Sustainable Farming Scheme update: insights from the latest impact assessments

This week, the Welsh Government published a range of impact assessments on the Sustainable Farming Scheme (SFS), starting in 2026.

CLA Cymru staff have played a major role in developing the latest iteration of the scheme published in July 2025 and we are broadly supportive of the universal layer. However, there remains more work to do to make the optional and collaborative layers work for farm businesses throughout Wales.

Firstly, our understanding is that the full scheme and guidance is to be published in December of this year, and we will be undertaking roadshows across Wales to help members better understand what taking part in the scheme will mean for them. Our key advice remains the same:

• Read the full details of what has been published
• Undertake the data confirmation exercise to ensure your mapping is correct
• Use the ‘ready reckoner’ tool to gauge how much you may be eligible under the universal layer

If you want to discuss anything in more detail on this, don’t hesitate in contacting the CLA Cymru team.

The impact assessments published this week outline the business case for introducing the SFS and the potential impacts on land use across Wales.

The business case lays out the rationale for introducing a new policy, succeeding the Basic Payment Scheme and Habitat Wales Scheme. The aim of the SFS is to link public funding to the Sustainable Land Management outcomes detailed in the Agriculture (Wales) Bill 2023. In more familiar terms, SFS will provide a payment for those outcomes that farmers are not traditionally paid for, in addition to measures that will improve productivity.

For those not familiar with the basics of the SFS, the scheme includes:

• A range of 12 Universal Actions (UAs) that all participating farms will need to undertake (if applicable) - covering soil health, integrated pest management, habitat maintenance, hedgerows, tree planning opportunities and others
• A Universal Baseline Payment designed to compensate (in part) for compliance costs and forgone income, plus a Social Value Payment that reflects wider public goods benefits.
• To mitigate disproportionate administrative burdens on smaller farms, the payment is structured in a way that the first 70 hectares of eligible land attracts a higher rate (£70/ha), with a low marginal rate (£2/ha) beyond that. There is also a stability payment of £1,000 for farms under 100 ha in 2026
• In total, the Welsh Government plans to commit £238m to the Universal Layer in 2026, and at least £102m to the Optional and Collaborative layers. CLA staff have been working hard over the summer to lobby all political parties, ahead of the Senedd elections, to commit to at least this level of funding on a multi-year basis

We welcome the time and effort that the Welsh Government has committed in publishing these impact assessments and there are some positives in the value for money for public funding that the analysis highlights.

As set out below, there are also concerns with the impacts that the modelling has brought to light. However, the Welsh Government has not quantified the impacts of the optional and collaborative layers which we know will make a significant contribution to farm incomes and environmental improvements. The modelling was also not able to capture the improvements in productivity that some of the options may lead to. 

Key modelled impacts (Universal layer only):

• A 5% reduction in grazing livestock units (GLUs) across all farms in the worst-case scenario 
• A loss of 1,163 standard labour requirements (i.e. jobs) across the sector
• A drop in Farm Business Income (FBI) by £76.3m (roughly £4,900 per farm in a worst-case scenario

It’s worth reiterating, our key advice is that the decision to take part in the scheme must be made on a business-by-business basis and CLA Cymru is here to discuss any concerns you may have going forward.

Please use the links below to access the impact assessments and Sustainable Farming Scheme Updates from the Welsh Government on:

• The scheme description
• The ready reckoner
• The business case