Wales' Sustainable Farming Scheme - economic impact assessment

Welsh Government has now published the evidence base that underpins the introduction of the Sustainable Farming Scheme (SFS), including the Business Case and an updated economic analysis of the scheme.

Evidence for the SFS Business Case

The Business Case is Welsh Government’s evidence-based justification for the SFS, due to launch in 2026. It's a formal document that explains why the scheme is needed, how it will be delivered, and what value it offers to the public purse. The Business Case argues that the scheme’s Universal layer provides a foundation, and that the Optional and Collaborative actions produce the greatest return on public investment and provide the strongest case for the SFS as a whole.

Because the SFS will replace the Basic Payment Scheme and other EU-linked funding, Welsh Government must show that it has thought through the impacts on farm businesses, rural communities, food production, and the environment. HM Treasury requires major spending programmes like this to be tested through a 'Five Case Model'. That’s why the Business Case is long and detailed: it covers strategic goals, economic evidence, financial costs, commercial arrangements, and how the scheme will be managed.

Benefits of Optional and Collaborative layers

The Business Case includes evidence and calculations that supports Welsh Government’s conclusion that the greatest value for public money comes from the Optional and Collaborative layers. These layers involve more ambitious actions such as support for organic farming, woodland planting, habitat restoration, improving water quality, or working together across landscapes. According to the modelling, these scheme layers deliver a stronger benefit-to-cost ratio than the Universal layer on its own, because they generate larger environmental gains and help farms build resilience to climate change and market shocks.

Is the modelling realistic?

The Business Case shows that ministers accept that there are trade-offs. An assessment of the potential economic effects of the Universal layer suggests that large farms and dairy farms would displace livestock and labour to meet the SFS Universal layer requirements.  However, the economic modelling uses unrealistic assumptions about how farms would deliver the SFS Universal requirements for habitats, and current livestock numbers are already below those recorded in 2019, the baseline year used in the modelling. Taken together, the predicted negative impacts of the SFS are likely to be overstated.

For individual farmers, the 'SFS payment ready reckoner’ that was launched in July provides a more accurate guide as to how the SFS will affect their businesses. We encourage farmers to look at this tool before placing too much weight on modelling projections.

Next steps

Welsh Government will publish detailed scheme guidance later in 2025, including 'the definitive technical notes setting out all the scheme requirements, scheme actions, and evidence required for the scheme'.

As Head of Policy Cymru, Andrew continues to engage with the SFS Ministerial Roundtable. 

Find out more

Sustainable Farming Scheme: business case | GOV.WALES