Sterling notes and coins© Nick Wright/REX/Shutterstock

The value of CAP aid payments to British farmers is to increase by just under 5% next year because of the weakening of sterling against the euro over the past year.

It has been confirmed today (29 September) that aid entitlements rates under the 2017 Basic Payment Scheme (BPS) and greening schemes will be converted into sterling at a rate of €1 = £0.89470, which is 4.98% higher than last year.

This represents a windfall increase of 22.3% compared with the rate two years ago – before the EU referendum result in June 2016 sent the pound tumbling on foreign exchanges.

See also: Scots farmers given more time to apply for ewe hogg payments

Sterling rally

A farmer with a total aid entitlement of €30,000 will thus receive £26,841 in the 2017 BPS scheme, compared with £25,566 in 2016 and £21,938 in 2015.

This year’s increase might have been even more marked had it not been for a sterling rally in the second half of September, which saw the pound rise against the euro.

BPS conversion rates for the year are based on the average official EU exchange rate for the whole month of September. Over the course of the month, sterling has appreciated from €1 = £0.92075 on 1 September, to just €1 = £0.88178 today.

Robert Gazely, partner in the farming department at Strutt & Parker, commented: “Any increase in the value of payments will be a welcome boost to farmers.

“While farm profitability has improved over the past 12 months, with a weaker pound leading to commodity price rises, farm incomes for many businesses are still way down on 2011/12 levels and levels of farm borrowing are also at an all-time high.”

Overall, the year-on-year currency change will be worth around an extra £135m to UK agriculture from direct aid payments alone.