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English farmland has seen the steepest fall in its value since the financial crisis, as investors fret about the possibility of a loss of subsidies in the event of Brexit.

Values fell by 3 per cent in the three months to March in an index by Knight Frank, the estate agent, the largest quarterly drop since the end of 2008, ending a bull run of spectacular returns on farmland.

Average values have risen nearly 180 per cent in the past decade, Knight Frank added. But in the current climate of political uncertainty ahead of June’s referendum on Britain’s place in the EU the number of transactions also appears to be falling.

British farmers receive annually €3.1bn in direct support from the EU’s Common Agricultural Policy (CAP) scheme, without which many fear going out of business given the current low prices for milk, wheat, pork and other agricultural commodities.

With no one but the UK Independence party so far sketching out an alternative to CAP if Britain leaves the EU, roughly two-thirds of farmers would vote against an exit, according to the National Farmers Union.

Andrew Shirley, head of rural research at Knight Frank, said it was reasonable to assume farmland will fall 8 per cent in value in 2016 “on the assumption that commodity prices remain low and the worst-case scenarios of a sterling collapse do not come to pass.”

The crucial role of EU subsidies in propping up profitability at many UK farms lies behind much of the disquiet. “There is a lot of uncertainty about where subsidy payments would go in event of Brexit,” said Mr Shirley. “That makes your sums harder to add up if you’re thinking about buying land.”

Farmers Weekly, which tracks the acreage of land advertised for sale in its pages, noted a 24 per cent drop in the three months from January compared to the same period last year, falling to 11,029 acres.

“Values are still high but it’s a significant correction,” Mr Shirley said, adding the average price of an acre of English farmland had now dropped back below £8,000.

Investors have been unnerved by the difficulty of foreseeing what subsidy regime might follow a British departure, in spite of reassurance from Brexiteers that no UK government would risk the political fallout of abandoning the sector.

Agriculture contributes less to the UK economy than it does to many EU countries, Mr Shirley said. “The worry is the UK government would be less inclined to subsidise farmers to the extent the EU does. Farmers in the UK have less political clout than, say, farmers in France.”

Experts said the market for farmland is unlikely to collapse because good-quality UK agricultural land remains a relatively scarce commodity.

Ian Monks, partner at Bidwells, a rural property consultancy, said values and transactions of public sales had declined but the number of private deals — a growing part of the market — remained strong. “Some of the steam has come out of values but things have not ground to a halt. There’s just less frenetic activity than in 2014/15,” he said.

If Britain were to leave, farmers may even enjoy a medium-term period of high profitability, agents said, as the current EU subsidy regime would remain in place during negotiations over the terms of the UK’s departure, but sterling would be likely to fall against other currencies, improving farmers’ export prospects.

The data comes in the wake of a report this week by the National Farmers Union warning that farmgate prices — those of goods bought directly from producers — would rise in two out of three of the most plausible Brexit scenarios, by 5 or 8 per cent respectively.

Additional reporting by Scheherazade Daneshkhu

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