Why supermarkets are siding with farmers over inheritance tax

In recent years, British farmers have faced growing pressures^[1], from Brexit to COVID and the Ukraine war. For some of them you can now add planned inheritance tax^[2] (IHT) reforms – announced in the budget^[3] last autumn – to that list.

The proposals to cut certain agricultural reliefs sparked protests^[4] by farmers across the UK. Currently, farms benefit from 100% relief on agricultural and business assets, but from 2026 the relief will be capped^[5] at £1 million, with excess taxed at 20% (half the usual rate). Exactly how many farms will be affected is not yet clear but estimates range between a quarter and a third^[6].

Farming associations and the government have clashed over this in recent months. Some sections of the public^[7] have backed the protesting farmers and voiced their frustration^[8] after the announcement.

But more recently, there has been support from a different – and unexpected – quarter. Seeing UK supermarkets^[9] enter the fray and highlight the concerns of farmers adds fuel to the already heated debate.

The big chains have long faced accusations^[10] of unfair treatment towards farmers, using their might to press suppliers for the lowest prices^[11] and reportedly forcing some out of business in the process.

So what has prompted supermarkets to speak out now? As a supply chain expert, I think there are several possible reasons.

1. Empty shelves

Simply put, the pressures on farmers can have far-reaching consequences for supermarket supply chains. A key reason for their support will be to avoid food shortages and empty shelves. There are many examples of supply chain disruptions^[12] leading to gaps in stores’ product lines, ultimately affecting the customer experience and supermarket profits.

UK food supply chains are under increasing pressure^[13]. Disruptions such as adverse weather^[14], energy price hikes^[15] and even cyberattacks^[16] have highlighted the vulnerability of the UK’s food system.

Farmers have also demonstrated their ability in the past to cause disruption^[17] to food supply chains by protesting over cheap imports. Mass and sustained farmer protests could turn off the tap to the UK’s food supply, as happened in the Netherlands^[18] in 2022. UK supermarkets will want to avoid this at all costs.

2. Reliance on imports

In the event that their IHT is unaffordable (those affected will have ten years to pay the tax, interest free), some farms may be forced to sell up^[19], leading to reduced availability of locally grown produce. Limited supply of domestic produce will increase the dependence on imports, ultimately leading to increased costs^[20] for supermarkets (and so for consumers too) as well as uncertainty.

The UK’s food supply depends on global regions, seasonal shifts and complex sourcing to maintain fresh produce year round. Increased reliance on imports, combined with post-Brexit import charges^[21] is neither ideal nor sustainable for supermarkets.

3. Reduced competition

Supermarkets have a vested interest in maintaining competitive prices. Fewer agricultural producers essentially means less competition. This could mean supermarkets having less bargaining power^[22] with suppliers and a diminished ability to meet consumer demand for variety and quality.

This could lead to higher prices^[23] in stores, potentially undermining supermarkets’ messaging around their competitive edge over smaller retailers.

4. Public image

Ultimately this move does supermarkets no harm. UK chains are both the backbone and the bane of farming. A handful of supermarkets dominate the food supply market^[24], setting the prices farmers receive and shaping the structure of agricultural production.

Supermarkets are often accused of exploiting farmers^[25] through their purchasing power, by dictating prices and imposing inflexible quotas. So their support for farmers could help with their public image. Aligning themselves with farmers offers them the opportunity to position themselves as protectors of the agricultural sector, boosting their public image while pressuring policymakers to take action.

But will it change anything? Well, supermarkets have economic clout^[26] – and having their support is better than not having it.

Historically, supermarkets have shown their collective ability to lobby. Their opposition to supermarket price caps^[27], support for plastic reduction initiatives^[28] and even influencing policy^[29] in the wake of Brexit highlight how pressure from the big stores can shape national conversations.