Scottish Financial Enterprise has warned a government minister that proposed reforms to land ownership could have “detrimental” consequences for the market.
Ahead of a key debate on the Land Reform (Scotland) Bill, SFE chief executive Sandy Begbie has written to Rural Affairs minister Mairi Gougeon expressing “our significant concerns”.
In his letter he notes several provisions within the Bill which, if enacted, “could have profound and detrimental consequences for the stability and attractiveness of Scotland’s land market.
“This, we believe, would create a significant deterrent to investment in Scotland, contrary to the Scottish Government’s stated goals for economic growth,” he writes.
He says it would hit investor confidence and risk future investment across sectors supported by the financial services industry, such as agriculture, forestry, natural capital, and renewables.
“The Bill, in its current form, risks sending a negative signal to current and prospective investors about the stability and predictability of Scotland’s regulatory environment,” he says.
“Any perception of increased political or legislative risk reduces Scotland’s competitiveness as an investment destination at a time when significant private capital is needed to achieve key policy objectives, including net zero and biodiversity targets.”
He adds that SFE is particularly concerned by the inclusion of provisions around the forced division (lotting) of land holdings, saying such measures would not only reduce the security of collateral underpinning existing and future loans, but could also undermine the ability of landowners to plan for the long term.
“Fragmented landholdings are generally less attractive to institutional investors and may reduce the scale at which sustainable land management and environmental outcomes can be achieved. We strongly urge the Scottish Government to reconsider the lotting provisions in the Bill to avoid
unnecessary market disruption.”
Mr Begbie also warns about the impact on Lending Agreements and Retrospective Legislation
The Bill proposes changes to the legislative framework governing the sale and transfer of land
ownership and agricultural holdings, including retrospective alterations to tenancy agreements
Uncertainty and the risk of retrospective legislative change significantly undermine the legal
certainty upon which lending agreements are based, he says.
“Any moves to alter the terms of existing tenancies or introduce new obligations retrospectively could trigger breaches of loan covenants, necessitate loan re-pricing, or in some cases, prompt withdrawal of finance altogether.
“This would have knock-on effects for land managers, tenants, and rural businesses reliant on continued access to finance.”
In light of these concerns, SFE urges the minister to consider amending the Bill at Stage 3 to undertake a detailed impact assessment of the Bill’s effects on lending, investment and the wider rural economy.
It calls on the minister to remove provisions relating to lotting from the Bill, to reconsider any measures which would retrospectively alter existing tenancies or other contractual arrangements, and engage further with the financial services sector and other stakeholders to ensure that land reform is delivered in a way that supports, rather than undermines, Scotland’s attractiveness for responsible investment.
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