Farm output also increased, recording a 5.4 per cent rise as the value of UK agricultural production topped £20.7billion, according to the Defra UK Agricultural Accounts figures.

NFU chief economist Phil Bicknell said: “Hot on the heels of some gloomy figures for the wider UK economy, these figures are a reminder of the role farming can and will play in leading the country back to sustainable economic growth. NFU members have already told us they are confident about the longer-term future of the industry, in sharp contrast to many other business sectors. I expect these latest figures will add to that conviction and anticipate positive implications for growth, investment and output in agriculture."

“However, these figures show that farming still faces challenging business conditions. The overall profitability of UK farming fell by some £173m (-3.6 per cent) in 2010 as the industry saw input costs rise by 5.5 per cent. Projections from Defra show higher input costs will again influence 2011 profitability, but indicate a two per cent rise in farming’s total income in the current year. And of course, this headline performance is not representative of trends across all agricultural sectors or individual farm businesses. In sectors like dairy and poultry for example, rising input costs have outpaced any change in farmgate prices. Elsewhere, farmers and food processors are increasingly conscious of potential downward price pressure from supermarkets that could squeeze margins."

“This demonstrates the real challenge farmers and growers face in generating profitable returns from food production. For policy makers, it provides a clear indication of the on-going need for a strong CAP. One that underpins the economics of farm production, while incorporating measures to correct the distortions of the supply chain, and helps farmers realise profitable returns from their marketplace.”

“A lot of what we heard in this week’s Autumn Statement was designed at giving confidence to the wider economy and boosting business growth. Agriculture has a good foundation, with rising optimism and increasing economic output. Yet farming still needs the right signals to invest and prosper. As we digest the policy measures set out by the Chancellor, it’s worth remembering that we also look to the agri-food supply chain and Europe’s policy makers for positive signals when it comes to investing in our farms and planning for the long term.”