Scottish forestry funding cuts could see investment in trees 'shift elsewhere' to areas like peatland restoration, industry leaders say

The carbon focus could shift to other schemes such as peatland restoration in Scotland while the forestry sector grapples with a major confidence blow after funding cuts

With drastic funding cuts of up to almost half of Scotland’s forestry budget, the dynamic in natural capital investment is likely to shift elsewhere in coming years, industry leaders have said.

The Scottish Government last month confirmed a 41 per cent slash to the forestry and woodland funding budget – a total of about £32 million.

Leading nurseries in Scotland, including Alba Trees and Christies of Fochabers, have spoken about how millions of seedings are likely to be ripped up and burnt, with perhaps the same happening again next year if the funding allocation remains the same. Confer and Woodland Trust said the cuts had been a blow to confidence in the sector “that will take a long time to recover”.

Lochaber smelter peatland restoration (pic: GFG Alliance)

From an investment point of view, the cuts to forestry funding are likely to make planting schemes less compelling and more of a risk.

David Elliott, from Future Forest Company, said: "The grants provide a catalyst for much more private finance to come into the sector, which is what we need to meet those targets. If the message is that those grant schemes are being reduced down, it will potentially put people off.

"The key word here is confidence. If the investors have confidence the grant scheme is going to help underpin the sector and allow it to grow significantly, then great. But if that confidence is taken away through messaging on funding, whether it’s real or perceived cuts, investment will go elsewhere.”

Mr Elliott said rather than saving funding in the long term, it could mean the government cuts will have the opposite effect as it will restrict the amount of private finance.

David Elliott, from Future Forest Company

Harry Humble, of True North Real Asset Partners, the largest afforestation investor in the UK, said the cuts would cause a shift in the land price dynamic away from forestry.

He said: “Inevitably, in our appraisal of any site we’re looking to buy, you would typically put in the grant money availability in that calculation and that ultimately feeds into justify paying for the land that you’re looking to buy.” Mr Humble added: “It [grant money removal] will mean the land price dynamic will shift away from forestry.”

One area that could see more of a focus when it comes to carbon-related schemes is peatland restoration.

Caledonian Climate (CC), a peatland conservation consultancy group, said hectares of damaged peatland were sitting and ready for private businesses to invest in.

Freddie Ingleby, managing director of Scotland's leading peatland conservation consultancy, Caledonian Climate

Degraded peatlands are Scotland’s fifth largest carbon emitter. In 2020, the Scottish Government committed to restoring 250,000 hectares by 2030. But last year, for example, only some 11,000 hectares were restored.

CC’s managing director Freddie Ingleby said: "There are projects here that are ready and waiting to build long-term partnerships, and I think the value that can be gained from a business perspective around brand reputation opportunities is really something that should be shouted about and provides a new option to what is provided by planting trees.”

Mr Ingleby said CC’s latest research, which has not yet been published, is showing the benefits of restored peatlands, some of which he said were “hyper relevant”, including flood mitigation in the wake of storms and extreme flooding.

He said CC was building on providing objective data to businesses to show them the benefit of supporting restoration programmes so they could see the work they were investing in was having the impact they expected.

Diggers at work doing peatland restoration.

“The two key targets associated with flooding are run-off and peak outflow from peatland habitats and the speed of river rise and fall, and indicatively on both those cases across a 250ha catchment area that has been studied over a period of five years, we are seeing that there are noticeable reductions in that increasing rate of river flow and overall reduced peak outflow,” he said.

Mr Ingleby said he was disappointed at the forestry funding cuts, claiming both well-thought-out afforestation schemes and peatland restoration were essential to meeting the country’s targets. But he said the associated impact and the attractiveness of peatland restoration was still not something as widely understood as it should be.

"Peat has a PR problem,” he said. “Trees are easy for people to get their head around – plant a tree, grow a tree.

"In reality, the impact of planting new trees, from a carbon perspective, is the positive carbon impact doesn’t happen for decades. The positive impact from a peatland restoration project is almost immediate because you are reducing emissions from a high emitting state to a low emitting state.”

Last year the Scottish Government increased its tree-planting target to 15,000ha, but only about 8,200ha was planted.

Ministers blame the decision on cuts on its block grant from the UK government.

Rural affairs secretary Mairi Gougeon said: “Scotland faces the most challenging Budget settlement since devolution, with the UK government seeing fit to give the Scottish Government a 10 per cent cut in its capital allocation. This clearly has a negative knock-on effect for what we can fund in Scotland.

“This is not a place that we wanted to be and we have had to make very tough Budget decisions. We are fully committed to maximising the important contribution that forestry makes to Scotland and tree nurseries are a vital component in this.

“Forestry nurseries are one of our recent success stories and I know just how hard they work to provide Scotland with enough planting stock every year. I am keen that we explore how we might support them to access other markets for their high-quality stock and to create a more resilient business model for the longer term.”