One in five Scottish farmers and crofters may retire early due to fears over Brexit, and over half worry that leaving Europe will further increase uncertainty for their businesses, according to a new survey.

This may lead to lower investment in farms and crofts, which in turn will have a negative impact on the wider rural economy, the report by Scotland’s Rural College (SRUC) says.

It argues that in an ageing industry more control must be passed to younger people who may be more ready to adopt the new approaches.

It highlights how vitally important the financial support from the European Common Agricultural Policy (CAP) is to those working on the land, compounding their fears over Brexit

It says "The reason that CAP grabs so much attention in Scotland is because it plays a very important role in ensuring

Scottish farms, on average, are 2015 only dairy farming returned a profit before CAP support, with production costs exceeding production incomes in all other sectors."

CAP subsidies accounted for 60 per cent of total farm output for sheep farms in less favoured areas (LFAs) such as mountainous or hilly land, and 48 per cent for LFA cattle and sheep farms. But only 8 per cent for dairy farms, whose success is dependent on the price of milk.

One third of all those surveyed indicated that with Brexit they are likely to need to increase off-farm income or diversify their businesses.

The report, based on a survey of over 700, finds that in recent years the amount of Scottish farm debt has reached record levels of over £3 billion, although this has coincided with a period of low interest rates.

But the number of full time occupiers of agricultural holdings has fallen by about a third in the last three decades. Meanwhile a third of farmers and crofters are over 65 with nearly 60 per cent over 55 years of age. In contrast only 10 per cent are under 40.

Steven Thomson, Senior Agricultural Economist with SRUC, said: “Brexit is clearly causing uncertainty, and some farmers have told us that means they are thinking of retiring earlier than planned. Scottish agriculture is used to change. Some of that has been in response to market demands and environmental pressure, but a key driver has been the various CAP regimes. Our report shows how vital that support has been, and still is, to the industry, especially the beef and sheep sectors.

“Under Brexit, we don’t know what will replace it yet but assume there will be budgetary pressures - meaning innovation and new approaches will be key to making farming more resilient. Being traditionally unsupported by the CAP, soft fruit growers, pig producers and others have shown the way. It is no coincidence they tend to be run by a younger generation – ready and able to grab opportunities, adopting new technologies and research ideas.”

The report's authors argue: “With Brexit we need to understand the characteristics, needs and contributions of all of Scotland’s businesses more than ever.” They say it is falsely assumed that the rural economy means agriculture. Yet the success of businesses involving wildlife tourism, food and drink, energy production or a wide range of service-related activities all challenge these assumptions.

Allan Bowie, President of NFU Scotland said: “Whether it is the 65,000 people directly employed in Scottish agriculture or the 360,000 employed in the wider food and drink industry in Scotland, the vote by the UK to leave Europe has created a degree of uncertainty that governments must quickly address.

“NFU Scotland is crystal clear that the contribution of the Scottish agricultural industry to the wider economy must not be undersold in Brexit discussions. Agriculture has a fundamental role to play in Scotland’s future, but this future can only be secured by the right policy framework in a post-Brexit era."