The government is racing to develop an interim subsidy scheme for english farmers to bridge a gap between eu payments and a new environmentally based system, after warnings that thousands of farm businesses could collapse.

The department of environment, food and rural affairs is working with farmers to introduce an interim system of environmentally based payments, which is likely to be called the sustainable farming incentive, from 2022.

This is likely to include payments to help boost productivity following pleas from farmers who worry that existing plans for future subsidies do not take into account food production.

The initiative follows warnings over what one person briefed on the situation called the valley of death problem as the basic payments scheme, under which cash is handed out based on acreage under the eus common agricultural policy, is reduced gradually in england from next year.

Its replacement based on contributions to nature, known as the environmental land management scheme, will only be at pilot stage in 2021 and rolled out nationally in late 2024.

George eustice, environment secretary, is determined to end eu-style payments, which have been notorious for handing large sums to wealthy landowners.

But downing street is concerned about the potential for struggling farms to be pushed into bankruptcy, according to one person briefed on the situation.

Research from defra showed that subsidies make up 61 per cent of profit for the average english farm, while almost one-fifth of farms would be unable to meet production costs without subsidy payments, once depreciation is taken into account. based on 85,000 farms that claim eu-style payments in england, this amounts to 16,150 farms unable to make ends meet.

A spokesperson for defra said: as we phase out direct payments ahead of the full rollout [of the new scheme] in 2024, we will offer financial assistance to help farmers prepare, and invest in ways to improve their productivity and manage the environment sustainably.

Farmers welcomed the plans for interim payments but are concerned the administrative burden of multiple new systems could result in delays to payouts, which have dogged an existing environmental scheme called countryside stewardship.

Tom bradshaw, vice-president of the national farmers union, said a bridging scheme would be a positive move from defra and show they are listening to concerns from the farming community.

For such a scheme to be successful, it is crucial that it is properly funded and well-resourced by the government. farmers will not want to see a scheme that has not learnt the lessons from previous issues that have caused significant payment delays.

Julia aglionby, chair of the uplands alliance, said moves to bridge the funding gap will mitigate the high risk in the uplands of farm bankruptcy and environmental degradation.

Eu-style payments to farmers have continued this year despite the uks exit from the bloc. but from next year english farmers face a 5 per cent cut to payments of less than 30,000, rising to a 10 per cent cut to the tranche between 30,000 and 50,000, 20 per cent on payments from 50,000 to 150,000, and 25 per cent above that.

New-style subsidies will eventually be based on public money for public goods, rewarding environmental work such as creating bird habitats or restoring peatland. these requirements mean the distribution of payments among farmers may differ markedly from before.

Scottish politicians, by contrast, have indicated they will keep payments largely unchanged until 2024. work towards the new scheme was first reported by the farmers guardian newspaper.