Wetlands are important habitats, often threatened by drainage, eutrophication, and suppression of grazing. In many countries, considerable resources are spent combatting scrub encroachment. Here, we hypothesize that encroachment may benefit biodiversity-especially under eutrophic conditions where asymmetric competition among plants compromises conservation targets. We studied the effects of scrub cover, nutrient levels, and soil moisture on the richness of vascular plants, bryophytes, soil fungi, and microbes in open and overgrown wetlands. We also tested the effect of encroachment, eutrophication, and soil moisture on indicators of conservation value (red-listed species, indicator species, and uniqueness). Plant and bryophyte species richness peaked at low soil fertility, whereas soil fertility promoted soil microbes. Soil fungi responded negatively to increasing soil moisture. Lidar-derived variables reflecting the degree of scrub cover had predominantly positive effects on species richness measures. Conservation value indicators had a negative relationship to soil fertility and a positive to encroachment. For plant indicator species, the negative effect of high nutrient levels was offset by encroachment, supporting our hypothesis of competitive release under shade. The positive effect of soil moisture on indicator species was strong in open habitats only. Nutrient-poor mires and meadows host many rare species and require conservation management by grazing and natural hydrology. On former agricultural lands, where restoration of infertile conditions is unfeasible, we recommend rewilding with opportunities for encroachment toward semi-open willow scrub and swamp forest, with the prospect of high species richness in bryophytes, fungi, and soil microbes and competitive release in the herb layer.