Non-farm income is an increasingly important source of revenue for farmers as they seek to offset reductions in government support.
UK farm income from diversification enterprises has risen to 13% of turnover in 2023, suggests research from rural insurer NFU Mutual. Some 34% of farmers now run a diversified business, up 6% since 2018.
The 1% rise since 2022 confirms a continuing trend of farmers diversifying outside traditional activities to maintain and secure extra income as the government phases out the Basic Payment Scheme across England.
UK-wide, English farmers have the highest proportion of diversification enterprises at 41%, followed by 38% of Welsh farmers and 27% of Scottish farmers. Only 15% of Northern Ireland farmers surveyed have a diversification enterprise.
Popular options
Renewable energy is the most popular diversification, with 6% of UK farmers operating schemes such as solar power, wind turbines or anaerobic digesters.
Property letting and providing holiday accommodation come in joint second place at 5% each. This is followed by livery/equestrian businesses and caravan/camping, (both 4%) and farm shops (3%).
The survey also found the number of existing farms undertaking agricultural contracting was up 7% to 22%, with farmers looking to capitalise on their machinery and equipment.
The impact of higher interest rates and the cost of living crisis was reflected in a three-fold jump in the percentage of farmers running diversifications who expect the income they produce will fall in the next five years.
The tough economic climate may also be responsible for a slight fall in the percentage of farmers considering a diversification scheme – down 1% to 15%. But it could also suggest that many farmers wanting to diversify have now done so.
Return on investment
For many, it has been a good option. Growers and livestock producers remain largely confident in the sustainability of their diversifications, with 37% (the same percentage as in 2022) expecting returns to increase over the next five years.
NFU Mutual farm specialist Chris Walsh said: “For many farmers supplementing the farming income is essential to ensure long-term sustainability – so we’re very pleased to see that well over a third of farmers running diversified businesses expect their returns to increase.
“Farmers are putting great businesses in place which will help protect the long-term future of their farms. Many are also providing jobs, both for members of farming families and for local people as well, enabling the public to enjoy new aspects of our fantastic countryside – a win-win.”
But farmers should seek advice before diversifying, added Mr Walsh.
An online Diversification Hub produced by NFU Mutual showcases a range of alternative enterprises to give farmers ideas of what they could do on their land.
Cautious approach
“Higher interest rates, rising prices and labour shortages make it more important than ever for farmers to cost any planned scheme in minute detail before taking the plunge and going ahead.
“Given the challenges facing businesses in every sector, caution is prudent in the current economic climate.
“To help farmers gauge the feasibility of their ideas – whether it’s for luxury glamping, an ice cream business, or letting out buildings for commercial or domestic use, we have a developed a Diversification Hub with a wealth of information.
But Mr Walsh added: “It’s important to recognise that diversification isn’t for every farm. If you haven’t got a suitable site, finance and the resource to run another business alongside your farm it may well not be for you.
For advice and ideas visit nfumutual.co.uk/farmingdiversification
