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Half of UK farmers plan diversification schemes

February 27, 2020 by  
Filed under News & Business

Almost half of all farmers plan to diversify their businesses to help maintain their incomes as direct payments are phased out over the next seven years.

Brexit has sparked a ‘diversification drive’ ahead of the biggest shake-up in agricultural funding for decades, according to rural insurer NFU Mutual. It has produced a report to help farmers plan successful schemes to make their businesses more sustainable.

Some 48% of UK farmers are planning to pursue diversified income streams to support their agricultural businesses, says the study. They are planning to set up or expand businesses involving rural hospitality, retail and renewable energy.

‘Crucial time’

This figure has doubled since NFU Mutual carried out similar research in 2018. It found that 23% of farmers were planning to expand or start diversification enterprises. The increase to 48% follows confirmation that the government will phase out direct payments, starting next year.

“The next seven years will be crucial for the farming industry,” explained Chris Walsh, NFU Mutual’s Farm Specialist. “Because of this, many farmers are looking at new business opportunities in order to spread their risk.”

Farmers had always had to adapt to changing times – and a number have been diversifying for decades, said Mr Walsh. But even more were now deciding to support their agricultural work with new ideas.

“Whether it’s building holiday cottages, launching a wedding venue, or opening a farm shop, not only can these new businesses supplement the existing farm, they often provide other members of the family with a crucial role in the business.

“Our research shows nearly half of UK farmers are either looking into setting up new businesses on their land or expanding existing diversification ideas, with a quarter planning to diversify in order to create business opportunities for family members.”

Right skills

But Mr Walsh warned: “There is only room for a certain number of farm shops, holiday cottages and wedding venues so farmers planning to diversify need to do careful research and costings before they start converting cow sheds into cafes.

“Farmers and their families also need to have the right skills – particularly if they’re going to be working with the public. It’s a big change looking after a demanding wedding party if you’re used to being on a hillside with a flock of sheep all day.”

The report stresses the importance of planning to minimise risks to the public and employees. It also highlights the importance of looking at the financial implications of setting up non-farming activities to avoid higher inheritance tax bills.

Diversified businesses generated £740m in farm income during 2018/19 – up 6% on the previous year, according to Defra statistics. Looking ahead, the study suggests there may be government support for diversification as direct payments diminish.