Tuesday, December 18, 2018

One in five farmers plans to diversify their business

December 3, 2018 by  
Filed under News & Business

One in five farmers plan to diversify in a bid to ensure their businesses remain viable without direct subsidies, suggests a study.

Almost two thirds of diversified farms say they obtain vital or significant income from diversification, reveals the NFU Mutual survey, which sets out the opportunities and challenges for farmers considering alternative enterprises.

The rural insurer’s diversification report provides information on latest trends, together with expert insight and analysis to help farmers make decisions on the direction of their farm businesses after Brexit.

Alternative enterprises

NFU Mutual surveyed farmers with established diversification businesses to gain insight into their experiences – as well as farmers currently solely involved in farming activities to understand their attitudes and plans for future diversification.

The government plans to phase out direct subsidies over seven years after the UK leaves the European Union next spring. Payments will largely be the same in 2020 and 2021 before being phased out altogether by 2027.

NFU Mutual farm insurance manager Chris Walsh said: “The basic choices farmers have available to them as direct subsidies cease are to maintain their current business models, specialise, intensify or diversify.”

Right choice

But starting a diversification enterprise shouldn’t be undertaken lightly. Mr Walsh added: “Every farm is different and making the right choice depends on many factors including the farm’s location, land type, family structure, financial and skills set.”

Researchers found that 94% of diversifications had been financially successful out of the 62% of UK farmers who have already diversified their businesses.

The important role diversification plays in the sustainability of many farms was demonstrated with nearly two thirds (63%) reporting that the income produced by diversification was vital or significant to their farm.

The most common diversification was renewable energy (29%), followed by property letting (15%) and holiday lets (12%). Other types of popular enterprises included: livery stables (6%), Outdoor leisure activities (5%), and farm shops (2%).

Boosting farm income was the main reason for diversifying – quoted by 62% of farmers surveyed. Other reasons included creating a business for a family member (26%), utilising redundant farm buildings or unproductive land (20%), and providing a short-term income (9%).

Some 89% of diversified farmers said diversification had a positive effect on their overall business – but a number of challenges were highlighted. These includeed lack of time (22%), red tape (18%), unreliable broadband (15%) and cash flow (15%).

Of those farmers who had already diversified, 25% said they were planning to further develop non-farming enterprises after Brexit. Among farmers without a current diversification, 19% said they would probably or definitely diversify in the future.

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