Farming

Diversification: expanding your business

Around 50 per cent of farms in the UK supplement traditional incomes through farm diversification. The likelihood is with the reform of the Common Agricultural policy and de-coupling of subsidy away from production that the need to diversify will become an integral part of running many farm businesses.

Why diversify?

Farm diversification can reduce your dependence on conventional agricultural production and can make better use of your farm’s physical resources.  The Defra Farm Business Survey for 2006/07 found that average additional income per diversified farm was £14,500.

Diversification can also help integrate farm businesses into the wider rural economy, bringing cash into the area, creating employment and stimulating spin-off business opportunities.

Diversification out of agriculture

The following are examples of diversification activities outside the core farm business:

  • accommodation - e.g. bed & breakfast, holiday cottages, camping and caravan sites
  • retail outlets and catering facilities - e.g. farm shop, tea-room/café, or restaurant
  • rural tourism and recreation - e.g. trekking holidays; visitor attractions; mountain biking/walking routes; clay pigeon shooting, archery, hot air ballooning
  • adding value to agricultural products - e.g. ready-made meals or direct meat sales
  • alternative use of redundant farm buildings - e.g. offices
  • making and/or selling non-agricultural food products - e.g. cakes, preserves, beer
  • development (including training) and promotion of rural crafts e.g. - thatching, dry-stone walling, hedge-laying, hurdle making, charcoal making etc
  • facilities for undertaking craft activities and exhibition of craft products

You should also bear in mind that planning permission from your local planning authority may be required for a new building or a change of use for land or an existing farm building.

Diversification into alternative agricultural products

The production of novel and/or niche agricultural products can have the capacity to generate higher returns, for example:

  • livestock products – e.g. sheep cheese, Angora wool, rare breed meat, venison, fish, wild boar, goat dairying, ostriches etc
  • crop products – e.g. speciality flowers, vineyards, crops for alternative use e.g. pharmaceutical or energy crops

Barriers to Farm Diversification

Defra appreciates that the route farmers take to achieve a successful diversified business may not always be easy and that barriers may exist which either inhibit farmers from undertaking diversification or threaten the success of diversified businesses once established.  

Announced by David Miliband at the Royal Show in 2006 - a joint Government/Industry working group has been looking at barriers farmers experience when trying to diversify their farm businesses.  

The group's report of their findings, which has been submitted to Ministers, found that key barriers include planning issues and lack of business skills.

Tenant farmers and diversification

If you are a farm tenant you may require permission from your landlord before embarking on non-agricultural projects on let land. However, not all landlords are supportive of diversification activities undertaken by their tenants and Defra has developed a code of practice in association with the Tenancy Industry Reform Group.

The code encourages tenants and landlords to discuss diversification and agri-environment scheme participation and recommends a series of five steps, including early consultation and concluding in a formal written agreement between parties.

The code is voluntary at present, but it is hoped that it will lead to a greater understanding of the issues and possibilities around diversification.

Diversification funding and training

Diversification often needs particular skills and interests, sometimes beyond the traditional farming mix, and can utilise knowledge and expertise within the whole farm family to develop new business proposals. In many cases it will involve a combination of these factors.

The grant schemes which supported diversification initiatives under the England Rural Development Programme (Rural Enterprise Scheme, Vocational Trainng Scheme and Processing and Marketing Grant) closed to new applications from 30 June 2006.

Regional Development Agencies are responsible for delivery of any funding available for diversification projects under the new Rural Development Programme for England from early 2007 and will develop regional priorities and funding mechanisms to suit regional circumstances.

If you have any questions about the new programme, please contact your Regional Development Agency.

Sources of advice

  • Business Link – a national advice service which provides business information and access to a wide network of business support
  • Lantra - provides information to employers or individuals working in the environmental and land-based sector that will help increase skills and drive forward business development; Lantra will also direct you to the relevant Sector Skills Development Agency if you plan to diversify into a non-agricultural sector e.g. the food and drink manufacturing sector

Further information

See also

Contacts

  • Defra helpline - 08459 335 577

Page last modified: 20 May 2008
Page published: 1 July 2006

Department for Environment, Food and Rural Affairs