'Huge untapped potential' for UK farm diversification

Farmers could develop innovative diversified projects alongside their core business, Strutt & Parker says
Farmers could develop innovative diversified projects alongside their core business, Strutt & Parker says

There is still a 'huge untapped potential' for farmers to diversify as figures show only a relatively small proportion of businesses have introduced customer-facing enterprises.

Farm Business Survey data for England shows that 68% of farms had some sort of diversified activity in 2019/20, up from 65% in 2018/19.

However, this figure drops to below 50% when the letting of buildings for non-agricultural use – the main diversified activity that landowners tend to have – is excluded.

But there still remains significant potential in the rural sector for farmers and landowners to diversify, according to land specialists Strutt & Parker.

“Diversification is not a new trend, but the rural sector has only scratched the surface of possibility when it comes to introducing diversified enterprises," said Ed Lewis, head of Strutt & Parker’s diversification team Rural Ambitions.

“There is still huge potential for farms and estates to develop new innovative businesses alongside their core business – spanning the tourism, hospitality, food processing, leisure, wellbeing and retail sectors.

"Of course, diversification will not be an option for everyone, but at a time of huge change within the rural sector it could prove to be an important source of additional income for those that can."

What these diversified businesses might be will vary according to a farm’s asset base, the farmer's aspirations, the location and the unmet needs within local communities, he said.

For example, the pandemic has highlighted that people who don’t have green spaces are desperate to access it, presenting opportunities for farmers to use their land as a vehicle to draw customers in and support the sales of other products and services.

Similarly, it is anticipated that after Covid-19 there is likely to be a much greater focus on public health, which could be another opportunity for landowners, given research proves that access to the countryside is beneficial for wellbeing.

Alternatively, while people have generally embraced the shift to homeworking, the novelty has started to wear off for some who would prefer a mix of working from an office and remotely, meaning there could be a growing appetite for shared office space or serviced offices in rural locations.

And the environmental agenda is also opening the door to new customer-facing businesses – with consumers increasingly seeking guilt-free experiences with a low carbon-footprint.

“The good news for farms and estates is that they have plenty to offer that society wants and the key to the future is working out how best to harness that demand,” Mr Lewis said.

For those farmers with the right entrepreneurial skills, diversification could involve the launch of their own in-hand businesses – but this is not the only option, he added.

"For many landowners it could be better to invite others who share their values to work alongside them as trading partners or tenants.

"This can help people avoid the pitfall of spreading themselves too thinly across their core business."