Diversification can take many forms including renewable energy, processing raw agricultural products to sell directly to the consumer, tourism, leisure, and lettings. With the phasing out of the Basic Payment Scheme (BPS) over the next six years having a potentially substantial impact of many farm businesses, some will be reviewing their opportunities to diversify.
Over the coming weeks, through a series of case study-based articles we will be addressing the following key questions that surround diversification. We asked Anna Collins, an Associate Director based at our Market Harborough office and expert in rural property management, how diversification could help to mitigate both the loss of subsidy income and risk from volatile agricultural commodity markets.
“The first step to any diversification is reviewing the current enterprise and establishing if the existing business is sustainable or whether a change and/or alternative income streams are necessary to the survival of the business. It is also important to assess whether the current situation has the ability and capacity to cope with a diversification.
The next step is to look at both the external opportunities and internal secondary ancillary businesses to identify options for change. The outcome of a successful diversification is to bring in further income, ensuring financial risk is spread and the business can be maintained for future generations. Whilst a new diversification project might generate a reasonable return it is important to compare this to the alternatives for the asset or land involved, especially where substantial capital investment is required for the project. A partial budget is always a good place to start.
Following the transition out of the EU, grant funding sources are currently limited. Good advice on the funding opportunities available is crucial, and competitive lending solutions are available.
Many projects will require a minimum change of use permission, so it is important that sufficient time is allowed at the offset to secure the necessary consents.
A different set of skills are often required when diversifying, therefore, it is important to play to your existing interests, experience, and knowledge. The management of a diversification project is often carried out by the individual who is diversifying, alternatively, consideration can be given to the benefits of a joint venture or letting to a third party.
The government has committed to reaching net zero by 2050 with the agricultural industry having an accelerated target for 2040. This means that any new enterprises should have a sustainability focus, whether that is using renewable energy sources, a reduced reliance on plastics and packaging or a local emphasis.”
If you are interested in investigating diversified income streams on your land and would like to seek professional advice on potential options, please don’t hesitate to get in touch.
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