Report reveals few farmers planning to diversify post Brexit

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

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 most common diversification on Northern Ireland farms is renewable energy (40%), followed by property letting (9%).

Across the UK, nine out of ten schemes (94%) have been financially successful. 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.

Not surprisingly, boosting farm income was the main reason for diversifying – quoted by 62% of farmers surveyed across the UK. Other reasons included: providing a business opportunity for a partner or other family member (26%), utilising redundant farm buildings or unproductive land (20%), and providing a short-term income (9%).

While 89% of diversified farmers’ said their schemes had a positive effect on the farm business; respondents highlighted a number of challenges running an alternative enterprise alongside a farm. These include: lack of time (22%); red tape (18%); unreliable broadband (15%) and cash flow (15%).

Of those UK farmers who had already diversified, 25% said they were planning to further develop non-farming enterprises after Brexit.

Over half (53%) of non-diversified Northern Ireland farmers still believe farming provides the best potential for their holding.

Other reasons for not planning to diversify included lack of access to finance, no interest amongst family members and poor broadband.

Across the UK, top choices for farmers now planning to diversify are: caravan/camping sites (27%) other holiday accommodation (20%), and renewable energy (20%). Encouragingly for the rural economy, 80% of farmers planning to diversify expect their schemes to create between one and two permanent jobs.

Turning to farm business structures, NFU Mutual is concerned that less than a third of diversified farms surveyed have taken Inheritance Tax implications into account in their new business plans. The insurer recommends farmers planning diversification seek expert financial advice as some types of diversification can alter the tax treatment of land and buildings.

As an organisation strongly supporting initiatives to promote mental well-being in farming families, NFU Mutual also looked at rural isolation issues. Over a third (39%) of Northern Ireland farmers surveyed thought a diversification project would make them feel less isolated than working as a farmer in an era when most work alone for long periods.

County Down diversified farmer and NFU Mutual Director, Dr Christine Kennedy said:

“Whether diversification is the right route for individual farms depends on a wide range of variable factors – but one thing is for sure: successful enterprises need full commitment from family members, good management skills and a clear vision for the farm’s future.

“Against a background of reduced direct farm support diversification offers some farmers the opportunity to complement and supplement their farm income from other less traditional farming sources.

“While farming remains the cornerstone of our rural communities, maintaining and enhancing farm profitability is critical to ensuring we have a vibrant rural community which welcomes and offers opportunities to our younger generation with their diverse skill sets.”

Christine is a partner in her family’s cereals and beef farm. It includes a diversification business focusing on buying and letting mainly rural property.

Chris Walsh, NFU Mutual Farm Insurance Manager, said: “Northern Ireland’s farmers are currently facing the greatest challenge to their future for generations, so we are working hard to help them make informed choices about the best route for their farms and families.

“The basic choices farmers have available to them as direct subsidies cease are to maintain their current business models, specialise, intensify or diversify.

“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.

“Northern Ireland’s farmers are incredibly resourceful - but for many, setting up a non-farming business is a step into the unknown so our report sets out clear information on the opportunities and challenges of diversification, together with insight from existing diversifiers and industry leaders.

“As the insurer of over three quarters of Northern Ireland’s farmers, NFU Mutual has wide expertise providing insurance for farming and a wide range of diversification schemes. This means we are well placed to help farmers through this challenging period. The report also stresses the importance of detailed research and getting expert advice while planning diversification. Involving insurers at an early stage means many risk can be designed out, keeping insurance premiums low when the project is up and running.”

The NFU Mutual report, together with a series of videos and podcasts produced to help farmers considering diversification decide how to proceed, are now available to download on: www.nfumutual.co.uk/farming/farming-diversification.