Do or diversify - farming isn't what it used to be

Increased income, enhancement of capital value and the utilisation of spare or otherwise impractical farm buildings are the main driving forces behind diversification.

Diversification on rural land holdings is not a new concept. The potential and importance of additional income from alternative enterprises as a result of the Mid Term Review of CAP has made diversification even more significant.

Mike Wooldridge, partner at Cluttons said: "Diversification is now more important than ever. With DEFRA's simplified grant regime now in place providing a decoupled annual payment not linked to production enables farmers to consider alternative land use.

"We have recently launched a 'Pride of Ownership' initiative which will assist farming businesses restructure their approach to land and buildings to overcome the single payment scheme (SPS) being eroded by inflation, modulation or 'financial discipline'.

Land and rural property traditionally lends itself to equine related enterprises and the conversion of buildings to residential, light industrial and office accommodation as well as recreation and leisure. "We anticipate there being a swing from investing in the land itself to investing in assets on the land.

"This year alone I have been involved in negotiations for golf driving ranges and start-up golf courses, advertising hoardings, clay pigeon and paint balling activities, car boot sales, holiday homes, a number of high profile TV shoots, not to mention finding a home for two professional football clubs! These diverse operations are in addition to dealing with cottage sublets, letting of farm buildings for light industrial use, and dealing with the ever-increasing number of mobile phone masts. Diversification comes in many forms and whilst farming and land agency certainly is not what it used to be, there is an array of potentially more rewarding options available."

Landowners and farmers are encouraged and advised to diversify by ministers and government policy advisers. Planning policy guidance and statements encourage diversification particularly where employment is created and enterprises will be deemed to help "sustain a diverse, vibrant and viable rural economy." The Local Planning Authority (LPA) and environmental groups still however require careful handling and stakeholder and community consultation has been pushed heavily up the agenda.

In addition recent changes to landlord and tenant law has removed the need to apply to the courts to prevent security of tenure being afforded to a business tenant, which should free up, both in time and costs, the process of letting commercial premises.

In addition to more flexible planning and legal arrangements, there are a number of grants aimed at contributing to the development of rural businesses. In particular, there are two schemes, the Rural Enterprise Scheme and Vocational Training Scheme under the English Rural Development Programme - as well as a Redundant Building Grant Scheme available from Regional Development Agencies.

The financial gains for the owner/investor are only achievable if the new ventures are successful. Success will inevitably depend on a strong market and the proximity to the market place, together with a robust and strategic business plan. Synergy with the remainder of the farm business is also important, as are the available management skills and the ability to offer a distinct competitive advantage. Quality and pride of ownership are essential.

Cluttons, 05.06.2005

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