Income from diversified enterprises could account from more than a quater of farm business income by 2009, according to a survey from the Royal Bank of Scotland.

Nearly 40% of farmers had expanded or diversified, with younger and dairy farmers most likely to have expanded, the survey of 300 mainly Scottish farmers found.

The most popular diversification options were either on-farm activities (26%), tourism (13%) or off-farm employment (13%).

Diversification activity accounted for 17% of turnover, but the survey results indicated that would increase to 26% in three years’ time.

Jimmy McLean, head of RSB Agricultural Services, said the survey revealed nearly half of producers had made changes to their business as a result of CAP reform, with more than half claiming they were more optimistic than two years ago.

Most Scottish farmers had received their second single farm payment and most believed CAP reform had made them more aware of risk management, he added.