Landowners move away from farming for business investments

Landowners are reducing investment in farming enterprises in favour of alternative rural diversifications amid Brexit uncertainty.

Diversification consultant Rural Solutions conducts an annual sentiment survey of landowners of 225,000ha in England, Scotland and Wales.

This year, the results show an increased confidence and commitment to investing in rural business but an overall decline in investment in farming enterprises.

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Compared to 22% last year, none of the respondents plan to diversify within farming, fewer than 4% plan to start or expand a lease for agriculture, and there was a 10% decrease in plans to invest in additional acreage.

Away from farming, the results are more positive, with 56% believing it is a good time to invest in rural business and 11% committed to capital projects over the next 12 months to deliver alternative revenue sources.

Two-thirds of respondents plan to invest in a diversified enterprise and more than 85% anticipate retained or increased income.

Investment plans include commercial space (47%), self-catering accommodation (40%), residential lettings (38%) and events (36%), such as festivals and weddings.

Move towards new ventures

The worst thing landowners can do is batten down the hatches and assume something that currently delivers low returns is going to save the day, said William Fry, managing director of Rural Solutions.

“The only certainty is that traditional income streams will go and planning consents will become more challenging and onerous,” said Mr Fry.

“Now is the time to reposition away from reliance on traditional incomes and invest in new enterprises in the countryside.

“It’s important to build a self-sufficient, sustainable business that has commercial appeal and longevity, and that would complement the current business.”

Financial planning

In 2018, 48% of respondents were concerned or very concerned about their longer-term financial prospects.

This year this figure rose to 60%.

However, their confidence to invest has also increased and 25% felt more optimistic about their business prospects now than at the start of 2019.

Most (73%) plan to use bank finance combined with reinvestment from the business to support investment, compared to a much more blended funding package in the past of personal investment, sales to generate capital and grant funding.

A number of respondents (13%) said they anticipated profits to actively decline in the next 12 months, with just over one-third anticipating positive growth.