Farm diversification: a smart move (but not for everyone)

Farming in the UK has been facing some serious challenges in recent times. Rising costs, changing consumer demands, and new environmental rules have all made traditional farming tougher than ever. Because of this, many farmers are turning to diversification to help keep their businesses afloat and build a more secure and resilient future.

1. The rise of farm diversification

According to DEFRA’s December 2022 report, 68% of farm businesses now engage in some form of diversified activity, a 15% increase over the past decade. This trend reflects a growing recognition of the need to broaden income streams beyond conventional agricultural production. Common diversification activities include:

• Renting out farm buildings for non-farming uses (47%)
• Generating solar energy (22%)
• Offering tourist accommodation and processing farm produce—both adding around £15,000 extra income on average.

Notably, diversification contributes significantly to farm incomes, accounting for around a quarter of total revenue in 52% of diversified farms – more than just a side hustle in many cases.

2. Benefits of diversification

The advantages of agricultural diversification extend well beyond additional income. Diversified farms can:

• Cushion farms from unpredictable markets
• Create new jobs in rural areas
• Support local businesses, boosting the wider community
• Meet growing demand for sustainable, experience-based products
• Encourage the next generation of farmers by providing diverse opportunities to enter and thrive in agriculture.

3. Navigating the rules

Diversification isn’t as simple as just trying new things—there are planning laws and safety regulations to consider. However, national planning policies increasingly encourage sustainable rural development. For example:

• The Planning and Compulsory Purchase Act 2004 promotes sustainable growth
• The National Planning Policy Framework (NPPF) urges planning authorities to support rural businesses while protecting the environment.

In Wales, Planning Policy Wales emphasises protecting prime farmland while supporting sustainable development.

4. Local Development Plans: varied but supportive

Local Development Plans (LDPs) differ across the UK but provide specific guidance reflecting regional priorities, for example:

• Northumberland County Council (2022) supports rural diversification where proposals relate directly to agricultural operations, leisure or tourism requiring countryside locations, or generate local employment, provided they do not impair the host farms’ operations
• Cornwall’s policy emphasises agricultural sector growth and diversification as a key to long-term prosperity
• Herefordshire’s Policy RA6 backs employment-generating projects that diversify the rural economy, including knowledge-based and environmentally focused industries
• Braintree Local Plan promotes rural economic diversification alongside natural environment conservation
• Swansea Council’s Rural Development Plan focuses on increasing productivity, diversity and efficiency of Welsh farming and forestry businesses to promote economic resilience and reduce businesses reliance upon subsidies.

5. Practical examples and emerging trends

Farming and forestry business owners have a lot of creative ideas, from farm shops and restaurants to renewable energy and agritourism, that help farmers secure a new line of income to support their livelihoods whilst also providing important infrastructure to the surrounding communities.

The NFU Mutual’s 2024 survey found 34% of farmers have diversified, with popular options including:

• Running local farm shops
• Renting out storage
• Starting B&Bs or glamping sites
• Introducing new crop varieties or livestock breeds.

6. The challenges

While diversification offers substantial benefits, it also brings new challenges, especially for farmers with smaller holdings. These farms tend to recover less income, which makes affording the up-front costs, such as legal and planning advice, significantly harder. The cost of setting up a glamping site, for instance, can cost between £50,000 to £100,000, just for infrastructure. If the site then operates more than 28 days a year, you will require planning permission to change land use, which inevitably requires additional expert advice and further costs. Once the site has been developed, ongoing expenses for utilities, cleaning, marketing, maintenance, insurance and meeting health and safety requirements will also be attracted.

Funding and grants are available to help with diversification, but eligibility often depends on how strong the farm’s current income is. If the farm income is limited, this can reduce access to those funds.

With 73% of farmers saying they’re tightening their belts due to rising costs, many are having to get more frugal just to keep going.

Farmers must understand planning permissions, legal obligations, staffing requirements, and health and safety standards—areas often outside traditional farming expertise.

Another challenge is market research which is an essential step to ensure success. Many farmers lack experience in this area, meaning they may need to hire consultants, which adds to further costs.

Furthermore, the NPPF and Local Development Plans stress that necessary infrastructure such as roads, broadband, and mobile networks, should be in place to support diversification projects. Since many farms are remote, limited infrastructure can really hold them back.

Farming and forestry work is physically demanding and time-consuming with many farmers not having the hours to devote to writing business plans, navigating planning applications, or managing the complexities of diversification.

7. Looking ahead

With financial pressures unlikely to ease soon, diversification is becoming essential. Supported by planning policies and growing community interest, it offers a path to a stronger, more resilient farming future, keeping rural economies vibrant and farming families thriving for years to come.

However, it’s true to say that there’s more to diversification than meets the eye, and many farmers are likely to struggle to align their holdings to enable them to develop their land to attract these additional streams of income.