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Chapter 5: Diversification

Updated 21 December 2023

Applies to England

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Chapter 4: Livestock Farms

Survey Details and Technical Notes

A possible and rational response to the changing position of agriculture in the economy is for farmers to seek to enhance their income from sources other than conventional farming production through diversifying their business activities. Diversification is widely thought to offer considerable scope for improving the economic viability of many farm businesses. Many farm diversification activities can also provide benefits for the wider rural economy and community by, for example, encouraging and providing additional job opportunities.

Most farm businesses engage in other activities in addition to those carried out on their own farm, even if only hire work for another farmer. However, the definition of diversified activity adopted here excludes agricultural work on another farm and is restricted to non-agricultural work of an entrepreneurial nature on or off farm but which utilises farm resources.

This chapter focuses on those farms which have diversified and excludes farms which do not undertake any diversified activities.

Proportion of farms engaging in diversified activities

Using the above definition, 69% of farm businesses in England had some diversified activity in 2022/23. Over the past five years this proportion has remained fairly stable, however, this was an increase of approximately 12 percentage points from 2013/14 (Figure 5.1).

The main diversified activity in 2022/23 was letting out buildings for non-agricultural use, with 49% of farms in England engaging in this activity (Figure 5.1). An increase of 10 percentage points from 2013/14

The second most common form of diversified activity in England is generating solar energy at 22% of farms in 2022/23 (Figure 5.1). Similarly to the general trend of diversification, the proportion of farms that engage in solar energy has remained relatively stable for the past five years, but since 2013/14 there has been an increase of 12 percentage points. All other activities have an uptake of no more than 12% in 2022/23.

See dataset table 15.2 for the full time series of proportions of farms engaging in different activities starting from 2006/07.

Figure 5.1: Percentage of farms with diversified activities England 2013/14 to 2022/23

Source: Dataset table 15

Figure note: The break in the series shown at 2017/18 represents changes in the method used to assign farms to a specific farm type. Where the break occurs, the proportion has been calculated using both methods for comparability.

Income from diversified activities

In 2022/23, farms with diversified activities had an average diversified enterprise income of £27,100. Across all farm types, the most profitable form of diversified activity was letting buildings for non-farming use, with an average enterprise income of £23,600 (Figure 5.2). Tourist accommodation/catering and processing/retailing of farm produce had an enterprise average income of £16,100 and £17,900 respectively.

Despite solar energy being the second most common form of diversified activity, enterprise income from this source remained small. Farms with solar energy made an average of £5,000 from this activity, equal to the income for farms engaging in sports and recreation. Farms with other sources of renewable energy showed an average enterprise income of £17,000. This relatively high value was driven by increases across the component factors of this measure, which includes income from biomass energy, wind power and anaerobic digestion.

For the full breakdown of output and income from different diversified activities by farm type see dataset table 15.4.

Figure 5.2: Income from diversified enterprises, England 2022/23

Source: Dataset table 15

Figure note: Income values are for farms engaging in those activities. Farms not engaging in each activity have been excluded.

Dependence on diversified income

For farms engaging in diversified activities, there was great variation in their dependence on this part of their business. For 36% of farm businesses with diversified activities, income from these activities accounted for at least a quarter of their Farm Business Income (FBI), whilst for 21% of farms, income from diversification accounted for the majority (greater than 50%) of their FBI (Figure 5.3).

In 2022/23, less farms fell into the lower two brackets, with 44% of farms engaging in diversified activities making up to a quarter of their FBI from diversification. This decrease was due to a larger proportion of farms with a negative FBI (16%), following a very strong year in 2021/22 which saw a much lower proportion of farms with a negative FBI. The 2022/23 proportion is similar to the percentage seen in 2018/19 and 2019/20 (see Figure 22).

Figure 5.3: Distribution of farms according to the proportion of their Farm Business Income (FBI) from diversified enterprises, England 2021/22 to 2022/23

Source: Farm Business Survey England

Figure notes:

1. Excludes farms with no diversified activities.

2. Farms within the category 100% and over have an FBI lower than their diversified enterprises income due, for example, to a negative agricultural income lowering their FBI.

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Chapter 4: Livestock Farms

Survey Details and Technical Notes