When Defra officials recently suggested farmers could boost profitability by making crisps or gin, it triggered justified eye-rolling across the farming community. While adding value to produce is a valid route to diversification, it’s not a silver bullet and it certainly isn’t universally applicable.
With a new Labour government in post, the question isn’t whether diversification should be encouraged, but how. Here’s what we believe needs to change if the Government wants diversification to drive rural economic growth and align with national priorities.
1. Targeted Capital Grants to Unlock Viable Projects
If Government wants farms to deliver on its strategic priorities economic growth, health, community development, and clean energy it must support accordingly.
Schemes like the Adding Value Grant have shown strong early promise. What’s needed now is expansion and continuity. These grants must:
- Provide meaningful capital to enable the leap from idea to implementation while easing the pre-funding requirements.
- Be tailored to reflect regional focus whether it’s on-farm processing, hospitality, renewables, or wellbeing.
- Prioritise projects that deliver against multiple government outcomes like food resilience, employment, and environmental gain.
A crisps factory is irrelevant if you can’t finance the fryer.
2. Planning Reform: From Obstacle to Enabler
The success of Class Q and Class R permitted development rights proved that sensible planning deregulation can spark rural innovation. However, inconsistencies in local authority interpretation and limited scope continue to choke viable projects.
We need a planning framework that actively supports rural diversification, including:
- A streamlined permitted development route for repurposing agricultural buildings for rural enterprises, community services, and sustainable tourism.
- More generous and realistic change-of-use policies that reflect the multifunctional nature of modern farms.
- Training and guidance for planning officers to understand the public benefits rural diversification can deliver.
3. Connect Farms to Consumers Through Hospitality and Engagement
Diversification shouldn’t be confined to profit generation. Done right, it’s a bridge between farming and society boosting understanding, building markets, and stimulating rural jobs.
Hospitality-led ventures like farm shops, glamping, cafés, or event spaces aren’t just financial opportunities. They:
- Support local employment and social cohesion.
- Improve public health through access to green space and real food.
- Help tell the story of sustainable British farming directly to consumers and voters.
4. Keep Farming at the Heart of the Farm
Diversification matters but so does protecting the skills that keep us fed and our landscapes cared for.
We must guard against a future where farming is side-lined in favour of higher-margin, non-agricultural ventures especially when global competitors may produce cheaper, but not better or more sustainably.
The solution? Grant frameworks and policy support should favour added value to food (e.g., processing, direct sales), and recognise farm diversification as a supplement, not a substitute, for food security and stewardship of the landscape.
5. Strengthen Confidence in Tax Rules to Support Long-Term Planning
While recent Inheritance Tax (IHT) updates haven’t changed the treatment of passive diversification which already fell outside relief under the Balfour test but uncertainty around tax implications continues to cloud farm decision-making.
Many businesses exploring diversification into areas like accommodation, retail, or food processing remain unsure of how these activities affect Agricultural and Business Property Relief.
To support confident, future-focused rural investment, government should:
- Provide clearer guidance on IHT eligibility for diversified activities within farm businesses.
- Offer reassurance on the future stability of Business and Agricultural Property Reliefs.
- Recognise that modern farm enterprises often require blended models to remain viable and should not be penalised for doing so.
Clear, consistent tax policy will unlock bolder, more strategic diversification that aligns with national priorities.
Final Word: From Tokenism to Transformation
If this government wants farmers to become gin producers or crisp manufacturers, it must do more than make offhand remarks. It needs to back rural diversification with intelligent policy, accessible finance, fair planning, and supportive tax.
More importantly, it must recognise that diversification is not about leaving farming behind it’s about making farming viable for the future.
At Dudley Peverill Associates, we believe the countryside can meet national missions: improving health, growing the economy, and powering net zero. But only if farmers are empowered, not patronised, to lead that change.
We’re here to farmers along their journey, get in touch now by giving us a call.