Diversification and innovation in the farming industry
This week Wales’ farming community and others with an interest in the countryside will be gathering at the Royal Welsh showground at Llanelwedd near Builth Wells to celebrate all that Welsh agriculture can do.
The Royal Welsh Show has become an institution since it was first held in Aberystwyth in 1904 and is one of the largest agricultural shows in Britain, if not Europe. Over four days thousands of farmers from across the country will come to show off their livestock in the hope of winning a coveted prize, while thousands more visitors will wander around the display halls to sample, and perhaps buy, the best in food and other produce that Wales’ farmers and rural businesses can supply.
Farming may not be Wales’ biggest industry by some margin, but for a country that prides itself on its beautiful, tourist-pulling landscapes, it is an important one both for our national self-image and for the thousands of jobs it supports. More than 80 per cent of Welsh land is used for agricultural purposes, and half the food the UK consumes is produced by UK farmers.
Farming, though, is a precarious business, and particularly in Wales which has a high proportion of small farms on land which is limited in what crops it can produce or animals it can support. Farm incomes are notoriously volatile, affected year by year by our variable and unpredictable weather, market conditions and the uncertainty of input prices.
According to the most recent Welsh Government figures, average farm incomes rose in the financial year 2017-18, but still remain below those of a decade ago. Within those figures there is huge variation between different types of farms. Dairy farms, which enjoy the highest incomes, had a very good year but that came after two particularly poor years. Cattle and sheep farms in the less favoured upland areas just managed to nudge up to 2011-12 levels, while lowland cattle and sheep farms are still worse off than at any time between 2008 and 2014. One in five such farms made a loss in 2017-18.
The figures also reveal, startlingly, that only dairy farms get most of their income from agricultural activities. Both lowland and upland cattle and sheep farms depend on subsidies for the bulk of their incomes. In fact, for upland farms agriculture made a negative contribution to their earnings.
Given this, it’s not surprising that many farmers look to alternative sources of income to keep them afloat. Nearly 40% of Welsh farms have some sort of diversified enterprise, and together these activities contribute £31m or 19 per cent to total farm incomes. The most lucrative of these activities are letting farm buildings for other uses, tourism and leisure, and renewable energy.
Eirwen Williams, director of rural programmes with Menter a Busnes, commented:
‘With potentially challenging times ahead in the industry, it is important businesses prepare for the future and identify opportunities to become more profitable.
At Farming Connect, we believe exploring and identifying a suitable diversification route is key for farm businesses. We would encourage anyone who would like to explore their diversification potential further to attend the Farming Connect Innovation and Diversification event which will be held on the 26th September on the Royal Welsh Showground in Builth Wells. The event has received fantastic interest to date from companies across the UK. Our aim and ambition for this event, which is free for attendees, is to inspire and give people confidence to develop new, innovative and profitable business ideas.
Farming Connect has an abundance of guidance, support, training and mentoring, designed to help clients improve efficiency across all areas of working. All Farming Connect services fully funded or subsidised by up to 80%.’
The role of R&D tax credits
The good news is that farm businesses looking to diversify might be able to get financial help from R&D tax credits. The business would need to be a limited company, and the qualifying work would need to meet certain criteria, but the types of projects that can qualify are endless and a lot of costs are covered. Any work that could result in an advance in technology, such as making duvets with wool as one farming couple did, could potentially qualify. With so much riding on diversifying incomes, investigating R&D tax credits is not something farmers can afford to ignore.
Matthew Jones, Managing Director of LimestoneGrey, Wales’ leading chartered R&D tax credit consultancy, commented:
‘R&D tax credits are a fantastic source of income. The capital can be invested back into the company to further expand diversification projects.
Sometimes, the perception of R&D can deter companies from investigating the relief. There are many companies in the agricultural sector that are missing out simply because they believe they do not qualify. The R&D tax credit relief is inclusive of all sectors, as long as you are a limited company and can demonstrate that you have faced challenges in a project that required effort and cost to overcome, you could be eligible. We would always encourage to seek expert advice to determine eligibility.
LimestoneGrey is proud to be supporting Farming Connect’s Innovation and Diversification event in September in a bid to provide advice and support to the agricultural community. You can find out more information by clicking on the link here. ‘
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