Making your Farm Buildings an Asset Now & for the Future
For many farmers, diversification is a worrying concern. Where to start, who to talk to,what to do and how to do it.... confusing? Well it need not be!
In these rapidly changing times, more traditional farm buildings are becoming redundant and will soon, if not maintained, become a liability rather than an asset to the farm.
Reasons for Diversification:
- The decline in farm income
- Supplementing inadequate income
- Exploiting an opportunity or ability
- Planning future expansion
- Facing changing circumstances
Developing Farm Buildings Considerations
- Planning Check whether the scheme requires planning permission or building regulations approval and identify potential problem areas that may require professional expertise;
- Costs Where a new venture means replacing part of the existing business be aware of the resulting loss of income, facilities and employment. This must be balanced against the benefits of reduced costs and of sale proceeds of stock and equipment;
- Asset Value Check how your proposals might impact on the value of the property as a whole either positively or adversely;
- Mark et Appraisal Check whether there will be enough demand for the product in the future and may require a sophisticated analysis of the local and national market at present and with forecasts over the first few years;
- Management Check there are the necessary skills and management resources to run the new venture;
- Timing Take a check on how long the project might take to complete and plan a timeframe to take into account planning deadlines, funding regimes and other commitments during the farming calendar;
- Location Always a crucial element in any property matter and each proposal should be checked to see whether this will help or hinder your proposal;
- Tenancy issues Lease terms will probably be for a 3-year term with a break clause either way at the end of the first year. Taking a deposit from the new tenant is a prudent move in addition to collecting rent quarterly in advance just in case something goes wrong. Make sure any lease is on a full repairing and insuring basis to minimise any further outlay by the landlord during the term of the lease;
- Funding Most schemes will require a capital outlay and where this is to be sourced by borrowings, you will need to work out the most effective way to arrange this;
- Make early decision whether professional help is required It is best to engage expert assistance at an early stage to avoid wasting effort and resources;
- Succession Don’t forget to consider succession issues when setting up any new business venture or disposal of land or buildings. Many farmers find the process too onerous and take short cuts that can be costly.
What Help is Out there for Farmers looking to Diversify
The Government recognises that farm diversification is a means for farmers to widen and strengthen the economic base of their businesses and contribute to a more diversified rural economy. Therefore, the Government has set up the Rural Enterprise Scheme (RES), which is the main instrument through which farmers (and those involved in Agriculture) can be helped to adjust their business in order to take advantage of changing market demands and business opportunities. Setting up a horse-based enterprise such as livery, riding stables, pony trekking etc is one of the many options open to diversifying farmers. RES also has a wider role in supporting the development of the wider rural economy including (amongst other measures) support to help both farming and non-farming applicants to develop genuine tourism based activities.
The scheme is administered by Defra's Rural Development Service (RDS) on a regional basis, with each region having its own priorities and objectives. If you would like further information on the scheme, full details can be obtained from your local RDS office.
Developing a diversified enterprise is undoubtedly a challenge for farmers traditionally skilled in the business of food production. Often different management skills are needed, such as public relations and marketing. Most new enterprises will also be subject to a range of additional rules and regulations such as business rates, planning consent, insurance and health and safety regulations, hygiene and so on. There are, however, many examples where well-planned diversification has been a great success and provided new incomes and employment in rural areas.
If your property is within the West Midlands Area:
The Redundant Building Grant (RBG) Scheme is part of a programme of rural regeneration. These grants are funded through the Rural Regeneration Zone Programme by Advantage West Midlands, the regional development agency, and administered by Herefordshire Council. Grants can contribute up to 25% of conversion costs, up to £62,500 for eligible projects within the Rural Priority Area and the Rural Regeneration Zone.
Grants are provided for the conversion or refurbishment of redundant buildings to bring them back into productive business use or to enhance their current business use. One of the key aims of the scheme is the creation of jobs, so by providing premises for new enterprises, local demand for workspace can be addressed, creating or safeguarding jobs in areas most in need in our rural communities.
What types of projects can get funding under this scheme?
Virtually any building could be eligible but the key criterion is that the building will be used for business purposes once the works are completed.
Eligible projects would include conversion or refurbishment, including upgrading of mains services, to provide facilities for:
- Manufacturing
- Crafts or service businesses
- Office premises
- Retail outlets
In particular they look for the sympathetic conversion of historic buildings, environmental sustainability features and workspace in priority industrial sectors including:
- creative industries – including craft workshops
- environmental technologies
- interactive media
- food & drink
- tourism & leisure attractions
It is worth bearing in mind that the operation of these grant schemes is subject to change and has a limited life-span. With the advent of the Rural Strategy issued by DEFRA, the funding regime is due to be overhauled next year! Watch this space……………………..
You may consider carrying out the project development yourself! Having been involved and completed many schemes over a number of years we are able to advise and give tips on the practical ways of becoming your own project manager/developer; often cost savings can be as much as the grant!
Enterprise Works is an initiative being delivered by the West Midlands Region Country Land Owners and Businesses Association. It offers a new and innovative training programme designed to help individuals and businesses in the farming and rural sectors to maximise their existing resources, to grow or to diversify.
The advice above is given in good faith, however the reader should always check with the author regarding the details of the information given above. It should be borne in mind that government legislation, new initiatives and funding regimes are prone to change.