Farm diversification is a well-used strategy by rural businesses to reduce risk and to boost income returns.

Our recently published research report Spotlight on Rural Diversification highlights the performance of our rural vibrancy index (RVI), which tracks some of the key trends influencing rural businesses and diversification strategies to give a comparative indication of the strength of the sector over time.

The economic disruption as a result of the Covid-19 pandemic as well as challenging farming conditions resulted overall in a weak performance by the index (down 5 per cent). This masked the more positive results for rural enterprises which were boosted by factors such as holiday accommodation, both existing and newly developed, and the dramatic rise in pet ownership in the UK.

Analysis of the three base indices that contribute to the RVI shows the overall decline in performance was unsurprisingly more heavily weighted towards economic and uncontrollable events such as the weather. The economic index recorded a 7.5 per cent decline, leaving it at its lowest point since its base year of 2011. Most of this weakening was attributable to falling stocks indices and economic indices such as GDP.

Unpredictable weather patterns hampered the farm drivers index, which declined another 11.4 per cent. Taking wheat as an example, a relatively small price rise in 2020 could not compensate for the smallest harvest on record since 1981. So far, the outlook for this index is promising with record grain prices and near perfect autumn drilling conditions compensating for the late harvest.

A small increase of 1.6 per cent was recorded for the diversified enterprises index. However, as an annual index the volatility endured during 2020 by diversified enterprises is masked and there were undoubtedly peaks and troughs throughout the year. Contributors to the positive outcome for the index included the rise in staycations and a growth in interest for locally grown and sourced food.

The adaptive and forward-thinking approach from rural businesses is a significant contributor to the performance of this index and it’s vital businesses keep abreast of changing consumer trends to guarantee long-term success. For example our index shows pet ownership increased by 14 per cent over the past two years – does this present opportunities for rural businesses such as the provision of pet pampering and secure walking facilities?

The negative impact of the pandemic and volatile weather patterns ultimately weighed heavily on the overall index. However, rural businesses displayed dynamism, flexibility and enterprise in the face of the challenges which should stand them in good stead for the future.

Further information

Contact Joe Lloyd

Savills Rural