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Renewables, Tourism And Forestry Provide Three Future-Proof Opportunities For Farmers

Many Scottish farmers could benefit from commercial opportunities in three key sectors which offer the potential to transform their businesses. The renewable energy, forestry and tourism sectors all offer attractive returns.

Speaking at the firm’s farming seminar for 160 industry figures on Friday 2 November, Ian Hope, head of the firm’s rural department, said:

We believe there are three sectors which offer the most potential currently, despite the uncertainties of the post-Brexit landscape. Commercial forestry continues to be one of the most rewarding areas for new entrants, with the best woodlands generating returns in excess of 10 per cent a year. In addition to the very attractive returns, the tax system is geared towards helping those who invest in woodland. No Income Tax or Capital Gains Tax is payable on the sale of timber and commercial forests are entitled to 100 per cent Business Property Relief from Inheritance Tax after two years of ownership.

Tourism businesses can offer good returns, but location is the critical factor to bear in mind. Urban fringe farms can do well in terms of offering farm shops, family facilities, coffee shops and the like. Glamping pods, chalets or other holiday lets can do well if the farm is close to a known tourist route such as the NC500 or Loch Lomond. It is important to consider whether an investment in a new venture can offer the potential to diversify from the existing business and perhaps to cushion the main business from short term variations in commodity prices. In the long term the potential to divide the farm into lots if and when the time ever comes to sell.

Mr Hope also said that at a time of historically low interest rates there is potential for farmers to generate more income from borrowing.

There is a every chance that farmers with significant equity in their property can borrow at an interest rate of around 3 per cent at the moment and rates are expected to continue to stay low for the foreseeable future. The borrowed money could then be invested in commercial ventures that could yield perhaps 5-8 per cent return on investment, which would have a significant impact on the bottom line for a farming business in Scotland.

Even the renewable energy sector, which is not as attractive as it once was, can still offer good returns in projects such as combined heat and power plants, biomass, or anaerobic digesters. Landowners may also wish to consider the potential to host a battery unit on their land for electricity storage, which is a growing sphere of activity, in partnership with utility companies. 

Galbraith is Scotland’s largest and leading rural consultancy managing and providing advice on farm, forestry, land and estate interests on over three million acres.