FARMERS' incomes are at their highest level since 1997, following the third annual increase in a row, according to Government figures.

Statistics released by Defra show the total UK income from farming rose by 32pc last year to £3.2bn, compared with £2.49bn in 2002. Average earnings from diversification were £1,800 per farm in 2001-02, up 30pc on the previous year.

Although this is the third year running to see an increase, total income is still far below its 1995 peak.

More than 6,900 farmers in the North-East and Yorkshire and Humber are now diversifying into non-food businesses such as horse-riding, farm shops and tourism.

In the North-East and Yorkshire and Humberside, more than 500 farmers have diversified into sport and recreation; more than 600 run tourist ventures, and more than 500 are involved in processing and retailing.

The Defra survey, published on Thursday of last week, shows such activities net English farmers £100m. More than half of English full-time farmers have diversified, with 1,800 earning more than £50,000 a year from their new activities.

An estimated 70pc of farming households supplement their income by diversifying or outside work. One in four farmers or their spouses have jobs away from the farm.

Many of the diversification projects have been part-funded by Defra's rural enterprise scheme. Since its launch in October 2000, more than £19m in grants has been awarded.

Food and Farming Minister Lord Whitty said: "This increase in incomes is good news, especially when the increasing levels of diversification by farmers into other activities is taken into account.

"We need competitive farmers and food producers. Government investment will continue to help them to improve performance, and we are working together to lay the foundations for a sustainable and profitable future for the rural economy."