Some thoughts on Farming: Let’s start with vertical ones
Good morning. I thought it was about time that I decided to set up a vertical farming business. Why not? Lots of people have been trying it. What is there to lose… perhaps my shirt it seems.
The problem is that lots of people have been trying it without really knowing what they are doing. In fact, I would go as far as to say that there only half a dozen people in the world that really know what they are doing.
Those genuine vertical farmers (rather than little old me with my greenhouse), may take issue with my assertion.
I base my opinion though on whether or not vertical farms are profitable I know of only one vertical farm in the world that has been able to get to being profitable at the EBITDA level. I know of no vertical farms that are profitable after deduction of interest and depreciation of the plant and infrastructure.
So, let's take a step back for a minute. What is vertical farming?
Vertical farming has garnered attention as a potential solution to food security and sustainable agriculture, especially in urban environments. However, for UK business owners considering investment in this sector, it's crucial to understand the financial and operational challenges that have led to the downfall of several high-profile vertical farming ventures.
1. High Capital Expenditure and Operational Costs
The initial investment for setting up a vertical farm is substantial. For instance, while a high-tech greenhouse may cost between £400 to £1,000 per square meter, a vertical farm can require £2,000 to £3,000 per square meter.
My greenhouse came in at about £279 per square meter.
This translates to a minimum of £10 million for a 5,000-square-metre facility. Beyond construction, ongoing expenses such as energy, maintenance, and skilled labour contribute to high operational costs. In Europe, vertical farms have been reported to spend approximately 60% of their revenue on electricity.
Many farms are funded by private equity, and more recently in the Middle East, Sovereign Wealth Funds. Given the cost per square meter, and the ‘Mine is Bigger than Yours’ mentality you can imagine that interest on debt is huge. Fed up of not getting a debt or even the interest paid, PE investors can choose to give in and the company fail.
I funded my ‘build’ from my savings account.
For this reason, when you factor in depreciation and the interest costs, farms are not profitable. Fischer Farms describe on their website that they currently grow “A wide range of delicious short leaf salad and herbs, including rocket, watercress, basil and chives. Grown in a controlled environment, free from the use of pesticides, herbicides or insecticides, we can select seeds based purely on their taste and texture, resulting in restaurant-quality food.”
So, at least they chose the correct crops: Short yield time; Higher value; High care.
How are the numbers looking? Well, a loss of £8.4m in the year to 31 March 2024; £10m net liabilities on the balance sheet, and secured debt of £36m paints a stark picture.
2. Energy Consumption and Sustainability Concerns
Vertical farms rely heavily on artificial lighting and climate control systems, leading to significant energy consumption. For example, Infarm, Europe's largest vertical farming company, faced challenges due to rising electricity prices, prompting them to lay off 500 employees and downsize operations . Such high energy demands raise questions about the long-term sustainability and environmental impact of vertical farming.
In any business you need to lead by what the customer wants. Jones Food Group (JFG) which failed in April 2025, was founded by someone who had a background in renewable energy. Too often people in that sector look at what they can do with the energy, not what the product should be. The latest foray into this, is what do data centres do with the excess heat – I know we will set up a vertical farm…. How hard can it be? Very.
3. Technological Complexity and Labour Challenges
Operating a vertical farm requires a blend of agricultural expertise and technical know-how. The complexity of managing hydroponic or aeroponic systems, coupled with the need for skilled technicians, can strain resources. Additionally, the reliance on advanced technology makes these operations vulnerable to system failures, as seen with Smartkas, a company that went bankrupt after experiencing issues with faulty equipment.
It is a relatively new industry, and a number of farms have unproven technology. It’s akin in a way to the Anaerobic Digestion industry, in which crops, usually maize, or food waste are used to create power. You will haveseen green domes around the countryside? There have been a number of failed AD plants and businesses, partly as a result of bad technology, and partly as a result in shifts in the market for food waste, agricultural prices and gate fees for food waste.
Back to the greenhouse… Automatic louvres and vents, and simple automated irrigation from Amazon at low cost. I just need to change the batteries occasionally, so not beyond my technical level nor too taxing on my time.
4. Limited Crop Variety and Market Demand
Currently, vertical farming is predominantly suited for growing leafy greens and herbs. Expanding to other crops like tomatoes or strawberries presents additional challenges in terms of space, lighting, and environmental control. The limited crop variety restricts market opportunities and scalability, making it difficult for vertical farms to compete with traditional agriculture on a larger scale.
Even I know from greenhouse, you have to think what are the products that my customers (our family) will want. I have germinated some carrot seeds, but that’s not going to give me a return on investment is it?
However, early season organic cherry tomatoes will, as will regular sewing of herbs, sorrel, rocket, et al throughout the season. If I need to know that so I don’t get waste, surely JFG should have known that too so that they didn’t have very high waste levels: supermarkets have irregular delivery requirements – Thursday and Friday delivery requirements are higher than Mondays, because supermarkets are busier at the weekend.
Further because very few Vertical farms have mastered ‘high care’ their product shelf life is shorter than it should be. JFG’s tag line was ‘Ready to Wash’ (Rather than Ready to Eat). They would have been better with Ready to Waste.
5. Examples of Failed Ventures
Several high-profile vertical farming companies have faced financial difficulties:
Jones Food Group: Founded by James Lloyd-Jones, but later as funds were needed owned largely by Ocado collapsed into administration earlier this year(April 2025). There were a number of mistakes: Size does matter and bigger is not always better; product was not good and an inability to schedule production so high levels of waste.
Infarm: Despite raising over $600 million, Infarm downsized operations in the UK, France, and the Netherlands due to financial pressures.
Agricool: A French vertical farming startup that raised €30 million but went bankrupt in April 2022 .
Smartkas: A Dutch company that declared bankruptcy in February 2024 after issues with equipment suppliers and financial mismanagement .
These cases highlight the financial and operational risks associated with vertical farming ventures.
Conclusion
While vertical farming presents innovative solutions for urban agriculture, UK business owners should approach with caution. The high capital requirements, energy consumption, technological complexities, limited crop varieties, and examples of failed ventures underscore the challenges in achieving profitability. Thorough market research, careful financial planning, and a clear understanding of the operational demands are essential before investing in vertical farming initiatives.
What are the alternatives?
Personally I am going to stick with the greenhouse.
Elsewhere, we need to rely on traditional farmers who know what they are doing. Amongst the best farmers I know, is an 80 yr old dairy farmer, who still puts in a 70hr+ working week; who is absolutely passionate about his herd; and an agricultural student who has to show the lecturers how to programme the JD tractors and produces microbe scores better than anyone else has done before him.
