Rural Economic Growth

In my previous post I mentioned that the conference I attended was about rural economic growth.  Having tried to make some sense of the rural economy I will try to pick out the conclusions about where economic growth in rural areas might come from, the barriers and what might help.

The most important point is that rural firms are as likely to want to grow as their urban counterparts, though for various reasons fewer achieve growth.  However, businesses that don’t wish to grow must still innovate: they are a vital part of the total economy and standing still (by implication) can lead to decline.  Because they are a mature industry, land based firms (i.e. agriculture, etc.) could be a stronger force in local development, but not the primary engine for growth – innovation that causes a step-change in output, the primary source of significant growth, will be elsewhere.  This means that nurturing growth within the wider rural economy is key.

Challenges to growth will vary with sector and firm size, so although agriculture as a mature industry has low growth ambitions in the terms of DEFRA’s Rural Economic Growth Review, rural manufacturing is seen as having high growth ambitions, though challenged by inadequate sites and premises.  Although services firms were not specifically mentioned they make up at least a quarter of the rural economy (the push for super-fast broadband will be important to many of them) and will be important for growth.  Small and medium-sized and larger firms face difficulties in recruiting skilled staff and finding space and premises to expand.

There are a number of barriers to growth more generally that need to be overcome including:

·         Improving access to finance

·         Local planning that enables firms and communities to grow

·         Support with recruitment difficulties and skills gaps

·         Improving access to services, markets and networks

·         Better communications infrastructure (a lot of emphasis is being put on superfast broadband in rural areas).

As I mentioned in my previous blog, there are a higher proportion of sole-traders and partnerships and other small businesses in rural areas (referred to in the jargon as micro-businesses) and it is felt these often fall below the radar.  They may find it difficult to grow because of:

·         Limited in-house resources

·         Diverse goals and motivations

·         They may be family-based

·         Many are reluctant or unable to take on staff

·         Many are home-based

It was proposed this suggests the need to review of the needs, opportunities and support for rural micro-enterprises.

DEFRA’s response to the Growth Review, announced in the 2012 Budget, attempted to address some of these difficulties particularly around broadband and access to premises. It also provided a small amount of money for some pilot schemes (which had to be bid for).  These will have a network of physical rural enterprise hubs and act as focal points for other activity including business support e.g. Knowledge transfer, provide mentoring, training and skills and will test different mechanisms and models that can be used by local authorities & LEPs to stimulate sustainable rural economic growth.  The nearest one to Worcestershire is through the Coventry and Warwickshire Local enterprise Partnership and based on a rural technology and innovation centre at Stoneleigh.

 
Other government funding packages will support  rural renewable energy projects, farm, forestry (and horticulture improvement; rural tourism to encourage more visitors and longer stays; expanding the food and drink sector; and the new National Planning Policy Framework that includes a rural exceptions policy - which will encourage the delivery of affordable housing in rural areas, and the broadening of the context of the rural economy with references to the diversification of all rural business (not just agricultural) and a reference to retaining and developing rural services that will encourage and enable rural economic development.

The amounts of money involved in many of these government programmes seem quite small but one of the other features of the rural economy is a mentality of getting on and doing things.  if this can be linked to the government and other encouragemnt that is available this will encourage greater innovation and more opportunities to be taken.