While many of us wish we could trade our grey metropolis office for a stunning countryside view, the practicalities of doing so have always seemed out of reach. The traditional perception of the rural economy is one dominated by farming and forestry; an avenue for higher productivity, innovation and investment into a diverse range of small and medium-sized enterprises (SMEs) would not exactly spring to mind.
Over the past eighteen months, small rural businesses have tended to be more optimistic about their prospects than the national average, according to the SME Growth Tracker quarterly reports from Capital Economics. In large part the government has been good at addressing the concerns of rural businesses, particularly under environment secretaries Liz Truss and Andrea Leadsom who ran the cross-departmental Rural planning review and the Rural productivity plan. Even the grandiose Industrial Strategy published in November 2017 set out measures to improve digital connectivity and access to finance for rural businesses. Public policy to support rural areas has shifted noticeably from what it once was seven years ago. The Coalition government took a more austere approach with its flagship Rural Economy Growth Review 2011, targeting the food & drink, energy, and tourism sectors. A series of regulatory changes and regional pilot schemes did little to address the major infrastructure problems rural areas still face to this day.
Can Whitehall really spearhead the non-farming rural economy against its heavily subsidised agricultural relative?
The reality is nuanced. Government figures for England show that there are roughly 537,000 businesses registered in rural areas, which is a quarter of all registered businesses. The government has played up the potential for start-ups in rural areas with good reason. There were 49 registered business start-ups per 10,000 population in predominantly rural areas in 2015, marginally fewer than the 53 per 10,000 for predominantly urban areas excluding London. Given average turnover per person employed lags significantly behind urban conurbations, there is an untapped potential. The former environment secretary Liz Truss, in contrast to the greener incumbent environmentalist Michael Gove, claimed that the government would “help create thriving towns and villages, where families can turn disused agricultural buildings into new homes for the next generation and entrepreneurs can launch the latest cutting-edge start-up from an office with a stunning countryside view”.
This is not to say that your tech-savvy Shoreditch start-up would be replicated in the villages surrounding Shoreham-by-Sea. The rural economy is still dominated by more traditional sectors such as wholesale & retail trade and construction, not professional, scientific and technical services that account for just 15 per cent of rural businesses.
Through its consultations with rural stakeholders, the government is not seeking to replace these dominant sectors but give them digital capabilities through e-commerce, exports and productivity gains. Separately, a wide-ranging consultation commissioned by Amazon UK and Rural England at the turn of 2018 found that almost four-in-five rural business owners believed digital tools were important to their future growth potential, including cloud computing and 5G mobile networks.
The finalists of the Rural Business Awards demonstrate cutting-edge innovation spanning breathable fabrics, high-accuracy sensors, rustic weddings, gunmakers, and off-grid renewable energy. The peer-to-peer lending platform Folk2Folk has developed an ISA transfer platform for its lenders to earn tax-free interest while helping local rural businesses to start-up or diversify. Modern social media and digital marketing tools are essential, given 43 per cent of all rural businesses specifically sell online through their own site or via a third-party site.
These cases, however, are the most conspicuous. Investors may look to them for a fast-growing acquisition or avenue to increase capacity into new regions and markets of the UK, but underlying infrastructure problems still exist. Inadequate transport, out-of-date planning regulations and campaigning from conservationists are compounded by a variety of skills-related obstacles to growth. The non-traditional rural economy has historically lacked a unified lobbying voice, given its diverse sectors act almost as a microcosm of the UK economy at large. The comments from Amazon UK’s Country Manager Doug Gurr that “as long as you have a laptop, internet connection and a great product, you can now be local and sell global” appear to be off the mark if you are a rural SME struggling to recruit a trained workforce or get planning permission to expand your office site.
In the short term, investors are likely to be cautious and prefer to “pick winners”. Putting money into a rural start-up runs a risk that it might not have the ambition or the capability to expand, nor attract the requisite talent and skills. The government’s policy over the past eighteen months has been welcomed by stakeholders across the non-traditional rural sectors such as food and drink and hospitality, with confidence in the future outstripping the UK average. The gross value added from rural areas in England is now worth £400 billion, but it is not clear whether public and private investment will do anything more than sustain what already exists. It remains to be seen whether the policies of Whitehall will propel an urban-rural rebalancing that makes investment into rural businesses part of a diversified portfolio, or whether this is a pipedream that never gets off the ground.