Can rural areas be engines of economic growth?

What is ‘the rural economy’?

Land management industries are important to us all – we depend on their provision of food, timber, water, energy and other goods – but the rural economy reaches far beyond this in terms of jobs, enterprises and output.

The rural economy can contribute to all the economic sectors, and is affected by all of the pressing challenges (infrastructure, planning, finance etc) that feature in national and local growth strategies, yet its contribution is often handled separately and focused on farming or tourism:

— Manufacturing, wholesale and retail, construction,

education and health, public administration and

professional and business services sectors flourish in the

countryside and many leading global, European and

national businesses operate from rural areas.

— Land management provides a wide range of ecosystems

services, including not only production of food, timber and

energy, but also provision of clean water, leisure facilities,

carbon storage and flood management.

— Rural areas display high levels of entrepreneurship, with

more businesses per head of population than in England’s

towns and cities.

— Most city economies are well supported by commuters,

businesses, consumer and environmental services from

neighbouring rural areas.

Just as firms vary across towns and cities, so the mix of business sizes, sectors and performance varies across rural areas:

— Manufacturing and professional firms are more likely to

be found in and close to rural towns in less sparse areas.

— Micro-businesses, social enterprises and self-employment

make a more significant contribution to rural employment

and services than those in urban areas.

— The high levels of entrepreneurship are partly driven by

large numbers of home-based businesses, (especially those

run by women), by self-employment and by incomers.

Why are rural economies important?

Cuts in public spending and the need to rebalance the economy reinforce the need for economic growth and innovation to come from all areas and sectors, not just from

urban centres.

Rural businesses already make a significant contribution to economic growth:

— They currently represent around 28% of England’s firms.

— Rural areas contribute at least 19% of Gross Value Added

to the English economy.

— Healthy environments are known to make critical

contributions to economic growth and society’s wellbeing.

Stewardship of the rural environment is central to achieving

this balance between economic growth and environmental

and societal wellbeing.

— Rural economies have demonstrated their potential to

provide more growth and employment if given appropriate

stimuli and support from national and local business leaders

and policy makers.

Rural Economy and Land Use Programme

Rural areas contribute at least £211billion a year directly to theEnglish economy but have great potential to achieve even more.

During the decade to 2010 our countryside and smallest settlements achieved higher rates of growth in numbers of businesses and jobs than any other settlement category in England.

Cuts in public spending and the need to rebalance the economy means that our expectations of what private and social enterprise can achieve in employment, wealth creation and service provision have increased.

We must, therefore, see growth across the whole country rather than only in certain cities or sectors. The distinctive characteristics, business and employment structure and past performance of rural economies mean that they are well placed to meet this challenge

How does the rural economy offer opportunities for growth?

Rural areas have a number of dynamic features that enable economic growth:

— Rural areas have more business start-ups per head

of population than many urban areas.

— Firms started by people moving into rural areas are more

likely to sell their products and services on national and

overseas markets, thus earning revenue beyond the locality.

— Many manufacturing businesses are located in rural areas

and this sector provides a higher proportion of rural jobs

than are supported by urban manufacturing firms.

— Rural economies have pioneered privatisation and

community provision of many local services, fuelled

by a combination of delivery and access difficulties and

the distinctive nature of rural demand.

— As the economic value and potential of ecosystems

services are recognised these will offer increased

opportunities for growth.

What barriers are holding rural economies back?

There are also some key weaknesses to be found in rural economies:

— Low densities and dominance of very small firms,

especially in sparse and peripheral rural areas, can lead

to a poorer choice of local employment opportunities

for rural residents.

— Lower business revenue and lower productivity in some

sectors leads to many rural jobs offering lower pay.

— Affordable housing for employees is limited in many areas.

When combined with poorer public transport, greater

distances between firms, this presents employers with

difficulties recruiting or retaining staff, and adds to

higher average living costs than for workers who are

residents in towns.

— Fuel costs are high for firms and for employees who need

to commute.

— Lower levels of local authority funding are available for

spending on consumer services and economic support.

For more information: Rural Economy and Land Use Programme

Centre for Rural Economy

School of Agriculture, Food and Rural Development

Newcastle University

Newcastle upon Tyne NE1 7RU

Telephone: 0191 222 6903

Fax: 0191 222 5411

Email: relu@ncl.ac.uk

www.relu.ac.uk