Breadcrumbs
Rural Economies - Stepping Stones to Healthier Futures (AP02/26)
FOR DECISION
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Relevance to Strategy and Corporate Plan:
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Staff and financial implications:
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Main issues to concern the Board:
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Purpose
1. The purpose of this paper is to secure Board agreement to an influencing role for the Agency on rural economies. The argument is set out in paragraph 3 below; a draft publication at annex 1 entitled 'Rural economies - stepping stones to a healthier future' draws on research findings and evidence gathered over the past twelve months. It was informed by the Board Seminar on rural economies held on 29 May 2002 and by the Board visit to South Shropshire and Herefordshire held on 27 June 2002.
Audience
2. We have internal and external audiences:
- the internal audience is the Agency's staff. For staff directly
involved, the aim isto shape and guide an expanded strand of work
described in discussions on the corporate plan as
to develop the evidence base for rural proofing economic
programmes. Staff throughout the Agency need to understand the
importance of rural economies to our objectives. Rural economies is
a huge field with many players. DEFRA itself is gearing up its work
in this area with the benefit of Tim Allen's services. It is
essential that the Agency has a clear and distinctive
role.
- the external audience is a diverse group of professionals with an interest in rural economies. Examples include chief executives of Business Links; directors of RDAs; local authority planning and economic development officers; civil servants in several government departments; specialists in banks, chambers of commerce and interest groups. We need to persuade these people that they should seriously consider the issues we raise when developing their economic policies and programmes. The proposed paper presents an evidence base, therefore, in a thorough and detailed way. It is not aimed at MPs, local authority members and those with only a passing interest in rural economies (but see below for our plans for them).
Argument
3. The paper makes clear that improving economic opportunities
for the residents of rural England requires an understanding of
five key characteristics, which are distinct attributes of rural
economies:
- the four key employing groups in the economies of rural areas
- the role of in-migrants to rural areas
- the contribution and dynamics of rural self employment
- the economic and social contribution of households
- the influence of the land and its goods and services
Why are rural economies important and how might greater attention to these five characteristics enable them to deliver more?
- rural economies contribute to the health of the UK
economy. Taken as a whole, the economies of rural areas
are strong. The health of our national economy depends on the
health of the 36% of businesses registered in rural areas, whose
outputs in turn rest on the skills, flexibility and productivity of
the 5.22 million employees and self employed who work in rural
locations. Additionally, over 700,000 people are employed in urban
workplaces by businesses registered in rural England.
- To maintain this contribution and release further potential, decision makers should refocus attention beyond farming and tourism and work to strengthen the value of four key rural employing and business sectors to those who live in rural areas -
- public administration, education and health
- distribution
- manufacturing
- banking and financial services.
- Those who steer and support firms in these sectors should recognise the scale of their rural footprint and work to eliminate causes of economic disadvantage, anticipate rather than react to business failures, provide appropriate business support and strengthen local supply chains as well as the skills of their workforce.
- Growth in business stock and job creation in rural areas has been greatly assisted by in-migrant households who account for up to two-thirds of all new businesses. Between 1999 and 2000 rural England experienced a net change of 103,000 people moving from urban areas. Cultivating more of these in-migrants to work as well as live in rural areas, reducing their tendency to live in the countryside but commute to higher waged distant urban areas, would give a boost to rural economies. Refocusing programmes of inward investment and environmental improvement to make more parts of rural England attractive to such in-migrants will help to raise the level of business start-ups.
- rural economies determine the social and financial well being of over five million rural households. Households contribute to the health of the wider economy through the formal labour market or by running their own businesses, informally through the community and social economy, and as consumers of goods and services. Many rural households combine self employment, employment, pensions and other benefit payments and other income to secure their standard of living. For almost a quarter of rural households, total income still falls below a threshold of less than 60% of median income - an indicator of poverty. Within low income households, self employment, especially for women, often provides poor rewards
Economic planners, policy makers and employers should work to improve engagement with the labour markets for all disadvantaged groups, and make self employment a more financially rewarding experience. To achieve these aims, those who support the economically disadvantaged need to respond to the influence which other household income and duties (such as caring for children) have on their ability to take up economic opportunities. Whilst raising the numbers of women running their own businesses, increasing the competitiveness of business or the productivity of employees are important goals of national economic policy, the most effective way of tackling disadvantage in rural areas is through support programmes which have at their heart raising the economic well being of households, rather than single objective policies.- rural economies are essential to the maintenance of an
attractive and diverse countryside.
This Countryside Capital extends from the finest
countryside of our remotest areas to the fringes of our towns and
cities. As well as underpinning rural businesses including food
production and tourism, the rural environment provides many
non-traded goods and services which are highly valued by society,
such as clean water, biodiversity and flood prevention.
Reforms are needed to the policies and programmes which support or regulate those who farm, manage woodlands and wetlands, maintain vernacular buildings and conserve our wildlife and heritage, to help them sustain and enhance our Countryside Capital. Targeted action is needed to improve the quality and delivery of the rural tourism product so that visitors can contribute more to this national asset. Support should be provided to rural communities and businesses to invest in traditional and innovative products and services which draw from and help to sustain Countryside Capital.
Publication
4. The aim is to publish the attached paper in December. It is not the stuff of press conferences, but we will try to find a public platform on which our speaker can launch it. The main method of dissemination will be direct mail and face to face discussion. Copies will be mailed with a personal letter to the groups noted above, with follow up meetings for those who hold key positions in organisations we wish to rural proof. We will also target the professional journals which they read (including outlets such as in house bank journals) and a very small number of media such as the Economist and the Financial Times.
5. We shall also prepare a short leaflet covering the core messages, shorn of the detailed evidence. This will be aimed at MPs, local authority members and those not professionally involved in the field. This will be either a 'pull out' supplement to Countryside Focus or a stand alone leaflet.
6. We will need to judge precise timing in relation to suitable events and what is becoming a very crowded Autumn/Winter for government announcements. It is possible that it may be best to delay the launch until the New Year.
7. The Board is strongly recommended to get this publication out as quickly as possible. We spent a long time refining a companion document - our Strategy for sustainable land management - and thereby reduced its value as a tool for influencing. Rather than spend time refining this paper, we would prefer to publish it now and replace it in a year's time with an improved version as our evidence base grows.
RURAL ECONOMIES -
STEPPING STONES TO HEALTHIER FUTURES
This paper has been prepared by the Enterprise Land Management and Tourism Branch of The Countryside Agency. Its publication will be complemented by a longer Working Paper containing more evidence of the nature and needs of rural economies and proposing further actions for improving their health.Diagrams and tables in this draft are largely those used in a Board seminar on rural economies in May.September, 2002Preface
In our vision of tomorrow's countryside the economy will be more broadly based than it is today. The traditional businesses of farming, forestry and minerals extraction will still have an important place among a broad range of rural business activity. But information and communication technology will help overcome the disadvantage of remoteness. Improving access to education and training and encouraging leisure activities will help underpin a broader economic base and support more vibrant communities. The labour force in the countryside will be equipped with marketable skills, meeting the needs of business keen to operate in a good environment. Firms will increasingly see a rural location as a positive advantage and there will be a growing understanding of the ways in which successful businesses and an attractive, diverse countryside can be mutually supportive.
Much has been said about the future of farming, particularly following the foot and mouth crisis. In 2001, we published a Strategy for Sustainable Land Management in England as our contribution to the debate about future directions for agricultural policy. We submitted evidence to the Policy Commission on the Future of Farming and Food and our Land Management Initiatives and "Eat the View" programme are demonstrating new approaches.
Much has also been said about the needs of rural tourism. In 2001, we published a joint Strategy with the English Tourism Council. Working for the Countryside: a strategy for rural tourism in England 2001 - 2005 sets out how rural tourism can reach its full potential and be a creative force supporting the economy, communities and the environment.
This paper looks at rural economies in the round and particularly at the contribution of sectors other than farming and tourism - sectors which, in terms of employment, are far more significant.
Introduction
This paper describes the nature and needs of rural economies primarily at the England level and proposes actions to improve their health. However rural economies are characterised by significant diversity, variation and complexity. The demographic and economic characteristics of rural areas create differences in the workforce, in the earnings they can command, in the share of businesses they create and own, and in the goods and services they consume. Similarly, the balance of funds invested in rural areas, or the assets which these areas offer residents, visitors and incomers, in turn influences the composition of businesses, the attractiveness of an area to other markets and dependence on public bodies.
National commentaries on rural economies tend to underplay diversity and complexity. Aggregation leads to simple description of problems and needs, gives the appearance that areas which show deprivation share similar causes and leads to simple solutions being offered to address complex weaknesses. The dynamics of rural economies are far from simple. In a supporting technical report (available on our website - www.countryside.gov.uk) we include fuller evidence of this diversity and a complete bibliography of all the sources we have drawn on.
Those responsible for economic health need to describe the characteristics and needs of rural economies and the impacts which their intervention will have on rural residents and capital. This is a priority whether rural areas are perceived largely as a sub set of the UK economy, as for the Chancellor of the Exchequer or the Secretary of State for Trade and Industry, or are the focus of attention for regional and local agencies. A consistent analytical framework is required to guide action. We offer this paper as a contribution towards such a framework.
Across rural England, we argue that improving economic
opportunities for residents needs to be based on an understanding
of five characteristics, which are significant or distinct
attributes of rural economies:
- the four key employing groups in the economies of rural areas ("broad industrial groups" in the terminology of current data collection)
- the role of in-migrants to rural areas
- the economic and social contribution of households
- the contribution and dynamics of rural self employment
- the influence of the land and its goods and services
These are explored and their performance assessed in this paper. But first, we need to define what we mean by rural economies and be clear why rural economies are important.
What are rural economies and why are they important?
Rural England contains over 4000 wards (almost half of all wards) and 145 wholly or mostly rural Local Authority Districts or Unitary Authorities. It extends well beyond the remote countryside of areas such as the northern Pennines, National parks and the sparsely populated areas of the English Marches. It includes populous Market Towns and densely populated areas close to England's major conurbations, many of whose residents find employment within large towns and cities, as well as coastal resorts to which, each year, thousands retire.
INSERT MAP OF RURAL WARDS FROM SOTC 2002
The economies of these areas are generally strong. They draw in and generate capital investment and income from both public and private sources, earned by the 5.92 million households and estimated 1 million businesses which they host. Their attractive environment and other qualities of life draw in-migrants from urban areas. These incomers are often an important source of new businesses and new jobs and increase connections to distant markets and networks. This entrepreneurial spirit is also displayed by many long term residents of rural England, resulting in higher rates of self employment and more businesses per head than in urban England, though with similar levels of business growth.
COMPONENTS OF RURAL ECONOMIES DIAGRAM
The health of our national economy is directly influenced by the health of the 36% of businesses registered in rural wards, whose outputs in turn rest on the skills, flexibility and productivity of the 5.22 million employees and self employed who work in rural locations. Businesses registered in rural England additionally employ over 700,000 people who work in urban workplaces in England or other places. Over 80% of this rural workforce work not in those businesses traditionally considered to be the backbone of rural economies - farming and tourism - but in distribution including retailing, in real estate, in public administration, education and health, and in manufacturing. Between them these groups (Broad Industrial Groups or BIGs) contain over 332,000 businesses or around 70% of all rural businesses.
Rural economies are important because they:
- make a major contribution to England's economy
- are a critical part of the solution to rural disadvantage and social exclusion
- are essential to the maintenance of an attractive and diverse
countryside
Properly supported, the contribution which rural England makes to the national economy could be made even stronger, thereby improving economic opportunity for those who live in rural areas. Growth in rural economies will be secured through investment in and support of existing businesses, through training and skill development of rural residents and through encouraging new business start-ups.
One of the more important drivers of growth in many rural economies is the flow of residents from urban to rural England. Around three quarters of urban firms are founded close to their owners' residence. However throughout the 1990's the majority of rural firms (up to two thirds in one study) were created by people who moved from urban to rural areas and then started business. Various studies confirm that the quality of life and environment in rural areas was a major attraction for these new business owners. With around three quarters of all rural local authorities recording lower business start-ups than the average for their region, the contribution of incomers to creating employment, wealth generating and new service outlets is vital and should be cultivated.
Healthy economies are central to tackling disadvantage and social exclusion in rural areas. Key issues are unemployment and low household incomes. Although the unemployment rate in many rural areas is low and normally lower than in urban areas, these lower rates conceal certain forms of unemployment and underemployment - ie those who work intermittently. Likewise, although average household incomes in 2001 exceeded £30,000 in more rural areas than in urban areas, 31 of the 50 lowest wage earning local authorities in England were rural.
INCOME DEPRIVATION MAP
Almost a quarter of all rural households have income levels indicative of poverty - less than 60% of average household income (£10, 800 in 2001). Although this is a lower proportion than in urban areas, these 1.3 million households demonstrate the scale of the problem and the scope for improvement.
Self employment is more widespread in rural England than in urban areas, with the national rural rate of 9% of people of working age comparing with 6.5% self employed who live in towns and cities. In areas such as the far South West up to a quarter of the workforce are self employed. Self employment in rural areas is not always a rewarding and positive experience.
One weakness of the UK economy when compared with other leading economies, is the low proportion of women running businesses. Although still low, a greater proportion of rural women are self employed than those living in urban England, but rural women:
- come to self employment more often from economic inactivity than rural men of working age.
- are less likely to be full time in self employment, and
- are more likely than men to be on very low personal and household incomes
Women and other groups need to be assisted to secure greater economic opportunities in rural economies. Access to childcare is a constraint on employment and self employment common to rural and urban areas, but poor access to public transport imposes additional problems for rural residents, as does the distance which rural residents have to travel to access well paid and flexible employment.
The choices faced by many rural residents to improve their economic well-being are frequently determined by the economic activities and income available to other members of their households. Indeed evidence suggests that households are the key economic unit in rural England.
Over a quarter of rural employees are part time and 5% hold more than one job. 12% of rural self employed live in households headed by at least one pensioner. In some of these households the pensioners may be running their own business to supplement their public or occupational pensions whilst in others this regular source of income provides a measure of financial security which allows other household members to run their own business.
New data from the Office for National Statistics about household incomes, shows the extent to which rural households benefit from and utilise many sources of income derived from employment and non-earned sources - public and private pensions, self employment and property receipts, wages and benefit payments. The ability of households to cope with lower wages in many rural areas and with crises such as Foot and Mouth, derives from the centrality of households in rural economies. Their dynamics may reduce the vulnerability of individual members to unemployment, low income and disability, and may partly explain why around a third of rural micro-firms may hold little ambition to grow profits or take on employees.
In many rural areas, non-wage income exceeds half of all household income. Use of the measure Gross Disposable Household Income (GDHI) would enable decision makers to build regeneration and expansion of rural economies on a wider base than rural labour markets. Narrower measures such as GDP per capita, which have been the focus of attention of programmes to raise productivity and business competitiveness, focus on the so-called 'economically active', i.e. individuals in employment, unemployed on government training schemes, family paid workers or others actively seeking work. In contrast, GDHI makes all major sources of household income visible and confirms that all members of rural households have an important financial contribution to make to the health of rural economies.
Overcoming the poverty experienced by some rural households and releasing the potential of all rural residents to contribute to stronger rural economies must be a central aim of public intervention in rural areas.
Finally, rural economies are important because they are essential to the maintenance of an attractive and diverse countryside. The fabric of the countryside, its distinctive landscapes, biodiversity, historic features and built environment of our villages and market towns, is the product of economic activity. We call it Countryside Capital.
Farming in particular has shaped the landscape, being responsible for three quarters of England's land area. However, despite its traditional image as a powerful rural business force, its contribution to the national economy is now small both in terms of Gross Value Added, by which measure it contributes less than 0.75% of the UK economy, and employment in which it contributes around 2% of England's employment.
Farmers and other land managers - woodland managers, owners of equine businesses, country sports, fishery and wildlife managers - have been joined over the centuries by builders, water managers and engineers, and recreation managers to create the distinctive character of rural England. This 'Countryside Capital' is, in turn, a key economic asset for:
- food processing and distribution enterprises,
- leisure and heritage businesses, and
- for those supplying consumers with key services such as clean water and energy.
It is also an important quality attracting in-migrants and existing firms to rural areas.
Beyond these tradeable products, the capital of English countryside provides a wide range of non-market goods and services, essential to current and future generations, including biodiversity, clean air, and opportunities for recreation and spiritual refreshment so important for good health. Some of these non-market goods have been in decline. For example in the last 30 years the Index of Farmland Wild Bird species - a government indicator of biodiversity and the health of the wider environment - has declined alarmingly to a little over half of its level in 1970.
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The continued provision of non-market goods and services depends upon the activities of businesses and individuals, some of which have been placed under severe strain in recent years by changing market forces, changing consumer habits and new priorities for public funds. In 2000 Total Income from Farming was at its lowest level for over 25 years, offering an average income per person employed in agriculture of only £8500.
Countryside capital in turn contains the physical infrastructure for rural England's social capital, including shops, churches, surgeries, care homes, banks, schools and community facilities. The charities, businesses, organisations and support structures who operate these facilities helped many families cope with crises such as those created by Foot and Mouth disease, or other disruptions which have arrested normal life for rural residents. Public investment and action is essential to ensure the protection and enhancement of Countryside Capital to benefit households in urban as well as rural England and businesses in rural areas which depend upon it.
Healthy Rural economies are thus important because:
- they contribute to the health of the UK economy and to government programmes to strengthen our competitiveness with other countries, to make the UK the best place in the world to do business, to raise productivity and to reduce disparity between structural weaknesses in labour markets of different regions.
- As we will explore in the next chapter, to maintain this contribution and release further potential decision makers should focus attention beyond farming and tourism and work to strengthen the value of key rural employing and business sectors to those who live in rural areas. Those who steer and support firms should be helped to recognise the scale of their rural footprint and work to eliminate causes of economic disadvantage, anticipate rather than react to business failures, provide appropriate business support and strengthen local supply chains as well as the skills of their workforce.
- Growth in business stock and job creation in rural areas has been greatly assisted by in-migrant households who account for up to two-thirds of all new businesses. Between 1999 and 2000 rural England experienced a net change of 103,000 people moving from urban areas. Cultivating more of these in-migrants to work as well as live in rural areas, should be the aim. Refocusing programmes such as Inward Investment and environmental improvement to extend the attractiveness of more parts of rural England to such in-migrants would help to raise the level of business start-ups.
- they determine the social and financial well being of over 5.2 million rural households. Households in turn contribute to the health of the wider economy through the formal labour market or by running their own businesses, informally through the community and social economy, and as consumers of goods and services. Many rural households combine self employment, employment, pensions and other benefit payments and other income to secure their standard of living. But, for almost a quarter of rural households total
- income still falls below a threshold of <60% of median income - an indicator of poverty. Within low income households, self employment, especially for women, often provides poor rewards.
Economic planners, policy makers and employers should work to improve engagement with the labour markets for all disadvantaged groups, and make self employment and employment a more financially rewarding experience. To achieve these aims, those who support the economically disadvantaged need to understand the influence which other household income and duties, (such as caring for children) have on their ability to take up economic opportunities. Whilst raising the levels of women running their own businesses, or increasing the competitiveness of business and the productivity of employees are important goals of national economic policy, support programmes which have at their heart raising the economic well being of households should replace such single objective policies.- they impact upon Countryside Capital extending from the finest countryside of our remotest areas to the fringes of our towns and cities. As well as underpinning rural businesses including food production and tourism, the rural environment provides many non-traded goods and services which are highly valued by society.
- Reforms are needed to those policies and programmes which support or regulate those who farm, manage woodlands and wetlands, maintain vernacular buildings and conserve our wildlife and heritage, to assist these managers to sustain and enhance our Countryside Capital. Targeted action is needed to improve the quality and delivery of the rural tourism product so that visitors can contribute more to this national asset. Support should be provided to rural communities and businesses to invest in traditional and innovative products and services which draw from and help to sustain Countryside Capital.
How can we improve economic opportunity for rural residents?
Policies and programmes for healthier rural economies should be focused on:
- overcoming weaknesses for those rural residents and communities who are currently disadvantaged as a result of their rural location; and
- exploiting opportunities to secure competitive advantage for the benefit of their employees, owners and their communities by strengthening or extending the qualities of rural areas which set them apart from urban England.
- securing growth in incomes;
- increasing the participation of women, young and unemployed in the labour markets, including as business owners;
- reducing business failures; and
- increasing the stock of businesses. Many of these have particular importance or require different approaches to their delivery, whilst others are specific to rural economies.
Some of the weaknesses identified justify intervention by public sector bodies or those using public funds either because:
- "there are market failures which result in economic inefficiencies and which can be corrected or overcome through government intervention; or
- there are distributional considerations which justify government intervention irrespective of the efficiency or otherwise of market processes." (PIU, 1999 - Rural Economies Annex A3)
In rural areas market failure may be associated with four broad phenomena - public goods, externalities, imperfect information and structural economic adjustments.
As the government's advisor on the needs of the people and places of rural England, we advocate intervention within this framework. However, we are also mandated to undertake some functions on behalf of government, including 'rural-proofing' government policies and running programmes which help to reduce economic disadvantage and raise economic opportunity for rural residents and businesses. Many of our responsibilities were laid out in the Rural White Paper.
Our Vital Villages programme, for example, seeks to raise the viability and accessibility of service enterprises such as shops, pubs, Post Offices, transport and child care operations, whether run by individuals or communities. Through our Market Towns and Finest Countryside programmes we help people to identify the economic and social needs of their communities and then to work to overcome some of the weaknesses. Projects pursued by our Rural Services and Enterprise, Land Management and Tourism programmes have increased our understanding of the employment and business needs of rural areas. They have also generated solutions helping more rural residents to gain employment, start businesses and access appropriate support.
Not all weaknesses warrant a response from government - central, regional or local. Many of the key employing and business sectors of rural England have strong representational and employer organisations, for example the National Farmers' Union, Federation of Small Businesses, British Chambers of Commerce, Institute of Chartered Accountants of England and Wales, Engineering Employers Federation. These organisations provide information, offer advice, establish qualifications, and organise and deliver training and other services for their members, enterprises and employees in their sector.
Some of these sector bodies or composite bodies, such as LANTRA, Business in the Community or Rural Shops Alliance, have membership or activity which focuses heavily upon rural economies. As such they may be better placed to assist their rural members and take steps to build stronger rural economies - but many do not. We will develop our relations with such organisations to secure an improved understanding of, and commitment to, the rural dimensions of their sectors and the needs of their rural enterprises, employees and residents.
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This will help other government departments, agencies, local authorities and other public and private bodies to develop and deliver support to overcome economic disadvantage and raise economic opportunity for rural households. It will have spatial, sectoral and community dimensions. It will build upon the analysis for DEFRA by Professor Hill of the statistical sources for social and economic issues for rural areas, and our State of the Countryside and other Countryside Agency studies such as, The Economy of Rural Gloucestershire (Gloucestershire Labour Market Information Unit for Countryside Agency, forthcoming). The framework will also be informed by the Healthchecks being developed under our Market Towns programme.
The following sections consider the evidence under the five distinct attributes of rural economies which have been introduced earlier, identifying in each the 'stepping stone to healthier rural economies':
- the four key employing groups in the economies of rural areas - secure winners in all sectors
- the role of in-migrants to rural areas - attract the in migrant
- the economic and social contribution of households - act by households
- the contribution and dynamics of rural self employment - cultivate the self employed
- the influence of the land and its goods and services - exploit countryside capital
Each section concludes with proposals for action by the Agency and others.
1. Secure winners in all sectors
To maintain and extend the significant contribution which rural economies make to the UK economy requires better engagement with those business sectors which make the most significant contributions to rural economies.
Of the 5.22 million employees of rural workplaces, almost 80% work in four broad industrial groups:
- Distribution, hotels and restaurants;
- Public administration, education and health;
- Manufacturing; and
- Banking, finance and insurance,
A slightly different mixture dominates rural business stocks, with Real Estate (largely equating to the Banking etc. employing group), Agriculture and Construction occupying leading places with a greater share of rural business though with lower numbers of rural employees. The average employee size of the 46,493 enterprises in Public administration, education and health (25 employees) and Manufacturing (17 employees) contrasts with the dominance of micro-business (1-10 employees) in firms in Distribution, hotels and restaurants with an size of 8 employees. Both Agriculture and Construction take up a greater share of business stocks in rural districts than in urban areas.
Many of the firms and employees in these key sectors play a critical role in reducing economic disadvantage or inequality of rural residents. Retailing, for example extends in rural areas from organic box schemes, farm shops, farmers markets and other local food links to village stores, to the core activity of the high streets of Market Towns through to the factory outlet and mill shopping villages such as Clarks' of Street of Somerset. The 130,000 firms in rural areas help to bring fresh food and healthy lifestyles to rural residents, link urban consumers with rural producers, provide an important service locally for the less mobile, offer activity and goods to rural visitors and not least provide employment, often on a part time and casual basis for ?????? 00000 employees especially women.
Understanding and profiling these key employing groups helps to explain some of the causes of economic disadvantage for example income deprivation. All these key sectors have a role to play in increasing economic opportunity for rural residents.
However, at a national level, little attention has been devoted to their economic footprint in rural England - perhaps because they are also dominant in many urban districts.
Government strategies currently fail to acknowledge the contribution of key employing business sectors to economic opportunity for rural residents or economic health. This can be seen in overtly rural strategies, such as the England Rural Development Plan, or insectoral strategies eg Government's Manufacturing Strategy; or in regional plans such as the Regional Development Agencies' Regional Economic Strategies and Cluster Action Plans.
Insert Rural Employment chart |
Insert Rural Businesses and Workplaces Table |
With a rural workforce of over 1.2 million the 46,000 firms or organisations in the Public administration, education and health sectors exert a strong influence on rural economies. Firms and organisations in these sectors have a central role in addressing economic disadvantage of rural residents, in promoting economic opportunity for all, in maintaining services and social capital of rural areas and in securing countryside capital. Their influence operates through the wage packets of their employees, through sourcing of goods and services and through the services provided to rural residents and businesses. Such services extend from housing, schools and health services to their wider roles in economic development and business regulations.
Not all of these firms or organisations are public sector employers - they also include opticians, pharmacists, other therapists, residential care homes and other private health enterprises, private schools, colleges and training companies, though many of these depend for at least part of their income on public funds. Curiously, the sectors' role as a rural employer has been little explored. The few indications that do exist, call out for us to remedy this lack of understanding, to overcome inherent weaknesses and utilise the sector to strengthen rural economies.
- Market towns in the South West region have significant public service employment (e.g. in Kennet District, Wiltshire 41% of employees are in this sector), though those in the North East region display the strongest concentration, with twice as many jobs in this sector as the region's share of all market towns would suggest.
- The rural self employed on very low incomes worked disproportionately in service industries especially in education, health and social services and were less likely to be employed in the retail and wholesale sectors.
- Part time working is more commonplace in rural than urban areas. With the Public administration, education and health sectors employing one third of rural part time workers, its firms are an important provider especially for women who need local and flexible employment to balance with family caring and household activities.
- The proposed closure of a University-sector college in Ripon in 1999 would have resulted in an estimated loss of 260 jobs, of which 85% were taken by local residents, and nearly £6 million in disposable income to the local economy.
- A third of the staff of the Northumberland National Park Authority live within the Park boundaries.
- Many of the social economy organisations fall within this
sector. Herefordshire and Worcestershire's 2000 social economy
organisations are the equivalent of 8% of the areas' VAT registered
businesses. In 1999 they used nearly 50,000 volunteers and provided
an important stepping stone to the formal labour market for many
volunteers, young and unemployed people. With almost 900 training
courses, together with confidence building and skills development,
they helped an estimated 1000 volunteers enter paid employment. In
addition they provided significant services for the elderly, the
young and families with children.
Manufacturing firms make up more than 10% of the business stock
in 33 rural local authority areas and they are not concentrated in
accessible rural areas. The East Riding of Yorkshire had the
largest number of manufacturing workplaces of any rural authority
in 2000, and in 1999 46% of employees in the Lancashire Rural
Priority Area were working in manufacturing especially aeronautical
engineering. Both as remote rural districts by previous rural
classifications.
- Manufacturing employment has been declining but it still contributes 20% of national GVA. Manufacturing contains at least 23 sectors in rural areas. Some such as Food and drink processing and production and Manufacture of pulp and paper products have some association with the land. Others relate to engineering and include growth sectors such as aeronautical engineering and manufacture of precision instruments.
- INSERT MANUFACTURING EMPLOYMENT TABLE
- The overall rate of decline in Manufacturing employment has been slower in rural areas than in urban areas, but in some districts and sub sectors there has been an absolute growth in manufacturing employees.
- The textiles and clothing industry has shed more jobs than
agriculture over the last 20 years. Only 33,500 people are now
employed in rural areas, but manufacture of textiles and clothing
is still an important employer in many Market Towns and rural
wards. This is especially so for those rural areas close to the
urban heartlands of textiles in the East Midlands and Lancashire,
as well as in South West England. Although textile employment has
declined significantly in several rural areas, firms in rural areas
in North Lincolnshire and South Derbyshire are now employing more
workers. (DTZ Pieda, 2002)
- The New Earnings Survey showed that in 2000 average pay for some textile workers was just 61% of the national average hourly rate. Across all sectors in Britain the hourly rate was £10.28/hr and in manufacturing £9.72/hr. Across the clothing and textile sector the average hourly rate was 24% below this Manufacturing average rate. This example may help to overcome the misconception that low earnings in rural areas are due to dependence on land based employment and low paid seasonal work in tourism. It also demonstrates the importance of undertaking spatial and sectoral analysis of rural economies, as only such analysis will reveal areas of growth and potential as well as of decline in need of attention.
Weaknesses in manufacturing sectors leading to loss of economic opportunity for rural employees include:
- A majority of rural employees in manufacturing work in the 12
lower value, lower waged processing sectors with fewer (395,000)
working in the 9 finishing sectors
- Some rural localities have high employment dependency on manufacturing employers e.g. Dursley and Wootton-under-Edge in Gloucestershire with over 50% of employment in manufacturing firms
- Rural firms generally expressed a high degree of satisfaction with premises and sites, but many of those contemplating relocation because of lack of growth premises or dissatisfaction with premises were in manufacturing.
- Manufacturing (and retailing) micro-business purchase a large
proportion of their business inputs from beyond the rural areas and
regions in which they are located.
With over 4 million employees, at least half of all rural self employed and over 400,000 firms, those operating in
Public administration
Distribution
Real estate/banking and
Manufacturing
occupy central roles in addressing economic opportunity in rural areas. Surprisingly, national and regional agencies have a poor understanding of the rural footprint of these employing groups, though many local authorities and other agencies recognise and work with such firms and organisations. This lack of knowledge should be remedied. Many rural self employed on very low personal and household incomes work within these sectors either as business owners, part time self employed or as employees.
The public administration, education & health and Retail/wholesale sectors also deliver or fund many of the services needed by rural households and contribute substantial employment in many Market Towns. Strengthening the business health of manufacturing and supporting sectors would help to retain rural England's contribution to the overall economic health the English economy as well as the capacity to add value to the products of Countryside Capital. The work of firms and employees in sectors such as construction, forestry, conservation and environmental industries also strengthens the natural and built heritage of rural England: those working in the hospitality and transport sectors help residents and visitors to enjoy this asset. Ensuring the viability of such firms would help secure a sound economic base for providing such benefits in the future.
Developing more comprehensive profiles of the main employing sectors in rural areas would help many agencies to appreciate the need to ensure that their strategies and programmes reach these firms and aid their employees. We will work with DEFRA and DTI to develop such profiles, including a spatial dimension.
RDAs and sub-regional economic partnerships should ensure that revised Regional Economic Strategies, Rural Development Programmes and other economic strategies identify how they will further the contribution of key business sectors beyond farming and tourism to rural employment and economic health.
The loss of rural shops and reduced economic health of many
Market Town high streets requires greater support
for retailing businesses and action to
strengthen the quality and attractiveness of retail employment.
This sector has long been neglected by government departments and
business support agencies.
2. Attract the in migrant.
Whilst the overall level of business change is similar in rural and urban areas, this disguises lower rates of business registrations and de-registrations in rural areas. In 1999 almost three quarters of rural local authority areas had business start up rates lower than their regional averages. An aim of the Small Business Service and other parts of central, regional and local government must be to boost the numbers of business start-ups. Such growth can come from four sources - long term rural residents, new businesses created by existing rural business owners, incomers to rural areas, and relocating firms from urban locations.
Of these drivers of change, incomers make a more significant contribution to new business start up, than business relocation, but they recieve less attention from policy makers and funders of economic development.
".. economic planners and training and enterprise councils could capitalise upon in-migration, especially amongst those with entrepreneurial skills." CA 1999, Migration impacts in Rural England)"In addition, the quality of the environment in rural areas can be important for attracting individuals to live and work in these areas..." (The Environmental economy of the West Midlands. Advantage West Midlands et al 2001)During the 1990's an average of 90,000 people per year moved into rural England, principally from urban areas. In 1999 - 2000 there was a net change of 103,000 people moving into rural areas from urban England.
Across rural England around 40-45,000 new firms (or 8-10 % of the rural business stock) are created, or at least registered for VAT, each year. Whilst it is not possible to look behind these start up data for the origin of owners, evidence from a variety of surveys of rural firms, employers and micro-business, and into migration, gives strong indications that many of these new rural businesses are started by in-migrants and their families.
Whilst most urban firms are started by locally-born owners, a large sample study of rural businesses in the early 1990's showed that between 60% and 66% of rural firms were started by owners who moved to rural areas from outside. Four out of five migrant founders stated that the quality of the environment was of some, or great, importance in their decision to move. The location of rural areas influenced the scale and indeed the type of business they operate in. More founders of firms in accessible rural areas moved before making the decision to set up in business (52% against 36% for remote rural areas) whilst in remote rural areas a further fifth of all business owners moved in order to set up their firms.
Around half of the 1,300 non-agricultural rural micro-businesses surveyed in the late 1990's across Northumberland, Co Durham and Tees Valley had been started by in-migrants. Of these, twice as many had moved with no intention of starting a business as those who moved having planned self employment.
In migrants were clearly more attracted to operate enterprises in some sectors than others. In rural North East hospitality firms were dominated by in-migrant husband and wife partnerships contrasting with businesses in construction, transport and personal services run by local residents. In accessible areas, incomers seem to prefer business service and production firms, i.e. business to business rather than business to consumers operations.
Quality of life in rural areas is one of the prime influences upon the decisions of in-migrating business owners, but in some areas it is less influential than good communications to connect to customers or workforce, and premises advantages.
Self employed migrants create many rural jobs, thus raising economic opportunity for rural residents. This is true even in former industrial areas such as the Wear Valley in Co. Durham and in rural areas of greatest social and economic disadvantage, i.e. Rural Priority Areas.
"....one of the greatest labour market gains in rural England resulting from migration has been the generation of new jobs by self employed migrants." (Countryside Agency, 1999)In five rural areas from Alnwick in Northumberland to East Devon, over 20% of the 265 heads of in-migrating families were self employed. A further 38 adult members of these households were similarly described as working either on a full or part time basis. Two fifths had not been self employed before moving to the area. Although 80% of these self employed were sole traders across the study areas, they also created a further 370 full or part time jobs. The study authors extrapolated this average of 2.4 new jobs per in-migrant to suggest that across rural England each self employed person moving to rural areas created an additional 1.7 jobs, with strongest job creation in manufacturing and services.
In-migrating business owners build upon their contacts with previous location and networks to secure business support, appear more likely to sell into regional and national markets than locally born business owners, and appear to use business support services more. However, they may also create or reinforce some social and economic weaknesses.
"There is real evidence of a twin track economy with relatively wealthy inward migrants and those in employment around the main settlements contrasting harshly with the poverty and exclusion found within these same settlements and more significantly in the more remote outlying locations." ( North Cornwall District Council, 2000)In migrants are more likely than long term residents to own their homes outright, use bank facilities in more distant urban centres and out of town shopping centres for weekly shopping. These personal buying habits - which may also be seen in commuters - compound more widespread and substantial business expenditure in non-local markets and are a loss to rural areas
(Insert Tables - Leaky Consumer Expenditure (CA 1999) and Leaky Business Expenditure (cre 1999) here |
Evidence of the scale of in-migrants contribution to economic opportunities - employment, business creation, market extension - offers a challenge to those responsible for rural economic development - how to capitalise on households' and relocating firms' desire to move to attractive rural areas, and create economic opportunities, whilst integrating them into local communities and reducing any adverse social impacts.
Unless in-migrants move to rural areas upon retirement or with the intention of setting up a business, in-migrants often become commuters. Evidence from the case studies of the contribution of women to rural economies suggests generally that male partners engage in longer distance commuting than their spouses and partners and that travel to work is principally by private cars. Is such commuting sustainable in environmental or social terms? Can such commuting be reduced?
Action -
National, regional and local economic regeneration agencies operate programmes to attract mobile investment and relocating companies. Such Inward Investment programmes are operated by InvestUK and the DTI and in the regions by InvestUK and RDAs. Levels of Investment are one of the Regional Competitiveness Indicators. There appears to be no source of information which records the scale of such programmes in rural areas and funds provided for rural areas.
The attributes of an area's labour force and its communications infrastructure to connect with customers and suppliers are the key attractions marketed by the agencies engaged in securing Inward Investment. However, the quality of the environment as a place to live and work is beginning to be recognised by some agencies, especially in more rural areas such as Cumbria and Shropshire.
"Inward investment and economic development organisations in the region need to recognise and promote the role of the environment in retaining and attracting investment and skilled personnel in the region. ........Regional regeneration programme should accelerate improvements to the physical environment in the West Midlands……to maximise economic, social and environmental benefits, making areas more attractive places to live and work….." (The Environmental Economy of the West Midlands. AWM et al 2001)DEFRA, RDAs and Invest UK should work together to determine the components and influence of good quality environment and environmental improvements on inward and other business investment and attempt to quantify such influences on jobs, business creation, skills, and quality of life.However, Inward Investment programmes are not focused to attract or support one of the principal sources of new businesses in many rural areas - in-migrants.
To extend economic opportunity for all, local authorities and other economic development and regeneration agencies at regional and local level, should:
- examine their economic strategies and priorities for rural areas to ensure that incomers' contribution to rural economies has been recognised; and
- explore how to promote funds, business support and training programmes available to in-migrant households in rural areas, from national and local organisations.
These should include national programmes such as LEADER+ and the Rural Enterprise Scheme as well as programmes supported SBS/Business Link and Learning and Skills Council.
We will offer to co-host a working group of representatives of private sector and public authorities to examine how best to:
- recognise potential business owners within in-migrating households;
- develop suitable promotional material about self employment opportunities in rural areas; and
- signpost such incomers to information and advice about business support and training, at the most appropriate time and in the most sensitive and appropriate manner.
The first contacts made in rural areas by those contemplating moves to those areas could become a useful channel to encourage such incomers to consider the area for work, as well for living. Such contacts range from property agents, solicitors and local media to educational authorities and local authorities' council tax departments. These may gain a useful, if confidential, insight into the household circumstances and work/living intentions of would be in-migrants. By sharing this information with their own economic development units, local authorities could make early approaches to new residents with offers of information and other advice which might increase the number of business start ups.
Of course such contacts may have been made already by in-migrants who move with the intention of starting businesses. For example they may have approached business support agencies and other advisors in the location from which they are departing. Improving links between agencies in departure and entry locations could make the transition of lifestyle and work beneficial to both households and rural economies
3. Act by Households
Whilst employment and self employment are two of the most
recognisable and analysed forms of economic opportunity, households
also access other sources of income to achieve an acceptable
standard of living. Similarly, the economic health of local areas
depends upon the scale and nature of all income flows.
Academic and policy literature describes the symbiosis between enterprise and the well-being and operation of households. This has been long recognised in relation to farming families and in recent years has been given greater exposure for other rural micro-businesses. Area based and soft research of rural micro-businesses reinforce statistical analysis of self employment in rural areas and show:
- setting up and running a micro-business is usually seen as part of a jigsaw of income generating activities for the household
- livelihood sources include income from employment -long term and casual, private income (for example inheritance; pensions and state benefits; and earnings from the businesses;
- several generations may be involved in the business venture with parents contributing child care, help in the business and even funding, whilst offspring work casually or occasionally in the firm;
- with around a third of micro-businesses being run from home, non-family labour often have a closer relationship with business owners' families than in urban firms; and
- business owners and spouses pull together to adjust this jigsaw for the benefit of the firm and members of the household.
Many of these intergenerational attributes are less apparent in urban micro-businesses.
The interconnectivity of these activities seemed to explain some of the survival responses to Foot and Mouth Disease in Cumbria, which included:
- reduced business turnover resulting in cancellation of capital investment and maintenance expenditure;
- reduced business turnover resulting in cut backs of household expenditure; and
- self employed or informally employed family members returning to run the household or rear the family.
The scale of financial contributions from these streams of income to households and rural areas can now be established. The average household income of the self employed was more than double the average personal income of the self employed. Consequently, whereas 44% of rural self employed reported earnings of less than 60% of median income, no income or a loss, only 23% of these people lived in households with a total net income of less than £150 per week. This results:
- from self employment for many rural residents being both a part time and a secondary form of employment;
- because nine out of every ten self employed live with at least one other adult and
- because of other sources of personal and household income.
Nevertheless, 16% of rural self employed people have earnings of less than £150 per week, compared with only 4% of rural employees.
Households thus shield vulnerable members and in many cases help to limit the disadvantage caused by low personal income.
Analysis for the Countryside Agency of the Family Resources Survey 1998-2000 establishes the scale of contribution of self employed earnings and other income streams to rural economies.
Insert pie diagram of contribution to rural economies from self employment |
Recently released data from ONS extends and confirms this understanding, showing that in many rural counties income other than wages and business earnings provides a substantial share of the areas' household income. For example, in rural parts of the North West Region 30% of the population are retirees, compared to only 18% across the population of the region as a whole. In 1999, pension income in Cumbria amounted to an estimated £979 million. This situation is repeated, particularly in areas of high commuting and attractive to retirees where the contribution of employees' wages to rural economies was often less than half of the area's income.
Insert Chart - Composition of Household Income by rural counties |
Retirees may also be an important source of self employed. National research has shown that the Third aged (i.e. above 50 year olds) now account for an estimated 15% of all business start ups, that a quarter of all rural self employed were over 55, and 12% were in at least one pensioner households.
Many streams of household income are drawn from outside the residents' economy, for example occupational and public pensions, dividends and property receipts. Similarly, many of the uses of this Household Income may find their way outside the resident's economy, especially payments to state and private pensions, insurance and other benefits. Examination of household incomes provides a more holistic and useful way for economic planners and decision makers to quantify non-local, unearned income and explore ways of servicing the consumption of goods and services which it supports to the benefit of rural economies.
In contrast, traditional portraits of local economies (e.g. HM Treasury Regional and Rural Productivity analyses and Objective 2 Single Programme Documents) focus upon those in employment, those officially unemployed and upon the average wages of these 'economically active' residents. Although other residents contribute to local economies - e.g. pensioners, disabled, others on benefit payments, casual employees and spouses of employees' or business owners unable to work more than 16 hours a week due to caring responsibilities for children or elderly relatives - they are categorised as 'economically inactive'. At best they may be addressed under social exclusion programmes. This is an unfair assessment of the breadth and value of their activities to local economies. Pensions are often a source of funds for offsprings' businesses or are the secure income around which in-migrants can build new businesses. They may also allow casual work or mothers to work part time. These are an important sources of employment to rural shops, farm enterprises, catering and other firms in the hospitality sectors and pensioners are an important share of regular volunteers and users of social economy organisations and community enterprises. For example, in Herefordshire nearly half of the 12,221 regular volunteers were aged 60 or over.
The broadest measure of an economy's productivity is GDP per capita. By comparing this measure with Gross Disposable Household Income (GDHI) per capita, using an index of these measures to allow comparison across the UK, the scale of economic impact of commuting, pensioners and other non-local sources of income can be established. Such data is not available for rural local authority or lower levels. However, we can see the effects in rural England by using rural counties such as North Yorkshire where GDP £ per capita (averaged for the 1997-99 period) was 89 compared with GDHI £ per capita of 107. Commuters from North Yorkshire contribute to the GDP of businesses outside the area but bring back wages to their places of residence, whilst the county's retirees similarly draw from public and private pension funds outside the area. The greater the difference between the two figures the greater the economic effect of commuting and retirees.
Commuters and retirees contribute to the GDP (now referred to as Gross Value Added (GVA)) of the businesses and organisations in which they work or indirectly to those businesses from which they purchase goods and services. However, commuters especially often make larger weekly purchases out of their local areas and in the towns and cities where they work.
Insert Tables here of residents shopping and business expenditure |
Using GDP and GDHI in tandem allows economic development agencies to see the value of measures designed to increase employment within rural areas, to reduce the scale of commuting and to provide more residents' needs with public services and private goods from within the area, for example by developing shop local schemes to encourage consumers and businesses to make more of their purchases within the area.
Action -
Policies and programmes to strengthen rural economies should move away from the perspectives of individuals and start from the decomposition of areas' household income. Beneficiaries of all income streams would become appreciated for their financial as well as their social contribution to rural areas, and this route would address needs in a way which more closely reflects how residents themselves engage all their members and balance their streams of income and outgoings.
This more holistic approach to the beneficiaries and drivers of economic and social opportunity should be placed at the heart of new programmes and approaches to securing sustainable development for rural England.
Government should adopt Raising household disposable income as a core objective for its work in rural England. This will require:
- An exploration - particularly by DEFRA, HM Treasury, DTI and DWP - of the focus, coverage and merging of objectives, programmes and targets to raise productivity, business and regional competitiveness, and reduce poverty of income and poverty of expectation and ambition, for the benefit of rural economies.
- An analytical framework to further understand and describe the dynamics of rural households, how they balance economic opportunity and risk, and how they use the various income streams;
- That economic development agencies should be able to measure Gross Disposable Household Income and its components at the level of individual local authorities (NUTS 4) and below.
Take up of employment opportunities, pursuit of self employment and even applications for benefits are constrained or informed in rural households by the range of their economic opportunities and by their income:expenditure pattern. The Job Centre plus is demonstrating an ability to look not only at the employment needs of its immediate clients in rural areas, but also at the wider needs and circumstances of other household members - for example, considering child care provision and funding, support for training, self employment options and transport to access information and employment and benefit payments for clients and other members of their households This provides a practical demonstration for more agencies to extend their engagement with households.
A more holistic understanding of households' economic activity might further the ability of business support and economic development agencies to identify businesses run by self employed prone to failure and anticipate unemployment and hardship and provide additional routes for such agencies to promote advice on business start ups or training. It might also provide routes for household members other than those in unemployment or self employment to secure guidance or to direct assistance to overcome weaknesses which may arise.
The government already measures Gross Disposable Household Income (GDHI) as one of their Regional Competitiveness Indicators to compare the competitiveness of regions. It appears to have little use at regional level. We recommend that the DTI Regional Policy Unit, RDAs and Government Offices in the Regions examine how this information could inform the targeting of their work to secure benefits to households, and that this household approach and objective be placed at the centre of Rural Regeneration or Action Zones, and any successor to Rural Priority Areas and Rural Development Programmes.
4. Cultivate the self employed
In-migrants to rural areas are a significant source of new businesses, and are counted amongst the estimated 470,000 self employed in rural areas. However, many more people moving to rural England add to the existing pool of labour, which in 2000 amounted to 5.22 million working in rural workplaces. Whilst most economic surveys and business and labour statistics record these as individuals, in reality many rural households contain employees, people in self employment, people seeking work, retired, and individuals classed as economically inactive. Sometimes these activities are pursued by the same individuals.
Around four in every ten rural workers (41%) are employed in the 540,000 rural micro-businesses (i.e. those with between 1 and 10 employees). Micro-businesses make up similar proportions of businesses in rural and urban England, but urban micro-businesses employ only 29% of the urban workforce. Some sectors are dominated by these very small businesses, for example Real estate and distribution, whilst the average firm in sectors such as Public administration, education and health is larger.
Similarly complex patterns emerge from studies of self employment. Half of rural self employed work in construction, wholesale and retail and in Real estate, with only one in ten working in agriculture or manufacturing.
A further understanding of the nature and scale of economic disadvantage for some residents in rural England can be gained from a comparison of some characteristics of rural employment and self employment. This has been drawn principally from an analysis of the Family Resources Survey between 1998-2000 as part of a study for the Countryside Agency into rural self employment and low income. The study also introduces those for whom self employment is a route to better economic opportunity.
- Men and women make up a broadly equal share of rural employees, but more than twice as many men as women are self employed and enter self employment each year, and women had higher exit rates than men.
- Rural self employed are older than rural employees, with an average age of 47 and almost 60% of them between 35 and 54.
- Over a third of self employed owned their house outright - more than for rural employees - with the majority living in houses in higher council tax bands
- Self employed tend to be more highly skilled than rural employees with a greater proportion in the top occupational categories and in the skilled manual workers category.
- Whilst a third of self employed work from home and less than 40% work away from home in business premises, all but 9% of rural employees work away from home in the same business sites.
- Average total net personal income of the rural se (£166 in 1998-2000) was less than the average earnings of rural employees (£196) but their average household income was increased to £368 because of other employment and income sources.
- Whereas only 4% of rural employees had net household incomes of £150 per week (equivalent to 208,000 workers in 2000) 16% of the rural self employed were in the same position. Similar proportions claimed income related benefits (4%). This suggests that many of those 11% who drew no income from self employment or made a loss and their business was failing to claim benefits to which they were entitled.
- On the other hand, almost double the proportion of self employed had high personal incomes, with 17% on more than £400 per week compared with only 9% of rural employees.
Self employment and employment cannot be neatly separated, as
- Many individuals are both employed and self employed. This is especially the case for the one third of rural self employed on less than 60% of the median income for self employed. These are most likely to be from the following groups - women, over the age of retirement, work part-time, have two or more jobs with self employment as their second job, and work in service industries (see Public Administration, education and health above)
- Many rural households have both employees and business owners
- The rural self employed who drew no income or made a loss from their self employment are likely to be business owners, even more of them have second jobs than the low income earners and a third employed between 1-24 workers.
- Just under half (45%) enter self employment from employment, especially so for men, and just over half (48%) left for employment, again especially so for men.
There are some very vulnerable groups amongst rural self employed, especially the estimated 75,000 on very low earnings, who particularly include women and people above retirement age, and the 230,000 (50%) who become self employed from unemployment or economic inactivity. This latter group includes many reluctant or necessity entrepreneurs, one of two categories used by the Global Entrepreneurship Monitor to compare entrepreneurial activity across 29 countries, including the UK.. In the UK the ratio of opportunistic entrepreneurs was 5 in every ten self employed, compared with only 1.4% of those who start businesses because the have, "no better choices for work."
Research into financial provision for enterprise in disadvantaged communities used by the Bank of England, "shows that many such 'reluctant recruits' either quickly drop out of self employment or become 'plodders' rather than ambitious business owners." It is important then that these potential self employed are supported before and after starting out in self employment.
In rural areas some unemployed young people have been helped into self employment through the New Deal self employment option. Others, especially young people from disadvantaged communities, have been encouraged to see that self employment offers an attractive alternative to leaving rural areas as a result of lack of suitable employment.
Self employment also captures around 10% who, though they are likely to be at the opposite end of the social and managerial classification, are struggling to draw earnings from their businesses. The economic vulnerability of this group may be experienced more by their employees, as this category of self employed are more likely to employ between 1 and 24 workers than other categories of self employed.
A third group of rural self employed might reasonably be equated with the 'opportunistic entrepreneurs'. These are more likely to be self employed full time and be amongst the 56% whose personal incomes are more than 60% of the median for self employment or the 17% on income of more than £21,000 per annum.
A fourth group would include those for whom self employment supplements their or their households income and are likely to include the 12% of rural self employed in one or more pensioner households and women working part time in self employment.
Those for whom becoming their own boss, or devoting more time to skills not required in their principal or previous job is part of a lifestyle decision comprise the final group of self employed. These individuals may draw little income from their self employment. However, as they are more likely to live in households with an income of more than £400 per week, their low earnings do not lead to hardship. For example arts and craft practitioners in North Yorkshire gave 'personal fulfilment', 'lifelong ambition' or similar reasons as their motivation, and none gave 'making money'. Nearly 80% had incomes of less than £20,000 per annum and two thirds had other jobs or other income to supplement their arts/crafts income. Other groups such as the one in six very small businesses in Gloucestershire who gave personal fulfilment and similar objectives, or the 33% of owners of micro-business in the rural counties of North east England who definitely did not wish to grow, demonstrate that this view of self employment is widespread.
The owner's motivation may be a constraint upon securing greater economic opportunity in rural areas and will impose some limits upon programmes to increase productivity in rural firms. Many owners of micro and small businesses do not follow ambitions or routes to growth expected by some economic policy makers and planners.
Self employment is currently encouraged by a wide variety of public, voluntary and private organisations. (see Smallbone et al, 2002 and Lyon et al 2002 for a commentary and review of support needs for rural self employment) and this has caused confusion. We have supported research and demonstration projects in:
- the East Northumberland Rural Coalfield, aimed at stimulating entrepreneurial activity in an area with little tradition of self employment as a means of economic regeneration;
- the Yorkshire Dales, to provide financial, business and peer group support for micro-business start-ups by young people (18-30), and
- in Devon, to provide support, information, counselling and training in business skills, to secure employment for socially and economically disadvantaged young people (16-30).
Some of the principal sources of support include Business Links, local Enterprise Agencies, the Employment Service, local authorities and NGOs such as The Princes Trust. Recently the Small Business Service's Phoenix Fund has offered funds to a few rural voluntary sector bodies such as Voluntary Action Cumbria and the Goole Development Trust to develop ways to advise, mentor and otherwise support the self employed in rural areas.
Action -
As this typology of rural self employed has demonstrated, some of the rural self employed are motivated less by the objectives of income maximisation and competitiveness and do not aim for growth by taking on employees and investing in R&D. Nevertheless these enterprises also contribute to the economic and social health of rural areas, for example by maintaining a shop, post office, garage, or other local service which might have closed if judged against measures of economic viability. These so-called lifestyle businesses make an important contribution to rural employment. Firms without growth ambition supported a quarter of all jobs provided by micro businesses in the rural North east. Enterprise and Prism Research estimated that there were 150,000 owner managed businesses in the South West in 2000 thus making, "an important contribution to employment."
It is important that public business support agencies recognise that these lifestyle business owners may make an important contribution to the social well-being of rural England and they need help to maintain this role. Such support should promote achieving business competency rather than business excellence or business growth, as a more realistic objective for such self employed.
All businesses should explore more flexible patterns of employee working. This would improve economic opportunity, particularly for women, pensioners and other intermittent 'economically inactive'. Organisations and firms in the Public Administration, education and health group are in a pivotal position to develop and promote such improvements, because of their average size and public funding.
Improvements might include:
- introducing flexible patterns of working such as term time working, work sharing and remote working;
- providing in situ child care or after school clubs;
- introducing employee transport schemes. Most rural employees commute by car to their workplace. Such firms and organisations should explore arrangements to improve accessibility for their rural employees, especially for those who work hours beyond daytime public transport operating hours. They may be assisted by working with Rural Transport Partnerships and funds.
- work with DfES and DWP New Deal advisors to explore extension of "Wheels to Work" schemes to enable rural unemployed and young people to take up employment opportunities;.
- public sector bodies which provide significant funds for non-profit organisations, social and community organisations exploring whether more could be done to promote local employment in return for funds.
Self employment is now being promoted to more rural groups, including unemployed and women. Studies of the effectiveness of professional business advice has shown that receiving advice before, or at the time of starting out, resulted in fewer failures and greater growth prospects. (Profiting from Support Barclays Bank, 2002). It is thus important that rural residents can access credible support before and during the early years of self employment.
Evidence exists that business advice in rural areas is non-targeted and uncoordinated. There is a lack of interest - real or perceived - from business support agencies especially towards those pursuing lifestyle business. Poor physical access to business support agencies deters other rural self employed from seeking support from mainstream support and training agencies.
Improvements in mainstream support for rural areas are needed. Young, unemployed and otherwise excluded people in rural areas appear to find voluntary agencies more approachable than government organisations. Almost half of Business Links with a large rural base have no specific policies for supporting rural businesses and that at least a third have poor knowledge of their rural client base. Experience drawn from pilot rural employment or business start up projects which we have supported indicates that public support organisations need to take pro-active approaches to engage unemployed and would-be entrepreneurs, especially in dispersed rural communities. This suggests that other approaches to supporting self employment which complement maintsream programmes may be needed for rural communities.
Such lessons need to be incorporated into current plans to raise the start-up and survival rates of businesses. The DTI/ SBS is currently consulting on the development of a national Birth Rate or Business Start-up Strategy and several RDAs have initiated regional business start-up strategies.
To ensure that rural residents and communities are better served by new Business Start-up Strategies, DTI, SBS and RDAs should:- Put households at the core of their focus and adopt as an objective, Raising household disposable income for public support for new business creation
- Define the support and training needs of different groups: young people; retirees; women; in-migrants; people in employment; unemployed, and target these needs.
- Assess the supply of business support as well as its demand - following perhaps the path adopted by Community Legal Services.
- Draw upon generic and sector-specific business support organisations in the public, voluntary and private sectors
- Generate appropriate business support and training materials for low growth as well as high growth business owners. Strategies should confirm that all owners will be provided with support.
- Link business support to funds available to promote self employment and improved services such as the Rural Enterprise Scheme and the DTI Phoenix Fund for enterprise in disadvantaged groups.
We will use our research, our experience of delivering employment/ self employment demonstration programmes and our rural proofing responsibilities including our role on the Whitehall group addressing services to small firms to encourage greater practical integration of support for rural self employed and latent entrepreneurs from public and voluntary sector bodies. Reducing confusion and frustration for would be clients must be a central aim of future support programmes.
5. Exploit Countryside Capital
We have demonstrated the link between an attractive and diverse countryside and healthy rural economies and have noted that the fabric of the countryside, its villages and its market towns - our Countryside Capital - is essentially the product of economic activity.
Our aim is more jobs and economic opportunities which draw from but also help to sustain and enhance Countryside Capital.
Countryside Capital can provide a market advantage to farmers, food processors and distributors:
- Farmers are finding it difficult to compete in an increasingly globalised market place and, despite substantial subsidy through the Common Agricultural Policy, farm incomes are very low.
- The Countryside Agency's "Eat the View" programme is working to improve the market for products which come from forms of land management which enhance or protect an area's distinctive landscape, wildlife and historic features and strengthen the sense of place of the area in which they are produced. In doing so, they provide an opportunity for the farmer to 'add value' to the product.
- The products of sustainable land management are often marketed and sold locally through farmers' markets, farm shops and in market towns, further benefiting local economies.
- In 2000, tourism attracted a spend of £14 bn, and its estimated 25,000 businesses hosted 80 million visits and overnight stays from domestic visitors.
- Expenditure of £943 million by visitors in Cornwall in 1998 was estimated by SW Tourism to amount to 23% of Cornwall's GDP.
- 18,000 people were directly employed in tourism in Gloucestershire of which 58% were in rural areas, and Gloucestershire Tourism estimated that tourism expenditure indirectly supported a further 8,700 jobs in the county.
- Visitors made over 21 million day and overnight visits to Lincolnshire in 1999 and spent £807 million. This converted to an estimated £973 million, when expenditure by businesses servicing this tourist market is added.
- The estimated 1,000 thatchers, for example, need wheat straw and water reeds from long established beds in Dorset to Norfolk to roof the 24,000+ listed thatched buildings in England.
- Craftsmen from England's 27,500 strong roofing trades maintain other vernacular styles of roofing, from the pantiles of Kent to the stone slabs and green slate of the Lake District.
Countryside Capital can supply us with key services
- Our uplands are important water catchment areas and a resource for wind energy.
- Lowland farmland can be used as washlands for flood defence and to grow non-food crops and crops for energy.
- Our forests and woodlands provide timber, recreation resources and absorb carbon dioxide so helping to reduce the rate of global warming.
- Historic and vernacular buildings in our market towns provide the accommodation for attractive retail outlets, banks and other services.
- Countryside Capital, through its environmental attributes, provides much of the attraction of rural areas for in-migrants and relocating firms. Quality environments need to be conserved and degraded areas improved.
- In recent years there has been growing recognition that a high quality environment can be recreated even in areas of highly degraded landscapes, such as in the former coalfields of the North East and Midlands. This greener environment in turn provides a foundation for generating new economic activity and attracting new investment. This approach has been pioneered through the Community Forest programme, the new National Forest and through coastal regeneration, as in Co. Durham.
Action -
Several policy instruments and structures need to reflect the importance and contribution of Countryside Capital. These include agricultural support programmes, business development and support services, training and skills promotion, and the land use planning system.
Whilst many farmers depend on the support which comes through the Common Agricultural Policy - over £3 billion a year - for the viability of their business, its main focus is on production. As such it inadequately encourages delivery of the wider public benefits from land management and the maintenance and enhancement of Countryside Capital. Less than 10% of the money goes, for example, to agri-environment schemes and related measures to help conserve the landscape and biodiversity, and encourage new public access. The Policy Commission on the Future of Farming and Food was clear that financial support for agriculture needs to be refocused as the basis for a new contract between farmers and society.
Changes are needed throughout the CAP, both in the direct commodity payments to farmers and related market supports, and in the Rural Development Regulation which supports agri-environment schemes and rural development.
The priorities for CAP reform are:
- to shift resources from commodity payments to purchase of public benefits;
- to give member states more flexibility in how money is spent to
benefit their rural areas.
A sound strategy for rural tourism exists in the joint strategy by the Countryside Agency and English Tourism Council Working for the Countryside: A Strategy for rural tourism in England 2001 - 2005. Its aims are based on the concept of sustainable tourism. They are:
- to maintain and increase the availability and quality of employment in rural tourism enterprises;
- to ensure that a high quality of visitor experience in the countryside is available to everyone
- to maintain and enhance the quality of the rural environment; and
- to spread the benefits of tourism throughout rural communities
Key elements include bringing out local distinctiveness, culture and heritage, promoting local produce and gastronomy and encouraging the tourism sector to lend its full weight to schemes aimed at maintaining the environmental qualities of the countryside and encourage visitor spending and investment into initiatives which support conservation
The lessons of the Community Forest programme and other regeneration initiatives need to be mainstreamed into core national and regional regeneration activities. Many of these lessons are already being applied through the Countryside Agency's REACT (Regeneration through Environmental Action) programme, for example in the Advantage West Midlands' Stoke-on- Trent strategic regeneration zone. It is similarly being extended through a theme in the England Forestry Strategy - Forestry for economic regeneration.
The Heritage Lottery Fund has recently examined the depth of skill shortages in the heritage sectors, demonstrating the need for greater support for our traditional craftsmen and women. This is being addressed in part through the Countryside Agency's craft training programme but the extent and breadth of these shortages require concerted action by Learning and Skills Councils, RDAs and others.
The distinctive characteristics of rural England are embodied in the 159 landscape character areas defined by the Countryside Agency and English Nature. Landscape character needs to underpin planning policies and subsequent decisions to help manage change and tailor development proposals to local circumstances and characteristics. Landscape character assessment is becoming more widely used as a basis for setting local plan policies and guiding development proposals, but there is further scope for landscape planning policies to be at the heart of development plans, the forthcoming Local Development Frameworks and at the regional level. There is a need to draw the countryside character approach better into the development control process, encouraging planning applicants to properly respond to and enhance landscape character through their proposals.
The above examples represent a few key routes to exploiting Countryside Capital. Through our research and development activity, we will be working to demonstrate how rural businesses more generally can draw from, sustain and enhance the countryside's capital to the benefit of both.
