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Rural economy and businesses

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The government is committed to improving the quality of life in rural areas. For most people, the availability of a job and having ready access to businesses who supply essential services are fundamental to quality of life. Both have suffered during the recession, so addressing the impacts of the recession in all areas, both urban and rural, and ensuring all areas have equal opportunities to recover is an important part of our work. The effects of the recession have been felt everywhere in broadly equal proportions.

The case for government action

Most people living in rural England are well-connected to local markets and job opportunities by virtue of proximity to nearby towns and cities. This is one of the main reasons why most of our rural areas appear to perform as well as urban areas against most key indicators of successful and sustainable communities (i.e. health, education, employment, crime, social capital and quality of life, etc).

However, the evidence also suggests rural areas are underperforming compared with the national average in two key aspects, housing affordability and economic productivity. In the case of economic productivity the national average is disproportionately raised by the “London effect” and once this effect is removed, rural businesses appear to perform on a par with urban ones. The government also recognises that, despite the general public perception of rural affluence, a significant proportion of people in rural areas experience poverty and deprivation, particularly in more peripheral areas. In addition, whilst the predominance of small and micro-businesses in rural areas have proved to be relatively resilient during the recession, evidence suggests they are recovering more slowly than urban businesses.

Furthermore, in addition to their economic contribution, our rural areas are frequently characterised by rich landscapes and biodiversity, providing public benefits and amenities that are not recognised in a straightforward analysis of economic activity. In supporting sustainable economic growth, we must not lose sight of these features that make rural areas unique.

Latest news

Since May 2009, Defra has been producing monthly dashboards which present a range of statistics originally designed to give an indication of the effects of the economic downturn in rural areas, but which are valuable now as more general measures of activity and progress. The dashboard is updated on a monthly basis. The five indicators used are: claimant count, economic activity, redundancies, house prices, and business insolvencies.

In addition to the rural dashboard of indicators, a further tool has been developed, the England rural Purchasing Managers Index (PMI). This provides a firm-based understanding of the recession and recovery in rural areas. The report provides information on the current state of order books, output and employment, based on purchasing managers’ intentions.

Key facts and figures

Information collected for the dashboard and PMI report shows:

  • On average, rural areas are performing on a par with urban areas.
  • The effects of the recession have been felt everywhere, but generally, the impacts of the current economic situation in rural areas are similar to those in urban areas. Rural areas were slower into recession and emerging from it more slowly. There is also evidence the relative resilience of rural firms has been as a result of absorbing the effects of the recession, weakening rural businesses, which in turn contributes to slower response to improving economic conditions.
  • Most of rural England is well-connected with strong links to nearby towns and cities and good access to local markets and job opportunities. This average position, however, encompasses significant variation. For instance, remoter areas and those historically more dependent on traditional sectors (such as agriculture, tourism and mining) tend to have lower wages.
  • On average, economic structure in rural and urban areas is similar in terms of types of businesses and employment. The main differences are the impact of farming and other land based industries (which can be locally significant, but still represent less than 1% of England’s Gross Value Added (GVA)) and the overall higher proportion of smaller enterprises in all sectors.

The current situation and background

The government’s immediate priority is to continue to support the econom, rural as well as urban, through challenging times.

One of Defra’s key roles is to improve the rural understanding of all parts of government so they are better able to develop and deliver policies which take full account of the particular challenges of rural areas. In that process, we can help others identify gaps, barriers and things that might need to be done slightly differently in rural areas.

Defra is currently putting £3.9 billion into the rural economy over the period 2007-13 via the Rural Development Programme for England (RDPE). The RDPE implements Defra’s agri-environment schemes, assists with the development of farming and wider rural business and aims to improve the quality of life for rural communities.

Access to good quality broadband is increasingly important for the success of all communities and businesses. Broadband enables people in rural areas to access public and commercial services and provides a level playing field for rural businesses to grow and compete. It also gives people better opportunities for improving their skills, education and learning, and finding jobs. The government believes strongly that it is vital all citizens, including those in rural communities, should have access to a good level of broadband service. Defra is working closely with the Department for Culture Media and Sport and the Department for Business, Innovation and Skills to ensure difficulties of access in rural areas are fully taken into account in broadband policy development.

Defra is working with Treasury and the Department for Energy and Climate Change to investigate options available to help those in remote rural areas with the cost of fuel.

England Rural Purchasing Managers Index (PMI) report

The Rural Development Programme for England

Page published: 3 October 2010