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Summary

Britain’s rural areas represent a forgotten opportunity. Their economic contribution – 16.6 per cent of GVA – derives from diverse activities; ‘traditional’ rural sectors such as agriculture and tourism operate alongside a growing presence of agri-tech, energy generation, and manufacturing. The latter accounts for the same proportion of the rural and the urban economy.

However, challenges arise from remoteness, lack of investment, mistaken or outdated assumptions about rurality, and the application of policies designed primarily for urban areas. Different elements of the rural economy are closely intertwined, relationships to urban neighbours are important, and rural places themselves are highly diverse. Policy for the rural economy in the 21st century needs to recognise this integration of issues and the importance of place.

For several decades the direction of rural policy has been substantially determined by tradition and by the Common Agricultural Policy (CAP). Withdrawal from the EU brings the chance to take an innovative and transformative approach, updating agricultural policy and addressing new opportunities and challenges. A place-based approach to rural policy offers the best mechanism to deliver rural policy which both addresses national and global issues and responds effectively to local need and diversity.

We recommend ‘rural devolution deals’ in which central government sets ‘minimum obligations’ which local areas with a substantial rural component must meet. These should relate to food production and sustainability; environmental protection including flood prevention and decarbonisation; participation in the industrial strategy; and capital spending to support infrastructure and economic development. Local and combined authorities, working with local enterprise partnerships, should demonstrate how they will use devolved budgets to meet their obligations and add value.

Key findings

Sectors in the rural economy

Agriculture is at the heart of the rural economy. It accounts for a small proportion of rural GVA (2 per cent), but shapes the landscape and produces more than half of the food consumed in Britain. Yet farmers face multiple challenges, including an ageing workforce; reliance on EU migrant labour; low food prices; availability and affordability of land; and the need to innovate to make the sector sustainable and prepared for future shocks.

Increasingly British farms provide the ‘raw materials’ for both the well-established food processing sector, and a growing ‘agri-tech’ presence which unites scientific and research capacity with traditional agriculture. Universities and industry are important drivers, and the government’s 2013 agri-tech strategy represents a strong commitment to this area.

Manufacturing (especially advanced manufacturing) accounts for the same proportion of the economy in rural as in urban areas, even more in certain counties. Space to expand and a good ‘quality of life’ offer to potential employees attract manufacturers to rural settings. Similarly, energy generation has strong presence, encompassing nuclear, renewable and fossil fuel businesses. Both industries rely on a good supply of skilled workers.

Tourism and leisure build on the ‘quality of place’ of rural Britain. These sectors have seen great innovation in both their offer and their marketing approach, but can struggle with poor connectivity (digital and physical) and some skills issues.

Challenges

The modern rural economy faces various challenges including the following.

  • The focus of rural policy on agriculture and environmental management in relative isolation; the need to integrate policies for economic growth across sectors, and ‘join up’ approaches.
  • Poor connectivity in some areas; superfast broadband coverage is patchy, despite acute needs and reliance on remote working and long-distance relationships with customers, clients and suppliers.
  • Opportunities to increase skills and innovation are unevenly spread.
  • Road and rail links, especially ‘east to west’ and north to south in Wales, are often slow, sparse, or unreliable.
  • Rural communities are often strong and constitute an asset for business as well as an attractive feature of rural life; recent figures show net migration to rural areas from urban ones. However, some social issues present threats, including income inequality, housing shortages, reductions to services, and an ageing population.

The rural economy is also central to managing potential challenges that go far beyond its ‘obvious’ reach – the following, for instance.

  • Food sustainability and security: Britain needs a sustainable, sufficient and safe level of food production for domestic consumption, and to grow food exports. However, the impacts of new trade agreements, low food prices and changes in exchange rates remain unknown.
  • Environmental management and decarbonisation: climate change and the imperative to decarbonise demand a new approach across all sectors and places.

Recommendations

Rather than one ‘separate’ rural economy, we found a characteristic set of ways in which the general economy operates in, and relies on, rural areas. These are diverse and their manifestations across rural England and Wales depend strongly on the characteristics of particular places.

We therefore recommend an integrative and devolved system of ‘rural devolution deals’ in which stakeholders negotiate with central government, setting out how they can best use their natural assets to contribute to national priorities and add value locally.

The Common Agricultural Policy (CAP) has effectively operated as an ‘industrial strategy’ for agriculture, including environmental management. Withdrawal from the EU represents an important opportunity for reforms integrating the diverse elements of the rural economy and fitting it for the modern global context.

  1. Central government should convene an advisory group to develop and regularly review a framework of short-, medium- and long-term goals for the rural economy. This framework will also guide negotiations for rural devolution deals with devolved areas. These will include defined ‘minimum obligations’ which local areas must meet, and ‘maximum entitlements’ of funding. Obligations will relate to food production and sustainability; environmental protection including flood prevention and decarbonisation; participation in the industrial strategy; and capital spending to support rural infrastructure and economic development, with superfast broadband as a priority. Funding under these deals will effectively replace the CAP but also relate to broader and integrated aspects of the rural economy.
  2. Local and combined authorities, working with LEPs, should negotiate ‘rural devolution deals’ with central government, demonstrating how they will meet minimum obligations and add value with the funding and other support which they seek. Deals should include payments to producers which support farm sustainability, incentivise good environmental practices, innovation and skills development, and support the wider rural economy. Other support for agriculture should include access to opportunities for innovation, skills training and collaboration. Deals should also support wider rural growth including full participation of rural areas in the national industrial strategy (see below).
  3. ‘Minimum obligations’ should be informed by; a position on agricultural outputs, including food sustainability and security, agricultural exports and agri-tech; the new industrial strategy; and wider strategies for decarbonisation, skills, broadband and infrastructure.
  4. Environmental protection should be considered at local and national levels; the framework for devolution deals should include requirements for neighbouring areas to work together on key issues such as flood protection.
  5. The 2013 agri-tech strategy should be revisited and strengthened in the context of EU withdrawal and the industrial strategy.
  6. Universities in rural areas and neighbouring cities should be incentivised to establish ‘spin out’ offices to boost agri-tech opportunities.
  7. The potential of rural areas as centres of excellence in advanced manufacturing and high-tech fields (e.g. energy) should be included in the industrial strategy.
  8. Improvements to rural connectivity should reflect the needs of both rural trading and workforces; superfast broadband provision is a priority.
  9. Workforce and skills issues should be addressed at sector level to meet the needs of particular places.
  10. Business support in rural areas should reflect distinctive business populations, e.g. numerous isolated small and micro-businesses and reliance on digital skills.
  11. Rural devolution deals should include an element of ‘placemaking’, which considers how communities and quality of life support economic growth and demand in local economies; this would include access to services and housing.