1.4. Overview of Rural Business
Farming and forestry is vital to the positive management of the countryside and still plays an important role in rural community life. To maintain this role, the agricultural industry must retain viable farming businesses, and especially the family farm. Viable farms sustain and create employment both on and off farm, including upstream and downstream jobs/industries. The rural areas of the region exhibit a heavy dependence on such industries. To maintain forestry's role, established forest resources will require management that can utilise both large and small scale processing opportunities. There is a need for larger scale, multi-purpose forest and woodland establishment in order to sustain economic objectives and increase other outputs, including non-market ones. Coupled with this increase there is a need to develop added value, supply chain and processing of all wood products.
Small firms dominate rural areas and, therefore, types of employment opportunities in rural businesses are limited. Over 90% of firms employ less than 20 people. Small businesses are a numerous and vital part of the region's rural economy and are the chief source of growth, with new and small firms' growth highest in rural areas. Small firms in remoter rural areas tend to be more labour intensive, less innovative and more orientated to providing consumer goods and services than elsewhere. Restructuring in manufacturing and future growth or decentralisation in services is likely to benefit more accessible rural areas.
The specific challenges facing small firms in rural areas need to be addressed, particularly the need to expand their markets geographically at an early stage in their development along with, the need to react and embrace technological change in order to maintain competitiveness and the need to invest in their human resources.
There is a need for agricultural businesses, along with the region's broader rural economy, to take advantage of opportunities to restructure and diversify. While agriculture is, and will remain, the core primary industry in the region, alternative sources of income and flexible and innovative means of stimulating alternative rural enterprises will be needed. The poor financial performance and wide variation in performance between 'best' and 'worst' farm businesses must be addressed through training and improved management.
Declining farm incomes are encouraging farmers and associated businesses to look for additional sources of income. The opportunities to diversify farm incomes depend crucially on the strength and diversity of the local and regional economy. Diversification is not always a viable option, particularly in remote uplands where smaller more vulnerable farms predominate. Planning constraints and poor access to capital may also restrict the development of on-farm diversification. In some areas the market is becoming saturated for some forms of farm tourism while in others there is still good potential for the further development.
There remain considerable opportunities for conversion to organic, integrated crop management or low input forms of production and industrial, energy and medicinal products. These could help meet government targets for renewable energy production and could have some environmental and social benefits if correctly sited. In order to exploit the opportunities to diversify or to seek alternative employment, there is a need to identify training needs and then to ensure that the appropriate training is accessible.
The decline in non-family, full-time agricultural employment is set to continue as the Common Agricultural Policy (CAP) reforms and World Trade Organisation (WTO) liberalisation impact on the industry. The increasing proportion of family workers is a significant indication of the extent of under-employment in agriculture and the increasing financial pressures on farming, particularly in remote areas. Multiple job holding is an increasingly important means of maintaining the farming population but is strongly dependent on off-farm employment opportunities. However, off-farm working may be constrained by on-farm work practices which vary according to farm type (e.g. milking dairy cows may limit off-farm working whereas seasonal arable operations may be more compatible). In many cases, farm household members may not have the necessary skills, qualifications or confidence to seek off-farm jobs and there is clearly a need to tackle this issue to enhance social and economic opportunity.
Tourism brings substantial benefits to rural areas in terms of direct and indirect employment and income generation. It also provides key opportunities for economic and community development in rural areas. In addition, tourism supports retail and other services which might otherwise be vulnerable in remoter areas. Employment in tourism related industries is expected to continue to grow and changes in consumer expectations will create a need for staff training. Policies aimed at promoting or encouraging tourism should seek to address social and economic issues while maintaining the rural environment, which is itself a key tourism asset in rural areas.
Rural businesses could benefit from more extensive collaboration and networking. The region has an excellent regional identity to trade on, especially in relation to the environment, regional food and rural products. Farm businesses in particular need to overcome any remaining insularity and collaborate with one another in production and marketing initiatives. There are currently relatively few farmer groups and a lack of marketing skills, reflecting the fact that price support mechanisms have meant that farmers have, until recently, had little or no requirement to market their own produce. There is considerable scope for integrated supply chain development to improve the co-ordination between production and markets, to maximise margins and minimise food miles.
Rural businesses, both in the primary and service sectors, are typically small and are exposed to significant competition from larger concerns such as supermarkets. The combination of the strength of the pound and its effect on exports, changing consumer demands for welfare/quality and traceability, an increasing administrative burden, the requirement to comply with new statutory legislation (e.g. animal welfare and health and safety) and the associated costs and the remote nature of many rural businesses all represent significant challenges for small rural businesses.
Overall, economic trends in rural areas broadly reflect trends taking place in the region as a whole. Most accessible rural areas will continue to be well placed to take advantage of the changing structure of economic opportunities, but other rural areas, particularly more remote areas, will continue to be disadvantaged especially where they are affected by long-term structural adjustments.
The experience of partnerships created through the operation of the Objective 5b programme of EU Structural funds can now be developed to roll out projects to other rural areas through integrated funding for social, economic and environmental objectives.
Page last modified:
17 August, 2005
Page published: 1 October, 2000