The Growth Belt

Foreword

Rural areas hold enormous potential for businesses to thrive and contribute to their local communities and the larger economy.

Small businesses and the self-employed help rural and coastal communities thrive across the United Kingdom. They provide local employment opportunities, drive innovation, and generate economic growth. From small-scale established family-owned businesses to start ups, the rural economy boasts a diverse array of firms. Rural enterprises are small businesses, producers and consumers and power the social life of their communities.

The rural economy is based on a bedrock of small business. It’s a common misconception that rural areas are sleepy hamlets with just a handful of residents. In reality, the rural economy is a complex and diverse ecosystem. However, despite the diversity, pois and ambition of rural enterprises, the productivity rate in rural areas is in decline.

Rural small businesses continue to face specific and often disproportionate infrastructural challenges compared to businesses based in urban areas. After decades of promises, poor digital connectivity and inadequate transport infrastructure continue to blight the prospects of small firms in rural and coastal areas. It is essential that policymakers recognise this and address the rural productivity gap, to create a more sustainable and resilient economy that benefits everyone, no matter how small or large their rural town is.

Rural small businesses should have a central role in determining the shape and future of their communities. Local authorities must consider their role in supporting rural small firms, working with small and micro businesses on tackling the issues that have the most significant impact on their local areas. Recognising rural small businesses as social agents and economic players is vital if we are to see a much-needed boost to productivity in rural communities.

Rural areas hold enormous potential for businesses to thrive and contribute to their local communities and the larger economy. To do this, these businesses require sustained support to weather the challenges and investment in essential infrastructure. By nurturing and empowering rural small firms, we can unlock their full potential to drive growth and prosperity for generations ahead.

Michael Weedon
FSB, Place-based Economy
and Local Government Policy Champion 

Key findings

[Image text]On average in 2022, 49% of urban small businesses reported they plan to grow compared to only 43% of rural small businesses with the same ambition

[Image text]In 2022, 37% of rural businesses on average reported more than a 10% increase in the cost of running their business over the past year

[Image text] On average in 2022, 30% of rural small firms reported finding appropriately skilled staff as the greatest barrier to their future growth aspirations

[Image text] Almost a third (32%) of rural small businesses report issues with the reliability of their broadband

[Image text] Only 58% of rural small businesses state that the speed of their broadband is sufficient for their current and future business needs

[Image text] In 2022, a quarter (25%) of rural small businesses on average highlighted fuel costs as a barrier to growth, compared to only 17% of urban firms

[Image text] 17% of small businesses in rural areas depend on alternative fuels, such as heating oil or LPG compared to 2% of urban-based small businesses

Economic growth

• On average in 2022, almost half (49%) of urban small businesses reported they plan to grow compared to only 43 per cent of rural small businesses with the same ambition.
• On average in 2022, 30 per cent of rural small firms reported finding appropriately skilled staff as the greatest barrier to their future growth aspirations.
• On average in 2022, 37 per cent of rural businesses reported more than a 10 per cent increase in the cost of running their business over the past year.
• Overall, in 2022, 41 per cent of rural firms report their business prospects worsened.
• In 2022, a quarter (25%) of rural small businesses on average highlighted fuel costs as a barrier to growth, compared to only 17 per cent of urban firms.

Connectivity

• Almost a third (32%) of rural small businesses report issues with the reliability of their broadband, compared to 17 per cent of urban businesses.
• Twice as many rural businesses reported that unreliable broadband has affected their ability to contact customers (14% vs. 6%), reduced the competitiveness of their business (11% vs. 5%), and led to a loss of business or sales (10% vs. 5%).
• Only 58 per cent of rural small businesses state that the speed of their broadband is sufficient for their current and future business needs.
• 43 per cent of rural-based businesses have not yet changed their transport habits because of the insufficient local infrastructure to support electric vehicles (e.g. charge points).

Energy

• 17 per cent of small businesses in rural areas depend on alternative fuels, such as heating oil or LPG (Liquefied Petroleum Gas), compared to 2 per cent of urban-based small businesses.
• 18 per cent of rural-based small businesses have seen their energy costs triple or worsen within the space of a year.
• Rural businesses demonstrate higher levels of extreme concern (40%) compared to urban businesses (36%) in regard to rising energy costs.

Recommendations

Levelling up

•  Department for Environment, Food and Rural Affairs (Defra)’s new training module on rural proofing should become compulsory for all civil servants working on domestic policy. (p35)
•  The UK Government should ensure appropriate or additional metrics are considered in policy development where existing metrics may fail to accurately capture the rural experience. (p35)
• Local authorities should appoint either elected members or senior management as Local Business Champions. These individuals would be given clear responsibility and accountability for business engagement and application to all available funding. (p35)
• Local authorities should create dedicated business engagement panels for the purposes of funding applications and conduct rapid user testing before launching business support programmes, to minimise barriers to uptake. (p35)
• Local authorities should use ‘tell us once’ data systems, to reduce duplicated forms and minimise administrative burden on businesses. (p36)
• The UK Government should set out clear metrics for the evaluation of its pride in place mission, which reflect the social value that small businesses create in their communities. (p36)

Economic outlook

• The UK Government should raise the VAT taxable turnover threshold from £85k to £100k, and in future link threshold increases to RPI. (p22)
• Increase the Small Business Rate Relief threshold to £25,000 from £12,000. (p22)
• Extend the Youth Mobility Scheme to EU countries with no annual quotas. (p23)
• The UK Government should adopt the Migration Advisory Committee’s recommendation and pilot a remote visa. (p23)
• The UK Government should change payment of the Community Infrastructure Levy to a post-sale levy rather than a post build levy to boost opportunities to small housebuilders. (p23)

Digital connectivity

• The UK Government should update the Universal Service Obligation minimum requirements for both upload and download speeds to ensure businesses have the right to decent broadband speed to meet their digital needs, and it should set a fairer safeguard cap at £35/month. (p44)
• The Department for Science, Innovation and Technology (DSIT) should ringfence a proportion of the remaining Project Gigabit budget to support projects that will help connect hard to reach and very hard to reach areas with superfast broadband. (p44)
• Ofcom should look to make current Voluntary Codes of Practice for broadband providers compulsory and extend the existing compensation schemes so that they also apply to business contracts. (p44)
• DSIT must ensure the Shared Rural Network does not fall behind its 2025 target of 95 per cent 4G coverage across the UK. (p44)
• Broadband providers should make it easier and cheaper for small businesses to leave broadband contacts before the minimum contract term has expired. (p44)

Transport

• Extend the ‘Get Around for £2’ scheme until the end of 2023. (p51)
• Governments across the UK must publish a coherent set of target-based infrastructure strategies to deliver the necessary charging and rapid charging infrastructure for electric vehicles by 2030 for remote rural parts of the UK to complement the UK Government’s existing strategies. (p51)
• Local authorities should work together on rural transport schemes to ensure that projects cover a wider catchment area. (p51)
• The UK Government should commit to a long-term fuel duty freeze and make the temporary 5p-per-litre cut into a permanent policy. (p51)

Energy and the environment

• The UK Government should ensure that the needs of businesses using alternative fuels are mainstreamed in future energy policy development. (p54)
• The UK Government should issue £5,000 grants or vouchers for businesses to spend on qualifying environmental products and services under a Help To Green initiative. (p54)
• Energy suppliers should allow vulnerable businesses that negotiated a new energy contract within the peak wholesale price period of 2022 to renegotiate or ‘blend and extend’ their energy contracts to reflect significantly lower wholesale prices now available. The Department for Energy Security and Net Zero should encourage suppliers across the UK to implement this. (p55)

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