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Helping Businesses Thrive in Peripheral Rural Towns

Neil Powe and Rhona Pringle, July 2017

In this new report, Newcastle University academics Neil Powe and Rhona Pringle explore the scope for business-led growth and place-based revival in peripheral rural towns – those that are distant rather than accessible to large urban areas, and that are between 2,000 and 12,000 in population. The research aims to investigate whether businesses can thrive in peripheral rural towns and, if so, the conditions needed for businesses to thrive in these locations.  Whilst there has been much research into the potential for growth in rural areas, there has been a lack of focus on specific places and the challenges they face.  Many studies have considered “rural” or sub-sectors of “rural” such as “peripheral rural” as generic categories whose economic prospects are assessed with little consideration of the outcomes within specific contexts.  The opportunities arising will vary considerably between specific places and depend on a range of specific factors which would be difficult to assess or judge generically from national statistics. The research is consistent with the ideas developed within the government green paper “Building our Industrial Strategy”.  Whilst the contribution of this research focuses primarily on the “driving growth across the whole country” pillar within the industrial strategy, it also considers other pillars “developing skills”, “supporting businesses to start and grow” and “creating the right institutions to bring together sectors and places”.

Key findings

Four key findings emerge:

  • Peripheral rural towns should not be neglected within policy.
  • Many firms can and do thrive in peripheral rural locations. Their growth comes through their adaptation to local circumstances as their businesses grow.  Local businesses contribute to national targets and bring hope for place-based revival.
  • Policy needs to focus on helping places help themselves, where business growth requires sustained support at the local level which is sensitive to local opportunity and context.
  • Government support needs to be supportive and sensitive to the diverse local activity emerging rather than leading and controlling.

What conditions are needed for business to thrive?

1. Understanding the potential for business growth

Industrial attraction is seen as being unlikely to be successful unless places can provide a niche which attracts entrepreneurs, such as residential desirability.  Enhancing tourism should not be seen as the only option for revival.  It is strongly argued that the following four strategies below should be given at least equal consideration.

  • Realising the potential within pre-existing businesses – Evidence suggests that the key source of business growth is likely to come from pre-existing businesses. Located in peripheral rural areas often for personal reasons (lifestyle, family, grew up there), local entrepreneurs know their business can function there and are more likely to be loyal to the area as their firm grows.
  • Enhancing the entrepreneurial culture – The future economic prospects for peripheral rural towns is likely to depend on local businesses and people with good ideas need to be encouraged to form and/or growth their business.
  • Tackling remoteness – Although digital connectivity may help compensate for the remoteness of these towns, there has tended to be a rural deficit within provision. Improving digital connectivity needs to remain a priority for peripheral rural towns.
  • Improve the local workforce – One challenge facing peripheral rural towns is recruiting skilled and professional staff. A combination of re-training and apprenticeships will make these towns more competitive and help tackle problems of deprivation.

2. Understanding opportunity

Whilst some rural towns do need support, business opportunity can occur throughout the wider rural area and focusing specifically on towns in need could mean much potential is missed.  It is important to consider the opportunities emerging within the region and the potential for peripheral rural towns to benefit from this.

  • The peripheral nature of the towns – The nature of the towns’ remoteness is a key factor affecting the opportunities arising within peripheral rural towns. The relationship with other (sometimes larger) towns can be crucial.  This could be complementary, where, for example, peripheral rural towns may provide more desirable residential locations and/or visitor attractions.  Being “out on a limb” will not help the opportunities available to the town.
  • Importance of amenity within revival – Natural amenity, heritage and culture are often the key assets upon which such towns can enhance their local economy and can encourage housing as well as entrepreneurs and employees to move to these locations.
  • Not all towns want amenity-led growth – It is often important to many local residents that their town continues to be an affordable residential location for low income groups. Gentrification is not always relevant or welcomed.
  • Opportunity is not purely determined by its context – Luck plays an important role within local success. Opportunities are more likely to be taken advantage of within more favourable contexts in terms of places with local capacity and natural, heritage and cultural assets.

3. Creating a business friendly environment

This research has highlighted a series of factors crucial in creating an environment which helps peripheral rural firms thrive.  The following issues relate to the need for a sustained local consensus and support which is sensitive to the diversity of local opportunity and context.

  • Leadership and collaboration – The economic prospects of peripheral rural towns very much depend on the strength of the local leadership and there being an atmosphere of local collaboration. In the absence of such consensus, it is difficult to see how places can take advantage of the opportunities that arise.
  • Planning – The usual constraint on growth within former mining or industrial towns is a lack of market activity. Such places often have sufficient space for development, but lack people wishing to invest. Within pressured small towns, however, growth needs to be carefully planned such that opportunity is realised and local amenity (natural amenity, heritage and culture) upon which success is usually built is not harmed.
  • Support – There is a need to recognise that peripheral rural areas are unlikely to be on the radar of property developers and external entrepreneurs. Peripheral towns are likely to gain less district/county level political support than the larger towns within their area.
  • Access to capital – Small and start-up businesses need “relationship” type banking experience in order to reduce information “opaqueness” in terms of their potential for successful growth. Good business ideas need to be encouraged and finance made available.

Policy recommendations

This report does not suggest radical change in policy, but rather a more careful adoption of policy which is sensitive to the diversity of issues arising locally.

1. Peripheral rural towns should not be neglected within policy

Given their size in terms of their population and local economy, there is a tendency for peripheral rural towns to be neglected within local authority politics.  Yet they can sometimes play a crucial role within business development and growth.  Their SMEs can be leading firms within their particular market niche and are likely to be crucial to maintaining the local economy and contributing to national goals.

2. Help places help themselves

Policy needs to focus on helping places help themselves, where place-based revival requires sustained support at the local level which is sensitive to local opportunity and circumstances.

  • Importance of local involvement and leadership – Policies need to recognise the importance of local activity in uncovering and realising local opportunity. Local leadership can come in many forms and from many sources, and where it emerges it needs to be supported.
  • Local consensus provides a friendly business environment – Places working towards a clear and unified vision are more likely to realise the potential for local business innovation. The importance of developing a local consensus should be addressed locally, but encouraged externally.
  • Encourage businesses to engage more locally – Encouragement for local networking, business breakfasts and mentoring from non-competitive firms may enable places to build on local business knowledge. This may help ensure that opportunities for business growth are appreciated and acted upon.

3. Business support needs to be sensitive to local circumstances

Government support needs to be sensitive to the diverse local initiatives/activities emerging rather than leading and controlling.

  • Need to make the most of local businesses – It is unlikely that attempts to attract big business will be successful within peripheral rural towns. There is more potential in helping local businesses grow.  It is important to better understand local businesses, recognise the potential and the constraints on their growth and encourage them to realise their potential.
  • Intensive and sensitive business support – The most successful business support efforts is intensive and sensitive to the needs of the individual firm and/or the local business context within which the firm resides. As business growth can come from all sizes and ages of firms and in all sectors, there is a need to better understand local potential when attempting to “pick winners”.
  • Planning for business growth – When planning for business growth the principle “allocate land and they will come” is inadequate. Facilitation may be needed to help bring together local businesses and property agents, for example.
  • Encourage regional banking – There is a need for applications for loans to be based on “soft” information. This would better enable SMEs with genuine potential for growth to access funding.  One route to this is through regional banking.

4. More generic issues

Further to the two themes of “helping places help themselves” and “support needing to be sensitive to local circumstances” outlined above, there are some more generic issues which are also of relevance here.

  • Infrastructure matters – This is an issue which usually requires external support. In the absence of adequate infrastructure (usually road, but also public transport, digital communication, key services and utilities) significant opportunities for growth can be missed. Where potential for business growth can be adequately demonstrated, such as landlocked development sites, government support needs to be forthcoming.
  • Long term solutions are required in terms of broadband accessibility – There is a tendency for rural areas to suffer from a technical deficit in digital connectivity. A workable solution is required so that reasonably up-to-date technology is maintained within rural towns.
  • Apprenticeships – The apprenticeship model seems to work well within rural peripheral towns, raising local youth aspirations and encouraging employee loyalty. Small firms need encouragement beyond current policy, however, to take on apprentices.
  • Local business support needs to continue beyond Brexit – As much of the business support available is from European Union funding, Brexit provides an opportunity to re-evaluate what forms of business support need to be provided.
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