Skip to main content

AN ECONOMIC STRATEGY FOR RURAL WALES


Earlier this week, the Labour AM Eluned Morgan asked the Welsh Government to develop a dedicated plan for the rural economy in Wales given the high degree of uncertainty going forward following the Brexit vote.

I couldn’t agree more but rural Wales, even prior to last June’s vote to leave the European Union, has faced many challenges over the last two decades including depopulation by young people, a decline in household incomes, the increased price of housing (especially for first time buyers), a decline in public services and transport, and the closure of rural schools.

In addition, rural businesses have had to face very different problems as compared to their counterparts in urban areas such as Cardiff, Wrexham, Newport, Swansea and the South Wales Valleys.

For example, one of the key competitive disadvantages faced by many rural businesses is that of small local markets, combined with the distance from major national and international markets.

This emphasises the importance of appropriate business support assistance to help with market development, exporting and marketing, a problem that is exacerbated by the fact that traditional financial and business support is typically weaker in rural areas.

In particular, commercial providers of business services - such as accountants or law firms  - tend be thinner on the ground and have less extensive expertise in key areas.

Lower business densities in rural areas also make it more expensive to deliver business and training support than to comparable urban-based firms, which means that it is important for rural firms to access the right type of advice from the business network.

This ‘rural premium’ can also make it very expensive for firms to participate in training sessions, business meetings and network events.

Of course, this market remoteness is not always a weakness and can also be turned to the advantage of the local economy. This is because many rural businesses will reach the capacity of the local market at an earlier stage than urban firms, and may have to adopt a more proactive approach in seeking our new market opportunities than those businesses based within densely populated areas.

This creates more specific challenges to entrepreneurial rural businesses as they will need to adopt a highly pro-active marketing method in order to extend their geographical markets. This can result in specific management problems for young rural firms as they require specialist knowledge and expertise which is often lacking in the business itself.

Another key issue for many rural businesses wishing to expand and grow their activities is the absence of suitable premises and an adequate pool of skilled labour.

Whereas urban areas are generally characterised by a wide range of different types of business property, this is invariably not the case in rural areas. Whilst there are certain advantages in having space availability at low cost in rural areas, there are also significant constraints affecting growing businesses resulting from the shortage of larger premises.

In many cases, the scarcity of larger premises in these localities is attributed to strict planning policies. This issue needs to be addressed sensitively but practically by local authorities as there is a clear need for a variety of sizes and types of business property in rural areas if the space requirements of businesses at different stages of development are to be met and if growing businesses are going to be retained within the rural economy.

The small size and occupational composition of rural labour markets can also impose a constraint on growing small firms, making it necessary to attract recruits from more distant locations.

Lower pay levels and a reliance on informal recruitment practices can make this difficult to achieve.

As a result, rural firms attempt to retain labour, with a willingness to train as a means of obtaining the required skills, although locational factors and their distance from centres of population means that many rural firms are disadvantaged in terms of access to suitable training opportunities which are based within towns and cities.

Finally, rural firms must take advantage of the potential offered by new technologies to improve links with customers and suppliers, and reduce the comparative disadvantage of remoteness. But whilst broadband is allegedly being made increasingly available across the whole of Wales, it still seems likely that many parts of rural Wales will be amongst the last areas to receive access because of the relatively low and dispersed nature of the demand.

Therefore, Baroness Morgan is right to highlight the issues facing the rural economy in Wales and it is clear that any economic support to businesses in rural Wales needs to take account of the distinctive environment in which firms operate such as the relatively small size of the local market, the limited opportunities to trade and network with other local businesses, and the small size and restricted skill base of the local labour market.

However, if the Welsh Government can begin to appreciate the unique economic nature of rural
Wales and develop a strategy that can address their particular weaknesses, then the entrepreneurial potential of many rural businesses can be realised and they can make a real difference to the wealth and employment of this very special part of the Welsh economy.

Popular posts from this blog

THE IMPORTANCE OF FRANCHISING

When we talk about start-ups and entrepreneurship, rarely do we discuss the potential of franchising not only as a way of establishing new ventures in the economy but also as a method of growing existing businesses. According to the British Franchising Association, franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor. The franchisee also receives initial training and ongoing support, comprising all the elements necessary to establish a previously untrained person in the business. This enables individuals to start their own businesses without having to develop their own ideas and utilising an existing brand and established market. Of course, whilst each franchise business is owned and operated by the franchisee, the franchisor controls the quality and standards of the way in which the business is

THE MANUFACTURING STRATEGY FOR WALES

Last night, I received the following comment on the previous post relating to a piece I had written back in early 2007 about the state of the manufacturing sector in Wales. "Dylan, you seem to be ignoring the fact that manufacturers in Wales have written the manufacturing strategy. Small and large manufacturers, all represented at the Manufacturing forum, have co-written this strategy. WAG has recently supported this strategy and have funded a co-ordinator with resources. Manufactures are happy with this progress as they are following the strategy they wanted. I know that the Conservatives have attacked the strategy as they seem to think that WAG wrote the strategy. They couldn't be more wrong. The Manufacturing Strategy was written by manufacturers, for manufacturers and is supported by WAG. If you don't agree with this, then I can invite you to the next Manufacturing Forum and you can explain to the manufacturers how their strategy is wrong....I appreciate that there is

THE PERFECT STORM FACING THE UK ECONOMY

In his sublime 1997 book on the fate of the fishing boat Andrea Gale, the author Sebastian Junger defined a “perfect storm” as a rare combination of events or circumstances that results in an unusually bad situation.  This term would not be out of place in describing what is currently happening to the UK economy which is being battered on so many fronts with little respite in sight. For example, the war in Ukraine has had an unexpected impact on energy bills in Europe due to the curtailing of exports from Russia which, last year, was responsible for supplying 40% of all natural gas to the European Union. Whilst the UK is not dependent on Russia for its energy needs, the scramble by other countries to find alternative sources has resulted in higher prices globally which has impacted on the fuel imported by the UK with normal suppliers struggling to meet demand. There have also been considerable supply constraints globally which have been driven by manufacturers struggling to get their g