LITERATURE REVIEW OF THE ENGLISH RURAL ECONOMY · Rather than talking of the rural economy, the...

FINAL REPORT TO DEFRA

LITERATURE REVIEW OF THE ENGLISH RURAL ECONOMY

Professor Michael Winter and Dr Liz Rushbrook Centre for Rural Research

School of Geography & Archaeology University of Exeter

Contact: [email protected] Tel: 01392 263837

May 2003

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Contents Acknowledgements Executive Summary 1. Introduction 1.1 Research Objectives 1.2 Key Research Themes 2. The Characteristics of Rural Economies 2.1 Problems of Definition 2.2 The Changing Nature of Economic Activity in Rural Areas 3. Rural Business 3.1 Characteristics of Rural Businesses 3.2 Business Performance and Success in Rural Economies 3.3 Drivers of Economic Success: Environment 3.4 Drivers of Economic Success: Knowledge and Innovation 4. Rural Labour Markets 5. Leakages & Interactions 5.1 Rediscovering the Local Economy 5.2 Social Capital and Local Economic Interactions 5.3 Interlinkages with Urban, Regional and National Economies 6. Commuting 7. The Impact of Government Policy 7.1 Introduction 7.2 Planning and Finance 7.3 Governance 7.4 Policy Recommendations and Policy Tensions 8. Conclusions: Future Research Priorities References

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Acknowledgements We are grateful to DEFRA for commissioning this review, particularly to Tom Corcut and his colleagues for helpful comments. The Rural Economies Seminar organised by DEFRA, the ESRC and the Countryside Agency in London on the 15th April provided an opportunity to present some initial ideas. The discussion that took place that day helped to inform our thinking. Recent research material was made available to us by Professors John Bryden, Mark Shucksmith and David Smallbone for which we are particularly grateful. We alone remain responsible for the contents of the report. Michael Winter and Liz Rushbrook

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Executive Summary 1. Introduction The objectives of the literature review were to examine: • How rural labour and product markets function; • The degree of interaction between different sectors within the rural economy; • The interlinkages between the rural, urban, regional and the national economy; • How interactions between economies might result in clusters of successful/

sustainable and unsuccessful/vulnerable rural economies; • The implications of geographical constraints that rural economies face. • The trends in composition and performance in rural economices; • The nature of commuting within rural areas and between rural and urban areas. • How policy has affected the functioning of rural economies; • How English rural economies compare to those elsewhere; • What areas of research would be useful to inform future policy development. To fulfil these objectives the report is structured around a number of key research themes. 2. The Characteristics of Rural Economies This chapter provides an overview of research on the characteristics of rural economies, using studies and reports which identify the characteristics of economies and businesses in rural areas. The issue of defining rurality is discussed . Rather than talking of the rural economy, the report focuses on economic activity that takes place in districts defined as rural using various population and spatial criteria. The economy of rural areas is no longer dominated by the land-based sector. However the land-based sector is also significant in terms of the environmental quality of rural areas which attract new residents and economic activities. The occupational profile of most rural areas is now diverse with services and manufacturing alongside the more traditional land based sectors. Since the1960s there has been a shift of firms, output and jobs from conurbations and big cities to smaller towns and rural areas. The reasons for relocation include space shortages, operating cost differences, the search for higher profits through new forms of labour exploitation and a desirable residential environment. Some of the key trends in rural economic changes can be summarised as follows: • A decline in agriculture and other land-based employment. • Counterurbanisation � and a growing rural population. • Increasing service employment. • Exposure to global markets. • Competition with cheap firms in low wage countries � footloose industrial firms

may not stay in rural regions in the near future. Industrial firms are likely to

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become more flexible, service intensive and customer oriented and are likely to need medium skilled labourers rather than unskilled workers.

• Increased levels of mobility and car ownership and the growth of dormitory settlements.

• More women in the workforce. • Decline of rural service provision, particularly shops, post offices, schools, village

halls. 3. Rural Business This chapter explores literature on rural business activity in the non-land based sectors. Work by Keeble et al (1992) is important because of its rigorous empirical base and the urban/rural comparisons. Firms in remote rural areas were matched with urban firms. The research found that remote rural firms were more specialised in niche markets, often serving retailing, tourist and agricultural markets. Accessible rural firms predominantly specialise in market niches created by increasing business and technological complexity. Urban firms occupy more traditional sub-contacting and manufacturing niches. Most rural enterprises are relatively new and small. Employment growth in remote rural firms was faster than in accessible rural businesses and urban firms. Rural businesses depend more than urban firms on distant customers and suppliers. There is a direct connection between migration to rural areas and high rates of new enterprise formation. Most rural entrepreneurs are in-migrants. Keeble and Tyler (1995) suggest that companies in accessible rural areas display enterprising. Lowe and Talbot (2000) confirm a number of these earlier findings. They suggest that rural areas may have weaker financial and business services. Jarvis et al (2002) highlight a tendency for small and medium size enterprises (SMEs) to play a pivotal role in local economic development. Their work provides a complex picture of the role of rurality in business success. A feature of the work by Lowe and Talbot (2000) and by Jarvis et al (2002) is to go beyond the large survey methods so successfully deployed by others. Data from the 1990s showed a declined in urban-rural difference in employment growth rates (Smallbone et al 2002, Cosh and Hughes, 1996). By 1994-97, rural SMEs were outperformed by urban firms (Cosh and Hughes, 1998). Most writers feel that geographical constraints of distance are not a problem for rural business. North and Smallbone (1996) found that the majority of rural firms did not suffer competitive disadvantage. However, North and Smallbone (2000) claim that SMEs in regions with weakly developed �learning infrastructures� will be less innovative than similar firms in better provided areas. The DORA project (Bryden and Hart in press) looks at four countries (Scotland, Germany, Greece and Sweden), and two contrasting rural areas in each, to examine the requirements for strong rural economic development. They suggest that differential economic performance is accounted for by the interaction of culture and society in the shift from state to market; infrastructure and peripherality; governance, public institutions and investment; entrepreneurship; economic structure and organisation; human resources and demography,

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The review considered the role of the environment as an economic driver, which has been neglected in studies of rural economic activities. By contrast, considerable research has been undertaken to inform public decision making with regard to policy priorities through work on environmental valuation (Garrod and Willis 1999). There are some studies of: how natural characteristics are used in the branding of products, the commodification of natural processes or outputs and how landscapes might benefit the economy. On occasions the environment may impede economic development. Little research appears to have been undertaken which explicitly tackles the issue of analysing the balance between a high quality natural environment as a constraint and a driver of economic activity. Another driver is knowledge, seen as necessary for economic performance. Benz and Forst (2002) suggest that research has not clarified how networks have to be organised and linked to the institutional framework and whether competitive or co-operative orientations of actors are more conducive to change. The precise relationships between knowledge generation, transmission and business success, especially in remoter rural regions, is still relatively under-researched. 4. Rural Labour Markets This short chapter looks at how businesses located in rural areas may benefit from a number of labour market characteristic, such as a cheap and compliant labour force. Recent research in economic geography, has developed a distinctive perspective on local labour markets with an emphasis on social relationships. Keeble et al (1992) report that remote rural firms also suffer some constraints on business development and efficiency, arising from shortages of skilled and technical workers, management and professional staff. 5. Interactions between Rural Economic Sectors This chapter examines interactions, linkages, transactions, and exchanges as a prerequisite for sustainable economic development. Endogenous models of development emphasise the importance of interactions which limit economic leakages A notion to help understand economic interactions is embeddedness which is based on the necessity of social relations to all economic transactions. However empirical research in this area is limited. However, there has been detailed empirical work on levels of local interaction and exchange in two rural towns by Courtney and Errington (2000). The patterns of relatively high integration conflict with earlier empirical evidence by Blackburn and Curran (1993). Clearly an important possible cause of spatial variation of this kind may be the influence of wider social factors. All economic transactions are social and any differentiation of economic behaviour and outcome is social. The notions of social capital and social networks are receiving considerable attention as explanatory factors in economic performance and development processes. For Maskell et al (1998) �some geographical environments are endowed with a structure as well as a culture which seem to be well suited for dynamic and economically sound development of knowledge, while other environments can function as a barrier to entrepreneurship and change.�

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There is little doubt that there are strong interlinkages between economies in rural and urban areas, the region in which they are based and the national economy. Commuters provide strong interlinkages with urban communities, as do firms located in rural areas. Maximising local input purchases by firms within a locality clearly makes sense for the overall economic wellbeing of a particular place, although we should not allow the trade benefits of comparative advantage to be completely lost sight of. 6. The Nature of Commuting This chapter provides an overview of research on the nature of rural commuting. The significance of commuting to economic activity in rural areas has received less attention than counterurbanisation. Milbourne et al (2000) examined relations between farmers and new rural populations. The research examined a range of potential rural conflicts. Disputes were bound up with four main issues: development and planning issues (usually residential); the interests of different social groups; the small-scale nature of rural living; and environmental issues. Relatively few respondents made any direct reference to farming and farmers or other land-based economic activities as sources of local conflict; still fewer to new economic activities taking place in the countryside. Lowe (1999) describes how residents in remote rural areas found between 80 to 90 percent of their jobs in rural areas, while those in accessible rural areas found only 40 to 60 percent. Commuting out of rural areas was greater in accessible rural areas, while commuting within rural areas was greater in the more remote locations. By undertaking an analysis of commuter flow data from the 1991 Census, Boyle et al (2001) considered the origins and destinations of all commuting into and out of the wards of England, and the characteristics of commuters. Urban areas experience far more commuting activity than rural areas. For Green et al. (1999), �the increasing penetration of ICT and flexible working practices into more areas of working lives opens up new opportunities for the geographical expression of labour market careers�. This has lead to an increasingly complex geography of home and working lives. 7. The Impact of Government Policy Research on the impact of policy is reviewed briefly for spatial and land use planning, the transfer of financial resources, and governance. Governance is of particular importance and the report reviews the blurring of boundaries, and the growth of self-governing networks of actors and government playing a steering and guiding role Consultation, strategy and partnership are the key words in the governance lexicon. Agriculture, food and the rural economy now figure in local strategic partnerships. Many questions arise as a result of changing rural governance and some of these are outlined in the review. Finally the report identifies a number of policy tensions in rural economic policy delivery. They are ideological tensions; institutional tensions; geographical tensions; rural versus agricultural policy tensions; social, economic and environmental policy tensions; and globalisation.

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8. Conclusions: Future Research Priorities Proposals are made throughout the report to highlight areas of research on economic activity in rural areas which warrant more investigation. They are as follows: Recommended Research on The Environment Driver • The nature and extent of any competitive advantage afforded by the natural

environment to businesses located in particular locations. Is it embodied in the attractions to the workforce or in some ways captured in the product itself?

• Is environmental benefit of this nature a generalised phenomenon or can it be differentiated in any way? In other words do particular types of landscape and land cover offer greater economic advantages than others?

• What would be the impact on rural businesses benefiting from the environment as an economic driver of significant changes to landscape and environment brought about by climate change, agricultural policy reform, etc?

• Are there particular businesses that might reap benefits from greater attention to the environment in marketing and branding?

• Are there new �environmental� business opportunities available? If so how can they be nurtured?

• Given that natural capital is, on the whole, produced and managed by land occupiers who do not receive the full value of this positive externality are there policy or economic mechanisms that might be used to ensure continued and/or improved environmental maintenance?

• Research should be undertaken which analyses the relationship and tensions, within a high quality natural environment, between the role of the environment as a constraint and as a driver of economic activity.

Recommended Research on The Knowledge Driver • Research attention should be focussed around the networks and knowledge

transmission mechanisms that may be appropriate to the wide range of businesses located in rural areas.

• Research should be undertaken on how science policy is formulated and how it impacts on regional and rural competitiveness.

Recommended Research on Social Capital • Research should be undertaken on the hypothesis that the �strength of households�

might be related to rurality. • Research should be undertaken on how the insights from the literature on

embeddedness might be applied in conceptualising and empirically researching rural economic development.

• Research should be undertaken on the applicability and implications of GDHI to both rural and urban areas and on the underlying social and household processes.

• Sociological and economic studies of rural businesses to reveal social networks and ownership of or access to social capital are required.

Recommended Research on Rural Business Performance • A scoping study should be commissioned, or a seminar convened, to compare and

contrast rural and agricultural business research with particular attention to methodological issues.

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• Research should be undertaken amongst rural businesses to explore some of the more qualitative issues surrounding business success and the significance of rural location.

• When the full text is available, Bryden and Hart�s work should be scoped with a view to rolling out or replicating their methodology and conceptual approach in comparative work in England.

• Research is required to examine the cultural, social and learning contexts for successful business activity in rural areas, in particular through more participative and qualitative research methods which unravel process rather than correlation.

Recommended Research on Local Economic Development • An extension of the �economic footprint� and �spatial tracking� methodologies

developed by Courtney and Errington into fresh localities deserves further application and development.

• There is scope, for example, for using Farm Business Survey data for spatial tracking of expenditure using the Courtney and Errington methodology.

• Further research is needed on the potential for reducing leakage through developing local markets.

Recommended Research on Counterurbanisation • Further examination of the implications of counterurbanisation for endogenous

rural development is required. What is the extent of local development conflicts? How might they be overcome?

• Research on power and influence in rural areas is required so that the constraints and drivers of economic development are more fully understood in a political and social context.

Recommended Research on Governance • Research on the implementation of policy in the context of the new governance.

Such research will have to be process as well as outcome orientated and will require in-depth qualitative work alongside more traditional data gathering.

• An examination of the relationships between local government and RDAs in rural regeneration policy. The urban development literature suggests that there may well be issues of considerable importance here. The extent to which the new partnership retains unity of purpose and is able to develop a shared vision for diagnosis of problems and delivery needs to be understood.

• A case study of the regional delivery groups for the Sustainable Farming and Food Strategy currently determining strategies and how they will relate to sub-regional actors.

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1. Introduction 1.1 Research Objectives The aim of this literature review is to assist DEFRA to better understand the nature of the economy in rural England, thereby facilitating a deeper appreciation of how rural economies work and how they interact within the regional and national economy. The work was designed to feed into DEFRA-funded research to determine the relative economic performance of rural areas, thereby assisting DEFRA to meet its Public Service Agreements (PSA) target of �reducing the productivity gap between the least well performing quartile of rural areas and the English median by 2006�1. We were asked by DEFRA to pay particular attention to the report on economic drivers in rural areas produced by Siôn Roberts (2002) almost exactly a year ago. As the purpose of this report was to scope DEFRA�s socio-economic evidence base and to recommend research priorities, we have used the Roberts report as a reference point in our own drawing of recommendations on research priorities where that has been appropriate. The specific objectives of the research, as set out in DEFRA�s contract research brief, were to examine: • How rural labour and product markets function themselves, and how they function

in the context of the whole economy. This should involve an analysis of the supply chains in rural economies, highlighting where possible characteristics that make rural economies robust and different in their urban counterparts;

• The degree of interaction between different sectors within the rural economy; • The interlinkages between the rural, urban, regional and the national economy,

including for example: are there any distinctive differences in �local multiplier� effects; what are the impacts of urban economic growth on adjacent rural economies; does improved urban economic performance only benefit adjacent rural areas or certain sub-groups of the rural population?

• How these interactions between economies might result in clusters of successful/

sustainable and unsuccessful/vulnerable rural economies; • What are the implications of the geographical constraints that rural economies

face particularly in terms of market access, and how they have (or have not) been overcome;

• The short and longer term trends that are occurring in rural economies in terms of

composition and performance; 1 The rural PSA has an additional clause not relevant to this research: �and improve the accessibility of services for rural people�. Public Service Agreements were introduced in 1998 to set ambitious goals for key service improvement to the public across all Government activities. They link directly to the local authority Local Public Service Agreements. The 2002 Spending Review included an examination of rural policy and consequently the new rural PSA.

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• The nature of commuting within rural areas and between rural and urban areas, including its change over time, its impact on rural communities and economies and future influences on the nature of commuting;

• How national and wider Government policy has affected the functioning of rural

economies, and how it could be adapted in the light of aforementioned trends; • How English rural economies compare to the rural experience in other similar

countries, including parallels that can be drawn as well as different policy approaches that have been taken.

• What areas of research would be useful to inform future policy development in

this area? 1.2 Key Research Themes Clearly, there is some overlap between these sections, particularly the first five. Following consultation with DEFRA, we decided that the report would not be structured strictly around these objectives with a section on each as originally envisaged. Our overview of the literature suggests that there are a number of key research themes and these provide the structure for the remainder of the report. For each we seek to identify the key research undertaken in the UK with some appropriate overseas examples. Whilst it has not been the aim of this report to conduct a rigorous evaluation of all the research, we have attempted to adopt an independent and critical stance. In particular, we have sought to identify conceptual or methodological issues that require further research work, as well as topics that appear to have been neglected in the research hitherto. Proposals for future research are indicated as boxed recommendations within the text. The concluding section of the report draws these recommendations together.

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2. The Characteristics of Rural Economies 2.1 Problems of Definition This chapter of the report provides an overview of research undertaken on the characteristics of rural economies. As we will see, the growing importance of non-agricultural economic activity in rural areas does not mean that there are no longer any distinctive features of economies in rural areas. The chapter examines some of these distinctive features using studies and reports that have set out to identify the particular characteristics of economies and businesses in rural areas. First, by way of introduction, some comments are required on the issue of defining rurality. The continuing use of the term rural, in some respects, derives as much from policy discourse as from academic work. Many academics have long been wary of using the word �rural� in anything other than a loose and generic sense, with some suggesting that it is unhelpful to use it at all (Hoggart 1990). Whilst there may be considerable conceptual justification for this coyness, policy makers have pragmatic reasons for requiring definitions. Once spatially defined areas are identified, it is a small step to provide descriptive data identifying the characteristics of those areas. However, we need to exercise some caution, even when operating with carefully delineated spatial definitions (Hodge and Monk 2003). The data used, often from secondary sources, may or may not provide a basis for valid comparisons between urban and rural areas or between different types of rural area. As Hodge and Monk (2003) explain:

While we may recognise an urban to rural transition, this takes place across many different variables, such as density of human settlement, remoteness from urban centres, balance of particular economic sectors and patterns of land use. These variables transform continuously at different rates in different locations. There can be no logical point at which �urban� changes to �rural� and the character of rural areas varies between places and through time. Any search for a single definitive definition of rural must be arbitrary at best and potentially futile (p2).

Pragmatically, however, definitions have to be used and the one that has informed this review, when applicable, is that developed by the Countryside Agency, drawing on earlier work undertaken by Tarling et al (1993) for the Rural Development Commission2, to define rural districts and wards. This is currently being used by DEFRA, and local and regional government in the identification of indicator districts for the rural PSA3. This is not to say that all the research we have covered in this 2 A map of the Tarling classification of districts is available as Map 3.1 in PIU 1999. 3 In 2001, the Government, mindful of the wide range of definitions in use, commissioned a wide-ranging study of urban and rural definitions (SERRL et al 2002). This led, subsequently, to a user guide published by the Office of the Deputy Prime Minister (2002) which represents the combined views of the ODPM, DEFRA, the Countryside Agency and the Office for National Statistics. Amongst other things the guide promises �a new definition of rural areas that will better reflect current needs for the development of rural policy and be more consistent with the land-use based definitions of urban areas�. This is expected in the autumn of 2003. In the meantime the guide suggests that the Countryside Agency methodology, which employs a range of variables to predict which wards are rural, should be used. The variables, all taken from the 1991 census at ward level are: • population density,

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review has necessarily used this definition. It is readily apparent that economic activity in rural areas transcends any neat boundaries between town and country. Rather than talking of the rural economy, or even rural economies, it is better to consider economic activity that takes place in rural districts and/or is undertaken by people in rural distircts. It therefore makes sense for our purposes to use population definitions of rural areas and to consider those economic activities that are important to the residents of defined rural areas. At the same time we need to recognise that there will be other people living in defined rural areas who work outside those rural areas. The problem of definition is not confined to rurality for there are also issues of conceptualisation when we use terms such as economy or economics. Suffice it to say here that we have interpreted economics broadly and draw our evidence as much from economic geography4 as from economics. We are impressed by the work and insights from �institutional� economics which see markets firmly embedded within social and policy institutions and processes (North 1990). 2.2 The Changing Nature of Economic Activity in Rural Areas An initial point to make at the outset of this section is that the economy of rural areas is no longer dominated by the land-based sector in terms either of GDP or employment. The decline in agricultural and other land-based employment has taken place across all rural districts and, even in the most remote, agriculture ceased to be the occupation of the majority some decades ago. Of course, there may be particular parishes and wards within districts where agriculture continues to account for a high proportion of jobs. The Performance and Innovation Unit (PIU 1999) identified a number of districts in the South West, West Midlands, East Anglia and the North where agriculture continues to account for more than 10% of employment. Just nine English districts are estimated by MAFF for the PIU report to have more than 20% employment in agriculture5. It is also fair to say that the land-based sector has significant knock-on consequences for rural economic activity in terms of up-stream and down-stream enterprises that depend to some extent on farming and forestry. Measuring this impact is by no means straight forward, although some work has been undertaken in the past that seeks to measure the size of the up and down stream land-based economy in this way (Harrison 1993)6. The relevance of this kind of research was very clear when large amounts of public money were being directed into agricultural commodity payments. Measuring knock-on economic impacts was a means of evaluating the wider benefits • the ratio of the economically active to the economically inactive population, • the percentage of people who use public transport, • the percentage of people working in agriculture, forestry and fishing, • the percentage of people in primary production (mining, energy, water), • the percentage of people who are ethnically non-white. 4 For a useful discussion on trends and debates in economic geography see: Martin and Sunley 2001. 5 It is not clear from the PIU report how these estimates (see Map 5.3 on p41 of the Report) were derived and some of them seem implausibly high. 6 More recently the issue of hunting has attracted research of this nature as attempts have been made to measure the economic impact of any hunting ban. The Burns Inquiry (2000) commissioned consultants who developed a �social accounting matrix� of the hunting economy. See also Ward 1999.

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of these transfers. However, with the impending radical reform of the Common Agricultural Policy and the move towards de-coupled payments, research on this aspect of the agricultural commodity production chain is of far less current policy relevance. There may, of course, be a future need to examine how de-coupled payments impact within the wider rural economy. We would argue that the land-based sector is of far greater economic significance in terms of the environmental quality of rural areas which acts as a magnet for new rural residents and associated economic activity. Accessible rural locations are likely to prove attractive to service sector businesses which supply the needs of other urban-based enterprises in close proximity. Remoter rural locations may attract businesses which focus upon niche market products7, so taking advantage of rising consumer incomes and the demand for specialised products. The occupational profile of most rural areas is now diverse with services and manufacturing showing strongly alongside the more traditional land based sectors (Williams 1996). Thus the Countryside Agency 2002 State of the Countryside Report suggests that the presence of �agricultural and fishing businesses� provides the only significant difference between rural and urban areas in terms of business types. The construction sector, hotels and restaurants are slightly over-represented in rural areas, otherwise there is a roughly even rural/urban pattern of business types:

This broad parallel between rural and urban company types corresponds with the similar match between rural and urban employment ... It is important to recognise, however, that there may be real differences in business activity concealed by this broad industry classification. There is continuing research � on the special characteristics of small rural businesses, which points to the importance of recognising niche marketing. 'Striking differences' are reported in the market niche specialisation and orientation between rural and urban firms. The same research noted niche variations between accessible and remote rural areas (page 85).

Keeble and Tyler (1995)8 point to plenty of evidence that since the1960s there has been a shift of firms, output and jobs from conurbations and big cities to smaller towns and rural areas. Rural areas have experienced the least rapid decline of manufacturing employment. On the basis of surveys undertaken by the ESRC Centre for Business Research, at the University of Cambridge, Britain�s small towns (less than 150 thousand inhabitants) contain more SMEs than its major conurbations, and its rural areas more SMEs than large towns (Keeble 1998). Though spearheaded by manufacturing industry, the urban-rural shift is equally evident for total employment and hence services, which now dominate both structure and trends in total employment. The reasons for the relocation of manufacturing are said to be urban space shortages, in the context of increasing capital intensity of manufacturing processes, operating cost differences between urban and rural locations, and the result of large firms restructuring in search of higher profits through 7 Cosh and Hughes (1998) show that rural firms have a lower average number of �serious competitors�: 11.0 compared with 17.4 in conurbations. 8 Drawing on earlier work by Keeble 1980, 1986; Fothergill and Gudgin 1982; Fothergill et al 1985; and Townsend 1993.

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new forms of labour exploitation (Keeble and Taylor 1995). In addition rural settlements are able to attract a relatively high proportion of actual or potential entrepreneurs because of the desirable residential environment. So what does this amount to in terms of the distinctive characteristics of rural economies. A number of studies have attempted to summarise the key issues. For instance, the influential report by the Performance and Innovation Unit (PIU 1999) set out a number of characteristics of rural economies, including: • A high proportion of micro businesses in rural areas, with over 90% of rural firms

employing less than 10 people. • A smaller proportion of large firms employing over 100 people - 1.4% of rural

firms compared to 2.2% of urban firms according to research by the RDC (1998). • A higher rate of smaller firm formation in rural areas in the 1990s so that by 1997

42.5% of VAT registered businesses were located in rural areas. • Higher unemployment or under-employment and low wages in the remoter rural

areas such as parts of Devon, Cornwall and Somerset. • Declining levels of certain services, e.g. village shops and post offices. • Since 1997, declining agricultural incomes. The Countryside Agency 2002 State of the Countryside Report also contains a number of useful characterisations of economic activity in rural areas as follows: • Rural firms represent nearly a third of all registered businesses in England, with

8% more per head of population than urban areas. • Microbusinesses, employing under ten people, are predominant in the countryside. • The rural sector has significantly more microbusinesses, with 1-10 employees,

than small to medium-size enterprises. There are 8% more rural businesses per 10,000 population (402) than urban businesses (372).

• Business start-ups and turnover are rising and slightly higher in rural areas than

urban. • Rural areas have a higher proportion of self-employed (9% of people of working

age) compared to 6.5% in urban areas. • Rural wages are 88% of urban wages and rising more slowly (5.2% compared

with 7.3%). More recently the Countryside Agency (2003) report on Rural Economies up-dates some of these figures and provides some additional data and analysis. The report points to the higher proportion of women who are self-employed in rural areas,

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though often on low incomes. It is a mistake to assume that self-employment in rural areas � for men or women � is necessarily a sign of high incomes. The report, drawing on household income data from the Office for National Statistics (2002) shows the extent to which rural households have developed multiple income strategies. The report goes on to state that:

The ability of households to cope with lower wages in many rural areas and with crises such as foot and mouth derives from the centrality of households in rural economies. Their dynamics may reduce the vulnerability of individual members to unemployment, low income and disability and may part explain why around a third of rural micro-firms may hold little ambition to grow profits or take on employees. In many rural areas, non-wage income exceeds half of all household income. Use of the measure Gross Disposable Household Income (GDHI) would enable decision makers to build regeneration and expansion of rural economies on a wider base than rural labour markets. Narrower measures, such as GDP per capita, which have been the focus of attention of programmes to raise productivity and business competitiveness, focus on the so-called �economically active� i.e. individuals in employment, unemployed on government training schemes, family paid workers or others actively seeking work. In contrast, GDHI makes all major sources of household income visible and confirms that all members of rural households have an important financial contribution to make to the health of rural economies. (p.13-14)

It seems to us that this line of argument combines the useful interpretation of data from the ONS with a good measure of speculation on the social and economic processes that underpin these data. In terms of rural distinctiveness, the Agency appears to be adding another variable to the already available list, namely that rural areas contain a higher proportion of �coping� households. This is a very important argument because of its potential implications for policy design, priorities and delivery. We feel that it requires further investigation, not least because the notion of coping also raises issues about the costs of coping including implications for mental health. Research Recommendation: Research should be undertaken on the applicability and implications of GDHI to both rural and urban areas and on the underlying social and household processes. Research Recommendation: Research should be undertaken on the hypothesis that the ‘strength of households’ might be related to rurality. To summarise, some of the key trends in rural economic changes are as follows: • A decline in agriculture and other land-based employment. • Counterurbanisation � and a growing rural population. • Increasing service employment.

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• Exposure to global markets. • Competition with cheap firms in low wage countries � footloose industrial firms

may not stay in rural regions in the near future. Industrial firms are likely to become more flexible, service intensive and customer oriented and are likely to need medium skilled labourers rather than unskilled workers.

• Increased levels of mobility and car ownership and the growth of dormitory

settlements. • More women in the workforce. • Decline of rural service provision, particularly shops, post offices, schools, village

halls.

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3. Rural Business 3.1 Characteristics of Rural Businesses In this chapter we explore some of the literature that has been developed about rural business activity in the non-land based sectors. A considerable body of literature has been built up in this area, although it has to be said that the extent of research does not appear to be at the same level of volume as that undertaken on agricultural businesses over many decades. For example, there is nothing that compares with the Farm Business Survey in terms of depth and range of business accounting data or indeed sample size. There appears to be relatively little cross-fertilisation of ideas and methods between farm business economics and rural business economics. Work by Keeble et al (1992) conducted a decade ago remains important because of its rigorous empirical base and the attempt to compare urban and rural economic activity. The study surveyed over 1,100 enterprises operating in England�s remote rural, accessible rural, and urban areas, using intensive face-to-face interviews and a postal questionnaire. All types of manufacturing industries and selected professional and business services were included in the sample. Firms in remote rural areas were carefully matched with urban firms in terms of their size, sector and location to permit valid comparisons. The research found that remote rural firms were significantly more specialised in niche markets created by rising consumer incomes, often serving retailing, tourist and agricultural markets. Accessible rural firms predominantly specialise in market niches created by increasing business and technological complexity. Urban firms occupy more traditional sub-contacting and manufacturing niches. Rural managers rate location highly with competitive advantages relating to attractive living conditions, good labour relations, lower wage and premises costs and greater space for expansion. However a minority identified disadvantages regarding distance to customers and suppliers, shortages of managerial and skilled labour, poorer access to business services and training facilities. Some of the key findings were as follows: • Most rural enterprises are relatively new, small businesses, which are independent

and locally formed. They reflect a vigorous recent process of new firm formation in England�s rural areas.

• Employment in remote rural firms had on average been growing faster than in

accessible rural businesses, while employment in urban firms has been declining. This difference particularly reflects trends in medium sized and large manufacturing firms.

• Rural businesses are forced to depend more than urban firms on distant non-local,

customers and suppliers, and hence need good external communication links. • The research unequivocally demonstrates for the first time a direct connection

between recent environmentally-influenced population migration to England�s rural areas and high rates of new enterprise formation there. Most rural entrepreneurs are in-migrants, whereas most urban entrepreneurs are locally-born. And rural migrant entrepreneurs are significantly more strongly influenced in their migration decision by the attractive residential environment of rural areas.

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• Company relocation from urban to rural areas is an important secondary influence

on the growth of rural enterprise. Keeble and Tyler (1995) suggest that companies in accessible rural areas display enterprising behaviour associated with business success, which may reflect the greater expertise/know-how and dynamism of the successful entrepreneurs who are attracted to move to these areas. But equally the characteristics of successful areas enable enterprising behaviour (floor space availability, operating costs). Recent creation and successful growth of rural enterprises are argued to be the result of the dynamic effects arising from environmentally-stimulated population migration fuelled by rising real household incomes, a proliferation of market niches for specialised/customised products and services. Lowe and Talbot (2000) in an overview of more recent research on small businesses in rural areas confirm a number of these earlier findings. They point to data in the Countryside Agency 1999 State of the Countryside report which shows that rural small firms tend to be very small. For example, a high percentage are one person businesses comprising 15.1% of all employment in rural districts compared to 12.1% for England as a whole. They cite evidence that SMEs in remoter areas are more labour-intensive and make less use of technology and innovation (North and Smallbone, 1996). Remoter firms frequently cite labour shortages, especially of managers, as a constraint to expansion, and many have developed niche markets for which demand can be volatile (RDC, 1997). A high proportion of firms make little use of training and business support (Bennett and Errington, 1995). Such characteristics make delivery of services difficult and increase the cost. Keeble et al (1992) report on access to business services:

Remote rural locations are widely seen as relatively less accessible to business services, such as banks, accountants, management, marketing and computing consultants, advertising and market research agencies, and training and public relations consultants, given that most of these services are located in towns and / or cities. At the same time, business use of information-based professional services has been growing rapidly (Keeble, Bryson and Wood, 1991), because of the increasing importance of information for business success in a rapidly changing market and competitive environment. Poorer rural access to these services may thus act as a constraint on rural enterprise development, though one very difficult to measure. (Keeble et al 1992:32)

As shown in Table 1, use of business advice was less for remote rural firms than urban firms in five out of seven business services (although statistical significance is confined to personnel and recruitment).

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Table 1. Areas of Use of External Business Advice

Company Location Remote Rural %

Accessible Rural %

Urban %

Taxation and Financial Planning

54.2 63.9 58.0

Computer Services 36.8 40.5 37.2 Training 25.2 31.6 26.0 Advertising 25.2 31.0 23.5 Business Strategy 22.6 26.6 26.2 Market Research 18.5 20.3 17.6 Personnel and recruitment 12.8 19.6 18.5 Source: Keeble and Tyler 1992:32 Lowe and Talbot (2000) also suggest that rural areas may have a weaker financial and business services sector and that the commercial providers of business services, such as accountancy or law firms may be absent or the service provided may be of lower quality or less specialised (Hitchens, 1997). Jarvis et al (2002) in examining industrialization in two rural areas (South Warwickshire and North Devon) highlight a tendency for small and medium size enterprises (SMEs) to play an increasingly pivotal role in local economic development. They cite Keeble and Taylor (1995) whose work suggests rural firms are more innovative or enterprising than their urban counterparts. Innovative behaviours they take to mean exploiting the advantages gained from cheap labour, novel working practices and marketing strategies, not just technological developments. Jarvis� et al own research reveals a complex picture regarding the role of rurality in business success9. Rural locations may aid the success of some businesses while simultaneously inhibiting the performance of others. Both positive and negative imagery emerged in both study areas as significant. North Devon respondents felt they were differentiated from their rivals by �business etiquette�. These rural small-scale manufacturers felt they were embedded within a business culture regarded as more customer-oriented and friendly; more able and willing to respond rapidly to consumer demands and to supply products at short notice; and more able to provide services/products faster. Moreover, 58% of North Devon postal survey respondents and 46% of those in South Warwickshire felt that they were able to draw business advantage from some aspect of their location. Thirty per cent of North Devon firms and 27% from South Warwickshire claimed that the perceived attractiveness of their operating environment had helped to initiate visits from potential customers. Conversely some cited a negative imagery of rural Devon as lacking in dynamism.

9 The paper represents findings from 19 in-depth interviews across both study areas and a postal survey of 949 manufacturing SMEs.

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A feature of the work by Lowe and Talbot (2000) and by Jarvis et al (2002) is a strong attempt to go somewhat beyond the large survey methods so successfully deployed by Smallbone and North and the Cambridge researchers. They use more qualitative research methods to examine less tangible issues of motivation, the significance of rurality, adopting, in short, a more sociological frame of reference10. Research Recommendation: A scoping study should be commissioned, or a seminar convened, to compare and contrast rural and agricultural business research with particular attention to methodological issues. 3.2 Business Performance and Success in Rural Economies This section draws on an excellent summary of this issue recently produced by Smallbone et al (2002). As already indicated research undertaken in the 1980s showed that the growth performance of SMEs in rural areas tended to be higher than in urban areas (Keeble and Tyler, 1995):

rural environments tend to attract people who are likely to demonstrate a high level of entrepreneurial ability and also that rural areas have an environment (in terms of economic, physical and institutional characteristics which is particularly conducive to entrepreneurial behaviour. Other authors have drawn attention to the more labour intensive development paths of rural enterprises, particularly those engaged in manufacturing in the more remote rural areas (North and Smallbone, 1995; 1996). They emphasise the adaptability of rural SMEs to the characteristics of local labour markets and the fewer opportunities for subcontracting out, which contributes to them being more self reliant in production terms. The result is that a given increase in sales is associated with a larger increase in employment in rural firms, compared with their urban counterparts. (Smallbone et al 2002, p16)

However, trends in the 1990s revealed fewer urban-rural difference in employment growth rates (Cosh and Hughes, 1996). By 1994-97, rural SMEs were outperformed by urban firms (Cosh and Hughes, 1998):

This was a noteworthy result because it is completely the opposite of what might be expected on the basis of previous studies ...... , which all found that until the early 1990s, employment in rural SMEs was growing significantly faster than that in urban-based SMEs. Cosh and Hughes (op cit) concluded that their results suggested that the dynamism shown by rural firms in the 1980s appeared to have been lost, indicating a cessation of the apparent urban-rural shift in employment that had been in operation since the 1960s. The superior employment growth performance of urban-based firms, identified in the CBRC survey during the 1994-97 period, was repeated in 1997-99 (Cosh and Hughes, 2000). In the latter case, the poorest employment growth performance (zero

10 It is perhaps not surprising that both Philip Lowe and Brian Ilbery (a co-author with Jarvis) have conducted a considerable amount of research with farmers where the sociological and social geographical traditions of investigation appear to be so much more strongly developed than in the non land-based rural business literature.

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median employment growth) was recorded in the rural sample, with the fastest growth evident in those SMEs located in large towns. Once again, the rural SME group contained a higher percentage of static or declining enterprises in terms of employment than the urban group. However, a more detailed breakdown of the aggregate picture revealed a subset of more dynamic rural enterprises (in employment terms), reflecting a polarisation between a majority of rural SMEs with static or declining employment on the one hand and a small sub-group of fast growing firms on the other. Nevertheless, the longstanding urban-rural shift of employment in SMEs appeared to have ended. (Smallbone et al 2002, 16)

One of the problems with trend data of this type based on large scale surveys is that they tell us relatively little about processes or about causal relationships. The fact that rural firms appear to have out-performed urban firms, in rather broad and general terms, for a period and then the reverse is not particularly illuminating, especially given the rather broad-brush definitions of rural and urban that are being deployed. Explanations from within the business economics discipline tend to focus on familiar business success variables such as levels of adoption of innovation, costs of production, etc. A key question is how interactions between economies result might lead to clusters of successful and sustainable or otherwise unsuccessful and vulnerable rural economies. Linked to this we were asked to consider the implications of geographical constraints that rural economies face, particularly in terms of market access, and how they may or may not have been overcome. Keeble and Tyler (1995) drawing on their 1992 survey (Keeble et al 1992) seek to examine factors that might account for business success and these are shown in Table 4 below. Most writers on rural economic activity seem to feel that geographical constraints of distance are usually not considered a problem by business managers/owners in rural areas within the UK. Thus Keeble and Tyler (1995) report no real problems with regard to access to business services, finance capital or infrastructure like communications. North and Smallbone (1996) found that the majority of rural firms did not consider that they suffered any competitive disadvantage as a result of supplying customers in other parts of the UK or other countries so long as they were within one hour of a motorway. North and Smallbone (2000) suggest that remote rural regions seem to stimulate innovation as businesses strive to overcome some local constraints and are more adaptable as a result. The constraints that may be encountered include increased transport costs and sometimes fewer skilled workers. This is countered sometimes through increased wages to compete with urban areas and/or the provision of training. There may also be poorer social networks due to sparsity of population and consequently a slower uptake of new technologies, a small customer base, and less business support (technology, subcontractors). Vaesson and Keeble (1995) make the same point suggesting that a more hostile business environment may encourage firms to be more innovative in order to overcome constraints. They cite the attention to marketing of some rural businesses as an example of this.

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Table 4. Business success factors affected by rural or urban location

Company location Remote rural (%)

Accessible rural (%)

Urban (%)

Percentage point difference between accessible rural and urban responses

Attractive living and working environment

24.0 31.3 1.7 +29.6

Local marketing opportunities 16.8 7.5 6.1 +1.4 Labour force stability, quality, motivation

10.6 14.9 1.7 +13.2

Good labour relations 5.8 7.5 1.0 +6.5 Low labour costs 4.8 6.0 0.0 +6.0 Greater labour availability 4.3 6.0 25.8 -19.8 Lower premises, rates and overhead costs

13.0 17.9 0.7 +17.2

Centrality/accessibility to clients, staff and suppliers

1.0

0.0

36.3

-36.3

Access to local services 2.9 1.5 10.2 -8.7 Other rural advantages 14.9 6.0 3.0 +3.0 Other urban advantages 1.9 1.5 13.5 -12.0 Total 100.0

100.0

100.0

0.0

Source: Keeble et al 1992: p36

One important point made by North and Smallbone (2000), drawing on Cooke (1995), is that SMEs in regions with weakly developed �learning infrastructures� will be less innovative than similar firms in better provided areas. Rural regions will therefore suffer comparatively because of lower density and more dispersed distribution of the business population, lack of opportunities for trading and subcontracting linkages, absence of HE and research institutes and relative lack of local business support services. Barriers to innovation in remote rural areas may also be due to the additional costs of delivering effective business and technology support where business densities are low, so slowing down diffusion and the adoption of new technologies.

Terluin and Post (2000) examine �leading� and �lagging� case study regions across nine EU member states11 (see also Terluin and Post 2001). Successful economies are characterised by strong internal networks (enhanced by an active attitude of local actors, solidarity, easy communication and strong local leaders). Lagging regions had weak internal networks (low density of actors, little interaction among internal actors, lack of co-operation among sectors, internal conflicts, lack of active actors, lack of capacity of local actors and lack of formal networks).

11 Luxembourg (Belgium), Niederbayem (Germany), Luneburg (Germany), Kormthia (Greece), Fthiotis (Greece), Albacete (Spain), Zamora (Spain), Alpes de Haute Provence (France), Ardennes (France), Nièvre (France), Pesaro (Italy), Macerata (Italy), Drenthe (Netherlands), Groningen (Netherlands), Osttirol (Austria) Liezen (Austria) Keski- Suomen Lääni (Finland) and Mikkelin Lääni (Finland).

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It is remarkable, and we would argue that this is in some contrast to the situation with regard to social science research on agriculture, how little work on the non land-based SME sector has focussed on the social processes that contribute to business success. Research Recommendation: Research should be undertaken amongst rural businesses to explore some of the more qualitative issues surrounding business success and the significance of rural location. Some important new insights into the differential performance of rural economies and the nature of rural development likely to be helpful and relevant to the recommended research on rural businesses are emerging from two EU funded projects. The first on the socio-economic impact of rural development policies in Europe, funded under the EU Fourth Framework FAIR research programme, is available in a series of case study papers highlighting characteristic features of rural development processes at a local level across Europe12. The second EU funded work is DORA project and this is soon to be published (Bryden and Hart in press; see also Bryden and Hart 2001). Taking four countries (Scotland, Germany, Greece and Sweden), and two rural areas with contrasting economic performance in each, the research team examines factors that go beyond what they considered to be the conventional (but flawed) requirements for strong rural economic development:

Conventionally, what is needed for development is more money, better roads, more effective primary resource exploitation and a labour force trained to staff whatever types of enterprises are installed in the area as a result of public and private sector initiatives. This perspective was shared to some extent by our informants, especially by the inhabitants of less well-performing areas, who tended to see the solution to their troubles as more outside investment in the tangible aspects of development, especially infrastructure. However, in the more successful areas, endogenous achievements of a more intangible nature tended to be stressed more often. (Bryden and Hart in press)

Differential economic performance is accounted for by the interaction of the following somewhat intangible factors: Culture and society in the shift from state to market, linking with:

• National context

• Community

• Networks

• Institutions

Infrastructure and peripherality, linking with:

12 Key publications are included in a special issue of Sociologia Ruralis (volume 40 2000).

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• Transport and communications infrastructure, location in relation to markets

• Institutional structure and performance

• Access to services and quality of life

• EU and national policies regarding provision of rural services and infrastructure

• Governance, public institutions and investment, linking with:

• Institutional autonomy, especially fiscal

• Co-operation between public institutions and with the private and voluntary

sectors

• Effective networks between public, private and voluntary sectors

• Institutional effectiveness and efficiency

• Information and transaction costs to entrepreneurs

• New rural economy, e.g. commercialisation of environment, heritage and identity

• Ability to tap national and EU resources for infrastructure and other investment

Entrepreneurship, linking with:

• Private sector investment levels and new start-ups

• Local autonomy/dependency

• Effective networks with other entrepreneurs, the public sector and universities

• Information and transaction costs, entrepreneurial risk and uncertainty

• Confidence and co-operation

• Culture, institutional structures and performance

Economic structure and organisation, linking with:

• Commercialisation of natural resources, culture and identity and local products

• �New rural economy�, e.g. tourism, environmental management and IT-based

services

• Specialisation/diversification of the local economy

• Degree of external/local ownership of land, housing and capital

• Weight of the primary sector in employment

• Contentious industries conflicting with new opportunities

Human resources and demography, linking with:

• Utilisation of available labour

• Skills and education

• Labour market imbalances

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• Institutions of further and higher education

• Migration and commuting

• Quality of life

This is just a very brief summary of some of the key ideas taken from just the concluding chapter13 of a work, as yet unpublished. It is included in the main to whet the appetite. The chapter I have seen is full of tantalising and challenging findings that suggest it is a work of major importance. To give just one additional instance the authors challenge the assumption that strong social networks are necessarily beneficial to economic development. On the contrary, they suggest that they might in some instances cause poor economic performance if they are exclusive, raise transactions costs and internalise information. This may relate in some ways to Irish research by Roper (2001) who suggests that local economic interactions are not as important to economic vibrancy as is sometimes claimed. We return to the issue of social networks and social capital in Chapter 5. The Bryden and Hart work goes well beyond the rather arid manipulations of official data sets, with perhaps a little additional secondary survey material, that sometimes passes for an analysis of differential economic performance. Research Recommendation: When the full text is available, Bryden and Hart’s work should be scoped with a view to rolling out or replicating their methodology and conceptual approach in comparative work in England. 3.3 Drivers of Economic Success: Environment Finally in this chapter we turn to a somewhat more detailed consideration of two sets of drivers, perhaps implicit in some of the work reviewed in the previous section: the natural environment and knowledge. We give them particular attention because in both cases we feel they were somewhat neglected in Roberts� review of economic drivers. First we look at the environment and then, in the final section, the issue of knowledge. There is a wide academic literature, not explicitly rural economics, where the notions of �ecological modernisation� and �sustainable development� have both been developed to depict the manner in which the environment may be positively developed and conceptualised within economic processes. Ecological modernization accepts that economic activity causes environmental harm and, rather than challenging this, offers solutions such as sustainable development instead of growth, anticipation rather than cure. It sees pollution as inefficiency and treats environmental regulation and economic growth as mutually beneficial, not least because of the need to assuage public and consumer opinion (Hajer, 1995; Giddens, 1998). Consequently

13 I am grateful to John Bryden for sending me a copy of the concluding chapter. I have not yet seen the bulk of the text including the crucial methodology chapters. I am aware that the research has been graded as an exemplary project by the European Commission.

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environmental management and protection come to be seen as drivers of economic success in an �ecologically modern � or �sustainable� economy. It is not an exaggeration to say that although the importance of the environment as a driver of economic activity is now widely acknowledged in general terms, it is routinely neglected in standard studies of rural economic activities and interactions within localities. It is remarkable how few of the studies of business economics in rural areas pay more than passing attention to the issue. Thus the natural environment as a driver figures very sketchily, if at all, in most of the literature we have reviewed so far in this chapter. Roberts acknowledges in a footnote the existence of environmental economy studies and suggest that it should be a future research priority14. But at the same time as Roberts was reviewing the drivers of economic change a number of RDAs, government agencies and voluntary organisations were proclaiming the natural environment to be a prime economic driver. For example, the South West of England Regional Development Agency identifies the environment as one of three key economic drivers in the region (the others being innovation and enterprise and skills and learning). This emphasis also features in the Countryside Agency�s Rural Economies: Stepping Stones to Healthier Futures. We understand that DEFRA has let a scoping contract to consultants to examine certain aspects of the role of the environment as a driver, but have not seen the terms of reference. Roberts proposed �developing a methodology to provide more robust estimates of the importance of the quality of the environment to economic development and regeneration in rural areas.� (p.10) We would endorse this. Given that it is commonly acknowledged that the maintenance and protection of this important natural capital is likely to require public intervention, identifying research requirements in this area is of considerable importance. Considerable research has been undertaken to inform public decision making with regard to policy priorities through work on environmental valuation (Garrod and Willis 1999). Contingent valuation (CV) is one of the most widely adopted methods for this kind of work. In CV, individuals are interviewed and asked to place a monetary value upon a particular non-commodity good, based on willingness to pay or, sometimes, an amount of money they would be willing to accept to forego the benefit. Whilst techniques have become ever more sophisticated, CV has also been subject to an increasingly sophisticated conceptual and methodological critique in the UK literature in recent years (e.g. Lowe et al 1993). Critics of the approach question the extent to which individuals have pre-existing values for novel, �exotic�, or complex environmental �goods� with which they are unfamiliar (Burgess et al 2000; Gregory et al, 1993; Hutchinson et al, 1995). In recent work researchers have examined CV empirically. Thus Burgess et al (2000; see also Clark et al 2000), conducted qualitative research with respondents to a CV survey and concluded that:

CV methodology is a communicative process through which different knowledges, meanings, and values are exchanged between researchers and respondents (Burgess et al 2000: p. 506).

14 No studies are even referenced.

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They suggest that more context-specific, qualitative research than that offered by CV is needed to capture complex, cultural values for nature and landscape (Clark et al 2000). So too Spash (2000) has conducted empirical work as part of research on the role of ethical positions in influencing intentions to undertake actions relating to environmental improvement:

The focus is on extending and improving the analysis of ethical positions in economic models. More specifically, an attempt is made to categorise an individual�s ethical stance so that it might be used to analyse the stated intention to pay for an environmental change. This requires identifying a relevant set of ethical positions, developing associated categories which can be easily identified, and placing the approach within the context of a specified environmental change. (Spash 2000: p.196)

The survey found that less than half of the sample (47%) held a position consistent with the utilitarian model of neo-classical economics. Jorgensen et al (2000) also raise questions on CV results based on empirical work with CV respondents. Another criticism of environmental valuation studies is that they can lead to counter-intuitive results unless some importance is attached to non-consumption or existence value. By contrast to this area of valuation work, we find remarkably little empirical research on the extent to which the environment may or may not be a driver of economic activity in terms of concrete empirical examples. Thus the driver principle is deduced from valuation studies of the type we have just mentioned and from studies of migration where attraction to a particular quality of environment is cited as a motivating factor in migration decisions. There are some studies, of course, of how specific natural characteristics of landscape and environment are used to help in the branding of products, for example through quality assurance schemes (Morris 2000; Morris and Young 2000); or how the commodification of natural processes or outputs may take place, as in game shooting for instance (Cox et al 1996); or how particular landscapes or wildlife sites might benefit the economy (Bonnieux and Le Goffe 1997, Crabtree 1997). A number of policy evaluations of agri-environment schemes give some modest attention to how payments are multiplied within the rural economy (eg. ADAS 1996). Specific attention has been given to how the proper maintenance of a particular landscape feature, partly through public expenditure (in this case Devon hedges) has a wide range of spin�off economic benefits (Mills et al 2000). The aim of the research was to estimate the additional income and employment impacts to the local economy arising from an injection of £1 million per year for 5 years for hedge restoration to meet the BAP targets for species-rich hedges in Devon. Based on data gathered through interviews with farmers and contractors and standard multiplier analysis, the research identified that expenditure on hedge restoration work in Devon contributed, both directly and indirectly, to income generation within the local economy, producing an output of £2,439,732. The greatest income impact is on wages to contractors and farmers who implement the work. The spending of these wages in the local economy also has a significant induced impact, generating a further £158,662 of expenditure in the local economy. An overall expenditure multiplier of 1.3 was

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calculated for hedge restoration work in Devon in order to implement the BAP targets for species rich hedges. Of course, this type of work does not attempt any kind of assessment of how Devon hedges, as havens for wildlife and an attractive landscape, drive the economy in a less tangible way. How much can they be said to contribute to business location, tourism, recreation, residential re-location, and so forth? A few studies have attempted to value the environment across the board. Such studies are unable, in practical terms, to use the detailed methodology employed by Mills et al for a single environmental feature. Nonetheless, a National Trust study (1999) estimated that 3.7 million or 79% of all annual holiday trips to Devon are motivated by the conserved landscape. The definition of the term �conserved landscape� was broad, describing fields, woods, moorland, villages and coastline. The trips were estimated to last 20.7 million nights with a visitor spend of £749 million. In addition, a total of 23,900 full time equivalent (FTE) jobs were supported by landscape motivated holiday trips. Of these 16,000 were directly supported by landscape motivated holiday trips and the linkage and multiplier effects supported the balance. Actual jobs supported by conserved landscape motivated holiday trips to Devon were 23,500 directly supported and 9,000 indirectly supported (National Trust, 1999). It is clear to us from the literature in this area and the emphasis now given to the environment as an economic driver that there is room for considerable further research effort. Research Recommendations: The following issues should provide a starting point for consideration: • The nature and extent of any competitive advantage afforded by the natural


• Is environmental benefit of this nature a generalised phenomenon or can it be differentiated in any way? In other words do particular types of landscape and land cover offer greater economic advantages than others?

• What would be the impact on rural businesses benefiting from the environment as an economic driver of significant changes to landscape and environment brought about by climate change, agricultural policy reform, etc?

• Are there particular businesses that might reap benefits from greater attention to the environment in marketing and branding?

• Are there new ‘environmental’ business opportunities available? If so how can they be nurtured?


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Finally, in this section we should note that the welcome attention given to the natural environment as a driver of economic activity should not hide the fact that there may be occasions when the quality of the environment impede economic development. Indeed, some authors have argued that there are still fundamental contradictions between economic development and environmental protection, with sustainable development seen by such commentators as a contradiction in terms (Sneddon 2000). In less abstract terms, the quality of the environment can clearly act as a constraint on economic activity in certain circumstances. Land and property may not be available for development due to protective designations and planning control (see section 7.2). The same constraints, because of their impact on residential housing markets, may adversely affect the availability of skilled labour. Little research appears to have been undertaken which explicitly tackles the issue of analysing the balance between a high quality natural environment as a constraint and a driver of economic activity. Research Recommendations: Research should be undertaken which analyses the relationship and tensions, within a high quality natural environment, between the role of the environment as a constraint and as a driver of economic activity. 3.4 Drivers of Economic Success: Knowledge and Innovation Knowledge-based innovation is seen as necessary for economic performance by most authors looking at economic development, although as Mackinnon et al (2002) point out �.. while the learning region literature advance some interesting propositions about the changing relationships between regions, knowledge creation and competitive advantage, the precise nature of these relationships is not clear from the limited empirical research that has been undertaken� (p.305). Similarly, Benz and Forst (2002) in the context of policy learning in regional networks, suggest that research, hitherto, has not clarified how networks have to be organised and linked to the institutional framework and whether competitive or co-operative orientations of actors are more conducive to change. Roberts (2002) gave little explicit attention to this area of work although it is implicit in suggestions offered on social capital and business development needs. The precise relationships between knowledge generation, transmission and business success, especially in remoter rural regions, is still relatively under-researched. Some of the links are obvious as in the case of electronics firms clustering around government funded university research in science (Charles and Benneworth 2000a), but less cutting-edge businesses have knowledge requirements too. The knowledge requirements and means of knowledge transfer in the land-based sector have also been the subject of numerous inquiries (e.g. Dampney et al 2001) Research Recommendation: Research attention should be focussed around the networks and knowledge transmission mechanisms that may be appropriate to the wide range of businesses located in rural areas.

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Charles and Benneworth (2000b) strongly suggest that a top-down approach to science policy has had negative impacts on regions that do not host successful and well-funded science facilities. The implications of this proposition need to be examined and research undertaken as to how the difficulties it poses to regional and rural competitiveness might be countered. Research undertaken with the RDAs, for example, might help to identify clustering opportunities within peripheral locations (see Atherton 2003, Benneworth 2002). Research Recommendation: Research should be undertaken on how science policy is formulated and how it impacts on regional and rural competitiveness.

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4. Rural Labour Markets Because this topic is the subject of another literature review for DEFRA being undertaken by Anne Green of the University of Warwick, our review here is a short one and touches on just a few broad themes15.

As evidenced in the responses to business surveys in the previous chapter, there is a prevalent view that businesses located in rural areas may benefit from a number of labour market characteristics. These include a cheap and compliant labour force (with low trade union membership) and high levels of social capital within the workforce. There are also suggestions that rural labour markets may exhibit high degrees of flexibility reflected in higher proportions of part-time work and self-employment (Gilbert et al 2001).

Recent research in economic geography, has sought to develop a distinctive socioeconomic regulatory and institutionalist perspective on local labour markets16 (Sunley and Martin 2000). Researchers stress the importance of social relationships and that labour is not a commodity like any other as it is inseparable from the seller (Sunley and Martin 2000; Jonas, 1996; Peck, 1996; Storper and Walker, 1989).

Thus, Sunley and Martin (2000) using New Earnings Survey data, reveal that most of the country�s major conurbations have lower proportions of employees earning below the minimum wage than surrounding rural areas. Many of the areas with the highest proportions of low-paid workers are in rural labour markets outside the south-east. The highest rates of low pay in England are found in Cornwall and parts of the South West, the Welsh borders, parts of East Anglia, Lincolnshire and Humberside, and parts of North East England in labour markets dominated by agriculture, retail, and tourism. Interestingly, the researchers claim that the position of the high numbers of low-paid employees in conurbations is obscured in average earnings figures by the co-presence of high earners. It is hard to see why that is not also the case in many rural areas given counterurbanisation.

Sunley and Martin (2000) examine the issue of monopsony power in labour markets. This is where employers have such a degree of market power that they can hold wages below the marginal product of workers, classically where there are single employers or isolated labour markets. It may also occur where informational and mobility costs impede job search and segment local labour markets. As Martin and Sunley (p1747) explain �if workers have incomplete knowledge about other job opportunities, or have no alternative but to work for a particular employer, then their wages are likely to be below their marginal product. Similarly, where women with children need to work near a childminder or school, this will act as a significant barrier to their mobility (Gosling, 1996).� They cite large rural and coastal labour markets where labour mobility is difficult as likely candidates for monopsony. Gilbert et al (2001) have taken a similar approach to Sunley and Martin in seeking to examine the likely impact of the minimum wage. They cite the high instance of low pay in rural areas which may be linked to business type (small businesses, tourism)

15 Nor do we offer any research recommendations as the4ase will emerge from Green�s review. However one general point is that research on labour markets appears to be rather specialised and there is perhaps a need to place some of the work in the wider context of rural economic development. 16 An explicit contrast is drawn between the models of perfect and imperfect competition developed by labour-market economists: Martin, forthcoming.

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and where collective bargaining coverage is low (Metcalf 1999). They point to evidence of certain distinctive characteristics of rural labour markets that help to explain the low pay phenomenon. Drawing on research by Dunn et al (1999) they refer to the existence of informal networks which are often required to find jobs in rural areas, the restricted choice of jobs, limited training opportunities, and difficulties in accessing public transport or �affordable� housing. All of these factors can help rural employers to have greater power over wage setting. Consequently in remote rural areas especially, in-work poverty is more prevalent than elsewhere, especially for females, the young and those with no or few qualifications. This has been explored in considerable detail by Dunn et al (1999) and in Monk et al (2000). This research, undertaken for the Rowntree Foundation, set out to examine the significance of the operation of labour markets to the incidence of rural deprivation, thereby reviving a strong emphasis on labour markets and deprivation in major research for the Department of the Environment in the early 1980s (Bradley 1984). Stowmarket in Suffolk was selected as a fairlv accessible rural area and Horncastle in Lincolnshire as fairly remote17. In both localities �gatekeepers� with local knowledge were interviewed. A questionnaire survey was undertaken of people potentially disadvantaged in the labour market, and interviews were undertaken with a sub-sample covering work histories, important life cycle events, and current labour market status. A key finding was that disadvantaged people in both areas faced similar problems in the labour market regardless of the degree of accessibility. The main barriers to finding employment were uncovered as a relative lack of appropriate jobs accessible to local people, the low level of wages (making benefits more attractive), and personal circumstances and characteristics (including ill health, over or under qualification, lack of childcare facilties) Accessibility difficulties were exacerbated by the small number of employers (see also Breeze et al 2000). This difficulty was compounded for those without transport:

As Breeze et al (2000) point out, those who own cars �barely acknowledge� the existence of a problem (p. 6). Yet for those people who cannot drive, or who face the �Catch 22� of no job, no car, yet without a car you cannot get to work, accessibility is surely the single most intractable problem (Monk et al 2000: 305).

The problems were compounded by two other factors: �strong rural networks which favoured some people while excluding others� and �employers� attitudes and behaviour�.

The findings on labour market reported thus far, might suggest there are considerable opportunities for rural businesses to exploit labour market circumstances. However as Keeble et al (1992) report, remote rural firms also suffer some constraints on business development and efficiency, arising from greater shortages of skilled and technical workers, management and professional staff. Bollman and Bryden (1997) provide an international study of rural labour and employment issues. In one chapter, for example (Irmen 1997) there is an examination of rural employment and population dynamics in seven OECD member countries 17 Although in fact both are classified as �remote rural� in the Tarling classification of local authority areas.

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(Austria, Finland, the former Federal Republic of Germany, Norway, Switzerland, United Kingdom and the United States). Foss (1997) compares Finland, Norway, Switzerland, United Kingdom and the United States in an examination of the basic structural characteristics of economic activity in different types of regions (rural/urban); the relationship between structural conditions, structural development and employment change; the relative importance of small and medium sized establishments to employment and employment change; and the relative importance of gross job flows and their gross components of change at the establishment level to the development of rural employment. Goffette-Nagot and Schmitt (1999) consider population densities, labour-force exchanges, and distribution of services in labour-market areas surrounding cities in six French regions.

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5. Interactions between Rural Economic Sectors 5.1 Rediscovering the Local Economy In this chapter we consider interactions between economic sectors in rural areas, seeking inter alia to examine the extent to which there may be clusters of successful and sustainable or, conversely, unsuccessful and vulnerable rural economies? Interactions, linkages, transactions, exchanges are all words that are deployed in this context. Critical in the context of this review is the spatialisation of these economic relationships. This has been made explicit in a number of recent studies which have at their core the notion of a �local economy� and examine economic relationships in the light of their contribution to, or detraction from, the strength of the local economy. Thus for Courtney and Errington (2000) economic linkages are � a network of transactions of varying nature which either contribute to the income generation within, or leakage from, the �local economy�.� Whilst at first sight the notion of economic interaction or exchange might appear to be somewhat dry, even turgid, it has recently attracted considerable interest beyond the narrow confines of local economic analysis. There are good policy and, indeed political, reasons for this. The deepening and strengthening of local economic interactions has been seen as a prerequisite for more sustainable economic development. Those concerned to promote endogenous models of development have emphasised the importance of interactions which limit economic leakages from particular localities, thereby both maximising local multipliers and reducing certain externalities such as those associated with long-distance transport18. Much helpful work has been conducted around the local food issue in this context (e.g. Gilg and Battershill 1998, Ilbery and Kneafsey 1999, 2000, Murdoch and Miele 1999)19. Clearly, in part, this is a concern associated with responses to globalisation. Indeed a number of commentators have suggested that a focus on local economic activity is bound up with globalisation rather than being in any way a contradiction. Their argument is that globalisation gives rise to more segmented and differentiated markets rather than homogeneity. Notwithstanding the MacDonaldization effect (Ritzer 1993, 1998), few would argue that in some sectors and for some goods, global markets open up significant opportunities for the development of markets built on local provenance and distinctiveness ( Murdoch et al 2000). Moreover, economic globalisation, it is argued, has led to some governance changes which amount to a �hollowing-out� of the state and a re-assertion of a local and/or regional policy dynamic20. Developing products with strong local provenance does not necessarily require high levels of local economic interactions21. Much will depend on the nature of the product and the way in which its provenance is developed and demonstrated. Clearly there may be differences between the interests of an individual business developing a

18 Hence the development of notions such as �food miles�. 19 See also forthcoming review of work in this area: Winter 1993e. 20 A large literature on governance and regionalism now exists of relevance to this theme. Recent writings include: Jessop 1995, 1998; MacKinnon, et al 2002, Storper, 1997; Ward 2000. 21 Nor indeed is the development of strong local social, cultural and political identities necessarily a mark of highly integrated and/or self contained local economies. There are numerous examples in history of strong local identities being forged on the back of global economic practices.

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particular market and the wider interests of those concerned for endogenous and sustainable development. A notion developed by economic sociologists and economic geographers to grapple with the issue of economic interactions, but to do so in a way that emphasises the wider social and cultural significance of economic relations, is that of embeddedness. As this is a term increasingly used in the literature, particularly but not exclusively with regard to the food economy, it is important to devote some attention to its origins and contribution to this area of research22. Murdoch et al (2000) have pointed out that the notion of embeddedness has a long lineage, with Granovetter (1985) providing seminal interpretation and extension of earlier ideas put forward by Polanyi (1944). At the heart of the concept is the emphasis laid on the necessity of social relations to all economic transactions. Thus Granovetter (1985) stresses the role of social relations in generating the trust necessary for economic transactions to take place. If embeddedness is to do with local social relations of production and consumption based on trust relations, it is also to do with the meaning that these relations hold. This �making sense� takes place in social relationships. Thus the embeddedness literature has concentrated on the social components of economic action, particularly networks of exchange (Murdoch et al 2000). But as Campbell and Lindberg (1991) point out, to identify embeddedness within networks as a means of conceptualising economic activity is only the first analytic step required. Of greater importance is the task of identifying different degrees and qualities of embeddedness (Campbell and Lindberg 1991). Not surprisingly, as rural researchers have responded to the emergence of alternative food networks, embeddeness has been seized upon by some as a powerful explanatory concept. Hinrichs, for example, draws on Block (1990) to use the concept �in a cautious, critical fashion� and �not simply as a friendly antithesis to the market� (p.296) in her analysis of direct agricultural markets in local food systems. Recently, however, the concept of embeddedness and its growing use in economic sociology has been subject to a rigorous critique by Krippner (2001), who argues paradoxically that the intuition that �markets are socially embedded � while containing an important insight � has led economic sociologists to take the market itself for granted. As a result, economic sociology has done scarcely better than economics in elaborating the concept of the market as a theoretical object in its own right� (p776). Krippner�s particular concern is with the extent to which the focus on embeddedness and the notion of a continuum effectively removes the hard core of instantaneous transactions from the purview of economic sociology. �But every transaction ... is social in the broader sense of the term: congealed into every market exchange is a history of struggle and contestation that has produced actors with certain understandings of themselves and the world that predispose them to exchange under a certain set of social rules and not another.� (Krippner 2001: 785)23

22 The section that follows draws on a recent paper by one of us: Winter 2003a 23 On the social nature of economy see also: Bell and Lowe 1998.

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When we turn to an examination of the empirical evidence around levels of interaction or local embeddedness, we find conflicting evidence24. We look at some of this evidence in the remainder of this section. First though it is important to stress that what might appear a somewhat academic and abstract debate is of considerable importance to issues of economic success and failure. Unfortunately much of the empirical research in this are has not drawn on the embeddedness literature and therefore the theoretical work we have been considering has been subjected to relatively infrequent empirical interrogation. Research Recommendation: Research should be undertaken on how the insights from the literature on embeddedness might be applied in conceptualising and empirically researching rural economic development. There is a strong body of literature which emphasises how either the characteristics of rural areas and/or the pace and nature of rural social and economic change may give rise to relatively low levels of interaction. For example, Curran and Blackburn (1994) suggest that there is an almost complete lack of integration of small firms with their respective local economies in anything other than a symbolic sense. Indeed their book is sub-titled �the death of the local economy�. Similarly, North and Smallbone (1995, 1996), in research on 80 manufacturing firms in rural Northern England25, emphasise that many firms in remote rural areas are specialist. There is a relative absence of suitable local sub-contractors. Consequently, few sub-contract out and larger firms have become vertically-integrated to economic actors outside of the locality. Smallbone and North (1999) have conducted a further study of innovation and the use of new technology in rural SMEs 26, this time covering both manufacturing and service sectors. This work was based on a survey of 330 firms located in rural districts in Northern England, the South West, and East Anglia27. The researchers found that nearly two thirds of the firms with innovative products or services developed them internally without any help from external individuals, firms or agencies, another indication of a relative lack of integration with other local economic actors. However, it is important to stress that neither of these surveys were undertaken to examine integration per se. The first was focussed on growth and employment performance, the second on innovation. The authors are particularly interested in specific business types and the factors associated with success. They offer some insights into the issue of integration but it is perhaps stretching the research findings too far to say that they offer conclusive evidence of low levels of integration or embeddedness of rural firms.

24 Although it is probable that differences are accounted for largely by contrasting research methods and objectives. 25 The research formed part of a Longitudinal Study of Adjustment Processes in Mature SMEs during the 1980s funded under the ESRC�s Small Business Research Initiative. Manufacturing firms were also studied in London and in Hertfordshire and Essex. 26 The research was funded by the Rural Development Commission (RDC). For more details see: North et al, 1997; North and Smallbone 2000. 27 Within the three regions, two thirds of the sample were from remote rural districts and one third from accessible rural districts.

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Other work has focussed explicitly on the issues of integration, the multiplier effect and economic leakage. For example, the New Economics Foundation project �Plugging the gaps� is seeking to engage local communities to make measurements, in both urban and rural areas, to determine the multiplier effect and extent of leakages, of different types of business activity and economic development. For instance, drawing on work in a locality in Cornwall funded by the Countryside Agency, the NEF claims that every £10 spent in a supermarket generates £14 in the vicinity in contrast to £25 for very £10 spent on a local organic food initiative (New Economics Foundation: www.pluggingtheleaks.org ). In terms of academic research, strong data on the extent to which local economies leak are rarely come by (but see Williams 1996). Courtney and Errington (2000) set out specifically to examine levels of local interaction and exchange (see also Courtney 2000, Courtney and Errington 1999, Errington and Courtney 1999)28. Their work is particularly important to this section of the review and it is worth examining it in some detail. The researchers seek to examine the economic linkages between two small towns with populations of around 5,000 (Kingsbridge in Devon and Olney in Buckinghamshire) and their surrounding hinterlands29. Their aim is to compare what they term the contemporary �economic footprint� of the towns30. The research examines transactions between firms (the purchase and sale of �intermediate goods� including business services) and between firms and households (the purchase of consumers goods and the sale of labour). Questionnaire data were gathered from 288 firms and 650 households in the two case-study areas. Respondents provided estimates of expenditure (firms and households) and receipts (firms only) and the proportion of these ascribed to suppliers (customers) within the town, within a four mile radius, and wider afield. For fourteen firms in Kingsbridge, Harrison�s (1993) �spatial tracking� technique was also used to record the transactions of a sub-sample of respondents using data gathered from financial records. The fact that this could only be done for just 14 firms is indicative of the labour-intensive nature of such research work, although clearly it is likely to yield much more than respondents� estimates31. The use of a four mile radius to define locality is considerably less than that adopted in some other studies. For example Williams (1994) defines �locality� as an area within a 20-mile radius of a central settlement. Curran and Blackburn (1994) opt for a 10-mile radius. The difficulties of defining a �local economy� are every bit as challenging as those facing those who struggle with definitions of rurality. As Curran and Blackburn (1994) point out, �in analytical terms, it is not difficult to take some geographical area, for example, a �travel-to-work area� or �local labour market area� drawn from official statistics of one kind or another, and designate this a �local

28 See also the linked work of Mills (2000) comparing business services and the purchasing patterns of different types of business or businessperson and different types of service. 29 Kingsbridge is in the South Hams District of south Devon classified as �remote rural� (RDC 1993), or in the �Service� cluster (Hodge and Monk 1991). Olney is close to three major regional centres - Milton Keynes, Bedford and Northampton. 30 The �economic footprints� methodology is now being used in a study of the impact of organic farming in the rural economy conducted for DEFRA by the universities of Exeter (Lobley, Reed and Winter) and Plymouth (Errington). 31 This check uncovered a total of 52 deviations out of a possible 98 for the data set. Over half were less than 10%; a fifth between 10% and 20%, and the remainder more than 20% (Errington. and Courtney 2000).

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economy�. Yet the extent to which businesses located within the boundaries of a �local economy� defined in this way form some form of integrated set of economic activities is open to question. �Local economies�, however defined, will have links, direct or indirect, material or cognitive, with a wider economy, regional or national or even international.� (p1). A particular problem that arises is when comparative research is undertaken, for as Courtney and Errington (2000) suggest the selection of a boundary for a locality is likely to be �largely dependent on the geographical area(s) in question.� This implies, quite rightly in our view, that the notion of locality will vary from place to place according to contrasting economic and social geographies thus making strict spatial definitions implausible. It is, therefore, somewhat paradoxical that Courtney and Errington (2000) proceed immediately to claim that in any comparative study the most important factor is that the chosen boundaries should be comparable and therefore the same so that variations in income generation and leakage between localities can be compared to the same baseline. Given that they chose two contrasting geographical areas in which to conduct their research it is hardly surprising, therefore, to find significant contrasts emerge when the same baseline is chosen to delineate a �bounded spatial form�. Admittedly, it is hard to know how else to conduct such research. This is an important methodological conundrum that should not be lost sight of. It is not made to de-value in any way the work we are considering here. On the contrary the difference uncovered by Courtney and Errington are of considerable value and their �economic footprint� methodology deserves further application and development. It certainly takes us a great deal further in understanding the content and impact of local economic interactions than conventional multiplier research. These seem to have diminished in academic fashion in recent years and do not figure highly in recent peer-reviewed academic literature32, although they continue to play a part in many pieces of applied research. Recently they have been revived in a more �user-friendly�, but simplistic, form by the New Economics Foundation. Thus, for example the NEF, through Ibstock Community Enterprises (a market town in Leicestershire), conducted a multiplier analysis in 2002 of a local cash point discovering that every £10 withdrawn from the cash point led to £6.30 spent locally compared to only £3.80 in the case of £10 withdrawn from a building society. It is concluded by the Countryside Agency (press release March 2002) that a local cash point is vital for market town business, a conclusion impossible to justify in the absence of any analysis of other variables or of counterfactuals. This is not to deny that consumer services play an important role in encouraging economic growth by preventing leakage of spending out of the local economy. As Williams (1996) points out this may be achieved through the provision of facilities thereby reducing the need of local consumers to go elsewhere to use such facilities and the alteration of expenditure patterns which increase the share of total local expenditure on consumer services. It is quite likely, therefore, that the provision of a cash-point facility does have a positive impact but a casual relationship is not conclusively demonstrated merely by association.

32 Important studies include: Archer 1977 and Armstrong and Taylor 1993,

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Tables 2 and 3 summarise the key results of the Kingsbridge/Colney comparison, showing that Kingsbridge (remote) is considerably more integrated into its locality than the more accessible Olney. The household survey provided similar results with Kingsbridge more self-contained in terms of its shopping patterns, with 32% of purchases of high order goods being made within the town itself, compared to less than 10% in Olney (Errington and Courtney 2000). Table 2 Economic Integration of settlements to locality: absolute proportions of corporate revenue and expenditure attributed to the local economy.

Kingsbridge Olney Transaction Type

%

N

%

N

Sales (outputs) 38.2 120 5.1 70 Supplies (inputs) 14.0 116 0.8 62 Source: Courtney and Errington 2000: 290 Table 3 Economic Integration of settlements to locality: mean proportions of corporate revenue and expenditure attributed to the local economy.

Kingsbridge Olney Transaction Type

%

n

%

N

Sales (outputs) 41.9 128 24.6 80 Supplies (inputs) 23.8 125 8.6 76 Source: Courtney and Errington 2000: 291 The authors also studied variations by firm type concluding as follows:

• Very small and independent firms (i.e. those that are not branches of a larger national or international organisation) are likely to be more closely integrated into the local economy in terms of both their purchases and their sales.

• In terms of their SIC (Standard Industrial Classification), the firms least closely connected to the local economy in the Kingsbridge study area fall within the �agriculture� category (though this relates to their pattern of sales rather than purchases). In the Olney study area it is those falling within the �business services� category (where both sales and purchases are concerned) that are least likely to be linked closely to the local economy. (Errington and Courtney 2000: 20).

In some ways these particular findings raise a fresh set of methodological questions and issues. If firm type is so important to the analysis perhaps it is the case that this is one of the key determinants of levels of integration rather than rurality and proximity to urban centres. Courtney and Errington (2000) recognise this and conduct bi-variate

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analysis which indicates that the strength of the local economic integration is in part a function of economic structure within the localities. They also contrast their findings with earlier work:

... the patterns of integration by firms in the respective localities conflicts with the existing empirical evidence by Blackburn and Curran (1993) who found that firms in �remote� rural areas were reaching outside their locality for sales. A possible reason for the discrepancy may be the fact that, by focussing on small towns, the findings are influenced by the strong representation of retail consumer services in the town centres, which by their very nature are likely to make a significant proportion of sales locally. .... The findings of Curran and Blackburn (1994) and Errington (1994), who found that small firms have more spatially proximate markets than larger establishments, are not upheld by the findings presented. .... the findings do not support Williams (1994) assertion that services have higher multiplier effects than firms in other sectors .... (Courtney and Errington 2000: 294).

Research Recommendation: An extension of the ‘economic footprint’ and ‘spatial tracking’ methodologies developed by Courtney and Errington into fresh localities deserves further application and development. Research Recommendation: There is scope, for example, for using Farm Business Survey data for spatial tracking of expenditure using the Courtney and Errington methodology. Research Recommendation: Further research is needed on the potential for reducing leakage through developing local markets. 5.2 Social Capital and Local Economic Interactions Clearly an important possible cause of spatial variation of the kind we have been reviewing may be the influence of wider social factors. Indeed as noted earlier, when quoting Krippner (2001), all economic transactions are social and, consequently, any differentiation of economic behaviour and outcome is social. The notions of social capital and social networks are beginning to receive considerable attention as a potential explanatory factor in economic performance and development processes (see Murdoch 2000). It has been highlighted in work in agriculture with attention given to the implications for farm business decision making of social networks (Reed et al 2002; see also Gray 1996). Árnason and Lee (2003), drawing on Colman (1988), Fukuyama (1995), Warren (1999) and Falk and Kilpatrick (2000) offer the following useful characterisation of social capital:

Social capital is said to form out of repeated social interaction between individuals and groups which develops trust, reciprocity and norm. The amount of capital built is seen to depend on the quality and quantity of interactions.

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Social capital represents the ability of actors to secure benefits through membership of social networks and other social structures. (Árnason and Lee 2003: 3)

Atterton (2001) cites declining social capital in rural areas due to: • increased mobility and car ownership (so creating dormitory settlements); • more women in the workforce (so spending less time in home localities); • more rural residents travelling to larger urban areas for a wider choice of leisure

and entertainment opportunities (leading to decline in rural areas); • declining rural service provision (particularly shops, post offices, schools and

village halls). As Maskell et al (1998) put it �some geographical environments are endowed with a structure as well as a culture which seem to be well suited for dynamic and economically sound development of knowledge, while other environments can function as a barrier to entrepreneurship and change.� (p181). Despite many helpful suggestions in Maskell et al�s work and elsewhere, the precise nature and foundations of these nurturing social contexts are not well understood (but see important insights arising from empirical work in Skye & Lochalsh in Scotland: Árnason and Lee 2003). Indeed, as stated earlier in our examination of the literature on rural (non-agricultural) businesses we were struck by the relative absence of sociological insight and study into business dynamics and formation (in contrast to much helpful work of this nature on farmers). The recent emphasis in economic geography on embeddedness goes only part of the way to remedying this, not least because so little of the literature, paradoxically, is grounded in empirical sociological research within business communities. Roberts (2002) agrees that �the role of social capital in endogenous development and in family and business aspirations .... is not well understood� (p.38). Research Recommendation: Research is required to examine the cultural, social and learning contexts for successful business activity in rural areas, in particular through more participative and qualitative research methods which unravel process rather than correlation. Research Recommendation: Sociological and economic studies of rural businesses to reveal social networks and ownership of or access to social capital are required. 5.3 Interlinkages with Urban, Regional and National Economies There is little doubt that there are strong interlinkages between economies in rural and

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urban areas, the region in which they are based and the national economy. Commuters provide strong interlinkages with urban communities, as do firms located in rural areas as demonstrated in the work by Courtney and Errington discussed in section 2 and by Williams (1996) in a case study of the Fens. The latter study is of particular relevance because of the emphasis it places on economic activities that extend the reach of local economic actors way beyond the narrow confines of a bounded locality. Thus this work acts as a powerful corrective to the wave of recent emphasis on local integration. Maximising local input purchases by firms within a locality clearly makes sense for the overall economic wellbeing of a particular place, although even then we should not allow the trade benefits of comparative advantage to be completely lost sight of. Localities, like countries, will have a relative advantage in some lines of production over competitors. Economic wellbeing is not always maximised by local purchasing and certainly not the idea of a �steady-state� or �no-growth� economy. But to expect all goods to be sold locally is to place unrealistic limitations on market growth. The emphasis on local purchasing in some current political discourses runs the danger of losing sight of these fundamental economic realities with regard to the benefits of trade. This is not in any way to downplay some of the negative aspects of trade, particularly with regard to externalities, for it has to be conceded that comparative advantage may be based on a spatially uneven distribution of externalities.

Indeed Williams starts from the maxim that external income coming into the economy is essential for economic vibrancy and therefore all local economies require �engines of growth�, an idea firmly rooted in �economic base� theory (Glickman, 1977; Haggett et al, 1977; Wilson, 1974). Where he differs with most base-line theorists, and it is an important difference given the fast changing nature of economic activity in rural areas, is in his understanding of the role of consumer services as:

�dependent� industries which serve the local market and are perceived as parasitic activities, contributing little if anything to the economy because they merely circulate money within the local area. Traditionally, the dominant approach was to regard basic industries as being composed of primary-sector and manufacturing-sector firms, with service-sector activities seen as dependent industries, reliant upon the primary and manufacturing sectors, which attract external income. ... this view that services are merely dependent or parasitic activities has been convincingly and conclusively discredited. An abundance of literature has shown that producer services export not only on an interurban and interregional basis (Beyers and Alvine, 1985; Coffey and Polèse, 1987; Daniels, 1984; Daniels and Moulaert, 1992; llleris, 1989; Keil and Mack, 1986; Marshall, 1983) but also internationally (Bhagwati, 1987; Daniels, 1991; Riddle, 1986; Segebarth, 1990). The outcome is that producer services have now become widely accepted as basic-sector activities. Indeed, the basic sector is now recognised as being composed not only of industries which export but also of all industries which generate external income. Hence, two types of basic-sector activity have been identified. First, there are export industries, which include primary, manufacturing, and an array of producer service activities in which the products are sold to customers outside the local area, and, second, there are those industries which draw consumers into a locality in order to spend

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their money (Farness, 1989; Hefner, 1990). As both fulfil the same function of earning income for a locality, both are accepted as basic activities.

Williams� research shows that while service-sector firms in the Fens are more oriented to local markets than manufacturing firms:

it is not the case that all manufacturing-sector establishments are basic-sector activities, and neither are all service-sector establishments dependent activities ... 11.9% of manufacturing establishments do not export any of their output outside the local economy, whereas only 15.4% of the service-sector establishments sell none of their output locally. Hence, the caricature of the service sector as an entirely local-oriented sector is wholly inaccurate in the Fens. Only 20.8% of service-sector establishments conform to such a pattern, even when �local� is defined as being within a twenty-mile radius. Moreover, only 23.8% of manufacturing establishments sell all of their output outside of the locality.

Thus it is mistaken to view the manufacturing sector as purely base-sector or to see services as wholly dependent. Regarding internationalisation the survey shows that only 7.1% of manufacturing firms have overseas customers compared with 9.4% for service-sector firms. Another issue we were asked to explore in this section was the impact of urban economic growth on adjacent rural economies and the question of whether improved urban economic performance only benefits adjacent rural areas or certain sub-groups of the rural population. It has been hard to find evidence on these issues in other than very general terms. Clearly accessibility to urban markets has long been a factor in rural economic activity. In a case study of food sector developments in Wales Bristow (2000) has shown that 20% of investment in new food and manufacturing and secondary processing since 1991 has been concentrated in a small area of north east Wales because of its proximity to the lucrative urban markets of NW England, although she also highlights the importance of lower labour costs, high manufacturing productivity levels, and a decline in the primary processing capacity in southern Wales. In the context of urban influence, Phelps et al (2001) deploy the notion of �borrowed size�, whereby there is a tendency for people and businesses to retain advantages of being based in smaller settlements (less congestion, lower rents) while reaping the advantages on offer in close larger settlements (access to sizeable markets, business services and expertise, larger and more diverse labour markets and cultural amenities). Accessible rural firms seem able to borrow the benefits without disbenefits of urban size when locating in accessible rural locations. Clearly accessible rural areas are well placed to receive re-locations of either people or businesses, especially, perhaps, business services and those with niche products targeted at urban consumers.

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6. The Nature of Commuting This chapter provides an overview of research on the nature of commuting within rural areas and between rural and urban areas, including its change over time, the trends that could influence it in the future and its impact on rural communities and economies. The significance of commuting to economic activity in rural areas has received far less attention in the literature than has various other aspects of counterurbanisation. Thus we know a great deal about counterurbanising trends in general including the motivations and aspirations of people moving to rural areas (their impact on the social composition of rural areas and their socio-economic positions (Bolton and Chalkley, 1990; Boyle and Halfacree 1998; Cloke et al 1995; Cloke and Thrift 1987, 1990; Champion 1994, 1998, 2000; Findlay et al 1999; Halfacree 1994). We know rather less about their economic activities and impacts on local economies33. Of particular relevance to this study, the classification of people as locals or incomers does not necessarily help us if our interest is commuting as both locals and newcomers may commute. There is, of course, plenty of anthropological and sociological research which suggests that in-migrants may be negatively classified as commuters by local residents (e.g. Bell 1994), but that is by no means the same thing as suggesting we should use �commuters� and �incomers� interchangeably. So in most of this section we have confined our attention to studies that explicitly focus on commuting or, in the case of studies of in-migrants, have generated data that allow commuters to be separately identified for analytic purposes. But first we make one exception to this rule by considering a study of in-migrants because of its relevance to the impact of migration on economic activities in the countryside. Milbourne et al (2000) in research for DEFRA sought to examine relations between farmers and new rural populations with a view to the better promotion of land-based economic and social development in rural areas. It is of some relevance to this review because of the attempt to examine whether or not in-migrants, and indeed local residents generally, tended to oppose local economic activities. In other words is rural economic regeneration inhibited by opposition from local residents? The research work was undertaken in five case-study areas (single wards in Cheshire, Devon, Hampshire, Norfolk and Powys. In each, interviews were undertaken with a sample of households as well as focus groups and the gathering of secondary data. The research examined a range of potential rural conflicts. Disputes were bound up with four main issues: development and planning issues (usually residential), which was most significant in numerical terms; the interests of different social groups, and particularly incomers; the small-scale nature of rural living; and environmental issues. Just over half of respondents (57%) reported the presence of incomer-local conflicts in their area. In general terms, incomer-local conflicts were seen as being bound up with cultural differences between the two groups. In particular, frequent reference was made to the limited understanding and awareness of key features of local rural life on the part of outside incomers. In some cases, farming was used as an illustration of cultural differences. Particular groups of outside incomers were viewed as not only importing different cultural norms into the local area, but attempting to impose these norms onto local rural life. Other respondents pointed to sets of housing-based conflicts which were, in part, bound up with an influx of new groups into their area, 33 But see Marsden et al 1993, Murdoch and Marsden 1994 and Spencer 1997 for important insights with regard to rural development and planning issues.

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while others still commented that any form of change was resented by some more established rural residents. Thus most of the conflict revolved around cultural and social rather than economic issues. Relatively few respondents made any direct reference to farming and farmers or other land-based economic activities as sources of local conflict; still fewer to new economic activities taking place in the countryside. Milbourne et al (2000) found that the descriptions of rural localities offered by in-migrants to rural areas were almost exclusively positive in nature. The main attractions of local rural life were seen to be peace and quiet, picturesque local countryside and close-knit communities. Other respondents considered rural lifestyles as safe and healthy. The key perceived disadvantage of local rural living was isolation from key services and facilities that resulted from limited local provision and poor public transport services. However social change and in-movement of new groups into the study areas were considered as problematic by some local and farming respondents. Roberts (2002) cites the tensions between �further development� and �no change� agendas within rural areas. These opportunities and challenges need further investigation through both economic and sociological research. Research Recommendation: Further examination of the implications of counterurbanisation for endogenous rural development is required. What is the extent of local development conflicts? How might they be overcome? In a study of �The Rural Economy of North East England�, Lowe (1999) describes how residents in remote rural areas found between 80 to 90 percent of their jobs in rural areas, while those in accessible rural areas found only 40 to 60 percent. Accordingly, the three remote rural zones studied were found to �have rather self-contained labour markets with limited inflows and outflows� (Lowe, 1999: 33). This was even true of well over 70 percent of the managers and professionals living in remote rural areas, dispelling the myth of �the well-paid resident of attractive upland areas commuting to far-away cities� (Lowe, 1999: 35). Within the more accessible rural areas however, Lowe found that 56 to 71 percent of managers and professionals commuted to urban areas. Commuting out of rural areas was thus far greater in accessible rural areas, while commuting within rural areas was greater in the more remote locations due to the sparse distribution of residents and jobs (Lowe, 1999). By undertaking an analysis of commuter flow data from the 1991 Census, Boyle et al (2001) considered the origins and destinations of all commuting into and out of the wards of England, and the characteristics of commuters. Rural wards are unlikely to attract in-commuters, but also less likely to generate out-commuters. Their findings show that urban areas experience far more commuting activity than rural areas, which lead to their key finding that �there is NOT a mass exodus of commuters from rural areas� (page 1). However, when rural residents do commute, Boyle et al. state that they generally travel much further (1.6 times further). This is said to be especially true of the more accessible wards, and particularly around London. Furthermore, when rural residents do commute, Boyle et al. state that they are far more likely to travel by car, although commuters to London are more likely to use public transport.

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Table 5. The likelihood of commuting a long distance (>30 km) in rural areas

Significantly more likely to commute long distances

Significantly less likely to commute long distances

• Long-distance migrants

• Professionals/managers

• Those with higher qualifications

• Short-distance migrants

• Married / remarried

• Those with two or more cars

• Agricultural workers

• Those in private renting

• Those in public housing

• Self-employed

• Unemployed / Government scheme

• Females

Source: Boyle et al., 2001: 28 While there may not be a �mass exodus� of commuters from rural areas, Schindegger and Krajasits (1997) note that the number of people commuting from rural areas increased by a far greater percentage between 1980 and 1990 than it did for those commuting from urban areas (21% for predominantly rural areas, 27% for significantly rural areas and 11% for urban areas). According to Stokes (1996) commuters from rural areas are usually those with more highly paid jobs, with the higher income rural residents travelling 230 miles per week compared to 105 miles by those on a lower income. Furthermore, Boyle et al. state that it is the long-distance recent migrants who are likely to commute the furthest, since they often retain their work and leisure links with urban centres. Table 5 shows the factors that affect the likelihood of commuting a long distance (over 30 km) in rural areas, based upon a sample of 16,592 commuters resident in rural areas. According to Boyle et al., counterurbanisation is likely to have had a significant effect upon commuting patterns over recent decades. Similarly, Champion (2000; 1998) observes that counterurbanisation is likely to be associated with commuting, with urban residents migrating short commutable distances from urban centres in a step-by step manner. Indeed, from in-depth interviews with 30 couples, Green (1997) identifies the desire to live in accessible semi-rural environments by many dual career households (those in which both partners work in managerial, professional or associate professional occupations) as a key reason for couples with high incomes to commute long-distance. However, other factors are also attributed to the increase in commuting, including the widespread tolerance of relatively long journeys to work and an increasing reluctance to relocate (Green 1997; 1999). With regard to this latter issue, Green et al. (1999) identify a number of explanatory factors, which include concerns about the impact on the partner�s career, the disruptive effects of a move on children�s education, the difficulties and stresses of selling the current home and the increasing insecurity and uncertainty in the labour market. These findings are based upon questionnaires completed in 1997 by 115 long-distance weekly commuters who had travelled on trains and coaches leaving

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employment centres (notably London), and a sub-sample of 25 individuals who were interviewed in-depth. According to Green (1997), this reluctance to relocate is another reason for the growing popularity of accessible semi-rural locations, since they enable residents to travel to a range of different workplaces without the need for job-related migration. Although a longer daily commuting journey has often been substituted for the migration of the whole household, Green (1997) found that an hour is still an important �psychological barrier� for journeys in each direction (although two of the sixty interviewees believed that journeys of at least two hours were an acceptable price to pay for living in a less accessible rural area). Change in commuting patterns for individuals is therefore considered to be a change in the distance travelled rather than the time taken to travel, and this been made easier by improvements and extensions to the road network. As distance to work has increased, so too has the prevalence of working from home, either occasionally or more regularly. According to those interviewed by Green et al. (1999), laptops, modems, email and faxes have all enabled individuals to adapt their way of working to suit their preferred lifestyle. Alongside their survey of long-distance weekly commuters, Green et al. (1999) conducted a postal survey of 48 large and medium-sized organisations across a range of industrial sectors, including manufacturing, retailing, financial services, the utilities, leisure services and the public sector. Although these employers preferred their employees to take advantage of what were considered to be generous relocation packages, they too reported an increasing resistance to relocation. As a result, three out of four companies surveyed indicated that they would contemplate hiring a long-distance weekly commuter in a managerial / professional role, while many stated that they were willing to be more flexible with long-distance commuters, including when and where their work was undertaken and offsetting some of the expenses they incurred. Table 6 shows the likelihood of these companies adopting flexible working patterns. Table 6. Flexible working practices potentially afforded by employers to long-distance commuters Opportunity Very

Possible Possible Not

possible Working at home occasionally Working at home regularly Leave work early on Friday Arrive at work late on Monday Have a four day working week Have company assistance with travelling expenses Have company assistance with lodging expenses

42% 9% 27% 23% 11% 10% 11%

48% 51% 50% 48% 40% 50% 55%

10% 40% 23% 29% 49% 40% 34%

Source: Green et al 1999: 64. For Green et al. (1999:64), �the increasing penetration of ICT and flexible working practices into more areas of working lives opens up new opportunities for the

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geographical expression of labour market careers�34. This has lead to an increasingly complex geography of home and working lives, which, they suggest, is a trend that is likely to continue. In particular, it is the �difficult-to-organise in-between behaviour� that they believe will be the main growth area over the next few years (Green et al., 1999:65); in other words, increasingly fragmented, irregular, long-distance commuting. If this is the case, it is likely that more people will be able to migrate to their preferred rural location, and perhaps even to those that are currently considered too remote. Indeed, as Green et al. (1999:65) point out, �the need for adequate facilities for home working (alone) could lead to an increased demand for residential space, often in environmentally attractive semi-rural areas where development pressures are already severe.� While Green et al. (1999) identify the potential for increased development pressures in rural areas, Stockdale et al. (1999) identify potential opportunities arising from in-migration in rural Scotland, such as population rejuvenation and economic opportunities. With particular relevance to commuting however, they state that those who commute beyond the immediate area, whether or not they are migrants or long-term residents, provide highest incomes and an important link to urban areas. Furthermore, they identify an initial willingness by in-migrants to use local services, which is squandered by unsatisfactory provision, and which thus results in considerable leakage of expenditure and job creation from rural to urban areas. However, as described above, Boyle et al. (2001) found that in-migrants to rural areas in England commuted further to both work and leisure activities, suggesting a propensity to spend their money within urban centres. Baccaini (1997) examines commuting in rural France and shows how affluence and high levels of educational attainment are associated with commuting. As de-concentration of jobs has not occurred to the same extent as de-concentration of population it has proved difficult for some to find jobs outside employment �poles� or sub-centres. Consequently migration is necessary for those who need a larger home but who cannot afford one in a more urban location. Vilhelmson and Thulin (2001) consider the potential role of ICT in increasing people�s freedom to decide when, where, and how they wish to work and travel in Sweden. The numbers and proportions of tele-workers are estimated using different criteria regarding the role of ICT. ICT could lead to virtual communication and less travel, and/or new contacts and more travel. Home-based workers are mainly farmers, freelance professionals, carers, and those running small businesses or making handicrafts. In Sweden just 5% were found to be regularly engaged in telework so ICT remains of minor importance. Telework is actually more prevalent in large urban areas than rural ones, being most common among male high-income earners.

34 On the economic impact of ICT in rural areas see Grimes 2000.

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7. The Impact of Government Policy 7.1 Introduction To review all the implications of government policy for economic activity in rural areas would clearly require a major separate report, so we confine this section to a selective review designed to provide a suitable framework for considering policy issues and highlighting gaps in our knowledge35. At the Rural Economies Seminar held in London on the 15th April 200336, Professor Nigel Curry of the University of Gloucestershire, in a helpful intervention during discussion, suggested that the impact of policy could be conceptualised as involving three strands. These he outlined as spatial or land use planning, the transfer of financial resources, and what he termed �governance�37. This threefold approach provides a suitable framework for this chapter, although at the end we turn also to a more general examination of policy implications and recommendations emerging from particular studies of rural economies. 7.2 Planning and Finance The first two of Curry�s three policy strands these have been the subject of extensive research of considerable relevance to understanding rural economic activity. For example, the operation of development control within the planning system has provided fertile territory for those interested in the interaction of spatial policy, economic activity and rural development (Gilg and Kelly 1996). In a rural economic context, the debate and research over the extent to which farm diversification may have been impeded by development control has given rise to a number of papers and reports. Most of these conclude that development control has not significantly impeded non-agricultural development on farms38 (Land Use Consultants 1995, 2001; Milbourne et al 2001; Shorten and Daniels 2000; Winter 2003d). The analysis of the flow of financial resources directly via public expenditure has spawned a huge volume of studies as for example with those carried out under DEFRA�s programme of policy evaluations. We were given guidance by DEFRA that we were not required to trawl through these numerous evaluations on the economic impacts of specific measures, such as agri-environment schemes, as part of this review. What is clear though is that the requirement to conduct these policy measure evaluations for the purposes of accountability and assessment of best value has generated a huge volume of work which has not been designed nor pulled together in a systematic manner. The evaluations are usually made available on the DEFRA website. However it is important to recognise that there may be other relevant evaluations conducted at a local and regional level by RDAs, local authorities or government offices responsible for the administration of structural funds.

35 Much of the policy evaluation research available is somewhat formulaic. However for a fresh and distinctive approach see: Bristow et al 2000. 36 See acknowledgements. 37 I hope I have done justice to his intervention as there are no transcripts available of the discussion. 38 This is not to deny that there may be important issues around improving the planning process, in particular relations between farmers/developers and planning authorities.

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Research Recommendation: A data base should be set up to log all relevant national and sub-national evaluations, to compare methodological approaches and to evaluate results through cross-comparison. A key task of the research should be the identification of best practice in policy schemes. Some years ago an attempt was made to provide an overview of the support systems operating in rural areas across various government programmes, through a quantitative analysis of the various flows of support payments into rural areas (Hill et al 1989, Hill and Young 1991). This important work has not been subsequently up-dated. Given the greater diversity of funding routes that have arisen in the intervening period, not to mention the rise of regionalism and of the blurring of boundaries between public and private governance (see below), to repeat this task would be challenging39, but potentially worthwhile. Research Recommendation: A scoping study should be conducted on the feasibility and value of repeating Hill’s assessment of alternative support systems in rural areas. 7.3 Governance Nigel Curry�s third strand � governance - is the one that warrants the most comment in this review. The promotion of rural economic regeneration is seen, at both regional and national levels as now particular we are concerned to examine the issue of policy delivery in the context of changing rural governance. The first part of this section draws on Winter (2003c) in which I examined governance, defined as �the development of governing styles in which boundaries between and within public and private sectors have become blurred� (Stoker, 1998 p. 17). In addition to this blurring of boundaries, Stoker (1998) identifies the significance of autonomous self-governing networks of actors and government playing a role of steering and guiding as well as, or in addition to, legislative provision (see also: Jessop, 1997, Majone, 1997). Governance has much to do with breaking with hierarchical centralism through incorporating multiple stakeholders (Healey 1998). Consultation, strategy and partnership are the key words in the governance lexicon. As Jessop (1995) points out �the various approaches to governance share a rejection of the conceptual trinity of market-state-civil society which has tended to dominate mainstream analyses of modern societies.� He points to the growing range of economic governance mechanisms which do not conform either to models of the market or of state regulation. Thus as Marsden et al (2000) have demonstrated for the food sector, regulation increasingly involves private sector interests legally empowered by and co-responsible with public authorities for implementation. Of course how the rural economy is conceptualised nationally in policy terms and the structures and mechanisms for its planning and regeneration remain important within the new governance. No less than four central government departments (DEFRA, DTI, DTLGR and DCMS) have responsibilities of central significance to rural economic development. Thus the formation of DEFRA, whilst clearly a more radical 39 It was by no means an easy task first time round!

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step than the incremental shifts that might have occurred in the absence of FMD (Winter 2003b) retains a rather narrow focus on agriculture. DEFRA�s broader remit, both in terms of its environmental focus and rural development under the terms of EU�s Rural Development Regulation, remains largely rooted in the land-based sector. Rural development is equated with diversifying agriculture rather than with any sense of a highly diverse rural economy and society in which farming per se is no longer the economic lynchpin. Nowhere is the continuing neglect of the rural economy more apparent than in DEFRA�s response to FMD as evidenced in the tasks it set its own enquiries. The Lessons Learned Inquiry was not required to devote a great deal of attention to lessons for the rural economy. The Commission on the Future of Food and Farming chaired by Sir Don Curry focussed exclusively on a future strategy for sustainable food and farming. The regional policy agenda was profoundly influenced by FMD with the new regional structures of governance providing opportunities for new policy initiatives. Moreover, in the early months of the crisis, the RDAs and local authorities were able to step into a policy vacuum regarding economic recovery. MAFF was so completely taken up with dealing with the disease itself that it had little spare capacity to deal with the knock-on social and economic effects and longer term recovery. By emphasising the wider economic implications of FMD, RDAs and local authorities positioned themselves to make much of the running in developing strategies for dealing with the resulting issues. In the south west, for example, the RDA commissioned research on the economic impacts of FMD, convened both an economic and a social summit on FMD, gave crucial support to the establishment of a new Chamber of Rural Enterprise, funded some early local recovery projects, and extended the Market and Coastal Town Initiative (MCTI) in the area to cover some of the hardest hit market towns, in particular in west and north Devon and in Gloucestershire. Devon County Council held it own independent inquiry on FMD, produced a Rural Recovery Plan and subsequently took the theme of rural recovery further forward by successfully pressing for the establishment of a Rural Task Group under the aegis of Devon Strategic Partnership. Agriculture, food and the rural economy now figure in the work of local strategic partnerships and, to a lesser extent, in district councils� development of community strategies under the terms of the Local Government Act (2000). The lion�s share of policy resources, in terms of finance, remain firmly with DEFRA through its administration of CAP payments. However DEFRA is also increasingly drawn into the regional net through its position within the Government Office of the South West. Examples include the fact that DEFRA is an MCTI partner and plays a lead role alongside the RDA as part of the regional delivery partnership for the national Sustainable Farming and Food Strategy launched in December 2002. We turn now to any relevant literature on how these new governance arrangements and policies impact on rural economies. The truth is there is not a great deal to go on here partly because some of the changes are so recent and partly because of the tendency for policy impact studies to be conducted on very specific policy measures, There is another point that needs emphasising. If we take seriously the transition to governance it becomes rather difficult to assess policy per se. The boundaries between public and private are blurred so that government actions (or in-actions) are

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implicated at every level. But agriculture and forestry stand alone within the spectrum of rural economic activities in being in receipt of very significant publicly funded resources (directly or indirectly). In other sectors, Government through its agencies and departments, and locally and regionally as well as nationally, works often in partnership in the development of policy. Facilitation and enrolment of differing stakeholders becomes the key way in which government policy is rolled out. Identifying the boundaries of government policy is difficult. Many questions arise as a result of changing rural governance. A number have been posed already by economic geographers but often in an urban context. For those interested in relations between the exercise of power within the policy process and economic outcomes an important issue concerns whether the underlying relations of power, influence and responsibility have really changed with the new fluid structures of governance. To put it more simply, are not the same power elites in charge? In the urban context, Imrie and Raco (1999) have made the claim that there is a strong continuity of elites involved in the new governance arrangements. For example they demonstrate that many local authority councillors find positions on the new quangos and partnerships. This is hardly surprising, and in response Ward (2000) has argued that mapping elites through time fails to address the extent to which the policy context has changed and the degree of additional incorporation of new interests, particularly business interests, alongside the older elites. Another important area for research is with regard to the implications for local governance of the new regional governance. The Regional Development Agencies (RDAs) core task of providing co-ordinated regional economic development and regeneration inevitably means that the interface with local governance structures is crucial. Local regeneration and neighbourhood renewal initiatives provide potential building blocks. To date very little research has been undertaken in this area (but see Ward et al 2003). Our thoughts here are consistent with Roberts (2002) who proposes policy research on two fronts:

First, to investigate the degree to which all the bodies involved in rural development policy are acting in a �joined-up� manner. Second, to understand better the balance of power and influence in rural areas and what barriers there are to the implementation of public policy. (Roberts 2002)

Research Recommendation: Research on power and influence in rural areas is required so that the constraints and drivers of economic development are more fully understood in a political and social context. Research Recommendation: Research on the implementation of policy in the context of the new governance. Such research will have to be process as well as outcome orientated and will require in-depth qualitative work alongside more traditional data gathering.

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Research Recommendation: An examination of the relationships between local government and RDAs in rural regeneration policy. The urban development literature suggests that there may well be issues of considerable importance here. The extent to which the new partnership retains unity of purpose and is able to develop a shared vision for diagnosis of problems and delivery needs to be understood. Research Recommendation: A case study of the regional delivery groups for the Sustainable Farming and Food Strategy currently determining strategies and how they will relate to sub-regional actors. 7.4 Policy Recommendations and Policy Tensions The purpose of this section is to highlight the fact that a number of the studies we have reviewed, some in other sections of this report, contain important commentaries on policy including recommendations. For instance Bryden and Hart (in press) make eight main policy recommendations which they regard as elements of a rural development �menu�. They are summarised as follows:

Good Rural Small Business Extension, aimed at small, local enterprises in the �new economy�. The extension service needs to be decentralised and knowledgeable of local conditions and priorities. A More Mobile Bureaucracy, able to engage in the dual process of learning from and helping local people in rural areas. Rural Interest Group Organisations � need for national and pan-European rural interest organisations which transparently bring together the old and new elements of economy, as well as local social interests. Broadening the Scope of Development Policies to go beyond economic growth or economic development narrowly conceived (e.g. Quality of life issues) The Need for Public Resource Transfers � notwithstanding the importance of intangibles, there is a continuing need for resource transfers from richer to poorer areas The Need for Greater Flexibility and Autonomy - central (EU, national, even regional) development policies have to be both flexible and well-informed about local circumstances.

A Joined-Up Approach – the performance of different levels of governance influencing local development must function more effectively and this requires an approach that �joins-up� thinking and action. Separation of Rural Development Policy from the CAP

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We have repeated these because they are not yet in print. It would be too time consuming an exercise here to list al the many recommendations available in the research we have reviewed. Indeed it is a task beyond the terms of this brief. However, we suggest that it is an important task to examine policy recommendations from research in the context of a broad understanding of policy change and challenges. There is a tendency for policy recommendations to be made without due regard to the political complexities that beset the interactions between policies and economic activities. Winter (2002), in work for the South West of England RDA identifies a number of policy tensions which continue to play a role in rural policy delivery. They are ideological tensions; institutional tensions; geographical tensions; rural versus agricultural policy tensions; social, economic and environmental policy tensions; and globalisation as an emerging cause of tension. Ideological tensions occur where when a particular political party or pressure group adopt a stance that is at odds with the policy of the government of the day or with other parties or groups. A classic example of this issue is hunting with dogs which is symptomatic of a wider set of concerns about the place of animals in society which may yet have profound long-term impacts on rural policy and land management. Institutional tensions are the tensions that derive from the allocation of responsibilities within central government. Geographical Tensions arise from uncertainty about how far the process of regional/local subsidiarity might go and the extent of likely tension between local government and the emerging regional layers of administration and policy engagement. These tensions are not merely tussles for power. There are genuine unresolved policy tensions between central government�s desire for a strong strategic steer to economic development and the belief in local participation and inclusiveness, so strongly apparent in the Rural White Paper. Rural/agricultural policy tensions are manifest in a number of ways. The most obvious is the extent to which agricultural policy itself is modified to take into account the new rural dimension to policy. There are other more fundamental manifestations of the rural-agricultural tension. To put it simply there are those who argue that primary land-based industries, such as forestry and agriculture, impose considerable costs on society and economy, costs that require taxation, regulation, and so forth to deal with them. Others argue that these rural land uses provide public goods (landscape, recreational access, etc) that bring positive economic and public good benefits. The social, economic and environmental policy tensions arise from the sustainable development as a policy goal. Globalisation as an emerging cause of tension has been apparent in a number of the sections in this report as we have explored different aspects of rural economic processes.

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8. Conclusions: Future Research Priorities In this final section, we pull together the proposals made throughout this report which seek to highlight areas of research on economic activity in rural areas which warrant considerably more investigation than has been the case hitherto. We have altered the order that the recommendations appear so that they may be grouped under the seven main areas that would appear to justify considerably greater investment of research resources: • the role of the natural environment as an economic driver in rural areas; • the role of knowledge and innovation as an economic driver in rural areas; • the role of social capital, particularly with regard to non land-based businesses, in

rural areas; • influences on rural business performance; • local economic development processes; • the potential impact of still further waves of counterurbanisation on consumption

and production patterns in rural localities; • the significance to rural economic development of the new rural governance. Recommended Research on The Environment Driver • The nature and extent of any competitive advantage afforded by the natural


• Is environmental benefit of this nature a generalised phenomenon or can it be

differentiated in any way? In other words do particular types of landscape and land cover offer greater economic advantages than others?

• What would be the impact on rural businesses benefiting from the environment as

an economic driver of significant changes to landscape and environment brought about by climate change, agricultural policy reform, etc?

• Are there particular businesses that might reap benefits from greater attention to

the environment in marketing and branding? • Are there new �environmental� business opportunities available? If so how can

they be nurtured?

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• Research should be undertaken which analyses the relationship and tensions,

within a high quality natural environment, between the role of the environment as a constraint and as a driver of economic activity.

Recommended Research on The Knowledge Driver • Research attention should be focussed around the networks and knowledge

transmission mechanisms that may be appropriate to the wide range of businesses located in rural areas.

• Research should be undertaken on how science policy is formulated and how it

impacts on regional and rural competitiveness. Recommended Research on Social Capital • Research should be undertaken on the hypothesis that the �strength of households�

might be related to rurality. • Research should be undertaken on how the insights from the literature on

embeddedness might be applied in conceptualising and empirically researching rural economic development.

• Research should be undertaken on the applicability and implications of GDHI to

both rural and urban areas and on the underlying social and household processes. • Sociological and economic studies of rural businesses to reveal social networks

and ownership of or access to social capital are required. Recommended Research on Rural Business Performance • A scoping study should be commissioned, or a seminar convened, to compare and

contrast rural and agricultural business research with particular attention to methodological issues.

• Research should be undertaken amongst rural businesses to explore some of the

more qualitative issues surrounding business success and the significance of rural location.

• When the full text is available, Bryden and Hart�s work should be scoped with a

view to rolling out or replicating their methodology and conceptual approach in comparative work in England.

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• Research is required to examine the cultural, social and learning contexts for

successful business activity in rural areas, in particular through more participative and qualitative research methods which unravel process rather than correlation.

Recommended Research on Local Economic Development • An extension of the �economic footprint� and �spatial tracking� methodologies

developed by Courtney and Errington into fresh localities deserves further application and development.

• There is scope, for example, for using Farm Business Survey data for spatial

tracking of expenditure using the Courtney and Errington methodology. • Further research is needed on the potential for reducing leakage through

developing local markets. Recommended Research on Counterurbanisation • Further examination of the implications of counterurbanisation for endogenous

rural development is required. What is the extent of local development conflicts? How might they be overcome?

• Research on power and influence in rural areas is required so that the constraints

and drivers of economic development are more fully understood in a political and social context.

Recommended Research on Governance • Research on the implementation of policy in the context of the new governance.

Such research will have to be process as well as outcome orientated and will require in-depth qualitative work alongside more traditional data gathering.

• An examination of the relationships between local government and RDAs in rural

regeneration policy. The urban development literature suggests that there may well be issues of considerable importance here. The extent to which the new partnership retains unity of purpose and is able to develop a shared vision for diagnosis of problems and delivery needs to be understood.

• A case study of the regional delivery groups for the Sustainable Farming and Food

Strategy currently determining strategies and how they will relate to sub-regional actors.

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