Annual business turnover in rural areas could grow by at least £15 billion, with rural microbusiness and small-sized business seeing the greatest returns
Report outlines five themes for the private and public sectors to help support this opportunity, including Rural Digital Enterprise Hubs, training and skills development and future support programmes targeting digital growth for rural businesses
Shropshire and Edinburgh – 12 March 2018 - Unlocking the digital potential of rural areas across the UK could add £12 to 26.4bn annually in Gross Value Added (GVA) – equivalent to 4 to 8.8 per cent - to the rural economy and at least £15bn to rural business turnover each year, according to a new report commissioned by Amazon and published today by Rural England and Scotland’s Rural College (SRUC). The full report is available here.
“Over the past 20 years, we’ve seen opportunities for rural entrepreneurs transformed through e-commerce, better delivery services and growing access to fast broadband. But as today’s report shows, there’s much further to go before anyone can say the rural-urban divide has closed,” said Doug Gurr, UK Country Manager, Amazon. “Embracing digital technology not only benefits the economy; it also allows rural communities to combine great quality of life with access to global opportunities. We are working to play our part in helping achieve the report’s ambitions through programmes such as Amazon Academy events and webinars, where last year we helped hundreds of rural businesses learn how to go digital.”
The report found that the South West, Eastern and South East regions, which have the largest share of rural businesses in the country, are set to benefit the most from greater digital adoption.
Footnote: GVA figures add to very slightly over £12.0 billion and £26.4 billion due to rounding.
If digital constraints are removed and the digital potential is realised in rural areas, an estimated £15bn or more could also be generated in additional business turnover. Microbusinesses (0-9 employees) in rural areas would see the greatest benefit, generating an additional £9.4bn in annual business turnover; followed by £4.6bn for small businesses (10-49 employees), £700m for medium-sized businesses (50-249 employees) and £200m for large businesses (over 250 employees).
“Rural businesses are to a considerable degree already strong digital adopters, and most recognise the importance of going further in future. However, their ability to go digital has been held back by constraints which have included connectivity but also extend to a lack of skills, training and resources,” said Brian Wilson, Chair of Directors at independent think tank Rural England. “To help address these constraints and boost rural economic productivity, we believe there are some straight forward ‘quick wins’, which if delivered locally, nationally and UK-wide, could have a significant and positive impact on the quality of life for rural communities and the UK economy as a whole.”
To unlock the billions of pounds additional GVA from greater digital adoption in rural areas, Rural England and SRUC outline a number of recommendations for the public and private sectors, including:
· Streamlining digital support services – Setting up a single portal for information and local directories giving guidance and support that fulfils the digital needs of rural businesses
· Digital Enterprise Hubs – Establishing hubs in rural towns which businesses can use or visit for better connectivity, start-up workspace, hot-desk space and training
· Training and skills development - Local collaboration between employers and education providers, improving retraining opportunities and ensuring short training courses and online tools are more readily available to small business owners for life-long learning
· Accelerated business adoption of digital connectivity - Encourage businesses using superfast broadband to champion its benefits to their peers locally, offering practical real-life examples of success, and prioritise investment in connectivity and digital tools.
· Stronger rural targeting by existing policies and strategies - Making support for digital growth a key objective in future rural business support programmes and encourage larger technology-driven firms to implement policies focused on greater digital adoption in rural areas that shares best practice and provides practical hands-on support for smaller companies
Rt Hon Michael Gove MP, Secretary of State for Environment, Food and Rural Affairs, said: “This report is very welcome. The internet has the potential to ensure the countryside can flourish in a way that combines preserving the environment with economic dynamism. Digital technology can open opportunities, build skills and connect rural businesses to global markets."
Rural businesses see digital technology as key to growth but face skills and training barriers
The report finds that the rural economy contributes £299 bn in GVA to the national economy. Rural businesses are typically family-run, home-based, owned by people aged over 55 years old and employ fewer than ten people. Proportionately more rural than urban businesses have an annual turnover below £50,000 (20 per cent) and proportionately fewer have a turnover above £1 million (8 per cent).
Rural businesses say digital brings significant benefits now and in the future in terms of assisting remote working (30 per cent of rural businesses), improving access to customers/suppliers (29 per cent), improving business efficiency (28 per cent), improving data storage and security (25 per cent) and enabling more business flexibility (25 per cent).
Almost four-in-five rural business owners believe digital tools and services are important to their future growth potential. Cloud computing is seen as the biggest driver (67 per cent), closely followed by 5G mobile networks (54 per cent), the Internet of Things (47 per cent) and Machine Learning/Artificial Intelligence (26 per cent). Rural business owners who export say e-commerce plays a big role, with over 80 per cent using digital tools and services to trade goods and services abroad. The top export destinations for rural businesses are the EU (84 per cent) followed by the U.S. (45 per cent). In addition, 43 per cent of all rural businesses specifically sell online through their own site or via a third party site, with the top two sectors using e-commerce being retail (80 per cent) and the accommodation & food sector (71 per cent).
However beyond issues with internet reliability and speed, over half (52 per cent) of rural business owners say they face some form of skills-related obstacle to adopting digital to unlock more growth, such as recruiting people with appropriate skills to finding training for their existing workforce. Almost a third (30 per cent) have difficulty finding external or outsourced digital connectivity support, 14 per cent have difficulty accessing appropriate external digital training for the existing workforce and one-in-five (20 per cent) say their existing workforce lacks sufficient skills or they struggle to recruit people with appropriate digital skills.
Sarah Lee, Head of Policy, Countryside Alliance added: “This report shows that far from being a secondary issue, a rural digital strategy should be central to the Government’s plans to create a stronger economy and fairer society. Achieving full connectivity, investing in skills development and encouraging more rural businesses to maximise the digital opportunities already in existence will enable rural communities to achieve their full economic potential.”
In addition to supporting this research, Amazon has introduced a range of initiatives to boost digital adoption in rural areas. In 2016, Amazon launched its Amazon Academy programme in the UK and has already helped over 1,000 businesses learn how to go digital. It held a rural focussed Amazon Academy at the Rural Entrepreneur show last November in Birmingham as well as a series of Amazon Academy webinars targeting rural businesses in partnership with the Federation of Small Business. The company also supports the Rural Business Awards, which ensures the sharing of best practices to enable more growth in rural areas.
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