Micro-businesses and Neo-Endogenous Rural Development: UK Perspectives
Jeremy Phillipson
Centre for Rural EconomySchool of Agriculture, Food and Rural Development
Newcastle University, United Kingdom
• Introduction: the Centre for Rural Economy and models of rural development
• Key characteristics of UK rural economies• Dynamics and contribution of rural micro-businesses
Structure of Presentation
• We are committed to
research and development activities oriented to achievement of a sustainable rural economy
• What are the barriers and prospects for development?
• What gives coherence and rootedness to local economic activity?
The Centre for Rural Economy (est. 1992)
Models of Rural DevelopmentExogenous development (post-war)
Key principle Economies of scale and concentration
Dynamic force Urban growth poles
Functions of rural areas
Food and primary products for expanding urban economies
Major rural development problems
Low productivity and peripherality
Focus of rural development
Agricultural modernisation; encourage labour and capital mobility into rural areas
Criticisms of the exogenous model
• dependent development
• distorted development
• destructive development
• dictated development
Models of Rural Development
Models of Rural DevelopmentEndogenous development (1980s -)
Key principle Harnessing local (natural, human and cultural) resources for sustainable development
Dynamic force Local initiatives and enterprise
Functions of rural areas
Diverse service economies
Major rural development problems
Limited capacity of areas/groups to participate in economic activity
Focus of rural development
Capacity-building (skills, institutions, infrastructure); overcoming exclusion
Build on internal capacities and resources of communities
Draw on and steer processes, resources and actions within the external environment
Models of Rural Development
neo-endogenous rural development
CRE’s Northern Rural Network
Decline in primary sector employment
- agricultural employment in England is below 350,000 and falling
- there are 1 million firms, supporting 5.2 million jobs
The Contemporary Rural Economy in the UK
• UK rural employment is multi-sectoral, 80% is in 4 sectors– distribution and
retailing
– banking and finance
– public administration, education and health
– manufacturing
The Broad Sectoral Basis of Rural Economies
The Broad Sectoral Basis of Rural Economies
• A need for rural development to focus on key sectors and understand their rural footprint
• UK rural areas strongly
affected by the movement of urban populations and economic activity to rural areas
• In-migrating households seen as major source of new business, jobs, funds, voluntary initiatives and markets
The Role of In-Migrants in Rural Areas
Ageing and the Countryside
The Dynamics and Contribution of Micro-businesses
• 90% of rural firms are micro-businesses, that is firms with less than 10 people
• An invisible sector, receiving limited attention
• Left out from official statistics
• Business advice / support services have been oriented towards urban and larger firms
• Rural development policies have been farm oriented
The Contribution and Dynamics of Micro-businesses
Value of Micro-businesses in
Rural Areas
• Increasing attention to the role and value of micro-businesses
• Farmers themselves are being encouraged to diversify into non-farming economic activities and become more entrepreneurial
• Restructuring of agriculture is placing increasing emphasis on non-farming micro-businesses in generating economic activity
• Dominance of sole operators and family businesses
• Limited in-house resources (capital, time and labour)
• Centrality of business owner to running of enterprise
Taking on Board the Characteristics of Micro Firms
• Diverse goals and motivations
– quality of life, personal and family considerations
– importance of flexibility and independence
– only a third want to grow in size or employ new people
– low priority to development of staff
Taking on Board the Characteristics of Micro Firms
Difficulties Faced by Rural Micro Firms: A Need for Resilience
• Restricted local markets and labour markets
• Constraints on spatial networking
• Distance from services
• Less developed infrastructure provision
• Vulnerable to economic and environmental shocks
• Evidence of contribution of households was seen during the UK’s 2001 Foot and Mouth Disease (FMD) Crisis
– 14000 farms had livestock culled
– cull of 4.2 million animals– large parts of the countryside
faced economic shutdown for several months as measures were taken to prevent spread of the disease
Micro-business-Household Interactions: FMD 2001
Infected farms in Northern England
Photos from website of the BBC
Photos from website of the BBC
“It is imperative that every local council which has rural footpaths and rights of way within its boundaries closes them immediately. There must be a blanket ban across the country. I implore everyone again: please, please stay away from the countryside”
Ben Gill, National Farmers Union
“Though we are not at direct risk from this disease, we can play a part, unknowingly, in spreading it. FMD is a highly infectious virus which can be picked up by us on our boots, clothes and cars and carried many miles. By staying away from farmland, by keeping off any footpaths through or next to farms or open land with livestock, we can help the efforts to eradicate this disease. We are giving local authorities today the power to enforce the temporary closure of footpaths and rights of way, but we hope people will voluntarily stay away in any case”
Tony Blair
Extent of Impact by Sector
Sector % firms impacted in
sector Hospitality 96 Land-based 92
Extensively affected sectors Recreation/culture 70
Retail 59 Transport 50 Business services 47
Partly affected sectors
Manufacturing 44 Personal services 29 Construction 18 Education and training 14
Little affected sectors
Health and social 10
impact spread throughout a wide range of sectors extensive impact on sectors reliant on tourism,
visitors or connected to agriculture partly affected included those directly affected or
servicing extensively affected sectors
Coping responses % impacted firms n=72
Household members working longer hours 40 Take smaller wage 39 Cancel or postpone investment 36 Reduce staff working hours 35 Increase marketing/advertising 32 Cut back household spending 30 Spend business reserves 30 Cancel or postpone plans to expand 29 Decrease marketing/advertising 27 Renegotiate existing loans 27 Spend personal savings 26 Take out new loan 21 Layoffs/redundancies 21 Not taking on seasonal/casual staff 17 Change strategy 16 Household member looking for job 14 Temporary closure 9 Ask staff to take holidays 7 Increase staff working hours 6 Attempt to sell business 3
• $8 billion cost to private business
• Massive losses but only 141 business closures officially registered
• Households acted as buffers to firms and rural economies
Micro-business-Household Interactions: FMD 2001
• Coping responses based on access to human, social, physical and financial capital of households and local communities
• Household income portfolio compensated for reduced flow of business income and maintained business cash flow
• Cut backs in household consumption, investment and spending
• Values and power relations influenced access to household assets by firms
Micro-business-Household Interactions: FMD 2001
Conclusions
• A need to focus on the key characteristics, capacities and drivers of rural economies in generating economic opportunities
• A need to recognise the contribution and tailor development approaches to the characteristics of rural micro-businesses