Examining the impacts of the recession on the economies and

communities of rural WalesA research project undertaken by the WRO between April 2009 and Oct 2009

Introduction

• Background

– The Wales Rural Observatory was commissioned by the Rural Policy Unit of the Welsh Assembly Government (WAG) in April 2009 to undertake research on the impacts of the current recession in rural Wales.

• Objectives

– to examine the economic, employment, housing, welfare and social consequences of the recession in rural areas, with a view to comparing the rural situation with that in other parts of Wales.

– explore the differential sectoral, social and spatial impacts of the recession within rural Wales.

Methodology

• Defining Rural Wales:- For the purpose of the report,

rural Wales was defined as all local authorities in Wales with a density of fewer than 150 residents per square kilometre.

• The study involved two stages of enquiry:

- temporal and spatial analyses of relevant data

- semi-structured interviews with representatives of organisations with a specific rural remit in Wales

Methodology

• Stage 1 - Temporal and spatial analyses of relevant data:

– house prices, housing affordability, property completions, housing need, property repossessions, homelessness, unemployment, Job Seekers Allowance (JSA) claimants, job vacancies, debt and other welfare enquiries, and business insolvencies.

– Where possible, data were analysed based on a fixed period between the first quarter of 2007 and the first quarter of 2009.

– Data were also examined at different spatial scales to compare the rural and non-rural situations

(NUTS3, LA, Ward).

Methodology• Stage 2 - Semi-structured interviews:

– Of the 50 organisations contacted, a total of 37 agreed to be interviewed as part of the research.

– The interviews explored in greater detail the impacts of the recession on different economic sectors, social groups and places within rural Wales and, where possible, compared the rural and non-rural situations

– Valuable evidence and commentary was provided by a range of relevant economic, employment, housing, welfare and social / health organisations

Findings

1. The economic position of rural Wales

2. The rural housing market

3. Welfare and advice

4. Impact on rural communities

5. Policy Implications

1. The economic position of rural Wales

(a) Economic Performance– Gross Value Added (GVA) is used as a broad indicator of

economic performance

– Problems using GVA

Table 1: GVA per head and GVA per head indices in Rural Wales

NUTS 3 Area GVA per head,

2006

Index of GVA per head, 2006

(UK=100) UK 19 430 100 Wales 14 226 75 Isle of Anglesey 10 560 56 Gwynedd 12 972 68 Conwy and Denbighshire 11 529 61 South West Wales 11 711 62 Powys 13 258 70 Monmouthshire and Newport 18 537 98

Source: Office for National Statistics (ONS)

(b) Economic Activity and Employment

- Rural Wales - relatively high economic activity rate and low levels of unemployment compared to rest of Wales

- Job Seekers Allowance (JSA), the UK’s main unemployment benefit

(b) Economic Activity and Employment

Total JSA claimants

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Jan-92

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Jan-01

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Rural Semi Rural

Valley Urban

Wales United Kingdom

(b) Economic Activity and Employment

– High levels of employment in the service sector

public administration, education, health, distribution, hotels and restaurants = 54%

agriculture accounts for only 5.5% of rural employment in Wales (Nomis, 2008) and its contribution to total Gross Value Added (GVA) in rural Wales is marginal, at only 2%

– The number of job vacancies per JSA claimant is decreasing in rural Wales

(c) Sector-specific evidence

• SMEs and the current recession- Small businesses prevalent in rural areas experiencing financial difficulties- Loss of business impacts on the community- Long-term impacts likely - difficult for rural enterprises to recover

• The agricultural sector in rural Wales- Recently experienced problems caused by diseases and major retailers forcing

down food prices- Fared better than other industries during the recession- Economic viability of dairy sector challenged

• Tourism in rural Wales- 5% reduction in tourist trips by residents in the UK to Wales + 12% reduction in

spend- Uncertainty about the future and fear over job security had led to fewer people

taking holidays- Business travel had fallen significantly during the recession as corporate budgets

were tightened

(d) Labour market Earnings

Mean weekly earnings by local authority of residence, 2009

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(e) The youth labour market– “We’re just creating a situation where our young people are left with no sort of

career route at the ages of sixteen or seventeen and can’t claim benefit until they’re eighteen.” (Careers Wales)

(f) Older Workers– “We’re now dealing with a lot of enquiries from older workers about loss of

contributions and earnings, pension funds losing value significantly, savings producing reduced levels of income, and all the difficulties that you’d associate with all these things, in terms of meeting above inflation rises in fuel and food costs.” (Age Concern Cymru)

(g) Migrant workers in rural Wales– Migrant workers accounted for a greater proportion of the working

population in rural areas of Wales than urban and valley regions

– The jobs that migrant workers are doing are predominantly low skilled manual positions

– Current slowdown in migrants entering the country resulting in hard to fill vacancies

2. The rural housing market

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Wales Region

Rural

Semi rural

Valley

Urban

Average house prices by region (January 1995 – January 2010)

• House prices decreased throughout Wales between February 2008 and February 2009 – highest falls observed in rural and valleys authorities

• But, recent changes have had little impact in the affordability of housing in rural areas

(a) Impact on rural homeowners

(b) Impact on housing development and supply

Developers and builders:

• Construction industry currently accounts for 9.7% of all jobs in rural Wales (Nomis, 2008)

• Substantial decline in construction activity, with knock-on effects on employment levels within the sector

• Calls for greater emphasis on repair and maintenance work – WAG Welsh Housing Quality Standard

(b) Impact on housing development and supply…(cont.)

New housing development and reinvestment:

• Evidence of limited flexibility in the rural housing market

• Higher interest rates / lack of credit impacting on housing association budgets

• Over-reliance on private sector to provide affordable homes via the planning system.

• Urgent need to widen scope of housing products to address demand / support transactions across tenures

3. Impact on welfare and advice services(a) Evidence of increased demand for housing services, debt

advice and benefit enquiries as a result of the recession:

Rates of recession related enquiries to Citizens Advice Cymru (April 2008 – March 2009)

Mortgage/secured loan arrears issues)

Redundancy issues

Jobseekers Allowance issues

Rural 83% 196% 117%

Semi Rural 11% 134% 104%

Valley 37% 160% 116%

Urban 44% 197% 174%

Source: CAB (2009) http://www.citizensadvice.org.uk

Changes in recession related enquiries to Shelter Cymru between the first quarter of 2008 and the first quarter of 2009

Comparison Q1 08 to Q1 09 RURAL SEMI RURAL VALLEY URBAN Homelessness -11.4 -17.0 -7.8 -14.5 Rent arrears 1.7 5.9 3.1 -9.4 Mortgage arrears 4.7 5.3 2.0 5.3 Rents/rent levels 1.0 -0.2 0.4 0.8 Other financial 1.8 0.5 2.9 11.2 Domestic violence 0.3 0.0 0.0 0.0 Household dispute -0.2 0.0 0.0 0.0 Neighbour friction -1.3 0.0 -0.2 1.1 Violence outside home -0.2 0.0 0.0 0.0 Dampness/disrepair 2.0 0.2 2.7 5.1 Unsuitable accommodation -0.3 0.0 0.3 1.7 Landlord possession action 1.6 1.0 2.5 2.2 Harassment/illegal eviction -0.6 0.0 -0.2 0.4 Tenancy ending -0.2 0.3 0.8 1.1 Deposits -0.3 -0.5 0.5 2.8 Landord/tenant - other 0.2 -0.2 0.6 1.3 Children Act 0.1 0.0 0.0 0.0 Medical/health -0.2 0.0 0.0 1.1 Red = Rural increase and Blue = Rural Decrease

Source: Shelter Cymru (2009) http://www.sheltercymru.org.uk/shelter/policy/default.asp

Anecdotal evidence from interviews:

• Increased demand for welfare and advice services across all socio-economic groups

• Unemployment and increased personal debt increasingly associated with mental and physical health problems

• Breadth of individuals impacted wider than just those who have lost their jobs

• Significant barriers to help-seeking within rural communities

(b) Impact on older people

• 27.2% of the rural population aged over 64 (ONS, 2007), a large proportion (60%) of this age group live alone (Census, 2001)

• Retired rural residents hit hard by economic downturn:

- rising prices / inflation

- issue of ‘pride’

- loss of rural services

• 2011 Census Projections indicate that population in rural Wales will increase from 986,000 in 2006 to over 1 million, with greatest proportional increase likely to occur within pensionable age range

• Implications for rural society and economy?

(c) Impact on families and children

• Financial / personal well-being of families and children highlighted as a key area of concern:

- unemployment / reduced incomes

- threat of repossessions and declining housing conditions

- sharp rise in cost of basic food items

- rising energy prices

- increasing levels of personal debt

- increasing levels of stress / health

• Housing debts and risk of evictions may translate into future extra demand on children’s services, social and care services

4. Impact on rural communities

(a) Loss of rural retail services

• Rural retailers affected by tightening h’hld budgets

• Social enterprises / co-operatives – key role to play in preserving services essential to sustainability of rural communities

• Impact of further cuts in public spending?

(b) Cost of fuel and heating oil

• Fuel poverty identified as a major issue in rural areas:

- increased costs / limited choice

- higher than average length of rural journeys / poor public transport provision

- higher distribution costs for rural services / businesses

5. Policy Implications

• Targeted investment in age-specific advice and counselling services urgently required

• Young people’s needs may be broader than education and employment

• Employment and training support should be maintained and expanded to help more disadvantaged people overcome information, skills, transport or childcare barriers to work

• Calls were made for improvements to banking services and credit availability in rural Wales

• WAG should give further consideration to the challenges facing small businesses in rural Wales, and consider improvements to the business infrastructure in these areas

• new approaches are needed to support older people hit hardest by the downturn in the economy

• tourism businesses may need to respond to current challenges by improving the quality of the service they provide