The latest 2010-11 triennial survey of more than 1,300 businesses in rural Wales, carried out for the Welsh Government by the Wales Rural Observatory, revealed some positive indicators despite the recession. The rate of businesses with internet connections increased from 67 per cent in 2007 to 85 per cent in 2010-11, while 76 per cent had broadband. A few respondents complained that broadband enabled some companies to avoid business rates by operating from ‘front-rooms and garages’, but many others embraced the flexibility it offered.
Future of Rural Wales
This is the third in a five part series on the economy of the Welsh countryside. Tomorrow Peter Midmore says the stakes are high for Welsh farmers in the negotiations now underway in Brussels to decide future agricultural support.
Business owners identified a range of advantages and disadvantages for locating in rural Wales. Advantages tended to focus on the better quality of life, the beautiful scenery and landscape, and good community spirit and close networks. At the same time the relative isolation of rural locations was seen as a disadvantage for business, with higher fuel costs, poor services, and inadequate roads and transport. In addition, business owners argued that the Welsh Government tended to focus on Cardiff and that, more broadly, rural businesses, particularly SMEs, lacked institutional support. Taken together, these adverse factors were perceived to exacerbate the effects of the recession.And there were signs that rural businesses were becoming more environmentally friendly. In 2007 61 per cent were recycling compared with 81 per cent in 2010-11. However, concerns were expressed about the costs to business of environmental regulation and compliance.
The recession was the dominating factor for the survey, as this respondent, paraphrasing US President Bill Clinton’s famous remark concerning the economy, declared: “It’s the recession, stupid!” Another said, “We were starting to soar prior to it hitting. A third added, “The tough economic downturn is demanding a huge increase in productivity just to stay in business.”
Some businesses had been forced to take on different types of work. For instance, one building firm that used to only undertake new building projects had been forced by the housing market downturn to undertake renovation work. Other comments revealed problems with money supply, customer demand and payments. As this respondent said:
‘The impact of the credit crunch is causing less spending by customers and larger customers cancelling contracts. The banks are being very restrictive with lending.”
“Customers are not paying so there is a decrease in turnover. We’re afraid to attract new customers as the payment risk increases. There’s a downturn in the construction industry due to worldwide banking problems.”
Perversely, a few businesses identified potential benefits from the recession, saying they had become leaner, more efficient, and more profitable. Others observed that business rivals had gone into liquidation, leaving the field open for them. More generally, however, the survey’s economic performance data reflected the recession’s detrimental effects and all compared unfavourably with the 2007 survey findings:
- 34 per cent of business had expanded
- 25 per cent had contracted
- 36 per cent had increased turnover
- 34 per cent had experienced a decrease in demand
- 26 per cent had increased profits while
- 41 per cent reported decreased profits
- 48 per cent reported difficulties obtaining investment
But some performance data revealed a trend that predated the recession. This was the persistence of a low-skills, low-wage economy, previously identified in the 2004 and 2007 surveys. Evidence from the 2010-11 survey confirmed the continuance of this trend:
- Low educational attainment.
- Perceived shortage of skilled job applicants.
- Lack of business training.
- Disregard for the usefulness of business plans
- A trend towards parochialism in terms of employees, customer and suppliers.
- A preference for the use of local networks, particularly for recruitment
Arguably, the effects of the recession, especially an increase in people looking for work, will exacerbate these problems. Rural business owners felt they lacked institutional support, investment and training. These are important views which should influence business policy for rural Wales.