Remote rural businesses face a double whammy – hit by a squeeze on consumer spending and the slow pace of broadband progress. But they're fighting back through a blend of commercial ingenuity and do-it-yourself technology
Running a business from a tranquil spot in the countryside – far from the pressures of urban commerce – may look idyllic, but appearances can be deceptive. On top of the economic challenges testing most organisations, firms operating in rural locations face even greater ordeals.
High-speed broadband connections that town, city and even semi-rural enterprises take for granted are not even on the cards for more remote corners of the UK. And without fast internet access, businesses cannot compete and jobs are put at risk. Skills that are the lifeblood of growing companies – and essential for sustainability and succession planning – are uncommon in many industries but they're scarcer still for technology and engineering businesses in far-flung areas.
The David and Goliath-like struggle between small, rural food producers and the major multiples is well known, but as consumer spending tightens, fierce supermarket pricing strategies are pushing
some of the smallest producers to the edge. But in spite of the obstacles, enterprise is alive and well in the countryside. What rural business owners lose out on by virtue of location, they more than make up for with creativity and resourcefulness.
A £60BN ECONOMY
A fast and reliable internet connection is vital for business yet in some regions it is non-existent. In an ideal world, every rural company would have access to a minimum broadband speed of 5Mbps. That is the target which the Country Land & Business Association (CLA) wants the government to achieve. Without it, the CLA estimates that around 100,000 businesses, with a total turnover of up to £60bn, are being held back.
CLA president Harry Cotterell says: "The current broadband targets are for 90 per cent of the population to be able to access speeds of 25Mbps and above by 2015, but that still leaves 10 per cent of Britain without. And with even faster internetaccess being delivered to urban areas, the digital divide will become even greater."
Alternatives for businesses with limited or no broadband access include satellite and the soon-to- be-launched 4G mobile broadband. But satellite can be expensive and prone to signal fluctuations, with restrictive download and upload limits. The government's broadband rollout plans do include rural areas and the number of properties unable to access a speed of 2Mbps – the minimum required for purposeful internet use – is set to fall to one in 50. But struggling business areas want to know when this will happen. In some areas left waiting for too long, people are taking matters into their own hands.
Farms and small firms in a sparsely populated area of north Lancashire, where it seems unlikely that BT will install fibre-optic cables, are throwing their collective weight behind the ambitious Broadband for the Rural North (B4RN) project, which involves laying cables to around 1,500 properties in an area of 250 sq km. Each property that takes the service will be offered a generous 1Gbps for £30 a month. Investment for the £1.8m project is being raised through a share scheme to which community members can subscribe, either with cash or the offer of labour and other services.
B4RN chief executive Barry Forde says: "We are talking about a large area, populated sparsely and remotely, with challenging terrain, so we recognise the financial restraints on BT and the fact that they are answerable to shareholders. This is also not a good time to be asking the government for money. Rural businesses that want to be part of the digital age must do it for themselves. They have to be multifaceted, they must diversify to survive in a tough economic climate, and they need good internet access to be able do that."
DOING IT FOR THEMSELVES
A B4RN project founder is Christine Conder, who runs W Conder & Son, a farming contracting business. Her family has farmed in Wray, north Lancashire, for four generations.
Conder became involved in the initiative when her previously poor dial-up internet connection was left standing by the rapid emergence and take-up of broadband in more built-up areas. In a pioneering move, she dug a trench and laid the first fibre cable to her farm in 2009.
"We need broadband for our business," she explains. "Nowadays when people source farming equipment they do it through social media sites such as Facebook and YouTube and look at videos of the machines in operation, and you need to have decent
broadband to be able to do that. The digital divide is getting wider, and businesses like ours are being severely disadvantaged. B4RN is about farmers and local business owners doing it for themselves – it's a model that can eventually be replicated by rural business communities elsewhere."
A RURAL SUCCESS STORY
A big threat to the British economy is a lack of competitiveness among small and medium-sized enterprises. Given the challenges of a rural setting, technology, engineering and manufacturing companies based in the countryside may well be questioning their choice of location.
But for one small manufacturer that has tapped into local skills and kept the lion's share of the domestic market away from foreign competitors, the effect of a remote base has been minimal.
Established 30 years ago in Ulverston, Cumbria, LED lighting technology specialist Marl International makes and supplies energy-saving lighting for domestic and overseas markets. It employs more than 100 staff and has an annual turnover of £9m.
Managing director Adrian Rawlinson says: "We are in a fairly remote part of the UK. Broadband connections are poor, transport infrastructure is improving but not great, yet businesses like ours have survived and are growing. High-quality engineering and manufacturing skills are crucial for us. Cumbria has a highly skilled workforce. By clustering with other small companies involved
in similar activities, or around a primary large customer, we can attract and retain the skills that our business needs.
"We're also in an industry that is moving faster than the IT sector. The UK customer base is growing, and we can manufacture and supply for that market faster and to a higher standard than any of our main overseas competitors, including China."
DIVERSIFY TO SURVIVE
Diversification is the key to survival for rural firms, particularly farms. Under pressure from economic downturns and major crises such as devastating flooding and foot and mouth disease, business owners are forced to find new revenue streams.
A popular move has been the conversion of redundant farm buildings into holiday cottages or renovating and letting the premises as offices. But with the government's decision to charge business rates on empty properties, diversifying can be costly.
The CLA's Cotterell says: "Rural firms often have better access to capital, so the commercial funding of these projects is not the big issue. Problems arise after they've converted empty barns to offices or business premises and rented them out. If a tenant leaves after a few months, the landlord must pick up the tab for business rates."
Poor rural broadband links can leave offices and business units based in converted farm buildings less competitive than their urban rivals.
Cotterell adds: "This makes it difficult for small rural businesses that are already struggling to survive and leaves a gap in the rural economic revival that the government so clearly needs. My feeling is that if you can demonstrate that you are being proactive in letting premises, you should be exempt from business rates."
TAKING ON THE SUPERMARKETS
As well as being hampered by the digital disparity, small independent suppliers – including farmers and specialist food producers – have been victims of ruthless pricing strategies by the major multiples.
But they are fighting back, with a growing number rejecting the notion that a supermarket listing is the ultimate commercial prize. They recognise that using the right marketing strategy can help them attract consumers and claim their own share of the market.
One emerging trend is the formation of local food producer groups and networks of retail communities that target customers directly. Online portal BigBarn points consumers towards local food producers and was founded by Anthony Davidson, a fifth-generation Bedfordshire crop farmer, in response to supermarket price pressure.
"We grow onions, which we sell for £100 per tonne," he says. "These end up at the supermarket via a middle man, with a price equivalent to £800 per tonne. Consumers see supermarkets as places to buy cheaper food, but even with the supermarkets' buying power, 'local' can be cheaper. Farmers receive about 9p in every £1 spent on food in a supermarket. If a producer can sell direct at 50p rather than 9p, revenue is five times higher, while consumers get a 50 per cent discount on supermarket prices."
While the numbers stack up, the real challenge is persuading customers to break their habit of one-stop convenience shopping and make the effort to travel to farmers' markets and food fairs.
Davidson adds: "A lack of time is the reason that people usually give for not buying food direct from the producer or farmer, but online marketplaces are growing in popularity and making it easier for companies to connect with customers directly and encourage them to stay put."
Fast, reliable internet coverage is a must for rural firms – thousands of jobs depend on quick links with customers. And although poor internet speeds have previously hindered the countryside, the outlook is improving. Campaigns such as B4RN as well as government plans for faster broadband in remote areas show the digital divide is closing. Combined with the flair, ingenuity and pioneering spirit of rural businesses, this is good news for the economy. D
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CASE STUDY: Stoate & Sons
Producing something that supermarkets don't sell is one way of engaging with customers and generating sales. Stoate & Sons is a fifth- generation flour mill based in Shaftesbury, Dorset, which supplies primarily to farm shops, bakers and delis across southern England.
Over the past few years, owner Michael Stoate has cultivated a growing customer base of individual buyers. "It's another revenue stream," he says. "We don't get involved with the supermarkets and our speciality flour is not trying to compete with the
mass products on their shelves.
Although the postage and packaging of individual orders involves extra cost, people are prepared to pay for something that is special and that they won't find elsewhere."
Individual customers make up a quarter of total sales. Marketing is through a combination of word of mouth and listings on local food
producer websites, which consumers can access more easily as faster broadband becomes more available.
"In a strange way the current economic climate has actually helped this side of the business," says Stoate. "People are more inclined to do their own baking, especially of bread, and it has opened the door to a market we previously didn't have."
- CLOSING THE DIGITAL GAPAlongside standard broadband services, rural businesses should look at two other digital options...
White space wireless networks will be rolled out over the coming year. They have greater range than conventional wireless broadband technologies and are less affected by obstacles such as trees and walls. But the networks have a top speed of only 2Mbps, and there's uncertainty over costs.
Bonded DSL (digital subscriber line) works by linking a number of individual DSL lines together to create a super-fast connection. Effectiveness hinges on proximity to the DSL exchange – the closer, the better. But bonded DSL won't help those businesses in the remotest locations where it doesn't reach.