Rural business premises and economic development

This research examines how the availability, form and quality of business premises impacts upon the pursuit of economic development in rural areas. The overarching study objective is to identify and quantify the level of market failure in rural property markets and consider its impact on constraining rural business growth (and diversification). Rural property markets are considered in relation to four comparator areas: Braemar and Upper Deeside, Galashiels and surrounding area, Highland Perthshire and Stranraer and the Rhins to Newton Stewart.

The methodology consisted of: an analysis of background and supporting research, including a review of the economic baseline, priority industry sectors, property market, strategic fit and academic/industry and current practice in other areas across the UK and Ireland; and a stakeholder and business survey.

The study identifies demand for additional business premises and land in rural areas but it is not possible to identify one specific type of business or premises that has greater constraint than others. The lack of property options constrains business activity, but it is not the only factor. For a small number of businesses it is identified as the key constraint, but for a greater number is part of the problem they face in growth and/or diversification. There are a large number of barriers constraining rural businesses in property/land terms including: availability of economically viable development land, property market economics/risk aversion, planning constraints and the difficulty in obtaining supply/demand information. There are also a number of barriers to the application and delivery of effective interventions to address rural property market issues, such as: delivery resources (staff and funding), lack of specific outcome targets set within policy/strategy documents, the level of priority attached to rural area property development and the conservative view of planners towards business property development in rural areas. The overall effect that the lack of property has on the rural economy can be described as: failure to retain businesses in the rural area, failure to create new and sustain existing jobs and failure to modernise rural economies from traditional industrial sectors to growing service based activities. It is clear from this study, however, that there is an opportunity to achieve economic growth and diversification in rural areas through property interventions.

The report recommends that a pilot programme of targeted support for the development of new and modern business space is developed. An outline approach is presented for future Scottish Enterprise (SE) and partner intervention to support the growth and diversification of rural businesses through property support.