Jason Beedell

Director, Research

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Jason

How landowners can make the most of their rural assets is a question that we deal with every day, so we know that the answer is not always straightforward.

That’s why Strutt & Parker was delighted to be one of the main sponsors of the CLA’s Rural Business Conference in London, titled Unlocking Investment, Unlocking Potential.

This exciting conference was the culmination of a year-long programme of research by the CLA, which included a series of seminars which we helped to organise.

It also marked the publication of a new report, Rural Business 2030, which highlights the challenges and opportunities facing rural businesses in terms of investing.

This important piece of research shows that landowning rural businesses make a substantial contribution to the national economy, but they have the potential to offer much more.

There is massive potential to invest and grow, but to harness this, the government and others must understand rural businesses better and give them the confidence to invest.

One of the critical points is that rural businesses see investment differently to other commercial organisations.

The majority are family-owned and 60% have been in the family for over 50 years. This means the owners often view themselves as the custodians of the family enterprise.

As a result, they take a long-term view of investment opportunities and their decision-making reflects the importance they place on the land, local community and succession planning, not just the return on capital.

This means that rural businesses want certainty that policies that promote or encourage investment will be maintained, rather than changed year-to-year.

Levels of investment – present and future

The report shows that the level of investment by rural businesses is significant. On average, £13bn is invested by them each year, compared with £87bn a year in urban areas.

Projections suggest investment levels could rise to over £16bn a year by 2020, if rural businesses are given higher levels of confidence.

However, a much lower level of confidence could result in a sharp fall – levels shrinking to £3.2bn a year.

Investment opportunities

Four out of five rural businesses say they are planning to invest, with investment in properties for the businesses’ own use or residential property for letting the two most popular options.

However, almost half of rural businesses cite the planning system as a barrier to future investments.

But while farming, food production and property management underpin the commercial operation of many estates, many are now involved in a huge range of additional activities.

So the report investigates the opportunities – and the barriers – for landowners in energy production, connectivity and natural capital.

Energy

Renewable energy has seen significant investment from rural businesses, but the research highlights how policy changes have left questions.

The report suggests that in future, businesses could find that investing in technology that cuts energy consumption, within the business itself and in any rented property, is the best investment.

However, there are new markets that also need to be explored, such as the use of district heating schemes to provide heating services for a local community or battery storage for electricity.

Connectivity

Mobile and broadband coverage is a challenge in rural areas after years of underinvestment.

The introduction of the Universal Service Obligation (USO) is a breakthrough, but businesses and consumers in rural areas will need broadband speeds greater than 10MBps to bring an end to the urban-rural digital divide. Alternatives will be required to provide the superfast connections that people want.

The report says the right incentives could encourage more rural businesses to invest in their own broadband connection and then become local suppliers though technologies such as fibre-to-premises or local wifi networks.

Natural capital

At present, it can be hard to make a business case for individuals to invest in natural capital.

However, the report shows that governments will struggle to meet their stated objectives for the environment – on water quality, soil management, habitat and wildlife protection¬ ¬– unless there is investment in this area.

Government, on behalf of society, is likely to remain the primary customer for natural capital or ecosystem services.

However, a number of new potential customers are emerging, including water companies needing ways to clean and store water, manufacturers having to meet carbon targets or organisations committed to improving health by connecting people and nature.

Policy recommendations

• Develop a new farming policy to succeed the CAP which ensures business resilience and increases environmental ambitions.
• Establish trade relationships that give access to the single market and the rest of the world to enable markets for food products to grow.
• Complete the process of planning reform to ensure the system facilitates necessary development. All Local Planning Authorities must establish local plans that encourage investment in rural areas and increase use of permitted development rights where appropriate.
• Encourage and enable rural landowners to become local suppliers of renewable heat, electricity and broadband internet services.
• Establish an investment tax road-map which means businesses can take decisions with certainty about future tax implications.

Our view

The CLA’s report is well-timed as the debate hots up about how to shape the countryside and prioritise government spending in a post-Brexit era.

The defining message is that rural businesses will be encouraged to invest more if there is long-term certainty about policy and greater recognition of what rural areas contribute to society at large and the challenges they face.

In short, achieving long-term prosperity for rural areas needs an end to short-term thinking by policy makers.