The Federation of Small Businesses has called for action to support Scotland’s rural economies after a report found startup rates are far slower than in cities.

According to the report, startup rates in rural Scotland are around half of those in cities. In a submission to the Scottish Government’s National Council of Rural Advisers, FSB suggests that boosting local and rural startup rates should be a “key priority for Ministers and the wider public sector.”

Andrew McRae, FSB’s Scotland Policy Chair, said: “Since the start of this decade, we’ve seen the number of registered Scottish rural firms increase at about half the rate of our cities.

“This trend should give all of us pause for thought. From Stornoway to Stranraer, smaller businesses are at the heart of local communities and economies.”

Urban Business Boosts

Between 2010 and 2017, the number of businesses registered in urban areas increased from 108,145 to just over 125,000; an increase of 16%. Over the same period, however, business startup rates in Scotland’s rural communities increased from 48,225 to 52,270 – an increase of only 8%.

The startup rate of businesses in rural areas, the report highlights, does not coincide with an increase to Scotland’s rural population, which has grown at a slightly faster rate than the country’s urban areas. With a growing population, Scotland’s rural areas are being deprived of variety and the availability of services compared to their city-dwelling compatriots.

McRae said: “Without a diverse mix of local businesses, driven by a healthy business start-up rate, rural areas will face sluggish growth and struggle to retain and attract working-age people.”

In its submission to the Scottish Government, FSB also highlighted that small-to-medium sized businesses in rural Scotland generate around £15 billion in turnover, while sustaining more than two-thirds of rural private sector jobs.

Breaking the Trend

If the current levels of business startup continue, McRae believes rural areas will face greater challenges in years to come.

He said: “In many parts of Scotland, smaller businesses are the local economy. This trend looks set to continue as many big businesses consolidate their operations.

“Therefore, if we want to develop resilient local economies, then we need to focus on helping our smaller firms thrive. That means ensuring smaller businesses get a fair share of public contracts. It means asking our enterprise support agencies to think local first. At every turn, it means those in charge taking stock of local business opinion.”

Accessibility and Infrastructure

Figures from Audit Scotland were highlighted in the FSB report and showed that one-third of Scotland’s local roads are in “unacceptable condition”. In areas such as Argyll & Bute, Dumfries & Galloway and Comhairle nan Eilean Siar, infrastructural standards are even poorer.

In addition to this, connectivity in Scotland’s rural areas is also playing a role in prohibiting business growth. McRae said that by improving infrastructure, rural areas will become more attractive to businesses who are more likely to set up operations in cities.

He said: “By improving transport and digital infrastructure, our rural areas can become more attractive to business startups, as well as families and tourists. This should be a priority for Scottish policymakers in their pursuit of a more productive, innovative economy.”