How do we measure the value of a place, and how does our measurement of value affect our perception of place? A flurry of reports and research papers published this month call into question whether the commonly accepted understanding of the economic value and performance of rural areas may be flawed. Being based in the south of Scotland gives an interesting perspective when reading these reports, not least because the outlier nature of the south of Scotland’s economic performance features prominently within one of the most influential.
For those of us in the south working in business support and economic development it’s no secret that our region’s economic performance lags behind the rest of the country. The lowest wages in Scotland, one of the oldest and fastest ageing populations, high outward migration of young people and the lowest GVA in the UK. The data points to market failure and a structurally fragile economy; and the south is not alone – many of those fragilities are mirrored in other rural areas of Scotland.
However a new report published last week, “Local productivity: The real differences across UK cities and regions” by Christina Beatty and Stephen Fothergill of Sheffield Hallam University suggests that on at least one measure the method of measurement itself may be resulting in the story being far from accurate.
GVA (Gross Value Added) is an economic indicator used to measure the state of the economy. In simple terms it measures the ‘value added’ by workers; the difference between the value of the goods and services produced and the cost of raw materials and other inputs. The Sheffield Hallam University report states that GVA per head (per resident) should ‘not really be confused with productivity’ but, to all intents and purposes, it tends to be.
So what does it say about the value of the south of Scotland’s businesses and employees when our GVA takes the last place spot at just 61% of the UK average? North Eastern Scotland’s GVA is a whopping 139% – does this mean employees and businesses in the north east are really working more than twice as efficiently as those in the south? The ‘Local Productivity’ report suggests not.
The report starts with the traditional measure of GVA then step by step adjusts for a range of factors that impact on a truer measure of productivity, such as looking at working age population rather than total population, exploring the impact of commuting and the balance of industries in a region. Following these adjustments what emerges is a picture of productivity across the UK that is much more equal, Southern Scotland moves up the table to 86% of the national average, while the North East moves down to 109%. The south is still lagging behind but looks, perhaps, not quite so broken.
The report’s authors suggest these findings have major implications for public policy, not least a need to move away from policies of agglomeration, which assumes that efficiencies are delivered when businesses are clustered together, in other words the urbanisation of economic activity.
But what has the narrative of a failing economy done to the south’s perception of its own value over the past decade? It’s an important question that is difficult to answer with any certainty, but anecdotally it appears that the south’s business confidence, ambition and willingness to take risk is markedly lower than the rest of Scotland, stymying growth, investment and opportunity.
Productivity aside, a notable feature of the south of Scotland economy over the past ten years has been very high levels of self employment. In fact it’s the highest in Scotland currently sitting at around 20% of the labour force, compared to a Scottish average of 12%. Like much of rural Scotland, self-employment and pluriactivity (multiple income sources) are both what sustains rural communities and what enables ‘lifestyle’ enterprises to be viable. So rural self employment is a good thing, right?
Well, new research by the Institute for Fiscal Studies suggests self employment is a more fragile existence than has ever previously been evidenced. The UK-wide report titled “Who are business owners and what are they doing?” uses HMRC records to learn more about business owners than has previously been possible, tracking businesses over time and analysing income patterns. What the report found was concerning for any region with high rates of self employment, predominately Scotland’s rural regions.
Self employment has been the fastest-growing part of the UK labour force for nearly 20 years. Over the past 10 years self employment in Scotland has grown by 1.9% while in Dumfries & Galloway and the Scottish Borders it has grown by 4.1% and 3.6% respectively – around double the national rate.
What the IFS found was that not only are sole trader incomes very low compared to those in employment, but they have been falling. The mean annual taxable income of sole traders across the UK was £21,000 in 2015–16 (£10,000 below that of employees) and 36% have a taxable income below £10,000. The income sole traders derive from their business (profit) is even lower on average (£12,100) and has fallen by £3,300 (21%) in real terms since 2007–08.
If self employment is what is sustaining rural Scotland then the foundations of our rural economies are weak indeed, because the consequences of these low self employment incomes not only affects standards of living in rural Scotland, it has a knock on effect to the whole rural economy, particularly the service sector.
So perhaps it’s not the value of our rural economies that should concern us – we need to think instead about the structure and the purpose of our rural economic activity. That is exactly what the Food, Farming and Countryside Commission, headed up by the RSA, explored.
The final report ‘Our Future in the Land’ was published two weeks ago after an 18 month inquiry and it makes for compelling reading. The research explored the land, as well as the people and industries that depend on it, as a system and researchers asked questions around current policy approaches, climate change, community and economics.
Most interestingly the FFC Commission report proposes an approach to economic and community development in the UK’s rural places that creates value not in linear consumption and output based models, but in the development of a regenerative economy, underpinned by land use that prioritises agroecology and an approach to leadership that values collaboration, diversity and distributive systems. A regenerative approach to economic development is one that integrates social and economic processes that ‘restore and replenish natural and human ecosystems’, and with the increasingly apparent climate catastrophe a radical rethink of our economic values has never been more urgent.
Reports such as this highlight that rural economies themselves function more like complex ecosystems than linear economic models; indeed the perceived failure of regions like the south of Scotland to ‘perform’ against traditional measures is arguably a failure of priority and of values rather than of productivity and place. If we measure rural regions on wellbeing rather than economic metrics the performance flips; those regions that are performing worst on economic measures are some of the wellbeing star turns.
Therefore, to understand the value and the potential of our rural economies we need to start thinking differently about them; with less emphasis on cause and effect and instead understand rural Scotland as a complex, interdependent system where there are few quick wins or easy answers, but, instead, a wealth of untapped potential and unrealised value. And if we can crack systems thinking in relation to rural economic development, what does that mean for public policy? We might see a focus on confidence and capacity building in Scotland’s rural places, supported by, for example, local supply chain development rather than centralised procurement.
Last year’s OECD Rural Development Conference hosted in Edinburgh encouraged delegates to reimagine rural areas as ‘engines of national prosperity’ contrasting in its policy statement the potential of empowered, innovative and inclusive economic development versus the traditional weakness-mitigating, subsidy based approach:
“Rural policy should mobilise assets and empower communities in order to enhance the social, economic and environmental well – being of rural areas. Without this focus, rural policies risk recourse to subsidies for lagging regions, which can in the long run, lead to unsustainable dependencies”
In short, rural economic policy should focus on supporting what’s already strong, not correcting what’s perceived to be wrong.
The various reports published this month would seem to reinforce that OECD statement. It’s time we revalued rural Scotland, not for what it currently contributes to Scotland’s traditionally measured economic performance, but for its potential to enable a different, regional and place-based approach. Perhaps it’s time we prioritised ‘how’ economic activity is done, rather than ‘how much’ is done.
It’s time to value Scotland’s rural people and places on their potential to transform Scotland into a regenerative economy, fit to tackle the climate and social challenges posed by a rapidly changing world. There has never been a better time to re-value rural than now.
Lorna Young is a marketing and economic development consultant based in Dumfries.
Photo by Ian Findlay
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