27 April 2023

Levelling Up the UK: how rural areas are overlooked

New academic paper

The gap in incomes between England’s richest and poorest regions continues to grow, with much political attention given to ‘Levelling Up’ less prosperous communities, writes Matthew Gorton, deputy director of NICRE. In improving the fortunes of less prosperous regions, one school of thought regards cities as the engines of improvement, with rural areas inevitable laggards in terms of levels of innovation and international trade. But does this argument hold for the North and Midlands of England?

Analysis of urban-rural SMEs

To answer, our recent paper published in the Journal of Rural Studies investigates the comparative performance of urban and rural Small and Medium Sized Enterprises (SMEs) in these regions. We used official Longitudinal Small Business Survey data for the analysis. To compare performance, we analysed both the rates of innovation and exporting for the overall stock of rural and urban businesses, as well as comparing rural and urban businesses with similar profile characteristics, using a statistical procedure known as propensity score matching.

The results reveal no systematic, significant differences in goods, service, and process innovation or exporting between rural and urban SMEs. Rather, rural firms are as likely to export and innovate as their urban counterparts and this holds for both the North and Midlands of England.

Building on NICRE evidence

Our findings suggest that rural areas are often overlooked in the Levelling Up agenda and the focus on urban areas appears misplaced. As discussed in a previous NICRE briefing, while rural areas and businesses are elements of the Levelling Up challenge, they can also be part of the solution. Therefore, policies for enhancing regional performance should adequately recognise the current contribution of rural businesses as well as their potential, arguments we put forward in our strategic case.

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