Investing in rural innovation: Unlocking potential for sustainable growth

With a new Labour Government now in place, time will tell whether they deliver on their manifesto plans to support small and medium-sized enterprises (SMEs) in rural areas, fostering innovation and creating employment opportunities. The manifesto also included comprehensive measures to tackle climate change, focusing on sustainable agriculture and reducing carbon emissions in rural areas. They advocated large-scale investments in renewable energy and conservation projects, with plans to invest in public services and infrastructure in rural areas, aiming to build resilient communities through comprehensive social and economic policies.

A £7.3bn National Wealth Fund is at the heart of the new government’s plan to revive economic growth. Given the importance of rural innovation, it should be evident that support for investing in rural areas can drive significant positive outcomes for economic growth, sustainability, and community resilience.

However, many UK governments have failed in rural innovation in the past. Most have seen innovation through a science and technology lens, focused on R&D investments, patents, and university spinouts. As such, other forms that are not primarily profit-driven or easily measured were often overlooked. This is frustrating as areas with higher non-metropolitan populations often see more significant benefits from increased innovation, as exemplified by the Nordic countries. This suggests a greater potential for growth in rural regions than in urban ones is achievable. For example, one of GB Energy’s initial priorities is to partner with energy companies, local authorities and cooperatives to develop 8GWs small-scale and medium-scale community energy projects. If profit flows directly back into local communities as promised, it will cut bills. This innovation alone will create a more decentralised energy system with more local generation and ownership and help create a more resilient energy system. Such innovation will boost real household income in these areas. But, it can also lead to growing inequalities, highlighting the need for balanced and inclusive approaches to fostering innovation in rural areas.

A healthy innovation system comprises a network of organisations, enterprises, and individuals dedicated to introducing new products, processes, and organisational forms into economic use. This network operates with the institutions and policies influencing their behaviour and performance, however, the unique nature of rural innovation differs significantly from urban settings. Urban innovation is often driven by formal, science-based systems in cities with universities and large corporations with dedicated R&D functions. While these science-based activities can successfully apply to rural contexts, rural innovation typically takes diverse forms so different solutions are needed to foster it and boost the performance of small and medium-sized enterprises (SMEs) in these regions. Rural labour markets are generally small, especially in remote areas, with limited prospects for large employers.

Consequently, SMEs are the primary drivers of employment growth in these regions. If SMEs can develop and identify niche areas of absolute and comparative advantages, they can prosper and become competitive on a global scale. With the right targeted policy initiatives and financial instruments to support innovative practices, rural regions can face the challenge of a lack of critical mass.

So, investing in rural innovation is essential for:

Economic Growth: Driving local economies and creating job opportunities.

Sustainability: Promoting environmentally friendly practices and reducing carbon footprints.

Community Resilience: Enhancing the quality of life and resilience of rural communities.