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Table of contents

Approximate read time: 25 minutes

On 19 December 2024 the House of Lords will debate the following motion:

The Lord Bishop of St Albans to move that this House takes note of the importance of growing the rural economy.

As part of the devolution settlement, responsibility for many of the policy areas directly affecting rural areas of the UK has been devolved.[1] This includes responsibility for policies including agriculture, forestry, fisheries and tourism. This briefing provides an overview of the contribution of rural areas across the UK to the UK economy. It then focuses on workforce statistics and policies affecting rural areas in England.

1. Overview of the rural economy

1.1 How much do rural areas contribute to the UK economy?

In 2022, predominantly rural areas of England contributed an estimated £315bn in gross value added (GVA) to England’s economy.[2] This represented 16.2% of England’s total GVA. The proportion of the economic output in England produced in rural areas has remained broadly stable over the last 20 years, rising by 0.2 percentage points over the last five years. However, the longer-term trend has been a slight decline down from 17.2% in 2001.

The size of the contribution of the rural economy varies across the UK, with rural areas in Wales and Scotland contributing a larger proportion of GVA to those countries’ respective totals:

  • In 2021, rural areas of Scotland contributed £39bn to Scotland’s economy, representing 26% of its total GVA.[3]
  • In 2022, rural areas of Wales contributed £21bn to the economy of Wales, representing 28% of its GVA.[4]

While there is no official comparison of GVA for rural and urban areas of Northern Ireland, statistics published by the Northern Ireland Department of Agriculture, Environment and Rural Affairs indicate that businesses in rural areas contributed a quarter of the total business turnover in Northern Ireland in 2023.[5]

1.2 What types of businesses operate in rural areas?

The rural economy is diverse and includes many different types of industry. In many respects, the economy of rural areas in England is similar to that of predominantly urban areas. For example, in 2022 public administration, education and health (21% of GVA) is the largest sector in both rural and urban areas in England.[6] However, as shown in graph 1 below, several sectors are more dominant in rural areas, including:

  • real estate activities, which constitute 15% of GVA of predominantly rural areas compared to 12% in predominantly urban areas (excluding London)
  • manufacturing, which constitutes 13% of GVA of predominantly rural areas compared to 10% in predominantly urban areas

Figure 1. Gross value added in predominantly rural and predominantly urban areas of England (including London) in 2022, broken down by sector

This graph provides a breakdown of gross value added in predominantly rural and predominantly urban areas of England (including London) by sector.
(Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 7—Rural economic bulletin supplementary data tables’, 15 October 2024)

In addition, the Department for Environment, Food and Rural Affairs (Defra) has noted that tourism also makes an important contribution to the rural economy. In 2018—the most recent year for which official figures are available—tourism made up 4% of GVA in rural areas of England.[7]

The greatest difference between predominantly rural and predominantly urban areas is the significance of agriculture, forestry and fishing in rural areas.[8] This sector contributed 3% (£8.6bn) of the GVA in predominantly rural areas compared with less than 1% in other parts of England. A similar sectoral breakdown of Scottish GVA indicates the size of the agriculture, forestry and fishing sector was slightly larger in Scotland where it made up 5% of the rural economy.[9]

While agriculture makes up a relatively small proportion of the rural economy in terms of GVA in both Scotland and England, it remains the largest industry in terms of land use. In 2024, agricultural land in England made up 8.7mn hectares, 67% of the total area of the country.[10] The equivalent figure for the whole of the UK was 16.8mn hectares, 69% of the total area of the UK.[11]

The agri-food sector overall makes up a larger proportion of the UK economy. In 2021, the agri-food sector (excluding fishing) contributed £127bn to the UK economy, constituting 6.2% of the national GVA.[12] The agri-food sector includes the wider food industry, such as manufacturing, wholesale and retail.

1.3 What types of businesses operate in rural areas of England?

In 2022/23, businesses registered in rural areas in England employed 3.8 million people in England.[13] This accounted for 14% of all those employed by registered businesses in England. There are more registered businesses per head in rural areas in England than in urban areas. In 2022/23, there were 590 businesses per 10,000 population in rural areas compared to 420 per 10,000 population in urban areas.[14] The turnover of businesses in rural areas tends to be smaller than for urban areas. The average turnover of businesses in rural areas per person employed is £147,000 per person employed compared to £218,000 in urban areas.[15] In rural areas, the largest sector in terms of registered businesses was agriculture, forestry and fishing (14%).[16]

1.4 What is the productivity rate for rural areas?

Productivity in predominantly rural areas tends to be lower than in predominantly urban areas. In 2022, the productivity (the rate of output per workforce job) of predominantly rural areas in England was around 86% of that for the country as a whole.[17] Over the last 20 years this figure has fallen by three percentage points from 89% in 2001. Defra argues this lower productivity rate has been caused by a failure of rural areas to keep pace with the rate of growth in urban areas driven by the expansion of the financial sector over the last two decades, especially in London.[18]

1.5 What are the demographics of rural areas?

The population of rural areas of England has a higher proportion of older people compared to urban areas.[19] This is partly driven by people moving from urban areas to the country either before or after retirement. Another contributing factor is young people born in rural areas moving to urban areas in order to find work or to study.

For over 40 years England has had a net migration from urban to rural areas.[20] For example, the net internal migration in England from urban to rural areas was almost 100,000 people in 2019/20. This migration was predominantly driven by people aged over 30.[21] The largest net inward migration to predominantly rural areas was among 30–34-year-olds (13,000 people). There was also net internal migration away from rural areas for young people aged 17–20 in the same period (34,100 people).[22]

In 2021, the Campaign to Protect Rural England published the findings of a survey of 16–25-year-olds living in rural communities in England.[23] The survey found that a minority of those questioned (43%) said they anticipated remaining in rural areas within the next five years. For those who wanted to move away, the reasons given included access to affordable housing, problems with infrequent and unreliable public transport, and poor digital connectivity. A more recent survey of young people conducted by Virgin Media O2 published in July 2024 found that around 66% of 18–24-year-olds living in rural areas said they were considering leaving in the next 12 months.[24]

2. Challenges facing the rural economy in England

Problems with infrastructure, housing and access to services have all been identified as the barriers to economic growth in rural areas. For example, in 2018, the House of Lords Rural Economy Committee argued (similarly to the findings above) that poor digital connectivity, the shortage of affordable housing in rural areas and rural transport were among the various challenges holding back the development of the rural economy.[25] Similarly, the campaign group the Rural Coalition argued in its 2024 report ‘Reigniting rural futures’ that the challenges to improving productivity in rural areas included: house price growth in rural areas; the gap between rural and urban areas when it came to access to reliable internet and phone coverage; and the difficulty in accessing NHS services.[26] The Rural Coalition has argued that unless action was taken to grow the rural economy, the gap between the productivity rate for rural areas and urban areas was likely to grow.

2.1 Internet and mobile phone coverage

While connectivity has improved in recent years, rural areas still have poorer access to internet and phone coverage compared with urban areas. Less than half of premises (47%) in rural areas of England have access to gigabit-capable broadband, compared with 84% in urban areas.[27] The proportion of areas in England unable to access broadband of at least 10mbps download speed is higher in rural areas (5%) compared with urban areas (1%).

The Conservative government provided funding to various projects intended to improve connectivity across the UK.[28] This included ‘Project Gigabit’, a £5bn programme launched in 2022 targeted towards households and businesses not already included in broadband suppliers’ plans. The Conservative government also launched the Shared Rural Network, a £1bn project to extend 4G access to 95% of the UK’s landmass. In its manifesto for the 2024 general election, Labour said it would seek to achieve full gigabit and national 5G coverage by 2030.[29] In the Labour government’s subsequent 2024 budget, it announced the provision of an additional £500mn for Project Gigabit and the Shared Rural Network in 2025–26.[30] Further information on the policies of the government to improve internet and mobile connectivity is provided in the House of Lords Library briefing ‘Rural communities: Issues and support’ (11 October 2024).

2.2 Transport and access to services

As noted above, people living in rural areas of England tend to have lower overall access to key service locations compared with people living in urban areas.[31] This is especially true for those not travelling by car. For example, for someone living in a rural area using public transport or walking, the average minimum travel time to a hospital was 66 minutes compared to as little as 36 minutes in urban areas.[32]

People in rural areas are also likely to have to travel further and face longer travel times if they do not work from home. For example, the average minimum travel time in England for someone using a car to reach a centre of employment with 5,000 or more jobs is 25 minutes in rural areas compared with 14 minutes in urban areas.[33] People living in rural areas are more likely to own cars than in urban areas. For example, in 2020, around a third of households in urban conurbations (32%) did not have access to a car, compared to only 6% of households in rural villages, hamlets or isolated dwellings.[34] However, the minority of people without access to a car in rural areas are likely to face longer travel times in order to access work. The average travel time for someone using public transport or walking in rural areas to access a centre of employment with 5,000 or more jobs is 55 minutes compared to 26 minutes in urban areas.

Labour did not refer to the provision of rural services or rural transport specifically in its manifesto. However, Labour has committed to reforming the way in which local bus services are run.[35] The manifesto said Labour would give local transport authorities new powers to franchise local bus services and would lift the ban on municipal ownership. It has said these changes would improve local transport networks and deliver better services for passengers.[36] During a question for short debate in the House of Lords on rural communities in November 2024, Baroness Hayman of Ullock, parliamentary under-secretary of state at Defra, said giving more power to local authorities would enable them to improve bus services, including in rural local authority areas.[37] Further information on the government’s transport proposals is provided in the House of Lords Library briefing ‘King’s Speech 2024: Transport’ (10 July 2024).

In November 2024, the Labour government also said it intended to reform the rural services delivery grant.[38] This grant was introduced to provide funding to supplement the additional costs for local authorities in delivering services in sparsely populated areas.[39] During the 2023/24 financial year, £95mn was provided to local authorities in England. Announcing the end of the grant, Minister of State for Local Government and English Devolution Jim McMahon described it as “outdated” and poorly targeted.[40] He said the funding would be “repurposed through improved methods to target funding toward areas with greater need and demand for services” during the 2025/26 period.

2.3 Housing

There is a shortage of affordable housing in both urban and rural areas of England. According to figures for affordability published by the UK government, there is little difference in the affordability of buying a house between rural and urban areas in England (excluding London).[41] For example, in 2024, the median price paid for a detached property in a predominantly rural area in England was 13.8 times higher than median earnings. In predominantly urban areas the median price was 13.6 times higher than median earnings. Rental prices were slightly cheaper in rural areas compared with urban areas.[42]

There is a significant council housing gap between rural and urban areas, however. Households on waiting lists for council housing were less likely to secure a dwelling in rural areas when compared with urban areas. In 2022/23, local authorities in predominantly rural areas were only able to meet 29% of the need for council housing.[43] In predominantly urban areas, local authorities were able to meet 59% of council housing needs.

The government has not set a target for increasing the number of houses built in rural areas specifically. However, the government has committed to building 1.5 million new homes over the next parliament.[44] On 12 December 2024, the government published its National Planning Policy Framework setting out its planning policies for England.[45] This included new mandatory housing targets for councils. The government also said the updated planning rules would establish a “new common-sense approach” to building on greenbelt land, including a requirement for councils to review their greenbelt boundaries in order to identify potential new land suitable for development.[46]

Further information on housing in rural areas is provided in the House of Lords Library briefing ‘Housing in rural and coastal communities’ (19 July 2023).

3. Recent developments

3.1 Changes in land use

One of the opportunities identified for new investment in rural areas is funding for nature recovery projects, woodland creation, renewable energy installations and other schemes intended to improve the natural environment.[47] The House of Lords Land Use in England Committee noted land use in England was in the process of moving away from being predominantly for food production towards other areas of activity including nature and biodiversity restoration as well as carbon sequestration.[48]

In 2018, the House of Lords Rural Economy Committee recommended that, in order to encourage growth in the rural economy in England, the government should introduce a strategy for how rural land is used in order to balance competing demand for land from development, agriculture, energy, recreation, conservation and other uses.[49] More recently, in 2023 the House of Lords Land Use in England Committee identified several factors preventing the best decisions being taken about how land should be used.[50] This included a lack of coordination between national, regional and local government regarding planning decisions. It recommended a commission should be established in order to develop a land use framework for England. It said this would help landowners, managers and other decision-makers to ensure land is used more appropriately.

In its response to the House of Lords Land Use in England Committee report in 2023, the Conservative government did not agree with the committee that a land use commission would be necessary.[51] However, it said it was committed to publishing a land use framework for England.[52] This land use framework was not published prior to the dissolution of Parliament for the 2024 general election.

The Labour Party has also committed to introducing a land-use framework for England.[53] This commitment was included in its manifesto for the 2024 general election. The manifesto did not set out what would be included in this framework. However, Labour said that its wider objective for rural areas was to preserve the UK’s food security and to “champion British farming whilst protecting the environment”.[54] In November 2024, Parliamentary Under-secretary of State at Defra Baroness Hayman of Ullock said the government was planning to publish a green paper on the land-use framework and this would be published for consultation in 2025.[55]

3.2 Government support for farmers and landowners

Following the departure of the UK from the EU, the system of direct payments established under the EU ‘Common agricultural policy’ (CAP) has been gradually replaced. The main new vehicle for providing financial support to farmers in England is the ‘Environmental land management’ (ELM) scheme. The Conservative government committed in 2020 to introduce this new system gradually over the course of seven years.[56] It also committed to maintaining the overall budget for farm support (referred to as the farming budget) at £2.4bn per year on average over the course of the 2019–24 parliament.[57]

The introduction of the ELM scheme has been welcomed by farmers and environmental groups, including the National Farmers’ Union (NFU) and the Wildlife Trusts.[58] However, the rollout of the scheme has been criticised for creating complexity and uncertainty amongst farmers and other land managers. For example, the House of Lords Land Use in England Committee concluded that uncertainty about how the ELM scheme would work had hampered its take-up.[59] On 18 January 2024, the statutory body that holds the government to account on environmental standards, the Office for Environmental Protection (OEP), published a report which concluded the uptake in the scheme by farmers had been too slow.[60] Further information on the introduction of the ELM scheme and commentary on how it has been rolled out is provided in the House of Lords Library briefing ‘Environmental land management: Recent changes to the sustainable farming incentive and countryside stewardship schemes’ (18 January 2024) and the House of Commons Library briefing ‘New approaches to farm funding in England’ (28 May 2024).

The Labour government has committed to retaining the ELM scheme as the principal means for providing support to farmers and other land owners in England.[61] In August 2024, Secretary of State for Environment, Food and Rural Affairs Steve Reed said the government intended to support growth in the rural economy through measures including:

Optimising ELM schemes so they produce the right outcomes for all farmers—including those who have been too often ignored such as small, grassland, upland and tenanted farms—while delivering food security and nature recovery in a just and equitable way.[62]

3.3 Measures announced in the 2024 budget

In the 2024 budget, the government said it would provide a total of £5bn to the farming budget over two years, of which £1.8bn would be provided for ELM schemes in 2025/26.[63] The government also said it would provide £60mn to support farmers affected by extreme wet weather through the farming recovery fund.[64]

In addition to these measures, the government announced it was introducing reforms to agricultural property relief and business property relief.[65] The government said these changes would result in the full 100% relief from inheritance tax being restricted to the first £1mn of combined agricultural and business property from April 2026. The government has argued that these changes are necessary to prevent wealthy landowners from using agricultural property relief as a means of avoiding inheritance tax.[66] However, these changes have been criticised by farming groups, including the NFU. The NFU has argued these changes would result in productive farms being broken up and sold off in order to pay inheritance tax. The change has also been criticised by both the Conservative Party and the Liberal Democrats.[67] Further information on the measures in the 2024 budget concerning farming and inheritance tax on agricultural land is provided in the House of Lords Library briefing ‘Budget 2024: Inheritance tax, family farms and food security’ (5 December 2024).

4. Read more

Cover image by Wheattree on Pixabay.

References

  1. Further information on the devolution settlement is provided in the House of Commons Library briefing ‘Introduction to devolution in the United Kingdom’, 21 May 2024. Return to text
  2. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England—Rural economic bulletin’, 15 October 2024, p 47. Return to text
  3. Scottish Government, ‘Rural Scotland data dashboard: Overview’, 21 December 2023, p 10. Return to text
  4. Office for National Statistics, ‘Regional gross value added (balanced) by industry: Local authorities by ITL1 region: TLL Wales’, 24 April 2024. The classification for rural areas in Wales is taken from the Statistics for Wales publication ‘A statistical focus on rural Wales: 2008 Edition’ (2008). Return to text
  5. Northern Ireland Department of Agriculture, Environment and Rural Affairs, ‘Key rural issues, Northern Ireland 2023’, 8 February 2024, p 18. Return to text
  6. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 7—Rural economic bulletin’, 15 October 2024, pp 50–1. Return to text
  7. As above, p 52. Return to text
  8. As above, pp 50–1. Return to text
  9. Scottish Government, ‘Rural Scotland data dashboard: Overview’, 21 December 2023, p 4. Return to text
  10. Department for Environment, Food and Rural Affairs, ‘Agricultural land use in England at 1 June 2024’, 26 September 2024. Return to text
  11. Department for Environment, Food and Rural Affairs, ‘Agricultural land use in UK at 1 June 2024’, 12 December 2024. Return to text
  12. Department for Environment, Food and Rural Affairs, ‘Agriculture in the United Kingdom 2022: Chapter 14: The food chain’, 20 February 2024. Return to text
  13. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 7—Rural economic bulletin’, 15 October 2024, p 54. Return to text
  14. As above. Return to text
  15. As above, p 56. Return to text
  16. As above, p 65. Return to text
  17. As above, p 48. Return to text
  18. As above. Return to text
  19. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 1—Population’, April 2024, p 14. Return to text
  20. As above; and Neil Ward and David L Brown, ‘Placing the rural in regional development’, Regional Studies, December 2009, vol 43 no 10, pp 1237–44. Return to text
  21. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 1—Population’, April 2024, p 10. Return to text
  22. As above, p 26. Return to text
  23. Campaign to Protect Rural England, ‘Outpriced and overlooked: Survey on why young people feel forced to leave rural areas’, October 2021. Return to text
  24. Virgin Media O2, ‘Countryside in crisis: Rural areas could lose over a third of residents in the next twelve months’, 31 July 2024. Return to text
  25. House of Lords Rural Economy Committee, ‘Time for a strategy for the rural economy’, 27 April 2019, HL Paper 330 of session 2017–19, pp 11–19. Return to text
  26. Rural Coalition, ‘Reigniting rural futures’, May 2024, p 13. The Rural Coalition comprises 11 organisations including Action with Communities in Rural England, the Campaign to Protect Rural England, the National Association of Local Councils and the National Farmers Union. The president of the Rural Coalition is the Bishop of St Albans. Return to text
  27. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 5—Connectivity and accessibility’, June 2024, p 13. Return to text
  28. Building Digital UK, ‘Project Gigabit’, 1 April 2022. Building Digital UK is a government agency sponsored by the Department for Science, Innovation and Technology. Return to text
  29. Labour Party, ‘Labour Party Manifesto 2024’, June 2024, p 65. Return to text
  30. HM Treasury, ‘Autumn budget 2024’, 30 October 2024, HC 295 of session 2024–25, p 65. Return to text
  31. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 5—Connectivity and accessibility’, June 2024, p 57. Return to text
  32. As above, p 56. Return to text
  33. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 5—Connectivity and accessibility: Supplementary data tables’, 18 June 2024, ‘Average minimum travel time (minutes) to reach the nearest key services, by mode of travel and rural-urban classification, England, 2019’. Return to text
  34. As above, ‘Household car availability, rural-urban classification, England, 2009/10–2021’. Return to text
  35. Labour Party, ‘Labour Party Manifesto 2024’, June 2024, p 34. Return to text
  36. Department for Transport, ‘Transport secretary sets the wheels in motion on “biggest overhaul to buses in a generation”’, 9 September 2024. Return to text
  37. HL Hansard, 26 November 2024, col 188. Return to text
  38. House of Commons, ‘Written statement: Local government finance (HCWS265)’, 28 November 2024. Return to text
  39. Local Government Inform, ‘Rural services delivery grant (actual) in England’, 1 July 2024. Return to text
  40. House of Commons, ‘Written statement: Local government finance (HCWS265)’, 28 November 2024. Return to text
  41. Department for Environment, Food and Rural Affairs, ‘Statistical digest of rural England: 2—Housing’, December 2024, p 10. This comparison is based on the ratio of median and lower quartile house prices and workplace-based earnings. Return to text
  42. As above. Return to text
  43. As above, p 30. Return to text
  44. Labour Party, ‘Labour Party Manifesto 2024’, June 2024, p 36; Prime Minister's Office, ‘Plan for Change: Milestones for mission-led government’, 5 December 2024, p 6. Return to text
  45. Ministry of Housing, Communities and Local Government, ‘National planning policy framework’, 12 December 2024. Return to text
  46. Ministry of Housing, Communities and Local Government, ‘Planning overhaul to reach 1.5 million new homes’, 12 December 2024. Return to text
  47. Parliamentary Office of Science and Technology, ‘Issues facing rural communities’, 21 November 2024. Return to text
  48. House of Lords Land Use in England Committee, ‘Making the most out of England’s land’ 13 July 2023, HL Paper 105 of session 2022–23. Return to text
  49. House of Lords Rural Economy Committee, ‘Time for a strategy for the rural economy’, 27 April 2019, HL Paper 330 of session 2017–19, pp 30–32. Return to text
  50. House of Lords Land Use in England Committee, ‘Making the most out of England’s land’ 13 July 2023, HL Paper 105 of session 2022–23, p 3. Return to text
  51. Department for Environment, Food and Rural Affairs, ‘Government response to the Land Use Committee report “Making the most out of England’s land”’, July 2023. Return to text
  52. As above. The Conservative government had previously committed to publish the land use framework in its ‘Government food strategy’ (3 June 2022). Return to text
  53. Labour Party, ‘Labour Party Manifesto 2024’, June 2024, p 59. Return to text
  54. As above. Further information on the proposals in Labour’s manifesto for the 2024 general election is provided in the House of Lords Library briefing, ‘King’s Speech 2024: Energy security, net zero, environment and agriculture’, 11 July 2024. Return to text
  55. HL Hansard, 26 November 2024, col 600. Return to text
  56. Department for Environment, Food and Rural Affairs, ‘The path to sustainable farming: An agricultural transition plan 2021 to 2024’, 30 November 2020. The seven-year time frame was established in section 4(3) of the Agriculture Act 2020. Return to text
  57. Department for Environment, Food and Rural Affairs, ‘Applications start for sustainable farming incentive 2023’, 18 September 2023. Return to text
  58. National Farmers’ Union, ‘Government food strategy—our response and analysis’, 15 June 2022; and Wildlife Trusts, ‘Environmental land management is too important to fail, but risks remain’, 28 October 2021. Return to text
  59. House of Lords Land Use in England Committee, ‘Making the most out of England’s land’, 13 December 2022, HL Paper 105 of session 2022–23, p 24. Return to text
  60. Office for Environmental Protection, ‘Progress in improving the natural environment in England 2022/2023’, 18 January 2024. Return to text
  61. Department for Environment, Food and Rural Affairs, ‘Government to restore stability for farmers as confidence amongst sector low’, 1 August 2024. Return to text
  62. As above. Return to text
  63. HM Treasury, ‘Autumn budget 2024’, 30 October 2024, HC 295 of session 2024–25, p 104; and House of Commons, ‘Written question: Agriculture: Subsidies (16711)’, 28 November 2024. Return to text
  64. HM Treasury, ‘Autumn budget 2024’, 30 October 2024, HC 295 of session 2024–25, p 104. Further information on the support for farmers affected by severe flooding is provided in the House of Lords Library briefing ‘Farming and flood prevention’, 4 October 2024. Return to text
  65. HM Treasury, ‘What are the changes to agricultural property relief?’, 5 November 2024. Return to text
  66. HC Hansard, 4 November 2024, col 23. Return to text
  67. BBC News, ‘Call to exempt “working farms” from inheritance tax’, 4 December 2024. Return to text