Labour shortages and skills gaps are major challenges for rural businesses which are hindering their performance and growth potential, according to a major new survey from the National Innovation Centre for Rural Enterprise (NICRE).

More than half of rural businesses in the North East, South West and West Midlands find it difficult to recruit or retain suitably-skilled staff with almost nine out of 10 of these firms citing a limited local pool of suitable labour, with low wage levels and a lack of suitable opportunities for apprenticeships or training also featuring highly.

Long-standing issues in rural areas exacerbate the situation with almost 40% of rural businesses experiencing staffing issues highlighting a lack of affordable housing and poor public transport for employees, both far less of a concern for urban firms.

As a result of these difficulties, a high proportion of rural firms report losing business or orders, having challenges meeting existing demand, and needing to outsource work, while 30% delay or withdraw from offering certain products or services altogether.

Alongside this, gaps in skills exist with the most prominent relating to technical expertise in the business.

NICRE’s State of Rural Enterprise Report Labour and skills availability: impacts on rural enterprise calls for a more integrated, collaborative approach to address common challenges and support skills development, and greater awareness of the knock-on economic impacts of inadequate infrastructure in rural areas.

Dr Barbara Tocco, Senior Research Associate and NICRE Centre Manager, based at Newcastle University’s Centre for Rural Economy, said:

“Our findings highlighting that skills and labour availability are major challenges for rural businesses and are affecting current productivity and future growth is particularly concerning for the UK economy.

“Given the geography of rural areas and the limited pool of suitable labour locally, opportunities for skills improvement policies should concentrate efforts on facilitating collaborative action by sector and/or locality.

“As we approach a general election, attention must continue to be paid to tackling the deep-rooted infrastructure challenges that exist in rural areas which not only impact skills and staffing but, as our survey has shown, other areas of business growth and innovation.”

NICRE’s evidence found that rural firms use a variety of strategies to overcome labour shortages and skills gaps. Of those facing constraints, a fifth deploy targeted marketing or advertising and around one in 10 collaborate with other businesses/organisations on recruitment or apprenticeships.

Very few businesses report tapping into wider national/international labour pools, or recruiting people to work remotely. The latter is despite a third of rural businesses with recruitment or retention challenges citing some difficulties due to the shift to remote working post-pandemic which enables rural residents to work for large city-based firms.

Dr Tocco added:

“Our research sheds light on the need for enhanced support for long-term strategies that can better address rural labour market needs, including opportunities and access to funds for skills improvement and training provision.

“It will be important for Local Skills Improvement Plans developed for all areas of England in 2023 to steadily address these issues through their current activities and future proposals.”

Read more to access the report and infographic and find out how Otter Handmade, in Northumberland, has devised its own innovative solution to skills and labour challenges.

This report is the fourth to be published from NICRE’s survey of rural businesses and follows The rural economy post-pandemic: opportunities and barriers for business growth, Rural SMEs and the environment and The cost-of-doing-business crisis: rural impacts and adaptation.

The Department for Environment, Food and Rural Affairs and Department for Education have responded to the report, which has been welcomed by the British Chambers of Commerce.