Support for rural businesses

A debate on support for rural businesses will be led by Steff Aquarone MP for North Norfolk in Westminster Hall on 18 June 2025 at 2:30pm.

The rural economy

A summary of economic indicators for rural areas is provided below.

Businesses

In July 2024, 24% of businesses in the UK were in rural constituencies. 76% were in urban constituencies.

There are more businesses per person in rural constituencies than urban constituencies. In July 2024, there were 47 businesses per 1,000 people in rural constituencies. In urban constituencies, there were 39 businesses per 1,000 people.

Agriculture, forestry and fishing businesses made up 15% of all businesses in rural constituencies, compared to 2% in urban constituencies. Rural constituencies had a smaller proportion of businesses in the information and communication, professional services, and wholesale and retail sectors.

Economic output

The Department for Environment, Food and Rural Affairs (Defra) estimates that the value of economic output in rural areas of England was £240 billion in 2022, accounting for 12% of the total for England. This measure is based on gross value added (GVA), with Defra using data for very small areas together with a rural-urban classification system to compile the statistics.

The Scottish Government estimates that GVA in islands and remote and mainly rural areas of Scotland was £42 billion in 2022, 25% of overall Scottish GVA. The House of Lords Library estimates that GVA in rural areas of Wales was £21 billion in 2022, 28% of overall Welsh GVA. Equivalent GVA figures for Northern Ireland are not available but the Northern Ireland Department for Agriculture, Environment and Rural Affairs estimates that 28% of all business turnover in Northern Ireland was from businesses located in rural areas.

Employment

Defra estimates that in the second quarter of 2024 the proportion of people aged 16 to 64 in work – the employment rate – was 79% in rural areas, higher than the 74% in urban areas. This is based on where people live and not where they work. Employment rates have been consistently higher in rural areas since at least 2005 (when Defra data begins).

Tourism

According to figures published by Defra, there were 69,900 tourist businesses registered in rural areas in 2022/23, which was 12% of all businesses in rural areas. This compared to 13% of businesses in urban areas. In rural areas, 14% of jobs were in tourism related businesses, compared to 11% in urban areas.

Further information

Information on the rural economy is available from:

• Defra, Rural Economic Bulletin, April 2025
• Scottish Government, Trends in Rural Scotland: a working paper, January 2025
• Welsh Parliament Senedd Research, Rural communities: research briefing (PDF), July 2024
• Northern Ireland’s Department for Agriculture, Environment and Rural Affairs, Key rural issues, February 2025
• House of Lord’s Library In Focus briefing, The rural economy, December 2024

Government support for coastal communities

In May 2025, the government announced the creation of the Fishing and Coastal Growth Fund, worth £360 million over a 12-year period, saying funding will be used to modernise Britain’s fishing fleet, deliver new training and skills, and promote the seafood sector. Details on how this funding will be allocated have not yet been published.

Coastal areas have previously received various forms of targeted financial support in recognition of specific challenges that coastal areas face. These challenges include their location, higher deprivation levels, older populations, outward migration of young people, and the seasonal nature of the coastal economy.

The Coastal Communities Fund awarded £233 million between 2012 and 2019, and funded projects intended to “encouraged sustainable economic development of coastal communities by providing funding to create sustainable economic growth and jobs.”

The Coastal Revival Fund awarded £7.5 million in funding in England between 2015 and 2019, with funding intended to bring ‘at risk’ heritage and community assets back into economic use.

For further information on these schemes, see the Library publication Coastal Communities – this was published in advance of a parliamentary debate on the subject on 20 March 2025.

Challenges and government policy

Data from the Office for National Statistics shows businesses generally (not just rural) rank falling demand, taxation, competition and inflation as their most pressing concerns.

Research published in 2024 by the public-private research body the National Innovation Centre for Rural Enterprise additionally highlighted lack of adequate housing, transport links and broadband capacity as challenges for rural businesses.

This section looks at these challenges and others and signposts relevant briefings where available.

Transport

There are significant disparities in transport connectivity across the UK, with people living in rural areas of England tending to have lower overall access to key service locations compared with people living in urban areas. Public transport and parking are frequently raised as particular challenges.

Funding for rural local transport

In the June 2025 Spending Review, the government announced £2.3 billion for local transport improvements in England outside of the city regions. Allocations are set out by Local Transport Grant capital allocations.

Buses

The government’s Bus Services (No. 2) Bill [HL] includes a clause providing a definition of “socially necessary bus services”, and a requirement for enhanced partnerships between bus operators and local transport authorities to list all such socially necessary services. It also includes a requirement for enhanced partnerships to specify measures that would apply if an operator proposed cancelling or drastically changing such a service.

Further information is in the Library briefing Bus Services (No. 2) Bill [HL] 2024–25.

In the June 2025 Spending Review, the government said it would extend the £3 bus fare cap to March 2027.

Parking

The House of Lords Built Environment Committee’s report High streets in towns and small cities said that car access and available parking are still necessary to sustain many high streets, particularly in areas with poor public transport links. It recommended that car parking should be designed so that it makes most efficient use of the space available and is accessible to people with disabilities.

Skills

The National Innovation Centre for Rural Enterprise (NICRE) reported in February 2024 that rural businesses were particularly likely to be experiencing challenges due to labour shortages and skills gaps.

The government has established Skills England which it has said will work with employers, local government and other important stakeholders to assess regional skills needs, and put in place regional systems that will meet these needs. Local Skills Improvement Plans (LSIPs) will also be overseen by Skills England, and the government has said that in rural areas these plans “recognise the importance of developing skilled workforces and expertise in priority local industries that can support these areas' growth and sustainability”. Further information on Skills England and other developments in skills policy can be found in the Library briefing for the Institute for Apprenticeships and Technical Education (Transfer of Functions etc) Bill [HL].

Skills England noted in its September 2024 report Driving growth and widening opportunities that, in 2023, businesses in rural areas of the North East, South West and West Midlands were more likely to report difficulty in hiring and retaining suitably skilled workers than urban areas in these regions.

In November 2024, the UK Government published the Get Britain Working White Paper which contained various initiatives to support more people into work. One of the priorities of the white paper is to support people who are economically inactive with local support and provision. The government has said that it will allow local areas in England to shape the support it will offer, and all areas in England will be provided with the resource needed to produce local Get Britain Working plans. These will be developed by combined or local authorities. The plans will include an analysis of the levels of economic inactivity in that area, and the actions that will be taken to reduce it.

Digital connectivity

Statistics on rural broadband and mobile connectivity, including at constituency level, can be explored using Ofcom’s interactive Connected Nations reports.

The government has funding programmes to support the rollout of broadband and mobile connectivity to rural areas. Both were initiated under the Conservative Government:

• Project Gigabit is a £5 billion programme to subsidise the rollout of broadband. Its target is to reach 85% of UK premises by the end of 2025, and nationwide coverage (99%) by 2032. The nationwide target had been 2030, but the Spending Review 2025 pushed this back.

The government has said that it is exploring “alternative connectivity options” for the 1% of premises likely to be too expensive to reach under Project Gigabit.

• The Shared Rural Network is a £1 billion agreement between the UK Government and the mobile industry to extend 4G coverage to 95% of the UK’s landmass by the end of 2025. This target has been met.

There is currently no equivalent scheme for 5G. The government has an “ambition” for all populated areas, including rural communities, to have access to standalone 5G by 2030.

Further information can be found in the following Library briefings:

• Gigabit broadband in the UK: Government targets, policy, and funding (November 2024)
• Rural mobile coverage in the UK: Not-spots and partial not-spots (March 2024)
• 5G in the UK (March 2024)

Housing

People living in rural areas can face housing challenges, in particular a shortage of affordable housing. Second homes and holiday lets can exacerbate rural housing market pressures in some areas, especially in popular tourist locations.

The availability of affordable housing underpins the vitality and sustainability of rural communities. A shortage of affordable housing can manifest itself in a variety of ways, including: difficulties in recruiting and retaining employees and key workers; young people and families forced to move away from their local areas; overcrowding; long waiting lists for social housing; and homelessness.

CPRE, a charity which campaigns on rural issues, published a report in November 2023 which analysed the housing challenges in rural communities and made policy recommendations for change.

The Housing Minister, Matthew Pennycook, outlined the action the government is taking to deliver more affordable homes in rural areas in response to a written parliamentary question (PQ 25804, 10 February 2025). At the Spending Review 2025, the Chancellor announced £39 billion capital funding for a new 10-year Affordable Homes Programme. The devolved administrations have their own housing policies.

Taxation

Businesses in rural areas have raised concerns about two tax measures announced in the 2024 Autumn Budget:

• an increase in the rate of employer National Insurance contributions (NICs) which took effect from 6 April 2025; and,
• proposals to set a £1 million cap to the 100% relief that currently applies to the bequest of both business property and agricultural property, from April 2026.

Details on each of these issues are provided in two Library research briefings:

• National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-25, updated 13 March 2025
• Changes to agricultural and business property reliefs for inheritance tax, updated 29 May 2025

Business rates

In England, 100% rural rate relief is available to public houses or petrol stations if they are the only such business in a rural settlement, and have a rateable value of less than £12,500; and to sole shops, general stores or post offices with a rateable value of less than £8,500. For further information, see the Library research briefing Business rates: Reliefs and grants.

Agricultural land is exempt from business rates. This exemption applies to land that is used for agriculture. Property on farms that is used for non-agricultural purposes – for instance stabling, a farm shop, a holiday let, or storage facilities – does not qualify for this exemption. More information is available in section 8.6 of the Library research briefing Business rates.

Small business properties, with a rateable value of £51,000 or under, receive a business rates bill based on the small business multiplier rather than the standard multiplier. For 2025/26, these multipliers are 49.9p and 55.5p respectively. These are the tax rates: so, for instance, a property with a rateable value of £40,000 would receive a basic annual business rates bill of £40,000 * 49.9p, which equals £19,960.

Historically, these two multipliers were very close, within 1-2p of each other, but they have diverged since the early 2020s.

Farming

The Labour government is broadly continuing with the previous government’s approach to farm funding. This means paying farmers for public goods such as environmental or animal welfare improvements, rather than under the previous system, the EU’s Common Agricultural Policy (CAP) of paying farmers based on how much land they farmed. The CAP Basic Payments System (BPS) stopped in 2024, replaced by transitionary delinked payments, which are reducing and ending in 2027.

The main source of funding for farmers is now the Environmental Land Management scheme (ELM), which is gradually replacing BPS and other sources of funding for such as Higher Level Stewardship. The ELM scheme is made up of the Sustainable Farming Incentive (SFI), the Countryside Stewardship Higher Tier (CSHT) schemes and the larger scale Landscape Recovery .

The overall budget for farm support schemes was announced in the October 2024 budget as £5 billion over two years, including £2.4 billion for 2025/26, which ministers said meant the “highest ever funding” levels for farming. The government announced in the Spending Review on 11 June 2025 that it would be increasing support for nature-friendly farming through Environmental Land Management schemes (ELMs) from £800 million in 2023-24 to £2 billion by 2028-29. More broadly to DEFRA will have f £2.7bn funding a year for sustainable farming and nature’s recovery” until 20g28-29.

For further detail on the new approach to funding see the library Insight on New approaches to farm funding in England, published in 28 May 2024

Access to banking

Businesses which take cash rely on there being places where they can deposit takings. The availability of bank branches has declined in recent years, especially in rural areas. While Post Offices take cash, banks limit how much businesses can deposit at Post Offices.

In response to cash access issues, Parliament passed legislation in 2023 requiring banks to maintain the cash access network for both individuals and businesses. Detail on this and other efforts to protect the cash infrastructure are provided in the Library briefing Access to cash and banking services.

General support for businesses

Lack of finance presents a challenge to small businesses of all types, not just in rural locations, as examined by the Treasury Committee’s 2023 inquiry into SME finance.

To help SMEs access finance, the government facilitates a range of loan and equity investments from banks via the British Business Bank. More detail on this is available in chapters 4 to 6 of the Library briefing Support for small businesses.

For rural businesses specifically, the government’s Rural England Prosperity Fund provides funding for local authorities to support local businesses and community infrastructure.

The government also offers a range of non-financial support and advice for businesses detailed in the Library’s briefing on the Estimates Day debate on spending of the Department for Business and Trade (pages 20-22) and chapter 3 of the Library briefing Support for small businesses.

Further reading

The rural economy - House of Lords Library

Coastal Communities - House of Commons Library

Closure of high street services in rural areas - House of Commons Library

Employment of people living in rural and coastal communities - House of Commons Library

Rural communities: Issues and support - House of Lords Library