As we keep hearing from politicians of all sides, small to medium sized enterprises (SMEs) are the backbone of the Welsh economy.
However, this is even more the case within rural areas of Wales where the SME sector accounts for 73 per cent of all employment, as compared to 53 per cent for industrial Wales.
It is therefore crucial for the economy of rural Wales that the right support structure is put into place to help this sector survive and prosper and, given the current economic climate, create jobs and prosperity.
With the Welsh Government busily putting together the Rural Development Plan for Wales 2014-2020, it is critical that this strategy takes into account the specific difficulties faced by SMEs in rural Wales, which are usually associated with a lack of infrastructure, distance to main markets and poor access to external information, as well as restricted local industrial environments and lack of qualified staff.
Obviously, the basic problem for rural areas is their isolation from the main national and international markets. The relative lack of infrastructure within the rural regions of Wales may also be a problem, especially in terms of poorly developed transport and communication structures.
These issues may be exacerbated by the fact that many SMEs in rural Wales are often viewed largely as traditional enterprises with low rates of innovation and serving local markets although there are fabulous exemplars of innovation to be found in such companies such as Huit Denim in Cardigan, Gaia Technologies in Gwynedd, Dulas in Machynlleth and Mabey Bridge in Monmouthshire.
Of course, some may argue that if only large companies could be attracted to rural Wales, then this would help solve some of the economic problems within the area. However, much of the research on the economic development of rural locations suggest that such an approach would be largely misplaced, with multiplier effects within the local economy being low given that branch plants inserted into such regions rarely develop linkages into the local economy itself.
Instead, the focus of policymakers needs to be on encouraging a ‘ground up’ approach which involves the stimulation of local start-ups, the support and development of existing businesses, and the creation of local networks between different stakeholders in the economy, including firms, educational institutions, support agencies, and large organisations.
And rural Wales has the rare blessing of three universities – Bangor, Aberystwyth and the University of Wales Trinity St David’s - that are playing a vital role in stimulating the local economy. In fact, all should ask how they can continue to help to support the specific needs of local SMEs, especially in upskilling the management and technical competencies of staff within such firms.
On a wider scale, both the Welsh Government and local councils should examine how they can improve the local industrial environment so as to address the causes of low indigenous growth of firms in rural areas. As the competitiveness of firms often does not depend on location alone, SMEs must constantly develop their products, adopt new methods of production and gain access to new markets.
The problem is that many traditional firms in rural areas may lack the resources and expertise required to develop these initiatives and may require external advice and consultancy to help develop their potential. Therefore, it is crucial that such services are tailored to the specific needs of SMEs and entrepreneurs based within a particular locality and the primary aim of any rural development strategy directed at stimulating indigenous development should be one which focuses on improving the specific competitive strengths of local firms.
Therefore, with two Welsh city regions being created centred on Cardiff and Swansea and North East Wales linking into the greater economic region of North West England, it is critical that policymakers do not forget rural Wales. Fortunately, the development of the Rural Development Plan does create a major opportunity to create an innovative economic strategy for the whole of rural Wales that will address the actual needs of local businesses, strengthen the infrastructure needed to address those needs and help increase the competitiveness of SMEs within the region.
Indeed, if done properly, this could be a model for other rural areas within Europe and will demonstrate that an entrepreneurial and dynamic environment, supported by a strong and responsive ecosystem, can be created outside the urban and industrial areas of Wales.