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Businesses need lasting support too, says new foot and mouth report

July 25, 2002

A new report urges politicians not to forget rural businesses as they consider the lessons learnt from the devastating foot and mouth crisis.

The study (1), by Newcastle University's Centre for Rural Economy, highlights that many small firms are still struggling from the effects of the 2001 foot and mouth disease (FMD) outbreak and will take several years to fully recover.

It recommends small businesses receive consistent and lasting support - both financial and advisory - from the Government and other agencies during this recovery period. It also says that future rural development initiatives should broader and less focused on the farming industry.

The Newcastle University researchers say that the three major probes into the foot and mouth crisis - the final report, by Scottish industrialist Dr Iain Anderson, was published this week - have largely been farm centred. But during FMD, total revenue losses in the wider rural economy far outstripped those inflicted on the farming sector.

For the report, the Newcastle University researchers surveyed 180 rural 'micro-businesses' in rural North East England (Northumberland, County Durham and the Tees Valley). in 2001, first in April and then in November. Micro-businesses are enterprises which employ less than 10 people, and make up 92% of firms in the North East countryside.

The results reveal how most small businesses in all sectors were sharply affected due to the interdependency of the rural economy, and the 'knock-on' effect from other businesses in crisis.   The worst impacts were concentrated in the more isolated parts of the region, such as Tynedale and the Wear Valley and Teesdale in County Durham.

Many business owners coped by taking out or renegotiating new loans, spending personal savings, laying off casual staff and cutting back in household spending, and other household members looked for jobs.

Some firms affected by FMD received financial and advisory help but still lost an average of £16,000 - or 17% of their revenue. While many firms, however, were starting to recover in November 2001, 8% of impacted firms had been forced to temporarily close or shut down altogether. About 40% were experiencing no signs of recovery.   

In November 2001, 18% of firms affected by FMD were still paying off additional debts and 40% said they would be looking to cut costs. And looking to the future, about 20% of firms thought it would take them between one and two years to fully recover - but 10% of businesses estimated it would take them several years.

The report makes various recommendations to enable businesses and the rural economy to fully recover. These include making available business advice specifically tailored to rural micro-businesses.   Many businesses did not seek advice during the crisis, and the research showed that many were sceptical about its value and found practical constraints in accessing it - the report says these problems need to be addressed.

It also asks that public authorities and banks remain sympathetic to the continuing financial difficulties that many businesses face, and that rural development plans consider the whole of the countryside, not just the farming industry.

Researcher Jeremy Phillipson said:

"Foot and mouth was a crisis for the rural economy but the main emphasis and debate has been around farming. The message is that the impact of foot and mouth extended far beyond agriculture.

"The need in the future is to think more about the interdependencies between different sectors of the rural economy.   Foot and mouth has not only demonstrated the diversity of the rural economy but also its vulnerability.

Mr Phillipson added: "The issue of business recovery remains an important consideration through 2002 and beyond. The legacy of FMD for many impacted businesses relates to additional debt, reduced reserves, disrupted trade and investment cycles and shelved plans for growth and investment."

The study was funded by the regional development agency, ONE North East, and forms part of a wider research initiative funded by the Economic and Social Research Council exploring the business, consumer and institutional response to FMD.

Newcastle upon Tyne, University of