Britain's small business landscape sits in a position of uncertainty. Following a tough winter, there is some optimism in the air, but challenges remain. Interest rates continue to rise, while rising unemployment levels risk pushing the country into recession.

For rural businesses, this uncertainty is far more ingrained. The challenges they face are exacerbated by their location, whether due to poor transport links, labour shortages or comparatively less access to digital infrastructure – according to research from Xero and the British Chambers of Commerce (BCC). For any economic recovery to be equitable, more must be done to address this rural-urban divide.

Public transport putting the brakes on

A healthy business requires strong transport links to connect them to the wider supply chain, customers and a wider talent pool. But at the moment, the infrastructure in the UK is letting down swathes of the small business community, especially those in rural areas and retail parks.

According to our research with the BCC, three in five (64%) rural businesses are being let down by poor transport links. As a result, they are at risk of being isolated from their wider network, leaving them in a state of limbo.

For retail or hospitality businesses, this can reduce access to new customers and suppliers. In particular, the bus and tram network is seen as falling below expectations; more than three-quarters (79%) of rural small business owners don’t think they have sufficient access.

For those based in business, industrial, and retail parks, greater rail investment is needed. Half (51%) of small businesses based in these locations said they were unhappy with the rail provision. Rail infrastructure is key to allow workers access to jobs that may have otherwise been unviable.

Disparities in rail provision have a snowball effect far beyond business parks too; the broader small business population in the North of England (52%) and Midlands (51%) are disproportionately impacted. If poor infrastructure remains, these regions – and the small business networks within them – risk becoming economically stunted.

There is a strong need for a clear strategy and roadmap to improve public transport networks. Without greater physical connectivity for these businesses, we risk dampening our economic outlook by cutting off large parts of the nation from each other.

The labour gap for rural businesses

Local businesses not only require greater transport links to access more customers and suppliers, but talent too. Xero’s research found that two in three (64%) small businesses do not believe their local area has a high availability of appropriately skilled labour.

The job market is already highly competitive, with businesses fighting to secure talent. In May, the median wage cited in UK job adverts was 7.2 per cent higher than it was a year earlier. For rural businesses, many are struggling to compete in this wage war. And without hiring more employees, it is very difficult to achieve growth.

With the job market in urban areas far more saturated than rural areas, city-based talent could be incentivised to consider jobs in other regions. Better transport links are essential in achieving this, alongside the additional incentives, such as grants to those who relocate.

This issue is particularly important because reduced access to labour for rural business increases the divide. Especially in the case of digital skills, these businesses will continue to fall further behind their competitors in towns and cities if small businesses aren’t helped to fill vacancies.

Future proofing with technology

It is no surprise that rural areas are disproportionately affected by lack of digital infrastructure. Whether the rollout of 5G networks, or fibre-optic broadband, they tend to be last on the list to benefit from these technologies.

For small businesses in these areas, a lack of connectivity can hinder communication with customers, suppliers and other stakeholders. Our research showed that only 56% of small businesses in rural areas believe they have reliable access to broadband – compared to 82% of urban areas. This leaves rural communities at a significant disadvantage.

Poor connectivity can also deter potential employees, as it limits the option for hybrid working, which has become a staple expectation for many of today’s workforce. To stop rural business falling behind, an equitable rollout of fast internet is key.

The Government is already making some headway in alleviating this issue, with its Shared Rural Network’s 2025 target of 85 per cent 4G coverage across the UK. But more must be done to drive digital connectivity.

Closing the gap

The next few months will be crucial in shaping the UK’s economic performance, as growth prospects remain uncertain. Small businesses have a key role to play in the recovery, and the UK economy can’t afford to neglect a large proportion of them.

Far more must be done to boost infrastructure in rural areas and help these businesses to thrive. Whether that be transport, talent or putting digital building blocks in place, rural businesses need these levers to drive growth and remain competitive.

Jo Copestake, Director of Small Business at Xero