Page last updated at 12:01 GMT, Thursday, 3 December 2009

Focus on rural economy and banks

Sheep in snow at Capel Curig, Snowdonia
Agriculture is 'fairing well', but the construction industry is feeling the pinch, says the report on rural Welsh economies

The ninth all-Wales economic summit is getting under way, examining how the recession has hit rural communities and whether banks are now lending again.

A report prepared for the summit suggests that rural Wales has been hit just as hard as urban areas, especially in housing and construction.

The study being presented in Aberystwyth says businesses have also been hit by cash-flow problems.

The summits are part of the assembly government's response to the recession.

The report by the Wales Rural Observatory took evidence from 37 organisations and agencies in both the private and public sector.

Money (generic)
Lending issue 'hindering hopes of a recovery'

On rural business, the authors stated: "It was clear from interviews that in several key sectors, including retail, distribution and tourism, these businesses were facing significant challenges from the downturn in the economy.

"Cash-flow problems, indebtedness of mortgages and home repossessions were among the key challenges facing small businesses in rural Wales."

It said the construction industry in particular had felt the pinch, which employs almost 10% of the rural workforce in Wales.

The market for development land "had collapsed", said the study, with reports of property companies pulling out of land deals.

However, with the exception of the dairy sector, the report believed that the agricultural industry had "faired better" than others.

As the summit got underway on Thursday, the Deputy First Minister, Ieuan Wyn Jones announced £7m of funding for information technology training in rural areas.

The project aims to train almost 4,000 individuals and support over 2,500 small rural enterprises.

"This important project is designed to ensure enterprises across the rural economy are able to fully benefit from the opportunities presented by ICT," said Mr Jones.

Credit crisis

But the issue of bank lending is also under the spotlight at the summit, amid concerns that small businesses are still struggling to access lines of credit.

"They are lending to small businesses - but at a price," Kent Matthews, the Julian Hodge professor of banking at Cardiff University, told BBC Wales.

"Banks are in the business of taking risks, so consequentially they will charge different interest rates to different customers.

"Some customers will be riskier than others. I don't think it is for us to tell them how they price their products."

Gwyn Evans, chair of the Federation of Small Businesses in north Wales, added: "We're hearing mixed rumours from members in north Wales, some say they are getting loans, at a price, others are not getting it.

"I think what we want in this country is more competition within the banking sector.

"We need to have more banking businesses in the UK to give small businesses a better opportunity to borrow money at a realistic price."



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