Key points• Risingunemployment,shrinkingprofitsandplummetingconfidencehasthrowntheruraleconomytothebrinkofafurtherrecession.

• Agriculturalbusinessesarefaringworst.Theoptimismtheyhadin2012hasgone,duetobadweather,poorharvestsandtherisingpriceoflivestockfeed.TheIndex’smeasureofoptimismhasfallenby40%comparedwiththisquarterlastyear.Theirsaleshavefalleninthepastsixmonthsandtheynowexpectorders,salesandprofitstobelowerinthenext12months.Theyanticipateemployingfewerpeople.Alloftheeightindicatorsfellcomparedwith3Q2012.

• Non-agriculturalbusinessesarealsolessoptimisticalthoughtheystillexpecthigherprofitsinthenextyeardespitetheiractualsalesshrinkingoverthelastsixmonthsandthenumberofbusinessenquiriesfalling.Hopesforhigheremploymentalsofadedwithfewernon-agriculturalbusinessesexpectingtoemploymorepeopleinthenextyear.Alleightofourindicatorsfell.Thispointstoweakergrowthinastagnatingeconomy.

Market Intelligence Report

CLA / Smiths Gore Rural Economy IndexQ1 2013

Figures shown are net balances; an increase in net balance shows the proportion (or %) of businesses reporting a rise minus those reporting a fall.

36%

32%

5%

11%11%

25%

0%

6%3%

9%

26%

29%

9%

1%

-24%

-3%-3%

31%

26%

-1%

-14%

4%6%

18%

7%

-7%

11%11%

34%

10%

-9%

6%

9%

29%

11%10%

0%

-2%

-17%

15%

4%

9%

2%3%

12%

...youractualsalesoverthepast6

months

...businessenquiresoverthepast6

months

...yourprofitabilityoverthenext12

months

...youroptimismforyourbusinessoverthenext12months

...yourexpectedsalesinthenext12

months

...yourexpectedorderbookinthenext12months

...expectedinvestmentinthe

businessinthenext12months

...expectedemploymentinthebusinessinthenext

12months

-5%

-9%

-16%

-5%

-28%

9%

-12%

16%

-5%

-13%

10%

0%

-3%

9%

1%

-5%

-14%

9%

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Key pointshavebeen‘trafficlight’coloured,withfallingindicatorscolouredred,stableamberandrisinggreen

Actual business performance

Actualsalesdroppedsignificantlyforfarmingbusinesseswithmorefarmersreportingfallingratherthanrisingsales(netbalancedownto-5%from+5%).Theswitchhasbeenmoredramaticfornon-farmingbusinesseswhichhaveswitchedfrompositivetonegative,asanetbalanceof-9%ofnon-farmingbusinessesreportedhighersales.

Actual business enquiries

Enquirieshavedroppedforfarmingoverthepast12months(netbalancedownto-5%from+3%)andtheyfellsharplyfornon-farmingbusinesses(netbalancefallingto-16%from+29%).

What’s happened over the last six months

Actual sales over the past six monthsFiguresarenetbalances

Business enquiries over the past six months Figuresarenetbalances

36%

32%

5%

13Q1-5%

13Q1-9%

11% 11%

25%

0%

6%3%

13Q1-5%

13Q1-16%

9%

26%29%

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue) Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Projected business performance

TheIndexalsolooksforwardtohowbusinessesareexpectingtoperform.Thereisasignificantdifferenceintheexpectationsoftheagriculturalandnon-agriculturalsectors.Agriculturalbusinessescontinuetoexpectsalestobelowerinthenext12months,asthenetbalanceremainsnegative(-12%from-7%).Thegreateroptimismexpressedbythenon-agriculturalbusinessesisreflectedinexpectations

ofhighersales,althoughbyfewerbusinesses(+16%from+34%inQ3).

Thesetrendsfollowthroughintoexpectedorderbooks.Farmingbusinessescontinuetoexpectafallinordersinthenext12months(netbalancedownto-13%from-5%inQ3).Andthebalanceofnon-agriculturalbusinessesexpectgrowingorderbooks(netbalancedownto+10%from+29%inQ3).

The level of business confidence

Theperceptionofconfidenceoroptimismisagoodindicatoroftheshort-termoutlookforbusinesses.

Thefarmingsectorcontinuestohaveanegativeoutlook,withanetbalanceof-14%from-14%inQ2and+26%in2012Q1;thisispartlyduetothepoorharvestanddifficultconditionsforsowingnextyear’scrops,andrisingcostoflivestockfeed.

Aftertherisein2012Q3,optimisminnon-farmingbusinesseshasdroppedbacksignificantly,toanetbalanceof+9%from+44%inQ3.

What businesses expect over the next 12 months

Optimism for your business over the next 12 monthsFiguresarenetbalances

Expected sales in the next 12 months Figuresarenetbalances

Expected order bookin the next 12 monthsFiguresarenetbalances

-1%

13Q19%

4% 6%

44%

7%

-7%

11% 11%

-9%-5%

6%9%10%

13Q1-13%

13Q1-12%

18%

34%

13Q116%

29%

13Q110%

26%

-14%13Q1-14%

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Future Trends – Profitability, investment and employment

ProfitabilityIncreasingnumbersofagriculturalbusinessesnowexpectprofitabilitytobelowerinthenext12months,asthenetbalancebecomesmorenegative(-28%from-24%).Non-agriculturalbusinessescontinuetoexpecthigherprofits,althoughthe

netbalancehasfallento+9%from+31%.

InvestmentFarmingbusinessescontinuetoputinvestmentdecisionsonholdasthenetbalanceremainsbroadlyneutral,at-3%from+0%.Non-agriculturalbusinessescontinuetoexpecttoinvestmore,althoughthenetbalanceisdownto+9%from+15%inQ2.

EmploymentThesignsofoptimismintermsofemploymentwereportedin1Q2012arefading.Farmingbusinessesexpecttoemployfewerpeopleinthenext12months(netbalancefallingto-5%from+9%inQ3).Non-agriculturalbusinessescontinuetoexpecttoemploymorepeopleinthenext12monthsbutthenetbalancehasfallento+2%from+12%inQ3.

Expected profitability over the next 12 months Figuresarenetbalances

Expected investment in the business in the next 12 monthsFiguresarenetbalances

9%

1%

-24%13Q-28%

13Q9%

-3%-3%

31%

11% 10%

0%

-2%

-17%

15%13Q19%

13Q1-3%

Expected employment in the business in the next 12 monthsFiguresarenetbalances 4%

1%

9%

2%3%

12%

13Q12%

13Q1-5%

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Agriculturalbusiness(green)

Q1 Q2 Q3 13Q1 Q1 Q2 Q3 13Q1

Non-agriculturalbusiness(blue)

Taking part in the Index

Anybusinesslocatedinaruralareacantakepart.Ittakeslessthan2minutesatyourcomputerandcostsnothing;inreturn,youwillbesentandcanusetheresultstosupportyourbusinessorsector.WeonlyaskthattheresultsarereferredtoastheCLA/SmithsGoreRuralEconomyIndex.Somakeacupoftea,clickon https://www.surveymonkey.com/s/cla_smithsgore_rural_economy_index_2Q2013 andtakepart!

TheCountryLandandBusinessAssociationandSmithsGorehavedevelopedtheRuralEconomyIndex(REI)toprovideaquarterlyinsightintothebusinessenvironmentoftheruraleconomy.

Asampleofagriculturalandnon-agriculturalbusinessesfromallregionsinEnglandandWalesaresurveyed.Thenon-agriculturalbusinessesinclude:

Agriculturalandnon-agriculturalbusinessesareanalysedseparatelyasthesectorshavedifferentdrivers.Thebusinesseswereaskedquestionsabout…

...youractualsalesoverthepast6months

...businessenquiriesoverthepast6months

...yourprofitabilityoverthenext12months

...youroptimismforyourbusinessoverthenext12months

...yourexpectedsalesinthenext12months

...yourexpectedorderbookinthenext12months

...yourexpectedinvestmentinthebusinessinthenext12months

...expectedemploymentinthebusinessinthenext12months

For more information contact:

Dr Jason Beedell Head of Researcht.01733866562e.jason.beedell@smithsgore.co.uk

Rupert ClarkHead of Management Divisiont.01798345980e.rupert.clark@smithsgore.co.uk

Charles Trotmant.02072350511e.charles.trotman@cla.org.uk

Mining,quarrying,renewableenergyorwastemanagement

Hotels,accommodation,restaurantsorfoodservice

Publicsectoradministration,educationorhealth

Manufacturing Transport,storageorcommunications

Otherservices(sports,arts,entertainment,recreation)

Construction Financialservicesorproperty

Other

Interpreting net balances

Aswellasshowingpercentagesofbusinessesreportinghigherorlowersales,theREIusesnetbalancestoshowthedirectionandscaleofchangeinindicators.Netbalanceshowstheproportionofbusinessesreportingariseinactualsales(oroptimismorinvestmentetc)minusthosereportingafall.Forexample,+26%ofagriculturalbusinessesreportedhighersalesand-21%lower,sothenetbalanceis+5%.Thiscanthenbecomparedwithpreviousquarters.

About the Rural Economy Index