Fergus Ewing on the future of Scotland's rural economy

Our rural areas are some of the most scenic in the country – from green farmland to small fishing villages or remote crofting communities, many have a unique way and pace of life.

To ensure those communities continue to thrive, we need to sustainably grow the rural economy, for those living and working there, and for the continued benefit of the rest of Scotland.

Rural Scotland is home to almost a fifth of our population, covers 98 per cent of Scotland’s land mass, and has undoubtedly significant potential for future economic growth. Three of Scotland’s key growth sectors – food and drink, energy and tourism – are reliant on Scotland’s natural resources.

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However, rural Scotland’s economic strengths – the importance of farming, fishing and forestry, for example – also diverge from the overall economy. That is why my priority remains to encourage and foster investment, such as the £450m investment we secured with Liberty House in Lochaber.

This investment safeguards 170 jobs and has the potential to create an additional 1,000 direct and 1,000 indirect posts in the supply chain and is predicted to add around £1bn to the local economy over the next decade.

But all our efforts to boost rural Scotland could be in jeopardy thanks to a situation not of our making.

Stakeholders have made clear to me that the uncertainty created by Brexit is already doing damage across rural Scotland. That is why we put forward genuine compromise proposals in ‘Scotland’s Place in Europe’ that were designed to square the circle of Scotland’s overwhelming vote to remain and the UK as a whole vote to leave.

Despite the UK Government rejecting these proposals, let me make it absolutely clear that our view remains that Scotland’s interests are best served by remaining within the EU and the single market. And I will do everything in my power to protect rural Scotland’s interests in the Brexit process.

I continue to press the UK Government on key areas for rural Scotland covering trade, labour, funding and powers. Unfortunately, they have been either unable or unwilling to provide satisfactory answers.

On trade, we have made clear that access to the single market is essential for our agriculture, food and aquaculture sectors. No one wants to see prime Scottish salmon, or other fresh produce for that matter, stuck in a lorry in a queue waiting for customs clearance.

It is also imperative that future trade arrangements do not undermine our environment and animal welfare standards, which underpin the reputation of Scottish products.

On labour, it is vital that our sectors retain the ability to recruit staff from across the EU. Around 8,000 people are employed in the food and drink sector, which grew by a record £5.5bn in 2016. A further 15,000 non-UK seasonal workers are employed in our soft fruit and vegetable sectors.

Rural areas are among the most heavily affected by Brexit, with CAP funding clearly a significant issue. Between 2014-20 Scotland will receive around €4.6bn from the EU across the two CAP pillars.

However, CAP is not the only funding stream at risk – rural businesses and initiatives will also lose vital funding from the EU’s Maritime and Fisheries Fund, the structural funds and EU research programmes. Yet the UK Government is extremely short on details surrounding future funding arrangements, leaving more questions than answers.

On powers, agriculture, fisheries, forestry and the environment are at the heart of the devolved agreement and we are clear that they must be returned to Scotland.

As the First Minister has set out, no one is suggesting we cut ourselves off from collaboration. But this must be done on the basis of these being devolved areas of responsibility. It is up to the devolved administrations to decide whether to take part in any UK-wide approach. Imposition from Westminster must not be allowed to occur and I will work tirelessly to make sure this does not happen.

Likewise, I continue to work to deliver farm payments by the end of the payment period. We always knew 2016 would be a difficult year and that is why I took the decision to offer farmers loan schemes to ensure money flowed into our rural communities.

Since November, we have paid out 80 per cent of farmers and crofters’ anticipated full basic and greening payment in the form of national loans to 13,279 farmers and crofters, with a total value of £275m, and   paid an additional 10 per cent of basic and greening payment entitlement to 9,903 farmers and crofters. We have also issued 2016 LFASS loans to over 8,000 farmers and crofters, worth approximately £49m in total, which in most cases represents 90 per cent of their anticipated full LFASS payment.

Business is the lifeblood in many of our rural areas, even the more remote ones. Thirty per cent of Scotland’s registered businesses operate in rural Scotland, generating £37.6bn turnover – 14 per cent of Scotland’s private sector turnover.  Our rural SMEs are key, accounting for a larger share of private sector employment in rural areas, compared to urban areas. In our remote rural areas, the role of SMEs in supporting the local economy is even more critical, accounting for 79 per cent of private sector employment.

I continue to hold a series of summits with key rural business sectors and interests to understand their needs, challenges and their ideas for delivering sustainable growth, jobs and opportunities, which will help guide our approach to increasing profitability, boosting innovation, production and sustainability across our rural communities.

The food and drink industry is one of Scotland’s real success stories and is going from strength to strength. We are lucky enough to have a fantastic natural larder, as well as the skills and expertise to create a first-class product which is renowned around the world. The sector is now the single biggest contributor to the Scottish economy, generating annual turnover of £14.4bn and with exports up 57 per cent since 2007. Since then we have provided £66m grant support to 217 projects, securing 10,500 jobs and £340m of private sector investment through the Food Processing Marketing and Co-operation Scheme.

With almost 50 per cent of food and drink supplied into the public sector being locally sourced – up from 34 per cent in 2008 – I am pleased that Scottish-based suppliers now make up over 75 per cent of the public sector’s supplier base. We have also created more than 374,700 individual opportunities for pupils to learn and 9,890 for teachers to be trained through food education projects.

The growth in food manufacturing has also risen at twice the rate of the UK average and I am working to ensure that this trajectory continues.

It is also important that we ensure that the right infrastructure is in place to support the rural economy. Annually, we provide over £1bn for public transport and other sustainable options. The National Transport Strategy Review was launched last year to look at how we want to prioritise multi-billion investments over the coming years.  This is over and above existing ambitious plans to dual the A9 and A96, at a combined cost of £6bn, part of the largest transport investment programme that Scotland has ever seen.

Improved connectivity has the potential to transform the productivity of rural communities, enhancing the lives of everyone who lives and works there. Our superfast broadband deployment programme is ahead of schedule and we are committed to delivering 100 per cent superfast broadband coverage by 2021. Without our investment, only 66 per cent of premises would have been reached, with as little as 21 per cent across the Highlands and 39 per cent in the Scottish Borders.

Scotland’s rural economy is also home to some outstanding natural assets. It is essential that we draw upon, protect and improve our natural capital – its continuing health and improvement is vital to sustainable inclusive economic growth. Our seas are a rich and valuable resource – whether fishing or aquaculture – worth £500m and provides jobs and supporting services in some of our most remote and rural communities. Our forestry industry contributes £1bn a year to the economy, supporting 25,000 jobs.

Developing and managing these resources well is vital to supporting a vibrant and strong rural economy. Currently Scotland’s natural environment is worth more than £20bn per annum and supports more than 60,000 direct jobs. Unlocking future opportunities will help provide jobs and sustain services across rural Scotland, and I am determined to build on our rural economy’s success.