Potential implications for rural Scotland of the UK leaving the EU

Funding

Perhaps not surprisingly the loss of EU funding (some £5 billion between 2014-20) to Scotland is a major concern to communities and businesses alike. Rural Scotland benefits from a number of EU funds, with investments supporting a range of activities across the rural economy, society and environment in areas such as local development, social inclusion, skills, collaboration, advice, knowledge transfer, capital investment, business efficiencies, environmental protection, technology and research and innovation.

Structural Funds including the European Regional Development Fund ( ERDF) and European Social Funds ( ESF) provide £800m of funding to support the EU2020 Strategy to deliver smart, sustainable, inclusive growth.

The importance of Common Agricultural Policy ( CAP) funding to the Scottish agriculture sector must not be underestimated, with support payments in 2016 contributing over £490m of the £749m Total Income From Farming in Scotland. Reliance on financial support varies across farming sectors. In the Scottish dairy sector, CAP support payments made up 53 per cent of Farm Business Income ( FBI) in 2014-15; whereas for the non-specialist Less Favoured Area sheep sector, CAP support was 230 per cent of FBI. The importance of EU CAP Pillar 2 funding through the Scotland Rural Development Programme ( SRDP) was key in creating and safeguarding over 30,000 jobs as well as improving business efficiency, output, quality and competitiveness under the previous programme.

The European Maritime and Fisheries Fund ( EMFF) provides crucial support for fisheries, aquaculture, the processing sector supporting communities and jobs that depend on them.

The LEADER approach (currently funded from EMFF and SRDP) also plays a unique role in enabling local partnerships to foster innovation and invest in their local development priorities, including local economies. LEADER funding also fosters collaborative working between Scotland and others across the UK and EU.

European Territorial Cooperation ( ETC) Programmes are also crucial in meeting the specific needs of rural areas. Actions can include the promotion of resource efficiency and the shift towards a low carbon and climate resilient economy in the agriculture, food and forestry sectors, as well as restoring, preserving and enhancing ecosystems dependant on agriculture and forestry. The resilience of remote and rural communities to economic, environmental and social challenges like out migration, demographic change and reduced public service provision can also be addressed through ETC. Critically such programmes recognise that the challenges faced by nations and regions across Europe are shared ones, and that working collectively is essential to overcome these.

It is also worth highlighting that funds such as Horizon 2020 provide significant levels of funding for participation and collaboration in research and innovation projects by researchers, Small and Medium Enterprises ( SMEs) and Non Governmental Organisations ( NGOs) across the EU. The UK is a net beneficiary of H2020 funding, with Scotland benefitting most per head of population within the UK nations. Most H2020 funding is aimed at societal challenges, including issues important to rural areas and to sectors such as food & drink and agriculture. Scotland has secured significant funding from this pillar of H2020.

Whilst it is clear that EU funding has and continues to make a difference in many areas, some areas with challenging landscapes tend to still be found in the Northern/Western Isles, North West Highlands and Dumfries and Galloway with pockets found in for example former coalfield and heavy industrial areas of the Central belt, Fife, Ayrshire and Lanarkshire. There are two key issues in terms of accessibility remoteness (peripheral, insular, sparsely populated) and structural legacy (still needing to restructure their local economies). Such disparities suggests that regardless of the funding source there is an opportunity going forward to put in place a territorial policy and delivery framework (local and regional) that it is better targeted, better reflects the needs of rural Scotland and is better focused on outcomes. In terms of targeting resources, there is scope to learn from the application of the LEADER approach in Scotland for the 2014-20 programming period, which for the first time made funding allocations for Community Led Local Development.

Of course, loss of EU funding also presents Scotland with an opportunity to revise and simplify the rules and regulations governing the funding mechanisms, the application of which till now may well have hampered the achievement of the outcomes sought by the relevant funding programmes.

Post Brexit we should:

• Have a strong and adequately financed policy and delivery framework that supports the needs of Scotland's rural communities, businesses and environment with appropriate levels and types of funding support. Any future support proposals should be stress tested by sector and by region to fully consider implications to businesses and communities alike.

• Enhance and strengthen existing provision to support and promote collaboration and networking with the EU and other 3 ^rd Countries in order to support the development of bids/initiatives from Scottish organisations and partnerships.

• Provide clear direction for businesses so that they know what support they will get during the period of transition after leaving the EU and thereafter, ensuring they are given adequate time to adapt.

• Protect rural SMEs from volatility in prices as a result of exposure to world markets.