Business start-up rates are far slower in rural Scotland than in the country’s cities, according to a new analysis by the Federation of Small Businesses (FSB).

Between 2010 and 2017, the number of registered businesses in Scotland’s urban areas rose from 108,145 to 125,545 - an increase of 16 per cent.

Over the same period, enterprises in Scotland’s rural areas increased from 48,225 to 52,270 - a rise of 8%.

More people working in the city and big institutions like banks closing rural branches may have had an impact on growth, while better infrastructure and digital connectivity have been identified as central to helping boost growth in rural areas.

In a submission to the Scottish Government’s National Council of Rural Advisers,the FSB argues that boosting local firms and rural business start-up rates should be a key priority for ministers and the wider public sector.

Read more: Business investment hit as Brexit uncertainty weighs on Scotland 

Andrew McRae, FSB Scotland policy chair, said: “Since the start of this decade, we’ve seen the number of registered Scottish rural firms increase at about half the rate of our cities.

"This trend should give all of us pause for thought.

"From Stornoway to Stranraer, smaller businesses are at the heart of local communities and economies.

"Without a diverse mix of local businesses, driven by a healthy business start-up rate, rural areas will face sluggish growth and struggle to retain and attract working-age people.”

In its response, the FSB says rural Scottish small-to-medium sized businesses generate around £15 billion in turnover while sustaining more than two thirds of rural private sector jobs.

Mr McRae said: “In many parts of Scotland, smaller businesses are the local economy."

He added that "if we want to develop resilient local economies, then we need to focus on helping our smaller firms thrive".

Read more: Analysis: Brexit is a lamentable distraction in era of huge technological change

Mr McRae declared: "That means ensuring smaller businesses get a fair share of public contracts.

"It means asking our enterprise support agencies to think local first.”

Uncertainty surrounding Brexit is also important in a rural context and the FSB says that, "without access to a functioning roads network, for example, many firms would be unable to get their products to market [and] tourists would be unable to travel to their accommodation or visit iconic Scottish landmarks".

The FSB highlights figures from Audit Scotland which show that one third of Scotland’s local roads are in unacceptable condition.

It also points to figures from Ofcom showing that 31% of Scotland’s landmass continues to have no access to 4G services by any operator, while by comparison 3% of the landmass of England and Northern Ireland lacks 4G services from any operator.

Read more: Demand for change is in the air as The Herald launches new campaign

Mr McRae said: “By improving transport and digital infrastructure, our rural areas can become more attractive to business start-ups, as well as families and tourists.

"This should be a priority for Scottish policymakers in their pursuit of a more productive, innovative economy.”

Stuart Mackinnon, FSB Scotland external affairs manager, said a number of factors may have contributed to a slower rate of increase in the number of businesses in rural areas.

He said: “One important thing to highlight is that there are still more small businesses per head of population in rural areas than in urban areas, but the pace that they are growing at might reflect changing working and living habits.

“We might be more likely to live in the country but work in the city, and that might in turn be a consequence of big institutions consolidating their estates and having less presence beyond the cities.

"So for example we’ve seen the banks close many of their units outside the cities, and other public bodies do similar things, like closing police stations and local courts."

He added: "All of this has a compound impact, perhaps making it less attractive to start up in a rural area than perhaps it has been in the past."