Has the tide turned for Cornwall?

The Cornish flag of St Piran flutters more breezily these days. The remoteness that has enhanced the county's charm as a holiday destination is now no barrier to business in a wirefree world. A rising student population is adding to the buzz, and EU cash is helping. Dave Waller weighs up the prospects for this problematic region.

Last Updated: 09 Oct 2013

Summer is here. If the style pundits are to be believed, it's time to aim the soft-top down the A30 and gun it round the verdant headlands of Cornwall to Watergate Bay, where two golden miles of premium sand await. Rent a luxury pad, watch the surf from Jamie Oliver's Fifteen restaurant over a pan-fried brill, and scour the travel tips - from Rick Stein's Padstow empire to the Eden Project. Cornish tourism, written off as backward just a decade ago, is now in the media glare and it's sizzling.

But best keep your reading to the travel sections. When national news-gatherers make the long trip to the Duchy, the tales they bring back are often in grim taste: some idiot has nailed a pig's head to a Muslim community centre (June 2008); a gang of feral youths has tortured a man with learning difficulties and pushed him to his death from a viaduct (June 2007); and local extremists are threatening the Rick Stein and Jamie Oliver restaurants with homemade bombs (June 2007). In this curious intersection between rural poverty and urban blight, things suddenly seem a bit more Moss Side than seaside.

The reality for most in the county lies somewhere in the middle, but all would agree that the Cornish economy has long been in trouble, or what the locals call 'a right bleddy state'. Even a £350m injection of European Objective One regional funding in 2000 didn't kill the need for a second major hand-out last year. Cornwall's old industries are in their death throes, and 25% of its economy revolves around tourism.

This is a highly emotive issue. The funding is there to address deep-rooted deprivation, yet critics claim that instead of creating significant long-term wealth for all, it's being squandered on large, media-friendly projects pandering to rich 'emmets', as the vast swathes of incomers are known (it means 'ants' in Cornish). For many proud industrious Cornish folk, this is about as welcome as finding your pasty full of carrots.

But there's hope that things are changing. The Cornish business scene is out to prove that there's meat among the vegetables. Thanks to communications technology, a nascent Cornish university, and the general shift towards all things sustainable, there is a growing sense in the county of an economic future beyond surfing and scallops.

Businesses are certainly springing up in unlikely places. The unforgiving northern coastline outside St Agnes, for example, is a better suited to ramblers than entrepreneurs. But among hidden coves and narrow coastal roads lies Wheal Kitty, a group of disused mine engine-houses converted into business premises. When the county's inward investment body sought a poster image to promote the appeal of ditching the bustle of the city to set up shop within the sound of the surf, this was it.

Wheal Kitty is home to a clothing company called Finisterre, consisting of 'four dudes and a dog', which last month claimed the fashion prize at the Observer Ethical Business Awards. The six-year-old company is making waves as much for its method as for the stylish outdoor gear it produces - running its mail order through the tiny local post office, pioneering renewable and recyclable fibres, and pulling out of China to work with Colombian nuns. As an approach to business, it's certainly in keeping with the down-to-earth, independent nature of its home county.

'We had six or seven investors last year saying they loved the brand,' says Canadian marketing director Ernie Capbert, 'and that with £200k of their backing, we'd be millionaires. But they didn't get what we're doing. Cornwall allows us to escape the distractions and really get psycho about our vision.'

At Finisterre, such gung-ho eco talk is kicked around a lot. The group's hardcore idealism is contagious. But if you're chasing big bucks, you probably won't share Capbert's enthusiasm for living in a caravan. This really is a lifestyle choice. 'Business relationships seem more sincere here,' he says. 'But I took a huge pay cut to do this. No car in that car park cost more than £500.' Indeed, Capbert's father despaired at his decision to throw in a job at defence giant Lockheed Martin for an eco surf brand.

Finisterre is typical of the new breed of small Cornish firms. Thanks to the wonder of broadband, clusters of ICT firms, design agencies and brand consultancies are cropping up all over the county. Where better for a creative business than a seaside location that provides both inspirational surroundings and the space to think? It's a popular choice. Whereas Britain's creative industries are expanding at a rate of 6% a year, Cornwall's are growing twice as fast.

Over on the south coast, a drive through the sun-dappled woods outside Helston takes you to Gear Farm, home to organic baby clothes company Frugi. This is one of more than 10,000 companies to have benefited from an Objective One scheme called actnow, designed to improve broadband connectivity in the county.

Frugi now distributes to 28 countries, some as far-flung as South Korea. It was recently ranked number one for kids' clothes by Ethical Consumer magazine - which must have had the vanquished M&S, Mothercare and H&M chucking their toys out of the pram. Like Finisterre, Frugi's business would have been next to impossible to run from Cornwall without the benefit of broadband. 'When we were growing up here, Cornwall was a one-trick pony,' says founder Lucy Jewson, who runs the company with husband Kurt. 'Careers advice was, basically: get your HND in tourism. But there are some real world-class companies here now.'

Indeed, heavy-hitters exist alongside the ambitious kitchen-table start-ups: Seacore, for example, a pioneering offshore marine engineer; Worlds Apart, a toy company that owns the ReadyBed brand, worth $50m worldwide; Research Instruments, which exports high-spec IVF technology to 40 countries; and Watson-Marlow Bredel, the world's largest manufacturer of peristaltic pumps, employing 180 in Falmouth. Then there's the last resort of the service-station fridge, Ginsters. With 2,000 employees on the books, Ginsters is now Cornwall's largest private-sector employer, cranking out three million pasties a week.

There are also interesting developments in the field of sustainability. Cornwall is well placed to capitalise on the drive towards renewable technology, gathering speed following the Stern review into the economics of climate change. The area has the environment, and a rich history of engineering to match. Cornish minds made a vital contribution to the Industrial Revolution.

And the county's sense of invention hasn't withered. Having established the UK's first wind farm at Delabole, Cornwall will soon be at the forefront of wave technology with Wave Hub, a £25m wave-energy testing ground due to be installed in 2010. Over in St Austell, china clay giant Imerys has followed the example of the Eden Project and proposed its disused clay pits for the Government's eco-town project. Meanwhile, a host of green companies are springing up, from heat-pump manufacturers to eco consultancies.

Yet Cornwall's economic fortunes remain dangerously centred on tourism. Jobs in that sector are seasonal, and can be poorly paid. In the mid-90s, the average GDP per Cornish head was 65% that of the national average. Wages are improving, but locals are all too aware of the distortions. 'Poverty in Cornwall is wildly under-represented,' says Eden Project founder Tim Smit. 'The stats say the average wage here is £317 a week. But we can all say we know loads of people on £150.'

Cornwall is a classic example of a two-speed economy, where most locals toil away while a few rich incomers buy up all the half-decent properties, and local services start providing for their tastes and budgets, so the cost of living climbs out of reach of the average working family.

According to housing analyst Hometrack, Cornwall has the biggest housing affordability gap in the country, driven up by the rush for second homes. Penwith had the lowest male earnings in England in 2004 and now has a house price-to-income ratio higher than 8:1. In the Carrick district, covering Truro, Penryn and Falmouth, 56% of young working households are priced out of the local market. The average house price was £53,000 in 1996. It's now in line with the UK average, at £195,000.

'The housing market down here is ridiculous,' says Lucy Cokes, chief executive of Neutralize, an online search optimisation company that relocated to Cornwall in 2000 and employs 46. 'I find it quite distressing when we take on staff and they can't afford decent housing.'

Victorian seaside town Newquay these days resembles a 1980s Spanish resort, with building sites dominating roads once lined with modest hotels. Over at Carlyon Bay is a controversial £200m private-sector redevelopment, with more than 500 luxury seaside apartments. At least, once the developers overcome the planning issues.

'Everyone is aware of the economic deprivation level,' says Richard Clark, economics spokesman for Mebyon Kernow, the Cornish political party that seeks self-determination for the county. 'Then they spend big, building something that doesn't address our kind of deprivation. And the idea of selling a place like it's the British California is poppycock.'

Last summer, Jamie Oliver's Fifteen and Rick Stein's restaurant received bomb threats from a group calling itself the Cornish National Liberation Army. Its argument was that the media attention did more to build up their owners' egos than local fortunes. Some suspect the CNLA is simply one lone lunatic with an e-mail account and a chip on their shoulder ('atrocious idiots', according to Mebyon Kernow). But it reflects a real sense of resentment among some pockets of the population.

David Meneer, chief executive of Fifteen, pointed out that it is a charity designed to provide training to disadvantaged local youth. Oliver doesn't profit - he has simply lent his idea and name. 'Two years ago, this place was a beach hut and some surfers,' says Meneer, who grew up in the county's old industrial heartland of Redruth. 'There are now 99 people working at Fifteen, year-round. And with 81% of our ingredients sourced in the area, we're spending £750k a year on local suppliers.'

The Eden Project has roused similar debate. Eden claims it will have brought £1bn to the county by the end of the decade, spending £10m a year through local suppliers. Still, it has been derided as an overblown theme park.

The arguments are sure to rage on, but for now tourism remains Cornwall's strongest proposition. Meneer believes that failing to capitalise on Cornwall's appeal would be economic suicide. 'The county should wake up and see that tourism provides real jobs. With the best will in the world, we can't keep holding on to mining.'

Indeed, the wheels fell off Cornwall's traditional money-spinner a long time ago. At its peak in the 19th century, Cornwall boasted some 400 copper and tin mines. Meanwhile, vast deposits of kaolin were discovered around St Austell, and the town became a global force in the production of china clay, used in everything from porcelain and paper to cosmetics and toothpaste. At its peak in the 1980s, English China Clays was Cornwall's largest employer, with 5,000 on its payroll.

But as the global markets opened up, the china clay industry took a beating with the discovery of cheaper kaolin in the Amazon basin. ECC was bought by Imerys in 1999, and the French company soon started shedding jobs. Locals knew it by its anagram - Misery. Meanwhile, Cornish fishing was crippled by stifling quotas and soaring fuel costs. Cheaper tin from countries like Malaysia brought demand for the Cornish metal to a trickle. Its last working mine, South Crofty, closed in 1999.

'When South Crofty closed it was a psychological body blow,' says John Berry, managing director of investment body Cornwall Enterprise. 'It was very symbolic, it meant the loss of Cornwall's industrial past.'

Eden's Smit moved to Cornwall in 1987, when the mood was 'resignation to the average'. It affected not just the old industrial centres but the tourist spots too. 'At the time, the people were asking whether Cornwall was closed because no-one was visiting, or whether no-one was visiting because everything was closed. There was a huge lack of confidence.'

The recent hike in tin prices may see the reopening of South Crofty. A £50m plan is in place to get the mine operational again next year, creating 250 jobs. Good news, but it hardly provides a long-term or large-scale solution. Yet through the recent mix of private initiative and public funding, confidence has begun to return to the county. Arrive at the revamped Newquay airport, an hour's flight from London, and you'll see plenty of business suits and laptops among the sandals and surfboards.

Historically, the county has watched its young leave in droves - and welcomed hordes of retirees. Some 22% of its population are now pensioners. But thanks in part to the Combined University of Cornwall in Falmouth, a collaboration between local further and higher education bodies, the county is now registering a net inward migration across all age groups. 'One of the biggest problems was that bright young talents were having to leave the county for education and decent employment,' says Stephen Bohane, head of business development at the South West Regional Development Agency. 'There are now 10,000 people in higher education here, and that number is increasing.'

In a parallel project, Unlocking Cornish Potential provides subsidies to Cornish firms, bumping graduate starting salaries up to the national average of £17k. Formed in 2004, it has so far placed about 230 graduates, 80% of whom have stayed on beyond the subsidised first year.

Bohane is positive about the changes, but cautions that any achievements must be measured 'from a very low base'. Indeed, Cornwall qualified last year for £500m of Convergence funding because its productivity, measured in GVA, was still below 75% of the European average.

Critics see this as galling proof that Cornwall has squandered the £350m it originally received through Objective One. Mebyon Kernow, for example, opposes the administration of funds by 'non-Cornish quangos' (the South West RDA is based in Exeter, Devon). The low point came with the South West Film Studios project in St Agnes. Managing director Alex Swann was jailed for four-and-a-half years in 2007 for fraudulently obtaining £1.87m from Objective One.

Sadly for budding Cornish fraudsters, there will be none of that under Convergence funding. The money is going mainly into IT, transport and university infrastructure. 'We're keen to have business competing on a level playing-field,' says Cornwall Enterprise's Berry. 'But we need to invest in the infrastructure that supports this.'

He can say that again. Not only is Cornwall an isolated peninsula 300 miles from London, but it is served by First Great Western, named earlier this year as the UK's poorest-performing rail service. 'The infrastructure is appalling,' says Mebyon Kernow's Clark. 'It takes longer to get from Penzance to Plymouth than it does from London to Lille.'

It seems there is now a genuine intention to invest in long-term developments - in transport, technology and education and in providing better jobs with higher salaries. To the Cornish, any tangible change will come as a relief.

'There are two approaches to fixing Cornwall,' says Smit. 'There's the Luddite view of "why don't they all just bugger off?". That's not going to happen. Which leaves you with the other way, of creating better business here and driving up wages.'

If this can be done without destroying what so many consider Cornwall's 'unique voice', there should be few complaints.

Addressing the deprivation is a huge task. The crunch will come in 2013, when the European funding runs out. By then, Cornwall may well be a thriving tourist location that also offers its youth genuine alternatives to serving up sea bass in 'Padstein'. Better book your table now.

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