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SP Paper 485 Volume 2

EE/S3/10/R8

8th Report, 2010 (Session 3)

Report on the public sector's support for exporters, international trade and
the attraction of inward investment

Volume 1 – Main Report

Remit and membership

Remit:

To consider and report on the Scottish economy, enterprise, energy, tourism and all other matters falling within the responsibility of the Cabinet Secretary for Finance and Sustainable Growth apart from those covered by the remits of the Transport, Infrastructure and Climate Change and the Local Government and Communities Committees.

Membership:

Ms Wendy Alexander
Gavin Brown
Rob Gibson (Deputy Convener)
Christopher Harvie
Marilyn Livingstone
Lewis Macdonald
Stuart McMillan
Iain Smith (Convener)

Committee Clerking Team:

Clerk to the Committee
Stephen Imrie

Senior Assistant Clerk
Joanna Hardy

Assistant Clerk
Diane Barr

Report on the public sector's support for exporters, international trade and
the attraction of inward investment

The Committee reports to the Parliament as follows—

Background to this inquiry

1. In November 2007, in one of the very first policy documents issued by the new administration, the First Minister stated that the Purpose of the Scottish Government is to create a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.1 The Scottish Government’s immediate growth target is to raise Scotland’s gross domestic product (GDP) growth rate to the UK level by 2011. The longer-term target is to match the GDP growth rate of small, independent EU countries by 20172.

2. Since the end of 2007, the Scottish economy along with many others worldwide has been badly affected by the crisis caused in the banking sector. According to the Scottish Government, the Scottish economy fell into recession in the middle of 2008.3 The most recent figures available for GDP – for the first quarter of 2010 – showed that whilst the Scottish economy has moved out of recession, growth is still sluggish.4

3. The Committee is aware of the analysis that over the last decade, the Scottish economy has become more service-orientated and more reliant on domestic demand. Nonetheless, we are equally aware that exports, international trade and the attraction of inward investment are all important to the growth of our economy, and that we have many examples of success stories in those areas.

4. The Committee believes that if the Scottish economy is to recover and to do so as quickly as possible, then an increased focus on international trade, both inward and outward, will be necessary. It is for this reason that the Committee launched this inquiry which sought to review the current approach within the public sector in Scotland of supporting businesses and other organisations to export their goods and services and to expand their operations internationally, such as through mergers and acquisitions, joint ventures, licensing arrangements etc. The Committee was also keen to look at how Scotland attracts appropriate types of inward investment.

5. Furthermore, in the current climate of sustained pressure on public sector budgets, the Committee believed it was essential to review how the Scottish Government and its key agencies use the increasingly scarce resources that are available in their support for international trade and inward investment. The Committee was looking for assurances that the money was being spent on precisely the right kind of services needed by private companies and was being targeted where ‘market failure’ was clear and where the public sector’s support could make the most impact. The Committee was also keen to know whether the public sector was not crowding out or duplicating the services provided by others to Scottish businesses.

Remit and terms of reference

6. The inquiry investigated the current strategy and policy in the public sector in Scotland and the allocation of resources to help Scottish businesses internationalise their activities. The inquiry also looked at how these policies are co-ordinated within Scotland and with other trade promotion bodies at a UK level.

7. The inquiry asked these key questions:

  • What is the economic rationale for trade development and promotion in Scotland and what have been the trends in international trade and inward investment?
  • Are the current strategy, policy and type of public sector support programme the right ones for businesses? Is the support right in terms of the changed economic circumstances, particularly for key sectors such as manufacturing?
  • Specifically in relation to Scottish Development International (SDI) – the leading public sector body for trade promotion - how does the international account management system operate? Who gets access to it? What services does SDI offer to support Scottish companies that are not account-managed? How many companies are supported and to do what? How is the return on investment of the public sector presence in overseas markets measured?
  • What type of support would businesses and other organisations like to see being supplied and who should supply it?
  • Do we have the correct balance between attracting a diverse range of inward investment and supporting exporters and international trade?
  • Should we prioritise where we target the public sector’s resources and intervention in terms of specific sectors of the economy or country, or on specific types of company (i.e. those more interested in exporting and trade or those already active in that regard), or on opportunities of a particular scale etc?
  • Do we have the right amount of co-operation and a joined up approach within the public sector in Scotland, between the public sector and bodies running trade programmes at a UK level? How well does the public sector facilitate business-to-business mentoring? What does the GlobalScot network deliver and can it be used more effectively in order to maximise its potential?
  • Are sufficient resources being made available for trade promotion and do the various public sector support organisations have the necessary skills and expertise to best support Scottish companies to internationalise and to attract inward investment in a very competitive market?
  • Are there any lessons we can learn from the approaches taken by other countries in their trade promotion?
  • Do we have in place the necessary data collection system that is needed to provide policy-makers with a detailed understanding at a Scottish level of our export, international trade and inward investment performances? What is the Scottish Government’s Global Connections Survey used for and are there opportunities to distribute evidence from this survey more widely and more meaningfully?

Evidence received

8. This inquiry started in March 2010 and has lasted 6 months. The Committee received over 40 written submissions in response to its call for evidence. During the inquiry, the Committee also heard evidence from the following witnesses:

Iain McTaggart, Scottish Council for Development and Industry

Paul Docherty, British Council Scotland

David Lonsdale, CBI

Alasdair Kerr, Scottish Chambers International

Boyd Tunnock, Thomas Tunnock Ltd

Giles Blackburn and Wendy Liu, China-Britain Business Council

Robyn M. Murray, Honorary Consul-General to Mongolia

Kenneth H, Stewart, Consular Attaché to Mongolia

Wolfgang Moessinger, Consulate General of the Federal Republic of Germany

Peter Horvath, Economic Investment and Trade Commissioner, Hungarian Embassy

Cameron Buchanan, Consul for Iceland

Reto Renggli, Consul General of Switzerland

Dr Alison Hiley, Confluence Scotland

Prof Pete Downes, Universities Scotland

Carol Booth, SCI/International

John McGlynn, Airlink Group of Companies

Ken Richardson, Chemical Industries Association

Ray Mountford, INEOS

Peter Hodgson, Dow Chemicals

Scott Johnstone, BioIndustry Association Scotland

Dr Deborah O’Neil, NovaBiotics Ltd

Gordon Hay, Bio-Rad Laboratories

Andrew Edwards, Silberline

Duncan Skinner, PSN

Jim Milne, The Balmoral Group

Gillian Black, OPITO

Paul Grant, Mackays Ltd

Charlie Devin, Lossie Seafoods Ltd

Rupert Soames, Aggreko Ltd

Susan Haird, UK Trade & Investment

David Smith, Scottish Development International

Frank Boyland, Scottish Development International

Mike Cantlay, VisitScotland

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth

Visits

9. In addition to the formal evidence considered during our Committee meetings in Edinburgh, the Committee visited Aberdeen to hear from representatives of the oil and gas services and food and drinks industries, and to visit OPITO - the oil and gas training company. Additionally, a delegation from the Committee visited Wales to meet with its then trade and investment agency and with local business representatives. Similar visits were made to Bristol, Barcelona, Brussels and North-Rhine Westphalia.

10. The Committee is grateful for the assistance given by the Scottish Council for Development and Industry, Aberdeen City Council, OPITO, International Business Wales, CBI Wales, the clerks at the National Assembly for Wales, the South West Regional Development Agency and representatives of Scottish Development International in Düsseldorf, the European Commission and Flanders Investment and Trade in Brussels and the Generalitat de Catalunya in London for help with the organisation of these visits and for the time they gave when we met. We are also grateful to all of those organisations that gave evidence to the Committee whether in person or in writing.

international trade and inward investment – an overview

Global trends

11. The financial crisis experienced in the economies of many countries around the world has led to a drop in worldwide demand and trade volumes, particularly during 2008 and 2009. However, world trade growth is now recovering – led in part by strong trade volumes in Asia. In other parts of the world, notably the USA and parts of the EU, the situation has improved but it is by no means uniform and fears of a ‘double dip’ recession are still high.

12. According to the Organisation for Economic Co-operation and Development (OECD), the latest update on lead indicators such as export orders and air freight shipments suggest that trade growth will strengthen in the near term. Its most recent projections (published in May 2010) indicate that real GDP growth in countries belonging to the OECD is expected to rise very slightly from 2.7% in 2010 to 2.8% in 2011.5 The figures for annual percentage change in worldwide trade are set out in Figure 1 below.

Figure 1: Annual percentage change in worldwide trade

Source: SPICe

13. Figure 2 below, sets out the trend data in more detail, highlighting that, at a global level, world trade volume growth is improving from the slump seen in 2009 and that export orders are improving too.

Figure 2: World trade volume growth and export orders

Source: OECD, Main Economic Indicator Database

14. At this stage of the economic recovery, the relatively favourable exchange rates (particularly against the US dollar and euro) should allow Scottish exporters to reduce the price paid by a foreign buyer of their product while still receiving the same Sterling revenue for each unit, thereby making Scottish exports more competitive in the international market. However, the favourable exchange rates can also make imported raw materials, and thus the cost of production, more expensive for Scottish firms.

15. Nevertheless, as the markets in Scotland’s main trading partners return to growth and the exchange rates remain favourable to Scottish firms, exports from Scotland should, at least in principle, be in a strong position to increase.

Scotland’s exports performance - past and present

16. Establishing a clear baseline against which to measure the current performance of the Scottish economy in terms of exports is not straightforward. A variety of sources of data are available, some measuring exports by volume and some recording the value of exports. Some of these statistical publications cover the manufacturing sector only whilst others - often more comprehensive in that they also cover the service industries - still omit much of the economic activity in the oil and gas industry. Obtaining up-to-date, comprehensive and reliable figures for the Scottish economy and its export performance has been a challenge for the Committee. We return to this point later in our conclusions.

17. Figure 3 below, produced by the Scottish Government, sets out long-term trend data for manufactured exports only, using 2007 as the base year for the index of performance.

Figure 3: Scottish manufactured exports

Source: Scottish Government - Index of Manufactured Exports 2010

18. According to the Parliament’s research service (SPICe), the recent period of decline has come to an end and figures for the first quarter of 2010 published on 1 July 2010 show that Scottish manufactured exports rose 0.2% over that period. Despite this more recent growth, manufactured exports were still down 7.3% over the year to March 2010 as a whole and export levels remain below pre-crisis levels. The decline has been broad-based, although manufactured export markets hit particularly hard over the course of the year include metals (-18%), engineering (-16%) and textiles (-9%). Food and drink is the only manufactured export sector which has seen growth in exports over the year (by 8%).

19. In terms of sectoral performance in the export of manufactured goods, electrical and instrument engineering remains the top sector, accounting for 27.0% of Scottish exports. However, the value of electronic exports has fallen significantly from its peak in the late 1990’s and the drink sector, currently accounting for 26.5% of manufactured exports, is likely to overtake it as the top exporting sector in coming years; see Table 1.

Table 1: Percentage of total manufactured exports contributed by each

Year Sector
Electrical & Instrument Engineering Drink Chemicals, Refined Petroleum & Nuclear Fuel Mechanical Engineering Transport Equipment Other Manufacturing Metals Wood, Paper & Printing Textiles Food & Tobacco
2002 42.7 16.6 12.0 6.7 5.0 4.6 3.7 3.1 3.0 2.7
2003 36.7 18.0 13.6 7.8 6.1 4.7 3.8 3.5 2.8 3.1
2004 31.0 21.3 14.1 7.5 6.8 4.8 3.7 3.9 3.2 3.6
2005 30.2 23.0 13.8 7.7 6.6 4.6 3.6 3.9 2.9 3.7
2006 30.2 23.1 13.5 7.8 7.1 4.5 4.4 3.4 2.9 3.1
2007 28.9 23.2 12.6 8.4 8.4 4.0 4.8 4.0 2.8 2.8
2008 29.0 23.2 12.8 10.1 6.6 4.3 4.9 3.9 2.6 2.6
2009 27.0 26.6 12.8 10.3 6.0 4.5 4.1 3.9 2.4 2.3

Notes: Components may not sum to 100 due to rounding

Source: Scottish Government - Index of Manufactured Exports 2010

20. To help look more broadly across other sectors of the Scottish economy, i.e. not just at manufactured goods, the Scottish Government produces an annual survey – the Global Connections Survey – which at one level is more comprehensive in that it also covers non-manufacturing sectors. It is, however, based on survey data and also excludes much of the export of oil and gas in its results. The data available is also at least 18 months to 2 years out of date and time series data is only available from 2002 onwards. Figure 4 contains trend data for exports between 2004-2008, based on the Global Connections Survey.

Figure 4: Scottish exports by industry (£ billion), 2004-2008

Source: Scottish Government, Global Connections Survey

21. The Scottish Government’s Global Connections Survey for 2010 states that the rest of the UK is Scotland’s largest export market, estimated to be worth £42.3 billion in 2008, compared to £43.6 billion in 2007.6 In 2008, the service sector accounted for 71% of sales to the rest of the UK – dominated by the financial services sector (£10.5 billion), followed by wholesale and retail, and hotels & restaurants. It should be noted that the provision of these estimates is a new development within the Global Connections Survey and given the difficulties in measuring trade against the rest of the UK, they are currently classed as “in development”.

22. Outwith the rest of the UK, the USA is Scotland’s largest export market, accounting for 15% of Scottish exports in 2008. The top five export markets as a whole account for over 40% of total exports. Figure 5 below provides further detail on the destination of Scottish exports.

Figure 5: Top 10 export markets (2008)

Source: Scottish Government - Global Connections Survey 2010

23. It may be surprising to note, given the prominence sometimes paid to emerging markets, that the People’s Republic of China was only Scotland’s 15th largest export market in 2008, accounting for just 1.5% of exports. In total, exports to Asia as a whole represented only 9% of Scottish exports.

24. As part of its performance measures and national indicators, the Scottish Government set itself an objective of growing exports at a faster average rate than GDP over the term of this Parliament (2007-2011). Table 2 below sets out the performance of the Scottish Government to date against this indicator.

Table 2: Export growth relative to GDP growth (cash terms)

Measure 2003 2004 2005 2006 2007 2008
Annual export growth (%) 3.1 4.1 -2.9 5.8 12.6 0.6
Annual GDP growth (%) 5.0 5.6 4.8 5.9 7.8 3.0
Percentage points difference between annual growth in exports and GDP -1.9 -1.5 -7.7 -0.1 4.8 -2.4

Source: Scottish Government - Global Connections Survey 2010, Office for National Statistics Regional Accounts (excluding “extra-regio”) 2010

25. This objective was achieved by the Scottish Government in 2007, where export growth was 4.8 percentage points above GDP growth. However, in 2008 (the most recent year for which figures are available) GDP grew by 3.0% while exports grew by just 0.6 % – leaving a gap of 2.4 percentage points.

26. Looking in more detail into the performance of the Scottish Government and its enterprise agencies, SPICe has provided the Committee with data outlining the export performance of the 6 key sectors of the economy that, until recently, appeared to have been the main focus of the enterprise agencies. This is set out below in Figure 6 below.

Figure 6: Export performance by key sector (2002-2008)

Source: SPICe

27. As stated previously, despite the rise in manufactured exports in the last quarter of 2009, the overall picture for exports from Scotland is still mixed, with the longer-term trend over the year passed still showing a decline. In recent months, further surveys have painted a negative picture. For example, Ernst and Young’s ITEM Club report published in June 2010 stated that Scottish exports have fallen 30 per cent since 2000 despite a doubling of world trade volumes since 1995. It also predicted that Scotland's insubstantial export base will weaken its growth prospects over the next few years and described past performance as “dismal”.7

28. Similarly, a survey undertaken by the Bank of Scotland of over 500 Scottish small- and medium-sized enterprises (SMEs) in April 2010 showed that only one-third (34 per cent) of SMEs in Scotland currently export and that, amongst the two-thirds (66 per cent) of businesses that are not currently exporting, only two per cent have plans to do so.8 In terms of international comparisons, this percentage of SMEs active in exporting is lower than countries such Denmark and Sweden.9

29. Building up a longer-term picture of Scotland’s export performance relative to other nations and regions in the UK is also far from straightforward. Her Majesty’s Revenue and Customs (HMRC) however, does produce data for the value of exports broken down by nation or region in the UK. Table 3 below provides such longer-term trend data.

Table 3: Value of exports to the rest of the world by nation/region within the UK (2001 to 2009) (figures rounded to nearest £ billion)

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009
UK 189 187 188 191 212 244 220 249 225
North East 7 7 8 8 8 8 10 11 10
North West 16 17 17 18 19 24 21 24 24
Yorkshire and the Humber 9 9 9 10 12 13 13 14 12
East Midlands 14 13 14 14 16 18 15 16 15
West Midlands 13 14 13 14 15 18 15 17 14
East 16 16 18 18 19 20 20 22 20
London 23 26 23 22 26 29 22 24 22
South East 26 26 29 29 32 34 33 40 38
South West 8 8 9 10 10 11 11 12 11
Wales 7 7 7 8 9 9 9 11 9
Scotland 17 16 13 12 13 13 14 14 15
Northern Ireland 4 3 4 4 5 5 5 6 5
Not attributable 29 26 23 23 27 40 31 38 31
Scottish share of UK total (%) 9 8 7 6 6 6 6 6 7

Source: HMRC, Regional Trade Statistics (excludes trade in services (e.g. banking, tourism) and intangibles (e.g. financial investments or transfers) and also the movement of goods between regions of the UK

30. Summarising the above tables and figures, it is probably fair to say that Scotland’s export performance is at best mixed. Over the last 10 years, the overall volume of Scottish manufactured exports has been declining since the peak years relating to the electronics boom at the start of this decade. The economy has also seen a marked shift in key sectors, with a shift away from the electronics sector towards more growth from other sectors, notably chemicals, food and drink. Key export markets, however, still include other parts of the UK, the USA and EU countries. Emerging markets, such as the BRIC countries (Brazil, India, China and Russia), whilst offering potential, still lag behind compared to existing markets. Finally, relative to other nations and regions in the UK, the performance of Scotland has been varied over the current decade, with Scotland seeing a fall in the value of its exports between 2001 and 2009 as a proportion of the UK total according to HMRC. It should be noted that almost all other nations and regions have – over the same period – seen the value of their exports rise during the same period.

The attraction of inward investment

31. Exports and international trade are, however, only one part of the equation in terms of the interests of the Committee during this inquiry. The other is the ability to attract inward investment into the country.

32. According to Scottish Development International (SDI), Scotland is home to 1,825 foreign-headquartered enterprises, employing over 263,000 people (15% of the total private sector employment of the country) with a combined turnover in excess of £61 billion (28% of the Scottish total)10. If companies owned elsewhere in UK are included, SDI cites UK Government estimates that there are 4,595 enterprises employing 628,000 people (35% of total private sector employment in Scotland) with turnover of £115 billion (52% of the Scottish total).

33. In its initial written submission to the Committee, SDI point out that on a global basis, the trend for foreign direct investment (FDI)11 in 2009 saw a sharpening of the recent decline with a fall by 39% from US$1,700 billion to $1,000 billion in 2009, with decreases across all major groups of economies. After severe declines in 2008, FDI flows in developed countries dropped by a further 41%, while transition and developing nations fared little better, with a slump of 39%. The US, the UK, France, Sweden and Spain all saw sharp dips in their ability to attract FDI.

34. In June 2009, Ernst & Young12 reported that inward investment into Europe was flat in 2008, demonstrating the global recession’s toll on investment projects into the region. The report, which examines figures for international investments into Europe, new projects or expansions, revealed that in 2008, Europe secured over 3,700 investment announcements, the same figure as in 2007. The number of projects remained steady but the impact of the impending recession on new employment was severe. The number of jobs created fell 16% to 148,000, accelerating a downward trend that has been underway since 2004.

35. SDI told the Committee in its written submission that, despite the very challenging global trading conditions, it has delivered many new projects to Scotland and retained jobs by supporting overseas investors. Between 1 April 2009 and 28 February 2010, SDI stated that it secured 3,627 planned jobs through inward investment (of which 1,789 are high-value jobs).

36. It should be noted that the recording of inward investment to Scotland or the UK for that matter can only ever be a partial estimate. This is because there is no requirement for a foreign firm to record any investments and acquisitions made in the country. Typically then, figures provided by public sector investment bodies such as SDI and UK Trade and Investment (UKTI) record only those FDI projects that they have been involved in or are aware of.

37. It its written submission, UKTI provided the Committee with trend data since 1985 for foreign direct investment in Scotland. This is set out in Table 4 below.

Table 4: Cumulative list of investment project successes in Scotland since 1985

Year No. of Projects No. of New Jobs No. of Safeguarded Jobs Total No. of Jobs
1984/85 67 6,179 2,074 8,253
1985/86 52 4,905 5,517 10,422
1986/87 35 2,267 341 2,608
1987/88 56 5,514 4,378 9,892
1988/89 43 4,849 726 5,575
1989/90 35 7,828 569 8,397
1990/91 40 5,701 928 6,629
1991/92 38 3,884 891 4,775
1992/93 61 4,497 4,189 8,686
1993/94 87 7,635 4,639 12,274
1994/95 81 7,678 3,117 10,795
1995/96 71 9,067 2,538 11,605
1996/97 76 9,928 2,069 11,997
1997/98 75 7,688 4,869 12,557
1998/99 56 6,447 1,098 7,545
1999/00 75 10,728 3,095 13,823
2000/01 72 9,274 4,231 13,505
2001/02 59 6,206 886 7,092
2002/03 49 3,599 1,724 5,323
2003/04 74 1,632 2,981 4,613
2004/05 68 4,340 2,171 6,511
2005/06 60 1,901 1,014 2,915
2006/07 89 3,185 3,057 6,242
2007/08 91 4,366 1,646 6,012
2008/09 78 1,365 1,486 2,851
Total 1,588 140,663 60,234 200,897

Source: UKTI

38. In terms of international comparators, a number of studies and evaluations have been conducted by national investment promotion agencies, or produced by consultancy firms on behalf of these public bodies. One relatively recent report - by DTZ for Scottish Enterprise - was published in June 2009. This contains a useful snapshot of the relative performance of a set of investment promotion agencies (IPA); see Table 5 below.

Table 5: Comparing investment promotion agencies (inward investment projects)

Source: DTZ13

39. To assist the Committee to look within the nations and regions of the UK, SDI provided us with longer-term data on the relative performance of Scotland in attracting foreign direct investment14. This data uses information from Ernst and Young’s European Investment Monitor. Table 6 below sets out Scotland’s relative performance in attracting FDI in terms of the number of projects secured.

Table 6: Foreign direct investment across the UK’s nations and regions (by number of projects)

Region

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Total

South East (1)

281

168

169

169

242

287

379

410

342

346

2,793

Scotland

55

35

25

39

64

33

62

69

53

51

486

West Midlands

48

31

17

32

46

43

49

54

37

51

408

North

17

11

34

46

50

49

31

42

37

39

356

North West

39

20

10

33

28

27

37

26

51

37

308

Wales

35

19

27

42

35

13

16

22

35

20

264

South West

27

9

31

28

22

20

23

9

29

32

230

Yorkshire & Humber

27

23

15

25

24

17

14

16

22

42

225

East Anglia

15

16

18

5

25

30

28

29

30

19

215

Northern Ireland

20

21

13

10

16

18

17

26

19

25

185

East Midlands

10

17

10

24

11

22

29

10

31

16

180

Total

574

370

369

453

563

559

685

713

686

678

5,650

Scotland’s %

10%

9%

7%

9%

11%

6%

9%

10%

8%

8%

9%

(1) Includes London

Source: Provided by SDI, using Ernst and Young’s European Investment Monitor

40. Although the statistics provided show a fall in the number of projects between 2000 and 2009, according to SDI, Scotland attracts a much higher proportion of R&D projects in the UK (19%) compared to overall projects (9%). This, the agency states, is important because in order to increase Scotland’s competitiveness and productivity performance, SDI’s focus has been on the attraction on ‘high value jobs’, such as those associated with R&D activity. However, in relative terms, SDI’s statistics show that whilst most other nations or regions saw a growth in the number of projects secured in 2009 compared to the data for 2000, Scotland’s performance declined slightly.

41. Similarly, SDI also provided the Committee with longer-term trend data on FDI in terms of the number of jobs attracted; see table 7 below.

Table 7: Foreign direct investment across the UK’s nations and regions (by number of jobs)

Notes: (i) The European Investment Monitor does not claim to capture all jobs for each project. The information covers approx 60% to 70% of projects, and (ii) the information does not include intra UK jobs e.g. jobs attracted to Scotland from the rest of the UK

Source: Provided by SDI, using Ernst and Young’s European Investment Monitor

42. Looking at the data provided in Table 6 above, the overall picture over the last decade for Scotland in terms of foreign direct investment by jobs is a more positive one. In absolute terms, comparing 2009 with 2000 shows that Scotland has been one of the best performing nations/regions in the UK. However, it should also be noted that Scotland’s share of the number of jobs from foreign direct investment has fallen from 18% of the UK total at the start of the decade to 8% towards the end of the decade. According to SDI, the number of R&D related jobs in Scotland from foreign direct investment was 19% of the UK total in 2009 (although this still represents a fall from the 29% share in 2000)15.

43. Looking at tables 5 and 6 together, it is hard to escape the conclusion that in relative terms, Scotland’s share of FDI into the UK has declined when comparing 2009 with the start of the decade as the base year both in terms of the number of projects (8% in 2009 and 10% in 2000) and the number of jobs attracted (8% in 2009 and 18% in 2000). Even SDI’s preferred measure of high-value jobs – such as those associated with R&D activities, has declined. However, Scotland remains in second place after the South-East of England when comparing either the totals for projects or for jobs attracted between 2000 and 2009.

key issues

The current strategy and policy framework for trade promotion and inward investment in the public sector

44. Given the current pressures on public sector finances, the Committee was keen to explore whether the current strategy, policy and type of intervention in the sector to support exports and inward investment are the right ones in terms of the needs and requirements of Scottish companies and other organisations.

45. In the main, the feedback received by the Committee was relatively positive with few, if any, organisations or individuals suggesting that the overall strategy was fundamentally flawed. The Committee received numerous submissions and heard a number of comments during its evidence taking, almost all expressing a fair degree of support towards the overall strategy being followed by the key public sector bodies in Scotland. However, there were a number of criticisms made and, more positively and constructively, also some suggestions for improvements. For example, the Chamber of Commerce in Edinburgh said that the support services offered by the public sector are reasonable but that it was important to avoid the dangers of complacency.16

46. Encouragingly, various organisations and individuals commented in their evidence that the overall balance in the strategy between the support for international trade and exports on the one hand and the attraction of inward investment on the other hand was about right. For example, Denis Taylor, a former Senior Director of Trade and Investment for Scottish Development International, welcomed some of the recent emphasis within SDI on its trade/export activities but noted that “…until recently, SDI’s overseas staff (especially in the US) were required to spend 80% of their time on attracting inward investment” and that around “65% of SDI’s budget, including its multi-million marketing budget has been spent overseas with a focus on FDI.”17

47. In its written submission, the Economic Development Association Scotland stated that there needed to be less emphasis placed on attracting foreign direct investment and more on exporting/international trade and that the balance between these two objectives was incorrect.18 This was a view shared by ADS Scotland, a trade association in the aerospace and defence industry. It said that it was important that public sector resources were targeted at local companies for the purpose of exports in preference to the attraction of inward investment. Its view was that “the reverse is actually the reality” within public sector bodies.19

48. In its written submission of evidence, SDI stated that “both inward investment and international trade are critical contributors to Scotland’s economic growth”. In the agency’s view, the relative importance and therefore the resources that should be devoted to each, varies over time and across sectors of the economy. SDI concluded that in terms of its overall strategy, “inward investment and internationalisation are not mutually exclusive”20.

49. For Mr Taylor, one way of ensuring that the balance between export/trade promotion and FDI is improved is to encourage SDI to state explicitly that the growth in exports is its number one priority for economic growth and to change SDI’s and Scottish Enterprise’s operating targets to focus on the value added to the Scottish economy of their activities and not the current simplistic and economically irrelevant count of the number of companies that they have assisted. He also suggested shifting marketing budgets to focus domestically on encouraging and celebrating the success of Scottish exporters.21

50. For the Confederation of British Industry in Scotland (CBI Scotland), the key issue was one of flexibility. It said in its written submission that the correct balance between export/trade and inward investment “can and ought to be calibrated to reflect changing opportunities and marketplaces” and that it would support SDI continuing to have the flexibility it needed to focus on its goals.22 It also stated that it agreed with the twin-track approach taken by Scottish Development International of encouraging foreign firms to invest for the first time in Scotland, while in parallel seeking to encourage our indigenous company base to expand overseas. However, the trade body did state that its members believed that the emphasis should be on helping indigenous headquartered businesses expand abroad.23

51. Another area where Mr Taylor and others were critical is the question of whether the advice and assistance provided by the public sector, and SDI in particular, represented the most appropriate use of scarce budgets or whether this in effect duplicated the activity that already exists in the private sector (this is what we refer to in this report as market failure). On this, in Mr Taylor’s view, “public sector provision is inadvertently competing with and masking the private sector’s own capabilities to provide international support services”.24

52. In its written evidence, SDI stated clearly that in its view, “there is a considerable body of evidence highlighting the market failures and barriers to international trade and investment that amply justify public sector intervention, particularly in positively addressing information gaps, developing international networks and internationalisation skills.”25

53. The view that perhaps there is too much intervention by too many different public, or publicly supported, bodies gained some traction in the evidence received by the Committee. For example, a trade body Scottish Engineering in its written submission stated that—

“The current situation is extremely cluttered and generalised support for trade missions etc. is a one-size-fits-all approach. In the current situation a far more tailored approach is appropriate, as the opportunities will vary much more by sector and by company. We need representatives of the government to be working much closer with key companies to help them unlock the potential offered by the reduced pound and distressed competitors in other markets. In some cases this may take the form of market research support, assistance with locating finance or market development support.”26

54. Similarly, Jonathan Muirhead, Chairman of Scottish Leather Group Ltd, stated that the number of public sector bodies providing assistance to businesses should be “rationalised” and that if a single agency could not be created then “at least duplication and overlap between current agencies should be avoided”. Mr Muirhead also stated that he believed that currently, “there is confusion and a lack of understanding of the roles of the respective agencies.”27

55. The Edinburgh Chamber of Commerce told the Committee that it believed that the private sector itself should be doing more. In its written submission, the Chamber stated that “the consumer and public sector purse can no longer feed the economy as they have been doing and the responsibility to mobilise the economy must now rest with private/corporate investment and trade.”28 Its view was that private sector agencies should be encouraged and supported to become more involved, to share in the burden of delivering quality services, and be considered as equal partners.

56. The Chamber was also keen to ensure that expenditure was better prioritised given the pressure on public sector budgets. Its submission noted that “we must not spend money on companies that are determined as ‘going nowhere’ as far as international activities are concerned” and that “we should also give priority to inward investment opportunities that fit economically with the ambitions of the Scottish economy both at domestic and global levels and where in particular we are looking to develop ‘cluster-formation’.”29

57. However, a slightly contrasting view was taken by a number of local authorities. They expressed concerns that an overtly sectoral approach, focused on ‘picking winners’, which targeted public sector support through, for example, the enterprise agencies, at these companies was not the way forward. For example, in its written submission, Aberdeen City Council stated that “while the account management system undoubtedly brings significant benefit to those companies in the system, by definition it has to be selective and therefore excludes a great number of companies that might nevertheless benefit from support.”30

58. Similarly, the City of Edinburgh Council indicated that a review that it had conducted had concluded that the current Business Gateway approach to providing support to companies for international trade leaves out a considerable number that do not meet existing criteria. Its review had stated that these companies can be considered too fledgling to qualify for support, although they might have significant potential to develop international trade. The Council did concede, however, that “targeting public sector resources is increasingly important as overall resources shrink”.31

59. The Scottish Council for Development and Industry (SCDI) took a similar view, stating that it considered the growth potential of each business – not just whether it is in a priority sector – as key. In its view, trade promotion support should be available to all companies which may benefit from them.32

60. In his evidence to the Committee, David Smith, then interim Chief Executive at SDI said that—

“… it is important that we do all that we can to declutter the landscape, while keeping support mechanisms and interventions available in the marketplace and maintaining constant levels of support. We have evidence that companies get concerned if there is a lot of change around support or if they find it difficult to understand how to access support, so we should continue to make it easier for companies to access the help that is available from public and private sector agencies.”33

61. He added, “if we can all do more to align our efforts and bring to bear, in a co-ordinated and concerted way, the various support mechanisms that are available to help companies, that will go a long way to enhancing the overall support provision that is available for companies and will take away some of the potential barriers or risks that companies perceive there are in doing more international trade.”34 He saw the role for SDI as providing services in the first instance to a company but if the type of advice needed was not available within his organisation then SDI’s role would be as a “signpost” to other organisations35.

62. In his evidence to the Committee, Alasdair Kerr, Managing Director of Scottish Chambers International, stated that “the public sector and the private sector need to work together” and that both the private sector and the public sector agencies that support businesses in Scotland have made “significant progress” on supporting the client journey and on providing support to the businesses that need it. He said that “the public sector is there to fill gaps, but we very much need to work in partnership.”36

63. However, for Denis Taylor, the “average” exporter, whether a start-up business or and experienced firm, is “utterly confused” by the current process for of applying for support. He said that “by the time many small/medium business has figured out who is best for what and who they are “permitted” to get help from, they lose the will to live and just give up.” His view that was that whilst SDI’s services both home and abroad are “terrific”, they are limited in scope and it is the overall policy framework in which SDI operates that is flawed.37 He was also critical of the efforts being made to develop partnerships between public bodies and other publicly supported trade bodies—

“I hear of great plans to get the Business Gateway/Scottish Development International/Scottish Chambers International/Scottish Council for Development and Industry working together better and help business understand their mutual roles. But that is not the problem, there are just too many of them for Scottish businesses to get their heads around. As independent organisations they will forever be more concerned in growing their individual power and influence. But while the leaders of these organisations get round the table regularly and occasionally run “joint” events, they have failed to present anything like a seamless and powerful suite of services to Scotland’s businesses.

The leaders of these organisations are highly competitive and naturally look for every opportunity for raising their own organisation’s public profile. That is not a criticism of these organisations, its natural behaviour and a reflection of the system of service provision. What is good for the individual is seldom good for the collective.”38

64. His recommendation to the Scottish Government was to avoid creating any more publicly-funded bodies or public-private collaborations and to create a single portal (e.g. website and an advice call centre) that brings together the services of all the providers and which is more accessible to a business. In his opinion, the role for this single agency should be more than a signposting or referral service and it would need to be able support a business throughout the process of internationalisation.

65. The Scottish Chambers of Commerce agreed to some extent in its written submission with the premise that “there is the perception that SDI, UKTI, Westminster and Holyrood present a confusing and contradictory image to new exporters” and that what was needed was “a clearly defined, integrated and constructive support network between government and Chambers … with a unified vision of Scottish and UK international trade”.39

66. John Swinney, the Cabinet Secretary for Finance and Sustainable Growth also commented on a perceived ‘cluttered landscape’ within the public sector—

“…we should provide a cohesive approach that focuses on the needs of individual customers, whether they are companies in Scotland that we are encouraging to internationalise or foreign direct investors from outside the country who we are trying to encourage to do business here. If you are putting to me the proposition that public sector agencies are not working together effectively to support such customers, I am interested in that perspective. It must be an absolute requirement that companies that come to the public sector for assistance receive a cohesive, joined-up service. If they do not, we must address that fact.”40

International trade and export-related initiatives

67. It is important to note that along with the feedback the Committee heard on the overall strategy and various publicly funded programmes, we also heard positive views from companies and from organisations about the public sector’s trade support programmes and the incentives that are provided to firms for exports and international trade.

68. For example, CBI Scotland stated that “whilst firms in receipt of publicly-funded export support are understandably less concerned as to who provides it, member feedback suggests such SDI services are on the whole relevant and of good quality.”41

69. One key issue that arose during our evidence-taking was that on the whole, many of Scotland’s larger companies are better informed than in the past about the type of support that SDI and others can provide them to export or trade internationally. However, somewhat perversely, a company of such size is, compared to small and medium-sized enterprises, more often in less need of such services. SMEs on the other hand, are in more need of support but often have less knowledge of its availability.

70. In its written evidence to the Committee, SDI agreed with this point noting that for businesses wishing to trade overseas there are irreversible sunk costs involved, with entry and exit being costly undertakings, and that this has a scale element. In the agency’s view, smaller companies in particular, lack diversified management structures and do not have specialist resources (e.g. a marketing manager) to enable them to begin exporting.42

71. Similarly, CBI Scotland noted that previous research that it had undertaken had found that Scottish businesses are the most likely compared to others in the UK to sell the majority of their goods/services within their own region. Conversely, the survey found that Scottish firms were the least likely – compared to any other part of the UK - to be selling the majority of their goods/services overseas43.

72. This was a point highlighted by the Edinburgh Chamber of Commerce which noted that Scotland must engage with the challenge of ensuring that our companies export a higher level of their sales than they currently do. Its view was that Scottish firms are too focused on the UK home market rather than international opportunities.44

73. In his evidence to the Committee, Iain McTaggart, General Manager of the Scottish Council for Development and Industry, said—

“I think that something is missing from the early stage that would excite the appetite of small businesses. We often talk about the barriers to exporting—there is no doubt that they exist—but we often witness small companies suddenly becoming global players because they take opportunities and get out into other markets, which helps to build their confidence and enables them to get to know the networks that can support their ambitions. We have to unlock that interest early and demonstrate to quite small companies that if they have the right product and service they can make it, and that there are people around who can help them.”45

74. One specific example of the difficultly faced by the Committee in engaging with smaller companies on the issue of exports and international trade was the decision by a key trade body for this sector of the economy – the Federation of Small Businesses in Scotland (FSB) – not to submit evidence to the Committee’s inquiry. It stated that most of its members do almost all their business locally, or within Scotland and the UK, and it would therefore decline to submit evidence to the Committee.46

75. The challenge of engaging with SMEs on exports and international trade was clear to many and, for the main public sector support body – SDI – so was the necessity of doing so. Its then interim Chief Executive, David Smith, told the Committee that he believed that—

“… it is important for us to concentrate some of our efforts on trying to grow the company base and increase the number of companies of scale in Scotland that are capable of competing in global marketplaces. That is why there is a considerable amount of focus—in both the public and private sectors—on the provision of support to increase the number of companies of scale that we have operating in overseas markets.”47

76. Mr Smith also indicated that more generally across the economy, there were challenges that must be addressed. He presented figures from HM Revenue and Customs which indicated that Scotland has around 4,000 exporting companies (representing around 5% of the UK's base of exporters) whereas it had nearly 8% of the companies when measured through VAT registration. It was his view that we needed to continue to work at broadening the base of companies that are engaged in export activity. He also said SDI needed to continue to work with companies that are experienced exporters but which have the capability to grow more in the next few years, to take advantage of factors such as the relatively low currency exchange rate and fast-developing economies around the world.48

77. In particular, David Smith stated that—

“… we must address the challenge of getting additional support to companies that are established and active in the Scottish economy, in particular the 10,000 or so active SMEs, which, if they were offered more support on upskilling and identifying opportunities in international markets, could become effective at exporting. An important part of our strategy is to widen the base of exporters by focusing on companies that are active and successful in trading and doing business in Scotland and more widely in the UK.”49

78. On the criticism that SDI is too sectorally focused and concentrates on larger, account-managed firms, Mr Smith stated—

“The overall approach is based on an assessment of the opportunities and the strengths that we have in the seven key sectors. We believe that the majority of the opportunities will come from those sectors, but there is not an exclusive focus on those sectors. It is important that we are opportunity driven and led, and we look at opportunities for Scotland wherever they exist throughout the economy.”50

79. He also noted that during the past year or so, SDI had directly supported a record 909 companies and that, more broadly, it had given worked with approximately 2,000 companies through its partners. SDI stated that an evaluation of its work showed, during the evaluation period, that about half of its work was with what it referred to as “non-direct-relationship-managed companies or non-account-managed companies”. Based on that figure, SDI stated that more than 50% of its support work during the evaluation period was with SMEs.51

80. For his part, the Cabinet Secretary for Finance and Sustainable Growth, agreed with the need to focus on SMEs and to increase the number active in exporting and international trade, noting that—

“SMEs play a critical role because they represent the overwhelming majority of the company base in Scotland. If we are not reaching and motivating SMEs to take part in exports and international activity, we are clearly missing an enormous opportunity.”52

81. More generally, the Cabinet Secretary said that—

“I very much agree with the committee's perspective on the importance of internationalising the Scottish economy. That forms a fundamental part of the Government's economic strategy, and it is one of the focal points of the Government's economic recovery plan. Encouraging more Scottish companies to be involved in export activity and international activity, and implementing measures and mechanisms to support that are important parts of the Government's agenda.”53

Trade missions – inward and outward

82. One of the very specific public sector interventions in place to help Scottish companies to export and to trade internationally is the trade mission. These are run either directly by SDI itself, or indirectly through finance provided by SDI and UK Trade and Investment to other bodies such as the Scottish Council for Development and Industry. Additionally, at the UK level, UK Trade and Investment also runs or supports its own trade missions which Scottish companies can access. Trade missions can either be outward, i.e. involving local companies seeking to access a new market overseas, or inward, involving foreign companies or trade delegations visiting Scotland to take forward trade opportunities. Trade missions are, of course, only one component of the various support initiatives that are on offer to companies, which also include provision of market research, business development advice, partner searches etc.

83. In its written submission, SDI states that it offers practical support for internationalisation including a programme of trade missions, with the aim of supporting participating companies to generate in excess of £250 million in international revenue. It stated that it had provided substantive assistance to over 1,000 businesses to participate in a trade mission overseas, including supporting 490 companies to attend overseas trade exhibitions.

84. In addition to SDI’s own missions, SCDI’s trade visit programme is financially supported by UK Trade and Investment with a contract awarded annually by Scottish Development International. According to SCDI, funding has fallen in recent years and is currently set at £50,000 for the full programme. Markets selected for visits are agreed in advance with SDI. The 2009/10 programme targets India, South Africa, the United Arab Emirates and China.54

85. With this, in its words, “comparatively modest financial support”, SCDI says that its trade visit programme in 2008/09 involved 63 companies which generated overall business from the visits worth £6.5m. In the three years between 2005 and 2008, 270 participants in SCDI trade visits have reported business valued at £23.3m.55

86. SCDI also told the Committee that it is also working with Glasgow City Council to deliver their 2010/2011 Glasgow Visit Programme and that Glasgow-based companies are now being offered fully funded places on trade visits to four key overseas markets with links to the city (India, North America, Poland and the United Arab Emirates).56

87. As indicated above, UK Trade and Investment also runs a number of its own inward and outward trade missions in which Scottish companies can be involved. To help gauge participation levels, we asked it for further details on the number of Scottish firms. UKTI was, however, unable to provide this data, stating that it did not hold it centrally.57

88. Feedback by companies on the merits and effectiveness of publicly funded trade missions was mixed. The main issues raised related to the composition and focus of trade missions and the relative balance between the funding of outward and inward missions. Additionally, the question of ministerial involvement was highlighted.

89. On the first of these issues – composition and focus – views presented to the Committee varied. For example, John McGlynn, founder and Chairman of the Airlink Group of Companies, was very specific and told the Committee that in his view, “the multi- sector mission style of SCDI is far more effective than the single sector missions adopted by other organisations and agencies.” He believed that whilst a good case can made for single-sector missions, multi-sector missions worked better for companies that were based in Scotland as well as for the companies that they met on the trade mission because the interaction, mentoring and sharing of business skills and contacts is much higher between delegates on such missions; due to the lack of internal competition between delegates in the same sector as would be the case in a single sector mission.58

90. Mr McGlynn was also of the view that the public sector needed to rethink its overall programme of trade missions and move towards a programme with a longer-term outlook. He suggested that a 3-year rolling programme of missions to the same countries would encourage a greater number of companies to export to new markets because potential exporters could see longevity of commitment to those markets.59

91. The Scotch Whisky Association (SWA) shared this view. It stated that “a more co-ordinated, long term export strategy at national level would be beneficial” and that it was unclear “how Scotch Whisky fits into the Scottish Government’s international strategy.”60

92. The point was also supported by SCDI. It stated that—

“…research and results demonstrate that cross-sector trade visits enable greater interaction and mentoring between participants. SDI and UKTI should support the expansion of this activity and introduce a guaranteed 3 year rolling programme of trade visits. Larger emerging markets can be very challenging for SMEs because of the competition, costs, risks and cultural differences. They would benefit from visiting “less difficult/ nursery” markets first. The programme should include a mixture of larger emerging markets and more familiar markets e.g. Eastern Europe.”61

93. SCDI did concede, however, that “both sectoral and cross-sectoral trade visits have particular advantages.”62 Cameron Buchanan, honorary consul for Iceland on the other hand told the Committee that in his opinion, trade missions must “not be too wide or too generalised” and that “we need a more concentrated approach”. He said that in his view, “trade missions are too multisectored”.63

94. Gordon Hay, General Manager of Bio-Rad Laboratories Europe Ltd, indicated that he had been on both types of trade mission and found them “both very good”.64 Scott Johnstone of BioIndustry Scotland, one of the main trade associations for this industry sector, said he believed that “sector-specific trade missions are important for the life sciences” because in the Scottish company base in this sector, the firms that would be involved “do not really compete among ourselves”.65

95. When appearing before the Committee, David Smith of SDI set out his agency’s approach to the question of the most effective composition and focus for trade missions. He said that SDI had shifted its approach in the past few years to the point at which just about every SDI-led mission or exhibition is focused on a particular sector or sectoral opportunity. SDI reported that the feedback from customers was that sectorally-focused or opportunity-focused missions are the most valuable and effective for the customer base. He did, however, state that SDI recognised that there is a place for cross-sectoral work and that there needed to be provision in Scotland to ensure that some cross-sectoral mission activity takes place. That, in his view, is particularly the case in some of the fast-developing markets, where there are often linked opportunities because the marketplace is more dynamic and there is an opportunity to take companies with a variety of capabilities to address cross-sectoral opportunities. In those instances, SDI provided funding to SCDI for cross-sectoral missions.66

96. For Donald Blair, a drinks industry consultant based in Warsaw and a former executive at a Scottish whisky company, the merits of a multi-sector versus a single sector mission was less important compared to demonstrating the tangible outcomes of a trade mission itself. For him, successfully organising six trade missions was not an outcome in itself whereas getting six Scottish companies to set up a subsidiary in a specific country was a better measure of success. That, in his view, was the best indicator of a trade mission’s success.67

97. One specific call for more financial support to companies to help them participate in trade missions was made by Aberdeen City Council. Its written submission to the Committee stated that there should be increased availability of grants to companies to help them to participate in trade missions (especially to SMEs, those new to exporting, those new to a market, and those outside the SDI account management system). The Council also called for loans at preferential rates to enable companies to follow up positive leads.68

98. Finally, the importance of ensuring that, in the case of manufacturing companies, the people that are being met by the trade delegation are the most appropriate was raised. Of particular importance to trade mission is ensuring that those in charge of purchasing new goods and services. This was a point emphasis by Paul Grant, Managing Director of Mackays Ltd—

“We are involved in other activities as well, for example SDI initiatives such as meet the buyer. That extremely important initiative involves SDI bringing potential customers into this country, shortlisting supply companies and fast tracking us to customers. The process is quite quick relative to how long it would normally take us.”69

The balance between inward and outward trade missions

99. The second key issue raised in evidence was that of the balance between the resources spent on outward and inward trade missions. Ian Traill, Chief Executive of Eurotactics consultancy and a former official of Locate in Scotland, said that “SDI should recognise that supporting inward trade and investment delegations to find their market contacts is an important part of the overall mix.”70 His view was shared by Paul Grant, Managing Director and owner of Mackay’s, who told the Committee that from the perspective of his firm in the food and drink industry, “more could be done about inward missions, but that is about creating more products and brands of interest.”71 Similarly, Gillian Black, Director of Policy Affairs for OPITO - the oil and gas academy - stated that if there were to be more inward delegations visiting Scotland supported by the public sector, then they had to “bring real, live opportunities.”72

100. In his evidence, Duncan Skinner, Chief Financial Officer for Production Services Network (PSN) - an oil and gas services firm - spoke positively about the value of one such inward mission—

“One of the best examples of support that PSN had was when we hosted a delegation from the Oil and Natural Gas Corporation—Indian's national oil company—at Dyce, which was very good. The SCDI sponsored that and put us on first-name terms with the Indian oil and gas minister and so on. We followed that up in the country and he remembered us. We are talking to the ONGC about a potential joint venture for operations and maintenance in India. That is an example of what can be done and I would like to see more of it. However, as they need to be spread around, we do not see too many visiting delegations like that.”73

101. Finally, the other main issue raised during the course of our inquiry relating to trade missions was that of the value that can be obtained by having a senior minister, parliamentarian or industry figure lead the delegation. For many, this gave enhanced status to the mission and could be helpful in facilitating introductions. John McGlynn of Airlink was typical of many during his evidence to the Committee on this point. He said—

“From personal experience, I know that when a minister, an MSP, a member of Parliament or a member of the European Parliament travels on a trade delegation, the impact magnifies by 10, as does the return on investment. The bottom line is that people on foreign soil want to meet politicians and senior executives of organisations. I would love to see this committee recommend to Parliament a change to the standing orders to the effect that when any member travels, whether they are a minister or not, the presumption should be that the best effort should be made to have an accompanying trade delegation. It may be a simple one-day trip, but ministers and members still have to have breakfast and lunch. With a bit of co-ordination, representatives of four or five companies could travel with a minister, and even such a small group would make a huge difference.”74

102. In Mr McGlynn’s view, there is little resistance to this idea and the problem is more “the machine of government and making things happen”. He said that somebody needed to be charged with responsibility to make this happen because the current fragmentation in who deals with such matters was not helping. He believed that a government agency was perhaps not the best organisation to make things happen and be accountable. His suggestion was to task Business Club Scotland75 with the function.76

103. Mr McGlynn’s view on the value of the involvement of ministers or another senior figurehead to lead the trade delegation was shared by others. For example, Scott Johnstone of the BioIndustry Association in Scotland told the Committee of an SDI mission to Japan in January 2010, led by Professor Sir Ian Wilmut.77 In his view, for some of his association’s members who were on the mission, the value of being alongside someone who is the world leader in his field meant that, when people come to the meetings, they felt that they were coming to see not only the world's leading scientist in the field, but also the world's leading companies.78

104. Similarly, and more generally, Duncan Skinner of Production Services Network (an oil and gas services firm) stated he wanted to see the Scottish Government, SDI and others in the public sector carry out what he described as “more ambassadorial work for Scottish companies”. He wanted public officials to “just lift the phone and ask us what we are doing and what we would like to do and can do, so that Government can tap into our needs in a very specific way”.79

105. The Cabinet Secretary for Finance and Sustainable Growth told the Committee that “ministers should be involved [in trade missions and overseas visits] so that they can reinforce particular contacts that our people out in the field have developed”. He thought that many of the opportunities that present themselves, particularly for inward investment, are the product of a great deal of patient activity to build up a relationship with a company that is based in another market, to encourage the development of that relationship and to encourage other economic possibilities for Scotland. In his opinion, ministerial activity in this area should be focused on adding value to the contacts that had been cultivated over time and “advocating on behalf of and promoting Scottish companies in external markets is a significant part of the work that ministers try to do.”80

106. The Cabinet Secretary indicated that the value and effectiveness of the expenditure on trade promotion and trade mission was a fundamental issue. He provided figures to the Committee which showed that, in 2006-07, there were 51 ministerial external visits at a total cost of £104,236. In 2008-09, there were 59 visits at a total cost of £92,139, so the average cost of these visits is coming down thereby, in his view, demonstrating increasing effectiveness in terms of spend.81

Smart Exporter programme

107. The other specific export/trade related public sector programme that was commented upon at some length in the evidence received was the newly established Smart Exporter programme. This programme is run primarily by the Scottish Chambers International (SCI), as a joint venture with Scottish Development International and the Scottish Council for Development and Industry. Smart Exporter comprises a range of products and services designed to increase exporting skills and knowledge within Scottish companies. It also seeks to raise awareness of the opportunities in exporting, and of the various topics and issues companies need to consider. The current Smart Exporter programme runs until the end of 2012. The programme has received EU funding to support the delivery of products and services.82 It is expected to be operational from the summer of 2010.

108. All Smart Exporter products and services are free to companies and individuals seeking to develop their exporting skills. Smart Exporter is available to all businesses in Scotland either exporting already or thinking about it. At the moment this, however, excludes the Highlands and Islands since the current EU funding is for the ‘Lowlands’ area, but SCI hopes to be able to announce the availability of Smart Exporter services to the Highlands and Islands later in 2010.

109. In its written submission, CBI Scotland stated that the use of £3.4m of EU Social Fund monies to expand the number of smaller firms with access to export support will hopefully prove an effective means of adding value and encouraging more firms to think about exporting. CBI Scotland welcomed SDI’s stated ambition of doubling the number of Scots firms which export - from 6,000 to 12,000 – but added that in its view, the challenge will be to ensure there is sufficient focus on obtaining the ‘biggest bang for its buck’ given the likely constraints on its future finances. CBI Scotland stated that “a more targeted approach to expand the number of firms with export potential who may take advantage of SDI’s services may be more appropriate”.83

110. David Smith, then interim Chief Executive of Scottish Development International – one of the partners in Smart Exporter – said that the programme was one way in which SDI can address the challenge of encouraging more SMEs to be active in exporting. This programme would, in his view, increase understanding and awareness in the wider company base, particularly among SMEs, of the advantages of doing business internationally and of exporting. He told the Committee that this was precisely why SDI was partnering SCDI and Scottish Chambers International to undertake the programme.84

111. The need for programmes of this type was highlighted by specialists from some of the other overseas trade promotion bodies based in the UK that the Committee spoke to. For example, Péter Horváth, economic investment and trade commissioner for Hungary in London, said Scotland—

“…should be more proactive and focus on SMEs and smaller countries. You do not have to help multinational companies, because they know what they want to do, have networks of offices and can use the services of PricewaterhouseCoopers and others. You should help small and medium-sized companies, because that is where your activity is really valuable. Sometimes it is worth while to give such companies a guiding hand. You should not tell them what to do—they know what to do—but show them opportunities.”85

The potential role of the Scottish Investment Bank in export and trade promotion

112. The establishment of a Scottish Investment Bank is a relatively recent initiative undertaken by the Scottish Government following a campaign by the Scottish Trades Union Congress and others for its creation. The Scottish Investment Bank aims to support business growth by initially bringing together Scottish Enterprise's existing Scottish Co-investment Fund, Scottish Venture Fund and Scottish Seed Fund.

113. This Committee has already commented in previous reports and inquiries on the merits of establishing such a bank and the time that is being taken to reach full operational status. However, during this inquiry on international trade, the Committee received a number of comments on how a Scottish Investment Bank could be used to benefit companies in their efforts to export and trade internationally.

114. For example, CBI Scotland told the Committee that establishing a dedicated sales force in overseas markets is an expensive model for any company to pursue, and that some of its members had suggested that financial assistance from the public sector to help mitigate a part of the staffing costs, at least initially, would be particularly beneficial. One option CBI Scotland suggested is for the proposed Scottish Investment Bank to explicitly target a portion of its lending activity toward those firms with real export potential.86

115. Similarly, the Scottish Council for Development and Industry recommended that one of the Scottish Investment Bank’s key priorities should be to provide lending to support the internationalisation of SMEs, which would be paid back as the company’s overseas sales grow87.

Attracting inward investment

116. The policy framework for supporting exports and growing international trade is only one component of the public sector’s overall strategy for increased international activity in our economy. The other key part is the attraction of inward investment. As indicated in preceding sections of this report, some of those from whom the Committee took evidence believed that the balance between these two objectives had in past been skewed more towards inward investment at the expense of supporting exports and trade.

117. In its written submission to the Committee, SDI stated that in order to attract investment, Scotland faces intense international competition to demonstrate that it is the best location to invest. SDI’s core objective was, therefore, to deliver a world class sales and marketing approach to both attract investment to Scotland and encourage and support Scottish businesses to increase their international trade.88 As David Smith of SDI explained—

“We support companies to meet potential customers or potential business partners one on one. From the inward investment point of view, our focus is on meeting companies that are interested in investing in Scotland and making that process as easy as possible for them. We go to those customers and have meetings with them. The highest-value-added activity that we can undertake is to help companies to engage directly with their customers wherever those customers want to meet them, and to make it as easy as possible for potential investors to come to Scotland.”89

118. The value of the support provided by SDI was covered in the evidence received from some of the firms that had located activities in Scotland. It should be noted that, particularly in certain industrial sectors, the Committee encountered a fair degree of reluctance by many companies to come and present their views to the Committee in public session, although many were prepared to send written evidence.

119. The importance of the work carried out by SDI and others to attract inward investment was outlined by, for example, Barclays Wealth. It told the Committee that the initial reason why Barclays Wealth had decided to locate in Scotland was quite simple in that it had acquired critical mass in some of its key businesses areas, principally stock broking, and that Scotland was the right choice for its expansion in terms of the quality and cost of the talent pool and infrastructure, and the support that it believed it would receive from SDI. Barclays Wealth indicated that it has received “significant support from SDI in terms of finance and expertise”. This assistance with the company’s start up costs was, in its view, crucial in securing buildings and other key infrastructure. The expert advice the company received was also vitally important, it said. Overall, Barclays Wealth stated that its experience of locating in Scotland had been “an extremely positive one”.90

120. In terms of future policy improvements, Barclays Wealth suggested that one of the biggest incentives for any employer is the ability to employ people with “tailor made” skills. In this regard, greater vocational links with Scottish universities and colleges should be encouraged. In its view, “a ready pool of talent with say, a NVQ in financial services, and having qualifications recognised by the FSA is a highly desirable asset which any financial services company choosing a location would find very attractive”.91

121. A similar experience was outlined in the evidence provided by Benny Higgins, Chief Executive of Tesco Bank. His submission stated that Scotland made a strong offer for supporting his company’s growth agenda through the provision of a strong labour pool with the right skills. He believed that Tesco Bank’s ambitions for its Scottish operations would benefit from Scotland’s rich financial services history which remained a source of economic strength and would continue to be so in the future.92

122. For Tesco Bank, the Regional Selective Assistance (RSA) grant it had received for its Glasgow investment highlighted the very positive role that the Scottish Government could and should continue to play in encouraging and promoting jobs and investment. This financial support from the Scottish Government was, in its view, “an important factor that helped our decision to invest in Glasgow in what is an extremely competitive global marketplace, particularly for large scale investments such as ours”.93

123. Looking more widely, Mr Higgins stated that, whilst development agency support was important, costs in the current climate were more crucial than ever, as was land availability and a positive approach to planning. Additionally, Tesco Bank stated that its business rates rateable value in Scotland was in excess of £100m and that it had recently seen a spike in this with the abolition of the transitional rates relief scheme. The bank said that whilst this would not in of itself deter large scale investment, Scotland must do everything possible to be as cost-competitive as possible in attracting new business investment, especially as the retail sector is a property-based business with substantial levels of business rates, often competing against internet-based alternatives.94

124. The Committee covers some of the issues raised by these inward investors, such as the value of RSA grants, the provision of a skilled and educated workforce and the overall environment for business, in subsequent sections of this report.

Scotland’s overseas networks and offices

125. A critical component of Scotland’s ability to attract inward investors to locate operations in the country is the network of publicly funded overseas offices and representatives. These chiefly, but not exclusively, consist of the offices of SDI and the Scottish Government.

126. For SDI, the rationale behind the need for an overseas network of offices and representatives is because potential overseas investors were unaware of the benefits of locating in Scotland. It also stated that the private sector alone cannot maintain adequate institutions and networks that support international linkages and knowledge flows. In total, SDI had offices or representatives in 22 countries; see figure 7 below. 95

Figure 7: SDI’s overseas network

Note: The incubator facilities in SDI’s offices provide office space and support services to Scottish firms setting up operations in the country and ease their transition into the new market.

Source: Figure provided by Scottish Development International

127. It is important to note, before considering how the overseas network attracts inward investment, that such offices can also assist Scottish companies to trade internationally. For example, in its evidence to the Committee, Standard Life stated that the Scottish Government had provided valued support in developing its operations in other regions and that it had also had mutually beneficial contact with SDI staff in Hong Kong and India. Standard Life said that it had been working with SDI to share the experience and knowledge gathered over a 10-year period to assist other Scottish companies interested in doing business in India.96

128. Scottish Council for Development and Industry said that it was vital to make best use of Scotland’s overseas office network (consisting of 3 Scottish Government offices and SDI’s 22 offices). SCDI’s view is that “trade promotion needs to be at the core of the role of all Scottish government staff in foreign markets”. SCDI believes that these overseas offices could have the potential to be redeveloped into ‘Scottish Trade Centres’. In its view, these Trade Centres would then attract investment to Scotland, help overseas investors gain a quick insight into investment opportunities and match them to appropriate companies or advisors. They would also provide information and research on opportunities in their markets, develop relationships and identify useful business contacts, promote attendance at trade shows and offer facilities and services (e.g. press and marketing support) for visiting Scottish companies. SCDI believed that such Trade Centres should be proactive in identifying emerging opportunities in the market rather than always responding to central directions or an individual company. Finally, SCDI stated that the private sector itself could have a significant role to play in the development and support of a Scottish Trade Centre network, working in partnership with the Scottish Government and SDI.97

129. The need to extend the current geographical coverage that is provided by SDI and the Scottish Government’s network of offices and representatives was raised by a number of other organisations and individuals. Donald Blair questioned the effectiveness of efforts by SDI staff in seeking to track down business leads in one country whilst at the same time having to work out of offices based in another. He said—

“Why is the SDI office for Central and Eastern European Regional Headquarters based in Düsseldorf in the west of Germany? And why is the SDI office for Northern Europe, Israel and South Africa based in London? Hardly local engagement, is it?”98

130. This point was also covered by John McGlynn of Airlink. He commented on the merits of the previous setup where SDI served the Baltic States from an office based in Germany rather than in, for example, Estonia itself. This situation had now changed, with SDI providing some financial support for the employment of a local consultant/trade representative. He outlined to the Committee the history of his efforts to encourage SDI to locate staff to Tallinn or employ local, on-the-ground experts—

“Following some meetings with SDI, it was heavily criticised in the press by other parties unconnected to us, who were considering the markets in Latvia and Lithuania more than Tallinn. They were not able to operate from an office in Germany. I gave evidence to the Enterprise and Culture Committee on that during the previous parliamentary session. As I said then, SDI eventually saw that having a contact in the Baltics would be a good thing.”99

131. In terms of his experience in operating in Estonia and the establishment of the ‘Scotland House’ in Tallinn in which he is involved, he told the Committee that “bricks and mortar are not essential but having a good, solid contact point in every country is”. His view was that “if we are going to invest in a country, we must have a local on the ground day in, day out”. He indicated that the ‘Scotland House’ in Tallinn no longer has any office costs, because a local Scottish businessman who has a large company based in the city sponsored a desk for the representative in his office complex.100

132. His suggestion to the Committee was to develop this concept and model further by tapping into the GlobalScot network of business people—

“The globalscot network has some A-list business contacts throughout the world, many of whom do not know what they can do to add value and to help. Some of those global Scots will have huge corporations that will have a desk and which might appoint a junior member of staff—perhaps a junior researcher in a huge company—as a part-time Scotland House officer, or in some other facilitator role. All that those people really want for that is a thank you—they do not want to be paid for it.”101

133. In simple terms, Mr McGlynn encouraged the Committee to recommend an extension to the current overseas network of SDI and Scottish Government offices, with the principle being that any extension would have a ‘maximum-coverage, minimum-overhead’ approach. He felt that at some point in the future, if other activities were to be performed, a physical office presence for Scotland would not necessarily be required in a specific country whereas the presence of a good, local project manager on the ground would be.102

134. Iain Lawson, honorary consul for Estonia in Scotland agreed with Mr McGlynn. His evidence to the Committee stated that more ‘Scotland Houses’ in the form of a locally hired consultant/employee, located at low or no cost in the premises of an already well established Scottish owned business in a country should be considered and reviewed on an annual basis dependent on results103.

135. In his evidence to the Committee, Wolfgang Mössinger, Consulate General of the Federal Republic of Germany in Scotland, stated that he had appreciation for the work of the SDI office in Düsseldorf. However, he noted that from this one office—

“SDI covers a big area, including Switzerland and many other countries—everything east of the Rhine, as has been said. […] That is a huge area to cover—it is a big task for SDI to fulfil, considering the number of people that it has.”104

136. Reto Renggli, Consul General for Switzerland in Scotland, noted that having an overseas office network for trade promotion was expensive and that the Swiss approach was to identify first the key markets, either existing key markets or those that were to be developed. In the most important markets, the Swiss equivalent of SDI opened offices. However, many countries shared bilateral chambers of commerce with the Swiss that were based on private initiatives. In those countries, the Swiss trade promotion organisations conclude mandates with those private organisations to co-ordinate public and private work. He concluded by stating that “a small country cannot have offices everywhere, so it must concentrate on areas and work with private organisations that have the same interests.”105

Recruitment of staff in overseas offices

137. In terms of recruitment practices, David Smith of SDI indicated that his organisation primarily focused on having “the right people—business professionals from different sectors and walks of life who are locally connected”. He said SDI hired the vast majority of its staff for overseas offices locally because it meant that the agency had people who could “hit the ground running and who, through their relationships with businesses and markets, can provide more access to opportunities for Scottish companies or give them more insight into how to tackle opportunities in particular marketplaces”.106

138. He also said, more generally, that SDI was always looking at opportunities to utilise other overseas markets networks such as GlobalScot and the networks and relationships that some of SDI’s public and private sector partners might have built up in Scotland. He gave the Committee an example of the partnership with Cairn Energy in India, which had offered temporary space to Scottish companies wanting to access the Indian market to give them a soft landing and a low-cost route to a new market. He also stated that SDI were having discussions with SCDI amongst others about leveraging the footprint or presence that many of SCDI’s members have in international markets to try to develop things from the virtual presence that Scotland has in many locations around the world. He stated that from his perspective, “it is far less about real estate and offices and far more about how we take advantage of the wide network of relationships that we and others have in international markets”.107

139. One suggestion made by some of those giving evidence to the Committee was that SDI’s overseas office network should build on the larger network of offices operated by UK Trade and Investment and indeed the embassy and consular network of the UK Foreign and Commonwealth Office.

140. Susan Haird, Deputy Chief Executive of UK Trade and Investment, outlined the benefits of co-location of its operations with British embassies or consulates—

“Co-location gives us the cachet of being part of the Foreign Office, which is helpful in opening doors overseas. The ambassador is responsible for UKTI's targets overseas, so proximity to the ambassador is important. Proximity to other Foreign Office staff working on the political relationship with and looking at the economy of the country concerned is also important. Trade policy, market access, liberalisation, climate change, and the science and innovation links with the country are all germane to UKTI's activities, so it works extremely well to be co-located.”108

141. Asked whether, based on the example of SDI and UKTI’s co-location in offices in Mumbai, India, further co-location of the offices of the two trade promotion agencies would be beneficial, Ms Haird told the Committee that—

“It does provide advantages, but where we are not co-located, the situation can be made to work perfectly well. Co-location makes day-to-day business easier but there is not always the space or the opportunity. I am sure that SDI is locked into leases in some places. The important thing is not really where we are located but that we have the will to work together to bring as many projects as possible into the UK.”109

142. In terms of other Scottish public sector bodies outwith SDI, there are a limited number of examples of overseas offices and representatives. The Scottish Qualifications Agency (SQA) maintains an office in the People’s Republic of China (opened in 2004), with staff based in the capital, Beijing. Additionally, SQA indicated in its written evidence that it was considering appointing a consultant in India to take forward its plans in that country. SQA described its relationship with SDI as “informal” in that SQA and SDI meet from time to time to share plans and ideas. It also suggested that closer work with SDI and the British Council could lead to a greater level of synergy in the months and years ahead, for example, with the implementation of the Scottish Government’s India plan. 110

143. The national tourism body – VisitScotland – confirmed that it had no overseas network of offices. Its representatives told the Committee that it had “no physical presence internationally at all”. VisitScotland noted that VisitBritain is the lead agency in that it has people on the ground in all the key destinations and that VisitScotland worked through the UK tourism body. VisitScotland did indicate that it had 5,000 of what it described as “agents” throughout the world who were specialists on Scotland and that it used these to promote Scottish tourism in other countries. Dr Cantlay, VisitScotland’s new Chairman, explained—

“Obviously, we have very limited funds for what we do in the tourism business, which is the most competitive business in the world—indeed, it is potentially the biggest business in the world. We therefore have to be opportunistic. We tend to seize the opportunities that are presented by, for example, trade missions.”111

144. Similarly, Riddell Graham of VisitScotland said—

“Our approach is about making the appropriate officers from SDI aware of the opportunities in the markets that we see are important from a tourism point of view. It would not necessarily be more effective simply to have a presence in a country. We need to identify the priority markets for us—we have already done that through a scale-of-opportunity analysis—work closely with VisitBritain from the tourism point of view and then, where appropriate, work with colleagues in SDI to maximise the impact of our work.”112

145. In his evidence to the Committee, John Swinney, Cabinet Secretary for Finance and Sustainable Growth, said that the Scottish Government would keep the merits of more overseas offices and co-location under review, because he felt that the government must ensure that its resources are deployed in areas that can deliver maximum benefit. His view was that those areas will change from time to time, because at particular stages some economies provide greater opportunities than others.113

146. Mr Swinney also stated that building a relationship with a foreign investor took time and that it was not possible to do that “through a presence that is here today, gone tomorrow”. However, he did state that the Scottish Government was interested in the Committee's views on whether an overseas presence should be realised through fixed offices or through a different type of overseas support network for Scottish companies and foreign investors.114

Regional selective assistance scheme

147. One of the key tools available to the Scottish Government for attracting inward investors is financial assistance under the Regional Selective Assistance (RSA) scheme. The value of RSA grants to companies has already been touched upon above in the evidence received from Barclays Wealth and Tesco Bank. Others such as INEOS in the chemicals sector also highlighted the value of such schemes.

148. RSA is the main investment grant scheme available to businesses only in designated areas of Scotland (the 'assisted' areas). However, businesses can apply whether they are Scottish-owned or owned or headquartered outside Scotland. It should be noted that other EU nations and regions are also able to offer RSA grants to attract inward investment or safeguard jobs.

149. As indicated, some companies mentioned the benefits of the RSA awards that they had received. However, some also highlighted a number of drawbacks and difficulties with the scheme. For example, Ray Mountford, Commercial Manager at INEOS in Grangemouth said—

“The [RSA] grants are fantastic, but the system is indeed a little bit bureaucratic. It can take three months before being told, "Yes, okay, we will support you." That three months can be critical.”115

150. Mr Mountford outlined to the Committee one of the challenges his company had had with RSA—

“INEOS has successfully obtained a significant RSA grant to modify one of its ethylene crackers to convert higher hydrocarbons into ethylene, which will help given the decline in the amount of ethane in the North Sea. The process of completing the form and finding the right people to talk to was not difficult; however, as the world turns, projects change. We will probably have to make slight changes to what we have to do and it will be difficult to explain that we need to spend the money in a slightly different way, even though the outcome will be the same. We will have to go through another loop to ensure that the money is spent in the right way—and quite rightly so—but surely if the outcome is the same it should not really matter if the project changes slightly.”116

151. Similarly, Ken Richardson of the Chemicals Industry Association in Scotland said that the message from a number of companies in his association was that RSA was valuable but that it was not the simplest of things to apply for. For a large company in his industry, investment decisions often require things to move pretty quickly.117

152. Peter Hodgson of Dow Chemical explained that—

“In this country, I have to talk with Scottish Enterprise to prepare the groundwork so that we can get assistance easily. When I built plants in China and Mexico, I always felt that people were chasing us a lot more and showing us what we could get instead of our having to ask for it.”118

153. Mr Richardson did point out, however, the value of RSA as a whole, and provided a number of positive examples in the chemicals industry where RSA grants had proved invaluable to the success of the inward investment process.119

Aftercare

154. Attracting foreign investors to Scotland should be just the start of the process according to some of the organisations submitting evidence to the Committee. The importance of ‘aftercare’ to companies was highlighted during our evidence-taking and was also a feature of our discussions with other trade promotion bodies, most notably during the Committee members’ visit to Bristol and the South West Regional Development Agency where an extensive aftercare service exists

155. In its written evidence, the Scottish Council for Development and Industry stated that international investors should be embedded within and encouraged to nurture the local business community and that specific supply chain gaps should then be targeted. Feedback from its members had suggested that there was a need to ensure that aftercare services for inward investors in Scotland from SDI and the wider public sector were more consistently excellent. The SCDI also said that it was important to support investors when they restructure to encourage other investors’ confidence.120

156. For the BioIndustry Association, one area that its larger, more established companies feel that there is room for improvement is in the retention of companies once they are located here. The association’s view was that having larger life sciences companies in Scotland was essential to maintaining a critical mass in the life sciences sector.121

157. Similarly, having innovative funding mechanisms to help smaller companies work with the larger companies was something that the association was working on nationally through fiscal mechanisms such as consortium relief. In its view, Scotland lacks a major venture capitalist, which was a barrier to the growth of the life science sector in Scotland. The BioIndustry Association called on SDI to help promote Scottish business angels and also assist investors to work with Scottish life sciences companies.122

158. Speaking more generally about the effectiveness of the aftercare services provided by the enterprise agencies in Scotland, John Swinney, Cabinet Secretary for Finance and Sustainable Growth, said that he was satisfied with current level of support but that—

“…we must be mindful of the fact that companies can change their priorities and their focus. From time to time, companies that are located here may consider whether this is the most appropriate place to be and whether they want to develop their operations here. We have had some difficult news from foreign direct investors that have been based here but which have taken the view that their prospects lie elsewhere. The key to addressing that issue is to ensure that we have very regular dialogue with the companies involved. That is the core part of the account management function of Scottish Enterprise and HIE. Through them, we must ensure that we are aware of all the considerations of FDI companies and are supportive of their plans.”123

Supply chains

159. The final area explored by the Committee in relation to inward investment was the ability of SDI to develop the associated supply chain when it had succeeded in attracting a major investor to Scotland, thereby achieving a higher gearing effect for the original public sector investment.

160. Duncan Skinner of Production Services Network, a major firm in the oil and gas services industry in Scotland, outlined his company’s approach when visiting new markets overseas—

“We take our subcontractors overseas with us—they are the people with whom we have good experience, from their service to us here in the UK. That becomes self-perpetuating as a business development tool.”124

161. In his view, involving firms from his company’s supply chain in this kind of activity had a wider, beneficial effect across the industry as a whole. Similarly, Alastair Kerr of Scottish Chambers International, outlined to the Committee the benefits in any given sector of firstly attracting substantial inward investment and then developing a cluster of similar companies and a supply chain for them. He said that other sectors such as food and drink, renewable energy and life sciences could follow the oil and gas production and services industries.125

162. At the UK level, Susan Haird of UKTI outlined the approach that her agency had followed in one particular sector and stressed the importance of supply chains—

“We feel that we have been successful in building supply chains in the energy sector, and we want to do that in the low-carbon area as well. We have global value chain specialists working in markets such as China, India, Japan and the US to look at opportunities in global value chains and bring them to the attention of British companies.”126

163. Likewise, Frank Boyland, SDI’s director of operations in Asia, said that—

“We have been working to build relationships with the top engineering companies in Asia, for example in China, India, Japan and Korea, to let them know about the opportunity in Scotland on offshore wind and the supply chain for that.”127

164. David Smith of SDI concluded more generally by indicating that—

“Deeper opportunities to attract multiplier investment or investment that might bring additional investment in the supply chain are extremely important. The evaluation evidence shows that we have succeeded in attracting to Scotland investment that has increased wages by creating high-value-added jobs and increased labour productivity. We want to concentrate even more on attracting investment that will have an impact on total factor productivity, which will bring greater multiplier effects and multiplier benefits. That will bring know-how and additional supply-chain activity to Scotland.”128

Wider issues

Exporting Scotland’s education system and other international activity in the education sector

165. One of the relatively recent additions to the work of SDI has been to assist in the promotion of Scotland’s education, skills and training sector. SDI’s role is additional to the work already carried out by individual universities and colleges themselves, their umbrella associations (Universities Scotland and Scotland’s Colleges), other government bodies such as the Scottish Qualifications Agency, and pan-UK bodies such as the British Council and EducationUK.

166. According to SDI, its education sector team aims to help increase the revenue generated from international education activity by 50 per cent over the next five years.129 Its objectives are to increase the participation of Scottish universities and colleges, especially those with strong growth opportunities in international markets and to achieve high levels of key stakeholder and institution satisfaction with the value-add provided by the SDI.

167. This type of activity was valued by some of the organisations that provided evidence to the Committee. For example, the Scottish Council for Development and Industry stated that there was a role for Scottish Government supported activity to capitalise on the highly regarded Scottish education and qualifications systems, with opportunities for colleges, universities and employers within key industry sectors to form alliances which export learning and skills development to global employers and governments.130

168. However, SCDI said it believed that “there should be greater synergy between Scotland’s trade, tourism education and cultural activity” and that “Scotland’s well-known strengths should be hooks for less well-known ones”. Its view was that Scotland should aim to capitalise where cultural or education links could be used to improve business links or vice versa.131

169. In addition to the attraction of research grants, building business/academia collaborations etc, the two main areas where the Committee heard the most views expressed related to the efforts to ‘sell’ Scotland’s tertiary education system and qualifications framework to third countries and, secondly, the benefits of attracting foreign students to Scottish higher education institutions and a longer-term goal of capitalising on the alumni base that can then be established.

170. According to Paul Docherty, Director of the British Council in Scotland, Scottish education is one of the “success stories” of the export business. He told the Committee that, compared to England, Scotland is “doing rather better than people are doing down south”. He cited research by Universities Scotland which showed that the value of UK education exports is £28 billion and that Scotland is in fourth place after London, the south-east and the north-west, which includes the big cluster around Liverpool and Manchester. He also highlighted international comparators which showed that per head of population, Scotland's share of the worldwide overseas student market comes in at about fourth.132

171. Like SCDI, the umbrella body Scotland’s Colleges was supportive of the support provided by other public sector bodies such as SDI. Carol Booth, manager of the international team at Scotland’s Colleges, said that—

“We work closely with SDI's education team. We have found it very helpful that such a team has been in place over the past couple of years. The team has been very supportive of us, both in aid-funded business and in looking for commercial opportunities for the colleges.”133

172. However, for her, co-ordination and the need to avoid duplication of effort were important. She told the Committee that one of the challenges was that many of the business opportunities abroad that are identified by Scotland’s Colleges have to be developed on an individual basis with a particular Scottish college. She felt it would be helpful if there could be more partnership working and more collaborative ventures. The problem, however was that, in her view—

“SDI can help us with that, but no single agency is currently charged with doing that kind of work. It would be helpful if some body was clearly given the responsibility to do that for Scotland.”134

173. Professor Downes of Universities Scotland was similarly supportive of the work of SDI and other bodies such as the British Council. He highlighted the “great and effective support”135 that Universities Scotland obtained from the former. He did, however, indicate that there were some markets where the British Council had not been as effective as he would have liked but described this as a “minor detailed point”.136

174. An important issue for both Universities Scotland and Scotland’s Colleges is the lack of resources available to both to finance the work of identifying and developing educational opportunities in overseas countries. Professor Downes said that it would be valuable if the work that a variety of organisations carried out to scout out and scope opportunities was better co-ordinated.137

175. Representatives in other industrial sectors were also appreciative of the work of the education team at SDI. For example, Gillian Black of OPITO – the oil and gas academy – told the Committee that it has been only two years since SDI's education and training element became a stand-alone function alongside other industrial sectors and that, in her view, “it works very well cross-sectorally with the oil and gas side”.138 OPITO itself had also been highly active in recent years to sell its approach to skills and training issues in the oil and gas sector to other countries.

176. The Committee received evidence from the Scottish Qualifications Agency as well as from SDI. SQA stated that it had a role to promote Scottish qualifications, education services and Scotland as a whole on the international stage, and was currently carrying out awarding activities in 10 countries. Although supportive of the work of others and complementary about the co-ordination between all of these bodies, SQA did suggest that closer work with Scottish Development International and the British Council could lead to a greater level of synergy in the coming years.139

177. One country on which many of the Scottish public sector bodies had a substantial interest and focus was China. SQA, for example, told the Committee that it had the largest number of awarding centres within China compared to other competitor countries. Carol Booth of Scotland’s Colleges stated that her organisation had examined the Chinese market closely but came to conclusion that it would be “extremely difficult for the college sector to enter the Chinese market, as the main areas have been covered”. Scotland’s Colleges had chosen to go down the route of collaborating with the SQA, because it already had a strong foothold in the Chinese market.140

178. In its evidence, the China-Britain Business Council (CBBC) said that there were opportunities for Scotland’s universities and colleges that were being overlooked and that were currently underdeveloped. CBBC’s representative in Scotland, Ms Wendy Lui, said that her organisation had recently—

“…promoted strongly the regional cities of China, which are the second and third-tier cities. In first-tier cities such as Beijing and Shanghai, the competition is stiff and the entry barriers are becoming higher. Therefore, we encourage companies to go to the second and third-tier cities in China and to seek opportunities there.”141

179. CBBC currently provides services to British companies and organisations interested in the PRC through UKTI’s sub-contracting of work to it (through UKTI’s Overseas Markets Introduction Service framework). Giles Blackburn, a director at CBBC, told the Committee that in his view—

“Ways in which organisations can help the public sector to reach its targets, get people into markets and deliver services are welcomed by organisations such as the CBBC, which is looking for opportunities for fuller engagement with companies in the early stages of their thinking about whether they should enter markets.

Although we are involved in promoting trade with China, we are open-minded about it. China is not for everybody—that is true. We can also be involved in helping a company to prioritise one market above another by giving it information on the basis of which it can make an informed decision. Generally, we would welcome greater engagement that comes not through individual referrals around the network, but through a more strategic approach to engaging with organisations such as ours.”142

180. The People’s Republic of China was also the focus of the suggestion made to the Committee that Scotland could do more to benefit from the number of overseas students that study and graduate from Scotland’s higher education institutions. Figures provided by SDI indicated that in 2008-9, there were nearly 280,000 students in higher education in Scotland’s universities and colleges, of which just over 39,000 were from non-UK countries, with over 5,000 of these from China. This was the highest share for any individual country. Other key countries were India (with nearly 4,000 students), the USA (just over 3,200) and the Republic of Ireland (over 2,800).143

181. Giles Blackburn of CBBC believed there was “obviously a huge opportunity” to encourage these students to act as “advocates” for Scotland upon their return to their country of origin.144 Similarly, Frank Boyland of SDI stated that his organisation worked with alumni groups in China and other parts of Asia because “those are potential Scottish salespeople for us.”145 David Smith, then interim chief executive officer at SDI, indicated that his organisation was—

“…active in the area but we can be more active. Our discussions with business schools in Scotland have enabled us to bring to the attention of Scottish companies the opportunity to engage MBA students for a short period in projects to consider business opportunities in the Chinese market.”146

Creating an attractive environment for business

182. Previous sections of this report have outlined the evidence that the Committee received in relation to the public sector’s efforts to attract companies to Scotland. In addition to the efforts of bodies such as SDI and the use of financial incentives such as Regional Selective Assistance grants, there are a number of other policy areas on which the Committee received views, such as the need for improved transport infrastructure, a competitive tax system, the provision of a skilled workforce and the attractiveness of our education system for the families of staff in incoming companies. It has been suggested by witnesses that improvements in many of these policy areas would also help indigenous companies to export and trade internationally.

183. According to CBI Scotland in its written evidence to the Committee—

“Wider devolved public policy has a significant role to play in order to ensure Scotland is - and is better known as – a great place to do business and invest. Practical actions to assist exporters and to tempt international firms to either continue to invest here or to start investing here for the first time, would include: re-introducing the Air Route Development Fund to support the introduction of new direct international air services between Scottish airports and key business destinations and hubs; supporting additional runway capacity at Heathrow to ensure connections with a wider range of countries; maintaining competitive business rates; delivering a supportive planning and infrastructure regime; and protecting capital grants which help firms expand or locate here.”147

184. Similarly, the Scottish Chambers of Commerce stated that the Scottish Government needed to invest in communication and infrastructure to grow and support international activities, increase our balance of trade and overall GDP. In particular, the Chambers said that funding for the development of additional air routes, and road, rail and port infrastructures to facilitate efficient distribution was absolutely essential.148

185. The views of these two business organisations on the issue of transport infrastructure in particular and the value of previous incentives such as the Air Route Development Fund (ARDF) were shared by other organisations which gave evidence to the Committee. For example, Diageo told the Committee in its evidence that a key priority for the Scottish Government should be routes to market and that there was a need to continue to invest in transport infrastructure so that goods could be transported quickly and efficiently from production sites in Scotland to the ports for onward shipment. On the ARDF in particular, the SCDI said—

“The development of a good airport infrastructure and direct air links to other economic centres are vitally important to the competitiveness and internationalisation of an economy. The expansion of Scotland’s route network has stalled in the last few years following cancellation of the Scottish Government-funded Route Development Fund following more restrictive guidelines from the European Commission (EC) and the economic downturn. The EC is at present reviewing its guidelines and is expected to consult on any proposed revisions later this year. The Scottish Government should seek to reinstate the air route development fund, subject to European legislation.”149

186. Another issue raised was education. One particular area that received significant comment was the effectiveness of Scotland’s schools, colleges and universities in providing the required number of graduates and technicians in the disciplines of science, technology, engineering and mathematics (STEM), language skills and/or a sales and marketing education.

187. CBI Scotland’s evidence was typical of many in the first of these areas – STEM subjects – when it told the Committee that businesses were concerned about the quantity and quality of graduates with STEM degrees. The CBI Scotland also commented on language issues. It said that foreign language skills and an appreciation of other cultures and cultural differences were important in an increasingly globalised workplace. In its view, 75% of firms want their staff to have conversational ability, with only 25% requiring full fluency. It noted that European languages are the focus for current recruitment, with French and German the most popular languages for businesses. Additionally, 43% of employers who were interested in language skills needed Mandarin/Cantonese speakers as well as Spanish.150

188. The mismatch between the needs of the business community and the output from the education system in was raised by other witnesses. For example, Iain McTaggart of the SCDI said that “there is almost a crisis in language learning in our school system in Scotland”.151 He was supported by Mr Docherty of the British Council in Scotland who told the Committee that he did not know how languages could be moved higher up the priority list, but achieving that might put Scotland in a better position for the future. In his view, “there is a lot of rhetoric about the need for languages and how they are a good thing, but that rhetoric is not always backed by action.”152

189. An alternative approach to recruiting staff with specific language skills is to use a specialist translator. The Committee took evidence from one such specialist firm (Confluence Scotland).

190. The firm’s representative, Dr Alison Hiley, said that many companies did not take translation seriously enough or dedicate enough time and resources to ensure they received professional input. There was a misconception that “any old translation would do”.153

191. Some of the ways in which these problems could be tackled in her view included a closer link with, and co-ordination between, the work of SDI and the enterprise agencies with companies interested in international trade, and with professional translation firms154. She also believed that there should be a clearer system to better refer companies to grants and any other forms of financial assistance available to help them access these types of service and for further resources to be available to assist companies to procure translation services155.

192. One of the other areas explored by the Committee in this area was Scotland’s ability to attract foreign companies and their staff by providing suitable schools and appropriate education system for their families. Whilst it was of course open to the families of overseas companies locating in Scotland to send their children to Scotland’s current public and private sector schools, there were often issues to do with the compatibility of qualifications and previous education systems. This had led in the past to the establishment of ‘international schools’, such as those for the oil and gas sector cluster in the north-east of Scotland. Such schools then ensured that the families of employees received the education best suited to them.

193. This problem was highlighted initially to the Committee by Rupert Soames, Chief Executive Officer at Aggreko, which recruits a substantial number of staff from non-UK countries to its Scottish workforce. He told the Committee of his experience—

“Last night, I visited a website that is much beloved of expatriates: it is every expatriate's guide to life wherever one may go. As you might imagine, there is an enormous tab for tax, but there is also stuff on living in the country. There is a global directory of schools that offer education to international students at secondary level—schools that offer the international baccalaureate, the American schools and the like—and I had a look at all the international schools that exist in the UK. The drop-down list helpfully started with Aberdeen—that was a good start. It went on to list Abingdon, Altrincham, Bridgwater, Burgess Hill, Croydon, Cobham, Exeter, Haslemere, Hastings and Hove. At that point I gave up, having found no mention of a school in either Glasgow or Edinburgh where, for example, somebody who has been through the American system can come and continue their education.”156

194. Similarly, Angus Tulloch, an investment adviser in the financial services industry in Edinburgh stated that improving the availability of international education in Scotland would also help attract overseas talent into his industry. In his view, the Scottish Government should “consider introducing an independently and internationally verified international baccalaureate programme.”157

195. In response to these points, David Smith of SDI said—

“There is excellent provision in the private sector throughout Scotland. Many individuals who come here, such as the senior management of potential investors, are aware of that provision and utilise it. It has been brought to our attention that the availability of the international baccalaureate qualification would be of interest to a minority of companies. That is worthy of further investigation.”158

Trade promotion policy and incentives at the UK level

196. In addition to the mainly devolved policy areas identified above, a number of those that gave evidence to the Committee highlighted policy and incentives where decisions are taken at the UK level. In particularly, the issues of export credits and guarantees and levels of corporation tax were raised.

197. The Scottish Chambers of Commerce raised both of these points. It said in its written submission that there was a difficulty in accessing trade credit and credit insurance to pay for or receive goods and that the UK Government needed to make funding available to all sizes of Scottish business to facilitate international growth. The Chambers also argued that the UK and Scottish Governments should provide tax incentives – particularly for market research – and that the corporation tax levied on SMEs exporting over 40% of their turnover should be lowered from the current rate of 21%.159

Difficulties with statistics and data collection

198. Finally, one of the wider issues that the Committee confronted during the course of this inquiry was the difficulty in accessing comprehensive and up-to-date statistics on exports and inward investment.

199. A key question posed to those considering providing evidence to us was whether they felt Scotland had in place the necessary data collection and statistical system and if they had any views on the Scottish Government’s Global Connections Survey.

200. In its evidence, the SCDI said that improved distribution of robust export statistics would enable businesses to identify market opportunities and inform the export and trade promotion strategy and support from the wider public sector. The SCDI indicated that it continued to be concerned that the Global Connections Survey lacks detail, profile among existing and potential exporters, and credibility with key export sectors.160

201. The SCDI noted that until 2001, it had received support to produce a Regional Manufacturing Export Analysis across Scotland but that since 2007, when local authorities assumed an enhanced role in local economic development and the delivery through Business Gateway of advice to new-start and local businesses, the Global Connections Survey no longer includes these local breakdowns. Feedback from SCDI members suggested that Global Connections is not made widely available in a way which is meaningful for businesses. In its view, judging overall performance can also be confused because statistics in Global Connections can significantly differ from industry-wide returns published by HM Revenue & Customs, for example. SCDI concluded that “this regional data deficit needs to be addressed”.161

The GlobalScot network, other business-to-business networks and mentoring

202. A number of submissions mentioned the benefits of increased interaction between companies interested in export markets and business people with a greater knowledge and experience of international trade.

203. One public sector initiative that is aimed at helping in this respect is the GlobalScot network. GlobalScot is designed and operated by Scottish Enterprise and seeks to develop and expand Scotland's standing in the global business community by utilising the talents of leading Scots, and of people with an affinity for Scotland, to establish a worldwide network of individuals who are outstanding in their field. These individuals would then be accessible to others and could assist them in developing their business.

204. According to SDI, which is involved in operating the GlobalScot network, the use of GlobalScots is an immensely powerful tool for supporting trade and investment in Scotland. It said that the most recent evaluation of the GlobalScots Network, which took place in 2007, demonstrated that the net Gross Value Added figure attributable to the Network was extremely positive at £28m with anecdotal evidence that this is likely to rise over time as unquantified outcomes and impacts become further embedded and generate quantifiable impacts. SDI stated that work was ongoing to look at ways of ensuring that the GlobalScots are more visible, more accessible and are used in the most effective way for Scotland.162

205. Other stakeholders agreed. For example, the Edinburgh Chambers of Commerce said that the GlobalScot network was a “very exciting concept” but that it “must be made more accessible to companies and maybe at the moment it is being ‘firewalled’ to an extent that might be discouraging some companies from utilising this very valuable service”.163

206. Similarly, the Scottish Council for Development and Industry said that the benefits of the GlobalScot network should be maximised by increasing its profile and making it more open and accessible for Scottish businesses.164

207. CBI Scotland also said that it was “very supportive” of the GlobalScots concept and initiative. Its members had told it that they believed that public sector and private networks could provide the practical and more immediate assistance they sought. However, they also said that their members often did not know who the GlobalScots actually were, or how to contact them, and were therefore unable to assess whether they could be of benefit to the business. CBI Scotland suggested that better marketing of the service through the enterprise networks’ account managers and of the globalscot.com website, which contains information on how to access the network, was required.165

208. Other witnesses highlighted the value of business-to-business networks and clubs. For example, John McGlynn of Airlink, cited Business Club Scotland as an organisation that shows the most potential as, in his view, it had cleverly and successfully modelled itself on Business Club Australia which has a proven track record in the delivery of sustainable economic growth. It was Mr McGlynn’s opinion that the skills required to deliver the maximum impact for international trade and exporting opportunities existed between the models of ‘Scotland Houses’, SCDI, Business Club Scotland and the GlobalScots network. He described the latter as “one of the best kept secrets in Scotland”.166

209. For Paul Grant of MacKay’s, “genuine global Scots who are committed and who are in the organisations that can do business with you, as opposed to people who undertake an ambassadorial role, are really important.”167 Similarly, Rupert Soames of Aggreko indicated that his firm had used the GlobalScot network occasionally and that “the ability to turn up in places and plug into a network of people who went to the same school and the same university is not to be underestimated.”168

The work of UK Trade and Investment and co-ordination with SDI

210. The final area considered by the Committee was the work undertaken by UK Trade and Investment, the benefits that this had for Scotland and for Scottish firms, and the co-ordination between the work of this pan-UK body set up by the UK Government and that of Scottish Development International.

211. Most of the organisations that commented on these matters were complimentary about the work of UKTI and did not see any real problem in having two such trade promotion bodies available to provide services to them. For example, Diageo told the Committee that it had benefited from the work of both agencies and that it was important that SDI continued to liaise as closely as possible with the UKTI and British Embassy network. Diageo wanted to see a consistent, co-ordinated approach from domestic agencies operating overseas and clarity on how best to link into the network. The company indicated that “co-location of offices may assist this process”.169

212. In its submission, Standard Life stated that by working more closely together, public agencies were more likely to achieve positive outcomes through a better utilisation of contacts and resources. It did not see this kind of constructive interaction being limited to Scottish agencies. Its view was that working with organisations such as UKTI could potentially generate enormous benefits. Standard Life stated that it believed it was important that UKTI fulfilled its responsibilities in supporting the whole of the UK, including Scotland.170

213. A different view was offered by the trade body Oil and Gas UK in its written submission to the Committee. The trade body said that many of its members who manufacture and provide services in Scotland for ultimate export, have other facilities in the UK and draw on resources from across the UK. One concern they had was “the fragmented nature of assistance and expertise from the public and private sectors in support of trade promotion and inward investment”. Its members would, in its view, “be more effectively served through a single organisation that addresses both UK and regional needs”.171

214. However, Oil and Gas UK stated that it appreciated that funds and assistance originate from differing sources and with differing target results in mind. It said it believed that with stronger co-ordination across these multiple sources, a greater degree of success would be achieved for both exporting organisations and businesses seeking to invest in the UK.

215. The Edinburgh Chambers of Commerce proposed creating a trans-UK Business Development Forum for international activities, with all public sector trade promotion agencies as well as private sector groups in attendance.172

216. CBI Scotland stated that it understood that the wider reach that UKTI naturally had could either be accessed directly or through SDI by Scottish companies, and endorsed the view that alignment of service provision by both SDI and UKTI would help minimise the chances of duplication and confusion amongst firms.173

217. The SCDI indicated that there was a continuing need to join up international activity by the Scottish Government, SDI and the wider public sector, and to work more closely with UK embassies and trade agencies. The organisation’s view was that whilst UKTI and SDI were generally working more closely together than in the past, feedback to it indicated that “there can be confusion on their roles abroad and the impression of duplication of effort at home”. In the SCDI’s view, this was especially the case in relation to the oil and gas sector, as UKTI has its Oil and Gas HQ in Scotland and is well-established.174

218. In its written submission, SDI stated that it worked in partnership with UKTI to ensure that companies based in Scotland benefited from an integrated package of SDI and UKTI Trade and Investment services. SDI indicated that UKTI provides the market intelligence and, in some countries, access to markets where SDI does not have a physical presence.175

219. David Smith, then interim CEO of SDI, told the Committee that at a national level, quarterly meetings of the respective marketing teams in UKTI and the nations/regions took place at which SDI discussed the alignment of strategies, particularly around inward investment promotion, and how all the agencies could work together more closely to help internationalise Scottish companies. He also informed the Committee that once a year, he attended a summit along with the heads of the other regional development agencies and the agencies in the other devolved Administrations to discuss how they could continue to develop and align strategies and approaches.176

220. In her evidence to the Committee, Susan Haird, Deputy Chief Executive at UKTI, said that given that trade and investment are matters of devolved responsibility, her organisation worked closely with its colleagues in SDI. She informed the Committee that almost all of UKTI’s trade services were open to Scottish companies, the only exceptions being those that are delivered on the ground in the English regions by UKTI’s international trade advisers.177

221. Ms Haird also stated that—

“We work closely with SDI to promote the UK and Scotland as inward investment destinations. SDI has staff overseas in a number of markets and we work closely with SDI overseas as well as in the UK to bring opportunities into the UK. In some overseas markets, such as Mumbai, our staff and SDI staff are co-located.”178

222. One of the particular issues explored by the Committee was the way in which UKTI responds to an inquiry from a foreign company and how it advises that potential investor about the most suitable location for their investment within the UK. Ms Haird said—

“SDI, like UKTI, has staff in a number of important inward investment destinations overseas. We work closely with SDI, and there are guidelines governing how we work together. Basically, they involve making sure that the project comes to the UK, first and foremost, and that the best proposition is put before the customer.

There is a great deal of common access to the electronic information that we both hold in relation to inward investment, which both organisations can use to give the customer the best possible range of information. It is very much an equal partnership.”179

223. Ms Haird was questioned further on whether UKTI gave parity of treatment to competing claims from the nations and regions within the UK. She stated—

“There are guidelines for how we operate overseas. There is an umbrella marketing operation for the UK in general, which seeks to promote the UK as a springboard for global growth—I am sure that members are familiar with it. Within the overall umbrella, individual devolved Administrations and regional development agencies share leads and are involved in joint business planning and discussion about where to focus efforts. In many cases, regions of the UK have different strengths and weaknesses and want to target a slightly different range of companies.

In practice, the arrangements work well. The presence overseas of staff from the devolved Administrations and the RDAs gives a degree of regional and local knowledge that helps in deepening our proposition to potential inward investors.”180

224. Ms Haird added that UKTI did not try to steer investors to particular parts of the UK, but did give them impartial information about sectoral strengths.181 In his evidence, David Smith of SDI concurred, stating that—

“The guidelines that are in place throughout the UK, which we respect and support, exist to try to avoid a bidding war for the UK taxpayer. We do not seek to get into a bidding war when it is clear that an investment is coming to the UK. We respect and play by the guidelines. The sales pitch moves to considering what value we can bring and what we can offer in addition to the financial support that might be on offer.”182

225. John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, touched upon these matters in his evidence. In responses to questions on the geographical coverage of SDI’s overseas network of offices, Mr Swinney said that in addition to the work of these, it was important to “also use the structures of UKTI, which we are entitled to work with, to try to advance the Scottish interest”.183

226. On whether there should be further co-location of offices between SDI and UKTI, the Cabinet Secretary said that the Scottish Government would be “perfectly prepared to do that”. He said he was keeping “an open mind on that question”.184

conclusions and recommendations

Overview and conclusions

227. Since the end of 2007, the Scottish economy along with many others worldwide has been badly affected by the crisis in the banking sector. According to the Scottish Government, our economy fell into recession in the middle of 2008.185 The most recent figures available for GDP – for the first quarter of 2010 – remained unchanged with no growth from the small increase that had been seen in the previous quarter.186

228. Worldwide, the global economy has fared slightly better. The USA recovered strongly in the second half of 2009 with a growth of 0.6% in the third quarter of 2009 and 1.4% in the last quarter of 2009. Further increases in its economy were predicted in the early estimates for the first quarter of 2010.187 The sharpest recoveries, however, have been in emerging and developing economies, particularly in Asia.188

229. Given the return to growth in some parts of the global economy and the mostly favourable exchange rates, there should, at least in theory, be a significant opportunity for increased international trade by Scottish companies in the global export markets. There should also a chance to capture a more significant share of the inward investment opportunities on offer as the global market begins to pick up.

230. The Committee’s inquiry has looked at how effectively the public sector in Scotland supports Scottish companies to trade internationally and at our track record in securing foreign direct investment to Scotland. These are important issues in their own right. They are, however, especially significant given the substantial constraints on public finances in the months ahead. The Committee’s inquiry has looked at the strategy and support measures that are in place to help boost Scottish exports and to attract inward investments, and at whether these initiatives provide value for money in such difficult times for the public purse.

231. The Committee is well aware and indeed proud of the many success stories in our past in exports and international trade, particularly from some of our leading industries. Scotland is world renowned, for example, for its oil and gas services, and its whisky, food and drink, and chemical industries. We have also enjoyed a positive track record in attracting inward investment, for example, the ‘silicon glen’ electronics boom of the past, as well as the more recent growth of the financial services industry in Glasgow, Edinburgh, Aberdeen and Inverness, and the oil/gas services, life sciences, games industry clusters in cities such as Aberdeen and Dundee.

232. However, whilst this past performance is to be welcomed, the evidence base we have presented in our report and our analysis of the long term trends for exports and inward investment shows that Scotland’s performance is increasingly patchy. It is true that, in the year to March 2010, the value of Scottish exports has increased by 3.5 per cent to £14.8 billion, outperforming the rest of the UK.189 However, according to Ernst and Young, which has looked at manufactured exports by volume over a longer timeframe, this has fallen 30% in the last decade, with exports now accounting for around 20% of Scotland’s GDP, compared to around 30% for the rest of the UK.190

233. The Committee notes with some interest the statistic provided to us by SDI that only 5% of all UK exporting companies are based in Scotland.191 This compares poorly to the fact that around 8% of all VAT registered firms in the UK are located in Scotland. We are also aware that the Federation of Small Businesses in Scotland did not wish to provide evidence to the inquiry, noting that the majority of its members do almost all their business locally, or within Scotland and the UK. The Committee is not singling out the FSB for criticism in this regard. We believe that these two points demonstrate one of the central messages from our inquiry, namely that there is a need to increase the number of Scottish companies involved in international trade and particularly our relative share of exports compared to the rest of the UK.

234. Similarly, a look at the number of inward investment projects attracted to Scotland relative to the rest of the UK shows a worsening picture since 2004. Analysis produced by SPICe for the Committee shows that Scotland’s share of inward investment projects attracted to the UK has fallen over the last five years relative to England, Wales or Northern Ireland. Similarly, figures provided by UKTI of the number of inward investment projects attracted to Scotland relative to other parts of the UK showed that whilst Scotland is the second most attractive destination for inward investment (after the South East of England), the number of such projects attracted to Scotland had fallen from 2000 to 2009. During the same period, eight out of the other ten countries or regions across the UK witnessed net growth.192 SDI will undoubtedly suggest that this fall is because the agency is seeking to attract fewer projects but of higher value. This may be the objective, but the trend data is clear.

235. In presenting the above analysis, the Committee is not seeking to make a party political point on the performance of the current government given that this long-term trend data spans Administrations of differing political hues in Scotland. One of the Committee’s conclusions is that whilst we have a past track record on exports and inward investment that we rightly can be proud of, these are fiercely competitive times and latterly, Scotland’s performance has been mixed, particularly given the growth opportunities that now arise through favourable exchange rates and a return to growth in the world economy.

236. The evidence that we have received demonstrably shows that the support, where it is offered by the public sector, for example, by Scottish Development International, is of great value to companies. This is particularly the case for those firms already fairly active in exporting and/or considering locating to Scotland or building up their operations.

237. However, a central finding of this inquiry is that whilst some firms have been receiving high-quality support from these public sector bodies, not enough companies are asking for such advice in the first place. Larger, more active and better resourced companies are more knowledgeable about what SDI and others can offer but perversely are in less need of such advice and support whilst others, particularly small and medium sized enterprise, are less aware of how the public sector can help them and, crucially, seem far less willing to take the first step on the road to export success.

238. This leads us to the conclusion that we need to ensure that the public sector’s trade and investment policy and our support schemes are focused on increasing the number of firms, especially SMEs, prepared to grow their business though an increased involvement in international trade. Whilst we do not wish SDI and others to stop supporting those companies already on that path, a future step change will only be brought about if we markedly increase the number of companies taking that first step. At the moment, however, not enough firms do.

239. Increased internationalisation of Scottish firms is, however, only one side of the coin. Of equal importance to the Committee are the efforts of SDI and others to attract inward investment to Scotland. We have concluded that Scottish Development International has its strategy broadly correct in its focus on both of these areas although we would urge that it does not return to some of its past mistakes (in the USA in particular) which saw an undue focus on inward investment alone at the expense of exports and international trade. We believe, however, that the agency has improved the balance between these two goals in recent years.

240. In our inquiry, we have received positive testimony from those foreign-owned firms that have been encouraged to locate some or all of their operations to Scotland. Although this is a fickle and hugely competitive marketplace, Scotland has historically done well to attract overseas firms. Nevertheless, analysis provided to us shows that this trend may now be in decline.

241. Our main conclusion in relation to SDI’s physical presence outwith Scotland is that it has relied on static, geographically-fixed locations for its offices and staff whilst Scottish companies and business people in reality need help and advice on-the-ground in more countries than can be served by the current network. Despite the valiant efforts of SDI’s overseas staff, the Committee believes that it is nearly impossible to support Scottish firms seeking to access markets in, for example, central and eastern Europe and the Baltics from offices based in Düsseldorf in western Germany. Nor is it possible, in our view, to provide Scottish firms with access to the best possible, on-the-ground local contacts in all of Southern Europe and Africa (excluding South Africa) with SDI staff based in Paris.

242. We conclude, therefore that there is a need not to dismantle but to build on the existing network of SDI’s overseas offices. The focus should be on seeking additional, low-cost solutions, for example, the ‘Scotland House’ model in Tallinn, Estonia, and thereby build a wider network of Scottish trade counsellors located in more countries worldwide but not necessarily through the expense of having to establish a new and expensive SDI office. The core principle behind the expansion of SDI’s overseas network should be a ‘maximum coverage for minimum overheads’ approach. Co-location of Scottish trade counsellors in UKTI offices or through offers of free desk space in the offices of companies owned by GlobalScots etc are some examples of the way forward to build a wider network of support and advisers in more countries worldwide. We also need to align the network of trade counsellors with the future of the GlobalScot network.

243. The Committee recognises that resources for SDI and others are scarce. It is for this reason that the Committee wishes to see SDI work more closely with UKTI. UKTI has a far greater overseas footprint and Scotland must ensure that it receives a fair share of the successes that UKTI delivers when attracting inward investment to the UK. In that respect, we welcome the new UK Government’s statement that inward investment projects and industrial growth needs to take place outside the M25 and we look forward to seeing evidence that UKTI and SDI will make that happen.

244. Looking more widely at the way in which the public sector works with others to provide advice and services to companies, we also have a number of conclusions. Firstly, the Committee was presented with a mixed picture on whether there is a cluttered landscape in terms of the support offered by SDI, UKTI, business organisations and other publicly-supported initiatives such as the trade missions run by the SCDI or the new, Smart Exporter joint venture with the Scottish Chambers of Commerce.

245. We conclude that there is no perfect model for trade promotion, particularly given our analysis of the way that other countries and regions such as Catalonia, Wales, North-Rhine Westphalia and others provide investment promotion services.

246. Our key conclusion is that we need to ensure that public sector and private sector initiatives and activity are joined-up and better co-ordinated. We believe that SDI has the central role to play, providing leadership and working alongside others such as the main business organisations and trade associations, to co-ordinate activities and to share information and leads.

247. Critically, we conclude that SDI must ensure that it does not unnecessarily duplicate or crowd out the type of advice and support that is currently being provided by other bodies in Scotland be they commercial companies or otherwise. We believe that the types of services that SDI should provide directly to companies should focused on addressing ‘market failure’, i.e. that these services are not already being provided by others. This is the ‘Heineken Model’. SDI should be seeking to provide principally those types of services that others do not. In our view, SDI is better placed working alongside others and, where necessary, contracting, subsidising or signposting companies to the advice and services that others can provide.

248. More generally, we conclude that there is the need for a further development of the way in which we market the Scottish education sector overseas and in which we benefit over the longer-term from the time that overseas students have spent in Scottish universities and colleges.

249. We also conclude that there are actions that the Scottish Government can take to develop the wider economic advantages that Scotland should be offering to attract new talent and business to Scotland in terms of the skills and training of our workforce, our transport and business infrastructure, our education system etc.

Recommendations

250. The Committee has deliberately chosen in this report to limit the number of recommendations we make to a small number of key areas. We do, however, believe that there are other policies where further change is required and these are also set out in this section.

251. We believe that a step change is needed in the number of companies in Scotland, particularly SMEs, taking the first step to trade internationally. Whilst we do not necessarily favour setting a vague or arbitrary target, our realistic goal for both the public and private sectors is that, as a first step, we want to see Scotland increase the number of exporting firms to a figure closer to our population share of the UK. At present, according to SDI, Her Majesty’s Revenue and Custom statistics show that only 5% of all UK exporters are based in Scotland, whereas around 8% of the UK’s VAT registered firms are located here.

252. Our central recommendation in relation to increasing international trade and exports is that SDI has to update its strategy, its business model and the services it offers so as to focus these on ensuring that Scotland achieves a step change in the number of Scottish companies that see exports and international trade as a route to future success. That should be the agency’s prime focus.

253. In that regard, we believe that SDI must ensure that it plays a high-level and more strategic role, ensuring that activity in Scotland is co-ordinated and joined up and that any services that it provides directly to companies do not duplicate or crowd out those that can better be provided by others. SDI’s focus, along with the wider enterprise network, should have a greater emphasis on helping companies take that first step to trade internationally. We recommend that the new chief executive of SDI, when finally appointed, reports back to this Committee as soon as possible to indicate what efforts s/he will now take to achieve this focus.

254. The Committee is concerned at the delay in appointing a new Chief Executive for SDI and we recommend that Ministers proceed to make a permanent appointment as soon as possible.

255. Some of the wider issues to help Scotland’s export performance that merit consideration include:

  • A rapid roll out and implementation of the new Smart Exporter joint venture initiative between SDI, SCDI and the Scottish Chambers of Commerce;
  • Ensuring that SDI and the enterprise network support all firms interested in exports, not just their account-managed firms;
  • Through its lending criteria, encourage the Scottish Investment Bank, when operational, to prioritise a share of its resources for internationalisation, export support and financing priorities. Supporting such firms will lead, as we have seen in evidence presented to us, to productivity gains in these companies;
  • Review the way in which trade missions are conducted and assessed, to ensure that the focus is on the business-generated and not simply on the number of firms participating, and seek to increase the number of ministerial-led missions. Where ministerial attendance may not be possible, the Scottish Government could establish a network of ‘Scottish trade ambassadors’, consisting of, for example, respected former senior politicians or business people who could lead these missions;
  • Review the time period over which trade missions to key countries are supported to increase this to a 3-year programme, thereby providing companies with a longer-term signal that specific countries are a priority;
  • Review the means by which the public sector can better direct Scottish firms to the help that is on offer from professional language/translation firms and build better ties between SDI and the network of translators in Scotland. This may also involve looking at how the pockets of financial support and grants that current exist can be more easily identified by companies and accessed;
  • Increase the curriculum provision in Scotland on modern languages and the financial incentives available to students to increase their language skills (particularly Spanish, Chinese and Russian), increase the number of STEM subject graduates and those with sales/marketing skills etc;
  • Open up access to the members of the GlobalScots network for Scottish businesses and business associations to help them more easily make contact directly. At the moment, access to this network is too tightly controlled by the enterprise agencies;
  • Build better and more regular ties between SDI and the Scottish based consular corps as well as between SDI and its local equivalent in the countries where it is based;
  • Encourage the new UK Government to rethink export credit provision, provide further fiscal incentives for exporting and inward investment and to support innovative ideas such as the ‘patent box’ (the application of a 10% rate of corporation tax on income from patents to create a competitive and attractive regime for R&D related inward investment).

256. In relation to the attraction of inward investment, we welcome our historic successes and note that this is an increasingly competitive marketplace. Central to the success of how we attract foreign direct investment (as well for that matter in how we increase exports) is Scotland’s presence overseas of offices and representatives. In the future, the focus of our inward investment strategy needs to concentrate less on the numbers of jobs created irrespective of the industry sector they are in and more on attracting specific types of foreign investors whose presence in Scotland will strengthen key growth sectors of the economy and broaden the supply chains.

257. Our central conclusion in this area is that whilst the current set-up provides companies and foreign governments with some valuable support, it does not go nearly far enough. Our main recommendation is that we need to build on the current network of 22 SDI and 3 Scottish Government offices by taking forward additional, low-cost options to establish a wider network of Scottish trade counsellors located in a greater number of countries around the world. We note that SDI has increased staff numbers at their existing overseas offices by 60% since 2005 from 51 to 80.5, but our point is that we need to see coverage in more countries not just within existing offices. The core principle behind an expansion of Scotland’s overseas network should be a ‘maximum coverage for minimum overheads approach’. What a Scottish business, a foreign company or a foreign government needs in practice is access to a well respected, locally-based expert acting for Scotland in-country who can discuss business leads face-to-face and offer advice and support. Attempting to provide trade advice or chasing inward investment leads out of an SDI office based hundreds of miles away from the proposed location, and perhaps in a different country, is neither credible nor effective. We want to see SDI build on what currently exists in its own network and to see how it can hire, contract or tie-in with some other form of support in a country where it does not have a base.

258. Similarly, we recommend that the new chief executive of SDI, when finally appointed, reports back to this Committee as soon as possible to indicate what specific steps s/he will take to achieve an extension to the current overseas network along the lines we set out above and in our report.

259. Some of the wider issues to help Scotland’s performance in attracting inward investment that merit consideration include:

  • Reviewing Regional Selective Assistance (RSA) and other inward investment support initiatives to ensure that they are flexible, competitive and fit-for-purpose, and provide the best possible aftercare service to firms that have located in Scotland;
  • Supporting some form of reformed air route development fund and as well as establishing high-speed rail connections, transport hubs for exporting goods etc;
  • Finalising agreement on accessing monies held as part of the fossil fuel levy and using these funds to strengthen the infrastructure required to develop the low carbon industry sector;
  • Increasing the provision of suitable international schools in Scotland offering an international baccalaureate.

260. Looking more widely, we believe that there are far greater opportunities in how can market the Scottish education and training sector in countries overseas, as well as benefit from the presence in Scotland during their studies of foreign students attending Scottish universities and colleges. We recommend that SDI and the Scottish Government provides additional support for the marketing of Scottish education overseas, increases the co-ordination between the different bodies involved in this area and works alongside the individual university or college-led initiatives etc. We believe also that the focus should be on marketing the technical/vocational strengths in Scottish colleges as well the university offering.

261. Finally, we have been frustrated during this inquiry, as we have during other inquiries, at the lack of up-to-date and comparable statistics which provide a clear picture, over the long-term, of Scotland’s actual and benchmarked performance in relation to exports and inward investment. We recommend that this is addressed by the Scottish Government and others to provide policy-makers with better data on which to base decisions.

Annexe A: EXTRACT FROM THE MINUTES OF RELEVANT COMMITTEE MEETINGS

11th Meeting, 2010 (Session 3)

Wednesday 24 March 2010

Present:

Gavin Brown Rob Gibson (Deputy Convener)
Christopher Harvie Marilyn Livingstone
Lewis Macdonald Stuart McMillan
Iain Smith (Convener)

Apologies were received from Ms Wendy Alexander.

The meeting opened at 9.33 am.

1. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee took evidence from—

Iain McTaggart, General Manager, Scottish Council for Development and Industry;

Paul Docherty, Director, British Council Scotland;

David Smith, Interim CEO, Scottish Development International;

David Lonsdale, Assistant Director, CBI;

Alasdair Kerr, Managing Director, Scottish Chambers International;

Boyd Tunnock, Managing Director, Thomas Tunnock Ltd.

2. The public sector's support for exporters, international trade and the attraction on inward investment: The Committee considered the written evidence received for this inquiry and agreed its approach and various bids for the Conveners Group.

12th Meeting, 2010 (Session 3)

Wednesday 14 April 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 9.32 am.

1. The public sector's support for exporters, international trade and the attraction on inward investment: The Committee took evidence from—

Giles Blackburn, Executive Director, and Wendy Liu, Manager, Scotland, China-Britain Business Council.

4. The public sector's support for exporters, international trade and the attraction on inward investment: The Committee took evidence from—

Robyn M. Murray, Honorary Consul-General to Mongolia;

Kenneth H. Stewart, Consular Attaché to Mongolia;

Wolfgang Moessinger, Consulate General of the Federal Republic of Germany;

Peter Horvath, Economic Investment and Trade Commissioner, Hungarian Embassy;

Cameron Buchanan, Consul for Iceland;

Reto Renggli, Consul General of Switzerland.

13th Meeting, 2010 (Session 3)

Wednesday 21 April 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 10.00 am.

1. The public sector's support for exporters, international trade and the attraction on inward investment: The Committee took evidence from—

Dr Alison Hiley, Director, Confluence Scotland;

Prof. Pete Downes, Principal of Dundee University and incoming Convener of the Universities Scotland's Research and Knowledge Exchange Committee, Universities Scotland;

Carol Booth, International Manager Scotland Colleges International, Sector Development Directorate, SCI/International.

14th Meeting, 2010 (Session 3)

Wednesday 28 April 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Lewis Macdonald Stuart McMillan
Iain Smith (Convener)

Apologies were received from Marilyn Livingstone.

The meeting opened at 9.37 am.

1. The public sector's support for exporters, international trade and the attraction on inward investment: The Committee took evidence from—

John McGlynn, Founder and Chairman, Airlink Group of Companies;

Ken Richardson, Scottish Advisor, Chemical Industries Association Scotland;

Ray Mountford, Site Commercial Manager, INEOS;

Peter Hodgson, Site Manager, Dow Chemicals;

Scott Johnstone, Director, BioIndustry Association Scotland;

Dr Deborah O'Neil, Chief Executive and Scientific Officer, NovaBiotics Ltd;

Gordon Hay, General Manager, Bio-Rad Laboratories;

Andrew Edwards, Global Director, Marketing for Inks, Silberline.

17th Meeting, 2010 (Session 3)

Monday 24 May 2010

Present:

Ms Wendy Alexander Rob Gibson (Deputy Convener)
Christopher Harvie Marilyn Livingstone
Lewis Macdonald Stuart McMillan
Iain Smith (Convener)

Also present: Brian Adam, Nigel Don and Maureen Watt

Apologies were received from Gavin Brown.

The meeting opened at 2.00 pm.

1. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee took evidence from—

Duncan Skinner, Chief Financial Officer, PSN;

Jim Milne, Chairman & Managing Director, The Balmoral Group;

Gillian Black, Director of Policy Affairs, OPITO;

Paul Grant, Managing Director, Mackays Ltd;

Charlie Devin, Sales and Marketing Director, Lossie Seafoods Ltd.

18th Meeting, 2010 (Session 3)

Wednesday 2 June 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 9.33 am.

1. Decision on taking business in private: The Committee decided to take item 4 in private.

2. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee took evidence from—

Rupert Soames, Chief Executive, Aggreko plc.

4. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee considered and agreed its approach to the inquiry report.

19th Meeting, 2010 (Session 3)

Wednesday 9 June 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 9.33 am.

1. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee took evidence from—

Susan Haird, Deputy Chief Executive, UK Trade and Investment;

David Smith, Interim CEO, and Frank Boyland, Director Asia, Scottish Development International.

20th Meeting, 2010 (Session 3)

Wednesday 16 June 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 9.31 am.

1. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee took evidence from—

Dr Mike Cantlay, Chairman, and Riddell Graham, Director of Strategic Partnerships, VisitScotland.

4. The public sector's support for exporters, international trade and the attraction of inward investment: The Committee took evidence from—

John Swinney MSP, Cabinet Secretary for Finance and Sustainable Growth, Scottish Government;

Ed Payne, Senior Manager, Strategy, Scottish Development International.

21st Meeting, 2010 (Session 3)

Wednesday 23 June 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 9.31 am.

4. The public sector's support for exporters, international trade and the attraction of inward investment (in private): The Committee considered a draft report.

22nd Meeting, 2010 (Session 3)

Tuesday 29 June 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 2.33 pm.

5. The public sector's support for exporters, international trade and the attraction of inward investment (in private): The Committee considered a draft report.

23rd Meeting, 2010 (Session 3)

Wednesday 8 September 2010

Present:

Ms Wendy Alexander Gavin Brown
Rob Gibson (Deputy Convener) Christopher Harvie
Marilyn Livingstone Lewis Macdonald
Stuart McMillan Iain Smith (Convener)

The meeting opened at 9.30 am.

5. The public sector's support for exporters, international trade and the attraction of inward investment (in private): The Committee discussed and agreed its report.


Footnotes:

1 Scottish Government, Economic Strategy, November 2007.

2 Scottish Government, Economic Strategy, Executive Summary, November 2007

3 Scottish Government, The Scottish Economic Recovery Plan: Accelerating Recovery, March 2010.

4 Scottish Government, GDP figures, 21 July 2010.

5 OCED, Economic Outlook, No 97, 26 May 2010.

6 Scottish Government, Global Connections Survey, 2010.

7 Ernst and Young, Scotland ITEM Club summer 2010 forecast, 6 June 2010.

8 Bank of Scotland, Scottish businesses missing a trick in export markets, press release, 2 June 2010.

9 European Commission, DG Enterprise and Industry, Internationalisation of European SMEs, 2010.

10 Scottish Development International, written evidence submitted to the Committee.

11 Defined by the United Nations as an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor.

12 Ernst & Young, Annual Country Attractiveness Survey, 2009.

13 DTZ study for Scottish Enterprise, Inward Investment Evidence Review - Comparator Annex Report, June 2009.

14 Scottish Development International, supplementary written evidence provided to the Committee.

15 Scottish Development International, supplementary written evidence provided to the Committee.

16 Edinburgh Chamber of Commerce, written evidence submitted to the Committee.

17 Denis Taylor, The Hidden Office Ltd, written evidence submitted to the Committee.

18 Economic Development Association Scotland, written evidence submitted to the Committee.

19 ADS Scotland, written evidence submitted to the Committee.

20 Scottish Development International, written evidence submitted to the Committee.

21 Denis Taylor, The Hidden Office Ltd, written evidence submitted to the Committee.

22 CBI Scotland, written evidence submitted to the Committee.

23 CBI Scotland, written evidence submitted to the Committee.

24 Denis Taylor, The Hidden Office Ltd, written evidence submitted to the Committee.

25 Scottish Development International, written evidence submitted to the Committee.

26 Scottish Engineering, written evidence submitted to the Committee.

27 Scottish Leather Group Ltd, written evidence submitted to the Committee

28 Edinburgh Chamber of Commerce, written evidence submitted to the Committee.

29 Edinburgh Chamber of Commerce, written evidence submitted to the Committee.

30 Aberdeen City Council, written evidence submitted to the Committee.

31 City of Edinburgh Council, written evidence submitted to the Committee.

32Scottish Council for Development and Industry, written evidence submitted to the Committee.

33 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3394-5.

34 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3395.

35 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3402.

36 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3416-7.

37 Denis Taylor, The Hidden Office Ltd, written evidence submitted to the Committee.

38 Denis Taylor, The Hidden Office Ltd, written evidence submitted to the Committee.

39 Scottish Chambers of Commerce, written evidence submitted to the Committee.

40 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3849.

41 CBI Scotland, written evidence submitted to the Committee.

42 Scottish Development International, written evidence submitted to the Committee.

43 CBI Scotland, written evidence submitted to the Committee.

44 Edinburgh Chamber of Commerce, written evidence submitted to the Committee.

45 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3487-8.

46 Correspondence between the Committee and the Federation of Small Business in Scotland.

47 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3488.

48 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3757.

49 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3759.

50 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3765.

51 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3768.

52 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3841.

53 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3836.

54 Scottish Council for Development and Industry, written evidence submitted to the Committee.

55 Scottish Council for Development and Industry, written evidence submitted to the Committee.

56 Scottish Council for Development and Industry, written evidence submitted to the Committee.

57 UK Trade and Investment, supplementary written evidence submitted to the Committee.

58 Airlink, written evidence submitted to the Committee.

59 Airlink, written evidence submitted to the Committee.

60 Scotch Whisky Association, written evidence submitted to the Committee.

61 Scottish Council for Development and Industry, written evidence submitted to the Committee.

62 Scottish Council for Development and Industry, written evidence submitted to the Committee.

63 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3460.

64 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3566.

65 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3567.

66 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3776.

67 Donald M. Blair, written evidence submitted to the Committee.

68 Aberdeen City Council, written evidence submitted to the Committee.

69 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3676.

70 The Eurotactics Consultancy, written evidence submitted to the Committee.

71 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3690.

72 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3674.

73 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3656.

74 Economy, Energy and Tourism Committee, Official Report, 24 April 2010, c3551.

75 More information on this body/network can be found at: http://www.businessclubscotland.co.uk/

76 Economy, Energy and Tourism Committee, Official Report, 24 April 2010, c3551-2.

77 Director of the MRC Centre for Regenerative Medicine at the University of Edinburgh and leader of a research group which led to the world-renowned “Dolly the sheep”.

78 Economy, Energy and Tourism Committee, Official Report, 24 April 2010, c3569.

79 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3668-9.

80 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3838.

81 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3838.

83 CBI Scotland, written evidence submitted to the Committee.

84 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3757.

85 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3478.

86 CBI Scotland, written evidence submitted to the Committee.

87 Scottish Council for Development and Industry, written evidence submitted to the Committee.

88 Scottish Council for Development and Industry, written evidence submitted to the Committee.

89 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3411.

90 Barclays Wealth, written submission of evidence to the Committee.

91 Barclays Wealth, written submission of evidence to the Committee.

92 Tesco Bank, written submission of evidence to the Committee.

93 Tesco Bank, written submission of evidence to the Committee.

94 Tesco Bank, written submission of evidence to the Committee.

95 Scottish Development International, written evidence submitted to the Committee.

96 Standard Life, written evidence submitted to the Committee.

97 Scottish Council for Development and Industry, written evidence submitted to the Committee.

98 Donald M Blair, written submission of evidence to the Committee.

99 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3549.

100 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3550.

101 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3552.

102 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3562.

103 Iain M. Lawson, written evidence submitted to the Committee.

104 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3463.

105 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3469.

106 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3765.

107 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3785-6.

108 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3754.

109 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3754-5.

110 Scottish Qualifications Agency, written evidence submitted to the Committee.

111 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3797.

112 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3804.

113 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3847.

114 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3848.

115 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3571.

116 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3574.

117 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3571.

118 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3572-3.

119 Economy, Energy and Tourism Committee, Official Report, 28 April 2010, c3574.

120 Scottish Council for Development and Industry, written evidence submitted to the Committee.

121 BioIndustry Association, written evidence submitted to the Committee.

122 BioIndustry Association, written evidence submitted to the Committee.

123 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3849-50.

124 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3673.

125 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3405.

126 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3750.

127 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3760.

128 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3771-2.

129 Scottish Development International and the education sector, available at: http://www.sdi.co.uk/Key%20Industries/Education/SDI%20Team.aspx

130 Scottish Council for Development and Industry, written evidence submitted to the Committee.

131 Scottish Council for Development and Industry, written evidence submitted to the Committee.

132 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3414-5.

133 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3505.

134 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3505.

135 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3504.

136 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3505.

137 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3508.

138 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3563.

139 Scottish Qualifications Agency, written evidence submitted to the Committee.

140 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3508.

141 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3430-1.

142 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3441.

143 Scottish Development International, supplementary written evidence submitted to the Committee.

144 Economy, Energy and Tourism Committee, Official Report, 14 April 2010, c3445.

145 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3780.

146 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3780.

147 CBI Scotland, written evidence submitted to the Committee.

148 Scottish Chambers of Commerce, written evidence submitted to the Committee

149 Scottish Council for Development and Industry, written evidence submitted to the Committee.

150 CBI Scotland, written evidence submitted to the Committee.

151 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3393.

152 Economy, Energy and Tourism Committee, Official Report, 24 March 2010, c3397.

153 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3490.

154 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3493 and 3495.

155 Economy, Energy and Tourism Committee, Official Report, 21 April 2010, c3501.

156 Economy, Energy and Tourism Committee, Official Report, 2 June 2010, c3702.

157 Economy, Energy and Tourism Committee, Official Report, 3 February 2010, c3117.

158 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3775.

159 Scottish Chambers of Commerce, written evidence submitted to the Committee.

160 Scottish Council for Development and Industry, written evidence submitted to the Committee.

161 Scottish Council for Development and Industry, written evidence submitted to the Committee.

162 Scottish Development International, written evidence submitted to the Committee.

163 Edinburgh Chambers of Commerce, written evidence submitted to the Committee.

164 Scottish Council for Development and Industry, written evidence submitted to the Committee.

165 CBI Scotland, written evidence submitted to the Committee.

166 Airlink, written evidence submitted to the Committee.

167 Economy, Energy and Tourism Committee, Official Report, 24 May 2010, c3682.

168 Economy, Energy and Tourism Committee, Official Report, 2 June 2010, c3769.

169 Diageo, written evidence submitted to the Committee.

170 Standard Life, written evidence submitted to the Committee.

171 Oil and Gas UK, written evidence submitted to the Committee.

172 Edinburgh Chambers of Commerce, written evidence submitted to the Committee.

173 CBI Scotland, written evidence submitted to the Committee.

174 Scottish Council for Development and Industry, written evidence submitted to the Committee.

175 Scottish Development International, written evidence submitted to the Committee.

176 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3770-1.

177 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3729.

178 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3730.

179 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3737.

180 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3738.

181 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3740.

182 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3774.

183 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3846.

184 Economy, Energy and Tourism Committee, Official Report, 16 June 2010, c3848.

185 Scottish Government, The Scottish Economic Recovery Plan: Accelerating Recovery, March 2010.

186 Scottish Government, GDP figures, 21 July 2010, available at: http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/gdp

187 USA economic accounts, available at: http://www.bea.gov/

188 Scottish Government, The Scottish Economic Recovery Plan: Accelerating Recovery, March 2010.

189 Her Majesty’s Customs and Excise, National Statistics Quarterly UK Regional Trade Estimates, June 2010.

190 Ernst and Young ITEM Club, news release, 6 June 2010.

191 Economy, Energy and Tourism Committee, Official Report, 9 June 2010, c3768.

192 Figures provided by UK Trade and Investment, supplementary written evidence.