Nice to see you. You must have been President. President. Thank you, sir. It's fine. Nice to see you. How are you, Mr President? I'm excited. Come here, President. How are you? Nice to see you, sir. Glad to see you. Fine over. Nice to see you, sir. It's fine. It's good to see you, sir. President? President. I'm going to say here that you can stay with us, bringing about a solution, leading your country, and how it is with you. Thank you, Mr. President. The President elected a wonder-expressing appreciation for having this opportunity to discuss with you the situation in Panama. Good to see you. Thank you. Well, honey, I have every confidence in you and taking over now and the negotiations there for the access agreement and the access agreement with Oman are very important to us. Well, thanks Mr. President. Our relations with Oman have improved greatly during the administration, and I hope I can keep in focus as well. Well, I'm sure you will. We're just a little something so you won't forget us. Thank you. Well, Merry Christmas to you. President Ambassador Brown. Yes. Good morning, Mr. President. Delighted to meet you, sir. Nice to see you. May I introduce my wife, Bill? Here's my brother, Matt. I'm so glad to be with you again, really. And this is my mother, Mrs. McConnell. Nice to see you. These are my daughters, Mr. President, Joanne Maria, and Dr. Margarita. She's a veterinarian. Wow. Anastasia. She's an actress, by the way. Wow. And one absent, our son is a B-52 pilot. I understand that. You couldn't make it. But I think we ought to have a family. All right. We just hope to be over here. Thank you. Thank you. Thank you. Well, we're taking over it. It's a rather strange time here.  Thank you very much, Mr. President. Thank you. I'm here. I'm here. Israel loves you, Mr. President. And they show hope that your policies will be sustained and we're confident that they will win. I can assure you of that. And I know George and Howard Fields, and they must realize that they made it with their weight. We have no intention of reducing our support and obligation to Israel. I understand that. It's a key word to me to say. Thank you, Mr. President. I think one of you wants to give up on your son. He's absent. He's a B-52 pilot and he will treasure this. Oh. Do you want the First Lady the very, very best wishes of all attention? And of Israel as well, sir. We thank you very, very much, sir. I appreciate it. Very much. We love you. Thank you. Ambassador Spearman. Yes, sir. Ambassador Spearman. Thank you so much. Let me see you. Thank you very much. Thank you. Well, I'm glad you had an opportunity to say hello to you. Please be quiet. I'm sorry. It's my wife. I'm sorry I'm sorry. I'm sorry. She's here with me. How are you? I'm fine. Good. I'm fine. Hello there. And my youngest son, Charles. Good to see you. Hello there. Now I think we ought to get a family group. Thank you.  That's fine, right? That's fine. Thank you. It's good to see you. It's good to see you. I know that one day you've got to have some mental circuits right here. Thank you. Thank you. You're welcome. Standing in the mirror again. I know it's got some problems, and I wonder if they're so good at taking in those refugees from the room. I understand now that many of them are returning. I left, and I just got a three-time job. And before the three-time job, most of those interactions will happen in this point, and you can see they've discovered that the situation. President Javier Ramona did a tremendous job in many days in this stable region. He played a great role in keeping the peace out there. We like to have him there. Well, we like to believe we've played a small part in it, but thanks to your support and the administration's support. Thank you. Well, thank you, and we wish you a Merry Christmas and a Happy New Year to you and let us know all of you. We sent you a little caricature of a soccer game that we played against the Soviets and with you and Mr. Delvershaw on one side, I don't remember if you ever had a chance to see it, but it was a little soccer contest and one of the people on our staff put it together and they beat us 15-3, 15-1, and 15-6. Well, we're going to fling them American softball when we get back. Mr. President and Master Tara. Dan, we're a little bit late with this, aren't we? It's so good to see you. Take it. Sure. It's nice to see you. And this is Judith, of course. It's such a pleasure. Why don't you get right in the middle of the night? Thank you. Thank you. Thank you. Thank God. Well, very good. Thank you. Vacation, yes it does. I'm grateful for the reminiscing. One day you get some rice. We'll sit down and talk about some of those. All right. Just a couple of souvenirs. Oh, wow. You're very kind. Thank you. Each of you. Well, I'm going to see you and thank you for all that you've been doing. Aside from everything, I did. I did. Two other speeches. Never wavered once for your policies. Never wavered once. Bless you. I know you wouldn't. It's wonderful. It's been a great eight years. Congratulations on your job. Well done. Thank you. Thank you. Thank you. Thank you. What's that. Thanks, nice to see you. Thank you. Merry Christmas. Congressman Phillips. Yes, hi. President, I'll probably warn you that I miss me. Congratulations. You know, it would have been a summary of the service now. That's what made this whole vlog this year for you, so we thank you for all that you've done. My wife, Margot. Yes it is. Thank you. Thank you. That's good news. And my son, Andrew? Hi. Are you a great person? Well, I think maybe we ought to give a family photo here, and maybe you would write, I think we, we're a minimum maybe flanked by the children, right, if I maybe one of you over here, okay, and then you should be in here. All right. Well, thank you. He was, he was a long process, but thank you. I want to just make you guys very thankful that we have the opportunity to do it. I'm excited to be here, excited to experience it. And I wish you a very, very best. Okay, I'll leave you with Nancy. See you again. We'd love to have you. We will take you up on that offer. Mr. President, excuse me, let me introduce Dave Poppy, Dan's top staff. He's going to be responsible for getting me back here. I'm going to work at it. Good. Nice to meet you.  Well, you know, the stranger, the fellow who was president, the stranger, and I don't know the best stranger, this is the number one. There. Dave Howard. Mr. Vice President, good to see you, sir. Now, what's happened here since I saw you? This is what's happened here. President, good to see you. Good to see you. You haven't seen each other in four years. I haven't seen you since when I last saw you at this thing. Now we know each other. Good to see you. Nice to see you. Hi, how are you? Good to see you.  All of us in the picture together or two separate pictures? Two separate pictures. All right, well, I'll be the one you have to smile to, right? Whoa, you take the lead. Yes, I think you want to be in the middle. Let's put that over here for the girls. Right. Jennifer, you can get in front of me. That's right. All right, girls, ready? Okay. I'm sure your baby sister did smile. At least she's quiet. That's the main thing. Okay, here we are. Here we are. Okay. You want any one of them? That's fine. That's fine. There we go. That's one, right? There we go. Do you have any help out there? Yeah. Thank you. Thank you, girl. Thank you very much. I have found out that babies get fascinated by that. Yes. That's all they look at. Tiffany, you want to get the first one? Her main concern is her thumbs. Her thumbs in her mouth. She's all the tricks always. August. August. Yeah. I'm ready to hear it. Second grader? That's for me. Oh, my God. That's what the president's got to present for you. Oh, thank you. Well, thank you very much. Thank you. That's very nice. Well, thank you. Now, we just thought that maybe you might have need for a book bag. You said you would be coming up to need one of those. And then that one's far away from what you needed. But maybe one of you could take it for your little sister or when she's ready. That's great. Thank you. And these are all for Mama and Papa's. Papa's got his arms over there. Thank you. That's all right. I've got a Russian story for both of you before we leave. Russian story? Russian story. An American entrepreneur went to Moscow and had a very successful week of doing business. He finished his business on Friday and his airplane wasn't late till Monday. So as Russian Ho said, is there anything he'd like to do over the weekend? And he said, well, yes. I'd really like to buy a sailor for my wife. And he said, oh, yes. Every visitor to Russia would like to do that. But it's a year waiting list, so that's not possible. He said, is there a second wish? And he said, well, if I could see the Bolshoi, I'd love to do that. And he said, oh, yes. Everyone wants to do that. Every Russian wants to see it. That's a two-year waiting list. How about a third thing? And he says, well, I'd like to see Lenin's tomb. And he said, well, that you can do. But you'd have to get up before dawn and stand in line for eight hours. And then just maybe you'd get to see him. So the American says, you just leave me alone and you pick me up on Monday. And I'll just be on my own for the weekend. On Monday morning, the limousine pulls up and the Russian sees the American come out of the hotel with a huge bundle under his arm. And he says to the American, what's that? He says, it's the sable for my wife. He said, well, how did you get that? And he said, well, it's very simple. I went to the shop and met the owner of the shop and said, I'd like to buy two sable coats, but I only have need for one. What you do with the other is your business. So he said, I got my sable. And he said, well, did you go to the valley? And he said, well, matter of fact, I did. He said, I stood in line and asked to see the manager and said I wanted to buy 12 tickets, but I had need for only one. And what he did with the other 11 were his business. And he said, and I suppose you saw Lenin too. And he said, well, I did. But I didn't get up too early. I got there about noon and the line went on forever. So I went to the front of the line and asked to see the captain of the guard and said, I've got $100 here if I can see Lenin. And the captain said, do you want to go in to see him or do you want me to bring him to you? Well, listen, thank you very much. Congratulations to you, sir. I gave him the Russian story about the Moscow Summit that we heard at the Moscow Summit. And this is their story. This is one they tell them in no sense. I've been collecting them. Well, this is the one that I am in the limousine with Gorbachev, the head of my secret service and me. And Gorbachev has his security man and we're sightseeing and we come to a waterfall and we all get out and looking at this beautiful waterfall. And Gorbachev says to my secret service, man, go ahead and jump over the fall. My man said, I've got a wife and three kids.  And he did. And my man scrambled down around the rocks to see if there could be a help down at the bottom and then ran his clothes out down there. And he said, when he told you to jump and go over the falls, why did you do that? He said, I've got a wife and three kids. Thank you very much. Merry Christmas to all of you. Merry Christmas. Good to see you today, sir. Good luck. Good luck. Merry Christmas. Thanks for my present. Thank you very much. Thank you. Thank you. Say hello to the staff. Of course. Yes. Three more to see more of those in the meantime. No more. Thank you very much. Okay.


Good morning and welcome to the 23rd meeting in 2022 of the Economy and Fair Work Committee. I have no apologies from members, but I have Fiona Hyslop and Michelle Thomson joining us remotely this morning. Our first item of business is the decision to take item C and 4 in private. Our members are content. Our next item of business is the second cost crisis evidence session as part of the committee's pre-budget scrutiny work. The purpose is to inform our pre-budget scrutiny work and the aim of influencing the budget before the spending priorities for the next financial year are decided. I welcome this morning Ewan Clark, commercial director of the Scottish Building Federation, who is joined with Ian Laird, Scottish Textile Industry Leadership Group, Paul Sheeran, chief executive officer from Scottish Engineering and David Thompson, chief executive officer of Food and Drink Federation Scotland, who is joining us online. I would like to thank the witnesses for coming in this morning. I would like to start the questions when we decided to look at the cost of doing business as part of our budget scrutiny. That was more than 45 days ago and quite a lot has happened in the past 45 days. I would be interested from the witnesses. The reason we looked at that was the high energy costs and recognition that users are sectors that are high energy users. Has the response from Governments been sufficient to quote the rises that you have seen? Is there further activity that you think needs to come, particularly from the UK Government, who has come forward with the measures around energy use? Ewan, would you like to start? Yes, absolutely. I think that for us in the construction industry, the support probably has not been as good as we would have liked. We have made approaches over the last few months. We were certainly encouraged to do so in the early mood music was that we would get some support over time. That has not actually found its way through to us. Generally yet, there have been odd bits and pieces of support. I think that we could probably be looking to do more support. The difficulty that we find with our members is probably how the contractual arrangements are set up and how that support would then find its way down into contractors and on down through their supply chain. You are bound by a contract, ultimately on any building project, so it is how that contractually finds its way down through the supply chain. The mechanism is not necessarily there to do so at the moment. We have made moves to get some additional support work that we have not quite found as much as we would like. The support that is being announced for businesses in terms of the introduction of an energy, the support with energy costs, is that the way in which it is designed does not really give the benefit to members? No, energy costs and construction is probably more of an indirect effect for us in our membership. We do not have a huge energy usage such as we heat and power our premises, we heat and power any building sites that we are on. Beyond that, it is probably the indirect costs that are coming from our supply chain in terms of manufacturing goods, products, et cetera, and how energy affects them, which then adds to increased costs. I guess that is good back to what I am saying about the contractual arrangements, how we then get that additional support. It is probably more of an indirect cost for us increased energy than a direct cost, because all we are doing is heating and power our premises, as I say. The committee did an inquiry into supply chains and we are taking evidence from the minister in the next couple of weeks about that inquiry. Some of the issues that you have identified are things that we have looked at earlier this year, but we recognise that the pressure is probably greater than it was at the start of the year. Yes, it is not as bad as it was, but we are still at a level that was greater than many of the projects that were priced, so there have been additional costs that ultimately our members have had to absorb at the moment, whilst we are waiting for the outcome of those further discussions and how that support finds its way down to the membership. Ian, you are the textile industry group. Is that an area where the energy costs have had a big impact? Yes, absolutely. I suppose that in a couple of areas, as a sector, we are manufacturing, but we employ a lot of people, so it is relatively labour intensive rather than capital intensive. Obviously, part of the concern is about employees and skills and labour costs, and so, at least the commitments that are made, even if it is for six months, to help people through that winter as consumers and support that, takes off some of the pressure on concerns—it does not take off—it alleviates some of the pressure that was there for consumers and our employees and them thinking about their living costs, and that would have flown into pressure on wages. That, albeit that six-month initiative, has a benefit, but in terms of the direct support for business, it is not enough, especially as an export sector, where we produce a lot and go overseas, where we are competing with countries that have got various other initiatives in place. In terms of France, it is obviously state-owned energy. The level of subsidy there is much greater. I think that they are seeing no more than something of 10 or 15 per cent increase in costs. Other places such as Italy have got different frameworks and models in which they can look at their energy costs, but our level of cost impact will be worse than those countries. Further afield, such as Asia, they are not really noticing the same level of increased energy costs. As an exporting sector, we find that those global pressures could do with more support, certainly in energy. Paul, the committee is looking at the cost of doing business. For your members, what are the factors that are driving that up? Is it energy or are there other factors that are more significant? There is a broad blanket of costs that have been rising. I am sure that you have heard before at this committee about materials costs, logistics costs and people costs. Energy cost is a right one to focus on, because what is different about it is that it is not evenly spread in the impact. You talked about it 45 days ago. We had our member companies telling us that one-third of them thought that they were at risk of having to either reduce staff or even go out of business because they were facing energy costs increases of an average of 3.6 times, but some individuals up to 10 times their current energy costs. Now, while the cap has helped with that, what brings it down to is an average of between 2 and 3 times increase. Manufacturing can have energy intensive manufacturing. Its total cost can be up to 50 per cent energy, so you can imagine the impact for those businesses. The timing thing is that all those other costs—materials, people, logistics—generally were broadly spread evenly, so people felt it at the same time. Maybe a little less so for the largest companies who could use the volume scale to get slightly better pricing. With energy, 45 days ago, giving us September, 48 per cent of our companies had experienced the change since energy cost started going up, which means that 52 per cent were still experiencing them. When we talked to them, they had contracts until later in 2023 or even 2024. We have a few who have very lucrative contacts in pace until 2025. What that does is, from a competitive point of view, is that those who are by dint of the bad luck of having the timing of their energy contract changing are a significant competitive disadvantage from those who, just by good luck, have an energy contract that lasts longer. I would reflect on what Ian said. Our competitiveness on energy against Europe, our closest neighbour, customers and competitor, we have just fallen further. We were second bottom of the EU14 in quarter one this year, and that gap has only widened since. David Thomson, who is joining us remotely, has anything to add to that, David, in terms of how your sector is coping with the cost of doing business increases? Food and drink manufacturing is 26 per cent of the Scottish manufacturing workforce. We employ 47,000 people, but 95 per cent of those businesses are small and medium-sized enterprises, lots and lots of small businesses across the whole of the country. Of course, energy is a major part of that. When you are baking biscuits or brewing or anything like that, you need a huge range of energy, so we are very energy sensitive in price costs or energy. Reflecting on what Paul and Ian said, there are significant issues that companies are facing in price increases of five, six or seven times. That has gone down to two or three times, but it is still a significant increase if people are coming off contracts. Therefore, there is still a lot in terms of cost that is being added to businesses, even with the Government's support. I have to say that we were very encouraged by the UK Government's support. It has made a huge difference and removed a lot of uncertainty, at least for a period of six months. It has been a very positive development, but we do not think that we would necessarily come to pass. There are still similar cases of education that Ian set out. Some elements where you are off-grid or you use different bits of power, the details are not clear and they are not really clear yet. We know that the Government is having a review. Bays are currently having a questionnaire out for businesses on the costs and what they would like to see beyond the six months period. They have only given a week to respond to that, so it is an incredibly short period of time. We have, of course, been advising our members to make sure that they have all the data and evidence there. The UK Government is doing it. They have a survey out, which is part of their consideration of what happens next after the six months period. Obviously, we will be making the case for future support for the food and drink industry because of that energy sensitivity. We need businesses in business to keep the nation fed, but many businesses, such as heating and so on, go down. In the summer, things like refrigeration and freezing costs go up in the summer. For some food and drink businesses, some costs go up over the summer period, as well as going down because of the lack of need for heating. The only other thing that I would say is that support for people as well, as I said, we employ 47,000 people, so that has done two things. It has helped many of the manufacturing workforce, but it has also reduced some of the pressure on businesses, in particular when they are trying to match the costs of living for people to make sure that they are properly rewarded. That, in itself, has been really useful. Unlike the others, there are a whole range of other costs of doing businesses, from material costs, labour costs and the costs of policy, which have an impact. I am sure that we will discuss that during the next session. Mr Thomson mentioned a survey from the UK Government. The Scottish Government is due to undertake an emergency budget review at the moment with the statement during Parliament quite soon. It brought together an expert panel. Has there been any consultation from the expert panel or the Scottish Government about what needs to be done to support businesses? The programme for government for 2022-23 was quite light in terms of business support. It mentioned the small business bonus scheme, which we have heard for a while, and it talked about lowest poundage, but there were no new announcements in the programme for government. Has there been any consultation either through the expert panel or through the Government about—I know that we are working to tight timescales—but has there been any discussions? Is there too much energy? I will just support more broadly. I suppose that both. Has the expert panel advised the Government on the budget review? I guess that— Have you had an input to that? I will come back to what I was saying originally. We had some formal discussions back in April of this year, where a few of our members and non-members, if you like, about other contractors were represented in discussions here. It was Shona Robison, Ivan McKee, among others that were in attendance. We set out our case about how, at that point, rising construction costs of which energy is clearly apart were hitting our membership. We have certainly had the opportunity to have those discussions. That was in April. Has anybody had discussions more recently in relation to the— When you consider that there is a macro-level support, such as the cap, as it were, for the next six months or six months, reserved, probably the most useful thing, has been the business energy support. I have got the name right for that. It has been heavily promoted and we have been sharing it. There are a lot of companies out there, as you would expect, who are looking for ways to reduce their energy usage. That programme, which has been quite actively taken up by SMEs, is probably the one that I have pointed to. The most is being really appreciated. Did you want to come in? I was going to say that I am not aware of that consultation. I will bring in Graham Simpson to be followed by Colin Smyth. David Thomson, I just want to ask another question about the survey. Is it just directed at the food and drink sector, or is it wider? It is wide for all businesses and, as far as I am aware, it has been run by the business department in the UK, but it has been promoted by other UK departments. It only came out very late on Friday night, and the responses are due, I think, by midnight on Sunday. It is not just food and drink. It is a questionnaire. That is useful. At the start, you said that you felt that there was not enough support, but you did not expand on what kind of support you thought there was not enough of. Can you do that now? I suppose that there is financial support in terms of assistance with additional costs. I think that we have all seen that. It goes way beyond the construction industry, but the source is that labour costs more, materials costs more, costs more to make goods, costs more to build things as a result of that. It is fair to say that contractually we have not had support to those additional costs in the last year or two. Are you asking Governments, UK and Scottish Governments to give your sector additional support? Yes. That was the basis of the discussion. So, not statistically for energy? No, it was not specific to energy. Energy is a part of it, which has led to additional costs. Clearly, if you are manufacturing goods, if you are supplying anything, energy is a part of those increase costs. There is a lot more to it, but energy is clearly a part of that. We had those discussions in April to reach out and try to find a way of getting some additional support. It has not been an absolute no. We have not been rejected out of hand, but the discussions go on and there is evidence being presented whilst we try to find some common ground, because contractually the mechanism is not there at the moment or in some forms of contract, the mechanism is not there for that additional support necessarily. Ian, from the textiles sector, you made the same point. So, I suppose that we are all facing the economic challenges and that is going to be hitting us with inflationary costs and then what we can try and have conversations with customers about what the right level of that cost being passed on is. Many of the companies are living wage employers, so that is a 10% increase in costs that we are looking at next year. That is fairly fixed. We then have the kind of costs in energy, which, if it is a factor of two or three, is significant. We have global trade, transportation costs, energy costs and supply chains, all our input materials are coming up, and that for us is actually compounded in the reduction of the exchange rate because commodities are traded in dollars. In theory, we might get a benefit of being exporting, but there is just the pressure on costs and in having those cost conversations with customers, they want to see the breakdown of, well, why are you getting these increases? What can you do to minimise your labour? What can you do with a productivity challenge, which is fair, but on energy specifically to overseas customers, they say, well, we are not seeing other people's energy go up the same. Why is it that you are saying that energy is going up this amount when that is not the story we get from France or Italy? I think that you might make the same point. I did, but I echo what David said. I think that we are really appreciative of the UK Government's step in for energy and I think that without that would be in a really tricky situation. Equally, I think that it is also important to understand why the six-month shortening is critical to considering and this survey is at the heart of that and, like others, I am sure that we have heavily pushed that out. Our members say, look, you need to get your voice out there and you need to fill that in, but the bit that underlines that is this part about the reason one-third of our companies are saying we are at risk of being able to sustain the businesses because they have orders which they have taken now in good faith based on a forward assumption of what energy cost might be and they were looking at up to 10 times increases or actually if you are a small SME, so we think that the cut point was around less than £15 million revenue. You are being told, I am sorry, we are not offering you a contract, you will get the spot price and that is something not being able to plan is the absolute cash risk for companies of being able to say, we have to act responsibly as directors and consider whether we can sustain this business. I was going to ask and I think that the three of you have answered it what you would be looking for from a budget UK or Scottish Government budgets and that basically comes down to more money, but while you were speaking, Paul, I saw David Thompson nodding quite vigorously, so he may want to come back in. So yes, I mean yes, I nod, I often agree with Paul, I nod very vigorously there and it is those kind of long term stability what businesses need, so the six months is incredibly welcome, it would be even more welcome if there was a view to push that further. We understand the issues with the amount of money that is available and the pressures that both the UK and Scottish Governments are under, so we do not expect any special favourers, but that kind of incredible level of support has allowed businesses to plan with surety and those long term contracts are absolutely what happens in the food and drinking industry, there will be people beginning to put together quotes now for Christmas next year, for example, and so it's that long term stability, just clarity on the costs that allow people to price appropriately, which means that number one, they don't lose business and number two, they don't lose their company if they're pricing. Thank you. Colin Smyth, Michael Chapman. Thank you very much, convener, and good morning to the panel. Can I turn to the issue of your workforce? You all represent sectors that are obviously very labour intensive in the staff that your members represent will be feeling real pressure at the moment, in the same way that your business is feeling pressure. Can I ask what impact that is having on the businesses? What sort of level, for example, of wage demands are you getting at the moment? To what extent is your sectors able to meet those particular demands? Is there anything that you can say about ways in which you're able to support or are currently supporting the workers or your businesses that are supporting the workers in each of your sectors? I think that it's been front and centre at the minds of businesses in our industry. The consideration of that comes hand in hand with, I'm sure that you've discussed here too, we have a skills crisis in Scotland. It's a numbers thing, we don't have the volume of people, we have low numbers of 17-year-olds, we have low numbers of everybody. I don't think we quite understood the benefit that we had from free movement of people and I think that that ripple in the carpet has reached the edge of the room quite sharply. I think from that point of view companies understand that in a high turnover labour market losing staff is a deeply difficult thing in order to deliver full order books, but more than that replacing them is even harder. We've seen a good approach across the sector, there's been use of quite innovative things such as salary increases plus cost of living payments, which does two things. It helps people out, basically going into winter, but at the same time it doesn't burden the business with costs that if those input costs come back down, the business would become unsustainable because it's uncompetitive. There have been examples where some of those increases have been a flat increase so that it's proportionally the highest for the lowest paid within the organisation that it has. The phrase, hunger makes good kitchen, companies are really aware of the value of hanging on to staff and I think that there's been some really good examples of how companies have tried to adapt to that to make sure that they do just that. I would echo a lot that skills are probably the single biggest concern in terms of the sector at the moment. In fact, in terms of demand, even despite this economically challenging situation, many of the companies in the sector have actually got good order books, many getting back to pre-Covid levels in terms of sales business. The key challenge is about fulfilment and delivery of that and the importance of both retaining and attracting the right skilled people. The Covid time has meant that people make different choices so we've had a loss of skills from the sector and getting new people into the sector and trained at the rate that we need them has been something that's been hard to do. We still struggle with that and an example would be even a recent panel that we did for apprentices. We invited 12 people along to it, six turned up of the six, we offered three. We've had one that was due to start this week that hasn't showed and so in terms of a pool of 12 actually we've got two that we've offered that hope can turn up but that's actually trying to get apprentices in. That's also paying apprentices a living wage rate rather than an apprenticeship rate and so just trying to get skills into the sector is a big challenge. It's magnified by the movement of people that has certainly impacted adversely for us so skills is a key challenge for us but so too is the workforce who've been through a hard few years, lots of uncertainty, this economic pressure is higher on them and so we see a lot more issues around about mental health, mental wellbeing, we do a lot more around about the workplace we're creating, about providing that support, whether it's through mental health first aiders, whether it's through having physiotherapy and yoga type stuff bought on site. Just looking after the employees we've got to support their wellbeing is of much greater importance for businesses now because we can't afford to lose good people and we can't place them at the right rate and we also want to do the right thing by supporting people through this and one of those pressures is the economic one and so we very much need to look at the increase in living wage and if that's 10% if you don't move up other salary bands correspondingly then you actually get an erosion of skills because if we've got a skilled person who can go and make the same money stacking shelves in Aldi that maybe suits them better then we lose those skills as well so we support the fact that Scotland is driving better wages for people in the business and as sectors we're all trying to attract and train people but what we can't just do is compete with each other and I've taken from engineering and engineering takes from food and drink and we have this merry-go-round we really need to be elevating the skills and the attractiveness and I think a key challenge is about how do we get people who are not economically at a value and and not in the work situation working and that might be people with you know autism or other characteristics in prisons you know and I know it's a societal challenge but we need to be more creative in terms of how we get these people contributing because we're shorter skills the areas that Ian's referred to so part of the budget proposal is to make a reduction of 53 million to the employability budget that was planned for this year and that money is focused on those who are furthers from the labour market do you have any I mean you know the government have justified it by saying the labour market is tight that people aren't short of finding employment but it does then reduce the services available to harder to reach members of the workforce do you have any concerns around that I think I think it's important that we support getting people into work and supporting the skills for that so if I give you know we've had some success within textiles so company acs in Eurocentral has been very good about taking autistic people who've got special skills and we can use those characteristics to get them into employment but it does take support there may be not the same productivity in the early stages and there is some support available but it's constrained by needing to be a commitment of least a year and businesses particularly seasonal businesses don't necessarily have that year's visibility to make that commitment and so you know to be more agile in working in partnership to create the right kind of workplaces that we can create that useful employment is something we would welcome and get those people into being productive and adding value to our businesses thank you mr smath so it's a really important point because there are a huge group of people out there that will make a huge contribution to businesses like yourself but they need that support to get in there so that's a really important point in terms of well I won't touch too much on skills and labour shortages because my colleague is probably going to ask you a little bit more on that but I don't know you and if you want to maybe touch on the support that your sector is able to provide well excuse me very much echo what the guys are saying how it affects ourselves and how we see you know the opportunities there for getting people into the the industry i think in terms of keeping people employed has been difficult our workload is there but getting projects actually started on site for our members has been difficult as construction costs increase so it takes maybe a wee bit longer to get them you see the reduction in projects as a result of that for example the public sector will have only so much to spend are they building fewer schools at the moment or are you seeing a reduction in not um no they're still there but what's happening is as time goes on construction costs are increasing so there's potentially set budgets or affordability caps for whether it's housing whether it's schools whether it's healthcare projects and more often than not a project will come back over budget which then sets you off in a whole different journey of trying to get affordable whether that's through making savings value engineering all that kind of stuff and as that happens it then becomes difficult to to retain your employees your workforce because you don't necessarily have bums on you don't have places for them to go and be gainfully employed so that leads to inefficiencies as well um and how your operation economically so um that is difficult we did i think we probably all saw a bit of an x this after certainly the initial lockdown during the pandemic you know one of the one of my colleagues had referred to it as an over 50s exodus where maybe just a change in mindset people decided they wanted to do something completely different to working on a building site looking inwardly at ourselves but and do something else while while they had the opportunity so there was we did lose a number of operatives um through that and it's difficult to replace that with you know a meaty apprenticeship programme it sounds as though we're maybe going to come on to that shortly but um when you don't necessarily have the surety that you know when the next tranche a project is starting and getting people involved and make and creating those opportunities such that people can come in and get started attracting apprentices is difficult as well you know we we all go to employment fairs we all try and attract new people into the industry and you do find it that numbers and enthusiasm isn't there what it used to be perhaps 10 20 years ago so it is difficult to keep that going but it's difficult to keep your um your workforce working efficiently at the moment just in terms of getting surety and when the next next workloads coming on so it's tough David wants to add to that i'm in terms of the the impact on how your support and how your members are supporting your workforces yeah sure and specifically about that rather than and we have similar labour problems which we might get on to and so that means that companies are looking at all sorts of different ways on our website we've got a whole range of fair work examples that food and drink manufacturers have been using so we've used some of our skills support to be able to promote businesses that have fair work packages obviously pay increases have been coming through that's out you know one of the cost pressures on businesses and also thinking about different ways of incentivising and supporting staff over what will be a pretty difficult winter so businesses are doing all they can to actually hold on to skilled staff because at the moment i think our quarter our quarter three figure for unfilled vacancies this is a UK figure because we're not disaggregated it yet but it's pretty pretty similar is 9.1% unfilled vacancies in food and drink manufacturing and companies have been holding at that kind of 10% down for a significant time so that puts additional pressure on people so companies definitely are you know looking at what they can do to support staff thank you Maggie Chapman to be followed by Gordon MacDonald thanks very much take good morning to the panel thank you for your your comments so far David if I can start with you and just unpick that a little bit when you talk about the 9.1% of vacancies is that directly related to the specific types of jobs or specific earlier you mentioned that 95% of the businesses you represent are small and medium businesses is are they what's the variation across across the the organisations than businesses you represent yeah it's um it's pretty consistent i have to say um obviously one person me can sometimes be more than 10% in themselves so um uh you you get fluctuations uh there but it's pretty consistent uh in that um you know we are struggling uh number one because people as as as Ian suggested are moving between businesses and others and as Ian suggested they may be choosing to do to do different things um we're struggling because some geographies are more difficult as food and drink manufacturing all over the country um and you know there are issues of remote and rural access but we're also um struggling because um you know there are skills that we need which are very similar to the skills that the other colleagues on the on the table will need in terms of science technology engineering maths um um we also need green skills um we need digital skills um we need to be able not just to think about that for new entrants but to think about that for people who are already in the business who will need to upskill um as we move forward one of the key things that the labour has um you know pushed people to think more about automation um and that in general is a good thing because it enhances productivity it gives people higher quality jobs but obviously we need different skills for that than perhaps we've had in the past and so all of that means companies are rethinking uh how they how they support staff and in particular you know there is a big gap in some of these skills for the future that i've set out thanks David that's helpful i think in when we try and grapple with the the mismatch of labour shortages um skill shortages and the the vacancies um one one of the one of the things that it strikes me sometimes that we we are trying to fix fix the same problem with solutions that actually aren't going to be aren't going to be fit for the future and and your introduction there of automation and shifting how business works i'm just wondering what in terms of the Scottish Government's budget what what are the kinds of focused supports that you would like to see coming from from the Scottish Government around that those kinds of areas trying to trying to pull together the the vacancy labour skills gaps given automation and actually what could be quite a quite a significant transformation in how we do what we do how you manufacture what you do yeah it's a really good point um so we've been very clear in letters and in discussions with the Scottish Government about a couple of things the first is we we are a recipient of Scottish Government support so we've got a food for the future programme which is looking at the skills system and how it supports more people choosing the food and drink as a career and that continues to evolve we've actually got a meeting later this week to discuss next year's strategy on how we develop that and that's about kind of things like promoting the fair work agenda thinking about skills for the future like green skills and you know helping both educators and the industry understand the type of dialogue that they need to have in order to make sure that they've got the right right people in the right places going forward and on automation we've been very clear that that's a key thing for the development of the industry in Scotland to support productivity and to support higher school jobs and so we Scottish Government has tended to support projects in food and drink manufacturing through various grants and what we've asked for is any grant one of the criteria has to be around how it's supporting greater automation and then greater productivity and that's quite difficult sometimes because sometimes grants are judged on how many jobs they provide for an area rather than necessarily how much more resilient they make a business and so you know that there's a bit of a there's a bit of a kind of sense change in terms of actually we need to concentrate on the automation but because the labour market is so tight and it's likely to remain tight for some time. Okay thanks David Ian if I can come to you you mentioned that I think you said up to a third of of the businesses are thinking about reducing their size and letting people go or potentially closing given the cost issues that that you're facing was that Paul. It was sorry sorry yeah but it was bad news it's bound to be me. Thanks Paul if I can ask what what are the I suppose what are the knock on consequences for employment more generally around that and are you seeing how are you seeing the tension between people wanting to work although I accept what we the panel said about shifting in shifting in people's approaches to employment but how are you balancing those kinds of tensions so there is definitely a tension there and I think you know you take this in the context of the overall pressure on costs pressure on costs pressure on energy and all those things the surprising thing is that for our sector we have just experienced the sixth consecutive quarter of growth and we're forecasting the next quarter to be the seventh consecutive quarter of growth and those are unusual bedfellows you know they normally when with all those pressures optimism falls tightening of belts and so on I think you need to be I need to be careful about the the energy pieces we're talking about companies who have got full order books who by dinner of running out of cash are saying we will either have to cut jobs or even cut the company because we cannot sustain you know and it's that situation of you have let a bunch of contract contracts on an assumption a worst case assumption on energy costs and if the energy costs are above that you're on the hook legally for those contracts but you cannot fulfil them and and without running out of cash so that's the consideration to have there I think on this you know if if I heard you correctly you know tying back to the skills issue we you know the point I made and what support we are flat out of skills just now and the two largest engineering projects on our on our radar are the two essential type 26 and type 31 both of them cannot get as many welders as they need you know to comfortably keep those programmes moving at the rate would all like this to see them and going Scotland has 12.8 billion pounds of Scottish manufacturing spend committed within it and most of that a big chunks of it will be fabrication and welding and our challenge there is is a nation of SMEs and I say that for Scotland and I say that also for the UK our challenge there is is that SMEs struggle to invest in the kind of skills that they are going to need in four or five years time when there is not direct line of sight to the purchase order that is going to pay for them and so if you look at our ratios of work based learning in Scotland and the UK and compare it to some of the nations that we would like to compare ourselves with we're just not at the races and so I think and it's a broken record for me every time the work based learning apprenticeship support to enable to you know to make sure that we do not miss out on huge opportunity Scotland's one example renewable heat is another example hydrogen futures you could add to that decarbonising transport all of which we want to see the maximum amount of value flowing to Scotland from if they all landed today if they were genuine often running projects today we do not have the people to do them and it's not even about green skills or any other because most of them just require good skills of the kind that we've got but we don't have enough of them and is that I mean there's a people shortage which several which you've all you've all mentioned in different ways some of that is is not within our our control but I suppose what what would you look what would you like to see us do to to try and support the attractiveness of welding of of those kinds of fabrication jobs so I think there has to be so I appreciate you know there are no money magic money trees anywhere you know neither for the Scottish Government or the UK Government but I think when when you face something as stark is that you have to look at well how do we split up what we've got you know and I do think there has to be a heavier emphasis that's put towards work based learning right otherwise you know and I'd be the last person who would want to see us missing any opportunity from from from what's ahead of us but we could unless we do something different okay thanks Paul Ian apologies for for for getting you next up earlier in terms of your your industry your sector the skills and labour balances do you have do you have the same sort of mismatch or are they just gaps everywhere I would say there's fairly broad gaps and we range from we don't have very large employers I think probably the largest is probably just over a thousand people up in Elgin and then we've got hubs such as Huyk in the Borders where has a number of companies and but probably the average number of employees per company in Scotland is only 14 so a lot of small companies as well and that ties in with with what was commented about on the on the skills development the productivity agenda is is right and we all recognise the need for more investment and and probably automation contributing but but just as we need different skills and whether that's control engineers so to in textiles it might not be the welders we're short of it might be the people who are taking the network and linking the arm to the body and that's very much a vocational training it's not necessarily people leaving the degrees it's people that have gone through skills programmes maybe from school apprenticeships and that type of thing and we will always have a need for it and and the people who don't want to go to university aren't inclined to do that academic study and textiles provides fulfilling careers for people doing that so we need to be helping support people into that industry and and the openness to consider different methods in different ways doing that is is key and I'm encouraged by some conversations we've had with things like skills development Scotland around about piloting different ways of doing that so there's some I'm encouraged by some of that initiative. Thanks I was going to ask what engagement you'd had with SDS so that's good to hear. Ewan if I can come to you there's the same kind of questions around the mismatch of skills and probably a very similar answer as well I think from just going back to what I'd said earlier is as you lose maybe some of the older members of the workforce you're really looking to get new opportunities for new entrants coming in whether it's trade apprentices whether it's professional apprentices whether it's people earning while you learn in terms of part-time education doing honors degrees and things like that for more professional roles within the construction industry and it's getting it's not only attracting apprentices it's actually having the pipeline there to allow you to to give those opportunities so and it all it's all in the mix together as you don't have these new projects coming online because of whatever issues and challenges we're facing you can't necessarily then have your membership going to into the schools into the colleges and all all of those places where you go and get some really you know good talent and if you don't have jobs for them to to come on on board then it's difficult to attract them and then you once you lose them they're gone because they're away doing something else for ever so that it's a real it's a real concern for the construction industry in terms of future future skills and growth in terms of the automation part off-site manufacturers obviously a hot topic in the construction industry many of our members will promote it in terms of that's what the the core of their business is others don't if i'm speaking you know personally i'm a i'm a director of Ashley down in Ayrshire we do promote trade apprentices we that's our preference it always has been we're quite traditional in terms of that and we want to continue to do that but we recognise that off-site manufacturer has a place and many of our members provide that service you've got to weigh that up in terms of cost and productivity and what different skillset that will bring and there is a place for it but you've got to weigh up where that sits in terms of what you're looking for but the the primary concern is getting opportunities out there for you know new income and talent that we want to come into the construction industry but to do that you've got to have the pipeline of work there and it goes back to the the original point in discussion I guess about what the challenges are and getting that going okay thank you Gordon MacDonald we followed by Colin Beattie thanks very much convener I just want to pick up on a point that it was yourself Paul that made earlier on about the removal of loss of free movement and I'm keen to understand what impact that has had on each year sectors you know my own background before I was elected was public transport and we had a large proportion of EU national superdrivers and that has clearly changed because a lot of them went back home after Brexit and I've certainly joined pandemic as well so I'm keen to understand what was the proportion of EU nationals that were in your sector roughly and how has that changed in recent years and would you be supportive of a devolved immigration system that happens in other countries in order that we can plug the gaps because you know again Paul you touched the point of fact that you know if you're not got a workforce you can't fulfil the order book so how do we close that circle because you know we are at full employment in Scotland 3.3 per cent when I studied economics many many years ago 4 per cent was considered to be full employment we're at 3.3 so you know if you can say a wee bit about the EU nationals yeah so absolutely it's been it's been a really significant I can't give you a number I'm sorry to say I don't know that I know that it anecdotally for me it varied tremendously regionally and so but we were going to companies where you know 30 35 percent of the workforce were EU nationals went into companies where there were interesting things going on such as the canteen had you know a particular cuisine day or signs that were up in dual language even lunchtime language clubs so you can communicate with your colleagues more easily I think if you see what sits underneath that I suppose to try and bring some balance and I think it did mask a little bit about us not growing our own at the rate that we could and I think the principal reason for that it goes back to the change that we've experienced across the board in moving from a balance of size of their companies to predominantly an SME led sector and I think that's important to note however I think really what what's happened is that we've had some masking so the masking being we had a tail-off of people choosing to leave to return to the EU coupled with the impact at Brexit of it was no longer easy for people to come and and it isn't easy and I give my example of the of of of welding shortages across Scotland and one of the strongest difficulties in that for even for the largest company who have the resource and the horsepower to be able to go through the process of bringing someone in is passing the language test and I know that's something that's probably in discussion and I hope it's something that the UK Government will will reconsider because it's an easy I think it's an easy and early one that could help there and I think I think beyond the pandemic and slowed down in industry coinciding with the sort of the timing on Brexit meant that we didn't really start to feel the true impact of it and still industry started picking up you know as we started coming out of lockdown and out of pandemic and I think that's what's what's made it front and centre to go ouch that that really hurts and right now companies small companies who in the past would have said look do you know what I'm going to go I'm going to go to a European country for the weekend we're going to set up in a hotel we're going to do registration and interviews and we're going to pick up five or six staff that's that was something that they could easily do and that has gone and it's a real impact okay Ian I don't have a sector view for the company I run so I run a business we employ at the moment about 200 people probably four years ago five years ago 10 percent of our employment would have been EU nationals and that's probably now five percent or the percentages halft we probably haven't lost too many we've maybe lost a couple but what we've not done is as we've grown we've not been able to attract people in and the jobs they're skilled jobs they're hard to create the skills and it takes time it's a apprenticeship that takes a few years but they're not high value jobs they're not 35 grand that you know it's physicists and we could articulate the need to to bring people over so it just it just means the door is closed and we can't address it so a different way to attract those skills there where their gaps would be helpful okay you very similar I think prior to march 20 the construction industry generally we were flying there was a number of EU nationals over working carrying out a variety of roles that potentially did mask opportunities for apprenticeships or shortages in that at the time certainly helped plug gaps and again I don't have the stats either but it will be down now compared to what it was pre-lockdown in terms of EU nationals working on building sites across the industry some of the some of the bigger developments and you know major major construction projects will still have a number of EU nationals working on them but certainly in terms of the smaller SME type membership they'll they'll have seen that quite significantly reduced and what the level of vacancies within your sector just now in terms of joiners and bricklayers et cetera well there is a number of vacancies so there again to tangle it slightly more personally we've just recently advertised for for two joiner apprentices which is late in the year and it's a lot less than it has been in previous years but a couple of recent awards have allowed us to do that so it's less than it would be normally but you know we're generally encouraged because we weren't able to do any last year so we do see it as an improvement and we're hoping that next year again if you know if we can release the floodgates a wee bit then we'll certainly be able to target to target more again but there's opportunities there I wouldn't say there's a massive shortage at the moment but I think as the workload picks up and the pipeline picks up we might begin to see a slightly different picture in the environment. As members will have observed, Dana Thompson had to leave us this is for understandable reasons and he's given us apologies for the rest of the meeting. Colin Beattie to be followed by Fiona Heslop. Thank you, convener. We've heard a fair bit about the cost of doing business, we've heard a fair bit about labour shortages and the issues around that. I suppose the other side of the coin is really the consumers, the people that are buying the products. There's been a number of policy announcements by both the Scottish and the UK governments although I'm not sure whether we can rely on the current situation as far as the UK policy pronouncements are concerned, there's likely to be changes in that I would think but how concerned are you about the longer term outlook for consumer spending and demand for goods and I'd like to start with Paul because he was remarkably cheery about the health of the order books. We're in a personal opinion range and that's never a comfortable place. With my optimistic hat on, I think that our sector could be somewhat insulated from that and I share the same concern from a societal, from a consumer point of view. The reason I have that concern is that post-pandemic there are a number of things that have happened which are causing those order books to be as full as they are. One of the principal ones in the engineering sector in Scotland just now is around the fact that no one wants to buy another cubic metre of Russian gas if they have to and so we have seen a growth in projects in existing extraction that were previously on hold for literally years, which have been taken off hold with some urgency and so that sector is busy. The other sector that we saw a real impact to aerospace is busy, partly for the renewal of fleet to less impacting aircraft, so the new fleet, new wide body, new narrow body, but also the space sector in Scotland, which is busy. If I couple all that with an optimistic future, which is that we cannot take our eye off the climate emergency and therefore the actions that we identified to address that in terms of decarbonisation of all the things that we've got choices on, I don't believe we have a choice on that. Even if you look at that from, I talked about Scotland earlier, £12.8 billion of manufacturing spend in Scotland. I'd see that alongside decarbonising heat, alongside decarbonising transport, alongside hydrogen futures, which I think Scotland is so well placed to take advantage of. I have a bit of optimism that we may have some tough times that wash over from what the broader economy does, but if we are doing the right things, the sector should be somewhat insulated from that. Ian, we're hearing a relatively optimistic view there, and yet when you come down to it, your average man on the street is facing rising food costs, exponential increases in the cost of their energy, the disposable incomes shrinking, and that's bound to have an impact throughout the economy. How do you see, how concerned are you about consumer demand? It's very strange because I agree with, we're looking at all the challenges of cost increasing, you know, across the board of inflation and the challenges and the skills we've talked about, and yet for the sector we are also strangely buoyant at the moment, and looking at demand and thinking this could well carry on for us. Now, the textile sector is generally making high value products and largely export, so we've got cashmere that's going to the best department stores in Tokyo and New York, and those are the consumers that are probably not so affected by the current conditions. We've got technical fabrics going around the world as well, we've got leather going into mulberry handbags, so the products made in Scotland that are created are tending to go into consumer products or applications that are relatively high value and which may not be as impacted by, I suppose, the squeeze that we see happening, and that's why the main concern about the cost of living really is actually for our employees, because, you know, we need the employees to be producing what we're creating, rather than thinking that end consumer of our products will disappear, where we share some of the same optimism that Paul has about the products that we're producing are best in class, are world leading, and there's a good demand. So it's slightly perplexing, because on one hand you're looking at it thinking, are we going to just fall off a cliff, can we really talk to customers about double digit price increases again and not have a softening of demand, and we've been through this already and you think, surely at some point demand is going to crash, and none of us want it. We're apprehensive about it. It also means we maybe hold back on some of the investment, because you think, you know, can this really be sustained, but the reality is at the moment that the order books are all good. Another optimistic person, Ewan. Bless you. No, I need to look at it from a slightly wider perspective, I guess, depending on whereabouts in our membership, you're pitching the question. So, if I look at it from the private housing market, there's most definitely been a slow down. There continues to be so, and I believe that's consumer driven, obviously, whilst there's a wider volatility around the interest rates and stuff like that. So that has seen a slow down. That will see no doubt some of the private house building guys reduce employment opportunities and potentially see a further loss of operatives wherever they may go. In terms of, you know, some of our smaller membership, they'll have seen smaller type projects, you know, housing extensions and things like that, which were absolutely flying during early lockdown. Everybody during that first summer of 2020 wanted to do something in their garden. They wanted to put an extension out the back of their house, and there were many of our members. You know, we're really doing well off the back of that. That has slowed down quite dramatically in terms of that type of construction opportunity, but that's at the much smaller end of the spectrum. The SME-type size of our membership, if it's public sector back, they're relying on a Scottish Government-funded projects coming out. That's there, apart from the cost challenges that we've spoke about throughout the session, really. So it's probably a bit of a mixed approach, I guess, in terms of where you're angling the perspective. Thank you. Fiona has thought before by Jamie Harvie-Johnston. For your valuable insights, we'll come to you and Clark first. The reality check is that we're going to face budget cuts rather than additional funding. We are anticipating the UK chancellor's statement, and austerity is likely to mean cuts in budgets. I'm going to ask all of you to start with you. What are the most important financial policy support measures from the Scottish Government that you would actually want to keep? Will you, in first place? I'll come to Ian. We obviously want to keep a pipeline of work, Fiona. It's probably trying to find a product that fits into the budgetary measures that are available to us. When we had discussions earlier in the year, there was discussion around how you fit affordability caps and perhaps you have to make specification changes. You may have to reduce not the quality of your product but what you're actually including within the product. Part of what we've witnessed in terms of increasing costs is not directly related to the hyperinflation on materials, labour, etc. It's what is actually to be included in these public sector buildings, whether it's housing, whether it's the introduced sprinklers or introduced sustainability enhancements, perhaps more expensive heating solutions in terms of finding renewables, alternative to gases, we move towards net zero, all that kind of thing. It's perhaps maybe reducing the expectation of what you get within the product such that you can still go ahead with a full construction programme, but perhaps it just maybe isn't as expensive to fit the budgets available to us. The power of procurement should be considered as part of the budget, I think, as a strong message there. Ian, can I come to you? What financial measures, support or policies do you want to keep rather than it cut? In my two areas of focus, one would be in skills in that I've just sounded optimistic that there is a future but only if we can fulfil orders and that pipeline of supply, so if we don't deliver then we will not be growing. That skills development programme is really key. The other thing is probably over a different time horizon, but thinking more strategically about the place of the future and it's probably roundabout the just transition to net zero in that the manufacturing sector is a key consumer of energy. We've talked about energy from a cost perspective but all of us are looking at just using less energy, using more sustainable sources of energy and I do think that Scotland articulates a desire to be leading in this area and we've got a huge manufacturing sector that I think we should do more with because we can think about individual company perspective and I'm very limited in terms of what we can do across individual companies to reduce energy and find more sustainable sources. I think that the opportunity for Scotland is to think about how we can do that for more of the manufacturing sector, whether it's food and drink, whether it's pharmaceuticals, whether it's the engineering companies and people like NMS have maybe got a role to play in helping to shape that and that's about helping us to be the type of companies that we want to be in 10 years' time where we're competing on a different playing fields but really leading in some of those spaces that just now we talk and we have a good aspiration but we're not leading the way any more than any other country or company. Can I come to Paul and I've got this one supplementary convener to Paul if that's possible after this? What do you want to keep? Pretty much the same as Ian. Skills number one, I think, and of that I'd subset it is we have to carve out protection and extension for work-based learning for all the reasons I gave earlier. I think that there's a bit behind that as well which is we have to protect or extend upskilling and reskilling. The largest swath of people that we have are in work for our workforce and some of those are in sectors which changing habits of humans may change and they become an opportunity to transform them but we need to have a resource set aside to upskill and reskill so that they can transition in that way. Skills first and then the same support for transition to net zero whether that's companies becoming more efficient before changing the way they work but also in diversifying. I mentioned that we have a tremendous opportunity from legacy energy, which is very important and a very busy sector just now, but those companies understand that there has to be a pathway to change for them. Support for those kinds of activities and support for making the most of the opportunities such as hydrogen futures ally to offshore wind generation, I think that those policy areas of support are massively important. I was very struck by a very sobering contribution that you made earlier about even with the best well in the world with a fantastic opportunity for new, whether it's hydrogen or indeed Scotland, programmes coming forward. We just don't have the people or skill base to make the most of that. Previously, for example, growing the life sciences sector, we had a two-for-one apprenticeship scheme. In keeping employability and workplace learning, is it possible to ramp up within that and the allowances to employers perhaps to have some kind of bridging scheme to help them over the next five years to grow that group of welders manufacturers to enable us to maximise the growth opportunities for the future? That might be a bit leading, but tell me if you agree or disagree. I think that you can see evidence if you wanted to look back at the apprenticeship incentive initiative, which isn't the right name for it. We were all concerned at the drop in apprentices across the board, not just engineering during the pandemic. That apprenticeship incentive that was in place for three or four months was hugely impactful. It didn't have to be. I think that it was £5,000. When you look at an apprentice for an engineering company, they generally would cost them about £100,000 of investment for four years to get that skillset. It's a very small percentage of that contribution from industry, but it makes a huge difference in terms of tipping those SMEs over to say, let's reach up, let's go for two, not one, let's go for four, not two. Anything in that area would be hugely useful to do that. Do we have the interest? We still have companies this year who are reporting application rates compared to places of 50 to one to 100 to one. The balance within that, the diversity-reflecting society, isn't what we'd like it to be, but that's for us and others in industry to work on. There's no shortage of demand, so it's not a case of people who don't want to come into industry. We simply don't have enough companies who are confident enough to say, you know what, I'm going to go for it and I'm going to increase my number of apprentices, and I think that we do need to do that if we want to take up in the opportunities coming. Thank you very much. Back to you, convener. Thank you very much. I'm just very quickly before I come to my questions and if I could just ask you, we've heard a lot particularly in the past from domestic home owners, et cetera, that clarity and signposting to energy advice, it can be quite difficult to see. I'm just wondering in terms of small SMEs particularly, whether you think that support is available, whether it's clearly enough signposted for them to access support funding to transition? I think that SMEs find it hard in terms of generally understanding support that's available, whether it's an energy, whether it's on skills. SMEs have just juggled on a lot of things between the demand, the fulfilment, and it's probably harsh to say that it wouldn't be there because it might be there if people weren't looking for it, it's about how they access it, and I think that that is probably tricky for small businesses. Sorry, Paul, did you want to come in on that as well? I suppose just to add to that. I think that because generally energy tends to be a bigger share of the total cost, it's something that there's good awareness of, so many of our companies are self-sufficient, but there are a number of range of organisations out there who will signpost them to the support where one of them en-miss would be another, such as Scottish Manufacturing Advisory Service, Scottish Enterprise, if they're account managed. There are a number of business gateways as well, so there are a number of ways. I don't think that there's any shortage. I would make the differentiation between that and consumers where it's something not so much thought about. I think that it's been pretty much front and centre for industry for some time. Over the next, we know that it's going to be a difficult few months ahead, but we know that people will be still starting new businesses. There'll be new initiatives and the like. Given the pressure on budgets, particularly on the pressure on the enterprise bodies and others that support startups, is there enough in the budget going forward, currently, to properly support new starts and what do you think the impact could be on them? Sorry, but yeah, that's cool. I think that for our sector, to be honest, we're not high in terms of new starts. It's also relatively low entry barriers, so I think that some of the new starts, funding and support that I think would be good in Scotland is probably going to be directed in other sectors, whether it's university spin-outs, development of technology, rather than textiles where people can relatively easily get going. It might be hard to develop traction, but textiles are a relatively low entry barrier, and I think that the business gateway type supports to help them scale is probably reasonable. I remember being at meetings and events at COP26, and the thing that struck me most was the phrase that there was a willingness of capital to support initiatives that would help. I was not too sceptical, but I got a cautious eye on it. I think that what I've seen since then is that that's true. Companies that are starting up, starting from foundations of something that is essentially useful to the climate challenge that are based on the kind of global from birth digital principles underpinning don't seem to be struggling to get the kind of support and investment from private finance. Government support should be there to support whether there's a market failure, and I suppose that what I've seen in my subjective view is that there's not a lack of market failure for those kind of start-up companies. I don't really have an awful lot to add in that. Obviously, start-up companies aren't there to infar between us over the last period. It's potentially a question that David would maybe have answered better. I don't really have anything meaningful to add to what the guys have said. Just one more question, if that's all right, very quickly, and this is, I suppose, the general. Looking forward, we've seen a chief entrepreneur appointed in, I think it was April of this year. We've talked about some of the changes that will happen with business, particularly around innovation. I'm just wondering whether you've had contact to your sectors, have contact with the chief entrepreneur yet, what your thoughts are on how innovation and entrepreneurship is supported in Scotland.  I'm hugely enthusiastic about innovation and entrepreneurship and what Scotland can do. I've been involved prior to textiles in it, and so I think it's great. For textiles specifically, we're actually relatively low-tech, and one of the things we are recognising as sector is we need to be embracing the future more collaboratively, starting to work together, even though we compete. We need to find the areas that we don't compete on, and for example, textiles, we've not been good at applying for things like innovation UK grants to work collaboratively, whereas, if we look at aerospace sector, they're great at it. We need to start looking at the areas that we don't compete in, or where there's a greater good, and find the ways of unlocking some of those schemes. That could be with support from Scottish Activities or Scottish Funding Council aligning some key challenges or actions that we might have, and saying, can we use the academic base in Scotland to help align towards sector challenges? As a sector, we've not been good enough in the past about articulating that. We're now starting to come together and think about how we can do that. Whether it's for manufacturing technology, innovation materials of the future, we recognise that we should use some of the talent that's on our doorstep and use some of those innovation schemes. The construction industry, you've always got to have an eye whenever innovation, whatever new products and materials are available. Obviously, you've got to have one eye in cost while that's got to fit into whatever budgets available. I think that everybody's just wanting to settle down at the moment, so whilst you've always got to demonstrate that you're looking at innovation and using it, where you can, I think that we'll just want to walk before we can run as we find our feet again after the pandemic. R&D and innovation have always been important for our sector. I always get nervous when I go to quote facts, but for a sector that represents around 10 per cent of our GDP, 50 per cent of the R&D and innovation spend in Scotland is from manufacturing engineering. I think that it's still front and centre. I think that there is a bit of overlap from some of the themes that we've talked about today on skills. Right now, and also the business, companies are busy. Order books are full. Companies talk about the limiting factor that they have in taking any more orders on is people. They don't have the volume of people to do that. One of the unhelpful overlaps from that is that during the pandemic, where there was certainly a reduction in flattening in orders, companies made good use of that time in progressing with diversification for future net zero aligned activities and how they could move from the industries that they were predominantly in into a better spread with a road map to the future. That business has definitely slowed that down. The R&D and innovation that was set behind it to how do we take the skills, knowledge and capability that we've got and apply it to future opportunities has had to take a backseat because the pressure simply has been on delivering and delivering on things that none of us would disagree with are important. We've covered such a broad range of areas across the piece. I just wanted to check before I ask a few other questions if each of the three remaining panel members feel that there's questions that we should have asked that we haven't done in this kind of breadth of sessions.  If I can go first then, Michelle, no, I wasn't expecting anything else to be asked this morning. I think there's been quite a broad range of questions and it's certainly from ours, but probably the three of us, it's been good to get our point across. No, I wasn't expecting anything else from you this morning. No, I think that you've covered things well, so I've certainly made some of the references to the points that I would have expected to answer. Michelle, same for me. It's been a really good conversation this morning. It came in with the focus on the impact of energy cost, but of course everything is related, and I think that the conversation this morning has really covered that. I suppose that just a last wee question to bottom that out. A lot of us sums up the issues that we're facing at the moment in terms of lack of access to labour, issues with capital into a longer term impact run on productivity or lack of productivity, where the UK scores very badly when you look at comparator countries, whether they're small advanced economies or larger advanced ones. My question to you, based on all the people that you're working with, do you anticipate a slowdown in investment, whether it's in automation, which I know that David brought up earlier, or more general terms, while the focus is at least in the short period in getting through what looks to be a very difficult period and, in the longer run, the wider concerns being shared about another decade of austerity? Some thoughts on that would be useful, thank you. Well, I guess in the construction industry the concern would be over pipeline. I think that I spoke earlier on about it would be good to have some surety around what that is. I guess you're not quite able to answer that at the moment, but in terms of how that impacts on the wider supply chain, it would have a far-reaching effect. Our concern would be that construction projects drop off and that there would be a fundamental and monumental impact on labour, on dealing with suppliers, on subcontractors, and that would affect all the issues that we've spoke about this morning. So we would be concerned about any reduced capital spend on projects. Yes, I think that it's a concern because confidence is really required for investment. And just now, whilst there are areas that we've articulated some areas to be buoyant and optimistic, there's also a wall of challenges for increasing costs, whether it's materials, labour, general inflation, and so that uncertainty isn't really good from an investment backdrop. We're also off the back of a few challenging years where companies have kept going but inevitably sustained losses, used up cash reserves, and so people have just got the tankers starting from less full. On top of that, the investment perspective, people looking at UK, Scotland right now, as a business where foreign owned, we're not putting on our best game in terms of saying that this is a place to invest right now. So I think that there's a number of reasons to be concerned about investment, and yet I do think that investment will be required to get us to the productivity that we do need given none of us think that we're going to address the people shortage instantly. Productivity has the future, which is why I suppose the Government investment in improving the manufacturing sector performance I think is one of the things I explained I would retain because we often talk sectorally, but manufacturing is still employing a lot of people and maybe we spent a number of years forgetting about the importance of manufacturing. So I think that two sides to that coin is how I'd characterise it. I think in terms of the large scale investments, in giving examples, companies who could really get help in terms of energy usage from changing the building they're in to one with a more thermally efficient roof, skylights and stuff that reduce some of those impacts, those are going to be difficult. So size and scale of investment I think are going to be difficult, as just said by Ian, the tanks are relatively empty despite, you know, I think we came out of the Covid impact amazingly well, thanks in part to the furlough scheme, but it did reduce cast reserves and so the ability to go and do the large investments I think will be restricted. The other side of that coin is that I used a phrase earlier, hunger makes good kitchen, so I've never seen so many projects which are looking at taking the people who stand at the end of line packing a good and replacing it with a cobot, but in all the cases I've ever seen that, there's never been a reduction of people. The companies I've seen who've invested in automation have only ended up employing more people, not less, because it's made their business fundamentally more sustainable. What you've got there is that there is a democratisation on some of those technologies where they have become much more affordable than they were even three, four, five years ago, and so I think they come into the category where it's an easier investment and people are just too precious to have them standing doing something where you can get a cobot to do it and you can get that person to do something much more useful. I think there are examples of that. I know that the Scottish Manufacturing Advisory Service has been following the principles of digital on a shoe string, which is using digital automation within SMEs, but it need not be expensive. It's using techniques and apps and things that are available at very low cost. It's a different way of thinking, but the sheer pervasiveness of that digital thread in society means that it's much easier to take these things and connect them together for an awful lot less money than it did even four or five years ago. That's very helpful. My last question actually concerns the energy suppliers themselves. Are they getting the support they need from the suppliers, as well as we've obviously covered quite extensively the support they need from Government, but are they getting the support they need in your opinion or what you're picking up the far? This is from the energy supply company, so the retail wings that are... Good question. I'm not sure how to answer that, because we've all learned an awful lot about the energy market in the past year. There are wider and broader, more international underpinnings to that than I think I ever understood in that respect. It's been a tumultuous time with suppliers who've come out of being suppliers and we're very much thin down the market. I'm going to pass on that question because I don't have a strong enough view on it to be useful. Before everybody else comes in, it's just to clarify that we've seen the focus on supporting consumers, but my concern is supporting SMEs, and it often won't be a contract of equals between a large supplier, a large multinational and a small SME, so I'm just trying to tease out a bit more information about that, sorry if I wasn't clear. Yeah, I did refer to that before. It's one of the reasons why the intervention by UK Government was as welcome. We did see a situation where companies who either were relatively short-lived, so they were fairly new, or they were below a certain threshold. There was a concern there that SMEs were at that end of the scale where they were not getting as good a deal as the larger. I suppose there is a bit of that, which is an understanding that for the energy suppliers, they're trying to second-guess where everything's going to go as well, and what their liability is going to be for very high potential costs that couldn't be recompensed by companies for the reasons that I said earlier on, if they end up in a situation. It's not a great situation, but everybody has a business to manage, and everybody has to manage their business with their duty of care as a director. That includes what contracts they take on and whether those contracts can be fulfilled. It's an unvirtuous circle that goes around, and it's understandable where the underpinnings to it are. Anyone else like to respond to Michelle's final question? I'm not sure that I can add an awful lot to that, Michelle. I'm afraid that I don't have a huge understanding of how the energy suppliers work. I know how it's impacted on our business and our membership in terms of how we've had to absorb increased costs with some support along the way, but I really can't answer that in terms of their viewpoint.  They described the current cost of living crisis as greater challenges for them than Covid, and compared the support that they got for the pandemic for businesses to survive to what they're getting now. I don't really get the impression from the panel this morning that either a lot of Covid is going to be easier to cope with for your sectors than it was for those sectors, and whether the challenges that are being presented to businesses at the moment can be compared to the lockdowns that we've had with the pandemic. Do you see any parallels between the support that you'd expect or that you're receiving from Government at the moment compared to what there was for the pandemic? Ian, do you want to come to you first? I think that in the pandemic we were managing a crisis that felt like survival and it was about keeping our heads above water and keeping going, and I think that the different support allowed us to do that. I think that what feels different now is that more of the control feels as though it should be in our own hands, particularly related to skills in people, because if you've got an order book in demand you just think that all we have to do is get people and get skills and fulfil it, so that feels as though we've got more that we should be able to do ourselves rather than the pandemic, which we were looking to Government, to vaccine producers and other people to solve. I suppose that the part that it does feel that we should be able to do more of ourselves, I guess we're just struggling because so much of it is limited by people, and that's where I think we're struggling that feels not within our control, and beyond that the rising costs, whether it's energy, materials and how we negotiate cost increases to us, and then passing on whatever we can to that to customers. Skills is an area that this committee constantly hears about and will bring panels in front of us on a different issue and we always end up coming back to skills and the skills gap, and you'll know that the Scottish Government have appointed James Wothers to lead an enquiry into skills. It's been a constant issue. The enquiry is just starting. It sounds like it's a pretty pressing issue. How soon do we need to see change in Scotland around this agenda? Paul, do you want to come in? I think I'll give you the last word on that. It literally is as soon as possible. The sooner we do something about it, the sooner the situation will get better. We're very aware of James Wothers' review and you wouldn't be surprised to know that we've gone in early and asked to be on the calendar for that group to give an input to it. Thank you very much for the witnesses this morning for sharing your expertise and your experiences with us. We'll now move into private session.


Hey everyone, and welcome. This is Melissa Armo with the Stock Swoosh and Revealing Test. So this was a really nice trade for us to short. Actually, as a day trade yesterday, we did it as a short in the run, but I also could puts in this. I call the 265 puts in this. It was a nice call yesterday. And then we gapped down this morning.  So this is a really, really nice options trade. Why? Because again, it's 12, 13 points for the strike right now. It went down, got close to the 250 number. In fact, the low of the day today was 250-49. Again, nice call, nice trade, good timing here. We did do this as a day trade yesterday, which was good as well.  So it closed at 254-11. This is a live gap. You're watching right now. The shock is trading moving, wiggling and jiggling between 250-292 and 253. So we're down a dollar plus right now tonight. We're down. But we gapped down yesterday into today. So we closed yesterday at 261-07, open here in the morning this morning at 255-57.  So like if this was tomorrow morning, we'd be gapping down. But I called some nice options in this that again, when rather quickly, which is always the benefit of trading options where you can get in it, get the move fast, get out if you want, or you can hold it overnight with no more risk exposure than the cost of the trade. So one of the reasons people like to do options is if you risk $1,000, even if the trade goes against you, that's all that you're gonna lose. So it's like the protection of the insurance, which is more than you get in a swing trade where you have unlimited risk practically. Again, one of the other reasons people like to do options is because you can trade options with a cash account, you'd not a margin account, and so you can get one contract as something, for example, instead of paying the margin of a stock that costs $257 a share. So it's a cheaper way to trade the stock. The other reason the benefit that people like to trade options is simply what happened last night into today when you can capture an overnight move to get a larger move, a bigger move, a secondary move in the gap in the following day or consecutive days, rather than just getting it out of the day trade quick, like which we did yesterday, we did in the day trade. But again, if you held the 265 puts overnight into today, okay, you made more money. And actually you could still be in them. You could still be in them. So this was a nice call. And again, there's many reasons people like to do options, many, many, many, but those are a few of them. And this was a nice trade. This was a nice trade. And you can even see the volume here today. Insane volume. In fact, let's look at the volume of the cues. There's more volume in Tesla today than the cues. That's hard to believe, but a lot of action in the stock in the last 24 hours. So we'll be watching this, we'll be looking at this, we'll be seeing where this goes with the market tomorrow. If you're interested in trading options with me or signing up for the Gap Options newsletter, email me and Melissa at thestockswish.com. Have a great day, everyone.