Welcome to our witnesses who have joined us for our enquiry into Scotland's economic performance. We have today, looking from my left to my right, Jackie Bryerton, who is the vice chair of Women's Enterprise Scotland and Enterprise and the CEO of GroBiz. Then Jim McCall, who is the founder, chairman and CEO of Clydeblowers Capital. Then Dr Cezanne Mawson, who is a lecturer in management work and organisation at the University of Stirling. And last but not least, Sandy Kennedy, chief executive of entrepreneurial Scotland. So welcome to all of you this morning, thank you for coming in. And if I might start with a question, the panel members may be aware it's not necessary to come in on every question but we try to allow things to flow and feel free to indicate by raising your hand if you wish to come in at point in the discussion, if you haven't already. So we'll start with a question from me and then move to questions from the other committee members. And what I would like to ask the panel about is how they see the Scottish economy as having performed over the past 10 years. And in particular how do they view the developments in entrepreneurship in Scotland or that time period and business growth? So I'm not sure if you would like to start off from the panel. Dr Cezanne Mawson. From my perspective I think we've seen quite a positive development in terms of entrepreneurial activity and I think as well awareness and interest in entrepreneurship. I think a lot of this has been a sustained rhetoric within policy but also within the wider media and then the development of other organizations that's represented here in terms of building this awareness. I think we still have a bit of work to do. I know we don't have the most recent figures on business creation in Scotland. I think the latest GEM report was 2014 where we did leg in Scotland behind the wider UK and I think there's again room for improvement to be developing entrepreneurial intention and new venture creation within Scotland. Part of that I think is about building confidence and if we look at the GEM figures I think for me the big thing that's come out is a gap in terms of people's perceptions of the skills and the abilities that they have to be able to start a business and working at a university I see this quite often. There's such strong interest in starting businesses and almost a worry that individuals will be unable to actually do that. I think if we want to continue our positive trend and see even more businesses started, more entrepreneurial activity in Scotland, this is perhaps a place that we can start by building that understanding of skills and knowledge needed to be able to start businesses. Jackie Brarton Yes, good morning. Following on from Suzanne, I would say if I focus on the two areas that I'm particularly interested in and potentially knowledgeable about is gender, women's enterprise and also rural enterprise. I think that looking back over the last 10 years we've seen some progress in the number of women starting and growing businesses in Scotland but I don't think that we've taken advantage of the huge potential that there is to grow that 20 per cent that's the current figure. In a rural context I think that we've actually probably sadly neglected a lot of our rural economy given that compared to urban rural is particularly dominated by small and micro businesses and the rate of self-employment is more than double that of urban. We haven't actually provided the kind of support that these small and micro businesses really need to grow because, after all, they are the pipeline to become the SMEs of the future. I think that those are two areas that I think there's lots of potential going forward if we can have a more gendered and rural proofing approach to both of those. Thank you and Sandy Kennedy. So thinking about the last 10 years we can go, I think that we should be looking to data. So as a question about how good is the data that we've got as our performance and what data do we need looking forward for the next 10 years to make us not only understand how well we're doing but also which bits are working and which bits aren't. Just looking backwards at the data over the last 10 years we have GDP growth which has been relatively weak both in Scottish towns but also against the UK. We have an improving productivity performance but again still relatively weak only just into the second quartile. Our higher education R&D is good but our business R&D is right down in the fourth quartile. So there's some pretty tough maybe mixed message hard data. I think that in terms of looking at other sources of data that we do have in terms of those organisations that scale up and see it as an indicator rather than something that's thoroughly researched but if you look at the top 50 firms in the insider 500 the most recently created firm was founded in 1985 and that was City Refrigeration by Lord Willie Hocky. So we have not created a firm in this country that can get into the top 50 since 1985 for 32 years. That's got to ask significant questions and that's despite obviously a strong focus on high growth. Similarly when you look at the landscape of entrepreneurial leaders from startups but right through to scale ups the number of female founders that we have and female CEOs is I don't have the exact percentage because I don't believe it's available but it's a very low number. So I think there's a key point there about latent potential and I think overarching and I think we can look at the hard data from the past we can look at some of those more specific point data from insider etc but the key thing is is perhaps how we feel and that that feeling is Scotland has much more potential than perhaps we're realising and we could be looking around and going this is something that we could accept as being this is just the norm this is where we are this is where an industrialised economy at the top of Europe really should be but in the people that I spend a lot of time with they believe that Scotland has got huge potential and we're not fulfilling it and that to me is the more pressing challenge which is how do we unlock that potential across a whole manner of different ways. Does that relate also to the the question of the rate of business start-ups business growth? So I think there's two different points in there. Firstly the rates of start-up yes well will ebb and flow and has ebb and flowed over many decades the issue I have is that we need to do both we need to keep that sort of that top of the hopper start-up flow coming in but really it's about how do we then move that to to create jobs and we create jobs by growing firms by exporting by increasing the talent flows that are going amongst those organisations so yes start-ups are important and yes we should try that number but that it's illusory to just look at that number alone we should be looking at how firms are growing and then how they're exporting and how good we are at creating new jobs. Jim McCall. I think there's certainly been a lot of more interest in entrepreneurial activity and people trying to start their own businesses over the past 10 years but I think it's been driven by a lack of opportunity for high quality jobs and people are being forced into looking at that rather than doing it as a first choice and I think it's a good thing that they're looking at it you know if I look at the decade before that 97 to 2007 that was a much more golden era for Scotland there were a lot of businesses grew a lot of entrepreneurs came to fore and encouraged others and you know if you ask why has it changed and I think it's down to the support for growth and the support for businesses including micro businesses and SMEs has disappeared we don't have the support structure that we need before 2007 we had good support from mainly two of the Scottish banks and you know you might get the quick back well that's how they got in trouble it's not how they got in trouble they gave very good support to small businesses which they don't give now they're very restricted in the support they can give and they've pulled back quite a bit so that that support's not there for small businesses or for businesses that are growing exporting is what we want to you know we want to encourage our SMEs to export the export finance system that's in place doesn't support SMEs there is theoretically a UK support system there which says that the government will will underwrite 80% of the export finance but it's got to be done through one of the big banks and if you go to them they'll say that's all very well but we want additional security as well so you can as an SME get the support to do the exports we do quite a bit of work in in Finland and the national investment bank there Finvera is very supportive of small and medium-sized businesses we've been the beneficiary of that and I think the statistic is in absolute terms they've given more export finance support to their companies three times the amount of the UK and that's a country that's 5.5 million they also have a very good infrastructure for supporting startups supporting growth companies through their national investment bank and I know we're looking through the government here at a national investment bank my worry is that we kind of half cook it and don't do the proper support which gets round claims from Europe on state aid every other country in Europe has a national investment bank that's set up to get round state aid they also can raise their own finance off of the government's balance sheet on the bank's balance sheet they can raise bonds to support small companies the problem we have here is that if you raise it in the UK it goes on to the national debt it doesn't go into national debt in any other European country because the banks are set up in a way that they're financed separately they're commercial entities owned by the government and they actually make money for the government so you know you can raise money support your infrastructure programmes your small businesses your growing businesses and you can do import substitution because if I'm competing against a Polish or a German or another European country bidding for local work as I do in my shipyard then it's an uneven playing field I don't have the support to put in place the guarantees that the Germans and the the Poles and then every other European country has and that's why we have a very weak industrial base John Mason just on that point it was just a depression that point you made about the other country's national investment banks are you saying that in the UK we couldn't set up a bank that was completely off balance sheet or because it's the European rules at the moment at least I think they govern all these things or are you saying that we're not planning to set up one that's off balance sheet you know you very often get the quip that yeah we're the only ones that stick to the rules and all the others the French cheating the challenge cheating everybody else cheats they don't cheat there is a method to do it and we can do it we have chosen not to do it or the politicians in the UK and in Scotland that Scotland you've probably been it's been more difficult because you're governed by the UK rules on debt the amount of debt you're allowed to raise but arguably if you set up a separate investment bank it should be outside those rules because every other country goes and raises it on you know on on the markets and because it's government backed you can borrow at low rates and then you're lending on and giving guarantees to companies to support their growth but you're charging a bit more than you're actually paying for your your bond and you know I had commissioned a report from university college London recently in this and some astonishing facts come out one which I thought was really quite surprising was if you look at Germany their national investment bank kfw if you put their debt that they raise in the bank on to the German national debt they would be the third most indebted nation in Europe after Greece and Lithuania but it's not part of national debt they shouldn't be viewed that way we can choose to do it here but we need to be you know we need to be ambitious enough to do it properly and you know just hope that with the national investment bank we're setting up here that we're ambitious enough and we make sure that it can get around european rules and that we don't have state aid rules held up because you know what we are going to do we're obviously going to have some sort of trading relationship with with brexit so there's going to be state aid rules if there's a trade agreement of any sorts there's going to be state aid rules now you need an investment bank like this more than ever thank you we'll move on to question Andy Wightman thanks very much the remit of this query is as much to look forward is to look back and and jim we've already talked about some of the challenges in terms of investing in the economy but i'm just wondering if panel members could give us some sense of the key challenges and risks that they see facing the Scottish economy and businesses over the next 10 years first up so in terms of the talent pool that we have to enable businesses to grow we have the scale up institute who have done research both for the UK and for Scotland and they highlight that scaling businesses their biggest barrier to growth is access to talent at the other end of spectrum we run a programme where we have 18 businesses who are at the lower end of scaling but i've got ambition to scale into 50 to 100 million they say that their number one issue is access to talent and even in that group they have currently around 50 positions vacant i look to there's a recent report out from the phrase valander again highland highlighted recruitment and specific issues there so there's clearly a skills and talent issue there i think clearly with brexit there's going to be that's potentially even worse because a lot of particularly our tech and technology and life science firms have enjoyed a flow of talent coming in from europe and that will well is that the best is uncertain so that that creates issues so i think access to talent is really important i think is important to emphasise i suppose a side issue to that as well is we run the salter scholar intern programme and we've had nearly 1500 applicants for that this year we've interviewed 600 people in the last few weeks the quality of young people coming through at that end is really really good we do have some very high quality people coming through so we've got to be careful we don't swing too far the other way but if they're looking for their opportunities in london or new york or into europe or around the world then we've also got to make sure there's transparency between the opportunities that exist in scotland with the young or some of our best young talent that's coming through and i don't believe that's happening at the moment jackie bairton i think if you going back to the data question that sandi mentioned earlier if you look at the trends over the last 10 years the only growth area analytically has been growth in self employment and unregister businesses and therefore in the next 10 years the only or one of the key ways we're going to get the economy to grow is to work with these self-employed people and unregistered businesses and help those that want to grow to get to the next stage and there's some challenges there which i'll come back to so for example women's enterprise scotland has surveyed women business owners several times over the last few years and 87 percent of them want to grow so there's obvious potential there but they don't necessarily want to grow in the same way as the agencies are stipulating that they need to grow in order to get support so for example i think to access the pipeline support you need to be targeting 400 000 increase in turnover over 18 months two years somewhere around those lines for a lot of women that is not that is not feasible or sustainable they're often starting from a part time basis they're often balancing other responsibilities and they want to grow but they want to grow organically so to take advantage of the opportunities and the potential of the next 10 years i think we have to have a fundamental relook at the way that we support businesses at that early stage and how we actually help the micro and small businesses to get to the next stage because once they're passed start-up unless they fulfill the criteria for high growth support there's nothing for them we've got a vast array of missing middle businesses in scotland who literally can't access support but i think one of the other huge challenges is is digital so it's an enormous opportunity the if we reach the target we're setting in 2021 so that every business every household can access high-speed broadband that's going to increase the number of micro businesses who can actually operate really efficiently they can they can actually use e-commerce to expand they can do all sorts of things that they couldn't have done 10-15 years ago and yet if you look at some of the recent stats less than a third of our businesses are using digital at the moment for cloud computing, CRM, data analysis there's still a third of businesses that don't have any digital presence at all and it's almost as if the the ability the digital ability and resource that's going to be available to businesses is going to be lost because we don't have either the skills or the confidence within the business community to use that resource to its fullest extent and even that ambition to have high-speed broadband we're still only talking about an average of 24 megs you know south korea practically their only priority within their economic development strategy is that every single business should have access to one gigabyte if we had something ambitious like that in scotland we could transform the economy in the next 10 years in my opinion. Jim McAll. As Sandy mentioned the access to talent I think we produce a lot of really good talent here but we don't produce the opportunities for them so we use we lose them I mean I'm a supportive of entrepreneurial scotland we've supported some of the young people coming through and I've spoken to them after they've been through the course and they're buzzing with energy and my big fear is they'll go into a company and they'll get it knocked out of them they're enthusiastic they want to be doing things and I don't think we I don't think we the fundamental problem is we need to produce more high quality jobs that are well paid and can provide a career path for people you know we don't we're producing low cost jobs just now unemployment is low but it's the quality of the jobs are not what we really want here I don't think and productivity is another issue that comes up and it's always linked back to R&D in my view productivity it may have a small connection to R&D but the two big factors or three big factors I think in productivity are happiness at work security and fair pay and if people have those three things surprisingly productivity goes up I've experienced it in my own businesses it shoots up and it's got nothing to do with us plugging in a lot more R&D so we need to be focusing on higher quality jobs fair pay and security and then I think the productivity follows and that's all about the support that that Jackie is saying is needed for these smaller businesses it's just not there and you're kind of muscle bound in a lot of the entities you have to support businesses I've tried it with a couple of things and you get to a blank a dead end well it doesn't really fit the criteria for how we can support you you know it's it's we need to have a more flexible approach and I think there are ways we can do that before I bring in Dr Mawson Julian Martin had a follow-up on one of the points raised so I'm very interested to hear what you're saying around skills one of the things that I've been aware of is as a former further education lecturer myself is that you've got a lot of young people who are doing the type of courses which would lend themselves to setting up a business for example here in beauty creative industries but there doesn't seem to be a lot in place in the curriculum for actually giving them the tools to set up in business has that been your experience that you know that we may be missing a trick by not having those and also I was in a school yesterday and one of the kids in fourth year said one of the most useful things they could learn in school will be how to fill in your tax return and you know this is the 30th of January this office is quite a little keenly interested in that right now but has that been your experience as well in terms of there's the skills to do jobs but there's also the tools to make confident entrepreneurs because I think at the moment people are falling in to self-employment like Jackie said rather than looking at it as an actual goal I want to be an employer I want to set up in business which is it's really an addendum to that which is that one of the biggest influences of young people actually of all of us is what our peer group are doing and then what people we have come into contact with so when we look at young people coming through schools or in colleges or in universities or not even you know apprentices or whatever the quality of contact that they have is really important so if you take an example of a school that example the fourth year that you mentioned earlier is if they are being taught and the only person that's influencing them is someone who's actually never worked in the workplace or has never had experience of that it's going to be either a best abstract and at worst ill informed so the more that we can get the boundaries between schools and colleges and the business community in particular much more porous the better and Jim probably can talk to this very powerfully particularly with the work that he's been doing in Glasgow with with your school is that when you get young people engaging with people who are who've got all sorts of backgrounds who maybe didn't go to university and have done phenomenally well or have got the ambition to start a business and sell into another country then it really affects those young people and therefore programmes like Founders for Schools Young Enterprise Scotland who are doing that we need to really get into that but we need to do it together so it's not that there's a it's like a pocket of schools over here and business over here and the public sector over here and the health service over here we need to start working much more together also with that you mentioned R&D is very good in universities but not so good in businesses who's facilitating the facilitating the the merging of business into universities is anyone taking responsibility for that? Organisations like interface who are looking at that but i would look at it maybe a wee bit more holistically and saying what is the driver for somebody taking all that R&D into universities and somebody with the data would be able to say it better but i suspect the driver is because you've got many academics who want to get their academic research funded their goal isn't to start a business their goal isn't to to connect back into business so it then ends up being siloed whereas if you look at the the fancily named the HERD and data versus the BRD we're in the top quarter for higher education R&D and we're in the bottom quartile for business R&D that says to me there's a massive gap going on between them there's a disconnect and if you look then at the amount of money and again i don't have the the the sort of broken down numbers but currently Scottish Government invests £2 billion a year in economic development and R&D and support skills for the economy you've got to be looking at where's the return on that investment from awesome one to come back in on that and then back to Andy Wightman i wanted to come back on on the skills i think that's a really critical point and for me this is maybe where we have our biggest stumbling block i see every day so many young people who are really passionate about doing something for themselves about starting a business even about working in a young or young venture or an SME and very often i see this confidence issue and i think it's because we are great in terms of having that dialogue about entrepreneurship as a potential career choice if we can say but we're not necessarily so great at actually giving them the the tangible training or tools that they can build on and and really engage initially and develop their confidence from there um i think we've seen a huge development in terms of what's available at school um elementary school high school level in colleges at universities things even in the last five years are so much better but again i think we've got work to be done and i think it's a finding a balance between giving them a chance to be inspired and i think that's where we need to have have business people coming into to institutions into schools into universities to share their their experience to build that passion and and that enthusiasm but then moving beyond that as well and and giving concrete education that gives specific tools so you know beyond just even business planning thinking about the tax return thinking about other specific elements that may help in terms of not only starting a business but then potentially giving them a platform for for development and for growth later on so i think there there's lots of potential there but but it is fair to say as well that that we have come a long way even in the last five years so we're on a positive trajectory even if we've got some some areas for improvement just coming back to my original question the um i think jackie you were saying that you we need to get self-employed people to the next stage gym had mentioned something about self-employed meant in an earlier question my understanding is a lot of self-employment is not through choice it's through necessity um so i'm just wondering if you can um say a little bit more about the extent to which you think self-employment as it currently exists can actually move on to create bigger businesses and you mentioned also the inappropriate level of support that was available particularly for women do you have any sense of what the latent capacity in the economy is there that we're missing out on okay um so from self-employment perspective i think statistically and certainly gym measures this opportunity versus necessity an opportunity outplays necessity undoubtedly there are people in the economy who choose self and but who don't choose self employment as their first priority but in rural areas often there's no choice so instead of saying well they don't they're doing it because they have to so we shouldn't be helping them we should actually engaging with them and finding out how we can support them to build a stronger way of employment even if it ends up they're only creating their own job that is still valuable particularly in a rural context and i think you know i work we grobe is um which operates in perth rural Perthshire it's the only model of its kind in scotland because we're a community based enterprise support organization we're independent and we provide it very much from provide the support very much from a perspective of helping the businesses to engage with each other support each other it's a peer support model there's a mentoring program within it there's a whole lot of different ways that we support the businesses which ends up becoming a very sustainable local economy because they all feel part of a community of business which is really important in terms of their sustainability and the survivability rates are really high the last time we measured there was over 90 percent of the businesses we've worked with in the last five years still operating now they might be just one two three people in a rural context that is really critical because if you multiply that the multiplier effect of having 100 businesses turning over 30 40 50 000 in a rural context is actually worth much more than having three four five million pounds turn over which would be unusual in most most rural areas coming back to the actual support then i think in our again from a rural perspective the self-employment and micro business level the only source of support in most areas is business gateway and business gateway is very centralized so they very rarely provide outreach support or go to to where people need but probably more importantly they also don't really value i think most self-employed occupations so they dismiss businesses too readily and we have many clients coming to us as grobas saying that they've been to business gateway but told that they're not really they're not worth basically that they're not worthy of support which i think is appalling because we are putting off so many people who've got that potential now it's not necessarily the business gateway operators fault that that's happening the business gateway the contract is i think not fit for purpose in today in 2018 it's an approach that we were it's very similar to the approach we were taking 15 20 years ago to sporting business it's a transactional approach it's minimal it misses out i think on a lot of opportunity and potential because of the way it works and i don't think it's the contractors or the operators fault i think we just need to rethink that and perhaps controversially i would say through the enterprise and skills review we missed an opportunity to review how that worked because to me that would have been a chance to actually take a more radical approach to how we support business and it's it's not about that that is more costly we've costed out how globe is operates we've supported 300 businesses in the last year it works out around 700 800 pounds of business and the business gateway cost is around 11 1200 pounds of business so it's not about cost you can create a really effective relational model of business support that works and if you do it in a facilitative way at a local level it doesn't need to cost a lot of money okay thank you very much and now john mason thanks convener um i'd like to focus on the whole question of growing businesses and i mean i look at the business pages of the herald sometimes and some small growing business has sold itself to microsoft or google or some huge international organization and that's seen as a success and a few people have made quite a lot of money i always feel disappointed when i read that kind of story because i feel sure could that company not have grown more as a scolish company with its headquarters in scotland i mean we've talked already about maybe there's not enough support for small businesses to grow so is it is it is it is it not a bad thing when we sell off all our small companies is it a lack of confidence in the part of the people running the companies or is it a lack of support from the public sector mrs mosson dr mosson yeah i think you raised a really interesting point and this is something that that's also been a bugbear for me personally over over the last few years watching um the the media footage when we look at our high growth business base in scotland we've got about 1500 high growth firms at at any given point in time and i'm always surprised just how quickly that stock replenishes itself so for example a couple of years ago i did um a small study looking at eight companies and within three years all eight high growth firms had been acquired by large multinationals and i think we have a number of factors at play it is a very good thing for for the owners of the business to be able to to sell out um to be able to move on for me the question would be less about the the rationale for that this decision and i'm not sure how effective policy would be in in terms of making what is a very personal decision on the part of a business owner but the issue of embeddedness so how can we actually keep businesses growing in scotland for as long as possible to avoid a branch plant economy where we maybe keep a head office as a as a business is acquired and also to embed CEOs managing directors their their employee base as well within scotland so that that we have a desire for people to stay here to be able to continue to grow businesses and if an acquisition were to happen in a business were to be sold how do we make sure that we have and i know the academic term is kind of silly entrepreneurial recycling how do we make sure that we get serial entrepreneurs people who are reinvesting in new business creation in scotland time and time again rather than going down to to other ecosystems or down to london and i think these these are critical issues support might be part of it and i strongly suspect that if you are getting um well given given the the nature of support through the enterprise agencies if you are trying to meet those growth targets year on year on year for support you are probably then building for growth for sale and and i wonder if maybe that's that's part of the issue there having such discrete targets may lead for an exit strategy or or again may may make companies be more more visible to potential buyers um from outside of the UK or even in the UK itself but i think maybe if we focus on this issue of of embeddedness and really trying to get individuals and their organizations to to see the benefit of staying and growing in scotland for however long that may be i think we'd end up in a much better situation than we are in currently where we're giving an awful lot of funding to very very promising early stage businesses tons and tons and tons of support financial and otherwise only to then help to line the pockets of big multinationals and to give away our IP and our other benefits that i think should be should be kept here and should be benefiting scotland and the scottish economy i think that's a very healthy part of the whole entrepreneurial cycle what we're missing is stronger businesses based in scotland that can buy those smaller businesses and you know that's the whole tier that we're missing out here the bigger businesses that can take them to the next stage are elsewhere we don't have the businesses that can then say okay i'll take this business that's been grown very strongly and it's a great business and it's got a good future but the commitment to finance that going on is is big and some people aren't up for the risk of that and you know it plays into the support the other kind of support that's that's not here in scotland to go to that next level so you know i think we have to break them break the the kind of logjam here and try and get businesses grow a tier of businesses that are bigger businesses that can take the smaller ones or the medium sized ones on to the next stage but they've got to be based here they've got to be scottish businesses we haven't broken through that and we're in danger of not breaking through if we don't put in place the infrastructure to get above that level so that we create again it's back to creating good quality businesses with high quality jobs um to retain the talent you know it's it's it's not rocket science can i just ask one just to follow up on the points just made by both of you is it slightly more complex than that because it's not just about the company and the actual ownership so selling a company to a large multinational doesn't mean that the the money paid for that leaves scotland and i'm just thinking of a company that where a similar situation occurred but the people that have the money now wish to invest that back into Scottish companies so there's the aspect of the the capital whether or not the intention is that that then is put back into business or not and is that something that can be measured because it's it's also about the capital and where the money that comes from the sale is then invested into because if that is then invested back into Scotland to grow new businesses it's not lost in that sense i appreciate that the on-going profitability of the company that is sold maybe but is that part of that scenario to be honest i'm not sure of any data sources that would be able to track that at this point in time but i don't see that it's something that couldn't have systems put in place to try and measure and i agree if you could determine exactly how much of that money was recycled within scotland that would give a far more accurate picture as to whether anything is really really lost or whether we're just seeing a bit of recycling and rejigging there are some data sources young company finance for instance tracks all deals are done in the high growth sector so i know that they would be able to get to that data out of thought pretty quickly and just to re-emphasise i think points that have already been made but i think worthy of repeating which are that there are different types of sale there's a sale where we sell businesses say for 20 million where they've got a latent potential to be a 200 million pound business within the scotish context or or maybe even more and therefore that's a lost opportunity to scotland and therefore you ask the question about why does that happen yet often confidence often the sort of the peer support that sits around them then that's that's what success looks like whereas in parts of america or asia 20 million pounds you still are the you're a distant hundredth in your local area as to how well you've done et cetera so there is a there's a sense there but really does it matter what sector you're in i mean it's very more centralized worldwide i don't know so would it is harder to grow an it company to that kind of size than other companies so i would say if you take sky scanner as an example and i would see that as a positive sale given where scotland has been in the past in that it was venture capital backed out of scotland by scotland it had founders that were based and live and still live in scotland and the shareholders a lot of employees took a lot of money out of that sale and therefore are recycling that finance and in terms of the talent the quality of jobs that they created was excellent and therefore a number of them are staying within the sky scanner group and but a number of them have gone and started new ventures as well and are mentoring and going on boards of other ventures so the net effect that that recycling effect not just of cash but of talent expertise and connections is i think in sky scanner and the truth will be told in the next two or three years could be very profound however we're contrast that with a business an engineering business which maybe was located here grew here and is being taken out the senior team had been taken out and at best there's a small sales office still based here and at worst even than that is there's nothing then the value of recycling to scotland is close to nothing and then when you layer on top of that how they've had the support and if there's a number and some sectors like life sciences can be more prone to this where they take on a lot of government support through smart grants through r&d grants through etc etc if you aggregated up where they've got their capital from then the government the public sector has paid a lot into that but actually when the returns come the public sector gets none of that back again could i continue i mean mr mercall's point about we need some bigger companies in scotland that potentially could take over and do other things i mean are other countries getting that right or get it doing it better i mean we hear about germany sometimes and the banks seem to be a bit more local and they support local businesses are there other countries we can look to for that kind of example most other countries in europe you can look to for that example i mean one that i the way that it involved in and is a similar size to scotland is finland and they get many big companies in finland if you look at norway as well you know it's i think it comes down to the infrastructure to support the companies and at the core of that is their national investment banks which work with what they call patient capital there's too many you know short term goals here in the public sector for example where you know public markets where it's all about next month's performance and there are all sorts of ways to get the share price up you know buying back shares not putting it back into the company there's there's you need patient capital behind it and all of these countries have it and in addition to that you need other things i mean at the moment we're raising a debt fund which is going to plug a a gap from five to 15 million in lending but i'm also in the process of starting up a new scotish bank and while pulling together consortium to support small and micro companies and that bank will end up to five million pounds initially have to apply for the licence it's 18 months away but we're about to start at i think in march start the process but i approached the scotish government about look how can you help do this and there's no way for them to help us do it now this is i'm not doing it to make money out of the small bank i'm doing it because there's a real need i think in scotland for support for these small companies and it's not it's not being delivered by the existing government agencies or by the banks there's a there's a big gap there and there are thousands of companies that we've identified that can that need access to this kind of support quick follow-ups from alec neal and then dean lockhart can i say i could think of a number of ways in which the scotish government could help you and i think you need to go back to them Jim because a wee bit of imagination and this is something that should be totally supportive of in my view well the vehicles that they have are only there if we can't get the capital elsewhere and the response to me was you'll find a way to do it you know and i mean i just think we need we need a more collaborative approach to these things rather than um well you know you go in and try and do something we need a more collaborative approach can i ask more generally both of what you've said which i totally agree with and what jackie has said about how i mean sandi made the point the scotish government spending two billion pounds a year at the moment on economic development what return are we getting for that and jackie i think rightly made the point and you a national level made the point in relation to national investment bank our delivery mechanisms might be part of the problem now that they are out of date they're no longer fit for purpose now i'm not being critical of scotish enterprise or high or anyone else particularly but i'm the founding chief executive of the prince of scotish youth business trust and one of the benefits of that was we were not a government agency and therefore we set the rules minimum bureaucracy uh business people were the ones involved in making the decisions and deciding whether a business plan was viable or not so my question is uh and you know i used to think if a tom farmer went along to business gateway and certainly if he went along to one of the high growth support units he would have been chased away because he would not have been perceived to have been a high growth potential many retailers would have been in the same position as i suspect maybe amazon if they'd gone to business gateway or to scotish enterprise would have been sent packing as well so it seems to me from one of the things you're saying is a lot of things that we need to change but one of the things we need to change is the whole delivery mechanism to make it much more flexible much freer of government much more imaginative and dynamic than i think now is i mean it's 10 years since we reorganised scotish enterprise and business gateway and all that stuff a lot has happened in that 10 years and i think what you're both saying is it's no longer fit for purpose well as i said before totally totally agree with you and if you look at um you know that two billion investment first of all we're only putting 12 and a half million of that into the business gateway operation and if the whole small and micro sector is reliant on that is the is the major the the main source of support that is proportionately not really enough in order to spot the future tom farmers and to support them in the right way we have to make it more flexible we have to be more responsive it needs to be decentralised as well because of course now that business gateways delivered through COSLA it's come within that context of local authority pressure so the local authorities rightly wrongly are now looking at their budget restraint they're potentially i think they're spending less on business gateway than the perhaps where two or three years ago so that whole area that's so critical for our economy is actually being pinched because it's possibly not in the right place we've also centralised the Scottish enterprise in high operations of you know since the local enterprise companies went now there's all sorts of good reasons possibly why that happened but i think actually the psybt models are really good one to look at because the good enterprise trusts in the days were much more local and were much more dynamic in my beauty i was just going to say 20 years ago when i first started my own first business in the 80s it was the local enterprise trust that supported me and there were local people local businesses business people who wanted to help new businesses um and there was an independence and a flexibility there that we just don't have now everything's been bureaucratised i mean we've got a business adviser in our area he's a perfectly nice guy but he's never been out of the public sector and that's not uncommon within that context because a lot of the economic development personnel and local authorities have transferred into the business gateway so we're really you know we we just i think we just have to relook at it all and as i say there are models now there's some good stuff that's captured and this is a rural review from the european network of rural development that looks at you know what was traditional what did traditional business support look like and what does smart business support look like and it is about taking it away from that one to one transactional very kind of top down approach and making it much more getting business is involved in delivering alongside professional advisors facilitators and just loosening it all up and making it more possible and presumably in that i mean i think one of the most the drawbacks of the existing system is that we've got a national system that's applied right across the country irrespective of whether it's the right solution for that you see rural areas for example are entirely different from urban areas so we need a much more diffuse type of approach so to allow flowers to grow and so on grobas came about because a group of local people in eastern persia decided that they needed a support system that suited that area and um and we've always listened to what our business or clients are looking for rather than say this is what you're getting and it works um and you know we've had a lot of interest from other areas so we may start to get a little bit more traction around that but that needs needs supported as well but i was just going to say that the new south of scotland agency is surely a fantastic opportunity to try some of that out and to take a different approach and not just to put a blueprint of the current seer high models on to it and make it work like that but i think there needs to be some activation there needs to be some involvement from other bodies to make sure that doesn't happen because that's the easy option i think going forward can i ask jim just coming back to national investment bank i totally agree with everything you said because i've seen it operate in other countries and it's very successful obviously bernie higgins is i think in the last rows of preparing his report to the scotland government about how we set up the national investment bank can i ask if you've given him your thoughts on this matter because it seems to be important that you do well i said i had a paper before benny was appointed i had a paper that i had commissioned by university college london by mariana matzacuto who's on the council for economic advisors and i've been lobbying for this for a while because of my experience in other countries and i'm glad to see that it's being done i haven't spoken to benny directly about it but i did he has got a copy of the report and i was supposed to be seeing him on thursday but he's been called to another meeting so i mean i'm very aware that we're nearly at the end of february and i worry about what might come out but hopefully it'll be i mean it's got to be a positive move but i think it is a great opportunity to really look at a number of the support that we have for business and i know there'll be pushback on well we don't want to make it too complicated to start with and lump everything in but there really needs to be some sort of vision on where it's going to go to because there's no use just plugging something else into the mix and confusing people about the the roles of the different entities i think you need to do it and i think it would be good from the national government from Westminster to try and get some responsibility for export finance because small and medium sized companies need a more flexible support in export finance and it'd be better handled it'd be better as a devolved responsibility than handled from London so you know i would encourage that being part of the national investment bank because it's not working what's happening just now for for SMEs. Can i just ask if your report is public or is it possible for us to get a copy of your report? I'm happy to send you a copy, yes. Yes, could I add if there's any issues that are raised then we would invite witnesses to send in in writing any further thoughts they have on any of the issues and points made here. Now i'd like to come to a short follow-up from Dean Lockhart and then move to a question from Jackie Baillie. Thank you very much. I think Alex has covered some of the issues that i was going to address but a quick follow-up we do spend £2.5 billion each year on enterprise skills development in Scotland but we don't see the return in terms of business growth or economic growth. With the SNP, the Scottish National Investment Bank coming on stream, that hopefully will make a difference. Is there a risk that we have a cluttered landscape in Scotland in terms of all the different agencies, Scottish Enterprise, High, the New South of Scotland agency, Business Gateway, the various agencies involved in economic development? That was one of the key conclusions from the Audit of Scotland. Is that a risk in terms of the accessibility of enterprise help for small business? To start us off on it is that it's not maybe taking a step back is when we look at the healthcare system and the public sector then a decision is made by the state that actually all the professionals exist either within the NHS or within a small group outside of that. When we look at the education something is similar to that it's put forward but in the business support area there's actually it's the other way round is that the vast majority of people who can help young businesses, established businesses, grow are other business people and therefore that should be get the those businesses should have access to those sorts of people and peer groups in particular are very powerful. Scalop Institute emphasises that peer networks are one of the most powerful or the most powerful way to transfer learning and expertise in that way so the question I would ask back again is is it right that there's almost like a nationalised public support system and we shouldn't necessarily be looking to the public sector to deliver it. The public sector's role and this has been highlighted in work by a professor based here although he had to go to Canada to do a lot of his research, Professor Ben Spiegel, is the state's role to nurture the so-called ecosystem rather than to be the key point of delivery every single time. That's not to say that the public sector doesn't have a role to play but it's a role to play in partnership with others and to answer your point there Dina Bout Clutter that would help reduce Clutter because there's a lot of people shouting to be heard whereas we and I very much count ourselves as part of that and work very closely both with Jim and Women's Enterprise Scotland as well is that we have to work out that the hero of the story is the person trying to grow their business. It's not us and we need to get back and work out how we collaborate to deliver for them and not be the ones either shouting for money or do this or do that and causing the confusion. I think you're absolutely right, it is too cluttered and it needs to be focused down a bit but it always seems to be difficult to take things away from people and I think you have to be quite assertive in that and give the vision for where the new investment bank is going and saying we want to put that under the bank. It would be managed by professionals because you don't want it managed by civil servants to be blunt. Thank you, perhaps we can come to Jackie Baillie and then others may want to come in on these points. Thank you, convener. I'm sure we'll return to the national investment bank in a moment but I want to explore exports with people, not least because we are a net importer of goods and services, we operate an annual trade deficit and this week from the Export Statistics Scotland series we find out from 2016 that there's been quite a substantial drop in exports across Scotland, particularly to our largest market, which is the rest of the UK, a drop of something like 11.6 per cent. So I'm curious to know what you think we can do to boost the number of firms in Scotland exporting goods and services overseas or indeed to the rest of the UK. Jackie Bratton. I just wanted to make a point generally that I don't think we actually measure the correct level of exports because again we're kind of out of date of the way people export because I look around at small businesses we deal with and a lot of them are exporting but they're doing it through e-commerce, sending goods off to customers all over the world individually and these are not being tracked anywhere so they won't shop in any statistics particularly if they're small businesses and I think that is one way. Looking at the statistics of how many businesses in Scotland are generating sales generally, not exporting but generating sales via e-commerce, it's only 30 per cent, so we've got huge potential to build on that going back to the new broadband availability that's going to come and off that if you could increase exporting through that I think it would make it more normal for businesses to think of selling their goods and services outside Scotland. Well I think, well certainly on medium-sized businesses it's definitely the support that you need that may be delivered through some sort of export finance and even competing with European countries and I'll give you an example of something, it was a medium-sized company I would say, a pump company that I bought in 2007. Now we bid to put the equipment in that when they were holding the Olympics in London they were renewing the sewer system and so on for the they hadn't been replaced since Victorian times and we have pumps in Glasgow was the company that had supplied the original equipment so we bid for that contract and we're very close in price but it was awarded to a German company and it was awarded because the German company had more financial support again from the KFW, their national bank and can you imagine Olympic Games being held in Frankfurt and the Germans giving a contract for the infrastructure to a British company but again it was down to the support mechanism in place to fund the working capital and maybe put up guarantees because there were guarantees required and perhaps I could just say something in guarantees because that's a big part of exporting. Up until the banking crisis banks all provided you with bank bonds or guarantees because it was a contingent obligation that wasn't money they had to give you and they would charge you 3% for it it was easy money for them after the banking crisis and you know the export credit system had fallen away because the banks had stepped in to get this easy money. After the banking collapse and with the new regulations that went in, bonds even although they were contingent obligations had to be counted as core debt so the banks all of a sudden weren't supplying these bank bonds to make it easy for companies to take on contracts or even support guarantees even national guarantee you know for somewhere else in the UK so that whole infrastructure disappeared and really there's nothing come in to replace the flexibility that was there with it we do have export finance theoretically but it doesn't work for small and when I say export finance it's more into the guarantees that have to be in place to deliver the goods or the services that you're going to deliver. One point you asked about Frankfurt and German games, I mean the German Bundes tag was designed the rebuilding of it by a British architect so I think the Germans I'm talking about the mass of business that you look at the German industrial sector I mean it doesn't even compare it goes along and it's going down slowly as a percentage of their GDP you look at the UK and Scotland it's just collapsing and it's going to continue going that way if we don't do something about it and I think what you're describing is perhaps the opportunity loss not just for the company but subcontractors that whole supply chain and jobs staying local so I am with you on that. I want to tease out the national investment bank because you know it's been announced several times we're now going to see it because they finally got the capital that will enable them to to bring this into reality through financial transaction money they're talking about taking all your points about you know flexibility off the balance sheet being creative so it gets round EU procurement rules and state aid rules they're looking at £340 million is that enough or do you think we're in danger of under capitalising this it's not enough by a long shot and if I you know if I give you an example of a bid that we could have put in for irish ferries for the shipyard 350 million was the value of the contract it had to be done by 2020 we would have had to take our workforce and port glass go up from 360 to about a thousand um we couldn't bid for it because the terms where you get 20 percent progress payments and 80 percent on delivery of the ships kfw backed flensberg in germany to take that contract we can't take it now an 80 guarantee and that's 250 million so are the scottish government going to give me tie up 250 million out of that investment bank for one contract no way and when i compare it with when i compare it again with finland because i've got personal experience of that that's why i've mentioned it a few times last year their support in guarantees and bridging finance and capital for startups and growth was 2 billion euros in a year that's a country of 5.5 million people same size of scotland so it needs to be up at that sort of level not but i understand it's going to be a billion to a billion and a half and really to i think there's i think there may be some question as to whether you need EU approval and i think in the people who are looking at its mind there is no question in my mind that you want to get european approval because if you don't they're going to hold it up as stated you've got to get it around the european the european rules for for being able to support businesses and i'm sure that's not but i'm not sure that's happening so you would envisage it probably as almost a two-tier operation one where they're providing guarantees and indeed loans to very significant projects as well as able to perhaps engage with SMEs on export finances yes okay and can i just say that a key part of it is being able to raise outside fine raise a bond for the bank outside of your national debt that's a key part and that's what qualifies it as being able to get around state aid because it's independently financed and it's a commercial entity although it's government owned it works under commercial rules with outside money and that's the two boxes you've got to take to be to be able to convince europe that this isn't state aid and then you can point the finger to all the other national banks that set up the same way if you don't do it that way they'll come back and say well they're different they do it a different way you can't do this and you're going to be blocked okay that's very helpful can i ask about the the again back to the institutional cluster which i think is a theme here um is it clear which of our institutions um public institutions support exporting and are they doing a decent enough job the only institution that i know that supports exports is UK export finance okay and it doesn't work for SMEs because it has to go through the major banks then although they will say to the government officials in Westminster yes we're doing this we're very supportive they ask smaller companies for additional security and very often these companies don't have the security to give up because they're already fully secured elsewhere i was thinking of Scottish development international se any experience it's not finance it's not support for the bonds you know it's other types of support which is also important and support and we've also got i think the name chains but UKTI as well is obviously an important access point for firms and i think you know you there'll be some examples of people who've had excellent support and very fast and very clear and there'll be other examples where they've got lost for for potentially 12 months and got no advice and in a growing business and in a business that's looking to export 12 months of going going to the wrong doors is can be fatal certainly to those export ambitions i think they do give good support it's the next step when you have to get the contract and fund it in part of the guarantee because we've used them to very good effect on introductions even using office space that they've had to help and and i've found the support excellent so i i think that part is actually quite good and i wouldn't i wouldn't do away with it but it's the it's all the kind of financial support that we've got in different forms that i think needs to be more efficiently organised i do think we have have an issue of clutter and the businesses i speak to many of them are now quite early stage they don't know where to go and i think the big problem is to access UKTI or or sdi assistance you have to go through business gateway and through Scottish enterprise and i think the issue there is a one of language if you don't say i'm i'm a high growth potential business and i want to internationalize and i'm a technology based firm and using all of the the different sort of language identifiers firms don't make it through the through the front door and so i think we're seeing a huge problem here in terms of access to even that that early stage more generalist support before they even get um further through their their own export journey and i think the the clutter is is a bit of an issue and how we can actually signpost individuals and organisations to relevant sources of support i think is a big discussion to be had and it links back into this issue of of of renegotiating or re-organising the support landscape in Scotland um like like gym i i think all the organisations have have a role and and i don't think we should be doing away with anyone or anything but i do think there's got to be a way that for the lay person for our students for our young people for you know individuals who are starting a business without a an existing network how do we make sure they can access the right types of support in a timely manner so that they don't sit around waiting for 12 months and i'm unconvinced that that currently is the case i think we have a lot of people who are turned away or who spend ages and ages looking for support and and actually can't find and access it effectively and now moving on to julian martin and then Colin Beattie after that thank you very much convener um i am interested in what i mean government can only do so much when it comes to businesses and the scotch government's already done a few things around it like Scottish business pledge for example which is voluntary um the UK government done the gender pay gap reporting which doesn't have an action plan associated with it there's you know people can have an action plan it's again voluntary but they're not asking for one and your particular business support and my business support maybe comes from agencies like Scottish enterprise business gateway or if we have a Scottish investment bank we should actually giving out finance to companies do you think that that should be dependent on companies making promises to deliver fair work because you're right a few of you've said that sustainable a sustainable economy comes out of having good jobs having fair work having opportunities having people actually satisfied in the work that you're doing do you see that there's any movement there and that's the way to encourage people to deliver fair work well i think it is but you're in danger of then looking at companies that may maybe can't provide high wages you know you've got to create high a higher wage companies but not not damage or kill the ones that can only afford to pay lower wages because there's a role for that if it's an entry if it gets someone into work and it keeps them busy and it gives them a platform to move on then you know do you go with the living wage or the minimum wage or whatever you know there's a there's a lot of low paying jobs about in scotland they're not bad people and they're providing a good opportunity for some young people maybe some older people as well but i do think that on the whole in general in companies you should be you know they should be seen to be paying good wages have equality and and all these other things that we're asking about and you know on the on the pledge this came up the business pledge this came up recently a meeting i was at and i think there was some complaint that only is it 5000 people have signed up to business pledge out of you know a whole load more companies not that doesn't mean that they're not doing what the business pledge is asking them to do not everybody wants to go out and wave their hands and say i've signed up to the business pledge i think there's a lot of businesses do it that are not signed up to the business pledge and i wasn't signed up to the business pledge but i do all and more of what the business pledge is asking you to do so i was approached after saying this to sign up to which i have done in the number of companies we have but we hadn't bothered doing it because we're just doing what we think is fair and the right thing to do and it fits with all of those so it's dangerous just to look at the people who are signed up and say it's not working because i don't think that's the case i think it is the the whole undertone is that the majority of businesses are looking to do what's in that pledge encourage the businesses that are not doing the things that promote fair work and to doing it by making the business case for it for example we are big and quiet in the gender pay gap and we had some great big organisations come in here and saying how they were trying to eradicate the gender pay gap but not many of them were actually able to articulate what the business case was for that and i'm convinced there is one easy to solve the gender you know that gap just be fair about it and pay the same we had a discussion at one of our meetings yesterday all the females in her business earned the same as something more than their equivalent male you know i don't see but that's equal pay it's not the gender pay gap necessarily there's a lot more to that what do you mean by the gender pay gap the gender pay gap is about women's progression within a company for example over a period of time giving putting things in place in the company that allows maybe people with caring responsibilities to be promoted in a way that's fair with the people that don't have caring responsibilities a lot more to that flexible working for example but a lot of these companies that were doing it they were doing it because it was the right thing to do but weren't able to articulate that there was actually a very strong business case for doing it which i think might encourage other businesses who are maybe not doing these fair work practices to actually get on board with it so i'll be honest i think it's back to this productivity argument that i gave you you know if people are happy they've got security and there's fair pay and fair treatment that has you know maybe you should be emphasising the productivity improvements that can come through from that it pays off big for companies you know you get you get much better return if you do that than if you don't do it and maybe that's where the emphasis should be instead of on arm despend you know do more of this and you'll get your productivity arm Jackie an aspect of one of your point i think julian is if you look back at the vast majority of people who are running their own their one one person businesses are self-employed often it takes them a while to get up to what you'd regard as a as a fair wage or a living living wage so many many self-employed people rely on the benefit system to get to that stage and we actually have quite an appalling approach to self-employment with the benefit system we've got something called the new enterprise allowance which is almost unworkable for most people and it's not actually terribly valuable it's actually paying less than the enterprise allowance did 20 years ago i think it's 33 pounds a week and we've got evidence now that rolling out of universal credit system is actually going to have a bigger effect bigger minute negative effect in self-employed people than any other groups so i think we've got quite a major issue again it's going back to how do we get people into into that whole process of building up what they're trying to do and get their achieve their aspirations when actually there's quite a lot stacked against them at that stage and on the gender gap i was really shocked to read i've got some stats here they're not published yet it's a working paper but this is on rural stats women living in remote rural scotland have the lowest annual income of any group and the largest median gender pay gap at £5,076 and that is is really appalling and very difficult to deal with when you're operating in a rural economy where there are fewer opportunities and something that will need to be be more aware of i think. I think we've got to recognise and appreciate that it's a long run societal issue that we're addressing here and that doesn't mean we don't have to put our shoulders to the wheel to solve it and we certainly do. I think looking to Jim's point about many businesses the businesses I spend most of my time with they do trying to develop those sorts of cultures to do that but equally they struggle sometimes when they're being told what to do by somebody very far away so maybe that's one of the reasons they don't sign up to things like pledges or react against it. It's only because it's a long run issue and because it's complex then you know there's going to be multi areas we have to address it. One particular area is about role models and there's you know both on the sort of emotional appeal of there's people like Jim and others who are doing it and they're doing it because it's good business sense then getting that out into the media and then building a culture that that's the right thing to do. On the other side of things is the hard data as well where we can produce hard data of evidence why this is better and the last part of that is again we work closely with a lot of the next generation coming through. They've got a very different value set than previous generations and they're the idea of things like profit with purpose etc it's coming through there so I think that if we can give it some nudges along the way for me that's better than big grandstand you're a bad person because you haven't signed this bit of paper then I'd be cautious about that. You mentioned the nudges and I guess that comes back to my earlier point is that the nudges could be incentivising things and is there a role for government there or is that really going to rest with things like the business support or working with other businesses and whether you invest in another business if they've got fair work or if they've got a lower gender pay gap do you think that's where they're going to come or is it just going to be about things that've got nothing to do with government and about the business community actually standing up and championing those things? I'm sure that we could spend a whole session talking about this some of the taking two extremes one would be looking at the how to support and you know nudge theory how to support the more general mass media presentation of organisations that are developing these kinds of work practices and their results so there's how you use that. The other side of it again with the national bank is it could be that part of when they look at the support they get that well what practices are they conducting now the types of businesses Jim's got they'll be doing it it shouldn't be whether they sign the pledge or not it's actually what's happening on the ground that's a much clearer way of doing it as well so I would look at every single opportunity of influence there is and then keep that moving forward but do it because it's a good business. But I think you've got if you can be rigid and make rules because if you take the example that Jackie gave say a couple of people wanted to join a business in a rural business and they were happy to take five thousand but there was some system to top them up there was you couldn't say to that business you have to pay them this amount of money because it just wouldn't happen you know you've got to look at the the particular circumstances of the business and where it is that you're looking at so you know to make hard and fast rules about if we are going to give you this support then you've got to do this this and this then you're going to you're not going to be able to help support companies that you really need to be supporting just one other little little point just about rural I'm very interested in your experience in Finland I'm going there in about six weeks and I'm interested do it does the Finnish economic activity have an equal well obviously not an equal but a good rural spread or is it all concentrated in the big cities it's actually quite rural I mean we're halfway between Helsinki and Lapland and you know it's all I mean if you look at Finland it's all kind of trees and lakes and there's communities all over the place so it can be done yes okay thank you like to move on now to Colin Beattie thank you I'd like to ask two questions kind of around the same subject the Scottish fiscal commission has commented that or believes that weak growth in Scotland has become structural rather than cyclical since the depression or at least since the since the recession so I'd like to ask do you agree with that and why has it happened and secondly do you share the view of the Scottish fiscal commission that Scotland like other advanced countries is entering a period of long-term poor economic growth or productivity productivity growth first I agree with what they say but I don't think we necessarily are entering a period of long long economic decline or low growth I think we are if we don't do anything if we keep doing things the same way we're doing them but I believe I strongly believe that you need to set the vision and the goal of what you want to do and then work out what you need to do to get there and to get to higher growth is absolutely possible but we need to be doing the right things the explanation for it probably sound like a broken record but the banking crisis at 2007 2008 you can't underestimate the support that took away from businesses they you know I know Peter Cummings and the others got really slated for some of the the big challenges that they created in the bank but underlying that was a lot of support for smaller Scottish companies more support than you know you would think a big bank like that would give it was because they were Scottish they were based in Scotland and they had a bias towards supporting smaller Scottish companies we don't have a Scottish bank anymore you know Royal Bank of Scotland I've got to go to London to speak to anyone senior and Bank of Scotland's now Lloyd's we you know we those those companies went the extra mile to support small businesses and that's gone that's gone now and nothing has really stepped in to support it and that's why unless we do something to fill that gap then we are going to see a continuing low growth scenario in Scotland but what is going to change that I think the national investment bank we're setting a fund and a new Scottish bank and is to try and fill that gap and and get more support into small companies that we need people doing more of this to get the support in and I think from the the government's point of view all of the kind of support mechanisms we have we talked about the clutter we need to you know sharpen that up a bit and and get more efficient support in through to the companies I think if we do all of that then that's what's going to change but we need to we need to change it it's not going to change if we don't aggressively go after it and change it would you agree with it Scotland is the same as other advanced economies in this regard or are other economies actually performing better than we are and already have some solutions the fiscal commission seems to think we are the same as other advanced economies in respect to this this this poor growth that's because we're of the the environment we've got around us the the infrastructure of course they're they're talking about if things don't change that's the only way they can only comment on the the environment we're in just now and unless that changes you know I think we are the same as others the others the others are changing you know the others are changing so they possibly will pull ahead of us and we'll be we'll be further behind Sandy Kennedy and Jackie Bratton wanted to come in on this as well so Sandy and then Jackie so just to to echo Jim's point is that when we went and maybe it's a question back to Jim partly as well is that when we talk about the Bank of Scotland and RBS support pre 2008 it's not just in terms of hard cash because too often we talk about the financial challenge is just being about the availability of finance and that's particularly an export that is clearly an issue however it was the advice it was the connectivity it was the inspiration it was the raw experience that the banks had in them at that time that provided additional support and then what it unlocked elsewhere so what we've got to be careful of is it's not just the finance it's also the support that sits around them as well and that's been replaced in part by the public sector our argument is it should be all of us are in it together but in a much more joined up fashion and the second point which is to your point about you know where do we go well obviously they're looking at it from a long run and comparing herself against the other advanced economies in many ways I would argue that if there was a second industrial revolution where we were very strong we missed out on the third and we've been getting ourselves sorted out through the third industrial as we enter the fourth industrial revolution we have an opportunity to say well what kind of country do we want to be and how are we going to front up without a lot of some of the legacy issues that the others have as well and just quoting from the world economic forum they recognise that it's people who are going to drive it and that interaction with AI in their case particularly but people with grit creativity and entrepreneurial spirit now Scotland's got a long heritage over centuries of people like that and we need to re-embrace that and if we can along with the structural stuff we're talking about then yeah we can buck that trend into this next stage it's actually going to say it's this is about people and we undoubtedly have the people in Scotland that can change that long that forecast and strengthen the performance going forward and you know two key areas I would highlight that have already been discussed this morning gender we're looking at a gender gap in Scotland where only 20 percent of our businesses are owned and driven by women and we know that there are women out there who want to be part of that business culture but for all sorts of reasons some of which we've touched on they're not making it even to the first step so we have to reimagine our economy and our infrastructure and how we deal with that and you know it's frustrating that we have a lot of commitment we have a lot of policy commitment from Scottish Government towards making women's enterprise central to economic growth and there's a policy framework and we have a lot of activity around that but the entire budget given to women's enterprise activity in this past financial year is £400,000 so it's a mere drop in the ocean compared to what we actually need in order to make a substantial difference so instead of saying yes it's a good thing and we should be getting more women we actually really needed to tackle it head on and say that is potentially a way of making up the difference in our economies there's a £7.6 billion prize if the same number of women as men were starting businesses in Scotland and as has been pointed out more than once that equates to the projected deficit that Brexit may cause to our economy over the next few years so there's a real prize worth going for there and on the rural economy rural gva growth has actually been quite strong if you separate out from the urban economy it's been positive since 1997 whereas up until then it was actually slightly going back but interestingly the worst performing sector sectors in the rural economy are agricultural fisheries and forestry and yet those are the ones that get all the investment and the attention now obviously that is going to huge changes coming about there but what we've got is a revolution within the rural economy where new people are moving in, new people with high levels of skills with aspirations with entrepreneurial ideas and with the improved infrastructure that we've now got in rural areas it could become a major part of the economic powerhouse that perhaps people haven't thought of it as before. Sorry perhaps very briefly and then we'll move on to the next question. Just to clarify one particular point the Scottish Fiscal Commission has put forward that it's not just Scotland that potentially is entering a long-term low productivity growth but that the other advanced economies are as well would you agree with that? I would agree with it across the board on other developed economies. I think there are big changes coming about in the way we all work. One of the things that Scotland has got a lot of expertise in is data analytics and big data in the universities. We haven't found a way to translate that into big companies and growing companies but there are other countries who are looking and investing in those things with patient capital. I know it covers just so many areas and so many problems that we've got. Just going back to the comment that Sandy made about, it's not just about the money, it's not another big difference with the banks is that it's moved from relationship managers who understand the local businesses to algorithms on a computer that decides whether you get a loan or not and that's all gone with the bigger banks. Relationship managers now get embarrassed if their clients don't get a loan. In fact, they don't even promise it anymore or are really pushing it because it goes into a machine and we've lost that and we need to recreate the personal understanding of the business and the people that are running the business and the communities that are involved in it. That's a big gap now in the way that we've moved. Other developed economies have more local banks. If you look at Germany, there are a lot of state banks that support the local communities and make decisions based on relationships and what they want to do. Another thing to remember about the Fiscal Commission is that this is the first time that they've had to predict what the growth is going to be and they're not going to overdo it. They would rather be surprised in the upside than be caught out in the downside. Susan Rice is a very careful lady so she wouldn't want to be sticking her neck out too far. I wanted to take us back to the role of government in supporting the growth of Scotland's economy. I've heard everything you've said about banking and how important that is and how important the national investment bank will be and how important it is to address export finance. In any sense, I want to blittle that. I've heard it as noted. I wanted to ask you more specifically about the comments that you made earlier about how to support decent employment, high-quality companies with decent jobs in Scotland. Aside from banking, what is it that the Scottish Government could do, either by getting out of the way or with a direct interventionist approach, to do more to create good, decent, sustainable jobs in Scotland? I know what you're saying that you've heard about the bank and that's like there's something else. The public sector is responsible for a lot of the big companies that are about. If you look at America, a lot of the big tech companies come out of government support for defence contracts or the space programme. A lot of money is going into that. A lot of money is going into support the companies that spin out of it. Companies can't just do this on their own. It needs to be a partnership, I think. I don't think that there's anything more important than getting this whole issue about the kind of financial support that you give. There's a lot of talented business people about it, and they know in general what they need to do. They just need the help to do it. I suppose that it's the finance and the support side. I'm quoting from a recent paper by Professor Spiegel and Harrison. They say that the proper role of the state is to cultivate the entrepreneurial community and culture that will eventually help to produce and reproduce the resources, rather than trying to create them from scratch. Translating that out is that the Government is definitely doing the things that Jim is talking about, but it can also do more to nurture that cluttered ecosystem as it is at the moment, but to nurture it rather than feel that everybody could get out of the way that we were going to do it. I think that the key thing is about how to nurture that entrepreneurial ecosystem. It's a key part in conjunction with making sure that the finance is getting to the right people and the export support, etc. If we accept that, the one thing that we could really do is the banking and then not look for any other policies to address. Maybe I'll ask a question about the national investment bank instead, because I think that there is an acceptance. There is a good idea, and that's universal across all the political parties. It's universally agreed from business leaders. I'm not sure whether the rhetoric matches up. Some people think that a national investment bank should exist to fund capital infrastructure projects that will benefit the public sector, whether that's transport links, big builds, new bridges, etc. What we're hearing from you today, Jim, is what we need, is that it's a national investment bank that's prepared because of the security of its finance to be slightly riskier and do the providing of the finance that our high street banks won't do just now because of the issues that they face. Is there agreed acceptance about what a national investment bank should do from those people who are going to set it up, or is there a lot of confusion about its ultimate purpose? There are plenty of models out there that we don't need to reinvent the wheel. All we need to do is go and look at how other countries do it. The French recently did what we were talking about, Alex, in taking a number of their entities that support business and put them together, working in what they call BPI, the bank-poor industry. They've put it all into that, but I think that it can help. If you take affordable housing, low-cost housing, the companies that are not getting the support just now to be able to do that are the small builders. I've talked to one of the people who are going to support the start-up of this new bank, who are going to invest in it. It's a large building company, but he said that someone who's going to build 10 or 20 houses is not going to get the funding, and they're not going to get the support. You could really start to encourage the building of affordable housing and get that going by supporting the small businesses that could do that that are not getting the support just now. It's big ones that are not interested in something like that. They want to build 200 or 400. The businesses that I'm talking to about supporting the bank are building 400 houses in Perth or something, but they wouldn't look at a development of affordable housing in a smaller scale. If you get lots of people doing that, you're going to address the affordable housing issue as well, just by being an enabler of small businesses that can employ more people. It all becomes a building block to a stronger economy. On the bank, one issue that is quite important at this critical stage of its development is that the consultation around the bank has not been particularly widespread. I don't know any businesses that we deal with or even know that it's coming about. We haven't been asked for any feedback on it. In terms of the role of the bank, what markets it is going to serve, what size of businesses it's likely to support, there's a lot of non-knowledge out there, so I think that there's maybe an issue there around at least having a wider conversation about it and getting more input around how it could operate. I mean, I have no idea whether it's even thinking about the very low end of the market because most businesses we talk to really struggle to get any any energy interested in lending them £10,000, £20,000, which is what a lot of very small businesses are looking for. There's also hardly any grant support at that level either. Four or five years ago in our area, we could point to around four or five different sources of grants that small businesses could look at. There's now none, apart from one small pilot that we're actually managing on behalf of SSE, who are imaginatively putting some windfarm funding into a grant scheme for small businesses, and it was launched last May, expected to last two years, and it's going to be fully expended by next month, which shows the demand for that kind of finance. Just one more question, convener. It's something that we haven't touched on yet. There was a report out yesterday from Cities Outlook projecting the impact of automation on Scotland's future employment, and they're suggesting 230,000 jobs to go over the next 10 years. They suggest that it's going to hit in particular places like Dundee with a strong industrial heritage that might be struggling to grasp some of the new employment opportunities. I wondered if the panellists had any views on whether there's a greater role for government in anticipating some of the challenges that are going to come from automation and what that might look like. I just think that that's scaremongering. I think if you look at history, every time some new technology is coming out, it's going to do away with jobs, new jobs appear, and that's what's going to happen. There will be other jobs, and what you need to be able to do is support the growth of these other jobs and the companies that emerge to create these other jobs. You don't need to interfere in that. That's going to work out okay. Believe me. We've touched on a number of areas that perhaps fall under the fair work agenda, which in itself more broadly comes under the rubric of inclusive growth, which is, of course, one of the four pillars of the Scottish Government's economic strategy. Can I invite the panel to each set out what their definition and understanding of inclusive growth is, and speak to how they feel about the relationship between inclusive growth and more conventional understandings of growth is? I've got a pet subject of mine, because I think that we've got an excluded group from the areas of multiple deprivation that we have in some of our bigger cities, such as Edinburgh, Glasgow, Dundee. If I take Glasgow as an example, 700 young people a year leave school at the statutory leaving age, 50 per cent of whom will go into job or go to college, so they're motivated. 30 per cent will get involved with Schools Development Scotland or activity events. Schools are allowed to take that and say that it's a positive destination. It's positive in that they're engaging with the support, but it's not positive destination. The figures that we get cover that up a bit, but there's 20 per cent that disappear off the radar. They don't engage with any public support and that's a poverty trap. It happens every year and it's the same statistic in Edinburgh and the same statistic in Dundee, which are the two other cities that I've tested, and it repeats consistently. That's a large number of young people that are being trapped in poverty and we don't do anything about it. Inclusive growth for me is giving those young people who are talented maybe don't fit into the academic system but are talented and we should be giving them the training and opportunities and the education that fits them and we should be engaging them in a way that they will engage. Because of my frustration with that, I started Newlands Junior College, which has been hugely successful. 100 per cent success in them going into work or going to college. 100 per cent real jobs, real college places. This is the fourth year. I've got a meeting this afternoon. I've got the education secretary supporting it in some way. My real problem is the local authority. I've got another meeting with the leader of Glasgow City Council this afternoon. They're letting these young people down. We're working on starting one in Edinburgh. I've got a meeting with Stirling University and they asked me to get involved with Clackmannanshire and we're looking at Dundee as well. This is happening every year and it's been happening for a long time and we don't address it. We talk about attainment being getting five fires or more at a certain grade. We need those young people in the skill base, such as technicians. We're not investing in them. I gave an example to the council of economic advisers saying, if you take Tommy from Tory Glen, a rough area of Glasgow, we invest four years of secondary education in him, 6,700 a year. Two of it is wasted because he stops attending after two years. He's absent. Nigel from Newton Merns, posh part of Glasgow, we invest six years of secondary education in him and four years of university education. Nigel gets more support than we taught me. We taught me is not worth the additional support. It's not a big additional amount of money. Inclusive growth to me is taking care of those people at the bottom, not to be trying to push more people through a system that only caters for people. It's the majority that caters for and that caters for them in a good way, but you're leaving too many people behind and that's not inclusive. I think exactly what Jim said. There's the enterprise parallel with all of that. We've already talked a little bit about that this morning, but a real inclusive growth economy is about helping anybody or enabling anyone who wants to create their own job or business, whatever it is, that they need to create an economic future for themselves to be able to do that, so it comes back to the kind of support that's available. That's about looking outside the normal areas as well. We have a group of entrepreneurs in our area with health issues and they come together as a peer group regularly. They don't talk about their health issues, they talk about how they can support each other to build their businesses. When you think that there's hundreds of thousands of people with health issues across the country, sometimes you can't go into traditional employment. That's a prime example of where an inclusive growth approach would help if there's the right support available for those people. However, another perspective that Jim touched on procurement is that we create an elitist version of business in Scotland because we tend to concentrate most of the public sector procurement on a relatively small number of businesses and we make it really difficult for very small businesses to get into that system. Various attempts have been made to address that over the years and haven't really succeeded. It needs a real effort. Ironically, perhaps post-Brexit, there might be more opportunities because often excuses around fair tendering, etc. European rules are used against opening it up to smaller businesses, but to me that would be a key way of ensuring that there's more equality of growth rather than exclusive growth. Echoing what's already been said on the panel for us in entrepreneurial Scotland, inclusive growth, if you look at it from an economy point of view, is that nobody's left behind, so Tommy's not left behind, and other people like that. Within an organisation, it's the same. Many of the best businesses do that is that everybody is coming through together, so that they benefit from the skyscanner would be a good example of that. Just a small additional point, which is that inclusive growth for me also includes those people who have got high potential and that could be women, young people and therefore making the top end as well. People who can be really successful and really maybe create the businesses of the future for them to have the equal opportunity. Just as an example, our Salter Scholar intern programme, where we send them all over the world coming, and they come from university, 40 per cent of them come from a widening access background. We have to be careful that the superstars who make it through some of the low-progression schools don't stunt their growth as well. We have to do it for Tommy and for his big brother, who happens to have managed to get to university and is showing absolutely stellar potential to be the next Jim McColl. I'm conscious of time, perhaps a brief final question from Jamie Halcro Johnston. I wanted to talk about skills as well, so it was good that Jim, you've covered some of that. I wanted to look at what the role of skills can play in terms of economic growth, particularly perhaps continuing that skills training and retraining for the over-25s, which isn't an area that has perhaps been focused on enough, except where there are specific issues within sectors. It would be interesting to hear your thoughts on that. I think that it is important, but the core of the problem that creates the over-25 starts way back at the early years. It is all back to our areas of multiple deprivation, which is a terrible leak that we had to have. A lot of the early years work is really important. The reason I called it a junior college so that it didn't have the stigma of a special school, but it takes them at 14, because I think that if you don't get them before they get out in the streets and get into bad stuff, they're already out in the streets then, but if you can give them an alternative, you've got a better chance of saving them. I don't think enough support goes in at that point. We do. There's a lot goes on, but it's maybe a six-week course. We're trying to deal with people that are coming from really troubled backgrounds, who for years have been abused mentally, sometimes physically. They're coming from really disruptive homes. They're not healthy. We pick them up in the morning, we give them breakfast, we take them to college, so we tie up with the local colleges on three-half days a week to give them a choice of three vocational skills, because they really get them interested in something. The other pillar that we have is life skills. I think that the longer you wait to embed those life skills that are missing from their earlier years—we do Duke of Edinburgh award, we take them out to national parks and museums—we also teach them things like the first weekend or a few weeks when they join us. This is eye contact week, and all week you've got to have eye contact with each other. Now it gets overdone and they make a joke of it, but after eye contact week, they all speak to you about looking at you in the eye. These are simple things. How to deal with their presentation when they're going for a job or when they're filling in a form. It's life skills that many of us take for granted that scare the hell out of these young people. The longer you go on, it's still important to have that. I don't want to take away from that, but the longer they go on with the old life skill model without you changing it, the more difficult and expensive it becomes to change it, I think. You're obviously catering for them at Newlands, but that should be starting a lot earlier. One jaw-dropping statistic we found out, we do a literacy test on the people we take in. 34 per cent have a literacy age of between six and seven. How can you expect these young people to go out and engage with training or skills development when they've got a literacy age of between six and seven? We develop a course that over six weeks can move them on a year every six weeks in the literacy age. You only want to get to 12. I'll probably get a literacy age of about 10 or 11. 12 is the peak. They're not miles away from it. They just need to move up quite a bit. Any other panel members want to come in for some final comments? Just quickly on skills. I think that there's an issue around how do we provide lifelong skills development for business owners who can't afford to take time out of their business to go and do an accelerator course or an expensive business management course or something like that. I think there's a huge opportunity to develop peer learning models with other businesses and to really help people to see that continuing to learn wherever they are in their business journey is really important, particularly given the need for learning new technology skills and the opportunities that digital is going to bring. Just two quick examples. Women's Enterprise Scotland are working with some business gateways to provide leadership training for women business owners. They've just put on their third, I think it is, in Fife and it's oversubscribed immediately, so it shows the demand for that sort of thing. It's a relatively informal approach. It's women sharing with each other, but it doesn't happen often enough. In Perthshire, we do around six, seven, eight learning sessions a month where businesses, eight or 10 businesses, come together. Somebody who knows a wee bit more about one subject will present and then everybody else chips in and everybody ends up learning a lot more at the end of the night. They've had a useful networking and development opportunity and it's not difficult to do. It's very easily facilitated, so it's sort of de-formalising that skills because we always see skills and training and development sounds like it's got to be a formal course. It doesn't have to be. Can I just add on the college that we've got? We have links with industry to support us with local businesses, but a more important part is young people coming from these businesses in to talk to the young people and also the young people going out and spending time with the businesses. Just to make it clear, I don't want to be in education. I think that this should be part of the public sector, with the private sector in local areas getting involved in contributing in a way, but it needs to be a public sector. I worry that because we've done it that people will just, we don't need to help, it can't work being privately. It's got to be part of the education system of Scotland. Susan Mawson. I just wanted to come back to a point that Jackie made about that idea of informal skills development, and I think that's a critical element. I see so many people who have come into higher education or further education late for a whole number of different reasons, and I'm very lucky to see them when I do. Conversely, I see quite a lot of younger entrepreneurs who haven't gone through that route, and all of them are lacking this confidence. They're not lacking ambition, they're not lacking skills in many ways, they're lacking confidence, and to a certain extent there is some skills development that's needed there, but they are very reluctant to go to formal mentoring sessions, to engage with a university, to go to college, to be part of a local business group because they perceive it as being this high pressure, a very professionalised environment, and I think that if we can integrate skills development in a more casual, informal, peer-to-peer learning kind of way, we may be able to address two key issues, both helping in terms of specific skills or specific knowledge bases, but also building that confidence without making people feel like they don't fit in and they're not polished enough to be in a particular training course, and I think anything that we can do to try and integrate that will be really helpful for lots of disadvantaged groups, as well as those who are doing really well, as the case may be. Sandy Kennedy, perhaps the last word? Dear, for everybody's sake. A last word for today? For today. Really just building on Suzanne's point is that I'm touched on in many places, it's the hero of the story as a person who's out there trying to start a business, grow a business, who's creating the culture to do fair work and all of these different things, so we need to do everything we can to gather around them and support them in the most efficient way, be it from finance to support, and then just really building on the very last point, which is that, as a country, we don't invest enough in our leaders or the next future sets of leaders and they don't invest maybe enough in themselves, and therefore the more we can encourage that sense of continual lifelong learning for those people who either are leaders or potentially could be leaders, that would be a huge step forward. Thank you very much. Well, thank you to all of our witnesses for coming in. I'll suspend the meeting at this stage. We'll move into private session.