Good morning and welcome to the 31st meeting in 2022 of the economy and fair work committee. So our first item of business is the decision to take item 5 in private. Are members content? Thank you. The committee will move to the next item of business, which is to take evidence on the bankruptcy and debt arrangement scheme, miscellaneous amendments, Scotland regulations 2023. I refer members to papers 1 and 2 and welcome to the meeting Tom Arthur MSP, Minister for Public Finance, Planning and Community Wealth, who is joined by Suzanne Houston, Solicitor and Alex. Read head of policy development from the Scottish Government. I invite the minister to make a short opening statement. Good morning to you, convener, and good morning to the committee. Thank you very much for taking the time to consider these draft regulations. I think that it's very important for us and for the portfolios across government to consider policies in the context of the current extreme cost of living pressure. We want to act quickly where we can make a difference, and there are four areas of particular focus with regard to these regulations. First, the debt arrangement scheme payment breaks. Through the debt arrangement scheme, there are in the region of 16,000 individuals who have taken control of their debt and maintain a debt payment plan. For the least some of these people, the increases in cost of living will pose a threat to the sustainability of those plans. We want to make sure that the arrangements for securing a payment break are sufficiently flexible, bearing in mind the current volatility in living costs. The provisions and needs regulations would allow for a break of up to six months where the wider pressures on household income apply. I consider it an important change that will help to see these payment programmes succeed. The next two issues relate to access to bankruptcy. Stakeholders working with us in a policy review have recommended removal of the minimum debt level for minimum asset process bankruptcy, currently set at £1,500. The recent report of the Social Justice and Social Security Committee following its inquiry into low income and debt has also made this recommendation. I understand the concerns raised that the current threshold may prevent individuals from accessing debt relief that they desperately need. The regulations remove the minimum debt level. We have made significant progress in reducing or removing the fees associated with self-nominated bankruptcy. The Social Justice and Social Security Committee has recommended further tweaking of the fee waiver criteria to encompass all those that have been assessed as unable to pay a contribution through the common financial tool. I am happy to take that forward. That will provide further benefit to the most financially vulnerable. There is a further change that I consider necessary and linked to the entirely appropriate actions that have been taken on fee reduction. Wider pressures on the public purse mean that we need to look at all the options within the current system that can help it to recover costs and remove burdens on public finance. Those regulations would increase the deposit that creditors must provide where the accountant in bankruptcy is nominated as trustee following court bankruptcy. Read for this is twofold. First, the reduction in fee income highlighted. Secondly, the administration of court petition bankruptcy where no funds can be collected comes at a significant cost on average almost £2,000 per case. This initial deposit paid by creditors is repaid where the bankruptcy generates funds. Where no funds are produced, it seems reasonable to me that the creditor bringing the action should bear some more of the cost. I will conclude there, convener, and I would hope that the committee will approve the regulations and agree with me that they are a sensible measure at this time. I have no actual question on the particular issues that you have brought forward, but in the last session, the committee looked at debt arrangement schemes and produced a report on it. One of the key things that came out of that report was the question of independent advice before someone enters into one of those arrangements, because the current arrangement does not allow for that. The financial advisers are all in-house to various interested parties. Now, it came up against a bit of a brick wall in that who would pay the cost, but the committee found that many, many people were going into debt arrangement schemes where it was possibly inappropriate and did not work for them. I just wondered if the Government was going to be looking at that again to see if there is a solution to that issue. The committee will be aware more broadly of the statutory debt solutions of the providing individuals with the debt advice and information pact, but with regards to the specific points that Mr Beattel asked Alex to come in. My understanding, I think, that concerns might have been related to protected trust deeds. I think that it was an inquiry into protected trust deeds and some concerns about where they might not be the appropriate solution. There is a requirement for debt advice in relation to access to the debt arrangement scheme that is built into the programme. The issues around protected trust deeds that were raised as part of that inquiry are being considered as part of the wider review of debt solutions that is on-going. We have consulted on recommendations made by stakeholder working groups who have been working on that wider review of debt solutions, and that work has been taken forward. As your committee will be aware, there are three parts to the review that we have been undertaking on our statutory debt solutions. Part 1 was completed in amendments that were brought forward in 2021 in response to the pandemic. Some of what is emerging here and will emerge in the legislative commitment at the PFG will reflect what has happened at stage 2, but there is also a stage 3 element to this, which will be a far more wide-ranging review that we will take forward in due course, and I will be happy to keep the committee abreast of developments on that. I am obviously very keen for the committee's views and input. Perhaps I can ask the minister to take into account the extensive work that was done by this committee in the previous session, which threw up a number of key issues, including the question of independent financial advice. I am happy to give that undertaking and also to assure the committee that its work has been very much valued and appreciated by the existing working group that we have, which has been undertaking the stage 2 review. There has been a suggestion that the increase in the fee for creditors would have an impact on creditors' willingness to take forward bankruptcy. Could the minister say a bit more about what he thinks the impact of that would be? Is he confident that AIB's income will be supplemented in order to compensate for the fee reduction that is anticipated? I would refer you, convener, to the detail that is provided in the Bria. Broadly, it is being stand. In the last three financial years, AIB has been the trustee. I think that about 56 per cent of bankruptcies have resulted in no fees being recovered to cover the administration costs. Those measures were taken to the FNC proportionate. I would note that what we are doing with the increase from £300 to £750 stands in contrast to the situation in England and Wales, where it has moved from £990 to £1,500. It is a proportionate response and, as set out in the Bria, it will have an impact. It does not lead to full cost recovery, but it makes a significant contribution, which I think that we all recognise as very important, given the challenging public finance landscape that we face. That fee going up from £350 to 150 per cent increased, so it was quite a large increase in the fees. You talked about the impact on it, but given the thresholds of being reduced for who can access map bankruptcy, that is going to put a considerable extra burden on creditors who are already likely to be losing money given, as you rightly say, a large number of cases do not deal with cost recovery or money coming back. How do you justify that? It is going to be a huge extra burden on potential extra burden on creditors. Will there be potential for a larger increase, as well, in those going into map bankruptcy? I would like to come in on a moment, but the majority of organisations that are taking forward a credit or petition of bankruptcies would be local authorities. We have engaged with regard to the map threshold, as I referred to in my opening statement. That is something that came out of the working group and was a very strong recommendation, particularly from the money advice sector. I should say what we are doing here in removing the £1,500 threshold. That is going to be a huge number of people who are going to necessarily take advantage of this, but for some people it will be very significant. I think that that was something certainly recognised in the deliberations of the review group and the discussions that we had in the meetings that I convened. On the minimal asset process threshold, it has been acknowledged by stakeholders that the numbers of people with unsustainable debt at lower than that level may be relatively small, but it would be a very important measure. If there is no surplus income to pay a contribution, if there is a requirement for debt relief, it is important that there is access. I think that the numbers would be small but important for those who are involved. That is the point that has been made by stakeholders and the social justice committee. The issue on the credit or petition fee is that it is in effect a deposit. Those fees are fully recoverable and there are funds available in the bankruptcy and the creditors would receive those funds back. I will move on, but in a large number of cases there are not funds. Is that right so they do not get paid back and it is for the credit to pay? I just want to ask very quickly what you consider to be the likely increase in people going down the route of mat bankruptcy with the reduction. Do you have any expectations of how that might increase and also how it might impact, for example, debt arrangement agreements and the choice between the two, whether there is any analysis of that? That is indicative of the engagement with stakeholders and the standing group that we have. As Alex said, we are not anticipating a huge number because we are talking about debts of under £1,500, but the reality is that for some people, debts of those levels are unsustainable. As such, although it might be a small number for those individuals, it would make a significant impact. With regard to more broadly how it interacts with the wider suite of debt solutions that we have, DAS is long standing and it is something that is unique to Scotland and is an important part of the landscape. What that range reflects is the fact that we have measures available that can be more suitable to individuals based on their particular circumstances, but mapping itself is by its very nature for some of the most vulnerable people with regards to unsustainable debt. I will move to agenda item 3. I invite the minister to speak to and move the motion. Do any members wish to contribute to any debate? No, I think that we are all quite satisfied. The question is that motion S6M-06962 be approved. The motion is therefore approved and the committee will produce a short factual approach that will be prepared and published. I thank the minister and his officials for joining us this morning and I will briefly suspend to allow for the next panel to come online. Our next item of business is an evidence session on the Outlook for Business Investment. I welcome Caroline Currie, chief executive, Women's Enterprise Scotland, Stacey Dingwall, head of policy, Federation of Small Businesses, Fergus Mutch, policy advisor from the Scottish Chamber of Commerce and Claire Reid, director of policy and public affairs, Scottish Council for Development and Industry. Welcome to this morning's meeting. If members and witnesses can keep their questions and answers as concise as possible, we will get through as much as we can this morning. I might be interested if the witnesses would like to set out their views on current economic circumstances and the impact of the budget in Scotland that was announced last week. I know that we have not had long to digest that, but I would be interested in maybe the broader views on the budget. I think that other members will come to issues around domestic and non-domestic rates and other practical issues that were in the budget. What I am interested in is whether you think that it sets out a positive context for investment in growth, but I will come to Caroline first and give everybody a chance to speak before I move to other questions. In the context of the budget, it is important to understand the landscape in which the budget is being presented. We have had two years of pandemic and we are heading into a cost of living crisis. The businesses that we work with are on average 44 per cent of the size of male-led businesses. Those businesses have been especially vulnerable to Covid and are now even more vulnerable to the cost of living crisis and the associated uncertainty. Against that background, what we would be looking for are dedicated pieces of support ring-fenced for women-owned businesses that acknowledge the background and the vulnerabilities of those businesses and that acknowledge the lack of support that has reached those businesses during the pandemic. I have given evidence previously about the lack of business relief funding being made available to women. Less than 11 per cent of Covid business relief funds were received by women-led companies. Those companies have not received their fair share of support to date. We would be looking for specific commitments to support women. It is important to say that this is not just about the financial support. As the committee will be aware, in many cases financial support is accompanied by non-financial support such as mentoring, support with signposting, support with assessing businesses' finances and the wider opportunities that it may find investment for growth. Those are the points that I would like to make. Stacey, would you like to come in from Federation and then I will invite Fergus Ewing after you? Yes, thank you for having me along today. Much as Cary has mentioned, our members are very much facing extremely challenging economic conditions at the moment. Obviously, they faced extremely challenging times during the pandemic, but there was support there from Government to help mitigate the impacts of the pandemic. Now they are dealing with a host of things, rising inflation, rising energy costs, supply chain disruption, staff shortages. Without that safety net of Government support that they had during the pandemic, things are extremely challenging for Scotland's small businesses at the moment. That is the backdrop against which they received the budget announcement last week. I would say that we are pleased to see that in terms of business rates that the poundage rate was frozen. We very much believe that that offers some breathing space and relief for small businesses at the moment, to have that confidence that the poundage rate is frozen. Although we would maybe like to have seen the specific reliefs for the most vulnerable sectors at retail hospitality, we have been given a specific relief as seen in England and Wales. We are also slightly concerned about the reform that was announced in the small business bonus scheme. That was not something that we had anticipated being announced in the budget last week, so we are working with our members to understand the impact that the removal of some of the reliefs for small businesses with the threshold being reduced to £12,000. I think that the Scottish Government's one figure states that that will affect about 19,000 businesses. At a time when costs are increasing significantly and it is causing extreme concern for our members, it is obviously going to be concerning for us that some of our members might face increasing costs that they had not anticipated at this time. I thank you very much, Stacey. I will come to Fergus Ewing. In the new year, we have taken evidence from the Deputy First Minister on the budget and also the 10-year economic strategy. I have been interested in the chamber's views of how well the budget will support that 10-year strategy, if that is something that you think enough has been done to respond to that. Yes, it is one part of it. Certainly, the chamber's response to last week's budget was probably mixed in its approach. I would certainly agree with what has been said just now on business rates freezing the poundage. It has been a particularly challenging time for so many businesses over the past few years. I think that, almost unanimously, Scotland's business organisations were calling for poundage rates to be frozen, so it was not to add the additional burden upon businesses at a crucial time of recovery when they are grappling with rising costs on a variety of other fronts. That was certainly pleasing to see on taxation. I think that the chamber has called for more detail on the economic modelling of divergence with the UK on certain areas of taxation and what impact that could have on proposed future investment decisions that are being made by companies. Aside from that, the biggest challenge for all of us and one of the Government's clear objectives in that 10-year strategy is its delivery of net zero. I am not convinced—certainly the Scottish Chamber is not convinced—that last week's budget necessarily will accelerate progress towards net zero or offer much new in that regard. There was an announcement about a further allocation of net zero transition fund money being allocated for the coming year, which is all well and good. That is £50 million in the grand scheme of things. Certainly, upping the ambition when it comes to delivering net zero for Scotland is something that the chambers would very much like to see tying into the 10-year strategy. I will come to Clare Reid. Clare, there is a similar question to you about the budget and the 10-year economic strategy, if there is enough in the budget to start delivery on that 10-year strategy. Morning. Thank you for having me. If I could just very briefly touch on the circumstances that our business is facing and I suppose that that is relevant in the context of the budget and the delivery of the end-set, I would characterise the feedback that we have had from members in terms of the current economic circumstances, which is varying from challenging to very challenging to in survival mode. That is the backdrop against which our members are working. Some of the larger organisations have managed to offset energy costs through contracts, but operating profits and the ability to invest is under pressure. The role of Government becomes even more important in those circumstances. I would echo points made by others, so that there were welcome elements in the budget and others have touched on the freezing of business rates. Stacey has also touched on the lack of potentially relief in areas where there are severe challenges. I would say that that is one area that we are talking to our members in rural areas and through our rural committees that hospitality and tourism have been severely affected and not just hospitality and tourism, but there are some quite specific issues that are facing rural areas. That is welcome, but we feel more that it should be done. On the income tax increases, we have had a mix of views. Clearly, there is a public spending challenge, but employers are facing real challenges in terms of recruiting staff right across all sectors that we work with. I think that there is just a little bit of worry and concern that the potential for further divergence and tax rates affects the ability to attract staff to fill posts in Scotland. That is materialism, but it is also in renewables and other sectors that are needed to achieve the just transition. If I were to summarise across the asks around that, I know that we are back to net zero specifically, but a lot of businesses are just because of the circumstances that they have been through and also because they can see quite a difficult period ahead. Stability and certainty is a big ask in terms of addressing some of the issues that will unblock the projects that are there. Having a Covid mindset in government, whether it is local government or national, or whether it is unblocking planning decisions, working together to find solutions to rural housing, which is really acting as a blocker to all sorts of projects in rural areas, and looking at support for what works in terms of supporting innovation in net zero. We know, for example, that local authorities' funding is under pressure and they clearly deliver lots of business gateway services. Similarly, the enterprise agencies are going to be critical in terms of helping businesses to invest both in the net zero context and in general to support the resilience going ahead. I will come on to non-domestic rates in a moment, but I just wanted to ask the panel to start with Stacey Denwell. Firstly, what one thing you would have liked to see in the budget but was not there? We have already mentioned hospitality and tourism in two areas with particular pressures. In terms of Government regulations or policies that are coming forward at the moment, whether it is short-term lets, the deposit return or anything like that, can you give us an idea of any areas of particular concern to you with new burdens and barriers coming up? If I could go to Stacey Denwell first on that. The thing that we would have liked to see was the specific release for the most vulnerable sectors, hospitality, retail and tourism, as we have seen brought forward in England and Wales. I think that that would have, particularly during the winter trading conditions and with the impact that we know that the current crisis is having on people's disposable incomes. That is obviously going to have an impact on those sectors in particular, so we would have liked to have seen that included in the budget. I agree with Stacey Denwell. We would definitely like to see particular sectors supported, and I agree with the sectors that she has already highlighted. However, from my perspective, women are a distinct sector of the economy. Already, from the evidence that I have given, how they have not received their fair share of support today. We would be looking for specific relief ring-fenced for women. In particular, I would call for the £50 million Government commitment to be accelerated, to be readily available now. It is tremendous to have this commitment at last dedicated for women, but we need to see it activated now. Women are a sector that has been specifically vulnerable to Covid and now to the cost of living crisis, and all the uncertainty that is associated with it. They have a lack of resources traditionally. They struggle to access investment and funding. The statistics on women's access to funding in this DNA age are downright appalling. There was a British Business Bank research just a few years ago, which revealed that all female founder teams received just one pence in every pound of venture capital invested on a UK basis. More recently, the gender index has found shockingly that just 0.5 per cent of investments in women-owned businesses are for venture capital, and private equity is appalling at just 0.1 per cent. Those are the types of investments that help businesses to grow, to get a solid foundation and to realise their ambitions. Women cannot access that type of finance or hearing it persistently. Now, more than ever, we require a very specific set of resources—50 million, please—to be set up and made available to women to help them through this pandemic, or we are going to see inequality continuing to heighten right in front of our noses here in Scotland in 2022, which is simply unacceptable. If I can put that question to you, did you hear that okay? I did. I'm sorry about that, James. I would never personally ignore it. Above all, Scotch James in commerce would like to see much more of a move to a competitive business and personal tax regime that would ultimately attract investments in Scotland and talents to Scotland. I'm not sure that the budget went particularly far on that front, other than a freeze to business rates, which I will add, was very welcome indeed. Thanks very much. Claire, I don't know if you want to come in on that as well. Yes, absolutely. I would reiterate the point on business rates released for hospitality and tourism. There has also been analysis done that suggests that there are still several thousand medium and larger premises in Scotland that are on a different poundage relative to their counterparts in England, and there will be further work that could be done to consider how that could be improved. Our big ask is about the funding of the national strategy for economic transformation. I have mentioned in previous committees that we have worked closely with the Government to share our thoughts and our members' thoughts on what is needed to support the ambition of that, which we very much support. We are preserving judgment at the moment about whether that has been fully funded to achieve the level of ambition that it says. Just in terms of the points on regulation, a deposit return scheme has been highlighted by some of our members not necessarily the implementation of it itself, but the pace at which it is happening and some of the potentials for inconsistencies with other parts of the UK. The other area is just around some of the regulatory reviews that have been happening and the follow-on actions. So, particularly in the context of Scottish agriculture, there has been a review with recommendations made, but I think that members are still awake some sort of insight into what is going to happen next in terms of moving forward. That is a sector in which I am sure that your colleagues and yourself will be aware, as I think that the UK is the largest fresh food export, and we are at real risk of losing our competitive advantage if we do not start to make movement on those recommendations. Thank you very much. If I can come to non-domestic rates and the re-evaluation, I was just wondering perhaps coming to you first, Fergus, and then to Stacey, your thoughts or any concerns you have with the re-evaluation and whether you feel that the budget went far enough or whether they have laid any fears? We had the draft valuation role published the week before the budget, which was quite a nervous time, particularly for businesses in Aberdeen. I am here representing the Scottish Chambers today, but I will produce and work closely with Aberdeen and Grampian Chamber of Commerce. There were anomalies at the last re-evaluation round, which left parts of the country terribly overvalued to the point that it has crippled businesses. Thankfully, the general trend in the north-east, which was, as I say, historically overvalued, was downward. We have seen pretty high rises in some of the retail sector and other sectors in the re-evaluation since the last round, which is hard to comprehend in some circumstances, given the economic conditions that have prevailed in the past five years or so. I also took great interest in your committee's recent reports into town centre retail. We have not quite removed yet the imbalance that exists between business rates hitting town centre, city centre and businesses very hard and letting out-of-town retail off fairly lightly. Until that balance is addressed properly, and that takes more than a re-evaluation, it takes more than a setting of the poundage rates, there is always going to be a structural imbalance there, which does not necessarily create the right conditions, particularly in the retail sector, but also hospitality and others for businesses to flourish. That is something that the Scottish Chambers would like to follow up on, based on your committee report, but also in future budgets, a serious look taken at. Thank you very much. I am very conscious of times. If I could come to Stacey next and then perhaps if the other two panellists would like to intimate for what they would like to come in on this. In terms of the re-evaluation following the Barclay review, we have been supportive of things such as the cycle being shortened to three years. We believe that that has been a positive move for our members. On the specific impacts of the most recent re-evaluation, I am sure that you can appreciate that we have 15,000 members across Scotland, so there has been different impacts for different members. Even before the budget, as I mentioned last week, when we had the changes being brought forward to the small business bonus scheme—I cannot really overstate how much of a lifeline in the small business bonus scheme is to our members—we have significant amounts of, unfortunately, members that we have lost over the past few years. We hear from our members, based on the survey that we do quarterly, around one in six of our members believe that they might be at risk of shrinking, shutting or closing in the next year, so I cannot overstate how much that relief is the thing that keeps a lot of businesses going. Before the reforms in the budget last week, we had started to hear from people who were being lifted out of the relief that was offered by the small business bonus scheme. Following last week's budget, we are concerned that even more of our members are going to lose that relief, so that is obviously going to have serious implications for them going forward in terms of the challenges that they are already facing and some tough decisions that they might have to make. I will now invite Colin Beattie. Maybe I would just like to ask for a clarification from Carling Currie. You mentioned about the difficulty female-led businesses in accessing venture capital and investment capital and so on. How many applications were made by women's-led businesses and how many were turned down? I would love to say that we had access to that data, but, sadly, that data just is not available. I have just talked about the 0.5 per cent and the 0.1 per cent of venture capital and private equity, respectively. It was based on data feeds drawn from companies' houses. One of the enduring issues that we face is setting policy and investing wisely as a lackey gender disaggregated data. That continues to be a serious issue. Back in 2017, when the Women and Enterprise strategic framework was last revised, five years ago, data was added as a central area of focus to that strategic framework. There has been no change in the intervening five years in terms of the availability of, certainly, of Government gender disaggregated data, so I cannot tell you in respect to that. I suppose that my concern is to get to the bottom of whether it is that female-led enterprises need better skills to be better skilled at making the applications or whether, institutionally, they get turned down or rebuffed when they try to apply. I am still not sure what the answer is on that. There is definitely a lack of data that would give us strong insights. What I can tell you is that there is simply been a survey this year where 91 per cent of business owners said that gender bias and inequality are prevalent in business. In a separate survey, 10 per cent—this is a survey for women in technology—so particular to the tech sector, 10 per cent of women business owners said that they had been denied investment based on their gender. That is quite a strong statement. How do they identify that it is being refused on the basis of their gender? I am just interested in how that process works. I cannot comment on that particular survey, but I can say that businesses that we work with are aware that, for example, if they are pitching to investors, questions are often directed to the male members of the team that is pitching, not to the women who are, in many cases, the chief execs or leaders of the companies. The types of questions are asked when women are pitching. There is a lot of research that has found that often women are asked what are termed prevention questions, difficult questions and reasons why they might not want to invest in a company, whereas men are asked promotion questions or more questions that enable them to talk about why they would want to invest why it is a good idea. There is certainly a lot of concern around equal treatment in terms of that sort of equity investment. We were talking about different sectors of the Scottish economy and which ones were vulnerable and perhaps rather obvious ones such as hospitality and so on were mentioned. We have a cost-loving crisis that is affecting businesses across Scotland. Which sectors in the Scottish economy are most impacted by the cost-loving crisis itself, the actual increase in prices? Maybe I can ask Fergus to have a comment on that. I probably have a couple of pieces of research to commend to the committee this morning in their inquiries. The Scottish Chamber is a commerce course economic indicator. It is not a bad one to start with. Scotland is the longest-running economic service of its kind, tracks economic performance and business confidence across five key industrial areas. There is manufacturing, construction, finance and business services, tourism and retail. What that shows pretty distinctly is that there is no sign of recovery to pre-pandemic levels for, in particular, construction or financial services for retail or for tourism. If there are any sectors that perhaps are still finding conditions challenging for recovery because of rising costs, it would probably be those ones. I would suggest that. I would like to ask Stacey to come in. Thank you. Those would be, obviously, a weather-cost-loving crisis. It is going to be the consumer facing ones. In terms of rising costs, our members who are producers of products, their costs to manufacture the products are obviously increasing steeply, but they are doing as much as they can to not pass on those costs to consumers at the moment. We recognise that there is a cost-of-living crisis and, just from the point of fact that they cannot actually put their prices up to something that is completely environment, which would be an realistic selling point for them for those products. They are absorbing those costs at the moment as much as they can, but there is going to be a tipping point for those in terms of how they are able to pass on those costs. Clare, do you have anything to add? Yes, thank you. The short answer is that it is every business of every size and every location that is seeing an impact. Even larger businesses who have maybe got greater cash reserves to sort of whether the storm is looking at the impact that it is having on their ability to invest in the future. I just wanted to refer to a piece of research that was shared with us from the Highlands and Islands Enterprise. Businesses looking ahead at their viability were the least confident about their viability in the future, where businesses with less than four staff, so that micro-businesses, businesses operating in rural areas and particularly remote rural areas, and those that are still looking to recover from pre-pandemic impacts on their businesses. That might be useful to us. Let me move on logically from that and ask you to get your crystal ball out, because what is your expectation in respect to consumer spending in 2023? We are in an economy that is consumer led to a greater extent than practically any other economy in Europe. We rely on people having disposable income to be able to spend that and drive the economy. Maybe I can start by asking Carolyn, if she's got any thoughts on that. How much of a concern is this for business? How are they factoring this in, this risk on the consumer side, or is there a reasonable confidence that the disposable income will be there and will be spent as it has in the past? No, there is definitely a lack of confidence. I think that there is not a terribly bright outlook in terms of consumers. We still don't know whether mortgage rate rises have bottomed out yet or whether they are going to continue. We don't know yet whether inflation has bottomed out or whether we are going to see further inflationary rises. All of that creates a very uncertain landscape for businesses to plan against and for consumers to put their hands in their pockets. There is a lot of concern about debt, about unsustainable debt now, given the rises that we have seen, not just in terms of mortgages but also in terms of personal debts. That is one of the costs that is not always factored in. We tend to focus on cost of living and energy crisis, but there is the cost of managing debt that people have in terms of a business perspective and consumers as well, particularly credit card debt. All of that means that we are unlikely to see consumers spending and increasing their spending in these times. There is far too much uncertainty at the moment. There needs to be certainty for people to start to plan ahead and invest in consumers as well as businesses. Can I ask Stacey whether she has a view on that? How confident is she, FSB? Yes, thank you. As I mentioned, we do a quarterly survey across our membership in terms of their levels of confidence. The last two quarters have both seen significant drops on that level. For quarter three 2022, we are now back to the lowest level that we have seen and that confidence chart since 2020. We do not expect to see things increase, unfortunately, in the next quarter. Overall, in terms of consumer spending, our members who are consumer facing would say that the worst is probably yet to come. Things are pretty bad, but just in terms of the signs post-Christmas, they expect things to get worse in 2023. That is really the energy bill relief scheme. We had hoped to see an announcement from the UK Government in terms of the future of that scheme, instead of this cliff edge that, unfortunately, we have at the moment, we would expect to see that before Christmas, but we heard yesterday that it is going to be January now, so that would have been a welcome boost if there had been some certainty offered at this side of the new year. Unfortunately, we now know that we will not get that. How are your members responding to that? How are they reacting? I suppose that it is all doom and gloom, but I would say that our members throughout the pandemic and previous crises are very resilient. As I said, they are very much looking at ways to absorb some of those costs in terms of what they experience in terms of input, as much as they can, and just looking at ways to adapt their business practices. Unfortunately, for some, that has been reducing their hours and being a bit smarter with how they are working. We have heard from people who offer food and are looking at new ways. I think that airfriars have become popular for everyone in terms of the reduced energy consumption that they use. Their members are being very resilient and innovative in looking at ways to cut those costs, but that is only going to go so far when things are not looking as though they are going to improve in the near-term future. Fergus Ewing, do you have any more cheery approach on that? I will try my best, Colin. I think that it is fair to say that it is uncertain. Companies that we know are deferring investment decisions because of costs and are worried about consumer spending. However, those cost pressures and consumer spending concerns are not isolated. Maybe there are places where Government can step in and help on that front when it comes to the skills gap. We know that people are being deterred from investing in the future growth of their business because they do not have the people. They would like a stable fiscal regime to allow them to do that to give them certainty over the longer term. Of course, there are other concerns, too, which are very political in nature. Robert Ewing, who was the Deputy Secretary of Commerce last month, produced its 36th energy transition survey report, which shows that political instability has doubled in the past year in terms of a risk factor for businesses diversifying and growing over the coming months. That one, I suppose, is down to you. It may be finally, can I ask whether Clare has got any comment on this? Thank you. I suppose what I would say is yes to your point about customer demand. There are some of our member businesses that are concerned about customer demand dropping next year. The actions that they are taking vary depending on the organisation. It may be cutting costs, it may be delaying new staff recruitment and it may be delaying investment. I would just say that in context of all the pressures that they are facing. If they were to say what they are looking at next year, it is higher inflation, higher energy costs, higher costs of raw materials, higher freight costs, higher costs of borrowing and servicing existing debt, costs to recruit staff and a lot of uncertainty, particularly for larger firms who are exporting. They are dealing with a variety of cost pressures. I want to add a couple of more upside and optimistic points to the doom and gloom. I think that one member has highlighted that freight costs are likely to start to come down, and that some raw materials may also come down, particularly in the net zero and the just transition space, particularly in the oil and gas sector projects are starting to go ahead. The risk there is not having enough staff to support them. Businesses that are operating in global markets, particularly in luxury goods, are seeing global demand picking up, which is really positive. We are seeing from enterprise partners that businesses that Stacey highlighted are responding to the pressures that they have and bringing forward investments in digital or automation and in some of the energy efficiency measures. For businesses that have grant support or cash to invest, it makes more economic sense to bring those investments forward. I think that there are some positives amid the gloom. Good morning. Thank you for joining us. I will come to Claire Reid first, if that is okay. I would like to ask about energy price support. The UK Government has indicated that energy price support for households and businesses will be replaced by a more targeted policy in spring 2023, although we have heard the disappointment that there is no indication of that pre-Christmas. If there is to be targeting for business support for energy from the UK Government, what would it look like and how could it best be co-ordinated with any devolved areas that the Scottish Government could work with? Thank you. It is not something that we have specifically done some work on, but obviously we highlight the businesses and regions that have expressed the greatest concern in business viability, such as rural areas and businesses in tourism and hospitality. However, there are other sectors where there are very large users of energy and are critical to the Scottish economy in terms of their impact and the number of jobs and people that they employ. It is probably going to be a more nuanced picture than that. If I was to say one thing, there may be an argument for tapering of support, but the main thing that our members are asking for is the advance warning, so knowing what is going to happen and when, but in good time, they can start to plan for it and make those investment decisions well ahead of any schemes being introduced. Caroline Currie, can you give us some idea of what you think a targeted energy support scheme would look like for women-led businesses? We would definitely like to see women receiving support with their energy bills and for a fund to be available and being fenced for women-led and women-owned businesses. Those businesses are really struggling and it does not make economic sense for us to support people to start up businesses, to only see them fail and fall back out of the economy and be inactive. Our call would be for support to be ring fenced for women, so we know and we have confidence that support is getting to where it is needed, because it certainly is not at the moment in terms of women. I echo Clare's comments about the importance of certainty to plan, so notice that the support is coming. Details of how it would be implemented would mean that businesses would have much greater confidence from which to plan. I want to make a quick comment that we spoke previously about resilience. Businesses are resilient and there are no more resilient businesses than those owned and led by women. However, that resilience comes at a real cost. I said previously that 48 per cent of the businesses that we work with say that Covid is still affecting their physical health and 44 per cent say that it is still affecting their mental health. That was a survey in June before the cost of living really hit. Things will be much worse, and it is important to recognise that. I turn to Stacey Dingwall. I understand that the FSB has said that a third of small firms expect to cancel or scale down their planned investment for their business growth should support from Government on energy and that would have impact. You also referred to the Welsh Government looking at development loans from the Development Bank for green investment in particular. Of course, Scotland has loans and grants for green investment for businesses and tends to be operated out of Scottish Enterprise rather than the Scottish National Investment Bank. Do you think that it is a case of businesses in Scotland, small businesses, not applying for funds that are existent now? Or do they need to be expanded? What are your suggestions to ensure that there is either green investment for innovations on energy or general investment for businesses? In terms of the targeting of the scheme, you might guess that we would be calling for it to be targeted based on the size of business, as opposed to by sector. We know that our members have significantly less reserves available to them than larger companies, so they are unable to absorb some of the astronomical price rises that we are seeing. Our call is really to do it by small size of business, recognising that small businesses are the majority of our self-employed micro and have a bargaining power in terms of energy akin to a domestic consumer. We think that that definitely needs to be recognised in the targeting of the scheme. As I said before, it would have been nice to hear about that before Christmas. In terms of investment, the key words there are probably the loans that are available. As you will know, a significant amount of debt was entered into during the pandemic among our members when we know that it is among businesses that have never taken on that level of debt before. I would say that there is a real reluctance to take on even more debt, although they still have the pandemic-related loans hanging over them, as those canary payments kick in. I think that there is a real reluctance to take on any more loan at this time. Thank you very much. If I can move to Fergus much, and particularly with reference to your Aberdeen members and perhaps a different scale of companies, looking at what you would expect to see from energy price support from the UK Government, how that could be supported and co-ordinated by the Scottish Government. What has been the impact of the UK chancellor's main budget on investment for your membership in terms of their decisions that are taking about future investment? Is there anything from the Scottish budget that has an inflation for investment, both on energy-target policy but also on what you see has been the impact of investment and what you think is required to encourage investment for your members? Thanks, Fiona. The first question is, what would you prefer the support with energy bills look like beyond the spring? For starters, we would agree that a relief scheme targeted or otherwise will be needed. It is a tough one in terms of which sectors to prioritise. The sectors that have been talked about in the initial airing of the idea have been hospitality and retail. Sure, but they have had a tough couple of years. We do not want to see more struggle against the wall, but other sectors are very worried indeed. I have not really heard them feature in discussions so far. For example, large-scale manufacturing, high-energy food processing. Those are firms that are very tough right now. We want to incentivise business to be more energy-efficient, so some taper relief on that front might be a good model for the UK Government to adopt. I completely appreciate that the Scottish Government is limited in what it can do, but comprehensive engagement with various sectors in advance. I suppose that there is some sort of recommendation and agreement with the UK Government on where targeted support is most desperately needed in Scotland. That is something that we would like to see forthcoming. On the mini-budget investment decisions—how that is affecting investment decisions—I mentioned in passing the energy transition, 36, a report that the Aberdeen and Grampian chambers produced a huge jump in political instability as a huge obstacle to unlocking energy transition. That is having an impact on investment decisions. In fact, the energy sector sees that as the biggest obstacle, which is quite striking. It was not really on risk registers just a couple of years ago, so that is striking. With the mini-budget, the market has reacted to that, and it has obviously seen the change in leadership at a UK level. Businesses take fright at that sort of instability, which has not been particularly helpful. There are net zero elements to the Scottish budget, which we are very pleased to see. Continuing commitment to the just transition fund is good news. However, I think that everybody appreciates that this is going to be the single most important issue in the future of Scotland's economy. Moving it to net zero is doing it in a way that is just and fair and protects a lot of new jobs. Collectively, between business and Government, we have a lot still left to do. I have a couple of questions for yourself, Caroline, but before I bring you in, can I ask everyone else on the panel, almost like it is our standard question, but it is always useful to ask, do you routinely disaggregate all data in all surveys by gender? That is a good question. I suppose that we tend to focus on sector and size primarily, but there is no reason why we could not do it in the future. The challenge that we always have in terms of surveys is that people have a choice whether they want to share information with you or not. Although we can ask the question, we cannot always oblige people to answer it, but I think that that is a fair question. Obviously, last kind of day, before we all break up Christmas, I do not think that Santa has arrived in my household yet. Can you give a public commitment on behalf of SEDI that you will action that going forward from this session?  I am happy to take that as a commitment and go and have a look at all the surveys that we do and consider whether we do at the moment or not. Obviously, I appreciate that you have one area and you are taking two roles here, but again, it is the same question to you. It is a fairly fair point, Michelle. The two that I have cited this morning, the survey responses have been done by a business organisation, rather than individuals themselves. I do not think that in those cases there would be a way to disaggregate who has submitted the response, if I am perfectly honest. I will point it in and run it up the tree. Thank you, and Stacey, you are so fast. Yes, our experience would be exactly the same as Claire has outlined at SEDI, so no, we do not currently do that and again it is because it is optional whether respondents want to provide that information. I can certainly commit to the ones that I have control of in Scotland to look into that and to raise it with my UK colleagues in terms of FSD's national survey work. The first thing is simply putting in place the data collectors, never mind moving on to interrogating that data. Of course, you can ask the question even if people subsequently do not answer it. I fully understand that, but asking the question in the first place is at least a start. Caroline, I wanted to ask—I mean, you have been in front of this committee before and I know that we share some areas of interest around that, but at this point in time, a lot of the pressures that are being faced are international inflation is high everywhere. Everyone is being subjected to the same energy restrictions. The UK, in particular, has got some special and unique challenges, which we have talked about. What is currently happening in policy terms as international best practice that you could highlight? Are there creative ideas? I feel as though that feels a bit like Groundhog Day for me today, but what is happening internationally if you could bring some other insights out? It is a bit like Groundhog Day, isn't it? We have this going into Covid, and at the start of Covid, we are part of the UK policy group. We warned that if a gendered analysis was not undertaken, there would be unintended consequences, and we have seen a heightening of inequality. We are back at the same position now. Inequality has heightened, so things are regressing. If we do not get a gender lens on our policy-making urgently in terms of getting to sport, where it is needed most, then inequality will continue to regress, which is simply unacceptable in this day and age. We would highlight particularly models that have been successful in the US and Canada. In the US, they have a women's business centre model, where they are able to deliver and re-fen support specifically for women. That has seen the numbers of women-owned businesses double over the past few decades. From a starting point, not dissimilar to the UK, around about 20 per cent, 1 in 5, in the US, 40 per cent of all businesses are women-owned. That is a phenomenal achievement and is down to the dedicated support that has been ring-fenced and made available to those businesses, not just through the women's business centres themselves, physical places to go, but also through their procurement policy, which mandates that 5 per cent public procurement must go to certified women-owned companies. 5 per cent might seem like a small amount, but that opens up procurement. It changes mindsets. It sets a clear policy that must be measured and maintained. We have seen that as being tremendously successful. In Canada, the Government there in successive years has made what has been termed as genderful budgets, where again support for women has been specifically mandated and ring-fenced. Access to lending, for example, but not just access to lending in itself, access to the non-financial support that goes with that lending, and access to funding to equity investment, so that businesses right from the get-go are able to access funds that have been set up dedicated to them, and that is helping to break down some of the structural inequalities that are prevalent within the investment landscapes and the lending landscapes currently. We have seen that to be highly successful, and it is no surprise that the US and Canada are the leading nations when you look at the percentage of the population that are running small businesses. They have the highest percentages, respectively, by a good deal for women-owned businesses. Another wee area that I wanted to explore is that we know that the failure rate for new businesses—most new businesses do not make it beyond the three-year point, and that is just regardless of who is running them. What is your anecdotal sense of how new businesses set up by women over the past three years, what the failure rate is? I know that we do not have the data, but it is more just an anecdotal sense. We do have some data proxies. We know now that, from business gateway, women-owned businesses are 50 per cent or sometimes more of the support that they provide at start-up. However, the measures for the business base remain way below that. We are tipping around about 50 per cent to a start-up funnel, yet, if you look at the statistics for women-owned employer business, which is a statistic that we can measure the trend on, that is now down at 17 per cent. You have 50 per cent going in the top of the funnel, and that is tripling right the way down to 17 per cent. That 17 per cent is a declining trend from 20.6 per cent several years ago. We can see that, from that data that is available, that we are hemorrhaging women-owned businesses. We see that ourselves. For all the reasons that we have mentioned, there are many structural inequalities. Women start-up with less funding, with less capital. They are vulnerable to crises like that. They do not have the structural stability to survive in the same way as other businesses, and often they do not have the choice to adapt. It is for those reasons that we often see that businesses fail. Last week's question, the women enterprise review, led by Anna Stewart, was launched, I am guessing, about April this year. How actively have you been able to contribute to that? We contributed to the review early on. We have not more recently. We are waiting, like everyone else, for the review to be announced. We are delighted to see a review into women's entrepreneurship. We look forward to the recommendations. If I had any ask, it would be that those recommendations will be made available quickly. At the minute, from a Government investment point, it has been made clear to all women enterprise support organisations like ourselves that there is no further investment until that review has been delivered. In the midst of a pandemic and a cost of living crisis, those are serious concerns for businesses that have faced at least three years of sustained vulnerability and pressures. We are seeing those pressures materialise in terms of business closures and the poor physical and mental health of some of the business owners who are doing their best to be resilient and adapt. However, with very small amounts of resources and support that are being made available to them, it is certainly not their fair share. Good morning to the panel. Can I focus specifically on small businesses in rural areas? I was very conscious of the point that was made by Carol about the feedback from Highlands and Islands Enterprise about business confidence levels among rural and remote businesses. I have just read a message from a business this morning in my South Scotland region at a butcher, highlighting the fact that energy costs, for obvious reasons, are crippling his business and making the point that, if his business goes, there will be no other butcher in the main street of that small town. I start with Stacey from the Federation. To what extent are the current business pressures having a disproportionate impact on small businesses in rural areas? Is there a particular policy intervention that the Government should be considering specifically for those rural businesses? I think that, broadly, when we see challenges, we always see them intensified in rural and remote areas because of the broader challenges that I have been highlighted previously on the panel, in terms of housing and transport, particularly in areas where they are off-gas. Obviously, the costs have historically always been higher for them. When everyone else is feeling it, unfortunately, they are going to feel it more acutely in rural and remote areas. Obviously, particularly in the Highlands and Islands, they rely on tourism as a key sector for their economy. This summer, although they might have had that boost, particularly last summer, when no one could travel abroad, this year the season was not what they would have hoped for as people began to go abroad and they did not see the trade that they might have expected. We did hear of some small businesses who had struggled to get staff and then managed to recruit them this summer, but unfortunately the trade was not there for them in order to keep those staff on. On future, as we look towards next year, other things that the Scottish Government has come down the line in terms of the tourism or the transient visitor levy. Is that going to be moved towards that regulation? I would say that that is probably causing some concern in terms of the impact that that might have on deterring visitors. It will just kind of impact us overall of regulation. We are kind of touching the short-term lets and the impact that might have. Obviously that would have an impact in the Highlands and Islands as well, so I would say that just overall the challenges that our members are facing are sometimes felt more acutely in the rural and remote areas. Are you seeing from—it is not a great phrase—business failures, are you seeing a higher proportion among members in rural areas compared to urban areas or is it just across the board? We do not disaggregate that data by gender or by geographical area at the moment, so I can comment on whether there was any kind of geographical difference, unfortunately. I will do a pitch similar to Michelle and maybe make a pitch for disagreeing data on the basis of geography as well, but that is very helpful. I suppose to fergus, from the chamber's point of view, about that disproportionate impact on rural businesses in any policy initiatives specific to rural areas. Rural businesses were being hit disproportionately with costs before the current inflation crisis, before the pandemic. They had huge difficulties in doing business, practical and financial. I live in Brimar, for example. There is no option here other than oil heating, and that is for domestic and business premises.  They also struggled to recruit staff, and all those things we understand pretty well. Also, some of the businesses that we represent work in certain sectors. Rural is more heavily weighted towards food and drink, for example, and the costs have been pretty acute in particular for some of those sectors. I suppose that, in terms of policy interventions, it is a bit of a jigsaw puzzle. In answer to Fiona's question about those targeted energy cost reliefs, perhaps it is worth exploring further if there is a model that provides relief to rural areas that are regionally targeted. Relief might be of benefit to a lot of rural businesses. That is very helpful. Carol was the one who mentioned the feedback from members in particular Highlands and Islands Enterprise. I am conscious that, in Dumfries and Galloway, where I live, 90 per cent of businesses are covered by small businesses that employ 10 or fewer people. I am sorry that it was Carol who was going to bring in, but I will ask Carol if she can say any more about the feedback that you have had from your rural business members. I have a question for you, Carol, in a second. You are not getting off lightly. Thank you. We have committees in the south of Scotland at Highlands and Islands, so quite a lot of the evidence that we take is from talking to them on a regular basis. I am undertaking a piece of work recently to update our earlier rural commission, which was carried out a number of years ago, to get an idea of the state of rural areas. We will be able to share that with the Government soon. It is a range of issues, so, in terms of your point about business failure, we should also be thinking about the constraints on businesses in transport infrastructure. We know that intermittent access to ferries, for example, has an impact on island communities. We know that a lack of reliable road and rail services have an impact on island communities and practical things such as access to digital infrastructure. One of our members highlighted that a lack of housing for workers who are delivering fast broadband was a constraint on a project. It is also worth thinking about the issues for rural areas in terms of constraint and opportunity. The other things that are impacting so that it is not all about issues for businesses at an individual business level, for example, are some of the big opportunities for Scotland to happen to be in rural areas. One example of that is green ports. I know that there is, perhaps not in the Scottish Government's gift to bring forward that decision on green ports, but we know, for example, of some investments that have gone to outside the UK because of the delay in the decision on green ports. Some of the other issues that they have raised are around planning. There is, again, a huge rural opportunity for Scotland in offshore wind, but there is a bit of a planning in bottleneck in terms of moving some of those projects forward. The big thing that I would highlight is housing. Short-term housing is to house the workers that are required for net zero, for digital, for all those major projects, and long-term housing solutions. That is the area that our partners in rural areas are looking to work much more closely together to find solutions on that. I will add one final point that I made earlier, which is that another major sector that supports rural communities is the agriculture sector. As I highlighted earlier, one of the challenges that they are facing is just around clarity about regulation in Scotland following one from the review in that sector. Thank you. It is very helpful. The South Scotland Enterprise has highlighted that housing is the single biggest barrier facing the growth in the economy in the South Scotland, so that is actually helpful. Carlin, you said that 40 per cent of businesses are owned by women. Is that the same proportion in rural areas or are there specific barriers in rural areas that women in business face that other businesses may not face in those areas? Yes. Sadly, 40 per cent is a figure from the US, and 20 per cent is a figure from here.  Women living and working in more remote and rural-based areas face significantly heightened challenges in terms of access to the economy and starting up and growing their businesses. Often, because of many of the issues that have been raised here, they are often heightened for women because, again, they have less resources when they start up, so they are much more vulnerable at start-up stage. One of the key issues is navigating past that initial start-up into a solid and stable foundation from where they can grow their business ideas and aspirations. We have worked with quite a number of women from remote and rural communities. Mewcastleton is probably the closest to where you are based. With a good deal of success, you have to be able to support and invest in those businesses for them to come through. You have to be able to join them up to on-going support. There has been a recent OECD report that has commented that far too much of support for women's enterprise are small, time-limited initiatives. Those initiatives inevitably come to an end. Businesses do not come to an end. If you are at start-up, you need on-going, joined-up strategic support. I have a personal interest in Dumfries and Galloway.  In terms of the rural landscape, we need to look at things a little bit differently. In business, we often identify key people within the business when we cover them with insurance policies because they are key to that business. We need to take a similar look to rural areas and identify key people and key businesses who are absolutely vital to the future of some of those very small rural communities. There is a fragility to some of those communities. If we are able to identify, for example, the butcher that you gave, but also the example of some people who have skills—maybe their businesses have not succeeded, maybe they are not able to get employment that fits those skills—with targeted support and intervention, we can start to grow businesses in rural areas and start to see that business mindset flourish and take hold. Again, we have to look at things a little bit differently. We have to identify those businesses and say that this business is not just key in terms of a small business and its contribution to the local economy. It is key in terms of engendering that wider business mindset, that opportunity, that economic health and viability that could come from this small rural hamlet. The other point that I would make is that, often, in small rural places—you will know this—there is a net migration out rather than in, yet the people who have migrated out are often in positions of great skill, great innovation and are interested to contribute and to give back. In the small hamlet, I stay in the row of nine houses. There are two families who have really inspiring, well-skilled individuals who would be interested to give back. One is working for Spotify, the other is working for another leading digital company. We need to get better at harnessing some of those skills, maybe even tempting them back, but certainly harnessing back to the future of some of those rural hamlets and places. Just taking a slightly different approach in terms of how we identify the assets that could give us a really solid and resilient foundation that would transform many at a part of Scotland. One final point, the space industry. Clare mentioned a lot of other industries. The space industry is the other industry that we should really be capitalising on in Scotland, and I would like to see more women in space. Thank you. Gordon Macdonald will be followed by Maggie Chapman. Okay, thank you very much, convener. I wanted to ask you about labour shortages. The UK economy is the only G7 country where growth is below pre-pandemic levels. Clare and Fergish have both mentioned earlier the labour shortages. I am aware of record vacancies of around £1.2 million across the UK. If I come to Clare first, could you say a bit more detail what impact labour shortages are having on businesses' ability to deliver growth, and, in particular, are there any key sectors or occupational shortages where the problem is particularly acute? I think that it is an issue across the board. As I have highlighted, it is particularly an issue in rural areas, in tourism and hospitality, so much so that some businesses are looking at reducing the hours that they operate just to adjust to the circumstances. I think that it is across the board. One of the areas that has been highlighted in particular shortage is IT, and I think that that is pushing up prices for IT consultants, etc. We know that, from one of our members, there is a backlog or a bottleneck at the home office in terms of processing visas. That is obviously not within the Scottish Government's gift, but to the extent that we can work with the UK Government to unlock that blockage would be helpful. That is particularly true for businesses that are operating in international talent pools, and the other aspect is that clarity, uncertainty and stability about future growth is one of the factors that will impact on businesses' decisions to employ more people or not, irrespective of labour shortages. I think that I would go back to that point in terms of future decisions taken to support business. It is the clarity, uncertainty about opportunity and growth in Scotland that will encourage businesses to take more people on. The other point that I made earlier was just around the fact that labour shortages are really a challenge across lots of sectors. That is some of the things that the enterprise agencies and business gateways are doing to help them to take a step back and look at their business and to think about how they could perhaps do the same with people who are having those challenges or to look at changing the role profile of the people who are working with them. It is particularly vital for smaller businesses to tend not to have that capacity in how to do it. Fergus Ewing, do you want to add anything on relating to your members? Just a couple of things. I would say that all sectors at all levels are facing challenges with recruitment. We do not have the skills in this country to fulfil labour requirements at the moment. That is as indisputable a fact as you can make about the current state of a very, very tight labour market. Just to speak specifically about the energy sector, for one example, there is a massive skills gap right across the UK. The UK faces a need for 400,000 people to create a net zero energy workforce. Without government intervention, there will be insufficient supply of skills needed to meet the UK and Scotland's decarbonisation targets. That is a massive challenge. The Aberdeen-Grampian Chamber energy transition survey that I mentioned earlier, we see from the results of that that there is difficulty recruiting in all levels in the energy sector. The striking rise that we have seen even from earlier this year is quite eye-washing. 64 per cent of businesses have had difficulty recruiting in technical roles. That is up 38 per cent within this year. 50 per cent have faced barriers to recruiting people in key trades. That is again up 38 per cent. 44 per cent of businesses can't easily hire managers. That is up 33 per cent. The same trend with administrative jobs and others. We shouldn't be under any illusions about the gigantic scale of the problem. Fergus Ewing, you have mentioned a number of areas that there are pressures and a lack of skilled workers. What needs to happen to increase the pool of skilled workers or what can businesses do to tackle labour shortages? Businesses need to make themselves competitive. Scotland and the UK need to make themselves competitively positioned to attract talent here. You are not going to fill these gaps by attracting people to Scotland from the rest of the UK. This workforce has to come through migration to some degree. There needs to be more of a focus on attracting and retaining skilled graduates through post-study work visas or graduate visas in other shapes and forms. How do we keep talented people here to ensure that our workforce and our economy thrives over the decades ahead? That is the key piece of the jigsaw. Recent soundings from some quotas of government that we should be restricting the number of international students coming to the UK. For example, that could be very damaging at a time when businesses are crying out for skills and labour. Stacey, have you got views of the impact of shortages on your members in the FSB? Yes, absolutely. The confidence index that we do every quarter for Q3, we found a net balance of minus 4.9 per cent of Scottish small businesses reporting an increased employee headcount, which means that the number of people from reporting a contraction and their employee numbers outweighs the number of those who are reporting an expansion. That has now been the case for four consecutive quarters. Also, as was the case in the previous quarter in Q2, this reported fall and employee number showed an opposing trend to what we are seeing in the aggregate labour market data. The latest on S figures showed that Scotland's labour market has improved in the past three months to August, which covers most of Q3. The combination of those findings suggests that employment games are likely to be concentrated among larger businesses, as they are able to benefit from the economies of scale, meaning that they are less exposed to current economic headwinds. Looking ahead to Q4, our members reported that they are expecting a further decline in employee numbers, with a net balance figure of about minus 1.8 per cent. Due to the anticipated recession, our members' ability to maintain staffing levels is certainly set to be tested. We will have to wait and see what comes in Q4, but the signs have not been good, as I have mentioned for the past few quarters in terms of employee headcount. Caroline, in terms of women's businesses, are there any particular issues in relation to labour shortages that have not already been highlighted? They have all really been highlighted. The only additional comment to make is in terms of a source of labour—one of the quickest wins that we have—is to put in better wraparound childcare. That is a consistent request from the businesses that we work with, access to affordable and accessible childcare holds many businesses back, but it also holds women back from entering the workforce in the first place. We have seen some of our colleague organisations run tremendous women returner programmes. I think that being able to build closer relationships between those returner programmes and businesses that have skills shortages, we could see a real strategic gain from that. For example, we have talked about the numbers of staff that are going to be needed to achieve our net zero ambitions. There is a serious lack of women engaged in net zero, so strategic programmes that bring renewable businesses or businesses with those ambitions, together with women returners and access to affordable, accessible wraparound childcare, could give us a real quick win of a nation to tap into our talent, but also provide the diverse workforce that would see innovation thrive, because innovation is driven in a great part by diversity and particularly gender diversity. We need innovative thinking to crack the race to net zero. In my last question, I will come back to Clare. You mentioned the issue of processing skilled workers visas. I was just wondering, bearing in mind the picture that Fergus painted about the number of vacancies that probably cannot be filled from the UK population, are you able to highlight, is there anything else that needs to change within the UK Government's shortage occupation list that would help to alleviate the labour stats? Thank you. I am afraid that I do not have any further detail in terms of specific occupations that are in short demand at the moment. I can certainly ask if we are happy to share it with you. As I say, the one area that has been highlighted is simply that there is a bureaucratic bottleneck in terms of processing existing visas and that IT has been highlighted as an area of shortage. Thank you. Fergus, is there anything that you would like to see for your members that the UK skilled workers visa needs to change? Is there anything? I think that just broadly in parameters out, Gordon. There is obviously a critical mass of people and skills that is required and if the current system is not delivering that, then it needs some close attention, I think. Thank you very much. Thank you very much, Clare. Good morning to everybody. Thank you for your comments so far. Thank you for being with us this morning. Following on from Gordon's questions around the labour market and vacancies, I think that there are a couple of areas that I want to explore. If I can come to Caroline first, please. We know that across the labour stats indicate that whilst there are significant gaps, we have very high employment rates or very low unemployment rates. I think that a lot of that is not only driven by people not being in the UK, in Scotland any more, but also because people have chosen to take themselves out of the employment market. From your point of view, are there particular areas of women's enterprise that are more likely to attract people who have absented themselves from the labour market and are more likely to attract them back into work because of flexibility, because of the types of work that might be available, and what are we not getting right to support that? Okay, well, what a great question. Thank you. We have had a lot of experience of working with women who are not economically active and working with them to look at shaping up a business idea and considering starting up a business. Those programmes have been more successful than we might have envisaged. That is working with women who are unable to hold down traditional employment because our flexibility is not there in terms of their family circumstances. We have seen about 70 per cent of those that we have worked with end up starting up a business at the end of what is a relatively short-lived 10-week programme. In response to what is needed to sustain that, I have talked a lot about how so many women-owned businesses are just not coming through and succeeding. It is that joined-up strategic support that is currently missing in the system. It is why we advocate for a women's business centre because we know that a 10-week programme, women who have never thought about starting up a business, will consider a business start-up with dedicated support that works for them. That is not just delivering standard business start-up support to a group of women. That is delivering a programme that is designed specifically for women that is full of gendered techniques that make women feel safe, comfortable and confident to articulate their aspirations and then to set a plan to achieve them. What we have seen with those programmes is that, when they come to an end, the strategic support just does not there and they fall through the cracks. That is even with us hosting introductions to local enterprise organisations and trying to bring that support in, but we need to do more. We need to be able to have joined-up, on-going support. That is the point that the OECD report that I mentioned earlier is making, that too much of women's enterprise support are one-off projects, they are not strategic, they are not joined up. Yes, they deal with a particular issue at a particular point in time, but that is only emergency support to get a business through a particular point in time. What is needed is a cohesive end-to-end support model. We would see that as being versions of the Canadian and the American support models that have been in place. Particularly, we ran a consultation earlier this year on a women's business centre. We are working on setting up the first women's business centre at Queen Margaret University and the outskirts of Edinburgh or East Lothian. Women were very clear in telling us that current support does not meet their needs, that having a place to go to is absolutely critical and having business support that is designed for them that creates an environment in which they can succeed, a physical environment is absolutely key. We have seen a good deal of success with our digital support. That was a game changer for a lot of women-owned businesses during the pandemic. I am incredibly proud of my team for setting up that digital portal, but it does not provide every last piece of support. What we need is a mixed hybrid model of physical support where women can go in person and wrap around digital support that feeds in to all the wider mixed sex support that is available out there. We can leverage and put to best use all the resources that we have. Those resources have to work really hard for us at this point in time. We need to identify the areas where gender-specific support is absolutely critical, patch in the resources that are available from current mixed sex support or mainstream support and use that to nurture and create a whole new generation of women-owned businesses because the desire is out there, the ability is out there, the thinking and the mindset is there. It is the support to enable that that is a missing component at this point in time, and let's not forget that existing women-owned businesses contribute £8.8 billion into our economy every single year. That is more than most of our identified growth sectors of the economy. Thanks, Carolyn. That is really helpful. I think that the point that you have made here before around that strategic piece needing to be done very clearly is important for us to remember. If I can come to Stacey and I suppose a similar-ish question, I'm wondering whether when we're looking at some of the small businesses that we have across Scotland and the challenges that we've already spoken about today around resilience, energy costs, all of that, are there other elements that we are missing around making working more attractive to people who might want to support small businesses or set up small businesses? I know that there have been conversations around the income tax changes from the budget last week and what that is going to affect, but in the sectors that you've identified as potentially needing support, some of the types of works in those sectors, if I'm understanding right, tend to be on the lower end and so therefore would benefit from the lower income tax levels. Can you just flesh that out a little bit for us? I guess that you're talking about maybe what those sectors would need to boost their confidence, really? I think that providing that stability in order that businesses can be more confident to make, as I said, our members are probably downsizing their plans to recruit more staff in the new year just because of the current uncertainties. Given business confidence in terms of mitigating some of the impacts of the challenges that they're facing at the moment, so making sure that things at the small business bonus scheme, the value of that is preserved and as many small businesses as possible continue to be able to benefit from that relief. As I've said before, it really is a key thing that gives confidence to our members, so making sure that that is protected as our number one priority. We can be touched on the end-set in terms of what is in there. Just making sure that the support that is available through end-set, yes, we need to support our future businesses but we also need to provide support to the existing businesses and just give them confidence that an economic strategy is focused on the types of sectors and businesses that we currently have in Scotland. Coming to FSB over the summer, I've structured an end-set that a lot of it is focused on tech-based businesses. I'm encouraging more of those to start up in Scotland, which is obviously a laudable ambition, but we need to balance that by making sure that we recognise the make-up of the current Scottish economy and that the strong businesses that we have in current sectors are also feeling confident that their type of business will be supported and those that are looking to go into those industries can be confident that they will support available for them even if they're not a tech-based business. Thanks very much, Stacey. Fergus Ewing, you spoke earlier in answer to, I think, it was Jamie's question that what you would have liked to have seen or what the chambers want is a competitive personal and business tax regime. I'm just curious to understand, if we're thinking in terms of the labour market, how you see the intersections or the interactions between some of the challenges that we've talked about today already—geography, sector, size, gender—how do you see that ask for interacting with those different challenges or those different issues that we've discussed? No, no. It's quite a complicated one, but I think that what the evidence does show, and certainly this has been borne out in quite a lot of work that the chambers and other partners have undertaken recently, is that recruitment challenges are at all levels. There are all levels that are reflected in demographic make-up, too. Frankly, I think that it needs to be how do we make Scotland a competitive place versus the rest of the UK in terms of cost benefits of living here, attracting people, and that needs to be globally competitive, too. It's maybe not the answer to looking forward in terms of more of a broken-down approach, but I do think that the evidence points to this being all sectors, all levels, all parts of the country. It is being acutely felt in rural areas, for example, but perhaps the policy approach to getting more people into rural Scotland is to build more affordable homes in rural Scotland, rather than it necessarily being about doing that through the tax regime. No, thank you. I think that that's helpful because I think we focus sometimes on the fiscal incentives or mechanisms that instruments that we have rather than looking at the whole picture, so I think that there is something for us to be thinking about in that. If I can come finally clear to you, we heard earlier from Caroline about the importance of, yes, the financial incentives for people wanting to and staying in work, but also the non-financial training, mentoring and so on. Is there something that SEDI is focusing on? Is there more that the Government can be supporting? Is there more that you can be asking of your members, of the business and sector more generally to make sure that we make the employment bit as attractive as possible and not just focus on the financial elements of that? Thank you. It's an interesting point because it just occurred to me that we've not really touched on the skills and support from the colleges and university sector results and particularly from the colleges sector for smaller businesses and businesses in those rural areas. A couple of things. One of the areas that was under pressure in the budget was employability support and for certain people in the workforce or who are excluded from the workforce, continuing to invest in that employability support is critical. People who are perhaps further from the workforce need that support. We have done a lot of work on skills and we look forward to the outcome of the skills reviews that are going on at the moment. One of the things that we have talked to us about in the past and our skills work is support for lifelong learning and measures that can enable that. We have talked about a skills wallet, for example, or a way of enabling learners to take more responsibility and have more flexibility around investing in their own learning over a long term. There is an idea there that could be explored and developed, but I think that the investment in colleges and universities to ensure that they are properly funded. If you take the net zero example, it is in absolutely a critical area. Feg has touched on the job vacancies and the skills that will be required. We have been looking at net zero a bit recently in thinking about where do you start with that. You start with STEM in schools, but through colleges. There are a couple of very tactical things that have been highlighted to us recently from the colleges sector. One is that colleges would like a little bit more flexibility in terms of how they reallocate funding to be a bit more nimble in terms of responding to those opportunities. If part of the solution to getting more people into work and filling in some of those labour shortages is to reskill and retrain people, then colleges would like a little bit more flexibility in how they allocate that funding, rather than it being then fenced for certain areas. On that as well, we need to think about the net zero opportunity in terms of all those jobs and skills that we need to deliver on our ambitions, whether it is through new solar power, wind farms, etc. There is a huge number of electricians, welders, etc, that are required to do that. We need to think about all the ways that we can support that through the colleges and university sector, not just in the north-east of Scotland. North-east of Scotland is absolutely critical. It is obviously where a lot of the transition is happening. It has that funding, which is fantastic. However, we need to think about how that activity is happening in other parts of Scotland as well and how it can be funded. I suppose that that is a final point to go back to support in Carrie's point about child care. There is something there about understanding. I do not think that we have a real understanding that that is something that will work in and out on. I know that they want to look at who are the people who have left the workforce. We know that some of them will be left with no intention of returning. They may be retiring early. They might have left due to ill health or something else. We need to understand a bit more about what the something else is to properly ensure that we have the right programs to support them to return to the workforce. That is really helpful. I have a final question from Gwyn Simpson. I will be very quick. I have a couple of questions. The other two are off the hook. If I could just ask you about your comments on tax rates and the need for Scotland to have a more competitive regime. You mentioned a more competitive regime in business and personal tax. Is it the view of the chambers—I am obviously not asking your personal view, it is the view of the chambers—that Scotland having higher personal tax rates is a disincentive to people coming here? Yes, and I am here giving my personal views, but I am certainly giving the chamber's view. Yes, I think across the piece and that is the balance being found with the whole suite of business and personal taxes. Higher rates may well deter people from making the choice to come and live and work here. This can be modelled on what rates that start to have an impact, but it is clear that, at a certain level, that could make a difference. We would like to see more modelling on the rates that have been set in the recent budget, so that we can get a better understanding of that. Yes, I think that modelling would be useful. The other area that I want to ask about both of you. Claire, you mentioned free ports and the delay in the announcement on Scottish free ports. Fergus, I notice your members in Aberdeen. You did a survey of what they are asking for. Obviously, they want a free port in the north-east, clearly. I wonder if you could say something about what you think the impact of Scotland having two free ports would be on local economies and the national economy. As you pointed out, a number of our members are looking to be successful. We know that there are rare opportunities in support for green industries and renewables, for example, and support for linking supply chains and thinking about sustainability around construction, for example. A lot of interest from the built environment in how green free ports can support their efforts to improve supply chains. We know that there is an economic opportunity for free ports. We are supportive of green free ports at SCDI, but the issue that we are seeing at the moment is the delay in announcements and the anecdotal evidence that, certainly, the bidders will all be talking to potential investors about the opportunity if they are successful, and we know of at least some who have had to turn investors away because of the delay in knowing about it. Just on your earlier point, I can also answer that question. We are taking a cautious approach in terms of the tax, and we have highlighted before a concern about the divergence between Scotland and England. Just similar to Fergus, we think that there is an increased risk that people may look at Scotland differently in terms of bringing their labour here. Obviously, we are operating in an international workforce, but we will have to monitor that very closely. The other point that I would make on that is the other area that we attract a lot of our labour from is the rest of the UK. Notwithstanding the fact that there are clearly some issues about how quickly people may be able to come and work in the UK or not, people who are already in the UK workforce may be a factor that they take into account when considering where to live and work. Fergus, last word to you on free ports, particularly in the north-east. Obviously, we do not know where the free ports will be yet. I hope that we will get an announcement soon, but you would be desperate for one in the north-east. I am here today representing the Scottish Chambers and Commerce Network. Broadly speaking, green free ports have the potential to turbocharge our energy transition, unlock jobs and investment, which can only be a good thing, and give Scotland a competitive edge when it comes to achieving net zero. Five strong bids have been submitted, and the current thinking is that two of those will be awarded. However, the criteria that is set by both Governments and agreed by both Governments allows more to be awarded if particularly strong cases. That could be three or four or the whole five of them, perhaps that is the model that would work best in concert to unlock the greatest potential for Scotland. I would say that there is obvious strength to some of the bids in what they can do in terms of unlocking, particularly, energy sector transition, where there are particular hubs, supply chain hubs in existence already. Others, perhaps, are more suited to expanding trade in other areas. What I will say is that the delay has been disappointing if we truly want to get cracking with Scotland's energy transition, and that is a key part of it. No more delays to the announcement, please. It was going to be summer, then it was late summer, then it was autumn, then it was late autumn, but I think that the most recent letter on green free ports that I saw was just this week, which said very soon that, before Christmas, early in January, it is well into the springtime. We do not know, but the delays to this are getting to the point of very unreasonable, and any longer I think will be harmful towards investment in our green future. Thank you very much. I would like to thank all the witnesses this morning for their contribution. That has been very helpful in the committee's work going into the new year. I will now move into private session.