AS I SEE IT: TERRY MURDEN says risk aversion and short term thinking may scupper Kate Forbes’ plan to transform the economy
Kate Forbes cannot be faulted for her ambition. Nor for her unswerving belief in the power of collaboration to get things done. The new National Strategy for Economic Transformation sets out a 10 year goal to turn Scotland into the best educated, most innovative and productive country in the world. Well, that’s the plan. More or less. Except cracks have already appeared that suggest the strategy will struggle to get anywhere near hitting its targets.
Seated alongside the Finance Secretary during the unveiling of the strategy in Dundee was games entrepreneur Chris van der Kuyl who stated that we “must strive to be world class” and that “every major investor puts their money first and foremost into what is world class”. Stirring stuff.
The reality, though, with the odd exception such as the flight comparison site Skyscanner, is that Scotland’s chances of building truly world class companies are about as good as its odds on winning the 2022 World Cup.
Just ask those investors at the top table who are seeking out such ventures. After Ms Forbes’ presentation I spoke to Tom Slater, one of the top fund managers at Edinburgh-based Baillie Gifford.
Slater, manager of the FTSE 100 listed Scottish Mortgage Investment Trust, told me that it rarely invested in the UK, let alone Scotland, because it is still largely risk averse and our entrepreneurs are “not ambitious enough”.
He was echoing the views of outgoing SMIT manager James Anderson who last summer bemoaned the lack of an entrepreneurial culture in the UK made worse by the short-termism of the stock market and the failure of domestic shareholders to stand up for homegrown companies during takeover approaches. The operation and influence of equity markets received scant attention in the Forbes review, even though it is a key component in the debate about creating and scaling companies.
Venture capital and other early stage investment into private companies did get a mention from Forbes, but without any detail about how it might be developed in order to sustain the growth of companies.
Slater said SMIT had invested in Skyscanner, which became a rare Scottish unicorn (worth $1bn), “but it was then sold to the Chinese”, he said, explaining that once a company is subsumed into another it becomes a weaker proposition from an investment point of view.
This was typical of the UK’s quick-sell culture. While not necessarily a bad thing if it generates funds to be re-invested, it does mean the country continually fails to create companies that are truly global. On the west coast of the US and east coast of China the attitude is that you do not sell at the first sight of someone waving a cheque book.
“They want to go even bigger. It is about having the ambition to remain independent,” said Slater. “One of the challenges we face about investing in the UK is finding companies with that scale of ambition. It’s the old question about why we have not created our own Alphabet (parent of Google), Amazon or Facebook. As such we have relatively little invested in the UK.”
He was unable to offer any comfort to those such as Kate Forbes and Chris van der Kuyl trying to recreate the innovation-led economy of the past that saw Scotland lead the world across a number of sectors. His view, and that of his team, is that the current negative attitude to risk and to scaling companies is a “cultural” issue that governments may be unable to change significantly, and certainly not in the short term.
“If it was an easily solvable problem it would have been addressed,” he said.
The media might have offered some searching questions to Ms Forbes if they had been allowed to attend her presentation at the Michelin Innovation Parc in Dundee. While Ms Forbes addressed a hand-picked audience of entrepreneurs, business leaders, industry experts, trade union representatives and members of the Advisory Council, the media was told that “due to ongoing COVID restrictions you are invited to watch and listen to the speech online”. Clearly the Covid restrictions didn’t affect those who did attend.
There were opportunities to ask questions online but no one from the media was asked to contribute.
Perhaps Ms Forbes was anxious not to be quizzed about the myriad of strategies and action plans that have poured out of Holyrood over the years, including the heavily-criticised 2020 Higgins review, or the recent departure of the head of the yet-to-impress Scottish National Investment Bank, or the government’s failure to create anywhere near the number of renewables jobs it promised.
She might also have been asked why her strategy makes no mention of oil and gas, or the government’s ability to achieve its targets without full tax and borrowing powers, and control over monetary policy. While that would have played into her arguments over the constitution, these shortcomings do restrict Holyrood’s ability to build its own economy.
As for business reaction to her plan, it may have been influenced by whether they were party to the consultations or not.
Liz Cameron, chief executive of the Scottish Chambers, was clearly supportive, declaring that “Scotland’s businesses will applaud the scale and ambition set out in the strategy, which has the potential to live up to its name and truly revolutionise the Scottish economic landscape over the next decade.”
Er… well, not quite.
Sir Tom Hunter, for one, reiterated his previous criticisms of government economic policy, adding that Ms Forbes’ ‘wish list’ did not appear to be “market tested nor pragmatic”.
Referring to Ms Forbes’ pledge to be relentless on delivery, Andrew McRae, FSB Scotland’s policy chairman, reminded her of recent delivery failures. “Delays and confusion associated with Covid grant funding shows that there’s much scope for improvement when it comes to execution,” he said.
Others, such as Struan Stevenson, chief executive of the anti-independence group Scottish Business UK, said the Scottish government “needed for once to show it is serious about the economy” but the finished plan “fundamentally fails to meet that challenge”.
Professor Ronald MacDonald, chairman of Our Scottish Future’s Economic Commission, said the report “provides a widely known and understood diagnosis of the problems facing the Scottish economy but, on solutions, it is simply a rehash of all the failed scripts we have seen since 2007.”
He could have recalled the many papers and strategies going back to Wendy Alexander’s days as enterprise minister when she coined the phrase “Smart, Successful Scotland” to describe her own ‘action plan’ to strengthen the Scottish economy. We’re still working on that one.
tmurden@dailybusinessgroup.co.uk
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business
The more politicians involved, the less likey the concept will reflect reality, espcially when these politicians have precious little professional experience to offer. This is already betrayed by Net Zero policies, a fantasy offering absolutely nothing to the Scottish economy. This nonsense is prevalent in the Scottish National Investment Bank’s activities.
“There is much more we would do with greater powers” claimed Forbes, failing to recognise making genuine progress with the powers they have might be the best way to gain more.