The new First Minister is already blaming Westminster for Scotlands’ woes. TERRY MURDEN says it isn’t holding back growth in England’s hotspots
John Swinney, the new First Minister, has been promising a “new chapter” for Scotland with a thriving economy built on technology and renewables, while taking a leaf out of the previous regime’s book by blaming Westminster for holding the country back. Oh dear. Poor start. Maybe the real problem lies within the party of government that has failed to deliver on previous promises and, fundamentally, prove that having a government in Scotland at all is money well spent.
If Mr Swinney really wants to stimulate economic growth he should stop passing the buck and take a look at what is happening in the tech hotspots in England, especially cities which do not have the “benefit” of a devolved parliament.
After 25 years of ministerial direction and an army of civil servants in Scotland, how come its productivity is so poor and its company creation still so low? How is it that regions of England consistently outperform Scotland with only a modest mayoral office to provide extra political input?
It was Kate Forbes as Scotland’s Finance Secretary who in 2022 focused on the digital sector as a key to future growth and pulled together the National Strategy for Economic Transformation (NSET). She hired Mark Logan, the former executive at search engine company Skyscanner, as chief entrepreneurial adviser and he produced a paper setting out what needed to be done to put the country on a competitive footing.
Then Ms Forbes left on maternity leave and, after losing out to Humza Yousaf in the SNP leadership campaign, was exiled from the front bench.
Over the past two years there has been some progress in building Mr Logan’s recommended techscaler incubators, but not much else, apart from a few steps backward, including cuts to enterprise budgets and higher income taxes.
Speaking to some tax experts at the Chartered Institute of Taxation lunch on Friday I was given first hand evidence that investors and companies looking to expand are indeed turning away from Scotland because of the higher taxes and complicated tax bands.
During the past week we have also heard that Ms Forbes’ proposed Economic Leadership Group that was supposed to oversee the NSET has never met. There was startling news that Bruntwood SciTech, a property company focused on the science and technology sector, has withdrawn plans for a £60m tech hub in the vacant Met Tower in Glasgow – this coming just days before Glasgow Tech Week.
Then came a stark reminder from one of Scotland’s leading academics, Prof Jim McDonald, that Scotland’s otherwise highly-valued universities were producing half the number of spin-outs as the UK average. “There are great successes to be celebrated in Scotland, but the overarching performance is actually a challenging read,” he told an audience in Glasgow where a new Enterprise Hub was being launched by the Royal Academy of Engineering of which he is president.
Glasgow and Edinburgh enjoy high levels of tech activity and Mark Logan’s eco-system model and techscalers are attracting attention from other parts of the UK and overseas. However, outside London, Manchester is the UK’s biggest hub for startups and increasingly gets the nod over Scotland from those seeking a desirable location.
Analysis published last month shows the city has 1,600 startups which employ over 60,000 people. It has produced several unicorns – companies valued at $1 billion – including data productivity cloud platform Matillion, ecommerce giants Boohoo, The Hut Group (THG), AO.com, and car marketplace AutoTrader. Enterprise City is a new ‘tech, media, and creative’ cluster in central Manchester around the Old Granada Studios, while MediaCityUK has sprung up in Salford.
These developments are now drawing in numerous global tech companies, such as Microsoft and Siemens, as well as recent UK successes like Starling Bank and Booking.com.
This is one city. Not one country. Scotland has produced four unicorns – fantasy sports firm FanDuel, now owned by betting giant Flutter and run from the US; Skyscanner, now in Chinese ownership; Craneware, the software company, and BrewDog, the brewer and pubs chain.
However, creating unicorns is not a real measure of success. It’s the strength of the underlying SME community that will drive growth and here Manchester is also outgunning over-politicised Scotland.
Venture capital is pouring into Manchester. In 2023, the city’s startups raised £532 million, a 50% increase on 2021. Matillion drew investment from Silicon Valley-based investor Lightspeed Venture Partners. Other sizeable raises in recent years include electric vehicle charging infrastructure Be.EV (£110m in 2022) and customer engagement platform Connex One (£93m in 2022). Both these latter two investments dwarf the £52m in total raised for companies through Scotland’s techscaler programme in the past year.
There is no devolved government in England. Cities and other regions have to fend for themselves. Apart from some of them having a mayor, they are beholden to the economic policies set down by Westminster, the same policies that, according to John Swinney and Kate Forbes, are standing in the way of Scotland’s growth.
How can it be that Manchester has become the fastest-growing part of the UK under Westminster rule while Scotland is somehow being “held back” by that same political system? Those who deal with investors say the answer lies at least partly in what are deemed to be anti-business policies such as higher taxes, a more complicated tax banding system, rent controls as well as the uncertainty surrounding independence. In other words, government getting in the way of growth, rather than encouraging it.
Blaming Westminster austerity and Brexit for Scotland’s weak economic performance is a poor excuse for failure over the past 17 years of SNP rule. The UK economy may be treading water, but beneath the overall compression is evidence of thriving entrepreneurial companies that will capitalise when the economy picks up. Manchester and other booming cities in England such as Birmingham, Leeds and Newcastle, are prospering. Even under the Tories. Who’d have thought it?
So here’s a suggestion: book a trip to Manchester, Mr Swinney, and see how it’s done.
Terry Murden was Scotland editor and Business Editor at The Sunday Times, Business Editor at The Scotsman, and Business and City Editor at Scotland on Sunday. He is now Editor of Daily Business
Leave a Reply