A nation in need of more business leaders

Investors are being courted at a big summit in Scotland, but the country also needs more HQs and decision makers, writes TERRY MURDEN

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Gogarburn, home to the biggest company campus in Scotland, offers the sort of scale and grandeur that befits a gathering of some of the biggest names in UK and international finance. They are descending on Edinburgh to talk about opportunities that could be pivotal in where the economy goes from here and who gets to decide its future.

The Global Investment Summit takes place at a venue known in some circles as ‘Fred’s folly’, the headquarters of what is now NatWest Group, built as a symbol of Scottish achievement. It was Fred Goodwin’s answer to Santander’s sprawling HQ in Boadilla del Monte, Madrid. The former Royal Bank of Scotland CEO wanted it to be the biggest bank in the world, and he managed to do just that. For a short time, Scottish banking really could claim to be a global leader.

It is now also a symbol of the shift in power that has taken place north of the border. NatWest may insist that Gogarburn is the company’s head office, but everyone else knows it moved the centre of its activities to London. Probably influenced by politically sensitive factors it must be the only plc on the stock market whose name does not grace its headquarters.

When First Minister John Swinney this week proclaims Scotland’s record on inward investment and its strengths in academia, financial services, technology and renewable energy he will avoid mentioning that its other banks – Bank of Scotland and Clydesdale (latterly Virgin Money) – are also part of bigger businesses based elsewhere.

ScottishPower’s boss Keith Anderson, another taking part in the Summit, answers to his bosses at Iberdrola in Spain. The big insurance and pensions companies – Scottish Amicable, General Accident, Scottish Life, Scottish Provident and Scottish Equitable – have long been under the ownership of companies in England or overseas. Transport company Stagecoach is in German hands, and the oil and gas wells in the North Sea are mostly owned by foreign energy giants.

Should we worry that fewer of the ultimate decision makers now prowl the corridors of Scotland’s biggest companies? Yes, because decisions around investment often follow the people in charge. Their leadership, the culture they create. And this investment cascades into other companies around them.

The absence of decision makers as a result of takeovers is a huge loss to Scotland. NatWest’s boss doesn’t live in Scotland, nor do many of those running other big institutions. This matters because they also don’t attend regular business gatherings and social events. They don’t sit on Scottish committees and working groups, getting involved in wider business, political and community affairs. This is not so viable from a home in Buckinghamshire. It was noted at the recent CBI Scotland dinner that few of those in charge of the biggest companies were on the guest list.

Was this lack of corporate big hitters in Scotland a factor in Scottish Enterprise struggling for two years to find a chairman? In years past Scottish company leaders like Sir Ian Robinson and Sir Ian Wood had taken on the role, but few stepped forward to replace Lord (Robert) Smith when his tenure ended in 2022.

Robinson, by the way, was credited with turning ScottishPower from a local electricity supplier into one of the world’s top 12 multi-utilities. He launched the first hostile takeover in the sector with the 1995 acquisition of Manweb, followed a year later by the purchase of Southern Water, the first acquisition of a water company by an electricity concern.

His boldest move came when ScottishPower secured the £4.7bn acquisition of Oregon-based PacifiCorp. That marked another industry first. It was the first time a foreign company had taken over a US utility.

All that came from running an independent company in Scotland, backed by the sort of institutional investors who will be in Edinburgh this week.

There is an undercurrent of concern that the demise of Scottish headquartered companies – the next likely to be Wood Group – is turning Scotland into a landing strip for those who determine its future from afar.

Too often they have arrived making big promises and backed by huge grants funded by the taxpayer, only to fall short and disappear. The Proclaimers were not far wrong when they sang about Linwood and Bathgate. Car manufacturing and Silicon Glen – including manufacturers such as Motorola and Compaq – came and went, their legacy often nothing more than a retail and leisure park built around a supermarket and a KFC drive-thru.

On the other hand, and at least for a time, they bring the sort of scale – and money – that might otherwise be denied to ambitious firms. There have also been gains from the likes of Barclays which has invested significantly in Glasgow, and other blue chips like Blackrock, Morgan Stanley and FNZ which have set up operations in Scotland. But they still answer to their masters outwith Scotland.

Nationalists look enviously at the Republic of Ireland where companies such as Google, Apple and Microsoft have transformed the economy. However, the advantage it gained from its low corporation tax cannot be replicated and without the tax receipts reclaimed from Apple which had been given illegal benefits, the budget falls to a deficit. The Irish miracle, it seems, was more of a mirage and it too has a dependency on decisions being made elsewhere.

Scotland’s USP is its energy assets. IT and finance can be done anywhere, but not all locations offer the same opportunities in natural resources. There is huge potential, particularly in the Highlands where the inflows of investment into renewables has led to new policies on housing to accommodate all the workers that are expected to arrive. Other infrastructure improvements will follow in roads, ports and telecommunications.

SSE, based in Perth, flies the flag for Scotland as a major player in the sector, building wind farms and grid connectivity. But once again, the main players are not Scottish, they are Danish, German, Japanese and, increasingly, Chinese. They build the turbines and own the facilities. The investment money comes in and the profits flow out.

This week, as the speakers address their invited guests, and the discussion panels chew over current threats and opportunities, there will be declarations about how Scotland manages to punch above its weight and has the credentials to earn the blessing of the investment community.

However, it is playing a supporting role to the power brokers based elsewhere, leaving it at the mercy of those investors and the companies they manage.

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

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