Low expectations of high growth pledge

Another ministerial promise to create business unicorns has failed to impress IAN RITCHIE

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Soon after has his re-election in May John Swinney told the Holyrood Parliament that the government will “establish a High‑Growth Unit to identify and support businesses with the potential to grow, and to grow significantly.” A new team, said the First Minister, would support and coordinate policy, programmes and interventions for these businesses, a new unit to back scaleups and create companies of “unicorn‑scale”, those valued at $1 billion.

This pledge puzzled those who were under the impression that Scotland already had a hugely experienced high growth unit in the shape of Scottish Enterprise (SE), a long-established enterprise agency which, in its current and previous iteration as the Scottish Development Agency, has been undertaking this role for more than 50 years.

So, what form will this new HGU take? What remit will it have, and how will it work with all of the disparate players in a very crowded Scottish field, organisations such as Scottish Enterprise, the Scottish National Investment Bank, the TechScalers, Scottish Funding Council, the universities and their technology‑transfer offices, Business Gateways, venture capital, private investors, accelerators and sector bodies?

Good questions. But no formal HGU remit, staffing structure or organogram has yet appeared on gov.scot or in the parliamentary written‑answers library. So far, only the speech and follow‑up parliamentary questions refer to it.

A parliamentary written question asking whether the HGU will sit within Scottish Enterprise was submitted (S7W‑01171), but no answer has been forthcoming; apparently officials are still clarifying its operation and governance.

Furthermore, the tenure of the current chief entrepreneur, Ana Stewart, ends this month and there has not yet been a statement about whether she, or a successor, will be appointed.

You can’t help feeling that there is a Kate Forbes-size hole in the current Scottish government.

Anyhow, the remit for this new HGU, whatever its shape, is a tough task, and it will be fascinating to learn quite how it is to achieve its stated goal of creating all those unicorns.

Only two have been confirmed in Scotland – FanDuel and Skyscanner, which were founded around 20 years ago, and have long since been sold to multinational parents. FanDuel is now the leading sports gaming brand in the US and last year a transaction valued the company at $31 billion, but in a controversial transaction in 2018 all the, mostly Scottish, early investors, founders and staff were wiped out and left empty-handed.

A third so-called unicorn, BrewDog, which had achieved a paper valuation of $2 billion in 2021, was acquired in a fire sale in March by US company Tilray Brands for just £33 million. The deal resulted in the closure of 38 bars and left its army of equity “punks”, who pumped in £80m through crowdfunders, empty-handed.

So, we haven’t been able to create any new unicorns for the last two decades and it is difficult to see what we will do differently now to achieve better results. In 2022 the Scottish Government set up a new organisation independent of SE, called TechScaler. Despite its name, it is mostly concerned with helping startups than scaleups.

A limiting factor is the level of investment that we put into this task. The Scottish Budget’s total funding for innovation and entrepreneurship activities in 2026–27 is almost £400m. Twenty years ago, when I was on the board of Scottish Enterprise, its budget was £471m, equivalent to £885m in today’s money.

The UK is not short of unicorns. At 80, it has the third largest herd of these beasts after the USA and China but the vast majority of these are based in London and the south-east. The rest of the UK finds it very difficult to create them.

There is no doubt that the cluster effect of many high-tech companies located close to each other is a major factor. London has the concentration of venture capital, research universities, and experienced entrepreneurs required to create them.

The UK government is currently proposing to rebuild the rail connection between Oxford and Cambridge, allowing new investment, and probably a new town, to form a new cluster of innovative companies stretched between them. Could we do the same in the Scottish central belt? Edinburgh and Glasgow are only 40 minutes apart and have four hugely innovative universities. Could this be exploited to grow such a cluster of companies of scale?

Sir Jim MacDonald was until recently the principal of Strathclyde University – which launched 44 spin‑out technology companies in the last 15 years – making it one of Scotland’s leading entrepreneurial universities. He has also just completed a five-year stint as president of the UK’s Royal Academy of Engineering during which time it has grown its entrepreneurial activities and has been rated as the top start-up hub in the UK.

Sir Jim now chairs Scottish Enterprise, and clearly, he and it have the knowledge, skills and experience to drive an ambitious national enterprise strategy.  Instead, it looks like we will get “a new Scottish Government team” of civil servants led by politicians. I suspect their chances of achieving a new technology unicorn company will be about the same as finding a real one.

Ian Ritchie has invested in more than 40 startups and served on the boards of Scottish Enterprise, the Scottish Funding Council and as co-chair of the Scottish Science Advisory Board.