Past strategies to grow the economy have been denied time and funding to take root, writes IAN RITCHIE
In launching the SNP manifesto, First Minister John Swinney, declared that ‘economic growth’ would be a central mission for a re-elected SNP government. He proposes a ‘high-growth unit’ to identify businesses that have the potential to achieve huge success and provide bespoke support to accelerate their growth. You’d be right for thinking we’ve been here before.
There is no doubt that growth is badly needed. During the last 20 years, with the SNP in government, GDP per head has grown annually at 0.3 to 0.6%, a paltry performance compared to the pre-2006 annual Scottish trend of around 2%.
Scotland’s performance compares badly compared to other small northern European countries: Ireland, Norway, Denmark, Sweden and Finland all have growth rates that are much higher.
But doesn’t Scotland already have ‘high-growth’ units, and if not, what exactly are its enterprise agencies for?
The main agency, Scottish Enterprise (SE), has a stated mission: grow the Scottish economy; increase sustainable economic growth; create jobs and prosperity for people across Scotland; and make Scotland a more competitive place to do business.
I was a board member of SE for six years up to 2005. The board is drawn from Scottish business and the wider community. The chairman is always a senior individual with huge experience of international business. It is independent of government.
Politicians don’t dictate SE’s initiatives, but they do agree its budget and can, and do, withdraw support for some or redirect funding to other bodies. Over the last two decades there has been a tendency to regularly cut back on long-term strategic initiatives and chop and change objectives.
When I left the SE board 20 years ago, its annual budget was £454 million – equivalent today with inflation to around £850 million – but today’s SE annual budget is only £237 million, a cut of 70% in real terms.
SE has been starved of resources, and the consequence is that many strategic long-term initiatives have been allowed to be cut, wither and die.
In a country like Scotland with a strong scientific research base, growth mostly comes from commercialising innovative new technology.
One initiative which we developed when I served on SE’s board was the creation of three new Intermediary Technology Institutes (ITIs), a 10-year Scottish Enterprise initiative designed to help bridge the gap between academic research and commercial exploitation — essentially trying to turn Scotland’s strong research base into economic value and business growth.
ITIs were established on the three key themes of energy, life sciences, and digital technology. The goal was to build and create high-tech businesses of scale. They were to be run independently of SE or government.
The ITIs were ambitious, and expensive, and turned out to be too ambitious and expensive for government to cope with. They were wound up in 2010.
Who knows what the ITIs could have achieved had they been allowed to thrive, the goal was to have developed substantial new businesses of scale.
Another important long-term strategic project supported by SE was the Enterprise Fellowships (EF) scheme which was run by the Royal Society of Edinburgh. The Enterprise Fellowships scheme identified and supported young researchers from Scottish universities to create new businesses based on the innovations that they had created from their research.
Candidates accepted as EFs were paid a salary for a year, assigned an expert and experienced mentor, and received a year’s worth of high-quality entrepreneurial training. Furthermore, 93% of these Fellows went on to launch new businesses, and an impressive 81% went on to prosper.
It was widely regarded as one of the most successful programmes of its kind in the UK for creating innovative businesses and in 2013 the UK’s Royal Academy of Engineering (RAEng) set up its own version.
I’ve served on selection boards and been a mentor on both the RSE and RAEng Enterprise Fellowship schemes and have been involved subsequently with some of the businesses as they go on to grow and prosper.
Even though this scheme was widely recognised as a huge success, Scottish Enterprise stopped funding the EFs in 2019 and the RSE was forced to wind it up.
The RSE is now in the process of building support to restart the EF scheme.
One of the downsides of the EF is that academic researchers, although very skilled in their own specialised fields, are often not naturally the best individuals to go on to build and lead a commercial business.
Which led to an initiative led by Crawford Gillies, then Chairman of SE, to create the Saltire Fellowship (SF) programme. The Saltire Fellowship was open to experienced candidates in their early 30s who wanted to reboot their career and start or run a business.
The scheme involved a residency at Babson College in Boston, rated top for entrepreneurship skills, followed by a period of internship with an international company, and then an internship with a Scottish business.
The key aspect of the SF was that the candidates all had management skills and were already mature and experienced in commercial activities.
Most of the SFs went on to become ‘C-level’ executives or start-up entrepreneurs. Some of the Fellows did not start companies right away but took senior roles and often founded companies later.
After a few years the Saltire Fellowship raised private funding to become independent of SE but unfortunately when the Covid pandemic hit, the scheme collapsed and hasn’t been able to start again. Another key growth accelerator has bit the dust.
So, the track record in creating initiatives to manage growth over the last 20 years has not been encouraging – so can we do better?
Given the way we have managed key strategic initiatives over the last 20 years it is difficult to have much confidence that we actually can.
Ian Ritchie is an entrepreneur and investor
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