Scotland's Economic Performance Published in Scotland by the Scottish Parliamentary Corporate Body
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Published 21 June 2018 SP Paper 359 5th Report 2018 (Session 5) Economy, Jobs and Fair Work Committee Comataidh Eaconomaidh, Dreuchdan is Obair Chothromach Scotland's Economic Performance Published in Scotland by the Scottish Parliamentary Corporate Body. All documents are available on the Scottish For information on the Scottish Parliament contact Parliament website at: Public Information on: http://www.parliament.scot/abouttheparliament/ Telephone: 0131 348 5000 91279.aspx Textphone: 0800 092 7100 Email: [email protected] © Parliamentary copyright. Scottish Parliament Corporate Body The Scottish Parliament's copyright policy can be found on the website — www.parliament.scot Economy, Jobs and Fair Work Committee Scotland's Economic Performance, 5th Report 2018 (Session 5) Contents Executive Summary _____________________________________________________1 Introduction ____________________________________________________________9 Membership Changes __________________________________________________10 Previous Performance __________________________________________________12 GDP Growth Rate _____________________________________________________13 Small EU Countries ____________________________________________________16 Productivity __________________________________________________________17 Participation __________________________________________________________25 Solidarity - income inequality and household income __________________________27 Export Targets ________________________________________________________29 Purpose Targets_______________________________________________________32 Challenges and Opportunities ____________________________________________34 Entrepreneurship and start-ups ___________________________________________35 Scale-up and the fear of heights __________________________________________36 Acquisition ___________________________________________________________38 Withdrawal from the EU_________________________________________________40 Technology___________________________________________________________42 Automation___________________________________________________________43 Procurement _________________________________________________________44 Late Payment _______________________________________________________46 Growth Sectors ________________________________________________________47 Low-productivity sectors ________________________________________________51 Health and Social Care _________________________________________________52 Scotland's Economic Strategy____________________________________________54 Inclusive Growth _______________________________________________________55 Regional Growth ______________________________________________________59 Maximising labour potential ______________________________________________60 Business Models ______________________________________________________62 Social Enterprises ___________________________________________________62 Employee Ownership _________________________________________________63 Innovation ____________________________________________________________65 Universities __________________________________________________________66 Internationalisation _____________________________________________________71 Investment ____________________________________________________________75 Economy, Jobs and Fair Work Committee Scotland's Economic Performance, 5th Report 2018 (Session 5) Scottish National Investment Bank (SNIB) __________________________________77 Enterprise and Skills Agencies ___________________________________________80 Business Pledge ______________________________________________________84 Business-to-Business___________________________________________________86 UK Industrial Strategy___________________________________________________87 Skills _________________________________________________________________88 Apprenticeships and the Apprenticeship Levy ________________________________90 Poverty of Analysis _____________________________________________________93 Conclusions___________________________________________________________95 Annexes ______________________________________________________________96 Annex A - Minutes of Meetings ___________________________________________96 Annex B - Written Evidence _____________________________________________101 Annex C - Visits and Events ____________________________________________103 Bibliography__________________________________________________________104 Economy, Jobs and Fair Work Committee Scotland's Economic Performance, 5th Report 2018 (Session 5) Economy, Jobs and Fair Work Committee To consider and report on matters falling within the responsibility of the Cabinet Secretary for Economy, Jobs and Fair Work. http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/ economy-committee.aspx [email protected] 0131 348 5214 Economy, Jobs and Fair Work Committee Scotland's Economic Performance, 5th Report 2018 (Session 5) Committee Membership Convener Deputy Convener Gordon Lindhurst John Mason Scottish Conservative Scottish National Party and Unionist Party Jackie Baillie Colin Beattie Scottish Labour Scottish National Party Kezia Dugdale Jamie Halcro Johnston Scottish Labour Scottish Conservative and Unionist Party Dean Lockhart Gordon MacDonald Scottish Conservative Scottish National Party and Unionist Party Fulton MacGregor Gillian Martin Scottish National Party Scottish National Party Andy Wightman Scottish Green Party Economy, Jobs and Fair Work Committee Scotland's Economic Performance, 5th Report 2018 (Session 5) Executive Summary 1. It has now been a decade since the beginning of the financial crash and the subsequent 'Great Recession'. It has also been a decade since the introduction of the Scottish Government's National Performance Framework (NPF) which measures performance and progress towards the Scottish Government's economic priorities. We thought that this ten year milestone marked a timely opportunity to look at the performance of the economy as well as future challenges for Scotland’s businesses and households. 2. This inquiry sought to examine the performance of Scotland's economy and to engage a wide range of people in considering which economic policies will best serve Scotland in the forthcoming decade. 3. The Committee's conclusions and recommendations are as follows: National Performance Framework • The Committee has concerns about the ability to measure policy impact under the new performance framework. Entrepreneurship • The Committee believes that entrepreneurial thinking and the commercialisation of ideas should be encouraged by colleges and universities. Whilst acknowledging that some educational institutions are already doing this, consideration should be given to how best to increase the integration of practical entrepreneurial, commercial and problem solving skills into courses. Scale-up • The Committee notes evidence on the need to ensure that Scotland "remains a good place in which to do business" and asks the Scottish Government to ensure that the Scottish business environment enables businesses to achieve their potential. • The Committee notes that the scale-up of companies has been a long-standing challenge in Scotland. There is a lack of business confidence to do so and the Committee recommends that the Scottish Government sets out how it will tackle this 'fear of heights'. • The scale-up of businesses from small to medium sized enterprises could have significant economic impact. Evidence to the Committee suggests that "missing middle businesses" cannot access support to grow. The Committee believes that there is a missed opportunity if we do not give support to businesses that have growth potential and the desire to grow, but that are not currently eligible for Scottish Enterprise account-management support. The Committee asks the Scottish Government to quantify the scale of businesses which fall into the "missing middle" category and to set out to the Committee how it will ensure that these businesses receive the support they need to thrive. 1 Economy, Jobs and Fair Work Committee Scotland's Economic Performance, 5th Report 2018 (Session 5) • The Committee is aware that in Scotland businesses are often being acquired rather than scaled-up. If the money is reinvested in the Scottish economy, that can be beneficial. However, it can also result in the loss of entrepreneurial role models and experienced people to manage larger scale businesses based in Scotland. • In order to gain a fuller picture, the Committee asks the Scottish Government how many account-managed companies have subsequently been sold and how much is reinvested in Scotland. • The Committee believes that targeted employee ownership policies and incentives may help to keep business ownership in Scotland. Other policies would provide the "anchoring" effect needed to embed businesses in Scotland including ensuring that there is adequate investment, not just from Government, but from other sources. As Jim McColl told us, we need more large businesses based in Scotland to support those coming through the pipeline. Withdrawal from the EU • The Committee previously did an inquiry on the economic impact of leaving the EU and made a number of recommendations, including asking the Scottish Government to detail how it will engage with Scottish businesses on the issues arising from negotiations on leaving the EU.The Committee asks for an update on what work the Scottish Government has done to engage Scottish businesses in this way and what representations