National Economic Forum
Inverness, 12 May 2017
Thank you, Paul (Wheelhouse).
We set up this event quite some time ago. We thought we would be taking advantage of the relative calm and tranquility that would descend on Scotland following the triggering of Article 50 after the local government elections.
As you’ve probably noticed that hasn’t gone quite to plan! But we thought it was important to go ahead with today’s event – because discussions like this matter to the work we do as a government to support our economy.
These National Economic Forums were first established when this Government took office – they were one of our manifesto commitments 10 years ago, in 2007.
We set them up specifically because we wanted to bring together businesses, the trade unions, the third sector and the wider public sector to promote sustainable economic growth – to discuss how we can address shared economic challenges and seize new opportunities.
That purpose remains as important as it’s ever been. In fact I would argue that it’s more important today than it has been in the last few years. That’s why, in addition to myself, there are five Scottish Government Ministers here today. That is an illustration of the importance we attach to these discussions and it’s why we’re delighted to welcome so many of you to Inverness.
The last decade since we first started organising these forums has been even more challenging for many businesses across the country than could have been expected back in 2007. Scotland’s economy, like the UK economy overall, has had to weather the financial crisis of 2008, and many companies – particularly in the north east – are now coping with the effects of the downturn in the oil and gas sector.
So when we consider all of this it’s a tribute to the resilience, initiative and hard work of businesses the length and breadth of the country that on many measures – despite these headwinds – Scotland’s economy has performed well over the last decade.
We currently have a slightly lower unemployment rate than the rest of the UK– despite being more directly affected by the difficulties in oil and gas. There are 40,000 more people in employment than 10 years ago before the recession – and 60% of that figure is accounted for by a growth in highly skilled jobs – something of course we want to see more of. Very encouragingly, given the long-term damage that we know youth unemployment can do to the very fabric of a society, we have the third lowest youth unemployment rate in the European Union.
We have higher levels of productivity than any part of the UK outside of London and the south east. And we have huge economic strengths which should give us optimism for the future.
Many of those strengths are evident across the Highlands and here in Inverness. Life sciences is a major employer. There are huge opportunities in renewable energy – something I will say more about later. Our food and drink and tourism sector continues to go from strength and strength.
In the last year, we’ve seen continued growth in the tourism industry, where of course the Highlands is a key part of what is a stunning national success story. And if you look at other areas – for example advanced manufacturing, we’ve recently seen hugely exciting proposals from the GFG Alliance to use the smelter site at Fort William to make automotive products – potentially creating 1000 jobs directly, and supporting a further 1,000 jobs indirectly. It’s yet another example of the fact that the Highlands and Islands, like Scotland as a whole, does have huge economic opportunities in the years ahead that we must make sure we seize and harness.
We are determined as a government, working with all of you, to build on those strengths. For example, Inverness and the Highlands – like all parts of the country - will benefit significantly in the next decade or so from Scottish Government infrastructure investment. Key projects here include the dualling of the A9 and the A96; better rail connections between the highlands and the central belt; and our commitment to make broadband accessible to every home and every business in Scotland by the end of this parliament without exception.
But we also know – despite the many reasons we have for optimism – that we still face economic challenges and there is still a huge amount of work to be done.
Recent economic growth figures for Scotland have been disappointing – so we clearly need to do more to drive growth in our economy. Scotland has relatively low unemployment, but we know we need to reduce our economic inactivity rates. And while our productivity has performed well recently in comparison with the rest of the UK, it still lags behind nations such as Sweden and Germany and many others across the European continent.
And of course we need to face up to the significant challenges that will be brought about by Brexit.
And so it’s highly appropriate that the issues that we’re discussing in today’s workshops are all central to one or more of those challenges.
For example, quite a few of you will attend the workshop on the enterprise and skills review. Businesses have already had a major input into the review – today’s event is a further opportunity for you to feed in your thoughts.
Our enterprise agencies - Scottish Enterprise and Highlands and Islands Enterprise – already do an extremely good job. For example in recent years they have stepped up their efforts to promote innovation and internationalisation. Six years ago, SDI helped 1,400 companies to internationalise. Now, the figure is more than 2,500.
But we want to be sure that the help our enterprise agencies provide is even better co-ordinated and more effectively targeted. In particular, we want to make it as easy and quick as possible for companies to access business support services.
We’re looking at other issues, too. For example in relation to internationalisation, we’re assessing how the work of Visitscotland in creating messaging for Scotland – in determining our national “brand” – can best be used by other government agencies, by universities and by individual businesses. It’s a step which could play an important part in helping all of us to promote Scotland more effectively right across the world.
That’s something which undoubtedly becomes even more important as we face the challenge of Brexit – which of course is the subject of another of today’s workshops.
We are determined to do everything we can to make sure that as these discussions progress over the months and perhaps years ahead, Scotland’s interests are very firmly to the forefront. And above all, we are determined that Scotland will remain, and be seen to be – across the rest of the UK, Europe and the world – an open, outward looking and international country.
Internationalisation has already been a major focus for this government – that’s why, as I mentioned, our enterprise agencies have focused more on support for companies which want to export.
And it’s important to say, that as a country, we already does pretty well in the international marketplace. The value of our international exports has increased by 40% in the last eight years. But there’s the potential for much stronger growth – right now more than 80% of companies don’t export at all at the moment. That’s quite a staggering statistic. It shows how much of our exports are concentrated in a small number of companies. Once you get over the shock of hearing that statistic, you can see the potential for growth if we can get more of our companies exporting, then the benefits to our economy are clear for all to see.
That’s why we are intensifying our efforts to build connections with our partners in Europe and around the world. We have recently opened innovation and investment hubs in Dublin and in London in order to promote Scotland more effectively to our closest neighbours. We are also planning to strengthen our presence in Brussels and to open an innovation and investment hub in Berlin.
And as you would expect, we are working closely with business organisations. At the end of last year we announced funding for the Scottish Chambers of Commerce to help them to promote trade. After all, the Chambers represent 11,000 businesses in Scotland, but they also have ties to chambers in more than 180 countries around the world. So they are ideally placed to encourage their members to export. And as a government, it is important that we work in partnership with them as we do that.
That is now happening – just two days ago, Inverness Chamber of Commerce led a delegation of local businesses on a visit to Munich and Augsburg in southern Germany.
It’s exactly that kind of initiative – encouraging small and medium sized firms to build links and to develop partnerships – that we need to see even more of.
We know that internationalisation is good for the economy as a whole. It’s not just good for our balance of trade, although it is – it also encourages companies to be more ambitious, more innovative and more productive. And so despite the difficulties that Brexit will create, we are determined to work with you to expand the opportunities which are available to Scottish businesses.
And of course that emphasis on internationalisation is also directly relevant to the two other workshops this morning – looking at Scotland’s energy industry and the move to a low carbon economy.
I’ve already mentioned the difficulties that the oil and gas sector has faced in the past two years. One part of our response has been to help the sector to develop new products and to find new markets.
For example, because of our experience in the North Sea, Scotland is currently a world leader in subsea engineering. That’s an area where we believe there are further export opportunities in the future.
That’s why Scottish Enterprise is confirming today a £1 million investment in the Balmoral Group’s project to develop new facilities for subsea testing. That project will make it easier for companies in Scotland to test how products will work in very deep waters.
By doing so, it will help them to develop and manufacture equipment which can then be exported around the world. It’s just one example of how we are working with business to increase our international competitiveness.
We are also working with the industry to maximise the economic recovery of our oil reserves – potentially up to 20 billion barrels still in the North Sea.
In doing that, we are also recognising that the oil and gas sector will continue to play an important role in meeting Scotland’s future energy requirements.
And of course, the industry also supports skills, investment, research and development, and infrastructure for the wider energy sector. Because of that, it can play an important part in the development of low carbon technologies – for example offshore renewable energy.
That’s an area where Scotland is already recognised as a world leader.
Just last month, it was confirmed in tests at the European Marine Energy Centre in Orkney, that the world’s most powerful tidal turbine had successfully operated at full power. The turbine isn’t just being tested in Scotland; it has been developed by a Scottish company – Scotrenewables.
The world’s largest tidal power array is currently being developed in the Pentland Firth.
And if you look at offshore wind, the world’s largest floating offshore windfarm will be deployed in the North Sea later on in the summer. SSE’s Beatrice offshore wind farm is already under construction in the Moray Firth.
It’s worth noting that these offshore windfarms are creating jobs at Nigg – just 30 miles north of here – and Wick. The proposed Kincardine floating windfarm is likely to bring 200 jobs to Wester Ross. Renewable energy is bringing economic as well as environmental benefits to the country.
And of course the wider move towards a low carbon economy creates many more opportunities for us. We’re going to need new technologies in heating, transport and manufacturing. Our energy efficiency programme will create jobs, and will also reduce household bills, improve business competitiveness and directly benefit our environment.
Promoting a circular economy – which keeps products and materials in use for as long as possible – can reduce long-term costs and increase our competitiveness and productivity.
And because climate change is a global challenge – one which all countries need to face up to - there is also a massive global market for successful low carbon technologies.
Scotland has undoubtedly got a moral obligation to lead the way in moving to a low carbon economy – we have a duty to do our bit to tackle climate change and we are absolutely doing that. We also have a huge economic opportunity that we can realise from this – we have a chance here in Scotland to develop new technologies, generate new jobs and expand into new export markets. I am determined, as we all are, that we will seize these opportunities in the years ahead.
I started off this morning by looking back to the establishment of the National Economic forum back in 2007. It is beyond argument that we have faced major challenges in these 10 years. But I think it’s also important to remember that we have made important progress and we now have important opportunities.
Above all else, the fundamentals of Scotland’s economy are strong. We offer a highly skilled workforce, world class universities, immense natural resources, and a worldwide reputation in some of the key economic sectors of the future.
So the ongoing mission of the government is to work with all of you to harness that potential – to make sure we’re creating the best environment possible for doing business.
The last ten years have demonstrated that, as we work to achieve that, bodies such as the National Economic Forum continue to be an important asset. As a government, we have benefited hugely, from the expertise, enterprise and initiative of businesses and third sector organisations across the country and we want to continue to do that
That’s why these events are so important. I hope you enjoy today – I know we’ll benefit from hearing what you’ve got to say and I hope it deepens your understanding of the priorities and the actions of the government.