Looking at Scotland’s economic foundations, Jim McColl sees a narrow base with two major supports that have not fully weathered global market shocks of recent years, creating widening cracks around the rest of the edifice.
The 64-year-old knows a thing or two about structures, having begun his career as an apprentice at Weir Pumps in Glasgow before going on to create an engineering empire. He says the banking crisis, followed by the current plunge in energy prices, has been a “huge shock to the economy” and makes the drive to expand Scotland’s business base more urgent than ever.
“We don’t have enough businesses of scale, and we don’t have enough businesses full stop,” says McColl, whose £1.4 billion Clyde Blowers Capital (CBC) portfolio includes the resurgent Ferguson shipyard at Port Glasgow.
“We have great talent and produce some fantastic graduates, but we can’t provide the jobs they want to achieve their professional goals, so they go down south or abroad and we lose them. These are the types of people who would be innovative and boost performance.”
Solving Scotland’s productivity puzzle has proven an elusive ambition for generations. Apart from a brief period in the late 1990s, gross domestic product (GDP) – the most common measure of growth and competitiveness – has stubbornly trailed that of the UK since the early 1970s, giving rise to endless headlines depicting the Scottish economy as “lagging”.
McColl is among Scotland’s wealthiest businessmen in large part through the revival of lethargic operations deemed by many to be past their sell-by date. Ferguson, for example, was on the brink of collapse 18 months ago but now boasts an order book of £120 million following an overhaul of its 12-acre site.
Projections from organisations such as the Fraser of Allander Institute and accountancy firm PwC indicate that Scottish growth will continue to struggle for at least a few more years to come, and with the brutal retrenchment taking place in the offshore sector, it’s difficult to imagine an alternative scenario. McColl says there is a solution to the conundrum though, as in the case of Ferguson, it will involve significant investment.
“The day before last I came back from Sydney, where we were visiting one of our companies,” says McColl, speaking before last week’s annual forum of the Scottish Council for Development and Industry (SCDI) in St Andrews. “The greater Sydney area has a population of about five million, but they are planning to grow that to seven million by 2025, and they are building the infrastructure to support that growth. They are focusing on expanding the population and the business base, and are investing for that now. Could you imagine if we said we were going to do something like that here in Scotland?”
Backed in part by government grants, McColl has spent about £16m on a near-complete refurbishment at Ferguson. Buildings have been knocked down, rebuilt, extended and improved to make way for modern equipment.
Crucially, most of this machinery is now under cover, with only 15 per cent of work taking place in the open on the slipway. That ratio used to be the other way around, leaving work vulnerable to weather-related stoppages.
The shipyard has also benefited from knowledge gleaned from other heavy industrial firms in the CBC portfolio, which includes ten “platform” companies running more than 90 subsidiaries in 30 countries. “You always pick up things from different businesses you buy,” McColl says. “You can see good practices elsewhere and bring them back.”
Additionally, Ferguson has repatriated some professionals from abroad as its workforce has expanded from just five in August 2014 to 220 and counting. McColl expects the yard will employ 400 people within the next year, with the supplement of talent from overseas helping to create an inventive environment where fresh ideas can flourish.
Innovation such as this is one of three key planks which the SCDI has highlighted if Scotland is to move from a “fragile to agile” economy. Its blueprint for prosperity, which also focuses on productivity and internationalisation, was at the core of last week’s forum where McColl was a keynote speaker.
SCDI chief executive Ross Martin says substantial leaps in productivity are difficult in developed economies such as Scotland’s. However, the problem “shouldn’t have to languish”, as leaders such as McColl have shown what can be done with sufficient resources deployed to the correct targets.
“He is one of those guys who is walking the walk,” Martin says. “He is a living, breathing iteration of how we go about doing these things.”
Set up in 2008 with an initial investment fund of £250m, CBC is the extension of East Kilbride-based Clyde Blowers, the heavy engineering group McColl took a minority stake in after striking out on his own in the late 1980s. He raised his holding to 70 per cent when he took the company private in 2001, after which he embarked on a series of acquisitions to make Clyde Blowers the largest in its market.
He then purchased what now trades as ClydeUnion Pumps from Weir Group in 2007, saving about 550 jobs in the process. He sold that businesses – where he began his career as a 16-year-old apprentice – four years later to SPX Corp of the US.
Acquisitions continued and moved further afield, evolving into today’s CBC portfolio. The common theme across this empire, McColl says, it to be a technology leader “in whatever sector we go into”.
“We like to be innovative,” he adds. “It’s about getting some smart people together and then challenging them to come up with new ways of doing things.”
McColl, who sits on the First Minister’s hand-picked council of economic advisers, would like to see comparable shift in the workings of governance. He was the highest-profile business supporter of Scottish independence during the run-up to the 2014 referendum, but has retracted his stance in the wake of the narrow “No” vote on the basis that “the decision has been made”. However, he still makes a strong case for the greater transfer of powers to the UK’s nations and regions.
“My whole issue was not about independence, it was about having the power to improve things,” he says. “If you don’t have the power, you have to take what you are dealt.
“The discussion now should be about how we get more control of the levers that can help to improve the health of Scotland’s economy.”
The Scottish Government is limited in what it can do, he adds, though the fiscal framework settlement is part of a “continuing process” providing more leeway on taxation and other policies that could be adjusted to benefit the country’s economy. McColl is also a supporter of the UK’s City Region initiative, which has allowed the Glasgow conurbation to pull together bigger infrastructure projects across multiple local councils.
Like the independence referendum, the forthcoming decision on a potential UK exit from the EU has produced sharply polarised views. McColl believes the economy will “adapt and do OK either way”, despite dire warnings about the “unknowns” coming from both sides of the debate.
“The real truth is, it is not going to be as extreme as any of those things that are being said – it will be somewhere in the middle,” he says. “If there is a vote to leave, it will still take two years to sort out our relationship with the EU. We will still engage with them in trade and so forth, because it is in both parties’ interests to do so.”