THE country’s 341,000 small and medium sized companies want more support, but not more red tape, finds Stephen McGinty.
White House Products sits on an acre or so of land in the Kelburn Business Park, just outside Port Glasgow, with the River Clyde at its back, where the driving wind is whipping up the waters into frothing white peaks. The modern warehouse and office is noticeable only for a letter missing from its signage, but it is remarkable for what lies inside. Neatly ordered on rows of high-rising shelves is the world’s largest collection of hydraulic pumps. If you are driving a combine harvester in South Dakota or a fork lift truck in the Sudan or a giant movable crane in Calcutta and a pump blows either you, or more than likely, your supplier will quickly be in touch with Alastair MacMillan and his team. In the upstairs office, where in the background a member of staff is quietly working on a new design, MacMillan explains: “We aim to be the Prontaprint of pumps.”
The company was started 30 years ago when MacMillan, then 20, was told by the army that he was, as yet, too young to join and to come back in a year. Since setting up his own business was always one of his ambitions, he started early with a view to selling machinery invented by his father, but sales of hydraulic pumps, initially viewed as a sideline to get them started, took off. Today, he and his father run a successful business which employs 22 people and has an annual turnover of £5 million: “We’ve been stuck at £5 million for a few years”.
Their business relies on export to America, currently their largest customer, followed by France and more than 100 other countries. Eighty per cent of the business is buying in pumps to sell on, while 20 per cent is designing their own replacements: “We can do something within two or three weeks when other people could be kept waiting for six weeks.”
Like many businessmen MacMillan was fearful of the consequences of independence. He and his father campaigned hard for a No vote with MacMillan snr printing his own leaflets which he distributed at Glasgow Central Station.
“I was a strong proponent of a No vote and the reason for that is that from a business perspective we do a tiny amount of business in Scotland. We are a very specialist business and the biggest single market for us, apart from export, is the rest of the UK and for any situation where there was a barrier at Gretna, it was going to cause problems and we could see no other option than to move a substantial portion of the business so that we weren’t affected by the Border issue.”
MacMillan takes a dim view on the efficacy of politicians, despite his strong suspicion that one helped in the purchase of their current base in Port Glasgow. In a novel twist, the land once belonged to his great-grandmother who lost it due to a compulsory purchase by the government after the Second World War for £8. When the company wanted to buy it off Renfrewshire Enterprise in 1997, they were repeatedly told no, as the council still had hopes that a big inward investor would snap it up. MacMillan snr wrote to complain to Michael Forsyth, then secretary of State for Scotland and while he received no reply, shortly afterwards Alastair received a phone call at 7pm one evening from someone at Renfrewshire Enterprise saying they could have the land: “It cost us £120,000 to get it back.”
The managing director of White House Products believes politicians have too great a faith that if they pull one lever then their desired result will happen. “Things do not work like that and they keep trying to sell that to people.” He is concerned about the damage caused to the already weakened Union by giving greater powers to the Scottish Parliament. “We have something that is pretty priceless in this Union. I don’t think people appreciate what powers the Scottish Parliament already has. It has pretty phenomenal powers, when you compare it to the lander in Germany or provinces in Canada. It is less than 20 years since it came into being and it has not found its feet and the idea of saying constantly, “more powers! more powers!”, well, at the end of the day there will be no more powers to give. I have sympathy with the argument that there should be an element of tax raising – local authorities can raise their own taxes – but why can’t the Scottish Parliament?
“I wonder whether all income tax being raised in Scotland is the right way or not. I also find it very disturbing that the Scottish Parliament is very keen for powers to be devolved to them, but they seem very reluctant to devolve powers beyond. Local authorities and individuals are the ones who need the power.”
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He’d like to see better support for people embarking on a new business. The local accountants in his area offer free advice and will do a fledgling company’s first tax return for free in the hope that if it survives loyal business will follow on an annual basis, but the accountants have struggled to have their offer advertised. “When someone is starting a business what you want is zero overheads – basically you want a garage and that is what we started with. That is what people need and trying to get hold of something like that is almost impossible. It is practical things that count.”
The Scottish Government, he believes, should concentrate on providing business with competent school leavers. “In Glasgow we have one of the oldest chambers of commerce in the world, that was the original support network for business, and I would actually much prefer that politicians got their noses out of business altogether. They have enough to do on the side of education, which they seem to make a complete Horlicks of. I would prefer they got that right because we and other employees rely on people who are numerate and literate –they need to get that right.”
It is a point picked up by Colin Borland of the Federation of Small Businesses (FSB). He says the public would be surprised at the difficulty of securing the right staff. “Access to a motivated work force is always incredibly important,” he explains, sitting in the FSB’s office in Glasgow. “It is consistently one of the key barriers our members cite in terms of access to their growth plans. The problems of hiring the right staff comes up time after time.”
The importance of small and medium sized companies cannot be over emphasised as, along with the state, they make up Scotland’s largest employers. In March 2013 there were 340,840 small and medium sized businesses employing an estimated 1.1 million people. If greater growth and employment is to be enjoyed by Scotland in the coming years, it will be these companies that deliver it.
So what do they want from the Smith Commission? The immediate answer is stability and a lasting peace between squabbling parties. “The first thing we want to achieve is some sort of sustainable long-term solution because we do not want to be back here in five years,” said Borland. “This is maybe optimistic given the time scale but we would like a clear stable framework that we can rely on and plan around.”
The FSB’s position is that the Scottish Parliament should gain more responsibility for raising the money it spends as well as “the revenues from other taxes that are roughly analogous to the level of economic activity”. As Borland explains: “You could put together an argument for the VAT take as a definite yardstick for economic activity or National Insurance if you could find a way of allocating those revenues.” He added: “We don’t want to play ‘amateur economist’, but we would be in favour of ways that would hardwire the economic development into the Scottish parliament.
“The great principle here should be how do you make the Scottish Parliament and the Scottish Government attuned to the needs of the Scottish economy and business growth? We will resist the temptation to say that requires devolving certain powers because we think the current Scottish Government would make good use of them, or indeed call for certain powers to be reserved because we are worried about what the current Scottish Government would do. We are going to try and focus our calls on those areas where we think devolving powers would be good for business in and of themselves regardless of the political complexion of the Scottish Government.”
The FSB would also be interested to see what benefits devolution of employment law could bring, particularly if it further reduced red tape: “Regulations designed for the large PLCs do not necessarily translate to small single member enterprise. It should be about making it easier to employ people.” Also, when necessary, to fire them. Borland said he’d like to explode the myths, “such as if you take someone on that you are stuck with them for life no matter how badly they behave”.
While Alastair MacMillan believes the government is capable of mixing up a “Horlicks”, CBI Scotland is equally adept at whipping up a piping hot brew, which it then proceeds to pour down its pin-stripe suit. The organisation’s decision to officially back the No campaign, then change its mind under pressure from members such as the BBC, STV and the nation’s universities, who promptly quit, was viewed as an embarrassing faux pas.
As Ash Gupta, founder of Gupta Partnership, a marketing company based in Edinburgh and a member of the CBI said: “We did have our kerfuffles leading up to the 18th, there might have been some wrong turnings, and everybody admits that, because it was a fraught time. But it won’t take long for industry and government to settle back down to interaction. We identify together. I think we have something that very few other countries have, it operates and it works.”
Across CBI Scotland there is extreme caution about the Smith Commission. A short statement sent to Scotland on Sunday by John Howie, chairman of CBI Scotland, reads: “Businesses would support further devolution to Scotland where it is likely to help deliver additional growth and jobs. Firms across the country benefit from the strength of the UK single market for trade, backed up by common rules and regulations, and it is important that any further devolution does not undermine this. In particular, it is vital that we keep a common corporation tax rate across the UK to avoid additional cost and complexity.”
While Andrew Palmer, director of CBI Scotland, is adept at banging the same muffled drum. “We are less concerned about ‘what powers?’ than by the outcome: what we are looking for are jobs, growth and investment and that is what we and the businesses that I talk to really want to see from the Smith Commission. The CBI is keen to see corporation tax reserved to provide the simplest environment for UK and foreign staff to operate in with one clear payment to HMI for UK operations, and that is what we would be saying.
“The Scottish Government can support firms in breaking into new markets by improving access to export finance and making sure that Scotland is well connected with strong transport links. We are focusing on jobs, growth and investment. We will be looking at the devil in the detail but we have to focus on those outcomes.”
When I ask what fears CBI Scotland would have at the prospect of devo-max, Palmer replies: “We do feel the UK single market underpins our economic success and that market must be kept reserved. We take a principled and evidence-based approach to further devolution and that is what we may well urge the commission to follow. Ultimately what we need is a long-term settlement. The business community, while respecting the right of elected politicians to come together and make choices, believes politicians should also respect that businesses need an evidence based case for further devolution.”
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