Foreign adventures hold key to recovery

DOUGAL SHARP has a new-found respect for Christopher Columbus. The founder of Edinburgh beer firm Innis & Gunn is on a quest to conquer the United States and has recently taken his first tentative steps on to American shores by appointing a local managing director.

"It's a massive investment for us," Sharp says. "It may take ten years but we believe the US will be a one million to two million case market for us."

It's a bold move for a firm that only launched its first beer in 2003 but, like Columbus, Sharp is already a seasoned explorer. Innis & Gunn, which broke new ground by ageing beer in oak barrels, may only be seven years old but it is already the best-selling British beer in Canada and the second best-selling imported ale in Sweden. "And we're closing in on the No 1 spot in Sweden at a rate of knots," he says.

About 70 per cent of its sales are made overseas, rendering Innis & Gunn one of Scotland's most successful exporting stories of the past decade. Policymakers are hoping other firms can replicate its success amid warnings Scotland and the rest of the UK must "export or die".

With UK debt soaring to new heights, economists, including the Ernst & Young Item Club, argue it is imperative to re-focus on exports. As Peter Spencer, chief economic adviser to the Item Club warns, Britain can no longer afford to borrow, so future growth is "almost totally dependent" on the ability of exporters to cash in on the rebound in world trade – particularly in boom economies such as China and India.

It's a stark message that has pricked the ears of Scottish politicians, particularly given warnings Scotland is most at risk of slipping into a double-dip recession due to its reliance on the public sector.

The Scottish Parliament's economy, energy and tourism committee, convened by Liberal Democrat member Iain Smith, has kicked off a three-month inquiry into how Scotland can boost exports. But

as Spencer cautions: "This high-wire rebalancing act (of regearing the economy towards exports] is going to be very challenging."

Recent data suggests some cause for optimism. The most recent manufactured export figures showed Scottish sales abroad grew for the first time in almost two years in the third quarter of 2009.

Alasdair Kerr, business development director at the Edinburgh Chamber of Commerce, argues that while government bodies such as Scottish Enterprise and Scottish Development International (SDI) have made credible inroads into improving Scotland's record on exports, major shifts in the global economy since the recession will require a fresh assault.

"If we are moving into a global market, we have to be good at this," he says. "It is the key to recovery from recession. We have to be serious about this or we have to give up."

Although the "Bric" countries – Brazil, Russia, India and China – have long been talked up as the next economic power houses, economists argue that the global downturn has widened the gap between established economies, such as the UK, and the Bric nations into a chasm.

In 2009, while the FTSE All Share Index grew 25 per cent, Chinese equities grew 79.8 per cent, Indian markets were up 81 per cent and Brazil was up 82.7 per cent.

"We have to stop kidding ourselves and relying on the fact that because we were once a great nation, people will do business with us," says Kerr.

Neil MacCallum, an adviser to the Organisation for Economic Co-operation and Development and director of Ikon International Associates, a consultancy that helps Scots firms enter Ukraine's markets, agrees strategy needs an overhaul.

"The approach is often seen as driven by the rules of the public sector rather than the needs and opportunities of business. It's time to revisit the market opportunities and the real market failures," he says.

"We do have ambitious companies but many need the right assistance and are often disappointed with the response from public sector and representative organisations. There is always a risk public agencies become distracted chasing performance and efficiency targets which makes them risk averse and lacking in ambition."

MacCallum adds that while Scottish firms are often bombarded with information about new markets, structured support to help them tap that potential is often missing.

Kerr agrees growth is going to be achieved by encouraging small and medium firms to broaden horizons. "Some of the most eager, determined and likely to succeed are medium and small businesses and they often get their act together," he says. "China isn't just where it is in the world because it has major corporations but because it has hundreds of thousands of small businesses that have got good products at a competitive price."

He says Scotland needs to examine the strategies of countries such as Germany. "The German Chamber of Commerce has 600 people working in India alone," he says.

Dougie Adams, senior economic adviser to the Scottish Item Club, says the weak state of the pound will provide a competitive advantage, though he warns: "It'll take two to three years to come through."

As a man who has proved a Scottish minnow can take on the might of countries such as Canada, Sharp of Innis & Gunn is upbeat, but says Scots should pick their battles.

"One of the things that has defined our approach has been focusing on a few markets and making them work rather than spreading ourselves thinly," he says. "We looked at markets that gave us a low-cost entry – and lowest possible risk – but which had genuine potential for growth."

But, he adds, if Scots want to make it globally, they have to do the legwork. "Our success has only been achieved by seven years of very, very hard work and luck," he says.