Nigel Paul: Strong local initiatives key to driving national growth

IN A time of significant economic upheaval, taking stock and planning ahead has never been more important. It is in this context that the Edinburgh Business Forum is overseeing a major economic review of the capital and surrounding city region by Edinburgh city council.

This will inform the development of a new economic strategy for the city over the next ten years - so it's important we get it right.

A key focus of the Edinburgh City Region Economic Review is enterprise - and innovation. These are critical drivers of economic growth and have been a policy focus of successive UK and Scottish governments. New firms generate about 25 per cent of all job creation in Scotland, while innovation drives 30 per cent of all productivity growth.

Edinburgh punches well above its weight in this respect, with 10 per cent of Scotland's business stock delivering 22 per cent of national output. We have more firms per capita than Manchester, Leeds and Glasgow, a heavy concentration of high-growth firms and start-up rates above the Scottish average. The rate of company formations from universities also compares well with US institutions. Edinburgh University alone formed 40 companies last year.

Edinburgh is, therefore, in a good position with regard to our business base and entrepreneurial activity. Our challenge, however, is to maintain a rate of growth that matches, if not exceeds, other equivalent city regions across the world.

Export and innovation activity are certainly areas where there is room for improvement. Access to affordable finance also continues to be a key barrier to growth for businesses across the region.

If these issues are to be addressed - and Edinburgh's economic performance is to be maximised - then investing in business support where it matters must be a critical element of policy development at both a national and local level.

This is a subject close to our hearts at the Edinburgh Business Forum, where our membership includes chief executives, entrepreneurs and academics from across the key sectors. In my own role as a member of Edinburgh University's senior executive team, supporting the spin-outs that will commercialise our world-class research is a daily preoccupation.

Access to investment finance is a major blockage in this pipeline, particularly at the early and intermediary stages for seed-corn and post-first round funding. Getting the right management skills on board at the right time is also vital if a two or 12-person start-up is to make the transition to a large business employing hundreds of people.Scotland's competitiveness in the life sciences sector, in particular, could be transformed if a large venture capital fund, able to leverage further funds from around the world by partnering with international investors, was based locally.

Bridging these gaps will require creative interventions by partners across the public and private sectors, and we support the recent campaign by the Federation of Small Businesses, the Institute of Directors in Scotland and three other groups to improve small business access to government funding schemes.

The City of Edinburgh Council is responding to this agenda with a renewed focus on business support activities through a dedicated enterprise and innovation team. This works with partners including Edinburgh Chamber of Commerce and, by leveraging matched funds from Europe, is delivering new Business Gateway services for growing businesses and co-funding projects such as the East of Scotland Investment Fund, which offers loans of up to 50,000 to help small- and medium-sized firms finance growth.

If Scotland is to fulfil its economic potential, then the Scottish Government must support and promote pioneering local initiatives like these across Edinburgh and the other cities. Scotland's six cities account for more than 60 per cent of Scottish employment and more than 80 per cent of research and development expenditure, so they are the real engine rooms of our economic growth.

If every penny of public money must count, surely these hotbeds of innovation and enterprise offer the best return on investment for national spending on business support? Edinburgh Business Forum believes so and looks forward to maximising the capital's contribution to the wider city region - and to Scotland's economy as a whole.

• Nigel Paul is part of Edinburgh Business Forum, which advises City of Edinburgh Council on economic development