Maximising Scottish growth - Sandy Begbie

It is a source of pride for many Scots that Adam Smith is widely considered the father of modern economics. His The Wealth of Nations is still vigorously debated today by industry leaders, academics and politicians across the world. One of the most hotly contested of Smith’s theses is his explanation of economic growth and its core emphasis on the division of labour as the source of society’s capacity to increase its productivity.

Almost 250 years since its publication, this issue is, yet again, front and centre of political discourse. Despite the turmoil surrounding the outgoing Prime Minister’s ill-fated plans for growth, the need to achieve long-term sustainable growth remains a fundamental economic ambition that all sides of the political divide largely agree on. .

The financial services industry is ideally placed to talk about growth. It’s a key consideration in so many aspects of our industry – from supporting entrepreneurs to scale up their businesses, to ensuring our customers’ pensions give them a decent standard of living and to enabling assets to meet liabilities through insurance.

But over time our industry has begun to think more about the value and purpose which growth creates. This has brought a marked shift away from the idea of ‘growth at all costs’ and heralded in a welcome focus on sustainable, inclusive growth, which creates long-lasting prosperity and sets a path away from our over-reliance on finite natural resources.

Sandy Begbie CBE, Chief Executive, Scottish Financial Enterprise

In the coming days the Scottish Government will articulate its response to the fiscal statement and, as ever, will have to balance support for vital public services with measures to ensure Scotland remains an attractive location to live, work and invest. This comes at a crucial time when Scotland’s economy faces significant structural challenges such as a declining population and relatively low levels of productivity compared to the rest of the UK.

In attempting to address these challenges it’s imperative the Scottish Government underpins their future approach with measures to stimulate sustainable economic growth for the long-term. I don’t envy any Chancellor or Finance Secretary for the decisions they must take but, given the hugely challenging context, it is important to resist the understandable temptation to be everything to everyone. Now is the time to be bold, focusing on where Scotland has widely recognised existing sectoral strengths.

In energy, Scotland is home to 75% of the world’s subsea engineering capability and the highest concentration of energy companies anywhere in Europe. Indeed, since the turn of the century, oil and gas revenues have contributed over £100 billion in cash revenues to the Exchequer. This critical mass in energy infrastructure and experience must be incentivised to transition to new green energies, particularly in offshore wind and hydrogen, as we race to meet net zero targets.

In food and drink, we have a world-renowned industry with a £15 billion turnover, an increase of 36% in the last 15 years, employing 119,000 people. Scotland’s financial and professionals’ services sector is a continued pillar of strength, employing over 145,000 people, adding a huge £14 billion of gross value annually to the UK economy, and with internationally renowned capabilities in fintech and green finance.

These are just three of Scotland’s truly world class industries which have a proven track record of delivering significant economic output, and we must now unlock their full potential by supporting them, and their associated supply chains, to grow and create highly skilled, well-paid jobs.

The ongoing green freeport process is a pertinent example of how this can be achieved and highlights welcome collaboration between the Scottish and UK Governments in awarding coastal locations with tax incentives to stimulate further growth and investment. The UK Government has indicated they want to augment this activity with new investment zones and, whilst we await further detail on this policy, the Scottish Government should approach it in the same constructive spirit and work closely with their UK counterparts to explore how locations across Scotland can potentially benefit.

In addition, SFE recently called on the Scottish Government to implement specific measures to support our entrepreneurial ecosystem. We were pleased to see this reflected in the National Strategy for Economic Transformation, delivered through initiatives like Codebase’s new Tech Scaler Hubs. There should be active consideration to allocating resources to accelerate the delivery of initiatives like this with particular alignment to our successful sectors.

The imperative of delivering sustainable, inclusive growth should not be viewed as a contentious issue but as a collective ambition. Ultimately our ability to improve the provision and funding of public services, particularly for those in lower- and middle-income households, can only be achieved if we successfully increase our tax base.

In recent decades this type of economic growth has been responsible for almost all significant increases in living standards, and our advancement as a society. Or as Adam Smith rightly surmised: “what improves the circumstances of the greater part can never be regarded as an inconvenience to the whole.”

Sandy Begbie CBE, Chief Executive, Scottish Financial Enterprise