Everyone knows that Scotland has a rich industrial history and everyone knows, too, the difficult times that Scottish industry faced in the final decades of the 20th century. But making, creating and innovating is part of the nation’s fabric and there are very many world-class companies and sectors thriving up and down the country. It is because of this that I believe that Scotland has an opportunity to lead the digital transformation that is taking place in manufacturing and, indeed, other industries too.
Even though Scotland has inherent industrial strengths there is some catching up to do, just as there is in the rest of the UK. This is because Scotland missed out on the last industrial leap that took place in the 1970s and 1980s, defined by the rise of electronics and microprocessors. The decline of engineering and manufacturing sectors in the latter part of the 20th century came at a time when other countries were investing in their industrial bases, and heavily at that. Places like Singapore, Taiwan and Japan thrived whilst the UK as a whole typically under-invested and lost its way.
The social consequences of this were dire. Unemployment was far too high for far too long, and too many people and places were left behind.
There is, however, a new window of opportunity opening for Scotland’s industrial economy, and I will be saying more about this today at the Scottish Manufacturing Advisory Service’s ‘Making Smarter in Scotland’ conference.
The new opportunity, the next industrial revolution, is all about digitalisation and how it can unlock the productivity of Scotland’s people and, in doing so, improve living standards for millions.
It is a revolution that is already underway and will transform business and society across the globe.
And my message will be simple – we must invest in the latest and best tech to help Scotland grow its industrial base over the coming decades. To do this, we will need to apply the tools of the digital world – virtual reality, augmented reality or artificial intelligence into manufacturing and physical things, like robotics and production lines. It will need connectivity with the internet of things too, technology that helps machines talk to one another and collect data that can be used to massively improve productivity.
By focusing on digitalisation, Siemens believes that not only can industry become more efficient but that the economy can create whole new industries in the supply chain dedicated to these new technologies.
Imagine if we ‘cross pollinated’ Scotland’s industrial base with its digital start-up sector, for example? You can see the new skills and technologies emerging already, the new economy already seeding.
Take the number of people working in Scotland’s video games sector, which has increased by nearly a quarter since 2016. It is the second fastest-growing sector in the country. It’s worth £172 million to the economy. There are also around 3,000 digital economy companies employing roughly 70,000 people in total. Imagine if we harnessed these digital assets what we could do for the already hefty industrial sector? Companies like Siemens are digital pioneers, and we can see the potential of Scotland to digitalise and grow its industrial base over the coming years, through this ‘cross pollination’.
Last year I chaired a major industrial review for the UK Government called ‘Made Smarter’. It looked at this very topic and how all four corners of Britain can benefit from this new industrial revolution that so many other nations’ globally are already embracing with open arms.
The review found that, as a minimum, digitalisation could boost UK manufacturing by £455 billion over 10 years, increasing sector growth up to three per cent per year, creating a net gain of 175,000 jobs whilst reducing carbon dioxide emissions by 4.5 per cent.
I firmly believe Scotland must be part of this new revolution, building on its already substantial assets such as the National Manufacturing Institute for Scotland. The Made Smarter proposals say that there must be a focus on strong leadership to drive this revolution, and that business with government must encourage the adoption of digital tech across the supply chain, especially within small to medium-sized businesses. Critically industry must be faster at innovation and the creation of new industrial digital technologies.
There is good news here, according to the Scottish Development International, because Scotland does more research per capita than anywhere else in the UK and is the most successful for spin-out companies. And this is important because the Made Smarter review calls for a UK-wide adoption programme, a joint plan between business and government to help small to medium-sized industrial firms digitalise their businesses. Scotland already has the frameworks to deliver such a programme and a great track record of delivering tangible and commercial research and development. This will be driven by a Made Smarter Commission for all of the UK, and will be accompanied by a plan to up-skill new and existing employees in the latest digital technologies. My call to business and government in Scotland is simple – don’t get left behind, get fully involved in Made Smarter and tailor it to the unique industrial attributes the economy has here.
If we get these things right, coupled with a determination from government and industry to invest and scale up, we can ensure that this century will be one where Scotland leads the world in the latest innovations. It will also require and create the skills that are needed across all industries: digital skills, engineering skills, programming and coding skills, social sciences skills and lots of creative skills that Scotland already has a firm foundation in.
And that will be to the benefit of not just business but to employees too, as higher rates of productivity help raise living standards – making this new industrial revolution as much about people as it is about technology. The potential is to create many new highly paid jobs, better exports and it will reinforce Scotland’s reputation as a country of innovators, creators and makers.
By embracing this new digital revolution, Scotland has everything to gain for its economy and everything to gain for its people.