Whatever kind of recession we’re in, pretty much everyone now agrees that we’re in one. What everyone does not agree on in how to get out of it. In fact, there is a significant proportion of the population—quite often those struggling with their finances—who question whether unbridled growth is desirable, sensible or even achievable in the long term. But, leaving aside the latter view, how best can we restore a modicum of growth—and thereby remove much of the ill-temper from present economic debate?
Though a global economy is pretty much a given and healthy US/Europe demands for Asian goods has become a lynch-pin of global growth, that does not mean opportunity does not exist for smaller economies to boom while the more sluggish giants who depend on global stimulus to prosper wallow from the inertia of size. For too long, Scotland has thought of itself as a branch of the UK economy: its finest hour to date was as arsenal, foundry and shipbuilder to the British Empire a century ago.
That proud Empire economy that once bestrode the world is now history. Even the last vestige of military manufacturing in the shape of BAE is contemplating merger into Europe. Whether you believe in Osbo’s austerity enema that is actually debt gluttony or not, this UK economy supertanker won’t turn around any time soon. The smart money is on fractional growth, if any, and a 12-15% real cut in public spending over 3-4 years.
Now, a definition of stupidity (or is it madness?) is to repeat the same action time after time, yet to expect a different outcome. What growth there has been in the Scottish economy owes little to Scottish Enterprise—the organ of state whose job it is to generate it. Their thinking was born in the statist 1970’s when the Linwoods, Ravenscraigs and other echoes of our manufacturing past were all the rage. It continued through the 80s and 90s when Mitsubishi and Chungwha and Hitachi all gave a modern veneer to Silicon Glen. It also provided good jobs so nobody was much concerned with quibbling.
But it was an illusion. Since Linwood, Ravenscraig, UCS, and most of Silicon Glen is now dust along with much of the investment provided, it’s time to ask what the hell SE thinks it is doing for our future and why most of its senior management don’t deserve their jotters. As part of the £1/4bn annual cost of SE are a Chief Exec at £204,000 and senior staff at over £1m among them, including pensions as sweet as any FTSE member. SE may hold £5m in 100% ownership of startup shares, plus £75m in others but they sit on £100m+ in cold, hard cash. They also heavily influence the distribution of over £1bn annually of EU and Scottish Government money.
In California, where much of today’s technology is still being developed, even if it’s being manufactured in Seoul or Shanghai, the venture capital denizens of Sand Hill Road must laugh themselves sick that such a colossus could exhibit either the foresight or the flexibility to punt on the future accurately, let alone the cojones to do it with their own money. It’s like releasing your pet dog Rover in Yellowstone and expecting him to compete with the wolves there to bring down caribou.
One of Scotland’s advantages is that it’s small. That means the politicians, bankers, businessmen—and the quangocrats—generally know one another and network well. But that also means that such a club is generally defensive about any major changes because there for the grace of fate goes any one of them. As a result, major moneys such as the European ESF and ERDF funds pass largely through SE, with the rest parcelled out to known recipients through a picked committee put there to rubberstamp what the Victoria Quay mandarins present tell them.
The point is that virtually none of public investment in Scotland is done with an eye on the far future. Go ask the Wood Group or Clyde Blowers or Barrs or Cairn Energy or even Brian Souter what they think of Scottish Enterprise and, once they’ve stopped laughing and picked themselves up off the floor they’ll put a flea in your ear how they grew their respective companies themselves and no thanks to the timeservers in the ivory towers of Apex House or Waterloo Street.
It took SE well into the nineties to twig that chip manufacture was a third-world operation that belonged offshore. It took them until the noughties to see that CRT picture tubes were old hat and that LED screens were the future. They are still fishing about for the next Motorola that will build a nice £1bn plant with 5,000 employees in Armadale because it seems that’s all they know. They have washed their hands of really small companies, palming them off on ‘one-stop shops’ with local councils who generally are not geared to real business advice or funding.
So what is the solution? The dog-eat-dog rapaciousness of the American business climate does not sit well with Scottish culture but nor do the environmentally indifferent sweat shops of East and South Asia. Appropriately enough, we may have something to learn from our UK partner in England. A couple of years ago they took out their equivalent of SE (the regional development agencies) out and shot them. The replacement was a network of much smaller local enterprise partnerships (LEPs), announced as part of the June 2010 UK budget and of which there are currently 39 in operation.
LEPs are voluntary partnerships between local authorities and businesses and, since they form organically, they seem to focus far better on the requirements of a particular area. While some thought needs to be given how they would be formed in the rest of Scotland, it seems that the area SE of Edinburgh, covering Mid- and East Lothian, plus Scottish Borders shares much in common, being a combination of commuter and rural but with none of the industrial concentration of West Lothian or the city focus of Edinburgh.
Such a SESLEP (South-east Scotland LEP) would, by its population, be entitled to around 10% of SE’s budget or approximately £25m. They should also get the equivalent of the EU and Scottish Government capital investments, allowing issues like Borders Rail or A1 dualling to be dealt and not dithered with. This would go a long way towards developing business to suit the area and thereby reduce the huge amount of travel into Edinburgh by professionals and salaried workers.
So what should such a SESLEC focus on to achieve such noble, not to mention useful, aims? For a start, the amount of skilled people and desirable quality of life would give them a flying start to develop:
- “Joined-up” tourism offering transport and entry to multiple attractions
- Linear recreation, such as long distance footpaths, an East Lothian Coast offering a smorgasbord of accessible recreation options and a bike hire network
- Town centre offices attracting architects, web/graphic design and other small professionals to work where they live—and spend their money there
- Quality food distribution network making local produce and seafood available to restaurants, specialty (e.g. farm) shops and other local outlets
- Quality restaurants specialising in the local produce and seafood
- Support infrastructure for building and maintaining Scottish & Southern offshore wind farm
- Town centre specialty retail that becomes a tourist destination in themselves
- Crafts and artwork network that would see equivalents of Wigton as book town spring up for art gallery tours
Although not all of the above may be viable, the point is that many opportunities here are lying unexploited—despite the growth in foreign and local tourism—because the enterprise ‘network’ we have is not geared to local small businesses. Such business offers the appropriate method of regenerating and making prosperous the 400,000 people who live in the quadrant SE of Edinburgh—and about which Scottish Enterprise is demonstrably clueless.