21 June 2017

  |  CBI Scotland

Press release

Boosting regional growth worth £25bn to the Scottish economy over the next decade

New report from CBI Scotland shows why regional productivity growth matters for Scotland’s future.

Boosting regional growth worth £25bn to the Scottish economy over the next decade

New CBI Scotland report shows that improving productivity and unlocking growth across Scotland’s regions could be worth up to £25bn to the economy over the next decade – increasing the size of the economy by as much as 15%.

Pursuing prosperity: Why regional productivity growth matters for Scotland’s future, shows that while productivity performance in Scotland has caught up with UK performance over the last decade, it still falls short of international competitors.

The report uncovers vast regional disparities in productivity across Scotland, with the highest performing local authority found to be more than 50% more productive than the lowest. From new research, four drivers of regional productivity difference across Scotland were identified:

  1. Educational achievement and skills training
  2. Transport and connectivity
  3. Management practices and innovation
  4. Exporting 

To seize the £25bn prize CBI Scotland is calling for the establishment of a business-led productivity taskforce that brings together representatives from government and the business community to focus on driving productivity growth. 

Boosting productivity is vital for long-term, sustainable economic growth as it is the foundation for prosperity. In Pursuing Prosperity, CBI Scotland outlines the specific scale of the challenge for businesses and policymakers in Scotland and proposes evidence based measures to address it.

 

Speaking on the launch of the report, CBI Scotland Director Hugh Aitken said:

“Against a backdrop of EU negotiations and new revenue raising powers for the Scottish parliament, there has never been a more important time to focus on improving productivity across Scotland. If we’re serious about generating sustainable, inclusive growth then unlocking regional productivity must be a priority.

“While productivity gains for Scotland overall should be welcomed, too many regions are being left behind. By bringing government and business together to focus on these four drivers we can go some way to making Scotland a more attractive destination for investment.

“With EU negotiations beginning this week, we hope that this report can be a timely reminder to the Scottish and UK governments of the need to remain focussed on the economy.”

 

Recommendations for education and skills:

  • Create and fund more high quality vocational options for 14-18-year-olds that have parity of esteem with higher qualifications.
  • Allow apprenticeship levy payers direct access – and flexible use of – levy funds.
  • Collect data centrally on frequency of business/school interactions in each local authority.
  • Encourage businesses to work more closely with schools and offer meaningful work experience for young people.
  • Above all, the UK government must ensure that our future relationship with the EU includes an immigration system that provides Scottish businesses with the skills and labour they need to succeed.

On education, Hugh said,

“Education and skills are key to driving productivity and ensuring every young person can fulfil their potential.

“We have a job to do to ensure that all young people get a good quality education, one that doesn’t just focus on qualifications but considers the wider skills they will need to succeed.

“Business has a key role to play and we’d like to see more businesses engaging with schools, colleges and universities to give young people vital, first-hand experience of the world of work.”

 

Recommendations for transport and connectivity:

  • Prioritise the completion of the existing transport infrastructure commitments and improve connectivity between Scotland’s City Deal regions and with key UK markets.
  • Make access to skills and labour easier for firms by reducing journey times within local areas.
  • Further explore the potential impact of the reduction and eventual abolition of Scottish Air Passenger Duty.
  • Ensure digital connectivity is integrated into all major planning and infrastructure decisions.
  • Increase broadband access and reliability.

On transport and connectivity, Hugh said,

“Connecting people to where jobs are being created and widening the pool of talent business can access is essential.

“The Scottish Government has made significant inroads on infrastructure investment, but we need to keep this momentum going and look towards the next generation of major projects.

“Digital connectivity is also crucial and needs to be integrated into all future planning and development decisions.”

 

Recommendations for management practices and innovation:

  • Ask the Scottish Government to set a concrete target for combined public and private R&D spending in Scotland.
  • UK government to work with Scottish Government to explore options for involvement in networks such as Horizon 2020 when the UK leaves the EU.
  • Ensure UK government uses the industrial strategy challenge fund to complement existing initiatives in Scotland.

On management practices and innovation, Hugh said,

“Boosting productivity day-to-day needs to be led by business.

“Productivity is not just about the size of companies, but how they’re run, how they invest in and retain their people and whether they want to grow and expand.

“Innovation will be key. For example, Scotland does really well on higher education R&D but falls behind on business R&D. That’s something we need to address.

“We’d like to see the Scottish Government set a target for combined public and private R&D expenditure as a percentage of GDP so we can benchmark our progress.”

 

Recommendations on exporting:

  • Ensure a joined-up conversation between the UK and Scottish governments so Scottish businesses can make their voice is heard as EU negotiations progress.
  • Encourage exporting firms to share best practice and participate in programmes to help non-exporting firms achieve their ambitions.

On exporting, Hugh said,

“Scotland has an exceptional track-record in exporting, with many globally recognised brands, but we can and must go further.

“We have a number of potential exporters here in Scotland that are not capitalising on this opportunity. We need to get to the root of what’s holding them back and find out how we can better encourage and support them.

“We know that exporting makes firms more productive and more productive firms are more likely to export. We need to better exploit this virtuous relationship between exporting and productivity.

“With the UK currently redefining its relationship with the EU and with new trade deals to be agreed, exporting will play a key role in driving future prosperity in Scotland.”