Scotland’s economy needs a big shock – and BREXIT may be just the wake-up shock it needs.
So says Robert Crawford, former head of Scottish Enterprise. It is 13 years since he quit the post. With the experience of having run an English development agency, and serving as chairman of the Economic Development Association Scotland, he warns the challenge facing the Scottish economy is far greater than policy-makers seem to appreciate.
Mr Crawford made his hard-hitting remarks on a Radio 4 programme about Start-Up Scotland hosted by BBC Scotland’s redoubtable business editor Douglas Fraser. It was broadcast on Sunday evening and a recording can be accessed through the BBC Scotland website.
He told Douglas that there were more high-growth, internationalising companies 20 to 30 years ago than there are now. And those that do grow have an unhelpful habit of being sold to bigger, foreign firms, rather than becoming the acquirer.
Asked about the start-up strategy now, he praised the work of the incubators and the entrepreneurs themselves. But do they put us on the cusp of economic breakthrough?
“We’ve been saying that all my adult life,” he said. “There have been a few flourishes, mainly on the back of inward investment activity that suggest that might happen, and with the honourable exception of firms such as Skyscanner [the Edinburgh-based travel search firm], the evidence doesn’t support it.
“We’re in the third quartile of the OECD [Organisation of Economic Co-operation and Development] innovation league, and aspiring to get out of it. We’re 15th out of 35 countries when it comes to productivity.
“That doesn’t mean there aren’t excellent start-ups businesses. Of course there are. But these are not transformational. These will not accelerate us beyond a trend growth of around 2%, and we should stop pretending that they will. We’ve been saying it – me included – for a long time, and it’s not happened.”
The numbers flow rapidly: “About 75 per cent of businesses were still in business after three years.
“Ninety-eight per cent of businesses employ less than 49 people, and 70 per cent of them employ one person. That’s not good enough.
“We are a relatively low innovation and low productivity economy, and one major reason for this is that these start-up businesses just don’t innovate effectively over time, nor do they internationalise.
“To get transformation in the economy, you need a massive economic shock,” he said.
He cited Finland, Israel, Singapore, New Zealand and Ireland as having been through a big shock – not out of choice, but effectively turned to their advantage.
He argues that Scotland needs monetary and full fiscal controls to achieve this. But he also believes Brexit holds a big opportunity for the Scottish and UK economies, so long as we are braced for a jolt.
“Despite the great efforts of the development agencies, they are nibbling at the edges of this problem, and they will be until we face a shock so fundamental that we have to transform ourselves, or something remarkable happens, like the discovery of new oil wells, which I’m not expecting soon.
“We’ve caught up with the rest of the UK, but we’re years and years from being transformed.
“We’ve been trending at 2% growth for some time, and that will not meet the appetite for the services that we have. So that matters a lot.”
And Brexit might be just the jolt that is needed.
The Global Entrepreneurship Monitor, co-directed by Professor Levie, put numbers to Scotland’s business birth rate gap. But recent years have seen an encouraging improvement.
Workers shaken out of established companies have seen many strike out on their own. Digital technology, e-commerce and the internet have also enabled many to launch businesses and reach a wide customer base much more quickly than before.
Incubator units have been set up, at first by universities, to help commercial spin-outs. More recently, others have joined such as Entrepreneurial Spark, Tech Cube and CodeBase.
Even so, there’s much to do to lift our enterprise spirit. And many will agree with Robert Crawford’s conclusion that we need a jolt.