Scottish business: how to become a north star

Scotland and Norway have much in common: oil, small populations, stunning scenery and ghastly weather. But when it comes to GDP per capita, Scotland is more than a country mile behind. Catching up would require Google’s entire output, according to a report by Oxford Economics for The Hunter Foundation.

A second bid to secure independence makes this more than a fun stat. An independent Scotland will need to earn its own living. That is even more key as oil revenues, once the cushion bolstering nationalism, dwindle. Since the chances of a Google-sized corporate behemoth setting up shop in the nation are extremely small, alternatives are required. These might include more government borrowing, tax cuts and support for business.

Industrial policy has worked for Singapore, where a similar-sized population produces almost twice the economic output. Scottish businesses look like they could use a nudge. The country has proportionately fewer businesses than the rest of the UK: 900 per 10,000 adults versus 1,100 for the UK. Fewer of its small enterprises grow much bigger.

Scotland produces notable innovations, but there need to be more of them. Not only does spending on research and development lag behind that of the broader UK, but by far the bulk of it is by non-Scottish-owned businesses. In 2019, a 30.5 per cent slice came from the US alone.

There are also few partnerships with universities — in contrast to the tie-ins in Silicon Fen companies in the east of England. That region boasts Cambridge university. Scotland’s relatively robust proportion of spending on higher education R&D suggests research opportunities are going to waste.

Developing a core competency — as Ireland has done in tech and pharma — is one good strategy. Scotland might focus on renewables or broader climate change technologies. But this is a long-haul game that requires either decades or a rapidly transformative technology.

Scottish businesses need not wait for the stimulus of independence that may never come. They have great universities on their doorstep, plenty of experience of export markets and have already carved out roles in technologies such as renewables. The ball is as much in their court as Hollyrood’s.

What’s your analysis of Scotland’s business strengths and weaknesses. Please tell us what you think (politely) in the comments section below.