CBI Scotland annual dinner 2018: First Minister's speech

It’s a pleasure to be here this evening. CBI Scotland is an important voice for businesses across the country, and an important critical friend and partner to the Scottish Government.

The reasons for that, I think, were very obvious from Carolyn’s speech. For most of my remarks this evening, I will focus on three issues which were prominent in this week’s Programme for Government, and which are of direct relevance to business – infrastructure, skills and internationalisation. However I want to start just by picking up on a couple of the other things that Carolyn mentioned.

The first relates to Brexit. Two weeks ago, when the UK Government published its technical notices on preparations for a 'no deal' scenario, I was struck by the strength of the CBI’s statement.

It said that the notices “show that those who claim crashing out of the EU on world trade organisation rules is acceptable live in a world of fantasy”.

It’s an assessment Caroline made again today, and it is an assessment that the Scottish Government agrees with wholeheartedly. No deal would be disastrous for businesses across Scotland and the UK. However a determination to avoid no deal should not lead us to accept a bad deal.

In fact we share many of the same concerns and priorities on Brexit as the CBI.

The CBI has been vocal in stating that the UK should stay inside the single market and the customs union throughout any post-Brexit transition period. Our view actually goes a bit further.

We believe that if Brexit has to happen, which we regret deeply, single market and customs union membership is the obvious solution – not simply for the transition period, but for the long term. It’s the least damaging economic solution and the most obvious democratic compromise given the range of perspectives on Brexit.

So the Scottish Government will do everything we can to argue for a common-sense approach to Brexit in the weeks and months ahead. And we welcome the fact that business organisations will also be making their views known. We hope that that has a real influence, and that it helps to move the debate out of the world of fantasy and into the realms of reality.

However Brexit cannot and will not define this Government’s actions. If anything, it increases the importance of getting on with the rest of our work – of building a strong society and a prosperous economy. The two go hand in hand.

And that’s directly relevant to the second issue in Carolyn’s speech that I want to pick up on. That’s the importance of innovation.

Two days ago, the Scottish Government published our programme for government.

It builds on the policies we set out last year, and reaffirms our commitment to Scotland as a country whose future success is based on innovation. We want to invent, develop and manufacture the key technologies and products of the future, rather than consuming those invented elsewhere.

We have the potential to do that in some of the key economic sectors of the future. I’m going to Aberdeen tomorrow for the opening of the European Offshore Development Centre – that development has the most powerful offshore wind turbines anywhere in the world. It’s just one example of the huge potential of our low carbon sector.

On Monday, I’m speaking at a summit in Perth about precision medicine – where treatments are tailored to a patient’s genetic and lifestyle characteristics. It’s an area where Scotland has huge potential, partly due to the strength of our life sciences sector and the strength of our patient data.

Scotland is also becoming recognised as a major centre for technology companies and big data analysis. Our space sector is thriving – this city makes more satellites than any other in Europe. We have a reputation to be proud of.

And many of our traditional sectors are also flourishing. For example our food and drink and tourism industries are going from strength to strength - figures published yesterday confirm that.

So the programme for government sets our further ways in which we can work with business to capitalise on those strengths, and help businesses to innovate and grow. Manufacturing growth is a cause for optimism. We are setting up a National Manufacturing Institute for Scotland, and legislating to create a South of Scotland Development Agency. We are continuing to support business research and development.

Last year, we implemented key recommendations of the Barclay Review of Business rates last year – we are working this year to take forward the others.

We are also creating a Scottish National Investment Bank.

The investment bank will be a source of patient finance to ambitious companies, and it will also be able to invest in major infrastructure projects. Often, these will be private sector developments which could have a transformational impact on communities, towns or regions.

As a result, it will complement another of our key commitments – increased spending on the social and economic infrastructure we need to thrive.

That’s been a major focus of ours in recent years. You can see the results across Scotland - for example in the completed central Scotland motorway network, the Queensferry crossing, the ongoing work to dual the A9, and the almost completed Aberdeen Western Peripheral Route. In the coming year passengers will start to see benefits from rail investment – for example a 20% increase in seating capacity.

And, having surpassed our target for more than 95% of properties to have access to fibre broadband, we will ensure that by 2021, every single home and business in Scotland will have access to superfast broadband. That’s a £600m commitment which is not matched by any other part of the UK. It has the potential to provide competitive advantage and is essential to modern life and business

When CBI Scotland published “Pursuing Prosperity” last year, you made it clear that good quality infrastructure creates job is the short term and is a vital part of raising productivity – especially in regions of Scotland where it is currently lower than average.

On Tuesday, we committed to further increases in infrastructure spending. By 2026, we will be spending £1.5 billion more than the £5 billion we spend now. The cumulative increase, over 7 years, is £7 billion. It’s an investment which provides certainty – to the construction industry and to business as a whole. It will create jobs in the short term, and raise productivity for the long term. And it will bring benefits to businesses and communities in every part of Scotland.

However we know that our investment in infrastructure will only pay benefits if we also invest in our people. And so skills is the second issue I want to talk about.

Last week, CBI Scotland joined with the STUC to stress the importance of skills. I found it hugely encouraging to see a major employer organisation working in partnership with unions on an issue of such national significance.

Skills is an issue where we have already worked closely with business and trade unions in recent years – for example in delivering more modern apprenticeships.

But looking to the future, we know that technological change will make some jobs redundant; will transform many others; and will create a lot of new jobs that we may not even have imagined yet. So Government has a duty to ensure that nobody is left behind by these developments.

That’s why we established a flexible workforce fund to helping existing workers to gain new skills. It’s also one reason for attaching a priority to STEM subjects. 

However we know we need to do more. And we also – and I know this is a genuine concern for many businesses – have to get better at streamlining or simplifying our support for skills. Support has to be easier for businesses to influence, learn about, and access support.

That’s one of the reasons why the Programme for Government pledged to publish a national skills plan early next year.

Perhaps even more fundamentally, it proposed a national retraining partnership to bring together government, trade unions and employers to discuss critical issues: for example future skills needs, and how access to support can be made simpler.

I expect it will rapidly become an important and influential body. And it will help us to direct and deliver a skills policy that meets the needs of Scottish businesses – now, and well into the future.

There are a couple of other points about skills which I think are worth making. The first is that we will only maximise our potential as a country if we enable everyone – regardless of gender, age, disability, sexuality or gender identity - to contribute as fully as possible to our society and economy. So promoting diversity is hugely important. I am therefore delighted that Ruth (Hunt, CEO Stonewall) is leading a conversation here this evening.  

And the second is that skills is a good example of an area where - as Caroline’s speech made very clear – Brexit creates an unwanted challenge. We face the risk of a shortage of skilled workers if freedom of movement ends.

So we will continue to ensure that Scotland remains – and is seen to remain – an open, welcoming, internationalist country. We will continue to make, in partnership with CBI, that positive case.

That is one reason why we promised on Tuesday to meet the settled status fees of EU nationals who work in our public services. And it is why, most fundamentally of all, we continue – like the CBI - to make a powerful positive case for immigration. It is good for our society, good for our public services, and good for our businesses.

The final area I want to talk about – internationalisation - is another one where Brexit increases the need for action.

In the last decade, the value of our international exports has increased by 45%. The latest figures show that goods exports increased by 7% last year – that’s better than any other nation of the UK. Goods exports to the EU increased by 18%. Sectors such as food and drink and our oil and gas supply chain have been major global success stories.

We have worked to build on that in the last year by expanding our presence in EU markets. I opened the Scottish government’s office in Berlin in June. Our Paris and Ottawa hubs open later this year. Scottish Development International has now doubled its representation in Europe, and we launched our major overseas promotional programme – 'Scotland is Now' in February.  

At this event last year, I mentioned the fact that approximately 70 companies are responsible for around half of Scotland’s exports. That is both a challenge and an opportunity – major benefits could emerge from small shifts in that dial.

And so this year’s Programme for Government looks to provide better support for more individual businesses. We’ll enable 150 high growth companies over the next three years to increase their overseas activity. And we’re creating 300 new business-to-business mentorships – where new exporters learn from experienced ones.

We’re backing these proposals, and also several others, with £20 million of additional funding. It’s actually – in terms of the scale of Scottish public spending overall – a relatively modest investment. But it’s one we believe can have a significant impact.

That’s partly because we are working in partnership with business. The idea for business mentorships is actually something that I discussed with Tracy (Black, of CBI Scotland) earlier this year. We’ll be working with CBI Scotland - and of course other business organisations - to identify the companies which will act as mentors.

We are also working with CBI Scotland to deliver a major conference at the end of November. It will help companies to find out more about the benefits of exporting, the opportunities they have, and the support that is available to them – including some of the new support I just outlined.

I hope it will encourage and enable new businesses across Scotland to enter international markets. I look forward to working with you.

In many ways, in fact, our work on exporting exemplifies how much all of us have to gain from a collaborative approach between business and government. In the coming months that will be more important than ever.

Brexit poses genuine risks and challenges to the Scottish Government and to business. But that makes it all the more important that we work together to promote innovation, invest in infrastructure, support skills, and encourage exports. If we do that, we can improve productivity and raise sustainable growth. And we can bring benefits to individuals, businesses and communities in every part of Scotland.

That’s the ambition which the Scottish Government reaffirmed in our programme for government on Tuesday. As we strive to achieve it, it is a huge help to be able to work with businesses and with organisations such as the CBI. So I am delighted to be here. I hope you enjoy the rest of the evening. And I look forward to working with all of you, in the months and years ahead.