SCDI Forum: First Minister's speech - 13 June 2022

Thank you very much indeed, Sally.

I hope I haven’t kept any of you waiting. It’s great to be here with you today.

It is actually a real joy now to be back doing in-person events like this, so it’s a particular pleasure to be here with you today, and also to take the opportunity at the outset of my remarks today to pay a big tribute to SCDI.

There’s no doubt that the organisation has been a really important, in fact vital, source of advice to successive governments for more than 90 years now - obviously I’ve not benefitted from that experience for all of those years, although some days it does feel like it – but I do know without a shadow of a doubt that the advice and support – often critical support – of SCDI has been particularly important to my government over the past couple of years.

So I want at the outset to put on record my thanks to Joanne, Sara and the whole team - and indeed to all of SCDI’s members - for everything you have done during this time, to help Scottish businesses and Scottish society, and indeed for everything that you have done throughout the entire period of the organisation’s existence.

Perhaps more importantly, today, I want to stress the role that SCDI is playing - particularly in the related areas of purpose and productivity - as we prepare to meet the challenges and indeed the opportunities of the years that lie ahead of us.

The challenges at present – as I don’t need to tell anybody in this room – are really significant - not just for Scotland – but for the UK, much of Europe, indeed for much of the world right now.

Scotland, like advanced economies everywhere – needs to recover and rebuild from what has been the worst pandemic in more than a century – a pandemic that we hope now has the worst behind us, but which we are still living, even today, with the impact of.

In addition to that, we all have an obligation to reduce our greenhouse gas emissions, while also working to raise our collective wellbeing.

And we are confronting those challenges of course at a time when inflation is at the highest level we’ve seen in more than a generation, indeed higher here in the UK than it is in any other G7 country, having a terrible impact of course on individuals, on families the length and breadth of the UK. It is also of course contributing to the increasing cost of doing business, and indeed that is being exacerbated by Brexit – and particularly the form of Brexit that has been pursued – and there is a real risk that that will be exacerbated even further now by the probably illegal action that the UK Government is outlining today over the Northern Ireland protocol.

So there is no shortage of challenges for us to confront. The good news is I’ll come on to some of the reasons for optimism in a moment as well.

The Scottish Government - given the limited, not insignificant but still limited, scale of our powers – will continue to urge our colleagues in the UK Government to do more to tackle right now the rising cost of living, because that matters not just to individuals but to businesses everywhere. But I want to give an assurance today that, as well as calling on the UK Government to do more, we will continue everything we can within the powers and the resources we have available to us to help individuals and consumers, notwithstanding the very tough public spending climate that we are dealing with.

Facing up to all of these challenges is crucial – it is inescapable. But as I said a moment ago, as we do so we also need to keep in mind – at the forefront of our minds - the huge potential, the enormous potential, that our country has.

That potential is – I think – well captured in the National Strategy for Economic Transformation that the Scottish Government published back in March.

But we also got an important reminder of that potential just a couple of weeks ago, when Ernst & Young (EY) published its latest assessment of different countries’ success in attracting overseas investment.

The report was glowing about Scotland, and that doesn’t happen by accident – it is the result of much hard work by many organisations, businesses and individuals across the country – but the latest EY report showed that in 2021, not an easy year in terms of global trade, Scotland was yet again the most successful part of the UK – outside of London – for inward investment. Inward investment increased, in that year, by 14% in Scotland – way above the UK increase of 2%. We saw a rise of more than 70% in the number of inward investments in the digital sector. And the proportion of companies who see Scotland as the best place in the UK to do business, has actually more than doubled over the past two years.

And I think that success highlights our strengths in areas which have traditionally been crucial in investment decisions – areas like skills and infrastructure. But – as the report sets out quite clearly - businesses are also increasingly making these investment decisions, based on issues such as a country’s approach to sustainability and climate change. And of course that is also now seen as a key strength that Scotland has.

So that underlines, I think, the importance of this forum’s theme. The Scottish Government and SCDI both believe that economic activity should be for a purpose – it should serve a purpose, a means to improving happiness, health and wellbeing, not just simply an end in itself.

SCDI puts this point very well in its Blueprint for Scotland – the excellent 10-year strategy that was published last year. The Blueprint’s very first recommendation says that “Scotland should aim to be a global hub for purposeful businesses that profitably solve the problems of people and planet,” and I think that is an excellent encapsulation of what we are talking about.

It is a vision that also is very much in line with the Scottish Government’s National Strategy, and so we have worked with SCDI over the past year to set up the Business Purpose Commission of Scotland, and that will publish its findings in two weeks’ time.

It is, I think, important to stress that that will be building on already strong and firm foundations. Many businesses are already making a hugely positive contribution to Scottish society.

And that’s true right across the different economic sectors – for example the pandemic reinforced the social importance of businesses in areas like retail and hospitality.

Scotland is also already a leading centre for finance – and increasingly becoming an important centre for green finance.

And if we look at our tech sector – the strengths of which, as I mentioned earlier, are increasingly internationally recognised - our strategy for data is founded upon the idea of using data for good, for a purpose.

But perhaps the most obvious example of this is the green economy. This is a sector where SCDI is again playing a really important role – for example through its Clean Leadership Group.

And it’s an area again where Scotland has massive potential – we see that in lots of different ways, but perhaps most prominently in recent months through the ScotWind auction results back in January, which could lead to more than £25 billion of supply chain investment in Scotland. It will not happen by accident – we will need to work to secure and ensure that – but it does illustrate very well the potential we have to turn our vast natural resources into massive economic benefits, supply chain and jobs benefits, across the country.

And we saw at COP 26 in Glasgow at the tail end of last year, that we were able to showcase to the world that businesses based here in Scotland are actively engaged in finding the solutions to the biggest challenge currently facing the planet – doing that for the moral reasons that every country has to address climate change, but also doing that in a way that if we get it right will deliver significant economic benefit to our country.

And that’s a good illustration of the fact that our strengths – not simply when it comes to net zero, but also in areas such as life sciences and big data – do make it possible, even with all of the headwinds that I spoke about earlier on, make it possible to fulfil the ambition that SCDI has set out. We can and we should strive to be a global hub for purposeful businesses. Because by doing that, we will give ourselves the best chance of improving our economy, increasing the wellbeing of the country and, in the process, will make a beneficial contribution to the world that we all live in.

One of the aims of the Business Purpose Commission of course is to show that a strong sense of purpose can help businesses to achieve better performance. It is therefore directly related to the final issue that I want to highlight to you today.

Improvements to productivity are a key way of raising living standards, something that is also important, but particularly important in the overall environment that we are living in today. That’s essential to wellbeing as well as to wealth.

In recent years, and this again is positive – Scotland has largely closed the productivity gap that we used to have with the rest of the UK. But – because low productivity has been part of the UK’s economic model for too long - our productivity remains below many of our European neighbours, so we need to raise it by that benchmark as well.

Over the coming weeks and months – starting tomorrow, in fact - the Scottish Government will be publishing a series of papers on the opportunities we believe Scotland would have with the greater powers of independence. Amongst other things, these will highlight the UK’s productivity gap with many of our European neighbours, and set out how – with a greater range of levers at our disposal, we could achieve a more productive and more sustainable economic model for the long term.

But for the moment, the National Strategy for Economic Transformation makes clear that we need to do everything we can – within existing powers - to raise productivity.

It therefore sets out 13 different actions to do that – covering everything from infrastructure improvements, to community wealth-building programmes.

And one key proposal is to expand the productivity clubs that are run by SCDI.

These clubs already have more than 1,800 members across the country. They allow businesses of all shapes and sizes to learn from each other about different ways of raising productivity - for example, effective management techniques, new ways to engage employees, and the successful use of new technology.

More than 50% of the members who responded to an independent evaluation said that they had made improvements or changes to their business as a result of productivity club events that they had attended. 10% said that they had already generated new business as a result of the changes that they had made.

So I’m very pleased to confirm today that the Scottish Government – as we indicated that we would do in the National strategy – will help SCDI now expand the productivity club network. We will help fund the establishment of a new club in Tayside. and our support will enable existing clubs to enlarge their membership by including more social enterprises and third sector organisations.

Productivity clubs are a simple, but they are – and they are proving themselves to be – a really powerful, way in which we can help and support many different kinds of business to raise their productivity, which we know collectively for the country is such an important objective.

And I think they also demonstrate the sort of partnership – between government, business organisations, and indeed individual businesses –that will be necessary as we seek to navigate the challenges and realise the opportunities of the years ahead.

And that idea of partnership is the note I want to end on, and it’s often one of the things I think that a country of Scotland’s scale has a particular opportunity to do well.

Often we hear about the downsides of being a relatively small country – there are massive upsides to being a small country where it is easier to build partnerships and networks.

The challenges we face in common with countries across the world right now are significant. But we need to keep our eyes on the potential, and on the massive benefits that we have.

When we read documents like the EY survey or SCDI’s blueprint – or simply when we look at the programme and the guest list for an event like this – the talent, the potential and the opportunity of Scotland is obvious for all of us to see.

The Scottish Government must, and we will, take a lead in helping businesses seize those opportunities - as we strive to meet the ambitions that are set out in the National Strategy.

But we can only succeed – we will only succeed – if we do work in partnership.

And SCDI, because of the breadth of your membership, and also the depth and the longevity of your expertise, will always be one the most valued and vital partners that we have.

So I want to end by thanking you for giving me the opportunity to be with you today, and to say that I and my entire government looks forward to continuing to work with you in the months and years ahead.

One of your most valued roles is to be a critical friend – to challenge us when we need to be challenged, but also to be there supporting us in the objectives that we’ve set and are seeking to implement.

So let’s not shy away from the challenges, but let’s go away from here today convinced and determined to seize the big opportunities that we have, and look to the future, with that sense of purpose and, indeed, with a sense of confidence.

Thank you all very much indeed.