Evaluating the impact of trade & investment support

Evaluating the impact of trade & investment support

A recent evaluation examining the impact of international trade and investment support for companies in Scotland has found a significant economic return for both trade and inward investment activity.

Evidently this is good news for business, workers and the Scottish economy, but many companies with growth potential are still unaware of the benefits of trade and investment support.

We know that increasing productivity in Scottish companies is vital to securing sustainable economic growth, creating better quality jobs and raising wage levels. And we also know that increasing exports and attracting companies to invest in Scotland are key to raising productivity performance.

Indeed, evidence shows that exporting activity can raise a company’s productivity levels, because they need to be innovative and efficient to compete in overseas markets, and the knowledge and ideas they pick up in through trading can help them improve their business performance further.

On the inward investment side, foreign-owned companies in Scotland pay higher wages and tend to be more innovative and productive than Scottish-owned ones and there can be knowledge spillovers from inward investors to Scottish companies that can raise their productivity.

So, if we want to secure sustainable and inclusive economic growth, we need to get more Scottish companies exporting and increase inward investment to Scotland.

However, there are a number of perceived barriers that can prevent companies from exploiting the potential benefits of selling overseas, and prevent foreign companies from considering investing in Scotland.

Overcoming barriers to trade & investment

For example, companies can overestimate the costs of entering new markets and underestimate the benefits. Key challenges include a lack of managerial time, limited knowledge of overseas markets they may be interested in and a lack of contacts.

Our support focuses on addressing these challenges, helping to ‘de-risk’ the prospect of exporting. For example, we can help companies recruit specialist exporting skills via our International Manager for Hire programme. This aims to address the biggest barrier to entering new markets: management resource in terms of both time and skills/knowledge.

We also have a comprehensive programme of overseas events and trade missions which provides information on new markets and allows businesses to test potential export demand, while our field staff and in-market sector specialists can provide invaluable expertise, insights and contacts.

For inward investors, the top three reasons for investing in Scotland are the skills base, building on a successful existing operation and availability of wider public sector support and funding.

The good news is that Scotland excels at attracting inward investment. The latest EY Scotland Attractiveness survey, which provides a useful insight on how Scotland is performing, recently highlighted another record year for Scotland in attracting FDI projects. And, once again, Scotland has been named as the top performing location in the UK outside London for FDI.

This illustrates the quality of our skills base, connections and other assets such as joined up public sector support, but we must continue to build on the international reach and connections that exist across many parts of our economy to attract even more new inward investment.

The evaluation indicates that barriers to investing in Scotland are lack of awareness of the opportunities and strengths we have (e.g. skills and research base) and the support available.

Provision of funding, and the availability of further support to help growth, were found to be key factors in attracting investment to Scotland. However, inward investors stated that no level of support would overcome a lack of skills/talent.

Among existing investors, support is often needed to help compete with other parts of their group, for example to bridge or offset any financial gaps reflecting higher costs of operating in Scotland.

The integrated programme of tailored support was also found to be key to supporting businesses to trade and to invest in Scotland. In other words, it’s not just about the funding, but also about the skills, expertise and knowledge of business growth advisors and specialists.

Economic impact

The evaluation found that international trade and investment support delivers real benefits to companies and the Scottish economy. Companies said that support helps them take forward plans quicker, better and to a greater scale than they would have done otherwise.

The evaluation shows that, as a direct result of support, companies have increased their exports by £630m in recent years and created 1400 jobs in Scotland. A further 10,000 jobs have been created by inward investors, which in turn yield supply chain and consumer spending benefits, supporting an additional 8500 jobs.

The evaluation endorses our approach to trade and investment and found that the economic gains (eg. increased economic output and tax revenues) of providing trade and international support, far outweigh the costs of support.

By building on this successful approach and by working with our partners, we can help even more ambitious companies to target new markets and attract new investors to Scotland, for even greater economic impact.

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