Dr Liz Cameron CBE CEO, Scottish Chambers of Commerce
The UK Government’s latest Spending Review offers a genuine opportunity to spark growth, create much-needed jobs, and unlock private investment across Scotland and the UK.
For the business community, the direction of travel is encouraging but unless promised reforms are implemented, momentum is at risk of stalling before it starts.
We welcome the Chancellor’s £86bn commitment to science, technology and research, as well as funding for the vital Acorn Project in Aberdeenshire, and the £750m restoration of the Edinburgh University supercomputer.
These decisions will help cement Scotland’s place at the cutting edge of global industries as well as generate jobs, boost regional economies, and spur commercialisation of ideas born in our world-class universities.
The UK Government’s plan to increase defence spending from 2% to 2.5% of GDP by 2027 also represents a significant economic opportunity for Scotland to expand the industrial base and create jobs in productive industries like advanced manufacturing.
Our aerospace, defence, security and space sectors provide 430,000 jobs and the Acorn Project carbon capture and storage facility will create 15,000 more in construction alone – as well as making the Northeast a world leader in the low-carbon industry and attracting billions in private investment.
By focusing on high-growth sectors like carbon capture, IT, biotechnology and life sciences, as well as increased defence spending, the government is signalling the right priorities.
Alongside the additional £2.9bn allocation for Scotland through the Barnett Formula it’s another shot in the arm for industrial growth. Scotland’s businesses will be buoyed by the potential this unlocks.
The UK Government’s Modern Industrial Strategy, published this week, reinforced these investments with a plan ready for implementation. SCC has long called for a joined-up approach to developing our major industries, and this week the Government has indicated it was listening, giving a vote of confidence to Scotland’s manufacturers and innovators.
But let’s be clear: without urgent, coordinated reform, this good news could be squandered if the headaches businesses face every day are not resolved:
- Soaring operational costs, including the hike in employer NICs and the highest energy bills in Europe
- Inadequate business rates support, hitting our struggling high streets and the hospitality sector hardest
- The bureaucratic burdens and constraints in planning blocking progress on infrastructure projects and private investment
- The huge staffing and skills shortage thwarting our ambitions and ability to grow to meet current and future demand
The Spending Review commitments can put the UK economy on a pathway to growth, but it’s clear the Treasury needs more financial flexibility to invest in long-term assets such as transport, infrastructure, connectivity and logistics. The Chancellor should heed calls from the International Monetary Fund and leading economists to review the Government’s fiscal rules.
Closer to home, it was encouraging to hear the First Minister, John Swinney, affirm his commitment at the Scotland 2050 conference to align policy with economic opportunity. Business desperately needs clarity and leadership, and we are starting to see this approach bear fruit. Just last week, EY reported that one in six UK investment projects were based in Scotland, underlining our nation’s structural attractiveness to investors, second only after London.
However, spending promises on building projects and transport infrastructure will amount to empty words without the necessary reforms to get the system moving at pace. Why does it currently take 58 weeks to process a planning application in Glasgow yet just 16 weeks in Manchester? Worryingly, we are also forecast to need 700 additional planners to meet market demand with no clear plan to meet that number anytime soon.
The cost of building is higher in Scotland than the rest of the UK, largely because of the Scottish Government’s higher regulatory standards. Whilst this may be well-intentioned, some regulations are clearly becoming an impediment to growth. Strategic thinking is required to balance sensible regulation against economic necessity.
Smart reforms are also needed across the public sector to ensure best practice and streamlined and simplified processes are aligned with key business priorities.
These are all critical areas we must address if we are to maximise the opportunities for jobs and economic growth offered by the Spending Review. We simply have to take this positive momentum and capitalise on it.
The Scottish Government also outlined its budget priorities yesterday, pledging to expand borrowing for capital spending in construction and renewables, but with a welcomed emphasis on public sector reform. The Finance Secretary has expressed her intention to maximise every penny of investment through efficiencies and technical improvement, boosting productivity in the long-term. This is something every sector of the economy stands to benefit from.
While Scottish Government spending is significantly shaped by the Barnett Formula, which ensures that a population-based adjustment is made to align spending in devolved areas such as health or education, the Scottish Government has outlined clear priorities and a direction of travel to business.
Westminster and Holyrood must now work in close collaboration to support these investments with a laser focus on delivery, removing obstacles to growth and finding solutions for businesses weighed down by spiralling costs and excessive regulation.
The Scottish Chambers of Commerce and our Network are ready and willing to work in partnership with Governments and help businesses navigate the business challenges and economic opportunities. Collaboration is the key to secure the growth and jobs we so badly need.
