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Scottish Affairs Committee - Minutes of EvidenceHC 657-i Supporting Scotland's Economy
House of COMMONS
TAKEN BEFORE the
Scottish Affairs Committee
SUPPORTING SCOTLAND’S ECONOMY
Wednesday 1 December 2010
PHILIP RYCROFT and SUSAN HAIRD
Evidence heard in Public Questions 1 - 56
USE OF THE TRANSCRIPT
1. This is a corrected transcript of evidence taken in public and reported to the
House. The transcript has been placed on the internet on the authority of the
Committee, and copies have been made available by the Vote Office for the use
of Members and others.
2. The transcript is an approved formal record of these proceedings. It will be
printed in due course.
Taken before the Scottish Affairs Committee
on Wednesday 1 December 2010
Mr Alan Reid (in the Chair)
Dr Eilidh Whiteford
Examination of Witnesses
Witnesses: Philip Rycroft, Director General, Innovation and Enterprise, and Chief Executive, Better Regulation Executive, Department for Business, Innovation and Skills, and Susan Haird, Deputy Chief Executive, UK Trade and Investment, gave evidence.
Q1 Chair: We welcome back Philip Rycroft and we thank Susan Haird for coming. We are delighted to see both of you this afternoon. We are expecting Divisions in the Chamber at any minute, so I am afraid we could be interrupted. I start off by asking both of you to introduce yourselves and say what your Departments are doing to encourage private sector growth in Scotland.
Philip Rycroft: I am Philip Rycroft. I am the Director General of Innovation and Enterprise in the Department for Business, Innovation and Skills. I am also Chief Executive of the Better Regulation Executive in the same Department. I have not come with a long statement, so I shall keep this very brief as you probably want to get into the questions. The key issue is: which areas of BIS’s responsibility are relevant to growth in Scotland? The very straightforward answer to that is: where BIS has responsibility for reserved policy areas that are relevant to the Scottish economy, our policies will, hopefully, have a positive impact on growth in Scotland. In some respects, I can do no better than draw to the Committee’s attention the paper The Path to Strong, Sustainable and Balanced Growth published on Monday by BIS and the Treasury, which gives you a very comprehensive record of policy domains where BIS is active. I would be very happy to talk through with you in some detail, if you wish, those that pertain to the UK as a whole and therefore are relevant to Scotland. Examples of those would be competition policy; regulation policy; issues around aspects of access to finance policy; and some aspects of innovation policy. These are areas where BIS is active across the UK and where, therefore, our work is very relevant to growth in Scotland.
Susan Haird: I am Susan Haird, Deputy Chief Executive of UK Trade and Investment. UK Trade and Investment is the Government body, part-owned by the Business Department and part-owned by the Foreign Office, with responsibility for both encouraging UK companies to go international and inward investment into the UK. We work very closely with the devolved administrations, and in Scotland we work very, very closely with Scottish Development International. In terms of what we are doing to promote private sector growth in Scotland, we are obviously working with SDI to encourage inward investment into Scotland. I shall be happy to say more about that when we get to the question stage. We work with companies throughout the UK to help them internationalise. Most of our services are open to companies in Scotland and those that are not are covered by SDI. For example, we have teams of international trade advisers and frontline staff throughout the English regions. SDI has teams of staff doing similar work throughout Scotland, but services like our Tradeshow Access Programme that helps companies to exhibit overseas, our missions and our chargeable service, called OMIS, are all available to companies in Scotland and are taken up by them.
Q2 Chair: Is your remit to help companies in Scotland to attract business from abroad, or would it also include attracting foreign-based companies to come and set up in Scotland?
Susan Haird: Essentially, we do two things: we attract inward investors from around the world to come into the UK, including Scotland-there are ways of working with the English regions and devolved Administrations to ensure that-and then we help companies based anywhere in the UK to go international through exporting outward investment, joint venturing and partnering. The arrangements for Scotland are slightly different from England because SDI has its own teams of frontline advisers.
Q3 Chair: Perhaps you would explain how you operate differently in Scotland compared with, say, the English regions. Maybe you would explain where the division of responsibility is between yourselves and SDI.
Susan Haird: If I may, I will take the question in two parts: the trade side and the investment side. On the trade side, in the English regions at the moment we have an international trade director co-located within each regional development agency. Those international trade advisers have contract staff working throughout that region and they will do one-to-one counselling with English companies in the region. They will advise those companies first about how they might get ready to export, if they aren’t ready, and which of our services might be appropriate. They will signpost them to our posts overseas. We have staff in 96 markets around the world and those staff are there to serve Scottish companies as well.
Q4 Chair: I am sorry to interrupt. Does SDI have staff abroad as well?
Susan Haird: They have some staff but not many, and they are free to use the services of all our posts overseas. We work very closely with SDI overseas. The typical pattern would be that a Scottish company would go to an SDI frontline member of staff somewhere in Scotland and receive that advice. First, do they have the capacity to export? If not, they will be helped to get the capacity to export. If they do have the capacity to export, they will have a discussion about where they should export, where their products would best sell and which of our services might be relevant. Do they want to go on a mission? Do they want to exhibit at a trade fair? Once the adviser in Scotland is into that sort of discussion in many cases the adviser will be signposting them to our services, either missions that might be organised nationally by us for the UK as a whole or, for example, a chargeable service that our embassy in, let’s say, Beijing might do for them. It might be a bit of market research or the organisation of a visit programme for somebody going out. It works very well. We hold events around the UK. For example, under Asia Task Force auspices, we organise events around the UK to encourage companies to export to the fast-growing markets of Asia. We bring staff back from our overseas embassies and consulates to advise companies, and we hold a kind of roadshow round the country. There was one in Scotland about a year ago; there will be another one early next year, so they benefit from a lot of things done on a nationwide basis. I will move on to inward investment when you are ready.
Chair: I think I have used up my five minutes, so I will throw it open to other members of the Committee. Perhaps we can allow five minutes each. Fiona, do you want to go first?
Q5 Fiona O'Donnell: Thank you for coming along today. If I may start with Philip, there is one UK-wide area of enterprise that we do not tap into but particularly so in Scotland. The previous Government set up a working group that looked at women and enterprise. I wonder whether your Department is taking any measures to encourage women to set up businesses. If we could match, or even come close to, the number of start-ups by men we could solve a lot of our problems.
Philip Rycroft: That is a very fair question and goes to the heart of where the different responsibilities lie. In terms of encouraging business formation generally and the conditions in which businesses can set up and grow, there are a number of policy domains for which BIS is responsible that play directly into that space-for example, the work we do on access to finance, competition policy, regulation and so on. There is then a series of economic development functions which relate particularly to supporting businesses to start up where the policy responsibilities are devolved. To put it in practical terms, typically where those policies are driven through Scottish Enterprise in Scotland that is a matter for the Scottish Government, and where the arrangements are in England currently they are held by the RDAs but obviously they will move into a new space under the auspices of the new Government. In that context clearly a lot of detailed work is driven through that which will help all different parts of the community to start businesses. Work has been done by BIS on women entrepreneurs and entrepreneurs from ethnic minorities and so on to encourage those groups to get into the economy. In answer to your question, in respect of what the Committee is interested in and where the relevant responsibilities lie, the BIS responsibilities are more at the macro-level; the micro-level responsibilities are more for the Scottish Government.
Q6 Fiona O'Donnell: This is something I want to ask you about as well, Susan. As to the Government making statements about the number of private sector jobs that it aims to create, if it is not within your power to create those jobs how does that relationship work with the devolved areas to ensure that the Government is meeting its targets?
Philip Rycroft: Let me take two examples of that. We are very, very concerned about the environment in which businesses can get themselves established, thrive and grow. If we take two domains and look at access to finance, are businesses able to access the finance they need to get established and grow? Therefore, from the BIS perspective, we run a number of UKwide schemes-the Enterprise Finance Guarantee scheme and various enterprise capital fund schemes-which are accessible to Scottish businesses as well as any other business across the UK. If you look at the regulatory domain, a lot of regulation is in reserved territory. If you think about employment and health and safety law and all the rest of it that is reserved to the UK Government, so the action we take to ensure that the regulatory environment is fit for purpose will work for businesses again right across the UK. That is where the work that BIS does has a direct relevance to every business in Scotland, but on the same basis it is relevant to every business in the rest of the UK.
Q7 Fiona O'Donnell: Susan, Scotland is very much dependent on Ireland for its exports. My understanding is that we export more to Ireland than all the BRIC countries put together. What action is Government taking in particular to help Scotland cope with the impact on our exports of the financial problems in Ireland?
Susan Haird: I think you would need to put that question to Scottish Development International, in that they are the people with the frontline advisers who give advice to companies about which export markets to look to. Ireland has a higher share of our exports than the BRIC countries put together, but that is a slightly misleading figure, if I may put it that way, because Ireland is basically like the domestic market. To try to skew the behaviour of companies is not good in economic terms. Company A may have a wonderful export opportunity in Ireland that has been going on for years. The person to whom they are selling may be perfectly solvent and it may carry on for years. For us to say to them, "Leave Ireland alone and go to China" would not be good. What we can and should do UK-wide is bring to the attention of all our exporters the opportunities in markets they may not have thought about. That is why we do a number of outreach events, like the Asia Task Force events I talked about and Partner Middle East events, to encourage companies to diversify into more markets. We began to do that even more during the recession because, frankly, many of our traditional export markets-Europe, including obviously Ireland, and the US-were suffering negative growth when the Asian and many Middle Eastern economies were still growing very fast. As Philip said, at macro-level it is for us to paint a picture that shows where the opportunities are and draws the attention of companies to those they might not otherwise have thought of. I would be very wary of saying to a company, "You must abandon a particular export market and look elsewhere," because we will never know the detail of the circumstances, but we should absolutely encourage them to diversify.
Q8 Cathy Jamieson: I want to pick up a couple of things specifically on the paper provided to us so I can get my head around some of this stuff. I was particularly interested in the Tradeshow Access Programme. You mentioned that 185 Scottish SMEs had received grant support. A few pages over, it talks about the demand for the TAP perhaps being less than would have been expected from Scotland’s share of UK exports. Could you say a wee bit more and give me some more examples of that? Do you think that has been a successful programme?
Susan Haird: The Tradeshow Access Programme is very successful. We have very rigorous economic impact evaluation in UKTI. Every pound we spend on the trade side turns into £19 of additional profit for our customers. That in turn results in £5 billion of additional profit for the customers and £35 billion of additional exports. Within that we evaluate all the different services. The Tradeshow Access Programme is a particularly high-performing service. Another measure we use is business impact. Has it changed your business? The target is 50% of companies saying "yes" and TAP scores about 80%, so it is a very high-performing service. We take companies both in groups and individually; the individual part is a kind of solo programme. In the main, we take groups of companies to exhibit at trade fairs overseas and all of them are open to companies right across the UK. Where we think a particular region is not taking as much advantage of a tradeshow programme as perhaps it might we do more outreach to encourage it. It is difficult to say exactly what the right share would be.
Q9 Cathy Jamieson: So that I have a flavour of the sort of companies that have been involved in this, do you think Scotland has taken as much advantage of that programme as it could have done? If not, specifically what has been done to try to encourage more SMEs to take it up?
Susan Haird: The way companies go to trade shows is that it begins with a discussion with their international trade adviser. That would be somebody on the ground in Scotland or England. It is very much up to the adviser whether he or she thinks that to exhibit overseas is right for that company. It is not right for every company or every sector, so it is extremely difficult to say what the correct share should be.
Q10 Cathy Jamieson: Can you tell me what kinds of companies have gone to these events?
Susan Haird: For example, energy companies have gone to a major energy show in Houston, exactly as you would expect; companies have gone on sporting events in Brazil. Scottish companies have taken part in a whole range of our events.
Q11 Cathy Jamieson: I am genuinely trying to get a flavour of this. I wonder how that fits with what Scottish Enterprise, for example, is doing on the high-growth industry sectors. Do they match or are they different?
Susan Haird: I am not familiar with that piece of work, but UKTI has identified a number of high-growth sectors into which it puts more resources, for example energy, life sciences, ICT, creative industries and financial services. These tend to match other people’s high-growth sectors as well.
Q12 Cathy Jamieson: Has there been discussion on that, and do they match up?
Susan Haird: I am not aware of specific discussions.
Q13 Dr Whiteford: I want to ask about small businesses, particularly very small ones. Quite recently, I discovered that Aberdeen has the highest proportion of people anywhere in Scotland who are self-employed. One of the things where very small business people, especially sole traders, seem to have a mental block, or perhaps just a logistical block, is taking the step to becoming somebody’s employer. I wonder whether either of you has any thoughts about how the process can be made less daunting for sole traders, because it is a huge opportunity for growth.
Philip Rycroft: That is a very clear question. We know quite a lot about the thoughts and feelings of small businesses as they get on that path of growth and the sort of things that inhibit them particularly to take on people. The Better Regulation Executive did a piece of work very recently, which I commend to you, on micro-businesses and regulation. It looked across all the regulatory interface with small businesses.
Chair: I am afraid we will have to break, hopefully for only 15 minutes. We will adjourn until 3.57.
Sitting suspended for a Division in the House.
Chair: Thank you very much for staying, Susan. I am sorry about the long break. I am afraid that Philip had another appointment and had to leave. Several members of the Committee also have other appointments. We had assumed we would all be finished by half-past four. We very much appreciate your staying.
Q14 Jim McGovern: Susan, since I was elected in 2005 most of the people who have come along to my weekly surgeries have had problems with pensions, immigration or the benefits system. In the past year or two more and more people who have come to the surgery have been business owners and have had problems with banks. Is it also your experience that banks have been giving business a hard time?
Susan Haird: Anecdotally, one hears that and reads it in the press. Interestingly, we have put questions about access to finance into the evaluation mechanism I described earlier. It has not come through as a significant problem from our customers. I find that interesting because it is not intuitively what I would have expected.
Q15 Jim McGovern: So you do not regard it as a problem?
Susan Haird: I read that it is a problem, but our customers have not been saying that to me. The present Government and the previous one have sought to ensure that lending continues to flow to SMEs.
Q16 Jim McGovern: I would like to make clear that it is not a party-political question.
Susan Haird: I did not interpret it as such.
Q17 Jim McGovern: I do not look for a partisan answer. This has been happening maybe for a year or two, certainly prior to the general election. I am surprised to hear your answer that it has not been flagged up to you. The Federation of Small Businesses have said they would recommend the creation of a business support scheme. How do you see the UK Government’s role in such a scheme?
Susan Haird: Could you explain exactly what their proposal is, because what my organisation does is business support?
Q18 Jim McGovern: Unfortunately, the Federation of Small Businesses do not seem to have a representative here. I cannot explain exactly what they mean.
Susan Haird: I think they were due to give evidence before me and did not make it today.
Q19 Chair: I think they were snowed in and could not make it.
Susan Haird: I am not exactly sure what they are referring to there.
Q20 Jim McGovern: So, you would prefer not to answer it?
Susan Haird: I do not have an answer I can give you, I am afraid. We give support to companies large and small: 90% of our customers are small and medium size enterprises; 40% of them have fewer than 10 employees. We give companies grants to exhibit at trade fairs overseas. There are grants we can give to companies to go on missions. We have a scheme in England called Passport for Export-I believe there is something similar in Scotland-which operates on the basis of matched funding. My organisation does give business support. If they are talking about a scheme to do with access to finance that would have been a question for Philip Rycroft and the Business Department. It would be wrong of me to try to interpret what they are asking for.
Q21 Jim McGovern: That’s okay, Susan. I apologise if I am directing a question to you that is for somebody else.
Susan Haird: No, no; it’s fine.
Q22 Jim McGovern: Do you believe the Government should support businesses, whether small, medium or whatever, by tax breaks, for example? The previous Government before the general election said that it would give tax breaks to the computer games industry, which is a big thing in my constituency in Dundee. The new coalition Government has said that it will not award tax breaks to the computer games industry because they are poorly targeted. Do you have a view on that?
Susan Haird: My view is the view of the Government of the day.
Q23 Jim McGovern: Yes. And?
Susan Haird: The Government has said it does not believe it appropriate to give grants to the games industry.
Q24 Jim McGovern: If your view is the same as the Government of the day, inasmuch as they are poorly targeted, why is that?
Susan Haird: I am afraid it is not my field. If I may clarify it, I am here to represent UK Trade and Investment. We help UK companies export and attract inward investment into the UK, so in that respect you are asking questions that are outside my area. I imagine that is a matter for the Department for Culture, Media and Sport and the Treasury.
Q25 Jim McGovern: That is fair enough. I am interested to hear you say that your view is the view of the Government, but you cannot answer the question as to why the Government’s view is fair.
Susan Haird: I am saying it would be wrong of me to give you a different answer. It is not my field; I cannot elaborate.
Q26 Jim McGovern: When UKTI send trade delegations abroad to try to attract inward investment to Scotland, do they include representatives from Scotland?
Susan Haird: I think your question concerns both inward investment and trade. When we take trade delegations overseas, that is UK-based companies seeking to export, the answer is yes, absolutely. All of our events and missions like that are open to companies throughout the UK. SDI will take some missions overseas on its own, but as far as we are concerned any mission we organise is open to all companies throughout the UK. On the inward investment side, UKTI has national responsibility for marketing the UK as an inward investment destination. We work very closely with the regional development agencies and the devolved Administrations to attract inward investment into the UK and then work with the investor to decide where in the UK it wishes to locate.
Q27 Fiona Bruce: Good afternoon, and thank you for coming, Miss Haird. It is estimated by one source that the 2012 Olympics will produce about £21 billion-worth of investment in our country. I would like to know how the UKTI is helping to ensure that a good proportion of that is gleaned by Scottish businesses.
Susan Haird: There are two ways in which we look to maximise the international economic legacy of the games. One is to attract inward investment into the UK around the magic of the games-so using the Olympics to draw companies into the UK. Once we have attracted them to think about the UK, we get into the business of working with them on where in the UK they would wish to go. Scotland has a very good track record in receiving inward investment projects. Perhaps I may come back to that in a moment. Just to look at the other side of the coin, trade, we are also very keen to maximise the opportunities for UK business around the world that come from having a major sporting event like the Olympics in the UK. We have signed host-to-host agreements with other cities and countries that host the Olympic Games-for example, Vancouver for winter games in 2010; Russia for the Sochi winter Olympics in 2014; and Rio for 2016. Having signed those host-to-host agreements, we would then work with the host nation on their needs around the games and how we right across the UK can best meet them. We would then take out sporting missions to the country concerned. There have been several to Sochi, Rio and Vancouver. Let me emphasise that a major sporting event offers opportunities not just in what might be viewed as a narrow definition of sport but right across architecture; design of stadia; security equipment, which is obviously very important; ticketing and all sorts of services. They are very broad-ranging missions. I know that inward investment in Scotland is an interest of the Committee. Would this be an appropriate moment to give some figures for inwards investment in Scotland? I am conscious that we have not got into that yet.
Q28 Chair: Yes.
Susan Haird: Scotland is the second most important destination for foreign investment projects after the South-East including London and gets between 8% and 11% of projects into the UK. That is roughly in proportion to Scotland’s 8% share of the UK’s GDP. If you look at projects involving research and development, 9% is the average for all projects over the 10year period Scotland receives 19% of R&D projects. So Scotland is doing particularly well and punching way above its weight in getting R&D projects. Scotland’s share of R&D jobs over the past 10 years has been 20%, which is the second top region after the South-East, including London. Scotland’s overall share of jobs was 14% over the 10year period-again punching above its weight-though I must emphasise that in 2008 and 2009 that figure was 8%. There were some very big expansions in the automotive sector in England for which Scotland could not have competed. So I think the FDI figures for Scotland are really encouraging. Scotland gets more than its proportion GDP-wise and a very high proportion of R&D-intensive projects.
Q29 Fiona Bruce: Thank you. That is a very interesting general picture. To bring us back to the 2012 Olympic Games which are now coming, can you give specific examples of actual businesses or trades-I do not necessarily want you to advertise on their behalf-where UKTI has, if you like, added value to them?
Susan Haird: Are you talking about inward investors?
Q30 Fiona Bruce: I am talking about how you have helped to boost trade. What particular businesses can you point to and say, "There’s a success for us."?
Susan Haird: Let me give you a company called Benoy which is based in England but is now worldwide. I give you one example. On a trade mission with us to India, it won the design work for 21 retail outlets all over India. Each one of those retail outlets was bigger than Bluewater in Kent, which at that time was the biggest retail outlet in the UK. I mention that because the other day I was on a speaking platform with somebody from Benoy. Not all companies want their successes made public, but the figures I gave you on the evaluation evidence show the scale of our impact. Recently, we received an award from our peers for the best trade promotion organisation in the developed world. That was in recognition of one of our products in particular which achieved a huge impact for customers. We work with customers of all sizes. For example, when the Prime Minister went to India a number of contracts were signed; similarly on his recent visit to China. A whole range of companies from small to large benefits from working with us.
Q31 Fiona Bruce: What is the annual budget of UKTI?
Susan Haird: It is about £350 million and it is a mix of programmes. We have three funding streams. We have funding from Parliament direct on programme spend which we spend on companies, primarily on company support, trade fairs and that sort of thing; we have funding from the Foreign Office, which funds our overseas network primarily; and we have funding from the Business Department, which funds our headquarters operations in London and Glasgow.
Q32 Fiona Bruce: How are you preparing for the change from the RDAs to what is likely to be the LEP basis of working which is private sector-led in many regions? It will be very different. I was interested that earlier you mentioned that, obviously, you supported the Government of the day. How will you change the culture of UKTI to match this change in emphasis? Linked to that, I am interested to know how many people who work for UKTI have run their own businesses.
Susan Haird: I will start with the RDAs and come back to that. We work with the RDAs in two main ways at the moment. On the trade side, we are basically their international delivery arm. We operate a system which I described partially earlier. We have an international trade director co-located with each regional development agency.
They work up an international trade strategy for the region and the frontline staff are then employed under contract with the likes of chambers of commerce. Those arrangements will pretty well continue after the abolition of the regional development agencies, except that there will not be an obvious immediate interlocutor at regional level. Over time, as growth hubs and local economic partnerships are set up, there will be other interlocutors to discuss the trade strategy for the region.
On the inward investment side, the RDAs are a key part of our delivery, as are the devolved Administrations. As an inward investor becomes interested in a particular region, or two or three regions or a region and a devolved area, essentially we will pass at least part of the client handling to the RDA or devolved Administration. They would go into the detail of things like the location of sites, local infrastructure needs, access to skills and partnering with local universities. We need to replicate that granular level of regional delivery. Ministers have decided that responsibility for inward investment will rise to national level; in other words, it will not go solely to the local economic partnerships, though no doubt they will be involved and will be a key partner. We will look to have a national means of delivery throughout the English regions which will be sector-focused so we can talk in depth to companies and make a very strong sector proposition, but the sector specialists would not be bound by geography in quite the same way as they are at the moment because they work for particular regions. So it would be a national scheme but regionally delivered with some flexibility. Through that delivery mechanism we will also want to work with local economic partnerships that will bring in a more local level of knowledge and help to the inward investor.
In terms of changing culture, UKTI is very private sector-focused. We use quite a number of business specialists. We have sector champions who are business specialists; we have a range of specialists who focus on fiscal stimulus initiatives around the world, unpicking major projects and matching them up with our companies. We have R&D specialists whose task it is to understand the best of the UK’s R&D offer and match that with the interests of prospective inward investors. The international trade advisers, our frontline staff in the English regions, are primarily from the private sector. About one fifth of our staff are UK diplomats based overseas for a posting, and the remainder of our staff are locally engaged and many of them have private sector experience. In headquarters, a number of us have had private sector experience. I do not have an exact figure for you, but it is quite a significant proportion of our staff, so I really do not think it is a culture shift.
Q33 Chair: Can you explain to me the mechanics of the system and how it works? Do foreign companies approach you to say they want to come to the UK, or do Scottish Enterprise, SDI and RDAs approach you to say they want to attract foreign companies? What is the balance of how it works?
Susan Haird: Let me explain how it works. We have staff in 96 markets around the world. Not all of those are active inward investment markets. We have inward investment resources in some 30 markets around the world. Typically, in major markets overseas some of the RDAs and devolved Administrations will also have people overseas. We work together as a team and there is a protocol that governs it. There is something called the International Business Development Forum which brings together UKTI, the devolved Administrations and the regional development agencies. We work out a modus operandi. I am sure you agree the most important thing is that the UK wins the business. So the first goal for all of us is to try to get business into the UK.
Q34 Chair: But how do you avoid different parts of the UK competing to offer the biggest subsidy, thus cutting each other’s throats?
Susan Haird: I have heard a colleague describe it as inviting the RDAs and devolved Administrations to set out their wares on a cheeseboard and try to attract the inward investor that way: in other words, slightly different specialities. In terms of how it works and how we build a pipeline, my staff round the world and the staff of the devolved Administrations and the regional development agencies will work together to target prospective inward investors. There are various ways in which we can do that. We look at companies in a market, for example a particular region of the US. Which are the up and coming companies? Who is showing signs of rapid growth? Who do we know or think might be interested in investing overseas? We would talk to them. We, SDI, the RDAs and other devolved Administrations will all be targeting companies but in a co-ordinated way. Having got a lead, as we call it, which might have come from one of my staff or the SDI, it goes on to a computer system which in most cases is accessible by all the regions and devolved Administrations. They then pick the ones they think are most likely to want to come to their region. That will depend on things like clusters and areas of comparative advantage. They will then make propositions. So for a particular inward investment prospect we might have, say, three propositions from different regions. There is some competition, and I do not think that is a bad thing. The important thing is to get the investor into the UK and to give them a choice that maximises the chance of the investor coming to the UK as opposed to another country.
Q35 Chair: Do you get into situations where competitive bidding goes on in that each of the RDAs and the SDI compete against each other to offer more money?
Susan Haird: Often there is not money on offer and other things that matter more. It is often to do with the local industrial geography, if I may put it that way. Is it a good place for a life sciences company? Is there a cluster? Is there a good university to partner with? What kind of site is available? What is the access to skilled labour?
Q36 Chair: Referring to the protocols, is all of this open and above board?
Susan Haird: It is all open.
Q37 Cathy Jamieson: I return to the paper to pick up two points in which I am interested, and then perhaps I will deal with a general point. On page 3, you talk about 800 complimentary business class tickets which were offered via a BA and UKTI initiative of which Scottish companies took up only 386. On page 7, you refer to this year, when BA has again made available a further number of discounted tickets and you have been closely liaising with SDI about that offer. Does the fact that only half the tickets were used first time around mean it was not a good scheme? Was it not what business needed? Was it poorly advertised? What is happening currently with the scheme?
Susan Haird: It is difficult to say why the take-up was variable across the UK. As far as we were concerned the tickets were allocated pro rata.
Q38 Cathy Jamieson: Did Scotland take up a lesser percentage than other regions?
Susan Haird: Yes, it did. It was for SDI to advertise. One suggestion that has been made is that BA does not fly long haul from as many Scottish destinations.
Q39 Cathy Jamieson: If people want to find excuses, I am sure they will.
Susan Haird: Exactly; they could have come down on the shuttle. Having identified that there was a problem last time, there will be more outreach to encourage companies to take them up this year, because obviously it is a great offer.
Q40 Cathy Jamieson: Is there any indication at the moment about the uptake so far?
Susan Haird: No; it is early days.
Q41 Cathy Jamieson: In a similar vein, on page 7, there is reference to the Export Communications Review programme in 2009-10, where there was no take-up by Scottish companies. Was that a surprise? Why did that happen? What is the learning from that?
Susan Haird: It was a surprise, but let me emphasise that we are not a product-driven organisation. What we and I believe SDI also try to do is tailor-make a package of support for an individual company that is appropriate to its needs. We do not really want companies to come to us saying they produce X; we would much rather have a strategic discussion with them and work out what is necessary.
Q42 Cathy Jamieson: I am sorry to interrupt you, but the paper talks about the programme providing companies with advice on language and cultural issues to help them develop an effective communications strategy. If we are talking about Scottish companies that look to a global market-that is exactly the kind of thing that some companies in my own area would need-why have people not accessed it? Is it because they do not know about it or it is too complicated? What are the reasons? What assessment has been made of why there is no take-up by Scottish companies?
Susan Haird: The assessment that has been made is that there is a need for greater outreach to try to encourage companies to take it up.
Q43 Cathy Jamieson: So, if a company in my constituency, for example, wanted to know about how to access that particular fund, who would it go to?
Susan Haird: My advice would be to talk to their frontline member of staff from the SDI organisation around Scotland as part of a package because, on its own, it will not be enough. They need strategic advice to discuss which markets to go to.
Q44 Cathy Jamieson: With respect, in the past two weeks I have visited two very successful local companies with a global market that have developed products; they have got on and done it. The guys who run the companies have come up literally from the shop floor. They have done all that bit; they know their business. What they say they need is added value. From what I hear at the moment, I cannot get a handle on what added value UKTI provides over and above what SCDI and SDI provide.
Susan Haird: We have the overseas network of staff in 96 markets, so through SDI working with us Scottish companies can access all that in-depth knowledge on the ground. If they want to go to a market like Australia, they can commission some work from us; we can do market research; we can arrange a visit programme for them. Working with their adviser in Scotland, they could access trade missions that we might be running to Australia, which SDI itself might not be running. They could access our stands at exhibitions overseas, for example. We offer a wider range of services because they are UK-wide. What SDI offers in Scotland is very heavily focused on face-to-face advice to start companies off, and then they can signpost to a whole range of our services.
Q45 Cathy Jamieson: Maybe you do not have the answer to this question. If those services are there but it appears from the paper you have given us that in Scotland companies do not access those services for one reason or another-we do not quite know why-that would be of concern to me. Again going through the paper, if we look at all the different organisations involved, UKTI, SCDI, SDI, IBDF, Scottish Enterprise in its various guises and local authority economic development units, are there too many people involved in doing this? Is there an industry in there that could be streamlined and some of that money released back to the frontline to create jobs?
Susan Haird: The International Business Development Forum is simply a body that meets; it is not another organisation. Governments over the years have taken decisions that set up SDI and the RDAs, which are going, so there is one layer coming out of the equation. We try to deliver an efficient service working together and not duplicating. Perhaps I might return to the issue of participation. The Export Communications Review is not a particularly big scheme, so I would not want to dwell on it too much. Perhaps I may just give a few figures.
Q46 Cathy Jamieson: With respect, you have highlighted it in the paper, which is why I ask.
Susan Haird: I know, because I wanted to be very open. Some 8% of those participating in inward missions were Scottish; 7.5% of companies going on outward missions were Scottish; 7.4% of companies attending UKTI events overseas were Scottish; and 5.3% of companies attending events in the UK were Scottish.
Q47 Jim McGovern: Is that a low percentage?
Susan Haird: No; it is roughly in proportion to Scotland’s share of GDP.
Q48 Jim McGovern: 7%?
Susan Haird: 7% to 8% is GDP; inwards missions, 8.3%; missions overseas, 7.5%; events overseas, 7.4%; and attending UKTI events in the UK, 5.3%. The latter figure is a little low, but it does not surprise me because SDI would be doing a lot of its own events in Scotland. Overall, the take-up of UKTI services by Scottish firms is good and is what I would expect.
Q49 Jim McGovern: Are those figures in the submission you have made to the Committee?
Susan Haird: No, they are not.
Q50 Jim McGovern: Can we have them, and the comparison you make with GDP?
Susan Haird: Yes, of course; I would be happy to do that.
Q51 Chair: Is GDP a valid comparison as compared with, say, population share?
Susan Haird: The population share would be less.
Chair: It would be about 9%.
Q52 Cathy Jamieson: It would be between 9% and 10%.
Susan Haird: Yes; it is broadly similar.
Q53 Chair: The population share is about 1.5% higher.
Susan Haird: Yes. You could use a number of different measures. You could use the number of companies.
Q54 Chair: Do you know why share of GDP was chosen?
Susan Haird: It was simply the one I picked, but nobody gave me a choice. Please do not think I picked the one that put us in the best light. I just decided to use GDP; it seemed to me to be fair.
Q55 Chair: What was the reasoning for that?
Susan Haird: I think GDP is a fair comparison. One can use lots and lots of different measures. I do not think population is a very good measure because you would then have to weight it for the number of working age and it becomes very complicated. If you took the number of companies you would need to start doing some pretty complex weighting about size and so on. GDP seemed to me to be the fairest.
Q56 Chair: In your calculation, how have you allocated a company that operates, say, throughout the UK or in two different parts of it?
Susan Haird: What I have allocated is where the company is based in terms of how we have counted it. It will have been done by the address of the part of the company that took up the scheme. It is probably not a very exact science. Again, there are lots and lots of permutations.
Chair: Does anybody else want to put a final question? We very much appreciate your staying on. I am sorry you had an hour-long wait, but thank you very much for coming.