SME POLICY FORUM

SCOTLAND’S EXPERIENCE

Professor David Deakins

Massey University

Contents

• Key demographics

• Policy issues

• Enterprise policy in Scotland

• Ethnic minority enterprise as a case example

• Recent policy

• Conclusions

Key Demographics

Population: 5.06 m. 2001 Census, 5.41 m. 2009

Age Structure

Area: 78,772 km2 Population density 64 per km2

Age Structure

Geographical Distribution

Population density by area (Persons per km2)

Source: GROS 2006 locality estimates.

Ethnicity

All people

White Indian Pakistani & other S. Asian

Chinese

Other

5062011 4960334

15037 39970 16310 30360

100% 97.99% 0.30% 0.79% 0.32% 0.60%

Source: Scottish Census GROS (www.scrol.gov.uk)

Key Economic Data

Birth rate 10.7 per 000

Death rate 11.0 per 000

Net migration rate + 4.1 per 000

Population growth rate 0.4%

Life expectancy M 74.2; F 79.3

GVA per head £19,152 (2007 est.)

Average gross weekly wage

£461.8 (2008)

Top exports Food/drink/chemicals/wholesale/retail/tourism/bus services/manf.

Destination for exports EU/North America

No of businesses (2008)

154,840 registered282,330 est. total

Size Distribution of Enterprises (2008)

Size Number Total Scottish

Employment

Turnover £m

0-49 employees

276,325 780,510 £63.1

50 to 249 employees

3,600 254, 930 £27.9

250 or more employees

2,405 1,506,310 £152,334

Source: Scottish Government, ONS (IDBR)

Policy Issues: Two Agencies

1. Scottish Enterprise (SE): regional development agency covering Central Belt and South of Scotland

2. Highlands and Islands Enterprise (HIE)

Scotland’s Enterprise Support Agencies

Scottish Enterprise

Highlands and Islands Enterprise

Policy Issues

• Low Business Birth Rate or entrepreneurial activity rates compared to rest of UK (c. 50% of rates in London, GEM 2008 TEA for Scotland = 4.5, compared to 5.6 for UK)

Business Birth Rates UK Regions (2006)

Source: Scottish Enterprise, BIS

VAT registrations per 10,000 adults, 2006

0

10

20

30

40

50

60London

S E

ast

East

S W

est

E M

idla

nds

W M

idla

nds

N I

rela

nd

N W

est

York

s/H

um

ber

Scotland

Wale

s

Nort

h E

ast

UK

Policy Issues

• Low Business Birth Rate or entrepreneurial activity rates compared to rest of UK (c. 50% of rates in London, GEM 2008 TEA for Scotland = 4.5, compared to 5.6 for UK)

• Reliance on traditional, but declining manufacturing sectors, particularly in the Central Belt

• Declining natural resources; e.g., North Sea oil and gas

• World class scientific research centres, but historically low rates of commercial spin-outs

• Rural enterprise: large rural areas in Highlands and Islands and in the South of Scotland

Scotland’s Economic Performance

Low growth economy

“For over 30 years, Scotland has suffered because our economy has been locked into a low growth economy”Government Economic Strategy (2009), Scottish Government

“From 1975 to 2005, Scotland’s annual average growth in GDP was 1.8%, compared to a UK average of 2.3% over the same period”. Innovation for Scotland Report (2009), Scottish Government

Enterprise Policy in Scotland

The Business Birth Rate Strategy (SE) 1993-2003

Volume v targeted support (HIE v SE)

Business networks (SE and HIE): Entrepreneurial ExchangeLINC Scotland

Commercialisation Strategy (SE) 1995 ---

Women’s Enterprise (SE and HIE): National Unit for Women’s Enterprise 2005--

Enterprise Education programme: Determined to Succeed

Ethnic Minority Enterprise as a Case Example

• Scottish Government commissioned national scoping study 2005

• Methodology

• Demographics guided research

• Map MEBs geographical and sectoral distribution in Scotland compared to a white control group

Self-Employment Rates for all Scotland (Per Cent)

0 5 1 0 1 5 2 0 2 5 3 0

A l l

P a k is ta n i

C h in e s e

In d ia n

B a n g la d e s h i

C a r ib b e a n

A fr ic a n

Source: 2001 Census Analysis: General Register Office for Scotland

Self-Employment Rates for Glasgow (Per Cent)

0 5 10 15 20 25

All

African

Bangladeshi

Caribbean

Chinese

Indian

Pakistani

Source: 2001 Census Analysis: General Register Office for Scotland

Self-Employment Rates for Edinburgh (Per Cent)

0 5 10 15 20 25 30 35

All

African

Caribbean

Bangladeshi

Chinese

Indian

Pakistani

Source: 2001 Census Analysis: General Register Office for Scotland

Self-Employment Rates for Highland Scotland including Western Isles and Orkney & Shetland (Per Cent)

0 5 10 15 20 25 30 35

All

African

Bangladeshi

Caribbean

Chinese

Indian

Pakistani

Source: 2001 Census Analysis: General Register Office for Scotland

Selected Key Findings

• Strength and diversity of ethnic minority enterprise in Scotland –, 4,500 businesses contributed upwards £1 billion to GDP

• Concentration by sector and location but key contribution outside cities in Central Belt and rural areas

• Innovation and resourcefulness of MEB owners

• Diversity a source of creativity and innovation

Selected Key Findings

• Low access to formal sources of finance

• Lack of trusted intermediaries between banks and MEB communities

• Lack of engagement with formal mainstream sources of advice and support and a low take-up of training. This includes:

-----------lack of awareness-----------strategies to avoid engagement

• Requires strategies to build trust

Policy Response

• SE and HIE Strategy to engage with ethnic minority businesses

-----engage with communities------support for access to finance------ethnic media and communication

• Scottish Institute for Minority Enterprise –owned and driven by ethnic minority business owners

Recent Policy

• Removing barriers

• Scottish Co-investment Fund• Scottish Seed Fund• Scottish Venture Fund

• Supporting Innovation (R&D Grants, Innovation Vouchers)

• Innovation Strategy, June 2009

Supporting Growth Firms

• Standard business support through Business Gateway (now devolved from Scottish Enterprise to the local authorities/councils)

• Targeted support for ‘growth firms’ by SE (but less so by HIE due to rural environment)

SE criteria (2009) : - £5m valuation by end of year 3,

- commitment to trade globally, - passion to succeed

Conclusions

• SMEs have raised awareness of enterprise agencies, but still dependent on support delivered now by local councils

• Finance initiatives have been more successful, especially local micro-credit, LINC Scotland and Co-investment Fund

• Gaps still exist: KT in rural areas/ethnic minority support

• Frequent changes in policy –lack of consistency

• Disparities in support, funding and investment