Manufacturing Scotland

There will have been many a wry smile at the squirming antics of North Sea oil and gas companies over the imposition of an additional oil tax by Chancellor Osborne.  Notoriously sensitive to tax demands it might have been supposed there was more hot air surrounding threats to pull out of Scottish waters* but Norway’s Statoil has stalled its £3billion development and other projects are thought to be on hold.

*Scottish waters have been a moveable feast.  On the eve of the reconstituted Scottish government in Edinburgh in 1999 the Blair Labour government altered the area of waters designated as Scottish – naturally transferring 6000 square miles into English jurisdiction with all that meant in  terms of rights of fishing, oil, gas and mineral resources.  It’s strange really given the unvarying cry from London that the hydrocarbon industry was at an end – an echo going back 30 years.

Despite being a major player in the UK economy it’s an industry much maligned in UK terms and little recognised to a surprising extent.  Look up the UK economy in Wikipedia and peruse the list of UK industries under GDP.  They appear in no particular order but are headed by aerospace – why?  Look further into the page and you see this industry has an annual turnover of some £20 billion.  Searching harder on the GDP list and you might just spot the UK’s biggest but apparently secret contributor to GDP – energy and utilities – I’m assuming this is oil and gas.  This sector is dismissed in two lines in the main text despite its value amounting to hundreds of £billions to the UK economy, £250 billion in 2007.

It is clear that the UK treasury has benefitted an enormous amount over the past four decades from our offshore industries as have Aberdeen and Aberdeenshire where employment is high and so too house and land prices. The industry was instrumental in encouraging former offshore workers set up their own companies which far from being confined to the north-east, operate globally.

While there will be few tears shed over multinationals having to cough up more taxes the hundreds of offshoot businesses operating in their wake are dependent on the bigger companies for contracts. Very few will be following the appalling example of Sir Ian Wood’s £multi-million Wood Group looking to set up its HQ in some tax haven to avoid paying taxes.  (See article by Ian Forsyth in The Press & Journal 28/3/2011

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As the article says – such behaviour is adding to the £25 billion lost annually to the public purse by the rich, greedy and reprehensible.

Throughout the 20th C Scotland has seen its heavy industries decline – from ship building on the Clyde  to smelting at Invergordon; from mining to fishing; from car production to oil rig fabrication. Our only big industry left currently is oil and gas. Whisky is important and tourism as well but they do not create the jobs we need to satisfy the growing numbers of unemployed. The success that was Dundee’s computer games industry has fallen victim to the chronic lack of investment that is stalling businesses across Scotland.

Where exactly is Scotland going to go in terms of jobs, therefore taxation, therefore funding for our social services, pensions and infrastructure?

Renewables are surely one way forward – with figures of 30 000 jobs in wind power being talked about – but companies require financial backing and already we’ve seen several go to the wall for lack of cash while in the developmental stage.  On top of this we have the outrageous absurdity of our potential for creating a rich mix of renewable – turbines, offshore wind, wave and tidal producing energy being scuppered by iniquitous regulations which apply costs to Scottish generators of electricity to the national grid while subsidising English generators.

On top of the penalty-system Scottish renewable energy producers must contend with there is the matter of Scotland’s shifting the waterline. In 1999 in a blatant attack on the Scottish economy, the Labour government under Blair, transferred 6000 square miles of sea off our coasts to English and Northern Irish jurisdiction, with all its oil and gas, fish and minerals. (The Scottish Adjacent Waters Boundaries 1999) See

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In a similar vein, I have never fully understood why Scottish hydro-electric is cheaper in the south of England than it is to consumers here in Scotland.

The Scottish Loan Fund, part of the Scottish Investment Bank, is the Scottish government’s answer to the need for private business financing but £94 million does not sound like a great sum of cash to construct an economy on.  As the spending cuts bite further into the fabric of Scottish society creating greater unemployment and as the public sector, currently providing 1 in 3 jobs, inevitably contracts under this pressure then there is going to be more need for smaller companies to offer work at a time when establishing businesses could not be harder. But is the SLF the answer Scotland needs? Isn’t it targeting established companies? Scottish Enterprise has various funds, including the Scottish Seed Fund designed to help new businesses but again funding amounts seem quite small.

There is another source of funding, Investment Angels.  Apparently Scotland is one of the best places to find these private individuals and investment companies looking for sure-fire returns for their money. Perhaps that should not be surprising given Scotland’s record of enterprising and inventive individuals. But this is a finite resource and it is hard to see how this type of support can underpin the rebuilding of Scotland’s economy.

There are voices in the financial world who maintain that despite the Icarus nature of our banks that  is precisely where our expertise lies and the potential to export our financial skills to developing economies across the world is one which should be grasped and quickly.  Whether or not the new economies will be happy to take on board the personnel instrumental in high profile mismanagement of our banking system is untested. It is true that there are many strands to the finance industry and perhaps there is some merit to this idea but I can only believe it will be marginal.

Scotland has long exported its talent. It is important to harness our skilled and imaginative people, whether natural Scots or people who have chosen to live here. We need to encourage innovation and support groups and companies in the most difficult and early stages of establishing their businesses. We have to build on our free and open educational system up through university level to attract the best talents here and ensure our young people leave school having had a quality education.  Having children leave schools innumerate and illiterate should not be happening after 12 plus years of education. There are faults in a complacent system of teacher training, over-bureaucratic education sector, confusion over what schooling should achieve.

Our young are our future and the well-being of Scotland’s economy depends on the type of entrepreneurs who have created so much wealth in the north-east over the last 40 years when hydrocarbons arrived in what were then Scotland’s waters.  But, of course, the talented youth of Scotland – and talented not so young, have to find industries within which to take on their skills. Is Scotland in a position to start the regeneration of our economy in 2011?

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