Friday 6 April 2018

Response to consultation on a new enterprise agency for the South of Scotland

1 Do you agree with our ambition outlined?


2 What would you like to see for the South of Scotland?

Locally owned businesses, rather than inward investment. The current problems at Pinney's just reprise the history of firms like Stelrads; investors from outside the region are attracted in with generous grants, stay for the good times, and pull out suddenly when times are tough. That isn't what we need.

What we need is to develop and grow a vibrant entrepreneurial culture locally. That means training in entrepreneurship, mentoring networks, and, ideally, if they can be found, local angels. It also means facilitating local business and tech meetups.

I'd personally like to see more high skill high wage businesses, like software and engineering, and less emphasis on low wage, insecure businesses like hospitality and tourism. As agriculture adapts to a low carbon economy, there are huge opportunities for disruptive new engineering products.

3 What are your ambitions for the future economic success of the South of Scotland?

Innovative engineering, especially around reducing fossil fuel use in agriculture and forestry.

A broad entrepreneurial culture, with school leavers and university graduates equipped with the skills and confidence to start their own businesses; supported by
  1. a mentoring network.
  2. A local angels/venture capital network, and a local business focussed bank after the German model.
  3. The ability to develop businesses where people want them, not where it's convenient to central planning.
In particular we need employment in villages, and employment flexible enough for people supplementing reduced agricultural incomes.

4 What are the strengths you would like to see the Agency build on?

As outlined, we're a dispersed region with significant opportunities in renewable energy, a highly educated workforce, and, in places, considerable self reliance.We also have land, although it is concentrated in few hands. Land-based businesses over the 20th century became heavily dependent on fossil fuels and that now has to change rapidly. That's a challenge, but it's also an opportunity. Southern Scotland has a history of agricultural innovation - for example, the milking machine was invented in Castle Douglas. We can respond to this challenge.

We lack confidence, finance, and entrepreneurial skills. We need to make up these deficits, and that's something an agency would be well placed to do. We also, relative to urban areas, lack informal opportunities for entrepreneurs to network, and that also needs to be addressed,

A local business bank would be a great asset, either as a strictly commercial business or as a mutual.

5 What are the economic challenges you would like to see the Agency address?

  1. Infrastructure, especially communications.
  2. Finance.
  3. Entrepreneurship training and mentoring.Research and development support.
  4. Networking, meetups, matchmaking.
  5. There is a problem with affordable housing for young people. If people are borrowed up to the hilt for housing, or paying a burdensome rent, the amount of risk they can afford to take on in business is sharply limited.
  6. Universal Basic Income would considerably de-risk business startup.

6 What currently works well in the South of Scotland?

Not a lot.

7 What would you add or take away from the potential activities that the Agency could carry out across the three areas:
a) drive forward the economy?:

While opportunities are great, we need to be aware of risks and challenges. Scottish agriculture is not equipped to compete at world market prices, and Brexit will mean widespread farm bankruptcies across the region with consequential bankruptcies among farm supply businesses and more widely.

The challenge for the rural economy over the next decade is to maintain people in their homes in the face of rapid change and stress. Challenges are opportunities, and there are considerable opportunities in the current situation. But we need to be clear that the requirement, before seeking to drive the economy forward, is to prevent its utter collapse.

b) sustain communities?:

The costs and models of rural transport are going to change considerably over the next decade, and the prospects are not easy to predict. Because the rural economy is relatively depressed and electric vehicles are new and expensive, it's unlikely that they will naturally propagate into the rural economy first; rather, they're likely to be in the towns.

There's a related issue that most remote rural areas have great opportunities for renewable electricity generation, but lack the grid connections to carry that power away. If it could be used locally to power transport and farm machinery, that's a triple benefit to the rural economy.

If we expand electric vehicle use rapidly and early in remote rural areas, that will cut the costs of rural transport very substantially, leading to much more sustainable communities; driverless, on demand electric taxis following the Google/Waymo model could have a very positive impact.

But without government intervention and considerable subsidy, neither will happen. The richer, urban economy will soak up these new products first, and remote rurals will get them only when that market becomes saturated. Instead it's likely that private rural transport will tend to depend largely on second hand diesel vehicles, because they're cheap to buy and reliable; but they will increasingly be more expensive to run. This further disadvantages rural areas with respect to urban.

Without affordable transport and access to affordable housing and land, the pattern of a populated landscape and vibrant village communities will be very hard to sustain.

c) capitalise on people and resources?:

We don't educate nearly enough in entrepreneurship or in civics. Young people leave education expecting to get a job, not start a business. They lack the skills and they lack the mentoring network.

A related problem is that most of our young people go away to distant universities, and, because of the cost of housing and the few opportunities for employment, few come back. Of those of my generation from Auchencairn who went to university and did not inherit farms, only two - myself and one other - came back.

Full disclosure, I started my first business in Auchencairn at the age of 21; it was a steep learning curve, but was supported by good mentoring from Scottish Enterprise for which I'm still grateful.

So: we need better education in entrepreneurship at all levels, a wide network of good, easily accessible mentoring, and affordable housing and business premises. The second and third of these are things the new agency can contribute greatly to.

With regard to resources, our primary resource after people is land and landscape. Landscape, as a marketable asset, derives from cultural aesthetics which are inevitably somewhat backward looking; people like to see (and to live in) a settled, patchwork landscape of mixed farming, woodlands and hills. They like to see in that landscape a broad diversity of wild flowers, birds, and other wildlife.

This is not from an agricultural point of the most efficient landscape. As pressure grows on farmers, we will see less employment, less varied agriculture, a less settled and less diverse landscape. Beef, lamb and cereal production will cease to be economic as we open up to world markets, increasing the reliance on dairy, and, probably, on cows kept indoors and fed silage.

If we are to protect a settled landscape, we need ways to subsidise small farms. I believe that moving from a per-hectare model of agricultural subsidy to a welfare model - preferably a universal basic income model - together with opportunities for part-time employment, would encourage a settled, more diverse landscape, which would in turn bring benefits to tourism.

8 What would you prioritise as the key areas of activity for the Agency?

  1. Building mentoring networks.Facilitating meetups/informal business networking.
  2. Encouraging entrepreneurship education, including on-going education for existing business owners.
  3. Providing/gatekeeping access to local angels.
  4. Encouraging the establishment of a regional business-oriented bank.
Politicians like inward investment because it provides sudden, relatively large job creation which they can take credit for. This is a snare and a delusion. As the south of Scotland has seen repeatedly over the past century, inward investors become outward divestors at the first sign of trouble. The agency should NOT support inward investment.

9 What specific things could the Agency do to help you, your business, your sector or your community?

  1. My business? Better broadband; business networking.
  2. My sector? Better broadband; business networking.
  3. My community? Affordable housing. The average income is about £21,000, the minimum house price is about £200,000, the two don't meet.

10 What could the Agency do outwith its boundaries working with other local authorities or with agencies like Highlands and Islands Enterprise to support specific projects which benefit the South of Scotland and with national agencies?

East to west travel across southern Scotland is not facilitated by either the road or rail network, and consequently there is not much communication between Dumfries and Galloway in the west, and the Borders in the east; rather, Galloway tends to face Ayrshire and Glasgow, where the Borders tend to face the Lothians and Edinburgh. It does not therefore seem to me that, despite the similar challenges, it will be easy for one agency to service all these regions.

In particular an agency headquartered in the Borders will find it hard to service Galloway, while one based in Dumfries will find it hard to service Berwickshire; sadly, one based in Langholm would find it hard to service anywhere at all.

In Scotland we over-centralise everything; Dumfries and Galloway, considered as a unit, is larger both in area and in population than one sixth of the independent nations of the world. On average across Europe, local government units are one twentieth the size they are in Scotland. I do not believe this can continue; I believe the democratic deficit must mean that we will soon see the break up of these monstrous local government divisions.

Nevertheless, there is a clear geographic divide running to the east of Moffat and Langholm, Without major new roads infrastructure, despite the similarities in economic challenge, it is not useful to see the whole of southern Scotland as one unit. While I think Dumfries and Galloway council is an oversized and anti-democratic anachronism, an economic development agency for the south-west would make sense.

11 Which option, either from the list above or your own suggestion, do you think offers the best way to ensure the Agency is accessible to all across the South of Scotland?

Of the options listed I would go with the first: 'the Agency could have minimal physical presence with its services delivered digitally across the area', supplemented by local, probably part time, networking and mentoring staff dispersed across the region.

There is no location which could reasonably serve as a 'headquarters' for the whole of southern Scotland, because there is effectively no transport infrastructure between east and west.

12 Which criteria should be used in reaching a decision about the location of the Agency?

Don't locate it. That is a snare and a delusion. A centre in Dumfries could service the southwest, but not the Borders. One in the Selkirk/Melrose area could service the Borders, but not the southwest.

Obviously in my personal interest it would be better in Dumfries than in Melrose, but that's exactly the point; getting bogged down in squabbles about location doesn't help, and whichever location were chosen, unless the Scottish Government is prepared to invest in a Stranraer to Melrose motorway, the side of the country not chosen will feel discriminated against.

Board meetings and other central functions should rotate across the whole area, rather than being centrally located; staff should be dispersed.

13 If you were to use the services of this Agency, what factors are important to you in terms of reaching it?

Digital delivery is still problematic across much of rural Scotland: broadband speeds are laughably poor - I'm currently seeing 0.9 Mbits/sec download and 0.3 upload, and I run an Internet business!

Without better broadband performance digital delivery alone will not service remote rural areas.
So until we have the broadband we've been promised for the past twenty years, the agency would need to work on an 'account manager' model, with dispersed, locally based, probably part-time account managers regularly visiting their client businesses, probably as part of a mentoring/support scheme.

14 What sort of people should be on the Board of the Agency and what sorts of skills and expertise should they have?

A board widely drawn from experienced local business people - not politicians nor career public servants.

15 We know that young people are less likely to stay in or move to the South of Scotland than they are other parts of the country. Do you have any comments on things the Agency could do to meet the interests of children and young people?

We need homes for them to come back to after university, and opportunities to create their own employment in the form of flexible, low-commitment business premises. Ideally we need either universal basic income or an enhanced enterprise allowance to de-risk at least the initial three years.

We need opportunities for part time employment so that people not able to make a sufficient income from a nascent business can supplement it.

But most of all we need housing. And the housing we need has to be affordable in perpetuity, so either we need sufficient council housing of sufficient quality to be both available and attractive to potential entrepreneurs, or else we need to make the Rural Housing Burden actually work.

19 Do you have any other thoughts on powers that the Agency will need?

There will be a great deal of pressure for the agency to intervene in situations like Pinney's. Pinney's is a tragedy, but it's one that is an inevitable consequence of businesses being owned from outwith the region, and of Brexit. We will see more instances of this over the coming years, and they could easily soak up all the resources of the proposed agency for years to come.

Furthermore, paying bribes to businesses based furth of Scotland to keep open businesses in Scotland, even if it preserves employment in Scotland, is poor use of Scottish government money.

The agency needs to have the independence to be able to resist political pressure to intervene in saving failing businesses. This isn't to say that the agency might not back a management buy-out, or some other scheme which brought ownership of a facility back into the region, provided that the facility was viable as a business or could reasonably be expected to be brought into a condition in which it was.

I don't think the agency should have the power to invest directly in businesses; I think that it should seek to encourage and support a network of angels, or a local venture capital group, and a regional commercial bank.

20 Is there anything else you wish to say about the operation of the Agency?

Keep it lightweight, keep it dispersed, don't spend money on fancy headquarters of large central staff.

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