Memorandum submitted by Scottish Enterprise
1.0 INTRODUCTION
Scottish Enterprise (SE) is funded by
the Scottish Government to provide enterprise, investment and
innovation support to an area covering 93% of the population,
reaching from Grampian to the Borders.
Working in partnership with Scottish business and
the public sector, we aim to support the sustainable growth of
the Scottish economy, contributing to the delivery of the objectives
of the recently launched Scottish Government Economic Strategy.
In recent years we have been changing our organisation
and practices to make sure we deliver the greatest possible economic
impact for Scotland. We have been identifying the opportunities
and working to overcome the barriers to growth in Scotland's priority
industries. More recently we have been adapting our economic development
approach and working increasingly with Scotland's research base
to respond to the specific challenges and opportunities available
to Scotland in the global economy.
Following the Scottish Government review
of the SE network which was announced in September 2007, we have
been given a very clear focus to help support business growth
and to build a better business environment. We aim to implement
our new organisational structure from 1 April 2008 in order to
deliver this as efficiently and effectively as possible.
Details of the Scottish Governments'
economic strategy is available at http://www.scotland.gov.uk/Publications/2007/11/12115041/0
Details of the Scottish Government's
review is available at http://www.scotland.gov.uk/Publications/2007/11/12115041/0
2.0 QUESTION
AREAS
The strategic context and background
to the work of SE over the last period is defined in two documents—Smart
Successful Scotland and the recently published Scottish Government's
Economic Strategy[184].
It is not intended that this response should re-articulate these
documents but in providing this submission highlight elements
that we see as being distinctive.
2.1 How UK business compares internationally
in areas such as research and development, creativity and design
The value of business enterprise research and development
(BERD) undertaken in Scotland in 2005 was £584 million, 4.4%
of the UK total and 0.59% of Scottish GDP.
Expenditure increased from £494 million in the
previous year (a 16% increase in real terms). This is the highest
level of Scottish BERD in cash terms since 1999, however in real
terms it is just below the levels seen in 2001 and 2002. R&D
expenditure in Scotland has increased by 29% in real terms in
the six year period between 1999 and 2005, compared to a real
terms increase of 3% in the UK. Almost two thirds of Scottish
BERD supported just three product groups: "pharmaceuticals"
(40%); "precision instruments" (17%) and "radio,
TV and communications equipment" (9%). Business R&D provided
employment for 7,400 people in 2005.
In 2005 BERD expenditure was equivalent
to 0.59% of GDP in Scotland compared to 1.08% of GDP in the UK.
BERD expenditure as a percentage of GDP is lower in Scotland than
in most important competitor countries. In 2005 EU expenditure
as a percentage of GDP was almost twice as high as that in Scotland
(1.12%). The leading countries in terms of business R&D have
expenditure levels more than four times higher than Scotland (eg
2.92% of GDP in Sweden).
Within the UK, the bulk of business R&D
expenditure takes place within the East of England (25%) and South
East (24%) regions. In terms of expenditure as a percentage of
GDP, Scotland ranked 7th out of the 12 UK regions in 2005.
The level of business expenditure on
R&D (BERD) has been an area of focus for the Scottish Government
and SE. This has led to a great deal of activity to address current
levels both at the firm and at the innovation system.[185]
To assist this activity, a pipeline of support, covering different
aspects of research and development has been developed as illustrated
below.
Notable interventions in this area have
been:
— R&D Plus: The UKs first
scheme to encourage larger business to carry out R&D.[186]
— ITI Scotland. A unique approach
to creating market focused R&D in three specific areas—Energy,
Life Science and Tech Media.[187]
— The Proof of Concept Programme
which aims to improve the level and quality of commercialisation
in Scotland in order to ensure the longer-term development of
a strong, knowledge-based economy. Overall £79 million has
been committed to the Programme over 12 years. So far the Programme
has supported 184 projects and committed funding of £30 million.[188]
2.2 The extent to which UK business
has absorbed new business practices such as lean manufacturing
SE has supported this type of activity
for a number of years. Our current "business improvement"
activities include the Scottish Manufacturing Advisory Service,
Lean Management, Environmental Management Initiative and ICT/e-business
support. The focus of ICT is its role in business efficiency,
productivity and innovation (particularly within the service sector).
A recent survey has suggested that although the take-up of broadband
has been extensive, more sophisticated use of ICT technology (eg
business process integration) is limited to particular sectors
eg Financial Services. There also remains room for improvement
in others eg Food and Drink and Tourism (Scottish E-Business Survey
2007 will be published in January 2008).
Environmental Management activity has seen a growth
in demand in recent years, driven mainly by increased energy and
waste management costs. In essence businesses now see this as
a business efficiency/cost saving agenda rather than an environmental
argument, hence the increased uptake. The Scottish Manufacturing
Advisory Service and Lean Management have similarly been driven
by global competition in this sector from Eastern Europe and Asia.
SE has provided these services for two years and whilst take up
has been positive, activity needs to continue to ensure competitiveness
of UK businesses.
2.3 The progress that has been made
on university/business co-operation and knowledge transfer since
the publication of the Lambert Review in December 2003
The Scottish Government has developed
a significant range of support for knowledge transfer provides
funding for several programmes designed to increase university/business
co-operation:
— The Scottish Funding Council's
Knowledge Transfer Grant (increased to £19 million in 2007-08)
which is allocated by formula to higher education institutions
to support knowledge transfer activities including commercialisation
of research.[189]
— The SEEKIT programme is designed
to support projects that will promote co-operation in R&D
and knowledge transfer between small to medium sized enterprises
(SMEs) and the Scottish public sector science base. Projects are
supported within public bodies, such as Universities, Research
Institutes, Technology Transfer Organisations, NHS Trusts etc.
The scheme supports a wide range of knowledge transfer/outreach
activities.[190]
— The SCORE programme is a grant
designed to support R&D projects jointly undertaken between
public sector research bodies (such as Higher Education Institutes
(HEIs), Research Institutes, NHS Trusts) and Scottish SMEs. Under
this scheme, an SME or group of SMEs with a specific technical
problem or need can assign a significant part of the required
scientific and technological research to a public sector research
body[191].
— We have supported the development
of a single point of access, "Interface" which is helping
businesses, particularly SMEs, to gain easier access to Scotland's
science base to help improve technology transfer[192].
2.4 Whether business and government
interpret innovation too narrowly
The new Government Economic Strategy
recognizes that the linear model, Science and Technology-dominated
approach is too narrow and specifically mentions the need to look
at the service sector and non-technological innovation. The Community
Innovation Survey results show that Scottish businesses are relatively
strong in UK terms in the areas of radical (Schumpeterian) product
and process innovation but weak in areas such as corporate strategy
and marketing innovation which may stem from too narrow an interpretation.
2.5 What the government can do to further
promote higher value-added business activities and innovative
thinking among UK businesses
SE has taken a more focused approach to working with
the business community by targeting its efforts at businesses
with the potential for growth (measured by sales growth) and across
priority industries.
To support this process, we operate an "Account
Management" approach of working directly with these potential
"higher value-added" businesses, allocating a dedicated
account manager and offering a range of potential supports. Interventions
are focussed on growth related activities including strategy development,
innovation and business efficiency and internationalisation activities.
We also take an industry view of working
with higher value-added businesses. Whereas the account management
approach provides the 1:1 activity with companies, taking an industry
approach allows support and promotion of activities across industries,
including specialist advice, infrastructure or financial supports.
This is delivered through dedicated industry teams working in
partnership with industry groups and businesses.
3.0 CONCLUSION[193]
Scotland's economic performance continued
to improve in 2006-07. GDP and business outputs are growing. The
level of employment is in the top quartile of the OECD, with most
forecasts indicating that these trends can be sustained. Scotland
also continues to enjoy a competitive position in creativity,
and has significant natural resources to support wealth creation
as well as many internationally competitive industries.
However, we continue to have opportunities to improve
our wealth creation in the areas of business research and development,
entrepreneurial activity and in building companies of scale. It
will be through resolving these issues that we can close the productivity
gap between Scotland and the top quartile of the OECD. These are
the areas where Scottish Enterprise's strategy is specifically
directed.
SE's annual report for 2005-06, signalled
the start of important changes to the way in which we deliver
higher levels of value to our customers and the Scottish economy.
These largely centred on the tailoring of our services in response
to the demands of our key industries and in developing projects
of scale. Details of our activities and the economic impact they
made are set out in the Annual Report 2006-07[194].
A few areas that are worthy of special mention are:
— The development of the Edinburgh
BioQuarter, which is expected to generate £250 million of
investment and create 6,500 new jobs, took a major step forward
with the appointment of Alexandria Real Estate Equities, the largest
dedicated life science property specialist in North America, as
the development partner for the commercial research campus.
— The creation of this campus,
integrating the Royal Infirmary of Edinburgh, the Queen's Medical
Research Institute and the Scottish Centre for Regenerative Medicine
with 1.4 million square feet of commercial life sciences space,
will be unique in Europe, and is hugely exciting.
— Our support for growing companies
was recognised in a report by research organisation, Library House,
which named SE, with 17 investments, as the top investor in European
venture capital backed companies in the first part of 2007.
— Our R&D Plus programme
generated an additional £80.7 million of business research
and development that would not otherwise happen in Scotland with
an investment of £13.7 million in 21 projects.
— Our decision to increase investment
in our overseas sales force is also paying off with strong overall
levels of foreign direct investment into Scotland during 2006-07.
Scottish Development International secured 59 inward investment
projects worth more than £313 million and creating or safeguarding
up to 7,500 jobs. Nearly 1,800 of these were high-value jobs,
with over a third more R&D investments coming to Scotland
than the UK and European averages. According to the European Investment
Monitor, Scotland won more R&D projects than at any time over
the past six years during 2006, equalling the number won by London
and the South East for the first time.
18 December 2007
184 Government Economic Strategy http://www.scotland.gov.uk/Publications/2007/11/12115041/0 Back
185
The Scottish Innovation System: Actors, Roles and Actions Scottish
Government 23/1/06 Back
186
http://www.scottish-enterprise.com/publications/r_d_plus.pdf Back
187
http://www.itiscotland.com/ Back
188
http://www.scottish-enterprise.com/proofofconcept Back
189
http://www.sfc.ac.uk/index.htm Back
190
http://www.scotland.gov.uk/Topics/Business-Industry/support/16879/14115 Back
191
http://www.scotland.gov.uk/Topics/Business-Industry/support/16879/14127 Back
192
http://www.interface-online.org.uk/view_item.aspx?item_id=3&closed1=true Back
193
http://www.scottish-enterprise.com/publications/intro_pack.pdf Back
194
http://www.scottish-enterprise.com/publications/2006-07_annual_review.pdf Back
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