Our Borderlands - Our Future : Final Report - Scottish Affairs Contents

4  Economic development and enterprise

84. Responsibility for both economic development and enterprise in Scotland is devolved to the Scottish Government and Parliament. However, Scottish Enterprise works very closely with other Scottish and UK-wide bodies, for example, Skills Development Scotland, the CBI and United Kingdom Trade and Industry in promoting economic development and enterprise in Scotland. Our inquiry very much focused on how Scottish and UK-wide organisations can best work together to promote economic development and enterprise in the south of Scotland-where the economy is 'cross-border' in nature.

85. Scottish Borders Council identified a number of areas where the UK Government could most appropriately and effectively promote enterprise and economic development in the region: supporting the economic development work of the local authorities and partners, such as Scottish Enterprise, the South of Scotland Alliance and the Borderlands Initiative; using its powers in relation to supporting employment; promoting comprehensive mobile phone coverage; supporting major transport investment initiatives on national cross-border road routes; and through support for a NUTS 2 designation for the south of Scotland.[130] We address these issues elsewhere in the Report, but the focus of this chapter is to examine existing structures for the promotion of economic development and enterprise in the south of Scotland. We chose to address this issue specifically because in several of our informal meetings, many organisations highlighted that the restructuring of Scottish Enterprise had had a detrimental impact on enterprise in the south of Scotland.

Scottish Enterprise

86. Scottish Enterprise is a non-departmental public body of the Scottish Government. This body covers the eastern, central and southern parts of Scotland.[131] Following the 2007 elections to the Scottish Parliament, the new Scottish Government undertook a major restructuring of Scottish Enterprise. Prior to 2007, 12 Local Enterprise Companies (or LECs) had existed across Scotland: Ayrshire, Borders, Dumfries and Galloway, Dunbartonshire, Edinburgh and Lothian, Fife, Forth Valley, Glasgow, Grampian, Lanarkshire, Renfrewshire and Tayside. As a consequence of the restructuring, their functions were either centralised to Scottish Enterprise itself or transferred to local authorities.[132]

87. Scottish Enterprise has 13 offices across Scotland, two of which are in the south of Scotland. Staff in these offices, including the Director of Rural and Head of Textiles, "work across the region and beyond, to support and grow business."[133] The south of Scotland has a relatively large number of registered businesses relative to the population (7.3% of Scottish registered businesses vs. 4.9% of the population). However, these businesses are, on average, smaller in turnover terms than the average (3.1% of Scottish total for registered businesses).[134]

88. We heard from a variety of witnesses that the restructuring has had adverse consequences for enterprise in the south of Scotland. Scottish Enterprise's revised remit is to support projects that are good for the Scottish economy as a whole. While Scottish Enterprise noted that an advantage of its national approach was that staff in each region could "draw upon the full breadth of SE's services and expertise",[135] Joan McAlpine cited the view of the Scottish Local Authorities Economic Development Group that an unintended consequence of this process "has been a considerable reduction in local economic development expenditure".[136] Dumfries and Galloway Chamber of Commerce stated that:

    There is no doubt that the operations of Scottish Enterprise in the south of Scotland have lost focus on the specific rural challenges of the region. Staff have been redeployed on national projects to the detriment of developing innovative solutions for the area.[137]

89. One of the main consequences of the Scotland-wide focus of Scottish Enterprise is that the specific needs of the south of Scotland were often overlooked. David Mundell MP stated that "Scottish Enterprise isn't working for us" because core responsibilities had been stripped out of local Scottish Enterprise offices so that it no longer had a clear remit in the south of Scotland. He said that the south of Scotland was perceived as "a bit of an inconvenience."[138]

90. Peebles Community Council, Community Trust, and AIMUp (Action for the Innerleithen Mechanical Uplift), argued that there had been a failing of economic development and tourism promotion in the south of Scotland, particularly in the Scottish Borders area.[139] RSA Fellows Borders Network stated that "Scottish Enterprise's focus on national priorities and large-scale projects is deemed inappropriate to the urgent needs of sparsely populated areas where SMEs are the life blood of sustainable communities."[140] Joan McAlpine MSP concluded that "it is clear from speaking to people on the ground that there is a perception, flawed or otherwise, that Scottish Enterprise and Business Gateway fail to understand the nature of the rural economy and are not fit for purpose."[141]

91. Drawing on the Scottish Borders activity report from Scottish Enterprise for 2013-14, which shows spending on projects across Scotland, Michael Moore noted that the total number of Scottish Investment Bank (SIB) investments for the whole of Scotland was 158, but that there had only been one in the Scottish Borders.[142] Mr Moore acknowledged the work being done for the south of Scotland by Alistair McKinnon of Scottish Enterprise, whom he described as "a stalwart". However, Mr Moore noted that he is "one guy where previously there was a whole team", and while he welcomed Mr McKinnon's efforts to fight for the south of Scotland within Scottish Enterprise, he described this as "sometimes an unequal struggle."[143]

92. Scottish Land and Estates disagreed with much of the criticism of Scottish Enterprise, and noted that the rural business sector had been "relatively well served by the Scottish Enterprise structure."[144] It specifically noted the extensive knowledge of the rural team based in the Scottish Borders, and its subsequent ability to tailor its support accordingly. Content with both the structures and processes of Scottish Enterprise, it did not recognise the need for "any wholesale reform."[145] Teresa Dougall of Scottish Land and Estates rejected the allegation that Scottish Enterprise was "an obstacle in development in the Borderlands."[146]

93. Many of Scottish Enterprise's previous responsibilities in the south of Scotland were transferred to local authorities, particularly Business Gateway, a publicly funded service that provides access to free business support services.[147] National Skills Programmes and dedicated skills programmes for sectors or geographies were transferred to Skills Development Scotland. Alistair McKinnon of Scottish Enterprise explained that "may be part of the reason why Scottish Enterprise is now less visible with the wider business community than it was previously."[148]

South of Scotland Alliance

94. The South of Scotland Alliance—a collaboration between Scottish Borders Council and Dumfries and Galloway Council—has worked closely with Scottish Enterprise to match projects in the south to Scottish Enterprise criteria, and it plays an important role in influencing and advocacy to relay messages to the Scottish and UK Governments. For example, since 2011 it has been working on a Next Generation Broadband Project for the south of Scotland.[149] The South of Scotland Alliance previously secured £19m in ring-fenced funds from the EU in the Lowland and Uplands (LUPS) European Regional Development Fund Programme 2007-2013.[150]

95. Scottish Enterprise has given strong support to the Alliance's successful case for Assisted Area Status for parts of its area. This led to the A7 and M74 transport corridors being designated as Assisted Areas in the recent review of the UK Government's Assisted Area Map, which was approved by the European Commission on 21 May 2014.[151] Douglas Scott, Senior Policy Adviser at the Chief Executive's Department of Scottish Borders Council, said that the South of Scotland Rural Regional Economic Development Programme, produced by the Alliance, recognised the national approach of Scottish Enterprise and the need for bigger projects to add value to the Scottish economy. The programme seeks to build up "critical mass" for projects in the south of Scotland.[152]

A new enterprise body for the south of Scotland?

96. One of the questions we raised in our launch Report was whether it was necessary to establish a new enterprise body for the south of Scotland akin to Highlands and Islands Enterprise (HIE), which could co-ordinate development, infrastructure and transport initiatives with a specific 'Borders' focus.[153] HIE is an economic and community development agency for the north and west of Scotland. Its purpose is to generate sustainable economic growth across the Highlands and Islands. Its priorities are to:

·  Support businesses and social enterprises to shape and realise their growth aspirations

·  Strengthen communities and fragile areas

·  Develop growth sectors, particularly distinctive regional opportunities

·  Create the conditions for a competitive and low-carbon region.[154]

97. As well as its specific regional focus, another key difference between Highlands and Islands Enterprise and Scottish Enterprise is that HIE has a social as well as an economic remit. The issues affecting those in the south of Scotland, such as the crucial connection between infrastructure and economic growth, the economic and social fragility of isolated communities, and the centrality of tourism to the regional economy, are directly comparable to many of the issues faced in the Highlands and Islands, and could be dealt with similarly. A view expressed repeatedly to us was that devolution of powers to Edinburgh had not led to further devolution of powers to the south of Scotland itself. The ending of the Local Enterprise Companies is a good example of how the Scottish Government have actually taken powers away from the region. This process has been exacerbated by the lack of a countervailing structure along the lines of Highlands and Islands Enterprise.


98. Some witnesses made the case that a new 'Borders Enterprise' type body should be created in the south of Scotland.[155] John Stevenson, MP for Carlisle, suggested that such a body should also include local authority areas on the English side of the border and added that "cross-border issues such as infrastructure, communications, and business support are issues which can only be properly addressed if the whole of the border area is involved in their conception and implementation."[156]


99. Highlands and Islands Enterprise describes itself as "an ambitious organisation with a unique remit that integrates economic and community development."[157] RSA Fellows Borders Network pointed out that the exclusion of such a social objective from Scottish Enterprise's remit "is by many deemed unhelpful - and should be introduced urgently - given the extent and diversity of rural Scotland."[158] While Joan McAlpine MSP did not endorse a restructuring of Scottish Enterprise, she acknowledged there was scope to look at the disparity between it and Highlands and Islands Enterprise "in terms of HIE's lower ceiling for account managed companies and more powers stemming from its social remit."[159] Bruce Simpson, Vice Convener of Scottish Borders Chamber of Commerce, said that broadening out Scottish Enterprise's work in the south of Scotland to include a social remit would "show that the body was not purely economics, it was for the whole of the area, the people of the area."[160]

100. Several witnesses, however, disagreed and argued that neither further restructuring of Scottish Enterprise, nor the creation of a new enterprise or development body, was necessary. Both Scottish Land and Estates and the Scottish Borders Council argued instead that existing structures should be strengthened, and that consideration should be given to developing the South of Scotland Alliance to allow for further collaboration.[161] The SNP group on Scottish Borders Council argued that the problem is not one of structures, but one of resources. They stated that "there has not been enough focused and relevant investment up until just recently" and called for greater investment in infrastructure and growth sector enterprises. [162]

101. We believe that the restructuring of Scottish Enterprise, and the centralising impetus behind that restructuring, has had a negative impact on the economic development and enterprise culture in the south of Scotland - not least because of the subsequent decline in both the visibility of the region and of services tailored to the specific economic challenges it faces.

102. We are not convinced that the efforts and resources required to restructure Scottish Enterprise yet again are justifiable, but urge the UK Government to work closely with the Scottish Government to identify how the negative consequences of the initial restructuring for the south of Scotland should be remedied, and to identify how a re-focusing of existing resources may best address the specific needs of the south of Scotland. We also recommend that there should be more collaboration and formal joint working between Scottish Enterprise and bodies operating across the south of Scotland, such as the South of Scotland Alliance.

103. We note the success of Highlands and Islands Enterprise in invigorating the economy of the Highlands and Islands and in promoting the distinctive identity of that area of Scotland, and in particular, we recognise the value of its social remit. We see no reason why Scottish Enterprise could not work with other bodies to promote such a social remit, and we recommend that it does so. The success of the Highlands and Islands Enterprise is as much about culture, energy, commitment and leadership as it is about structures. We are confident that the south of Scotland can achieve similar success.

130   Scottish Borders Council, (BOR0003), para 12 Back

131   Scottish Enterprise, About us | Scottish Enterprise, accessed 7 July 2014; The Highlands and Islands have a separate enterprise body. Back

132   Scottish Borders Council, Business Gateway - Scottish Borders Council, accessed 27 June 2014 Back

133   Scottish Enterprise, (BOR0013), para 3 Back

134   Ibid., para 3 Back

135   Scottish Enterprise, (BOR0013), para 3 Back

136   Joan McAlpine MSP, (BOR0020), para 3.1.4 Back

137   Dumfries and Galloway Chamber of Commerce, (BOR0002), para 3.2 Back

138   Q5 Back

139   AIMUp, Peebles Community Council and Peebles Community Trust, (BOR0017), para 1.3 Back

140   RSA Fellows Borders Network, (BOR0008), para 28 Back

141   Joan McAlpine MSP, (BOR0020), para 2.1.1 Back

142   Q38. Moreover, the total value of SIB investments was £32 million, while in the Scottish Borders it was £200,000. Back

143   Q38 Back

144   Scottish Land and Estates, (BOR0012), para e Back

145   Ibid. Back

146   Q120 Back

147   Business Gateway, About Business Gateway, accessed 25 February 2015 Back

148   Q67 Back

149   South of Scotland Alliance Next Generation Broadband, SoS Broadband Project Team - Quarterly Update April-June 2013, accessed 18 March 2015 Back

150   Scottish Government, Lowlands and Uplands Scotland European Regional Development Fund 2007-13, p 58 Back

151   Scottish Borders Council, (BOR0003), para 9 ; Dumfries and Galloway Council, (BOR0006), para 2.11 Back

152   Q27 Back

153   Scottish Affairs Committee, Second Report of session 2014-2015, Our Borderlands, Our Future, HC 556, para 14 Back

154   Highlands and Islands Enterprise, Highands and Islands Enterprise - what we do, accessed 27 June 2014 Back

155   Councillor Archie Dryburgh, (BOR0009) Back

156   John Stevenson MP, (BOR0019) Back

157   Highlands and Islands Enterprise, Highands and Islands Enterprise - what we do, accessed 27 June 2014 Back

158   RSA Fellows Borders Network, (BOR0008), para 21 Back

159   Joan McAlpine MSP, (BOR0020), para 3.2.1 Back

160   Q69 Back

161   Scottish Land and Estates, (BOR0012), para f and Scottish Borders Council, (BOR0003), para 10 Back

162   SNP group, Scottish Borders Council, (BOR0004), para 5 Back

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Prepared 26 March 2015