 The 12th meeting of the Economy, Jobs and Fair Work Committee for 2018 may remind everyone in the public gallery to switch any electrical devices to silent so as not to interfere with proceedings. We have apologies today from committee members, Kizia Dugdale, Jamie Halcro-Johnson and Dean Lockhart and may also welcome Tom Mason as a substitute for Dean Lockhart. On the agenda is to invite Mr Mason to declare any relevant interests. Ah, yes, I still remain a member of the council of Aberdeen City, and my small consultancy deals with China extensively. And are there any other declarations of interest from other committee members? Yes, convener. If you want to escape your attention that, like Paul Shearan, I'm a director of Strathleaf and Regeneration Company, but I'm sure that that isn't going to make me any kinder to him. All right. Thank you very much. Item 2 on the agenda is a decision for the committee to take items 4 and 5 in private. Are we all agreed? Yes. Thank you. We turn today to our Inquiry in Scotland's economic performance, and I'd like to welcome our witnesses today. In no particular order, we have Paul Shearan, just mentioned, chief executive officer of Scottish engineering, Karen Betz, chief executive officer of the Scotch Whiskey Association, Neil Francis, interim managing director, Scottish Development International, James Brodie, director of Scotland and China Business Advisor of the China Britain Business Council and, last but not least, Claire Slipper, political affairs manager at NFU Scotland. Welcome to all of you today. Thank you for coming in. If I might start with a fairly general question, and this is about Scotland's competitiveness in the international market, where is Scotland the most competitive and where the least competitive in international terms? I should say that the sound desk will operate your microphones. Obviously, it's not necessary to come and respond to every question from each of you. We'll try and let the flow as a bit of a discussion. If there are other things that you'd like to add to your evidence, then you can write into the committee if there's something that you aren't able to respond to today or want to add a bit of detail to. Who would like to start with that opening question? Paul Sheeran? I think that from an engineering manufacturing point of view, I see evidence that we are competitive in manufacturing worldwide. I have seen evidence recently of companies that are manufacturing for aerospace and space industries, where they are wanting business in Italy. They are doing so because they are being innovative, because they have invested time, effort and energy in lean practices in the way that they manufacture, and they are seeing the result of that. The challenge for that is that those companies that are doing that and are successful are by no means unique. They are mostly on the same path as the other companies around Scotland. The challenge becomes the one to open the door or open the mindset to target export as a successful way of increasing their business. I think that you mentioned Italy there. Post-leaving the EU, are there changes in emphasis that should be developed by Scottish companies in terms of where they seek markets internationally, or does nothing change as a result of that? Do you have a view on that? We are maybe two minutes in and we get to the B word. I think that the real challenge across Scottish engineering manufacturing companies is the famous lack of clarity. I would say that engineering manufacturing companies, we are by nature engineers, are pragmatic. In some ways, we almost like a problem, that is what we are in it for. We set ourselves to say, okay, that is tough, how are we going to fix that? The problem is that, first of all, you need to know what the problem is. The challenge for all those companies out there is that they are saying, and I haven't met one yet that has anything nice to say about the prospect of Brexit, but they also say, once we know what it is, we will roll our sleeves up and get on with it. The problem is that we don't know what it is. Right now, those who are watching and following closely are saying that there may be some snippets of supposed clarity, but nothing is agreed until everything is agreed. We all know that there are some big questions that hold out that final everything being agreed. That is the real challenge. Those companies who are expanding into export, particularly Italy and Europe, are saying what it is going to look like later. Right now, what they cannot say is that, if I do A, B and C, I will be able to take account of that and work around it, because I do not know what I am facing. Right. Anyone else would like to come in on the question about where Scotland is strong or weak in international terms? Karen Betz? Thank you, convener. In very bold terms, obviously, Scottish West can only be produced in Scotland, so it is not as if we are competing. It is not as if Scottish could be produced anywhere else at cheaper rates or whatever. It is a slightly different question for us. When you look at markets around the world and when you look back at Scotland from being overseas, I would say that we still, as a country, have a reputation for quality, integrity and innovation in what we produce. Certainly in my previous role in the UK foreign office, I think that was very clear. In terms of being competitive overseas, I mean, looked at from an industry like Scotch whisky, there is an enormous amount that any of us have to do to get out there internationally, to know our markets and to know our consumers. That is about some very basic questions there around how competitive you are against whatever your global competition is when you export outside Scotland, outside the UK. Now, we compete against other categories of spirits. We compete against other whiskies, and those questions become very relevant for our companies as they look at how Scotch's market share matches up against other spirits market share, where our competition is, where we need to appeal to consumers. As we look at Brexit and all of the challenges, the changes to the way in which we export and trade overseas, all the changes that are going to happen as we go through Brexit and come out the other side, the issue that I would float really is around how you bring together trade policy and trade promotion to better support Scottish exports in overseas markets. I think that we will come on to a question from John Mason now, which may develop some of the themes in that. John Mason. I was interested in Mr Sheeran using the word mindset in there. It has been suggested to us that Scottish firms or Scottish individuals are just not ambitious enough. They just do not have their horizons high enough. Is that something that you recognise? Is that something that we need to deal with? If so, how do we deal with it? Do we teach ambition to primary kids in school, or how do you do that? That is a good question. I do not feel that it is a lack of ambition because those companies who are not export-based feel to me to be ambitious for their businesses. That comes back to this. In terms of mindset, I do not think that it is ambitious. It is more about someone having opened the door or showing them what that could look like. Companies who do well at that, who previously did not, I see evidence of it coming from where you get new staff coming, who have come in from a bigger company, who have been working internationally. The exporting thing is not that difficult. There are companies around the world who want our products and services. We just need to do a bit of work to get ourselves in that marketplace. Something brings it. It can be cross-pollination. It comes from people who have been in other businesses. You are right. The enterprise in education is absolutely key. We have to educate a generation who do not think of the borders being Scotland, the UK or Europe, but generally worldwide. I agree with Paul. Our best companies are as ambitious as any other companies I come across internationally. The challenge is that we probably do not have enough businesses that have that scale of ambition. If you look at the whole company base in Scotland, we have about 17,000 companies that employ more than 10 employees and are growing at a rate of 10 per cent over any three-year period. I think that there is something also around the structural kind of of our economy, the amount of businesses that we have that have a strong platform in the domestic market that then allows them to take on the things that Paul was talking about, the awareness. You need a bit more extra resource and capacity to go internationally because it takes a bit longer to do, so it is really important that you have a strong foundation in your domestic market. I do think that there is more to do, especially around the awareness. I think that to get more of our businesses to understand the opportunities that they are by trading internationally and how to manage and mitigate the risks associated with doing that. I am here representing NFU Scotland, which is a membership organisation made of 8,500 farming businesses. We have crofters, growers and professional businesses in there. NFU Scotland likes to make a big play of the fact that we are essentially the foundation stone of the food and drinks industry, which, going back to the first question about competitiveness, has shown a massive expansion, particularly in the past 10 years, with exports totaling about £5 billion. I believe that ambition is to go that much further. To move on to the second question about ambition, we recently signed up to the launch of a new document called Ambition 2030, which we think is a fantastic piece of work. I am sure that, if you have had representatives from the food and drink industry giving evidence to the committee, you will have heard about some of the measures in that document. However, for our members representing the primary production end of it, we are still seeing major issues with competitiveness. Agriculture businesses are subject to a range of different change drivers, not least things like the geography and the weather, but also unfairness within supply chains, price volatility, cash flow problems, capital management and so on. There is a lot of uncertainty about that. At the current time, a lot of folk are perhaps looking a bit less ambitious about looking ahead to the future and where things might be, because it is a bit of a batten down the hatches at the current time in light of the political situation that we find ourselves in. Can I ask—would your members be thinking directly of exporting—say that it is a beef farmer, or are they thinking, no, I am going to sell my beef to X and then X might do the exporting, so it would not really be on their agenda so much the exporting side and things? We have long supply chains in Scotland, but our members are very concerned about the potential for export to be displaced. It differs between commodities, so we have to be very careful about talking about a big boom in exporting internationally agricultural products more generally, because some sectors will prefer a more protectionist approach. However, in light of the political situation, we have to be looking at new and innovative ideas and putting people directly in touch with new markets abroad. Our provenance, as Karen outlined in her opening remarks, is absolutely our USP, and that is what we will be selling on into the future. To come in on the second question around ambition, anecdotally, the companies that I meet that seek me out for advice on doing business with China are hugely ambitious in general terms. I cannot speak to the broader spectrum of Scottish industry and businesses and perhaps the statistics. So, do you have to be more efficient to sell to China than to sell to the Netherlands? Not necessarily. It is difficult to say exactly which countries. There are probably greater differences in exporting to China than there would be in exporting a product to the Netherlands, certainly in the current context of being part of the European Union and the customs market. You would need to address certain differences. It very much depends on the product or service that you are selling, but there may be further barriers to overcome if you were looking to export to China. However, when those businesses come to me, they are clearly articulating great ambition for their own business. In terms of how we can increase that ambition on our broader skill, we need to point to success stories to engage with pupils at school at the very earliest stage to open their eyes to the opportunities, while also highlighting some of the challenges. Build that awareness of both the opportunity and the challenge so that we are better equipped to take on that challenge of exporting in the future. That is certainly something that we are committed to doing ourselves at the China-Britain Business Council. Thank you. Our member companies range from listed PLCs through to small businesses, and they all export very successfully and usually from a very early stage in their development. Many younger companies will set themselves up, will establish their UK market and then will get exporting very quickly. Are people more ambitious from that point of view in whisky because whisky is such an international product per se? Is that making it easier in your sector? It makes it a much more obvious thing to do. Most of our companies know that there is a very strong international market for whisky out there. They either know because they have been exporting for a number of years or they know because they see other companies do it. To a degree, over the 150-odd years that our industry has been exporting, the road is gradually more and more paved into the 180-odd markets into which we export. Our industry is very collaborative in that way. Many of our smaller companies will readily acknowledge that their road to exporting in China has been paved by the bigger companies. A trade association like ours works very hard to tackle trade barriers one way or the other, whether those are through trade agreements or whether those are through lobbying in countries hand-in-hand with Government to tackle tariff barriers or behind-the-board barriers and any of the complications that people might encounter as they actually practically get into exporting. The ambition question is asked of us a bit because we are clearly good at exporting. A couple of years ago, we set up with Scotland Food and Drink and Export Collaboration Charter, which was designed to help raise the issues around exporting, to help people to understand the sorts of things they would need to understand in order to export successfully. We have done a number of exercises through that. What I would say is that the take-up has not been massive. I come back to that question around what is it? I think that there is quite a lot of resource out there if you are thinking about exporting. We offer help with Scotland Food and Drink, SDI does, the chambers of commerce do. There is quite a lot out there if you go and look for it, but perhaps something else is holding people back. I am not sure what that is. I do think, personally, that language in education is very important. I think that educating our young people to have an international outlook at school and to be comfortable operating in foreign languages will remain very important economically as we move forward. Paul, you mentioned the space industry in your opening remarks. I wonder if members can give the committee other examples of particular success stories in Scottish business where they have been exporting successfully or started exporting or have attracted inward investment or indeed are investing overseas. The whisky is an obvious one. You have been doing it for a long, long time, so we know about that. I wonder if there are other particular success stories and what lessons we might learn from them. Good is a food and drink when again, but I think it brings together a lot of things that you have to do to be successful in the international market. You will recall last year, Haggis was exported again for the first time to the Canadian market. That was as a result of a lot of influence at a government and regulatory level to make the case of the safety issues that the Canadian government was concerned of in terms of taking that product. That was done over a number of years and reached a very successful outcome, I think it was in 2014. That then opened the door, but then we have worked with other partners, with companies like McSweeney's, on reformulating their product. You cannot just take the Haggis that is sold in Scotland and sell it straight into the Canadian market. There are still particular regulations and standards that you have to meet, so there is all that reformulation in terms of the product. We have an in-market, OSDI with Scotland Food and Drink has an in-market specialist in the Canadian market who is working the networks and the potential customers during this process, and then that has led successfully to McSweeney trading very well in the Canadian market. James Brodie wanted to come in. We ran our first-ever China-Scotland business awards this January, and I can send the committee on the details of the short-listed companies, which are about a dozen companies that are all with great, some of them exporting, some of them investment stories, and right across the board in terms of economic sector, ranging from peak scientific instruments, who manufacture gas generators and have had a very successful and fast-growing business in China for the last four years. They won exporter of the year through to the aviation sector, Finlay Irvine, a local SME to Penicook, manufacturing machines that measure the grippiness of runways, very important when you're landing on aircraft apparently, and right through to some of the larger PLCs like Babcock International and some of the design work that they've been doing for shipyards in China for state-of-the-art LNG vessels. So, there are a lot of great success stories to point to in really quite a range of different areas. I think it's just about shouting louder about them and engaging with them and bringing them together with other companies who are on that journey to learn from their experience. I'd like to add just a couple of points on that. My initial example was about finding export to the space industry in Italy. The committee may know that I'm relatively new to this post about a month and a half into this role. Prior to that, though, I am an engineer and reasonably well-networked in the engineering world in Scotland. I have been surprised by the number of metal fabricators that I have gone into in the past month and a half who are making aerospace and space parts. It's not the headline part of their business, and some of the products that they're making are truly innovative and they're winning the business because of that. I didn't know about it, so it's well-hidden, but it has shown to me that there is another cross-pollination. Wherever I go to other metal fabricators, one of the issues that I'm raising with them is, have you considered this sector? There's a marketplace out there and Scottish companies are being competitive. That's the first one that I tack on. The other one that I wanted to add was that I did want to echo something that Karen said about languages. We talked already about where does it come from? Is it a lack of ambition? I argued that it was about opening a mindset towards this as a possibility. Languages in school are massively important to that. What's important about it is that it's not the language that you learn, it's a language. If you look at the challenge of internationalisation, we're rarely going to be in a situation where we're conversing with our customers or suppliers in their own language, but at least if someone has learned the basics of foreign language, then they understand that language is constructed differently, that the person sitting across them is not speaking in their first language and has some patience and slow down. That comes from having a basic grasp. I think that this is really key. It has to be whether not everyone is going to go on to be foreign language students for their education, but foreign language is really important if Scotland wants to have ambition for internationalisation. I have a small point about international exports. We have a really good example within Scotland's sea potato industry, which is an unsupported sector within Scottish agriculture. It's a little known fact, but we grow 70 per cent of the UK's sea potatoes and export 73 per cent of them to countries such as Egypt and Morocco, which isn't really shouted about, but clearly that's going to be an issue moving forward with new trade deals. We need to try to secure preferential access, otherwise these quite large capacity within Scotland, although it's a small sector, will be displaced almost overnight. We need to start thinking about things such as export certification and having all the infrastructure there already in order to have a seamless transition. In terms of some of those success stories, what are the key lessons to be learned from other companies that are perhaps not seen as ambitious enough or not realising what the opportunities are? James Boyle talked about the China Awards earlier this year. Is there a case for much, much more peer support across industries and within sectors, such as food and drink, to encourage more exporting? Peer-to-peer support has proven to be very successful. Both companies who are on the receiving end respond positively to support from people who have been there and done it. I think clearly it's something that we need to carry on nurturing and helping happen. As Karen said, there's good examples of it happening across sectors currently. I think all made the point about it doesn't have to be exactly the same. I think when you look at international, it might be from within companies from within the same sector, but it could also be from companies from different sectors but who have an experience in a particular market that the company is targeting. I think it can be both sector-specific but also market-specific. That is a very powerful way of supporting the ambition and the capability for companies to trade internationally. I think we do have a bit of an issue in Scotland of celebrating success. I thought that was the point that you're going to make in terms of the awards that James was going to say. I do think we need to do more about publicly celebrating those companies that are doing a fantastic job trading internationally. There's more for us to do there. We've got the Scottish Exports Awards that I think are in their fourth or fifth year. I was at the awards ceremony this year, over 500 people attending the awards. That's grown rapidly over that period and a very broad range of companies receiving the awards. Bridge of We Are Leather got the overall export of the year, so that's obviously from a textile point of view. You had SST Sensing, which is basically an engineering company. You had Turtle, where people produced the alternative to those wrap-round travel pillows. You had a company of pure malt products that used to be a commodity-based product and turned it into something that's much more valuable. The more we can do to celebrate the success of those companies doing a great job, the better. Karen Betts has to leave at this point, so thank you for coming in. I've probably got another 10 minutes or so. I was going to intervene on that point and say that I do think that in-market support where it's possible is important. I think that's around helping new exporters understand the issues in the market that they are trying to export into. When you say in-market support, what precisely do you mean? I mean government support where it's available. I think that there's a good deal that government can do. There are a number of Scottish Government officials based around the world, and some of them are teamed up with the Department of International Trade officials around the world. Where those teams can help exporters understand the particular issues in those markets, that's really useful information. It's information that they don't then have to find for themselves as a sort of accelerating and in-market knowledge issue that I think is helpful, and that can be really helpful on the trade promotion side. But on the trade policy side, it's really important too, and it will become increasingly important as we go through Brexit and come out the other side, because at the moment for most trade policy issues in markets, we use the European Commission to help us tackle trade barriers where they arise. As I say, those are either tariff barriers or the regulatory barriers. You don't need a trade agreement to solve those things. Trade agreements can be helpful, but often these issues can be solved outside trade agreements, sometimes on a sector by sector basis. Again, some in-market knowledge and expertise of how that's done is really important. As we look ahead to Brexit and beyond, one of the things that will be important to us as an industry, where normally we have gone to EU delegation offices with these sorts of issues, is to know where we go into the future. Some of that is also for us around intellectual property. As you know, Scottish Whiskey is a geographical indication. There are other geographical indications in the Scottish food and drink industry, and they are important to the value of each of those products as you export them. They are the things that stop those things becoming generic. Again, where those issues arise, some in-market support is useful. I could just expand on in-market support. It could also be in not necessarily government, but through the overseas business network, which is the British Chambers of Commerce overseas network of British Chambers of Commerce in various markets around the world, of which the CBBC is also included for the designated one for China. Especially in light of the fact that UK and Scottish Governments don't have a huge presence in every market around the world, we need to draw up on the support networks that are out there for providing exactly the kind of support that Karen alluded to. Gillian Martin and Tom Arthur wanted to come out in supplementaries. First of all, Gillian. I just want to come back to something that Neil Francis was saying about the celebrating success. How important is it that civic society, particularly the media, look positively on trade missions abroad? I'm thinking of things like Tartan week in New York, which we just had that last week. The First Minister's visit to China last week as well. A lot of the press around that seems to be quite negative. Not looking at those things as being positive experiences and looking for negativity in them. Does that have an impact on companies who might be thinking of exporting and that general psyche around that? Do you think that it's important that we have a more positive approach to those trade missions and initiatives? Absolutely. I think that the media has and will continue to have an influence on society as a whole, but also on companies. I think that mood music is really, really, really important. The other thing I would add is obviously in terms of, and it's been alluded to by a number of my colleagues already, that our international perspective is broader than simply trading investment. Trading investment is a very tangible outcome, but it's important that in all aspects of Scotland's life where we civic community or governmental, there has to be an international mindset and building that right through the fabric of our society is really, really important because people might get their first experience through one avenue, but then be much more open when they end up working with a company to actually think about international. We've also just seen the Commonwealth Games again, another platform for Scotland being seen as an outward progressive internationally minded country, which I think is really, really important. I don't know if anyone else has any thoughts on that at all because it's a bit of an international reputation, isn't it? Do you think that it has an impact? In particular, James Brody obviously is working with China. Do you think that it has an impact on the way that Chinese traders will look at Scotland if we have this kind of mood music that's surrounding our interaction with China that's negative? I mean, I do think that positive press on such missions would be much appreciated, although I'm not too concerned that the negative press that you sometimes see in Scotland will have much of an impact in China, per se, you know, itself. I don't think it's very difficult to make an immediate splash in China, and I don't think that domestic Scottish press is making much of a splash. I wish it was making more of a splash. It might have a negative impact on someone who might rule out actually going out to... For the Scottish companies here, you're quite right. I think that for those companies, I think it probably does have an impact, yeah. I don't think on the other side of the... Yeah, it was the other side of the map. Yeah, no, no, no, fair point. But I think it builds to Karen's point about trade promotion. The more those markets, those countries that we want to engage internationally with, have a broad understanding of what Scotland stands for right across a whole gamut, whether it's to come here to visit as a tourist, whether it's to come here to study at our academic institutes for academic partnerships or to trade on and invest. The more they understand what we stand for, then the easier it will be for companies to access those markets for their specific products or services. That's clear. And I think what we saw last week with Scotland is now is a brining together all our interests internationally in one cohesive approach to build our international reputation. I think that is absolutely critical. We'll move on to Tom Arthur's follow-up. I think that Gillian's question most recovered it. I'd probably say that beyond civic society, there's a responsibility for politicians. I just wondered if the panel would agree with me that decrying the First Minister's visit to the United States last year as not getting on with the day job and she should be back here isn't very helpful. It sends out their own mood music and indeed opposition politicians decrying the use of the Scotland is now campaign, for example, and saying that's a waste of money. Do you think that it's important for politicians as well to be sending out the right messages as well as wider civic society in the media? You can just say yes. Comment on that without taking a political position? I'm not asking for a political position to be taken. I'm simply pointing out that it seems to be a bit of a tall body syndrome that goes on in this country. I'm getting myself fired. It's really important that across the whole of Scotland's society, everyone in a leadership position exercises leadership and what we have agreed upon having a very clear method of making our way internationally is incredibly important to our future, so that would be really important. Was that a politician's answer to your question? We have another taker here, Karen Betts. Scotland has so much to be proud of on the international stage and I think sometimes we can get sucked into, in our own media, a negative view of all sorts of things, but I think that I'm not sure that negative press puts companies off, but I think that it goes back to the mindset issue about Scotland's role in the world and part of that is trade and exporting. I think that we have so much that is positive to contribute across the board and I think that fostering somehow that sense of nurturing, that sense of positivity is very important. I'd like to ask you just a very simple question. What more does the Scottish Government need to do to support internationalisation? Is what we're doing enough? Is it a case of doing more of the same or do we need to do something totally different? There are lots of fantastic routes for Scottish companies to exploit the opportunities and export. From the other side of the desk, when I was part of industry and leading a business, the support that we got from Scottish Enterprise, SDI, Scottish Manufacturing Advisory Service, Chambers of Commerce—excellent, really good. If you are minded and therefore the door is being opened on, that this is a route to go and can be a successful one, it's a great experience. I can say from my own personal experience at a time when we were launching a new product in Asia principally and SDI opened doors for us that we couldn't open on our own and not just saying that because Neil is sitting, toothpaste space is to the right. The challenge and the opportunity, I think, comes from—it felt to me for a while that when I met other companies, they would reflect that that's fine for you. The company I was with at that time was Polaroid, account managed by Scottish Enterprise, and we were well looked after. I would meet other companies who would say that it feels harder to get access to those support mechanisms. It's not impossible, but it's harder. I wonder whether that's the opportunity. Obviously, Steve Dunlop is coming in at post. That will be a chance for new leadership to look and say where the opportunities are for that. It felt to me in that situation that when the regional lecs were taken away, it certainly felt like there was a gap, so much that more local regional support for enterprise fell into local authorities. I would say that even they wouldn't be offended if I said that they are not absolutely the best place to think in terms of internationalisation, whereas Scottish Enterprise, SDI and the others I mentioned are. I think that with that, and maybe in light of the acknowledgement of a solution for South of Scotland in terms of enterprise, that provides maybe a shift which is, okay, how do we get the best balance on this, where we have economy of scale but we have the right solution for either the right region or the other. It's local enough so that that support, and it is good support, but make sure that it's open to all as possible. I think that that becomes the challenge. I think that there's an opportunity to do that because we have a new chief executive coming in in Scottish Enterprise. Something that I probably should have caveat in my comments at the beginning with is that for Scottish farmers and growers and crofters, our biggest market is our home market, so 70 per cent of our produce goes probably no further than the boundaries of the M25, to be quite honest. It's a small amount of what is produced that is exported internationally, but what we do, export, we do extremely well. It's important that we continue to produce for the home market and have things in place there to support our farmers. It's very clear that UK consumers have a very clear preference towards high standards, provenance and origin. It's on those principles that we also sell abroad. I'm sorry to keep going back to the Brexit issue, but it really is the number one thing that is occupying our and our members' minds at the moment, but it's hugely important that our home producers are supported by Scottish Government to continue to produce to those high standards, and it's recognised that that does come at a cost. I think that Scottish Government does actually get that, but when it's perhaps UK negotiators in the room negotiating new trade deals, what we must not forget is the importance of having very high equivalent standards and protecting things such as the protective geographical indications, which Karen mentioned, for things like a Scotch beef. It's hugely important, and if we let them slip away then that could be quite devastating for our agricultural industry. I'm not saying that Scottish Government could do more. What I'm saying is that we want to work very closely with the Scottish Government over the coming weeks, months and years, as we find ourselves at a bit of a crossroads in order to make sure that they really are the top priorities. Can I just add a perspective? We've looked at a number of other countries to see what they do in terms of supporting their companies to internationalise, including Australia, New Zealand, Ireland and other European countries. No-one is really doing anything uniquely different from what we are doing. What you see is differences in scale and investment principally. It's how much people are investing, and more commentators look to Ireland, and the scale of investment they make in terms of supporting their trade and their investment is considerable, given the size of their country. It's really scale. I think that James Brodie wanted to come in as well. Largely speaking, most of the tools and most of the initiatives and programmes are probably there, but I think that there could still be more work done in aligning those programmes more than currently is the case. For the end-user company who just wants support, just being signposted and making sure that if a Government is funding different initiatives that they're forcing them through that funding mechanism to work together rather than in duplication. I know that there are also very many initiatives aimed at trying to bring those things together. It's not easy, but I think that the more work that can be done in that regard, the better. Presently, you feel that it's a little bit cluttered. It can be. Just still on the question of Government support, do you think that the Government's internationalisation strategy is well-focused, well-targeted? Maybe I should ask if you know what the Government's internationalisation strategy is. I'll give that a go. I think that it's a strategy, so it sets out the ambition and the broad areas that need to be tackled. I think that it's good in so much that it recognises that in order to be successful, it's not simply what you do to achieve the end outcome. So I think that what's really positive about the strategy, it puts an ask on our infrastructure, whether that be our physical infrastructure or digital infrastructure, it puts an ask on our education sector and some of the things we've already talked about. If I think of international, it's almost at the end of a journey, and there's lots of building blocks that you have to put into place that you won't directly see them generating the outcome today or tomorrow. Fundamentally, they are critical in building a sustainable international kind of performance. Is the focus on the right sectors? Paul Shearan mentioned that some companies had a bit of difficulty accessing support. Is the Government's strategy targeted on the right sectors? Are we developing the right sectors? You would be asking the wrong person if you asked me, because manufacturing and engineering is all that I am about. I would say more please, more please, but I suspect that everybody sitting to the right of me would say exactly the same thing. The better way to answer it is that you ask the question calling about have we got the right strategy. The strategy to me and what boils down to the member companies is that export is essentially good. Putting the effort and energy into that to improve and increase that is where we want to support. That's the bit that I've taken away from that, and I think that's for companies. In terms of accessing those services, the services are good. One of the things that I've got is that it would be great to make sure that we enable those that are interested and those that have got ambition to find an easy route to those services. Just to add to that, Colin, we've talked before the committee. We've got two challenges in terms of our export performance. The total value that we generate from international trade is the number of companies that drive that value. As we know, we've got too few companies accounting for too much of that trade, and we have too few total exporters. We do need to tackle both those things. From my perspective, almost every company will have an international opportunity in some market. It's important that we find appropriate mechanisms to support that. What we do know is the proliferation of online platforms globally are making it much easier for very small companies with niche products going for niche markets or even big markets to make that much more viable. We also have to look at some of the sectors that are actually really driving performance. We've talked a lot about food and drink, and we could talk about energy, oil and gas performance, technology and engineering. Those are some of our key sectors that will continue to drive that total value performance, and we need to continue to support them as well. We've heard this morning that there's no lack of ambition in companies to export, etc. What I would like to know is what type of support is out there to encourage companies to export or to examine the possibilities of exporting. James Brodie. To take one very tangible service that we've got on offer and also to come back to earlier committee members' question about success stories and case studies, I could look at Devro, who manufactures sausage casings. They use the service of ours called Launchpad, which is a business incubation model whereby any UK company can use one of our offices in China as a base for an employee who would be employed under CBBC's payroll but could work full-time for a UK company. It offers a bridge mechanism whereby they don't open themselves up to the liabilities that they might do if they open up their own legal entity and if they're not quite sure about exactly what that legal entity should look like or if the market is actually for them, but it gives them a 12-month period in which they can really deeply assess that market and decide how to develop their business further. Devro did that several years ago. They ended up being in Launchpad for three years, ended up setting up their own office manufacturing hub. They're now employing over 200 staff in China. It's the most efficient of their seven worldwide plants, which is now based in China. That would be one service that's there just to point to a very tangible one. I know that that exists in other markets where some of the market barriers are perhaps more significant in other places, so you sometimes need that buffer zone that a lot of companies are still, although they might be ambitious, not 100 per cent convinced by the merits of a market or whether the market is there for them. They need that kind of hand-holding period where they're in a more protected environment before they take the next step. If you can offer those kind of services that can de-risk the opportunities to some extent, it's very well received by industry. A very small example from our sector, and it's not specifically geared towards putting members in touch to directly export or anything like that, but we have something called the Scottish Rural Leadership programme, which runs every year. There are some fantastic success stories of businesses that have gone on to that. It's about getting your own business acumen in place to grow your own confidence and grow your business in whichever way you might want to. One small example off the top of my head that I can think of is Grampian growers who grow daffodils up north. They are now the biggest exporter of daffodils in the UK. They took part in the Scottish Rural Leadership programme and said that it was very helpful for them in putting them in touch with the right people and allowing them to have a bit more ambition for their business. It's a small example, but there are lots of those schemes that, if linked together, are very supportive. Add one other thing into that. It's a good question. I come back to that theme of cross-pollination, so there are lots of support mechanisms and numbers that go, but they are dependent on connections. I had one last week where a company based in the Netherlands got in touch through Scottish Engineering because they are interested in the manufacturing capacity or capability in Scotland, so we connect them to the right thing. That cross-pollination thing works. The bigger question is what can you do that doesn't depend on those one-to-one connections or Scottish Manufacturing Advisory Service going into a company and going, will you do that? Do you know that there are companies out there in Europe who are interested in that? You should look at that. It's almost by chance. One of the things that I came across this week earlier was I met somebody, another person who'd been through the Saltaire Foundation. I think that that in terms of how do you seed an international approach, that's a super successful programme. There are others like it. The one that I heard of was the Young Chamber of Commerce. There are lots of those, but if you want to think about that, how do you enable at a generational level things like Saltaire Foundation and those other programmes are excellent at that, and what you're doing is setting people out who will go, and in our careers now we'll go from company to company, but you'll be taking that mindset and thinking about asking the questions. Is there any one issue, whether it's engineering or farming, that needs to be addressed that would encourage or assist companies to export? Is there any one issue that needs to be addressed, one burning issue in each sector? I think that skills availability is and remains concerned, so there's been a good bit of discussion in our groups recently. We are in a situation of relatively low unemployment. There is definitely a stretch and squeeze on those skills. If I had a magic wand for our industry, one of the things that, after Brexit, is the most universally-unliked topic in my conversations is apprenticeship levy. It seems to be having the opposite effect to what it intended to do. I don't think that that's even just a feedback that's true in Scotland. I think that, in our contacts with the Engineering Employer Federation, it's the same, and they've reported a drop year on year in the number of apprenticeships as a result. If we all agree that export is good, if we agree that making things and engineering things as part of that overall picture is good and we agree that we have an ageing workforce and we want to encourage more people to be in that thread, then look for barriers—I'm sorry, but right now apprenticeship levy is a barrier. Companies are actively talking about whether they want to carry on with apprenticeship programmes because of the burden that that places on them. I would point on skills that is filtered through to our sector very clearly as well. It's perhaps an uncomfortable fact for us and it's a figure that we bandy around. It won't be statistically accurate, but we say that 80 per cent think that they're in the top 20 per cent. It's true. I think that, particularly post-Brexit, we need to get a lot better at farming more productively and not mistaking that for just being more productive. It's about producing what we produce but doing it a lot better and putting a lot less into it, which then, in turn, will have much better implications for the environment and costs and downstream things as well. We do have an issue with skills. Farming and food technology are not particularly hot topics within the school curriculum and that's something that we are looking to address and think that, as an industry, we need to take the lead. It's not about finger pointing to education providers. We need to bring everybody together and we're very much at the start of that process at the current time. Looking ahead, we need to try and do a lot more to cultivate young people to think about farming as a viable career moving forward. If not farming, then all the other downstream industries that feed into agriculture more generally. There are big opportunities but we need people to fill those roles. My last point is that in the last meeting of the economy committee, we heard from one witness that he believed that there wasn't enough use of e-commerce. I'm just wondering in your own individual sectors, do you feel that there's enough use of the internet to sell abroad or highlight the products that you guys have available? Is there enough support coming from Government agencies in order to encourage people to make use of e-commerce? I think that a lot of our members would love to make more of it but purely because of their location and the proverbiality, broadband services aren't quite there at the current time. I think that I said earlier on in answer to Jolene's question that I think that we have to do even more to encourage people to look at the online trading platforms, the Amazons and the Alibabas and all of these and support companies to do that. We partnered at Amazons last summer, I think it was, in their academy in Edinburgh. That is running again, I think, today in Glasgow and I think there's going to be over 500 attendants. It's definitely a very viable to market that is low cost for people and especially the small company with very niche products. We will continue to support that. Specific to China obviously but e-commerce is massive there and accessing the Chinese market is a crucial channel. In almost all the events that we do, we will talk about the e-commerce platforms available in China now to access them. We've got a lot of members that offer services to access it through that, so it's very important. I just want to clarify one thing with Paul Sheeran. You talked about a year-on-year fall of in apprenticeships. I'm quoting from memory now that there was an article in January that the EF reported I want to think a 24 per cent fall. I don't know if it was a year-on-year or quarter-on-quarter, but I remember that story that was carried out by the BBC in January. The apprenticeship levy is not because of that, because that came in from 6 April 2017. You wouldn't have a year-on-year comparison for that. I think that that's fair, so maybe a quarter or a half year. The point of the article was that it was worried that there was a correlation between the unpopularity of the apprenticeship levy and the net outcome of a drop in the number of apprenticeships being taken up. I can say from my own evidence that I have met companies who have said that the apprenticeship levy is causing us to stop and think about whether we want to have apprentices going forward. Of course, it's different in Scotland than in England because there are separate systems. I suppose that my point is that, across the board, there is dissatisfaction for different reasons on both sides of the border, but I haven't met anybody on mass who has a good thing to say about it. Would it not be a good thing to set up systems to encourage and support companies in having apprenticeships? If the apprenticeship levy does that, compared to what was in place before, because the companies that I have spoken to about it don't feel that's the case? We'll move on to questions from Jackie Baillie. Can I take us back to exports? I think that we would all in the room agree that exporting is a good thing. I hesitate to be negative given the previous criticism, but I think that we need to understand what works and what doesn't work in order that we can maximise the opportunities going forward. In 2015, internationalisation became a key part of the Government's economic strategy, and we all welcomed it. I'm keen to know how we've performed against some of those targets. For example, one was to boost exports by 50 per cent between 2010 and 2017. Did we achieve it? If not, what was the barrier to us achieving that? That's the first question. I can run through the others, because they're in similar vein. That's the first one. The second one is, one of the studies done by SDI established that you are very good at supporting trade and investment amongst existing companies. The example that Paul gave of Polaroid is an absolute case in point. You've got somebody there who is account managed. They get all the support that's necessary. I wonder, given that SMEs make up the bulk of the Scottish economy, how successful we've been at encouraging them to get involved. When I look at SEs internationalisation targets, we haven't really been wholly meeting them. I'm looking for a very honest assessment of where we've been in order to then develop some questioning about where we should go. I'll look at Neil first. Thank you, Jackie. That's very welcome. Clearly, the original 50 per cent increase in the value of international trade has not been met. I hesitate to give you a single reason why that's the case. I think what's important is it did set an ambition and an ambition that we should be working towards. We should also use it as a means of holding ourselves to account in terms of understanding what has worked and what could work better. That would be my answer to that one. In terms of the company supported, I think I said at the outset that earlier we've got two things to tackle, the total value and the total number of companies. When that strategy was originally launched, there wasn't the emphasis put on encouraging companies to export for the first time. We've now changed that and are putting a lot of effort into that. In recent years, the total number of companies, from an SDI perspective, we've been supporting with their international trade ambitions, has grown from 1,300 to 2,300, so fairly significant. In terms of the number of companies we've been supporting to trade internationally for the first time, last year, we supported almost 1,600 companies to do that for the first time. I think my honest assessment would be we are in the right areas, we are engaging strongly with companies and supporting them where we can. What hasn't necessarily happened is the scale of the outcomes, not only from the companies we work with, but from the economy as a whole in terms of international performance. I won't rehearse now, but I was here last month or the month before where we talked specifically about the evaluation evidence in terms of both our inward investment and our trade performance. Is that enough? Do I get let off for that? Well, maybe. Let me just pursue one point because you gave us some very impressive numbers. I'm wondering, are these companies the ones you've provided help to? Are they actually exporting now? The number I said when we grew from 1,300 to 2,300, those are really existing exporters. The other number I gave you, which is around the 1,600, are the support to new exporters, so companies we're trying to get to export for the first time. Are all the 1,600 now exported? No. A truer figure wouldn't be an input figure, which is the support you give them, but the outcome figure of how many are now trading and it would be enormously helpful if you don't have them to hand if you could certainly provide them because I think that gives us a truer picture of what's out there so we understand what the challenge is. I'll certainly do that for the last three years. What I would say is getting companies to trade internationally for the first time is one of the hardest things we are trying to do. There's also timing issues. You work with a company and it might be three years before they secure their first international contract, so there's a lag, but you'll appreciate that. No, I do appreciate that. I think it's just to get a better picture. I wonder from the people that consume the services on offer, given the current strategy, what do you think? I know you've replied to Colin in similar terms, but how would you change the targets on the strategy because the targets determine where the resource goes and the kind of help that you get as a priority from the Government? I suppose that I wouldn't change the target. I think that the target is good to have a stretched ambition, and we've talked about ambition a few times already today. Clearly, as Niels alluded to in terms of meeting that target, that's not happened, but I would give evidence where there's been a positive outcome from setting a good target and setting a decent ambition. I was up in Aberdeen two weeks ago visiting member companies in the oil and gas and from Aberdeen down through Fife and Dundee. What I did to see was a little bit that Niels reflected companies that have been doing many things to survive the downturn. They've done so by becoming more efficient. They've done so by tightening their belt, but they've also done so by diversifying and opening up either new sectors, including export. Those that are starting to be successful in export are small green shoots, but I think that you can point from that to the ambition to export is good, making things and selling them is good, and there's a bit of patience. I get your point about the target. From my point of view, member companies don't matter, set the bar high, export is good, making things and selling things is good. That's the only message that we really care about. Paul, in that regard, in terms of setting a bar high, it can only be a good thing to motivate all of us to support as much as we can the new exporters. The target on new exporters is also something that we see reflected at a UK level through our funding from the Department for International Trade. We also have, in the past couple of years, been pushed very heavily towards supporting companies that have not exported to China before, so they might be exporters but not exporting to China. I'm also quite familiar with that lag time that Neil referred to in terms of we might give a good amount of support in year one, and it's not until year three that they pick up the phone and say, by the way, did you know that we've just secured a contract and it might well all go back to that year one support. It can be a challenge to get those outcomes in the near term, but it's an honourable ambition to encourage more exporters. Time and time again, if you look at export statistics from Scotland, the sample size is just too small to make any very firm conclusions when you see it rise and fall. Drawing conclusions on a sample base that small is—and with so few very large exporters accounting for some of the absolute terms, the biggest volume is what we actually see in qualitative terms. There's actually more companies perhaps exporting, but they might just be small SMEs, so it still doesn't knock away the fact that the downturn in the oil prices has affected our overall volume. Again, I can only really talk to the Scotland-China statistics, but that was certainly the case with the 40 per cent increase in export to China last year. I think that the biggest chunk of that was oil products and petroleum products, and that can largely be put down to an upturn in the oil price on the positive side. The more we can do to encourage more companies to export for the first time, the better. Clare, I don't know if you want to add anything. I agree with all that has been said. I think that ambition is good. Whenever agriculture in Scotland is never going to compete on a stack at high and sell at low massive commodity markets, we do very well. In terms of food and drink exports, we have smashed through targets. I don't have them in front of me, but the targets that were set in 2007 were reached in 2010, I believe. Now we have much bigger targets to do more, so it's very positive. Andy Wightman has some questions about internationalisation of exports. I have just a couple of specific questions for Neil Francis following the evaluation. The evaluation raised a number of questions and made some recommendations, one of which was to better integrate the work of SGI with Scottish Enterprise and the other high, etc. How significant do you think that is, and will the new strategic board assist in that process? I think it's a great point. It's a recognition that in order to be successful internationally, a company needs to do a number of different things. Sometimes they need to innovate their product, sometimes they need to enhance their leadership skills. That integration of business support is a really critical thing. Of course, it's something that we've been doing for a number of years. I think what the report was emphasising was that you need to carry on doing that. I think, as colleagues have said today, there are other aspects of international support that are provided by sister agencies and partners. It is important that we do all we can to integrate those into a cohesive set of services available to the customer. It makes it easier. We mustn't put another barrier in the way. The sense that the strategic board requires the agencies to collaborate most strongly will be a very positive thing for us. Another question about collaboration and integration is the relationship between SGI and the wider enterprise network and the Department of Trade in the UK Government. How is that relationship working? Is a critical relationship obviously with Brexit? I think that it is a very critical relationship. I think that what you have now is, in terms of the Department of International Trade, it has a much broader remit than its predecessor, which was UKTI. Our principal relationship as SDI with DITs on the operational delivery is very strong. There are some differences market by market of how we work. In some markets, we work extremely well. In other markets, there is room for improvement. That is not me being critical of either DIT or ourselves. I am just stating the fact that we could do more to be more collaborative in certain markets. In general, it is a very positive relationship. At the end of the day, we are trying to achieve the same outcomes, which is support companies to enhance and increase their international trade. The other aspect that is really important with DIT now is the whole trade policy. Of course, that is not only in relation to the outcome that would be when we exit the EU but also what we are doing in terms of trade policy with the rest of the world. That is from a Scotland point of view being led by colleagues in the Scottish Government. John Mason, one last question about environmental impact. Thank you, convener. Clearly, as we move things around the world, there could be an environmental impact. I suppose that if all the Russians drank all the vodka and we drank all the whisky, we would not need all the ships and lorries to move between them. Do you take environment on board when you are looking at trade how to go and mitigate against some of those environmental issues? Are those issues for you? I think that you are absolutely right that moving things around the world has got an environmental impact. I cannot step away from that. From an environmental impact, from an engineering manufacturing point of view, the circular economy is a massive opportunity for Scotland. I think that it is a massive opportunity because it is something that comes with a carat and a stick. The stick being the environmental impact that we do not do something about it, then things will not carry on as they are. However, the carat comes as that for many businesses that are manufacturing new OEM equipment, the margins and therefore the sustainability of the company for low-margin new equipment business is difficult. Those companies that have been getting more actively involved in refurbishment, repair or new manufacturer using more techniques that are aligned to circular economy outcomes are seeing the benefits in terms of their overall sustainability because the margins are better. Many companies will say, and certainly the companies that I was involved with, it was true that we paid our bills from our new equipment manufacturer and we made our profitability on our aftermarket sales and service. The margins on refurbished remanufactured equipment are more akin to aftermarket sales and service, so there is a carat that might come at a slight shrinkage in terms of revenue, but it is a more sustainable business overall. If I go back to an example that I gave earlier and forgive me, I cannot help the engineer in me, but I saw something that really caught my eye, which was one of those companies that I talked about, that is selling. They were manufacturing casings for satellites selling in Tiddily. In the aerospace industry, one of the key metrics that they use is the thing called buy-to-fly ratio. Buy-to-fly ratio is, in its essence, talks to the circular economy. The buy-to-fly ratio is that if I need to make a satellite casing out of Incanel and I need to buy 200 kilograms a billet of that, and then I gouge out 180 kilograms for the middle to make the casing overall, then my buy-to-fly ratio is not so good. If I come up with a way of manufacturing that builds up the material layer on layer and comes up with the same structurally sound component, I win the competitive advantage. It is an example where the idea of manufacturing things in a different way, which has a much, much less environmental impact, can lead to competitiveness and better sustainability. Will you come on? There is perhaps one final question, which may also touch on what has just been said by Paul Sheehan from Gillian Martin about best international practice. Yes, I am going to ask about Brexit. Paul has led on to what we have had a historical reputation as a country of invention, innovation and manufacturing. However, intellectual property is key to that, and it will be post-Brexit in particular, given that IP is something that is protected and, as I said, it is administrated by the EU. We have got the international trade minister in front of us on Thursday, and I want to give you the opportunity, with Claire Slipper and Paul Sheehan, to ask what you would like to ask him about protection of geographical indicators, the trademarks and intellectual property that your industries have as an ask in terms of clarity now, given that it has not really been discussed in any of the transitional papers. I take that very quickly. I think that our question would be are the GIs important to them and are they going to be protected? We have seen in previous trade deals most recently the seated deal with Canada, the protected geographical indications were left out, which left certain products that we have here in Scotland, such as Scotch beef, quite exposed. Having done some investigation into why that was, it appeared that somebody within DIT had just purely forgotten to include them on the schedule. That is a major area of emphasis for us. Perhaps that is not shared elsewhere with our colleagues in the rest of the UK, but I suppose that I would be very interested to hear directly from the minister whether those are valuable to them. That is key to Scottish farming and food and drink production journals that we have heard today. In terms of the intellectual property for things such as engineering, innovation and manufacturing, the intellectual property is key to that, too. Once again, the concern there is that there are other ways to protect your intellectual property, depending on what that outcome looks like. The concern is that it takes a lot more effort and spend and resource and time and effort than it does just now, and that is a concern for those companies that are exporting. Do you think that the UK is ready for that? Do you think that we have got the things in place? I have no idea. It is an area of detail that I do not know. I will ask what is now the final question. Are there any specific examples in the international field of public support for internationalisation that we in Scotland could learn from? Are any of you aware of, or do you have any specific country or example that comes to mind? An example that I would draw from is not particularly around public support, but I have a colleague who has just come back from a study trip to New Zealand to look at the livestock industry over there and how they work with their Government to export. It is a very international outlook that they have in terms of the export of lamb in particular in New Zealand, the export to over 100 countries. The point that my colleague made when he came back was that he was absolutely blown away by the amount of linkage between industry and the primary producer at one end with the processer and the Government. They were all very much single-minded on what their aims and ambitions were and it was to export, export, export. As I have said in the course of the session, our biggest market is the home market. We are not going to purely always be focused on an export market, but the lesson that he learned was about that real integration from Government right down to the primary producer on the ground. They were all very much aligned on what the priorities were, which I think that we could perhaps do a bit more of in this country. Just to add to that example in New Zealand, we talked a little about the importance of developing an international narrative and a brand position and reputation. Again, New Zealand has done that successfully over a number of years and the ability to align all aspects of their society to a common ends in terms of the way they project themselves internationally is something that is worthy of looking at. I am just going to give another example. It is coming from the idea of what we can do and what we actually do. My most recent example of that is the country that I was most heavily involved in working in was in Italy. The thing that struck me in Italy was that I did not see any—as I said before—a lot to be proud about what Scottish manufacturing and export is. There are a lot of good news stories and I certainly did not see something where I thought, oh wow, Italy is doing engineering manufacturing much better than Scotland. In some cases, this is quite the reverse, but coming back to that point earlier about who is flagging the flag, who is promoting that for Scotland and whether Tom's comments about negative comments hurt it, if you look at the press in Italy, look at the big dailies, you will see a manufacturing and export story on the front page every single day. You will see their politicians, their business leaders leading by example in that respect. The point that I have taken from today is that it is all of our responsibilities by lead by example. It struck me that I would come home and look at our daily quality newspapers and at best would be on the back page. I go back to Italy the following week and every day I saw something about engineering manufacturing. It is in all our benefits to raise that profile and try to make sure that we are leading from the front in terms of exporting and making things as good on the front page. Thank you very much. That is a good point at which to finish the session. I thank you to all of our guests for coming in today. I will now suspend the meeting and move on to private session.