 Good morning, everyone, and welcome to the 10th meeting of the Economy, Jobs and Fair Work Committee. May I ask everyone to turn off or turn to silent any electronic devices they have on them so that they do not interfere with proceedings? The first decision on the agenda is a decision by the committee to take items 3 and 4 in private. Are we all agreed that these items should be taken in private? Yes. Thank you. In our first session, we are looking at the economic impact of leaving the European Union. And we have three guests today who will be giving evidence. They are Neil Francis, International Operations Director of Scottish Development International. Welcome. Alison McRae, Senior Director Glasgow Chamber of Commerce. Again, welcome to you. Professor Brad Mackay, Chair in Strategic Management at the University of St Andrews Management School. Again, welcome to you, Professor Mackay. I will ask perhaps a general question before we then move to other more specific questions that committee members would like to put to you. Just to say that you don't need to press a button or anything to speak, the sound desk will deal with that. If you wish to come in on a question or point, simply raise your hand as the discussion carries on. My question to the three of you to start off is what do you see as the top priorities in terms of leaving the European Union from the point of view of challenges to the Scottish economy and also opportunities? Perhaps start with Professor Mackay. Ideally, when you talk about the range of different scenarios that could evolve and what the implications of each one of those are for both the Scottish economy but crucially given the configuration of the British economy, a soft Brexit or something that kept access to the single market would be certainly desirable for a whole range of different reasons. I think that particularly for the Scottish economy, immigration is absolutely fundamental as well. There are obviously very particular demographic challenges that Scotland is facing but also when you look at a range of different industries in Scotland, they are really very reliant on having particularly skilled immigration but in some cases non-skilled as well. If you think about financial services, for example, that relies on being able to fairly easily recruit top talent, you think about the university sector, which is hugely reliant on faculty, research funding, students. You think about biotech. All of these different industries are hugely reliant on having that sort of easy access to top talent and it gives Scotland quite an advantage in a number of different areas. Depending on what comes out of the negotiations, a hard Brexit where the UK doesn't have access is outside the customs union and the single market. I think that we would pose some particular challenges in terms of costs, of increased complexity and difficulty in trading with the UK. I know that there has been some talk of a repivot towards places like India and China, emerging markets, maybe the US, Canada and other places, and of course those are all very real and very important opportunities. The reality is that most trade, even in this global world, is still regional. When you look at Canada's top trading partner, it's the US. If you look at the US's top trading partner, it's Canada. If you look at Australia's top trading partner, it's China. They call it gravitational effects. Effectively, there are certain location advantages to trade and so I think Europe will always be very important, but you could see in a hard Brexit whether the UK doesn't have access to that single market where that becomes more costly and more difficult. In particular types of businesses, that might mean that they have to make decisions on whether or not the competitive environment that exists in Scotland or exists in the UK more widely is still attractive enough that it compensates for increased complexity and cost in dealing with the European Union. On the other hand, if you get a scenario where there's a soft Brexit or the UK still has access to the single market, that might mitigate against some of those different challenges that a hard Brexit would pose for the economy. Should I stop there and then...? Yes, thank you. On the one point, you mentioned universities and access to people from across the world. I take it for example that Canada is not an EU member. Is there a problem at the minute with universities being able to employ staff or bring researchers in from non-EU countries? No, there's not, although I think it's getting more difficult to employ people from outside the EU. What I would say is that you look at Scottish universities in particular and they would have a disproportionate amount of faculty from the EU. That would be the same with students, that would be the same in terms of research networks. They're far more integrated with the EU than they would be with Canada or the US or Australia or other places. That's not to say that there still aren't very strong connections there. The reality is that, because of our proximity and our integration with the rest of the EU, there's a disproportionate amount of faculty, students and research funding that comes from there. Alison McRae. Yes, good morning and many thanks again for the opportunities that present some evidence to you this morning. I think that I'd probably respond initially by saying that there are a couple of levels that I'd like to come at this from. The first of which is a Glasgow-wide basis. Members may be aware that on 10 October Glasgow came together in the form of the Glasgow Economic Leadership Board, which is chaired by Professor Jim MacDonald of the University of Strathclyde, alongside Glasgow City Council and the Chamber to publish recommendations and asks around this Brexit issue. That can be submitted after this committee meeting if it's helpful as evidence if indeed members haven't already taken on board. There are many issues raised within that in terms of challenges and opportunities. I'll mention a couple of them, one of which would be the desire and need for continued investment and fast-tracking of investment and infrastructure, particularly around the city deal, which Glasgow has, and also some access to the obliteration of business rates around greedy property. Glasgow is at that tipping point at the moment where it's at the new stage of greedy listed property and to help make that happen and continue to give confidence in the business community and investment prospects. We'd encourage that to be taken on board. In terms of the chamber specifically, Scottish Chambers of Commerce did some work immediately after Brexit, which we worked in partnership with them on, which looked at the member base across Scotland and what was the reaction. Predominantly, the biggest ask from the business community was about the access to trading relationships perhaps unsurprisingly. From our point of view, we are looking at collaboration within the city to unlock opportunity with the Scottish Government, with Scottish Chambers of Commerce. We have already started that process by signing a memorandum of understanding as part of a worldwide chamber of commerce network that we have with Manhattan Chamber of Commerce earlier this year and more recently with British Chambers in Italy and Milan. We intend to build on that, particularly around Berlin and the relationship between Glasgow and Berlin on the sports championships in 2018 just to give you a flavour for that. I think that an opportunity would be consolidating relationships through the network worldwide of the chambers of commerce. Business-led organisations is definitely one. Of course, the free movement of talent which is undoubtedly going to come up and that would apply from us as a city point of view in terms of skilled labour and also access to students and we welcome and support the Government's view to continue that. Thank you. Neil Francis. Thank you, chair. Scotland is a small economy, just over 5 million people. What we know is that our future economic prosperity will be largely dependent on how we make our way in the global environment. The internationalisation of the Scottish economy remains a vital thing for us to do. So anything that makes that challenge more difficult is something that we wouldn't unduly welcome. Now, in terms of our relationship with the European Union, it is multifaceted, it is complex and it is wide-reaching. In terms of my own role, I'm going to really speak about the trade environment with the European Union. What we do know is that the location of the European Union isn't changing. Europe will remain to be where it is and it will remain a key opportunity for Scotland's products and services. So whilst the framework in which we might have in terms of our trading relationships with the European might change, I think that the opportunity for Scotland's companies to continue to sell its products and services will remain very strong. I'll go to Gordon MacDonald now who has a question relating to exports and imports. I just wanted to review on what you thought the impact on exports and costs since the Brexit vote. Given the devaluation of the currency, what impact has that had on exports and costs to manufacturers? Who would like to? I'll go. I think the starting point is we have continued to work closely with both our long-managed companies. Those are the companies we have an ongoing relationship with since the announcement of Brexit. On balance, what people are saying to us is that they remain eager to understand more about the impacts of the Brexit but that they are near to mid-term but remain slightly more positive than neutral. To answer your question specifically, obviously the devaluation of sterling against the euro means that it has given a greater opportunity for some of our exporters to sell into those markets. That's to be welcomed. Certainly we are seeing some anecdotal evidence from the company base that says that from existing customers they're seeing an increase in terms of the volumes of export and that they put down partly to the difference in exchange rates. I think obviously that picture changes slightly if you are importing raw materials or components in order to make that final product. Obviously that switches round that the cost of imports are more expensive. I don't have any kind of quantitative evidence at this point on how that is playing out but of course the other thing is as imports get more expensive into the UK it does provide our companies the opportunity to sell more into the UK market as well which is also a positive thing. Did you follow up Christian Gordon? I thought that somebody else would want to come on up. First of all we can say that British chambers of commerce have noted a slight increase in exports since the referendum and it's slower pace than pre-referendum but there has been an overall tone of slight growth. We at the Chamber of Commerce operate and are accredited by British chambers of commerce national certification service to allow companies to sell their goods overseas. We've noticed considerable growth in the last three months by increasing uptake and that service by over 50% in those last three months. You could argue that that might be attributed to currency variations or the quality of the business offer but all we can do is tell you what we're experiencing at this particular moment in time but from our perspective it still affords an opportunity to build on. That's slightly different from what I'm reading from the CBI. The economic forecast that was just produced this week said that on a survey of participants on their industrial trends survey it found that 32% of exporting manufacturers thought that sterling's depreciation was a net positive while 47% considered to be a net negative with 22% saying it had no overall impact. That's slightly different from what you were saying Neil, where you thought it was slightly positive. They're highlighting that 50% more think it's negative. I think these SNAP surveys will show different results. I think it also is understanding the structure of our economy and I think perhaps in Scotland we have less as a percentage of our total company base of mainstream manufacturers that will be importing components and what have you. That may account for it. Certainly if you look at food and drink which is one of our biggest exporters then they don't import very much to get the produce from around Scotland so you can see why a devaluation in sterling would be a really positive for them. Yesterday we met with people involved in the meat industry and they were suggesting that volumes weren't increasing and part of that was because of the whole debate about Brexit and retailers in EU countries were actually reducing the amount of shelf space for Scottish meat products because of the anti-EU feeling that they thought was emanating from the UK so while I accept that we don't have the raw material issue to look at we could be losing sales. I'm sure Stuart James who I think is coming in later on to give evidence will be much closer to that. I think the message we are giving to our the companies we are working with is that we are assisting exporter with customers in the European Union at the moment. What's really important is that you re-double your efforts of having good relationships with your customers. Businesses buy from businesses and the politics takes care of itself and I think that's what we are encouraging people to do is be really close to your customers and certainly we are hearing little or no negativity about people saying I don't want to buy from you any longer because Britain is coming out of the European Union. We certainly haven't heard much of that at all. The food and drink sector obviously has a worldwide reach but going back to the meat industry 96% of the exports are to the EU. If that market was to restrict in some way, what capacity has the likes of DEFRA got for negotiating trade deals in order that we don't lose market share, we find new markets? Where is any capacity within the UK Government to negotiating trade deals? I might be speaking slightly out with my range of expertise here but I'll kind of enter into the spirit of your question there. If you look at trade agreements in the round at the moment trade agreements usually comprise of tariffs and then non-tariff barriers to exporting. Our relationship with the European Union at the moment is based on what I would describe as total conformity so there are no non-tariff barriers because we have single regulations for health and safety for food standards for fire retard and everything you like and we have no tariffs. Going forward you're trying to envision a situation that would make trade more difficult so that's an interesting thing just to think about. Clearly in the recent past we have seen agreements being reached with other parts of the world in terms of food and drink in terms of beef going back into the US cheese I think fish going into Asia so there's always I think the capacity to come to arrangements with other territories for certain categories and I think that whole approach you know at the moment the US is our biggest single international market 4.3 billion I think 14% of our international exports and of course we operate largely under WTO regulations with the US and their tariffs but you can still do trade and the important thing is from our perspective is if our companies are producing high quality products and services that meets the demands of global customers then businesses will always find a way of connecting in a mutually beneficial way that allows them to exercise trade internationally. I'd like to bring Gillian Martin in here and perhaps then if others on the panel want to come in on the previous points or this question they may. You've all at one point mentioned talent skilled labour but one of the issues for many companies in terms of manufacturing and exporting of produce of any kind particularly food and drink volume of labour not necessarily skilled labour myself and Lline Care were up at a fish processing factory in Peterhead yesterday which had 90% of their employees were from Eastern Europe and would be classed as unskilled labour and I'm just wondering if when you were putting your asks together was that a consideration as well not just necessarily access to skilled professional expertise in terms of the volume of labour which would allow us to manufacture the products that we're exporting? Who would like to respond to that? Alison McRae Thank you for the question. I suppose the answer is we want to make sure that we have fit for purpose workforce whatever sector that applies to and as opposed from Glasgow's point of view we'd like to think that we start from a position of strength around the fact that the UK outside London and the HFE sector supports and sustains this position and it's one of our crown jewels but we've got 190,000 students in the city and there's 15,000 of those foreign students so the ask around making sure that there's access to EU students coming into the city is really important to us in terms of the wider ask on on labour we want to encourage a vibrant workforce and I think that's really important to make sure that we have that. There's a risk by always mentioning skilled labour talent that you're missing a fundamental thing of volume of workers which are actually sustaining quite of the very successful Scottish industries you mentioned fish, food and drink which actually on paper people coming over and facilitating those industries have not had a university degree are not termed as skilled as such but are absolutely vital to the Scottish economy? Well certainly in terms of the hospitality and tourism sector that's one of the sectors where there's another major need for that labour and to ensure that it's coming from the EU's a priority for that sector and I know that Scottish tourism alliance will have submitted evidence already and probably submit further evidence to that fact, it's critical. Thank you, perhaps on that point I'm just wondering we had a witness in our session last week Stephen Boyle who said the following I would turn quickly to the fact that in Scotland a very large proportion of the working age population is still outside the job market by all means focus on the actions that you can take to try to secure a good deal on the free movement of people but it is at least as important to try to draw more people back into the job market because that is in a sense a form of internal migration that you could think about drawing on. So looking forward there may be areas of Scotland where there's very low unemployment so it can vary from place to place within Scotland but is that something that should be focused on moving forward the large population within Scotland already here that is not in the job market? I think it's really important for economies to support as many of its citizens as possible into productive employment. I think that's an absolute given. I think we do need to ensure that we are developing an appropriate skilled workforce that meets the demands right across our industry sectors and also by the types of employment opportunity so I'd fully agree continuing to focus to ensure that many of our citizens have appropriate gameful employment is critical. Professor Mackay I think did you want to come in on that? I would agree with that as well. I think that whatever materialises the negotiations it's going to mean a reconfiguration in all kinds of different ways so a focus on competitiveness and ensuring that Scotland remains competitive across a whole range of different areas is going to be important no matter what form Brexit takes so skilled labour is a big part of that training I think moving up the scale ensuring that we also have a pool of really talented people that can take on senior positions and lead in what will probably be a more competitive world a focus on productivity and innovation also going to be absolutely fundamental ensuring that businesses have the opportunity to look for opportunities around the world so all those different areas are going to be no matter what materialises from the negotiation are going to be important so I would agree with the statement. I do wonder though because I think Gillian Martin's question was more about low skilled workers so how does that fit together with leaving the European Union and looking forwards where are these low skilled workers going to come from because although there may be large numbers in the population present in Scotland who are unemployed is that sufficient to cover that's the point that's being made because it's not just high skilled I can clarify actually it's not really that point because actually I'm talking about a situation where we have large volumes of people from Eastern Europe who are doing jobs into quite tight labour markets and I'm talking about the northeast of Scotland where there is not high unemployment and there are not a lot of Scots actually doing those jobs for example in fish processing and that's really where I'm coming from here and in terms of sore fruit as well there is not a large volume of Scots actually willing to do those jobs or wanting to do those jobs I think you make it it's a good point and in my opening statement I said skilled labour but I also said skilled labour and it's for sectors like agriculture, hospitality construction, I mean there's a whole range of different sectors that rely on that migrant labour and even if there was the prospect of switching to more of a domestic source that also has an implication in costs as well and whether or not these businesses can remain competitive if their costs are going way up so I think there's a whole host of different issues that have to be unpacked but in terms of what is likely to emerge from Brexit it does mean a reconfiguration and that includes where different types of businesses are recruiting their labour from what it does to their costs in some cases although obviously not in all where they choose to locate the fish processing plant is obviously probably pretty situated in where they're currently operating and so it's going to provide a huge challenge for them I think trying to think through that I think just to add there for May I think again companies can't grow and it's companies that grow the economy if they don't have access to the right quantity and quality of labour so I think your point is very well made I think it would be in Scotland's interests that we found a way of ensuring that going forward our businesses, our companies can retain access to the right quantity as you put it and quality of skilled people that they need to grow their businesses Gil Paterson I think you might use this question I've got in the second panel but I'll just briefly just in case there's some answers to it I'm interested in those folk that actually are better make a declaration because my business we import quite a substantial bit we're in the automotive industry and we deal not in parts but we deal in coatings very sophisticated materials particularly on cars rather than buses and things like that so my question is in regards to almost all of that table product and I'm talking about in Scottish terms we don't do a lot of manufacturing in Scotland there's one caracender line in Glasgow a lot of folk don't know about so that's one company but I'm talking about all over the country where you have repair shops and almost exclusively all of that material very high end very expensive material is actually from the European Union and not manufacturers we don't have as far as I'm aware we don't have any manufacturing for that type of material so I wonder if you have any information in regards how the pound itself in the strength of it is affecting importers and what would you see the light outcome if it's a hard Brexit and so they will have the cost of the pound and the end of cost of having to bring it into the country Professor Mackay maybe if I could start very generally and then come back to your specific question so the stuff that the research that I do and where my area of expertise is in really looking at how businesses view events like referendums it started actually in the lead up to the Scottish referendum where we did a lot of work around business perceptions and how they were reacting to the independence referendum and we developed a framework which explained a lot of those responses and then we looked at how businesses were responding in the lead up to the European referendum and the framework held up pretty well and it comes down to a number of different factors which would include things like what the ownership structure of the businesses is a private, is it employee owned is it publicly traded is it a partnership it comes down to where the bulk of trade is is it in Scotland, the UK, Europe global obviously different factors to do with the actual configuration of the business so customers, suppliers employees and where they're attracting that talent from and if you start to look at different sectors and different types of businesses through that kind of a lens and you start to get patterns so coming back to the question of the CBI survey when you see a lot of these different surveys some of these different industry organizations represent different types of businesses so you tend to get different types of responses and how a lot of different organizations even in the lead up to the EU referendum were responding were very much a function of the type of business that they were coming from so if I can take a couple of prominent examples if you take James Dyson of Dyson or Lord Bantford of JCB for example there's two examples of both those companies are private and there's two examples of both those companies are private and there's two examples of both those companies are private the fact that they're private means that a lot of the risk of whatever happens is assumed by the individual rather than shareholders they have to be paying attention to their customer base outside of the UK is generally very global so they're not as exposed to the EU as for example other types of businesses so in some ways it wasn't a surprise that they were coming out pro-Brexit but there's going to be lots of other businesses particularly for example American businesses employment 1.2 million people across the UK a lot of those businesses are in the UK for location advantages in accessing the wider EU so when you begin to look at the configuration of these businesses where their customers are and so on you begin to get very distinct patterns the type of business that you're talking about where particularly in the automotive sector it's highly highly integrated across the EU and particularly for businesses where most of their market is in the UK but their supply chain is in the EU it's going to be a very tough challenge in either reducing costs so that their costs aren't going way up or in some cases where they can reconfigure someone that supply chain in the UK so I was talking to a business as a manufacturing business very much in a similar situation up in the northeast of Scotland the employee owned all of their customer bases in the UK supply chain is primarily in the EU so with the depreciation of the pound their costs have gone up by 20% and they're now losing money so they either have to figure out how they reconfigure their supply chain so that they can be doing more of their total manufacturing in the UK or they're going to have a real challenge in adapting to the chain's circumstances particularly given their employee owned business so it's not like they can just move around some of their UK manufacturing so I think to answer your question I mean it's it seems as though the direction of travel for the UK government is that the automotive industry is going to be one of those industries where they're going to try and negotiate some sort of a carvert or deal and that actually isn't unprecedented before the free trade agreement between Canada and the US there is the automotive pact which was about 20 years before the free trade agreement came across if they don't get that or for whatever reason they're unable to negotiate it then it means that businesses like yours where the supply chain is primarily in Europe and the automotive sector or the market is primarily in the UK will either have to figure out ways of reducing costs or where they can reconfiguring their supply chain so that it's within the UK or alternatively depending on what other types of factors the UK government might introduce to mitigate some of those cost effects by a depreciated pound I think the other thing to mention too is that probably where the pound winds up at its natural level will depend very much on what gets negotiated out of that out of that Brexit negotiation so in the case of a hard Brexit I suspect that probably you're looking at I could be wrong but probably a lower depreciated value of the pound in a soft Brexit scenario it might begin to creep back up to levels that perhaps it's historically been at I don't know if that answers your question or not but just a... Is there anyone else? I'm just going to concur entirely with Brian. As I said earlier in answer to Goan's question other than some of the anecdotal things that you would have seen in the press we don't have that much evidence coming from importers people who import a lot analysis is absolutely right if the price to import increases too much then that will on one hand present opportunities for businesses to start up because they can see the value they can achieve is high or as Brian said there's an opportunity for reconfiguration of supply chain i.e attract inward investment into Scotland that can add to Scotland's economy as well Perhaps just two last questions on the import-export area first of all from Jackie Baillie and then Liam Kerr I think wanted to get in and then we'll move on to a different area if we might I wonder whether I could just explore some of the export statistics that we have and make the link between Pessemer Cymru of proximity to market the latest statistics we have are actually for 2014 they're the latest published and I understand exports were down overall by 3.2% but if you actually interrogate the figures some more exports to the rest of the UK rose by 1.5 billion and that's already the highest sector we export to but exports to Netherlands Germany all down Netherlands by 22% France by 8% so I'm kind of curious if we are exporting less to the EU than we did in previous years is there any evidence to suggest any reliable evidence not anecdote to suggest that that's improved in the last two years are we exporting more to the EU than we did previously Neil? So Jackie thank you very much in the previous committee when we looked at the whole issue of Scotland's internationalisation one thing that I think everyone readily agreed on was the imperfectness of export statistics so we all know there's a lot more need to be done to get heavily reliable stats I think we do see it's interesting the time frame over which you look at things and I think currently 42% of our international exports are destined for the EU according to 2014 and that is as you said rightly down 3.2% on the previous year and as a proportion of Scotland's total exports the European Union has been decreasing since 2002 and I think it's down quite a lot as an overall percentage but that's of course that since 2002 we've been growing the total size of the pie and we've seen much more rapid growth in other parts of the world in the US and in Asia but obviously they have been starting from smaller basis so I think to get back to your question the European Union at 42% of Scotland's total exports is still important but it's probably was on a trajectory to grow at a less of a rate than the rest of the world in terms of our international exports but I think it is interesting as an observation that our single biggest market as I said earlier on is the USA and we do not have any trade agreement with the US at the moment and I think that just illustrates that where you have the right products and services and customers are looking for those then you can find a way of executing mutually beneficial trade Just so we're careful with that because you said 42% of all exports is actually all international exports language becomes particularly important to your context I always think that exports are international but yes you are absolutely right and we do know that the rest of the UK is around 42 billion 64% is the rest of the UK No thank you I don't know if anybody else wants to contribute at this point Sorry I was wondering if we could bring Liam Kerr in with the question I'm just conscious of time and then we'll bring the rest of you in on either point Perhaps Just by happy coincidence I'll follow on from Jackie Baillie's question Just to go back Professor Mackay you talked about most trade being regional but Mr Francis talked of globalization being key Mr Francis can you comment on why we don't do more trade outside the EU and can that be changed either as a function of Brexit or otherwise and if so how Well perhaps Mr Francis could comment briefly and then Professor Mackay and Alison Mackay could also take the opportunity to respond on either of these points So I'll be very brief I agree with Brian's comment that when you're growing your business you've got saturation in your local market what you do you look for the next market closest to you so proximity is always going to be an advantage that's for sure but you also then have to look at the size of the markets the growth of those markets as well so what we know is some of our markets further away the US or Asia are potentially extremely large markets and they're growing at a faster rate so I think it's important with all of these things at a Scotland level that you try and do the two things you carry on developing your relationships with those closest to you to get your base for your international trade whilst also looking at those emerging economies that are going to perhaps be more dominant in the future Now one final point there the further away the market is the harder it is to penetrate the differences usually in the business environment in the culture, the customs the languages make international trade harder and it usually takes a longer time to actually get a toe hole in the market and that's why it's really important from a government's perspective an agency like SDI does support businesses to do that Sorry Brian I agree with that just a couple of things I would add in terms of a lot of the stuff the manufacturing numbers and so on Aside from the fact that there's been a vote which is to leave the European Union and there's been a depreciation in the pound nothing else has happened and the way businesses normally react to a lot of these types of bigger issues is they don't make immediate decisions they wait and they see and they look at the direction of travel the final outcome or resolution to start making business decisions about where to invest, where to locate and so on but there is a wait and see period and I think we're still into that so a lot of the stuff that's floating around in the press I think one has to really look at fairly critically the other thing I'd make a comment on is the configuration of the Scottish economy on the one hand yes it's 64-65% depending on what statistics you look at of exports that go to the rest of the UK 15% to 19% depending on what statistics you look at go to the rest of the EU but one of the areas where Scotland is likely to be slightly more resilient than the rest of the UK is some of the big exporting success stories are global industries so you think about whiskey for example you think about oil and gas and given the nature of some of those big success stories and exporting in Scotland there probably is quite a substantive opportunity to continue to look at global opportunities it's not to say that the gravitational effects of the EU or the rest of the UK for that matter go away that's not the case at all but the reality is that because of the way these industries are configured it does present some more global opportunity for them Alison just in response to Jackie's question it's a practical answer I hope to support the evidence but without it being a formal survey so obviously being a membership organisation I don't know if I'm going to be a member but the countries that I mentioned earlier that we're already working with in terms of memorandum of understandings with respect to chambers we've also gone through a process to select which countries we're going to work with which at the moment are America, Italy, Germany, UAE with others under exploration and it's a range of products that we're finding that members are active with ranging from alcohol, electric goods and engineering but it's probably useful to just reiterate those countries number one the members are active in those territories so there's a good evidence base of that there's scope for much more activity in those markets based on the feedback that they're actually giving us during their discussions with us we can see direct flights going out of Glasgow which makes access and the movement of goods easier and then also we have a presidents club where we can work with people like Global Scots who are interested in Glasgow and open doors in market for us at that end so it's a very pragmatic and practical response without it being a macro answer to stats and exports I can understand that I think we're a bit I'll be very quick Please do I absolutely understand the logic of that so in my head if proximity matters then what are we doing to increase exports to the rest of the UK through the Scottish economy all the evidence you're telling us is that's the quickest route in so in both responses I think it dealt with the rest of the world as well as the rest of Europe but what are you doing with the UK? So I think Jackie from our perspective the UK is business as normal so I think our ongoing work with our account managed companies is about helping them in all aspects and the UK market will be an important part of those discussions From an STI point of view it's part of our relationship we have as Scottish Enterprise to support the companies Thank you I'd like to move on now to Richard Leonard who has a question in another area Yep but it is part of STI's job Neil isn't it investment and I've just got a couple of questions on that part of the task that STI undertakes the EY attractiveness survey which came out in May this year identified the key factors which have attracted inward investment to Scotland in the most recent past and it talks about the availability and skills of the local workforce transport infrastructure local labour costs availability of business partners and suppliers in that list of factors where do you think sits access to the European Union single market as a critical factor in attracting inward investment So a really great question I was hoping next week I'm coming to speak more in depth about inward investment I think but I'll try and do my best today so generally speaking inward investment or inward invest horse are motivated by two main factors one is access to market so they want to go somewhere because there's a market for their products and services or the other thing is they want access to resources and by resources I mean that could be people and talent, intellectual assets or physical assets for example a wind, a water and what have you so those are the two motivators so to answer your question where does access to the single market sit it depends on the type and nature of the business so if the inward investor is an R&D centre conducting global group R&D then its motivator is really about access to people access to collaborations universities and intellectual property so in that perspective they're probably less concerned about the single market however if there's an inward investor who is manufacturing something here whether it be cars or some other thing then they are probably much more concerned about access to the single market so it depends on the sector and the specific nature of the business I think Andy Wightman wanted to ask in this area a question as well yes thank you convener I'm just interested in the enterprise and skills review providing SDI with potential enhanced role as a separate organisation and I'm just wondering what your priorities are just now in response to the EU referendum and how the support you provide to business is changing and perhaps a question for the other panellist about what the priorities for the Scottish Government should be now in terms of supporting business shall I start yes and then we'll come to our other so I think our priority at the moment is to stay close to all the businesses we work with to understand their concerns to listen closely to them and then obviously to ensure that they in the first instance get clear information about what's happening as that comes to pass and as we all know nothing really has come to pass so far but staying close to our businesses listening to them and providing them with clear information is absolutely critical as time goes on I think we need to do two things we need to ensure one of the things we do with for our businesses is work with them on establishing an appropriate internationalisation strategy help them think through the pros and cons of this market versus another market so I think it's important that as we progress through this and the framework of what businesses will need to operate in the future becomes clearer that we help them digest that in the terms of their strategy of formulation we also need to look at the total range of products and services we offer and again we will be fleet of foot in terms of of those as we see the framework of Brexit unfold and I think that's really important we have seen the Scottish Government announce their point plan in terms of a trade board trade end voice increasing the STI footprint in Europe and we are very supportive of that and we'll be discussing with Scottish Government colleagues how to take that forward and I think it does reinforce a point I made earlier I think it was in relation to either Jackie or Gordon's question one of the big things for businesses to do at the moment is to ensure they stay close to those existing customers they have, especially in the European Union and I think that by having more resources on the ground in the European Union we will be able to help businesses to achieve that I hope that answers at least in part your question Andy Thank you, Professor Mackay did you want to come in on that and Alison? I would agree with what Neil said but it has to be done on a sector by sector basis to understand the specifics of how different sectors are going to be affected and how they might be supported but I think that thinking about the general competitive environment in Scotland, so some of the location advantages of being located here vis-a-vis the EU are either disappear or become more cumbersome or complex than thinking about the various things that Scotland can be doing to maintain a very attractive competitive environment I think the other thing too is in thinking about in particular the importance of immigration it's not unprecedented for regions within countries to have deals so for example in Canada and Quebec has an agreement with the federal government in Canada over quite significant control over its own immigration and that's something that doesn't rely on the EU it's something that could be done internally within the UK and I think if I were the government I'd be putting an awful lot of effort in seeing what the prospects of creating some sort of a deal within the UK to have more control over immigration that suits and can be tailored for the needs of Scotland and so I guess those would be the things I'd add to Neil I think Ash Denham had a question which may also relate to this area before we bring in Alison McRae I'm interested in sort of exploring this feeling that Scottish businesses are having in the sort of post referendum sort of period that we're in at the moment and I've noted that you earlier were saying businesses are in a sort of a wait and see pattern at the moment because there's a complete lack of information as to what the UK's position for trading might be in the future but obviously businesses do have to plan they've got to make contingency plans decisions about where to invest or what to invest in what sort of challenges are they facing then with the fact that there is so little information available for them in order to make these type of decisions I'd go into the very last Cray perhaps at this point and then perhaps Professor Mackay Okay thank you convener if I may go back to Andy's equation first in response to your ask around the priorities for Scottish Government in terms of helping the business community before we have our breaks in the Glasgow economy report which I should note includes feedback and endorsement by over 100 businesses across all the various priority work streams for the city so it is considerable buy-in across the city including the academic and wider business community and of course the local authority so in the first instance there's probably six key recommendations in that that I will just canter through what some of which I've referred to already is to maintain the structural fund programme post Brexit to the tune of £780 million and prioritise urban areas where the vast majority of Scotland's economic output currently is in terms of the business community I've mentioned city deal and fast-tracking infrastructural investment from that point of view again in terms of demonstrating confidence looking at committing to the transfer of surplus land holdings to the council to enable their inclusion in the city's strategic housing investment plan again, live and work in the city all very important factors around economic development skills all of the government agencies develop more collaborations across those agencies and with Glasgow and the cities in general in Scotland to support higher levels of city competitiveness and innovation and economic growth access to horizon 2020 funding beyond 2019 particularly for the university and further education sectors and then lastly a two-year moratorium on non-domestic rates, which I've already mentioned with specific reference to the business community and the kind of things that they're specifically looking at for comfort on at the moment understanding and identifying new market opportunities was the absolute top priority which is why we have been proactively looking at chamber to chamber links so we believe that it would be great if the government could start to look at collaborations of business-led engagement around trade to trade links priority markets and to help us develop those new market opportunities and explore what that could look like guidance in the future of EU funding has cited as the second most required answer in terms of reassurance and then building connections with European and the global chamber network in the round so those are just some specific pieces of evidence that we have Perhaps briefly in light of time I was just going to say in response to your question Ash I think it depends on the specific nature and scale of the business so large multinational businesses that have a significant footprint in Scotland are clearly able to and wanting to plan methodically to take into account the uncertainty and what might unfold I think the smaller businesses are running today to stand still so they are just doing their day-to-day let's make this business work Professor McKay you wanted to also I would agree with Neil and it comes back to those factors that I talked a bit before the vast majority will just be getting on to it so for those that have seen cost rise they will be looking at ways to mitigate against that some will have experienced a bit of an upsurge in exports because of the depreciated pound it's the larger businesses and you get two types of them the ones that are based here in the UK their head offices are in the UK or in Scotland and what we've seen in the past is that they wait and see but they also build in optionality so if they think that they may have to whether to invest or to relocate or locate activity they'll build in options as they're waiting for the picture to become clear and the direction of travel to become clear the other types of businesses that have their head offices elsewhere the multinationals often times they have pretty sophisticated business continuity planning already in place and some of that will also involve optionality of being able to reconfigure their businesses depending on what the circumstances are for those that don't have options built in for the scenarios that might commit a Brexit they'll be in the process of putting them in place and particularly for businesses that have big strategy planning departments for example I know that there's already work that's going on that's looking at the different possible scenarios and how they can reconfigure to ensure that they remain competitive in the future Thank you How is the business community responding to the way that the UK Government is handling this with the idea of issuing let's call it a letter of intent to one specific manufacturer and one specific sector? How are they perceiving that? I mean I've had very limited conversations so I can't really say except that we don't really know what was in the letter of intent so that's fairly opaque my guess is given competition rules so they couldn't have done something that was just specific to that business and if I had to take a wild guess I'd say that probably given that Carlos Ghosian is a smart guy he knows that it's not within the UK Government's gift to carve-out automotive that might be a desirable outcome for the UK but it's not, it's going to be a negotiation but my guess is that probably what she told him is that she'll ensure that either it's going to be a very very attractive environment for them to continue to to trade from which probably means thinking about how they might mitigate against the potential for tariffs being put in place by the EU which probably means lowering corporate tax and other types of taxes to give them an advantage that way or alternatively potentially by giving the sector itself support if they wind up having their competitiveness deteriorated by by the result but she will have said something that won't just be for Nissan but there will be something telling in what she has said just by the fact that they've made such a substantive commitment to investing in the UK right thank you two final questions first of all from John Mason and then from Dean Lockhart and pardon me I'll give each of you an opportunity to come back on this thanks very much convener we have touched a little bit on employment and employability but that was the area I wanted to look at just a little bit more I mean Spice tell us that we've got 115,000 EU nationals in employment in Scotland and quite a large proportion of them I think it's 33,000 are in distribution hotels and restaurants and then there's other sectors all the way through I mean can any of you comment on why it is actually that we have so many or so few nationals working in different sectors within the economy are there fundamental reasons for that and also I'll take the question from Dean Lockhart and perhaps we can wind up with each of you giving your comments on these two questions thank you convener it's just to return to a question on exports I think it was clearly highlighted that the rest of the UK is the major market for Scottish exports someone mentioned that it is business as usual with the rest of the UK if there is a second independence referendum Professor Mackay I note that you're doing some research at the moment on the impact of the independence debate on the Scottish economy and on the UK economy as a whole so I wonder if in your wrapping up you could comment briefly on your initial analysis of what the impact might be if there is a second independence referendum on Scottish exports to the rest of the UK putting aside the non-material reasons for why a country may or may not want independence the reality is that Scotland effectively operates as a regional economy in the UK it's highly integrated whether you look at labour markets, you look at financial markets, trade patterns highly integrated with the UK so that for the foreseeable future is going to be Scotland's most important trading relationship and trading partner anything that comes between that is going to have a very challenging impact on the Scottish economy if you combine that with potentially being out of the EU as well that would be it's not a scenario worth thinking about to be frank with you but Scotland's number one priority has to always be in keeping that trade relationship with the rest of the UK open and fluid just by the nature of how integrated it is it's not inconceivable that you can change that over time it's a very challenging transition you have to go through to be able to reconfigure that does that answer your question or? Just add a little to what Brad said there I mean I think with our largest trading partner why would we try to make it more difficult or reduce the amount of trade we did with them going forward with the rest of the UK so I think in whatever circumstances that might play out then protecting the free trade or just that open market between Scotland and the rest of the UK would be paramount I just want to try and answer John's question otherwise we'll all just focus there I'm not an expert in the whole kind of skills employability environment but it seems to me that the requirements of those sectors the type of jobs they have in terms of the types of skills that require them whether you need language skills to operate in those jobs we'll all play a part in their attractiveness or relative attractiveness to migrant labour as opposed to Scottish Labour With that next was should we be worried about some sectors or can we treat them all equally or are the potatoes just going to stay in the ground because we are not going to get Scots to dig potatoes out the ground That's a really complex question and I think there's two things in terms of what's happening in terms of Brexit I think Brad's made the point earlier on that we need to do much deeper analysis sector by sector to understand the potential implications where the pressure points are and so on and so forth The other point I would just make in response to potatoes staying in the ground what we do know that one of the big kind of drags on the Scottish economy is productivity and we do know that productivity is particularly an issue a complex issue within tourism, hospitality and some of our food manufacturing sectors very complex issue but we do know that productivity is a big drag on the Scottish economy so I think we do need to wrestle with that particular question you posed and if it was easy I guess it would be the answer before now I suspect that we're not going to have time to go into it in great depth today I was going to say something I wanted to give Alison McCrae a chance to a last word is it were perhaps it will be brief in response to John's question similarly we don't have stats on that but they will exist in the city so it's just a case of bringing that to the fore and the answer to the very challenging question as Neil has already said with regards to the exports and referendum question we would probably just reiterate the point that will be known to many of you is that there are so many unknown factors within all of the referendum and that business does not like uncertainty and that's probably the main message that I would leave you with today is that on-going uncertainty makes it extremely challenging Thank you very much to all of our guests that completes this part of the session so we'll have a break until 10.45 and again thank you very much to all of our guests for coming today to the committee, thank you Well good morning and welcome to our guests today we have with us a number of guests and perhaps each of you introduce yourselves and just say who you are and the organisation that you're from we'll start with Brian Buchan Good morning everyone Brian Buchan, CEO of Scottish Engineering we're the representative body for engineering and manufacturing in Scotland we look after the interests of about 360 companies everything from SMEs through to the major players so the likes of Wood Group Babcock and the others so thank you for the invitation to give evidence Mark Hogarth has just arrived just introducing the guests asking each of you to say who you are and very briefly state the organisation you're from I apologise for being late Mark Hogarth, creative director for Harris Tweed Hebrides Scottish Leather Group and managing director of Bridgeway Leather Company I've never been to anything like this before so please be gentle with me Scottish Leather Group is based in West of Scotland and we've a turnover last year of 128 million and we're currently employing about 900 people so maybe not the biggest but certainly a very substantial manufacturer in Renfrewshire which I'm absolutely passionate about yes thank you I should have said we'll try and be gentle with our witnesses of course the sound desk looks after the sound system so no need to press a button or anything when you do speak and if you want to come in on a question or a discussion either simply do so or indicate by raising your hand and we'll get to that point when we get to questions so Alistair Sim I'm director of University Scotland the representative organisation for Scottish higher education leaders morning everyone I'm James Withers, chief executive at Scotland food and drink with the industry leadership body for the food and drink sector so we're a collaborative partnership at the main trade associations across the different food and drink sectors alongside the public sector and we're a membership body too so we've got about 360 members of us most of whom are food and drink manufacturers good morning everybody my name is David Williamson I'm the public affairs director at the Scotch whisky association around the world currently 63 member companies everyone from single brands single distillery companies like Kilhoman and Islay through to companies operating on a global basis like Edrington, Grants and Chivas thank you very much we'll start with a question from committee member Andy Wightman thank you convener perhaps you could indicate although it's early stages yet in terms of the outcome of your referendum what evaluations you've done on the potential outcome for your sector and what in broad terms you consider the most critical issues the most important issues are in terms of an outcome of the negotiations for your sectors who would like to start David Williamson perhaps thank you for us Mr Wightman as an industry was that we campaigned to remain in the European Union for a number of reasons not least access to an influence within the single market which is our largest market about a third of Scotch whisky exports and that we've done well as an industry in terms of the benefits we've secured through the EU's free trade agreements over the years over the summer the industry's done a lot of work looking at the range of different scenarios and our priorities are pretty clear looking at the single market and further afield in terms of the single market it's making sure as far as possible there's pragmatic non-disruptive transitional arrangements to whatever the new model might be whether it's EEA or FTA style type agreement that's important because currently single market rules cover everything from the bottle size that we sell our whisky and the label that goes on the bottle and the very definition of our product and it's important that there's continuity and certainty there looking further afield the industry at the moment is focused on encouraging as open and liberal a trading policy as possible and if we're going to be in a position where the UK is negotiating free trade agreements around the world making sure one we maintain what we have now making benefits we've secured for industries like Scotch whisky but also look further afield at where the opportunities might be in the future markets like India and China and trying to encourage trade deals that tackle tariffs non-tariff barriers to trade and make sure the geographical indication Scotch whisky is protected James Withers I would echo some of that and I would say probably at the start because the expert is to my left on that so my comments are really around other sectors most of the food sector rather than drinks lots of detailed issues but there are three that are top for us number one is trade so roughly 76% of all the food exported from Scotland that goes out of the UK goes to the European Union at the moment so continued access to the European market in as pragmatic and tariff free and sensible way as possible as a priority the other issue is then access to labour so approximately a third of our workforce in food manufacturing comes from the European Union it's absolutely central it's woven into the fabric of our industry it's woven into the fabric of our communities and both reassurance to the existing workforce and then on-going access to the workforce and beyond Brexit it's absolutely crucial to our ambitions and further growth and the final issue I would put in the top 3 is around access to future funding and in particular what that might mean for agricultural support obviously there's something in the region of 400 to 500 million that will be paid directly to farms through EU funding another 300 to 350 million through the rural development measures and that supports much of the raw material that goes into food and drink manufacturing so future trade with single market and funding would be our top 3 priorities well if I can maybe cover our top 3 priorities I mean responding to the first part of Mr Blitman's question I think we can see the risks and to some extent of our opportunities I suppose opportunities we can see what they are more clearly and we can actually evaluate at the moment because the things are still unfolding but I could pick on the three areas that are really of crucial importance to the university sector I would first of all see staff issues which will unpackage a bit student issues and research issues on a staff side I think there's huge issues about what the future is for EU staff and also what the future is for international staff at the moment we are proud to have about 4,600 EU staff in universities across academic and professional disciplines about 16 per cent of that academic workforce is EU now at the moment bluntly they're facing rather an uncertain future I think university principals will are doing everything they can to assure these people that they are an extremely valuable part of our academic enterprise and that we hope very very strongly that it will be able to continue on the current basis to contribute to universities but there are questions at the moment that can't be answered frankly about what is their immigration status if they order successors come to the Scotland in future can they send their kids to school on the same basis as UK citizens can they use NHS on the same basis as UK citizens and all these issues make it an extremely unsettling time for EU staff and a difficult time to attract staff from EU countries because there simply aren't answers to these questions similarly we're proud to have over 3,000 staff from outside the EU again huge contributors to our intellectual vitality and we need to be able to give them and their potential successors the assurances that the UK and Scotland will continue to remain a welcoming destination and that we won't be putting up unnecessary visa barriers to the residency in Scotland because we wish them to contribute on student issues I think part of the rhetoric of Brexit has really been about looking at the opportunities and obviously we're encouraged to look at opportunities as internationally as we can and this is a territory within which universities are already extremely active to give an example we've got 36,000 students overseas at Scottish degrees we've got overseas campuses for instance in Dubai and Malaysia and one that Aberdeen is just starting up in South Korea we're out there building our international footprint but I think what we find difficult is that while doing that and while particularly trying to attract international students to Scotland who really are a vital part both of our academic and cultural ecosystem contributing to our financial sustainability we're facing real barriers both in terms of the existing visa regime and in terms of suggestions that were made for instance in the Home Secretary's speech due to the Conservative conference that that will be tightened up even further and that universities will find it more difficult to actually attract international talent on the research side we have a kind of hierarchy of who are the main funders of research the biggest element of research funding comes from UK sources including over 260 million from research councils and 135 million a year from charities in the UK the next level down hierarchically is EU sources which contribute about 95 million pounds a year and the next level down from that is international non-EU sources which contribute about 37 million pounds a year so obviously the EU element of that research funding ecosystem is extremely important both in itself and as a catalyst for the cross-border research collaboration that really is part of the vitality of the university offer so as far as possible we wish to see that continue both for financial and for intellectual and academic reasons I think I'm probably aligned more with David Williamson as a manufacturer in Scotland exporting about 90 per cent of our turnover of which probably 80 per cent of that is within Europe so for us the three we'll probably cover that uncertainty around Brexit at another question but that obviously is a big umbrella under which everything else sits but for us the three top would be international trade duties and tariffs this situation is certainly unclear just now is certainly extremely uncertain and it does depend on what kind of Brexit we have and what trade deals are concluded both within the EU and outside the EU we as a company operate in very very competitive global marketplace our margins are always in low single figures but we do employ an awful lot of people and we do help with the balance of trade particularly in the automotive and aviation sectors margins are very very slim and the global competitors are willing to buy business just the size of them our competitor base is much much bigger we're not the size of Scottish Whisky but they are much much bigger and they're able to operate in very slim margins so the imposition of tariffs could make already extremely competitive business unprofitable or certainly less profitable and that in time may render some businesses unsustainable also could in fact in our future investments in Scotland so for us it's really really important that we get quick resolution and I don't know I've not experienced on how quick those resolutions can be but the longer this goes on if we look at Canada the length of time that it takes to take trade deals that in itself adds to the whole uncertainty in what happens the second impact for us would also be Labour we employ probably about 25 per cent of our 900 people are from Eastern European they've came over many years when primarily Poland when Poland entered the EU they are now skilled workers leather making is a skill it takes years to train people and many of those people are experienced and skilled workers so it is important that their future in Scotland is secure and indeed that we can secure other Labour as and when required the third for us as well is just about the whole perception of the risk and personal attitudes of our European customers trading with a non-EU supplier I personally travel the world it's what we do at Scottish Leather Group we build long-term partnerships with our customers we build relationships in person we're forever in airports all over the world travelling meeting people doing business they're just aghast all the people I've met since June last week for a week in business they're aghast that we have voted to come out of Europe and whilst there's no tangible evidence of detrimental impact in this area there's certainly a nervousness in some of our customer base about dealing with a non-European major supplier in some instances we are sole suppliers some of our automotive OEMs very much long-term partnerships come back over 30 years with some of them so they have a nervousness about what the impact will be and it's easier perhaps for them to choose a European partner rather than a non-European partner so although I haven't got tangible evidence of that yet certainly there are lots of questions about what this means for them, the customer so that's my three areas Mark I'll try to give some specifics as well as adding to the content from the other witnesses I would say the three elements for Harris Tweed would be market access currency and the third one which is less easy to define would be the notion of buying and that would be buying both at the wholesale stage but then the residual element of the consumer actually buying at retail as well just to give you some context Harris Tweed Hebrides was an openly pro-remain company I think about 90 to 95% of UK textiles and fashion companies were vociferously open pro-remain politics beginning with currency it's been widely reported that it's a positive of course a weaker pound makes exports better however we are 70% on exports but we are a luxury company like many of the products we represent on the witness panel the world market sees us being luxury so we don't want to trade on currency we don't want to trade on being affordable that does not have longevity moving forward yes there's obviously growth potential in the States there is growth potential in markets like Russia but we've tried very very hard in Russia most of our samples get sent back before entering the country so it's not easy to develop new markets Europe is a key market to give some context we have actually managed to crack Italy to sell Tweed to sell what is deemed by many to be a rough Scottish fabric to sell that to Italians is like the English sell in wine to France it's not easy in years to build that up and to go over those perceptions and that leads me on to the final part the third part which is the emotional consumption to be seen to withdraw from Europe is to be seen to withdraw from that fashion fraternity we're very very fortunate in that our main expense is will is will that comes from Galashiels through the British Will Marketing Board so we're fortunate in that level but it's these unknowns in terms of how the buying process is going both at wholesale and indeed at retail and ultimately it will come down to tariffs the new tariffs the new creation of new markets creating new markets from what was old single market which will prove very very difficult and I guess that all comes down to the politics what kind of Brexit we are going to get Brian Mocken did you want to yes please I mean I can echo much of what's already being said but for our sector 78% of our membership were in favour of remaining within the EU on the back of the collapse in oil price since 2014 this has been a really bitter blow to our sector in the round Scottish engineering and manufacturing is characterised by SMEs and our largest single market is the rest of the UK so we're not deriving a benefit from the weak pound the contra is we are suffering terribly from increases in prices of raw materials notably you take galvanisers are having to buy zinc from Norway priced in dollars have seen price increases since January not just related to Brexit but certainly exacerbated by it rise by almost 60% we're seeing the price of UK sourced steel rising markedly we're seeing nickel prices go up we can't pass on all these prices to the customers so what we're seeing is that businesses are trading literally on the margin you will take business if you can absorb the material cost your labour cost and your fixed and variable overheads beyond that there's virtually no margin I'm not hearing of anyone yet buying business but I'm told that that's potentially imminent so I think we need to be alert to what potentially could happen within our industry the point that's really quite important for us as well is free movement of skilled labour if you want to walk around the carrier under construction at Rysaith at the moment every sign on that vessel in English is replicated in Polish if it wasn't for the Polish welders and platers that we've brought in to do that work it wouldn't have been completed so we still need access to skilled trades I think the big thing for us will be hammering out trade deals what does the future hold because the word that's used repeatedly and I think with some justification is uncertainty the breaks are on hard in terms of capital investment and they're not likely to come off until there's clarity for the future thank you I should say some of the questions can be directed to a specific topic or area so the panel members shouldn't feel obliged to come in on every question but certainly they'll be given the opportunity as time permits to do so in regard to the various matters that arise Ash Denham has a question area that's already been touched on yes it was specifically for the university sector I went to visit Edinburgh University just last week and obviously we were talking to them and they're very concerned about a number of issues but I know my colleague Gillian Martin wants to come in on funding so I can find myself to the free movement and staffing issues so we know that Edinburgh University in particular makes a significant contribution to the Scottish economy and particularly to the Edinburgh economy as well and it was explained to me that about 25% of Edinburgh University's academic staff are actually from the EU so obviously it's really important for universities if they're going to stay competitive on the world stage they need to be able to recruit the absolute, I mean the best in the world so can you explain the challenges what the challenges going forward might be if free movement is restricted I guess that will lead to a drop in applications I mean obviously you can still you do recruit internationally but I believe that's a lot more complex I believe it's more expensive so would you like to speak to that in a little bit more detail briefly the lifeblood of universities is the free movement of talent and we don't want to see that restricted I think in relation to EU staff the effect on existing staff has been really unsettling because they just don't know what the future is for themselves their partners or families principals have been working hard for instance to make sure they've got access to advice services so that they can find out for instance if they're entitled to permanent leave to remain but there are still massive uncertainties and as I say, these are not just about residency they're also about your entitlement to public services and I think the experience that's already apparent in recruitment exercises is just more difficult to get a field of candidates that's got a strong EU element and you're not confident that the person from the EU is going to take up the offer because these questions are still unanswerable about what their entitlements will be and it's just it basically reduces our capacity fine, we're proud to have massive talent from within the UK and we do but universities are about the free exchange of ideas, the free exchange of talent that's what keeps us vital and so being able to draw that from the EU continues to be essential and international talent is equally valuable at a personal level obviously there are at the moment more obstacles in terms of having a limited number of sponsor licences for instance from the home office or cases where you're recruiting part-time academic professionals they're also active in the creative industries and they may not meet the sort of salary thresholds that are required for immigration from outside the EU so there are some issues there and my overall message would be we want to welcome talent from around the world that's what universities are for that's how we stay vital I'm just wondering have you seen a drop in applications for vacancies that might be open at the moment I couldn't quantify that at the moment I can really only go by the anecdote of people who are trying to recruit and there is a feeling that it's getting harder to attract a field a really strong EU contingent perhaps I might ask I take it that the university does give advice to EU staff on the issue of right to remain and indeed most of this is for a large number publicly available for example the UGov website that gives the indication that EU citizens who have been resident for five years have the right to remain permanently typically what universities are doing is giving access to advice services some are actually giving financial help to people to go through the process of applying for right to remain or citizenship whatever meets their needs but I still think there are long term unanswered questions for EU staff but all right maybe I can remain but what's going to happen to my access to public services for instance will I be able to access on the same basis thank you you've largely answered quite a lot of what I was going to ask you anyway but I want to pick up on something else which is having a profound effect on universities being able to attract international talent and that is the post-study work visa so recently there was a pilot that opened up by the Home Office which did not include Scottish universities I'd just like to have your opinion on the importance of a post-study work visa particularly given that we have this Brexit situation and the pilot itself and the effect that that potentially has on the devolved nations not being included in it that was a great shame and the rationale given by UK Government was that four institutions were chosen that had a particularly low rates of visa refusal I think quite a number of our members have said they've got low rates of visa refusal and would have wanted to be in that as well and also it penalises people who are active and slightly riskier markets for instance if you're trying to attract really good people from Pakistan you've got a higher risk of visa refusal so you're penalised for being entrepreneurial there more generally on post-study work and on student immigration generally I think we've made the point and there's been extraordinary strong cross-party agreement on the point that Scotland is disadvantaged in relation to competitors such as the US, Australia and Canada by not having a competitive post-study work regime a lot of students want to come want to leave wherever is India, China wherever do their degree have the opportunity to get some professional experience on-front degree and then go home and take that combination of academic and professional experience to enable them to position themselves extremely competitively in their own workforce and basically our competitive countries all see the advantage of that and we are at a particular disadvantage but I think what worries me potentially even more is that things look like they might be getting worse I mean I'm not quite sure how much is political rhetoric and how much is solid policy proposal we won't know that for another few weeks yet but the suggestions in Amber Rudd's speech to the Conservative party conference that there would be a further crackdown on international student numbers and that there would be a restriction to only certain institutions or certain courses in terms of being able to recruit international students I mean that's pretty fatal the representative of 19 highly quality assured higher education institutions you know I can't understand why there would be a rationale for saying to some of Scotland's university sorry you can't have international students and it would be financially fatal so I think there's some really hard work you know which again I think there's good cross-party support for the Scottish Parliament to actually say no we don't international students shouldn't be counted as part of our migration totals they're people who come here study if they can work for a while, go away take their skills to the economy form this wonderful network of soft power across the world just take them out the international migration statistics they're irrelevant to it and that as we look towards exploiting international opportunities in the wake of the Brexit vote that we are just building an intrinsic perversity into the system by actually trying to make it more difficult for us to go out and internationalise and attract the talent that contributes so much post academically and culturally and economically and just following on from something that you alluded to very briefly in your reply to Ash Denham was about the salary thresholds quite a lot of research researchers would fall beneath a salary threshold which would be considered a positive when actually applying for a visa in case we can explain that to us I think that there's a danger to me I think that at the moment we've seen some well-known cases of a creative professional but I think that the danger possibly lurks more in the future that some months ago the Migration Advisory Committee published advice which suggested that the salary threshold for people coming in on tier 2 might in fact be increased and I think that the problem is that first of all you might be taking a south-east England salary level that if you look at other parts of the United Kingdom is inappropriate for early stage professionals and secondly when you look at the sort of salary thresholds they were proposing all sorts of people would fall beneath that early career researchers at the very start of our academic career would fall beneath that early career lawyers would fall beneath that creative professionals certainly would fall beneath that people either to move on from being international students to tier 2, the work threshold or people who can come in to work in the United Kingdom a lot of early career people are going to have a fairly modest salary but I've got huge talent to offer and we need to be able to recognise that by making sure we don't set artificially high thresholds for salary requirement Thank you for explaining that Thank you We do agree that the United Kingdom and Scotland is a very attractive place for students since English is the language and often more often than not perhaps that's the international second language as it were We don't have an advantage over our competitors in that, our competitors are United States, Canada Australia who have got that advantage and also a much more international student friendly visa regime Students are voting with their feet but I've been fortunate in general that the increasing prosperity of China and the increasing capacity of people from the Chinese middle class to come and pay for education has kept things bobbing along, certainly not growing strongly but Indian students are voting with their feet the number of Indian students in Scottish universities has gone down by 50% since 2010-11 similarly Nigerian students have gone down by 23% since 2010-11 so people who can make a choice about whether to come to Britain or go to the United States or Canada or go to Australia are often making a choice that they will go somewhere which has got a less unwelcoming rhetoric and which has got a better visa offered that enables them to stay on and work for a limited period after their studies Right, thank you I think we want to move on to another area and John Mason has a question Okay, well I think it's probably linked to that but I mean employment more generally whereas the last few questions have been specifically the universities I mean I was interested in the comment about the aircraft carrier that we couldn't build it without Polish people. Now to be devil's advocate, I mean some people I've had constituents come to me and say what's not fair, the Polish workers just undercut our price so I mean is it the case that if we don't have the Polish workers we just have to pay a slightly better wage and there's lots of Scottish workers kind of waiting there On the food side Mr Willers I mean I heard a cut a programme on the radio the other day taking potatoes out of the ground and I think they said there was five Romanian's were operating that whole farm or that area highly mechanised not a huge number of people but I mean again if they're not here can we find five Scots to do that or do the potatoes just stay in the ground So history would tell us Sorry, I shall answer that first before we come back into the aircraft carrier So I think you know the lesson would be that our sector and our businesses started growing significantly when we had greater access to an EU workforce and I'll come back to agriculture in a second but I'll use one specific example so Walker's shortbread based in Abelair and Jim Walker the MD there phoned me and staff the Brexit vote and explained that during the 90s his business couldn't grow Abelair is fairly close to full employment but things changed dramatically in the early 2000s when he had greater access particularly to eastern European countries he now employs 350 Polish staff in particular most of them have moved into the community with their families as well and he has huge concerns about the future potential of his business without access to that labour and I think the what we see is probably a bit of a perfect storm that's building on the labour front and I would say at the start that we're usually ambitious and optimistic about the future of the food and drink sector we see great potential Brexit notwithstanding, I would echo what Mark said about the potential for us in premium markets tapping into consumers' desires for quality, authenticity, provenance none of that has changed none of those global trends have changed because of Brexit so we remain hugely optimistic but require that labour force to exploit those opportunities that the perfect storm has caused by a few things one, I think the home countries for much of where this labour has originated are developing so opportunities are developing back home for them the pound has weakened in the short term so the value of their earnings here carry less strength back at home they've developed skills here which are increasingly applicable back in their country of origin but the fourth thing is probably the one that maybe concerns me the most are the emotional messages that we're sending to the workforce just now particularly messages coming at UK Parliament level and I think that I've been fortunate to do a lot of travelling on this job and there's a difference between being allowed in a country and then being made to feel welcome when you are there and we've talked down at Westminster recently and we've been told there are reassurances and the reassurance seems to be for the migrant labour and foreign worker we probably won't send you home and that is a very different message to saying you are hugely valued we want you here, you are a major contributor to our businesses, to our industry to our communities, to our culture and my concern is that unless we change the dynamic of that conversation which is not only maybe not send you home but actually we need you here you are not just reluctantly employed to fill a gap in the night shift you are required at all skill levels than that will be the fourth part of this perfect storm which might try so if I'm getting you correctly you said that some firms, some companies have only grown because they could get EU labour so does the opposite hold true that some of these firms might have to contract despite the fact they had a market for their product but if they couldn't get the labour they might have to contract? Yes absolutely, I do think there may be opportunities within this to reinvigorate a domestic workforce and access to EU labour has perhaps allowed us to avoid that real challenge about the employability and skill development of domestic workforce but in terms of the businesses like walkers and others if we lost access to that existing workforce we would see contraction and if we do not have future access and do not have a future immigration policy which reflects our requirement at all skill levels our ability to grow will be severely hampered you mentioned that the TATIS example certainly in the primary sectors and particularly in agriculture access to that seasonal workforce around tatty picking soft fruit would be an obvious example a third of all of the UK soft fruit has grown in Scotland and access to that seasonal labour is absolutely critical in that area so I fear both contraction and probably more importantly our inability to exploit the growth opportunities going forward Mr Buckingham, is it the same for yourself? No, I think just to clarify it was not a price driven decision that brought the Polish welders and platers in it was purely in response to skills shortages we did not have the skilled people to the extent that we needed them for recite at the time the landscape changed dramatically with the collapse in oil prices but it has been very slow to filter back through to the central belt central belt hit really hard with the downturn in oil extraction and exploration but the people who had been taken from quite often immediately on completion of apprenticeships they would be offered inducements to relocate to the northeast of the country to work in oil and gas with significantly greater salaries quite often golden hallows for even the likes of someone coming out as a CNC operator computer numerically controlled lathe operator would double their salary easily by moving to the northeast of the country now we've got this release of people to come back into the central belt who there's reluctance on the part of some of the employers to take them because the belief is if there is an uptake in oil they'll go back to the high paid locations that were at before and on the part of the individual if as a CNC operator you're used to making £70,000 a year you're going to bulk at £35,000 a year in central Scotland so the easing of the skills shortages hasn't happened to the extent that you might expect and we are quite dependent on European Labour in particular we don't think there'll be a huge problem with them disappearing because if it takes two years at least to hammer out the deals then most of them who are here just now will have qualified for residency having done at least three years in their time here and to be fair in our sector what we see is pretty good integration of those families into the communities where they're living thank you so much certainly with Brian there's absolutely no price differential whether you're a Eastern European worker or a Scottish worker never ever have made any differential in pay rates to those workers I think also I don't think that the Eastern European allowed us to grow 10, 12 years ago but we certainly had a gap in the Scottish workforce that was filled by Eastern Europeans and Polish workers that came we found many of them were highly educated we had teachers, university lecturers welders, engineers and they were coming to work in the back of a manual job in a spray machine earning 8 pounds an hour and then over time we've been able to integrate them into the business into more skilled jobs and they're now a very very valued part of our workforce many of them are in management roles now that we have over the last five years had a very proactive and positive apprenticeship programme where we've worked with the University of West of Scotland where we've developed particular svqs for leather making this was an absolute first in Britain there was no such qualification before and we're working with educational institutes to bridge this gap and to actually home-grow some talent for the future but I don't think either that they will leave us I think most of them are integrated into the community their children are going to schools here their homes are here they're settled here but they do certainly have this the word uncertainty again they have this uncertainty about what does the future hold for them forward that this has been or over the last few years the Scottish workforce have responded better than they were doing 10, 15 years ago and hopefully we can grow some home-grown workers Thank you Just perhaps if we come back on one point I appreciate you may not have seen the spice briefing paper on EU nationals living in Scotland but the comment there at page 14 of that is their analysis shows that EU nationals are on average earning less than Scottish employees in general so I appreciate in your area it may be that there's no differential in wages but there appears to be in fact an overall difference and the difference given is Scottish average £11.10 per hour compared to £8.60 for EU nationals working in Scotland so there obviously must be sectors in which EU nationals are earning less than Scottish residents That might be the jobs where they're precisioned in a company if you have more of them doing the manual labour at living wage as opposed to middle management it could just be the numerator rather than the denominator I think Certainly in our sector It's a light for light job I would echo exactly Karen's point that we're aware of a single example of where there would be a differential in periods but there will be that issue of school levels we have EU nationals working from board level, MD level down but if there's any such thing as an average EU nationals are more likely to be at the lower skilled end than the highest skilled end but it's a real variation so I suspect that's what excuse the figures I just want to clarify that point Liam Kerr I have two questions The first specifically directed to David Williamson, the second more general First of all David Williamson I'm interested in the global opportunities potential of Brexit and I'm looking at the scotch whiskey exports to south America amount to roughly 500 million In the last couple of days Juan Manuel Santos who is the president of Colombia Brexit offered a huge opportunity for British business Colombia is ready simply to have a free trade agreement with the UK on the same conditions or even improved because many times in free trade agreements with a group of countries some countries object to some issues and maybe we can go even further So the question is does this suggest that there are global opportunities presented by Brexit that aren't currently there and is there anything you can easily identify where you could go even further Ok, thank you for that Maybe if I take Colombia first and then maybe the wider picture In terms of Colombia I'm fortunate enough to have actually visited Colombia to represent the scotch whiskey industry during discussions around the EU's free trade agreement talks It's a market of significant potential for us it might not be one that's immediately obvious Exports are around 20 million to 30 million a year and you go into some of the bars and restaurants in places like Bogota and scotch is really prevalent already it's just making it more affordable to the consumer Colombia is also a classic example of an emerging market where there are all sorts of trade barriers Currently we face a 20 per cent tariff that would be gradually eliminated which makes our products more expensive There is tax discrimination in the market where you have local spirits, a guardiente being taxed at a significantly reduced rate compared to scotch and we're currently as a wider international spirits industry at the WTO trying to resolve that issue and there's also issues of discrimination at provincial level where scotch is placed at a competitive disadvantage So taking the opportunity first of all to grandfather in the benefits we've secured through the EU trade deal with Colombia is important because some of those issues would be resolved but if there's a chance to then build on that in the future and revisit these sort of trade agreements to get a more level playing field to tackle tariffs, to tackle protectionism in the market then that would be for an export oriented business like ours significant and Colombia is definitely one of the markets that would be on our target list I think more widely the whisky industry over recent months has looked at where are the potential opportunities if this is what's going to happen where do we look to in the future to strike these sort of free trade agreements and we can split them up into about four or five different categories The first one are the major markets that you might think of which have long-term potential so we're talking about markets like India, China, Brazil where there's huge commercial potential but we're being held back by tariffs or other forms of trade barrier at the moment India is the industry's top international trade priority has been for a number of years there's a 150% tariff on Scotch whisky going into India that simply makes our products largely unaffordable to the ordinary consumer so any sort of trade discussions that can verbalise that issue would be significant because we're in India at the moment it's been assessed that if you were to substantially liberalise that tariff and get it down to sort of the levels we see in Brazil or China which is 10 to 20% that could help us grow the Indian market to about 5% now that doesn't sound much but 1% to 5% in the world's biggest whisky market that's an important step forward for our industry there are also a second category of markets we're looking at at the moment and those would classify as fast growers so markets for example in sub-Saharan Africa the Nigerias, the Gannas, the Kenya's of the world where economies have been growing where there's consumers who have increasing amounts of disposable income and want to show they're making progress and Scotch is a classic product for them to buy to do that but there's all sorts of trade barriers that we need to resolve in those markets and any future negotiations we would hope would take that into account there's also markets in Southeast Asia that wouldn't be immediately apparent like Vietnam and Burma where again we see the same dynamic but where we're held back by tariffs and other restrictions the third category we've been looking at are candidly markets where it's been a struggle for Scotch whisky in recent years where the exports haven't been growing as fast as we would like or indeed perhaps declining markets like South Korea and Thailand where if we were able to secure strong benefits through future free trade agreements that would be the sort of boost we would need to really start to grow again in those markets and then there's a fourth category of markets which are reasonably mature for Scotch where we still think there are some nuisance trade barriers that should be relatively straightforward to get rid of so I'm thinking for example in a market like Australia there's a 5% tariff which should be relatively straightforward or indeed a market like Canada there's been a lot of talk about Canada and international trade in recent weeks I worked in that deal for the industry over a three or four year period it's not perfect as a trade deal seater but there's certainly for our sector some benefits around tackling discrimination we face and it should be relatively straightforward to bank those in any future UK discussions because the EU and Canada have already agreed to them in terms of Scotch in the current negotiation I think the final point is being a bit more creative in this sort of area I think there's two areas where we think government could look at trade deals slightly differently currently these sort of negotiations tend to be all or nothing you're looking at a whole vast array of different products, goods and services there is an opportunity to be a bit more flexible strike deals where it's possible and to come back in the future as things develop we certainly think there's also an opportunity to look at what existing trade agreements are out there and see if the UK could simply add its name to those agreements and become a party to them for example the discussions that have been in the across the Pacific region over recent years I think finally for us we hope that the UK will re-establish itself as an active and autonomous actor at the WTO very quickly because there's a range of mechanisms there which would be beneficial to Scottish business to actually do more with to remove the sort of trade barriers I'm talking about there are committees in Geneva that deal with technical barriers to trade review countries trade policies and offer the chance to go to dispute settlement which would be a way of resolving some of these issues in the future outside free trade agreements if necessary and it's an area where there hasn't been much attention in the past because it's simply been the EU that's been looking at it Thank you for that Just follow on quickly and I will be brief, convener Gillian Martin and I visited a business yesterday in a sector that requires EU certification in order to export its products elsewhere so it gets a number as I understand it that says we have been checked out for hygiene health and safety, certain standards and that ensures that they can they can trade they have a concern that coming out of the EU means that they won't have access to that certification with all that that implies those of you who may face similar issues what do you understand will happen will there be some way to retain such certification does the UK become body and what representation are your trade bodies making on that I think it's a very very good point and it points towards the complexity that we have not just in the fashion and textiles industry but in the whisky industry and the food industries as well which is that it's not just a straight export business I think one of the biggest problems we will have at Harris Tweed is the residual effects of Brexit to give you an example one of the big buzzwords in the fashion industry is reshoring bringing manufacturing back to the UK because it adds provenance and there still is the embers of a skill set here but that's happening very very slowly what tends to happen at the moment is coming from China where the majority of Harris Tweed at some point would have been pushed out maybe ten years ago for manufacturing and it's coming into the European hinterland Turkey, Romania and Portugal so Walker Slater here in Edinburgh they will fabricate a lot of their goods in Portugal but of course that's now 20 per cent or so more expensive even before you get to the kind of certifications that are needed for going forward and that will have an effect on buying a premium product like Harris Tweed so it's not just simply about certifications and about tariffs all sorts of residual effects which will only sort themselves out over getting direct deals put through in the correct sequence manufacturing side if you look at Switzerland there's a fairly substantial machine building industry there who export to the rest of Europe in a previous capacity I used to spend a lot of money in Switzerland on high speed automation they can get their machines EU certified whilst not being part of the EU central bloc so I don't think that will be a problem going forward what we'll still have is the problem that we've had for years of protectionism on the part of Germany hiding behind DIN standards so that our products can't be exported to Germany in some cases using that as an excuse and frankly quite blatant protectionism on the part of France so I think we're still going to be faced with that regardless of whether we're in or out thank you so from your point of view the EU has not resolved these issues of protectionism no thank you Gil Paterson wanted to come in on this subject question in regards to building new markets is it the cover well the door's been prized open again with this article 50 with the high court so I don't think anybody knows exactly where it's going to land so I suppose my question is twofold should this Parliament be focusing in a particular area in that regard but when it comes to expanding markets and I suppose the Scottish whisky and food and drink from Scotland are the two people that are mainly at and I've got one of your covers on an old can that I've got and it's brilliant so I wouldn't be talking to you about it and complain it's brilliant anyway my question is what the cover that you get from the European Union when you're entering a market and all the provisors and regulations that are already in place that gives you surety is it possible to develop the market on a level if you're taking on these individual agreements because it sounds like that's what you would need to do when you're trying to enter another market or is it easier to stick if we could negotiate this deal through the door being opened in regards to article 50 that we can continue using the cover you get from the EU involvement my thought on that is I suppose a level uncertainty how it plays out my own view if you take the food sector 90 per cent of the regulatory regime is driven by Europe so it's UK Scotland's interpretation of directives driven at Europe around environmental safety, animal welfare, food safety and hygiene there's been some commentary on the chance to free the industry from a web of complicated regulation and I'm struggling to see that that will happen because almost certainly one of the core requirements for us to continue trading with Europe is the requirement that we meet their base level of regulation and I think it's important too because that's part of our brand and consumer assurance so I think the reality is we'll be operating in an environment post Brexit if Scotland's part of the UK that's coming out of Europe and we meet European regulatory standards we'll need to do that to trade with Europe anyway so I'd be relatively reassured about that particular point and how we institute that will be very interesting and maybe far from a great repeal act there's maybe a single SI to go through UK Government which says we transpose the current regulator of current Europe on to the UK system to which we're all working to anyway I think that that would also be the Scotch whisky industry's preferred way forward that taking existing European legislation and having it transposed into UK law at the current time for that consistency and certainty that James is alluding to regardless of what the future model looks like the EU is still going to be Scotch whisky's biggest market you've got countries like France Spain and Germany all who are in our top 10 export markets that access to the single market and having similar rules around the definition of our product the protection of our geographical indication the labels, the bottle sizes some of that may sound a bit technical but it's absolutely fundamental to businesses in terms of understanding that and having some certainty going forward so if there's a way to do that that would be great I think that one of the areas where it's particularly important for us is going to be the protection of the geographical indication making sure that we continue to have those products protected in the highest way in these markets we're pretty confident that if EU law simply comes into UK law in that area we'll be alright in terms of being able to transfer our current protection to a slightly different protection but under the same regulatory framework but there will be challenges elsewhere in terms of products that they may not have the same level of protection of Scotch whisky how they navigate that difficult environment Thank you I'd like to bring Richard Leonard in with a new point I think Yeah thank you, thank you convener When I look around the panel I can see industries represented which have faced shocks before whether it's an overvaluation of the pound in the early 80s the current oil price crash which Brian Booken has already referred to and to many of you I don't know whether this has affected the sheep of Gala Shields or not but my foot and mouth in 2001 was a big challenge to the leather industry and to parts of the food industry and maybe to Harris Tweed as well so my question is in two parts one is can you then place into some kind of perspective Brexit as a shock compared to some of those other things that you've had to deal with and secondly are the lessons that you can learn from those shocks for this shock that you're beginning to experience now especially as regards what kind of support you could get from Government and its agencies Mark Hogarth I'll have to kick off on that just anecdotally no point in looking into the crystal ball when you can look back in the books Harris Tweed went from a peak of 7 million metres of fabric back in 1967 to its nadir 2005 300,000 age of weavers 62 and really facing terminal decline and the principle dynamic in that was the parity of currency in the United States which was by far the biggest market up until the mid 80s and just at the same time synthetics came in and of course once a market gets out of the habit of buying your product it's very very hard for that market to get back into buying your product which is why the renaissance long may continue of Harris Tweed has been very slow very sure and spread across not just markets in terms of nation state markets or European markets but the way I talk about it is markets within markets and there's no uniformity so I think that would be the biggest example of a shock I think you made some other very very good examples but currency does dictate particularly at this time of year when the majority of the buying of the fabric is happening I'm actually I sit on the campaign for will as well and they've got huge problems because again it taps into this internationalisation of the fashion industry where you're not really seen as being just a British fashion house or fashion company you may have been a European designer schooled in one of the great institutions like St Martin's Art School you may set your business up in Edinburgh or indeed in London and then you take it from there and I think the biggest shock of Brexit is that it cuts across it really truncates that international fashion fraternity which is why the voices against were so strong I would totally agree that currency is so important we have to keep everything in perspective the chairman tells us our company is 112 years old and he reminds us that his forefathers fought two world wars and we survived there's no doubt we'll survive this and we'll learn to adapt to whatever trading conditions come post Brexit I think though for me the main thing is that we've got to get free trade however whether that's the single market and beyond or whether it's some different model but there has to be free trade because of your working there's a conundrum I feel in our market sector globally that our European competitors don't pay in national living wage we pride ourselves in paying the very minimum of the living wage not the minimum wage and most people vast majority of people learn an awful lot more than that our European competitors don't pay that they're not subject to the same environmental laws that we are in Scotland even worse in Scotland or more stringent in Scotland and they are in England so they have a different cost base than we have in Scotland manufacturing in Scotland in our sector is very very difficult it's even more difficult when you're exporting the variances of sterling and whilst everybody thinks that the weak pound is a friend of the exporter prudent companies especially when you have many variables generally hedge for a period so we're not getting the benefit and we won't get the benefit of this weaker pound until start of January 2018 we have an awful lot of people's livelihoods to protect so we don't gamble we take hedge out over a two year 18 month two year period so we don't get this benefit for an awful long time to come and in the meantime you've got competitors coming in and buying the UK material cheaper than we can buy it so we've got it's a loose loose you've got the competitors able to buy your material and we then if anything we're importing are not manufactured in Britain any more their bases are in Germany in France some hides have to come from the South Americas when we're buying in dollars and euros we're losing out then because of the goods that we are importing and we're less of importing goods than other sectors perhaps but we still have that so it's a loose loose just now the currency if those rates stay full the way where they are we yes but we're not getting the benefit just now so it's a economic environment that we're trading in that is difficult to manufacture in Scotland we have all the rules and legislations we have all the costs and all we can do is lean our company as much as we can to be competitive I think James Withers wanted to come in and then sorry after that perhaps that was too simple thanks chairman the strategy for the food and drink industry out to 2030 and some people have said what on earth are you doing how could you possibly try and chart a road to 2030 when we don't know what how Brexit is going to play out and I take heart from the fact that the first strategy we wrote was done in 0708 in the midst of a global financial crisis at times where it felt like the world was falling apart around our ears but hey ho we got through it the world is different than it was back then but we got through it so it's important and then two other elements for us one is about building reputation and building Scotland's brand for our particular sector and that will drive opportunities the balance of attractiveness of different markets will change but if we can build Scotland's reputation of food and drink that will stand as in good stead but the second part is really where there is work in progress for us and that's about we need to be a much more resilient sector that is much more robust and resilient than all the others is Scotch whisky because it has a very nice long-developed spread of markets it is not too reliant on any one market for our food products 80 per cent of the food we produce in Scotland is sold in the UK and of the 20 per cent that leaves the UK as I've said you know 17 or 18 or 19 per cent of that is going to Europe we are too reliant on few markets and we've already seen shocks the Russian embargo flooded more products on to the European market in foot and mouth obviously our export markets for lamb beef closed again and that causes a huge problem so we need to build greater resilience at the moment we sell more food to Belgium than we do the whole of Asia combined and that's crazy so we're investing in that already so there's a new export partnership where there's industry bodies putting money collectively in with STI and Scottish Government overseas specialists so there's 11 specialists in 11 cities around the world to ensure we spread our markets better recognising that there will be challenges in different markets in different times but providing we're not too overly reliant on any one particular market we will be better placed to withstand the inevitable shock and there will be three or four or five of them that we can't predict now between now and 2030 it will get us in a more robust position thank you Alice for saying well I think Mr Leonard's last is about being shocked before and obviously a lot of my members have been in this scheme for a very long time about the middle of the 15th century so we've seen reformations, wars etc but I think what I would say is we are in an extraordinary position in Scotland I mean to have five universities in a world top 200 for a small country in a northwest edge of Europe is absolutely extraordinary but let's not pretend that we've got some sort of inheritance of that, that's because we've been able to attract the brilliant people from across the world and given an environment in which you can do brilliant things and we've seen a lot of continental European universities that used to be great 100 years ago 200 years ago they're not anymore and we need to stay great I mean we are at a geographical disadvantage we're not having excellent universities that are generating ideas that are attracting inward investment or around the games industry where we are a world leader then we're not just going to lose our universities we're going to lose the whole economic impact that sits around that so we need a combination we need obviously sustainable public investment in universities but we also need an open environment where we can get out there and compete where we can attract the best talent from wherever country it comes from where we can enter into arrangements with universities throughout Europe and the world and where we can attract students and I think what would really help quite apart from policy we've talked quite a lot about policy on student migration and staff migration it's also the rhetoric if the government's rhetoric across the UK could be that we're a great place to come or a great place to invest we really welcome you I think that would help us in this new environment where we absolutely have to be internationally competitive on a global basis Dean Lockhart had a question just to pick up on a point made by James Withers and a couple of others about the changing mix of our export markets going forward we heard earlier today from Scottish Development International about their expanding network and I think they have a role to play in helping different sectors identifying new markets but also increasing exports into existing markets can you give us your thoughts and invite other members of the panel what specific steps could SDI and the other enterprise agencies take to help companies identify new markets increase exports to existing markets so I've got to ask nothing but good things to say in terms of how SDI have worked with our sector and we've got a really close partnership with them I mentioned this I suppose going back a step one of our concerns if I went back three years with SDI was they were a staff body mostly of generalists so if you went into a market you would see one of their advisors in one of their field offices and they'd be doing food and drink on a Monday they'd need to do financial services on a Tuesday renewables by Wednesday and life sciences by Thursday and one of the lessons we drew from countries that were more successful at exporting food than ours like Ireland, like New Zealand, like Scandinavia, like Canada was they had dedicated specialists on the ground and we have 11 of them that are now based around the world and it's a mix of securing that existing strong market and elsewhere so there's three in Europe, in Paris Dusseldorf and a new recruit in Copenhagen and the remaining eight are in these growth markets for us around the world and having that expertise, that local market knowledge is an absolute game changer for us because our companies will go out to market and with the best will in the world they'll spend four or five weeks in market between an international show and making a few visits out there that leaves another 47-48 weeks where we need representation there so that dedicated resource is critical I think that the one area we do need to think about though is where building the demand side and we're building the demand overseas for Scottish products we're building the ambition of companies to want to export but often we can fall down around real practical elements around the certification and paperwork that you mentioned around where can I consolidate my product through what importer and partners it best to use in market and I think that we'll develop that over time but some of that real pragmatic practical support which the industry has to do for itself because a lot of that expertise exists within industry so that's our job to try and share that better but I think thinking how we can plug more of that support into exploit the growing opportunities would be an interesting area to look at Williamson Just coming back on that I think again from a Scotch whisky industry perspective we get generally excellent support from Scottish Development International and it's been their expertise has been growing over recent years through some of the work that James has just outlined I think maybe two or three things just to pick up on there there's undoubtedly a need for SDI to revisit its international network and to look at where it's putting its resources from a Scotch whisky industry perspective I've outlined some of the new emerging markets that we have an interest in in places like Latin America Sub-Saharan Africa these are areas where currently SDI doesn't have a significant presence and certainly through the recent review that's something that we've been talking to them about about where some of those markets of the future might be there's certainly a role for SDI and UKTI or now rebranded working as closely together as possible so there's not duplication within market and it's as far as possible co-ordinated as we try and develop our export offering SDI traditionally has been focused on trade promotion that's important work and it needs to continue but a lot of what we're talking about this morning is something slightly different which is trade policy market access tackling trade barriers initiating free trade agreements that's a different area of the same playing field and there's certainly a case to revisit now expertise and capacity both within SDI and indeed within the Scottish Government in this sort of area as we look forward to playing a full part in these sort of talks in the future the final area with SDI which I think is important and it's an area where James and I both been involved is it's got an important role in the organisations and fostering as much collaboration as possible the Scottish Whiskey Association and Scotland Food and Drink have launched an export collaboration charter working with SDI trying to make sure that the sort of networks contacts and market intelligence that the Scottish Whiskey industry might have in some of these new markets can be shared more widely and SDI has got an important role there helping to foster that contribution out into the wider economy I think Gil Paterson is a mini question on this subject and I think Mark Hogarth wants to come in after that so perhaps if we get a view It was a fundamental question on exports Scottish exports, UK exports and there's some evidence that would suggest that some Scottish exports are actually counted as English exports because they go through English ports and I think it's because when the deal's been done the suggestion is through an English port when the contract's been signed so where do the stats come from how do we know that the figures that were actually asked to the figures we hear are actually accurate I'll bring Mark Hogarth back in I'm not sure if you can assist on that particular point Director and to talk about figures I'll let you talk about the point I do have Karen beside me he'll be much stronger on that I do concur with both James and David that STI do an excellent job particularly when Harris Tweed hybridies were building up from our first couple of years of trading of just a couple of hundred thousand pounds moving up to the 11 million of last year I also want to make special mention of the Scottish Whiskey Association which has been very kind to allow us to drag along boat tails and visits to China and indeed India where we're trying to open up markets and it's on those markets specifically that I would like to comment we came up with the idea of doing a tour to the BRIC countries about four or five years ago but each individual market huge though it may seem is beset with various different problems Karen may have the stats on it Brazil all seem to be good a small market in the south particularly in interiors for Harris Tweed but there was a very specific tariff on all wheel products to protect the Brazilian sheep industry similarly in India Harris Tweed and indeed Scots products have a very very high value probably because of Scots Whiskey but there's a very antiquated system so it's very very difficult to get your product into that market and indeed in Russia you simply have problems at port trying to get access to the markets and again it was actually seen, Harris Tweed was seen because of the provenance because of the hand woven to be great value for money but of course getting into that market very very difficult because what Marley is about promotion they can't change tariffs they can't change the politics of actually getting your product in so thinking back to the original question then maybe that's somewhere where some focus could be put is lobbying the correct term I'm not quite sure but anything that can actually reduce these preclusive tariff measures or indeed in certain cases antiquated customs legislation about getting your product to market then SDI and indeed your individual product could flourish Thank you Tweed and then Whiskey, David Williamson and then Brian Buchan perhaps David Williamson briefly and then Brian Buchan on these points Thank you convener, just coming back on the question of export statistics we couldn't agree more with the point that's being made I think there's been a challenge in terms of having detailed and accurate Scottish export statistics for a range of reasons and it's difficult when you've got competing sets of figures the global connection survey as was from the Scottish Government HM Revenue and Customs own figures themselves which haven't always tallied up and haven't given us a clear picture of what our export offering to the world is and trying to get more comprehensive, consistent figures in place and setting a benchmark is really important so we actually understand how exports are doing in this country and what's working looking forward so it's certainly something that was identified as a challenge within the recent Scottish Government trade and investment strategy certainly no officials have been looking at it and we hope that they'll be able to take that forward and put in place something that is more robust than has been in the past Brian Buchan sympathised with the ONS and others in trying to untangle what Scotland actually does export in my first year in this job I spent a bit of time with the ONS going through some of our companies who they had labelled as being non-exporters give one example manufacturer of flotation devices in Aberdeen flotation devices and umbilicals none of it was going to the continental shelf all of it was going to the likes of West Africa South America for deep sea extraction but ONS were categorising them as being non-exporters because they were actually selling their componentry to some of the major extractors including the likes of Shell and BP and also through intermediaries like Oceanics and some of the other so it's quite difficult to pick up on whether or not something is an export or not for the ONS thank you now I don't know if Gordon MacDonald if you had a question on this area certainly on data I was going to ask if you thought that the data accurately reflected your industry looking at the methodology that both ONS use and HMRC seems to be a bit simple in the sense that ONS assume that all parts of a business are involved in the export rather than just the productivity side and they allocate exports by the number of staff in any one area HMRC appear to identify each region depending of one if there is any export activity or regardless of how many production units are in that area so for instance if there was four production units in Scotland and one in Wales then both would have equal weightings and therefore the exports would be weighted 50-50 across Wales in Scotland despite the fact that the majority production facility was in Scotland I was just wondering if in your own experience do you feel that the stats accurately affect your industry James Withers So the quick answer is no and we've almost and it's a kind of act of surrender having spent time with HMRC statisticians and gradually lost a will to live trying to unpick and it is and I don't think it's good enough going forward our view has been the figures are flawed providing they're consistently flawed at least we get a sense of direction and that's the kind of approach we've taken I am absolutely certain that the the 1.1 billion in food exports and the values actually what we export for precisely the point that Mr Paterson was making about portive departure I'm almost certain about that that the sector will be as close as any to getting it right and they have a specific six or eight digit code that Scotch whisky has at HMRC will track which we don't have for other sectors but it seems crazy to me that if you bought a steak in a supermarket in Shanghai that was a Scotch steak we could tell you what farm it came from that we can't also track the fact that that is a Scotch export in terms of how we measure it at the UK so I think it absolutely needs fixed and I think our salmon exports as our number one export I think we're undervaluing that as well but it's incredibly difficult to unpick so at the moment we take the figures with a huge pinch of salt and just use the annual changes to give us a sense of direction Thank you and Jackie Baillie had a question to come in on I want to just develop the points made by James Weathers and David Williamson for a minute if food and drinkers are biggest export which it is if I picked you up correctly James is 80% to the rest of the UK 20% abroad and would it be fair to say David that it is absolutely the reverse for the whisky industry that you are truly global and I wonder what the percentage is rest of UK, rest of Europe and rest of world for whisky that brings me to ask two questions if the Scottish Government is putting their effort into increasing the trade opportunities at Berlin where would you want them to put their effort into doing that would suit your industries that would grow your exports and secondly everybody talks about the lack of capacity at the UK and Scottish level to negotiate what opportunities are there for us to share as Harris Tweed have done the expertise within the Scotch whisky sector I pick up at this there's a lot of points in there in answer to the statistical question at the start just to give you a sense of what Scotch whisky is as a scriddling down there we are 90% of our markets overseas 10% in the UK still significant in the UK it's our third largest market globally but obviously a very heavy international focus the split between the EU and third countries other trade partners a third of our exports are to the single market as it stands about £1.2 billion of the around £4 billion in terms of exports in terms of the priorities go back to what I said earlier about some of the markets that the whisky industry has been looking at as markets that offer significant commercial potential in the future more widely markets like India Brazil, China some of the other markets I talked about where we see real opportunities but significant trade barriers at present and looking as the trade and investment strategy is implemented as SDI looks at its network how do we play better into those sort of markets as well for us the lesson from the whisky industry when it comes to exporting is you've got to take a long term view and you have to be as international as you can in your focus as James alluded to earlier our picture as an export industry has been very strong over the last 10 to 20 years it's been more difficult for traders in a range of markets but we've continued to either grow or to mitigate some of the challenges because of that export spread because we're in nearly 200 markets that won't work for everybody but the lesson of the whisky industry is to take that long term view tackle those sort of trade barriers consistently over time working with government in terms of the final point there is a job to do in terms of expertise and capacity it's an area where the Scotch whisky Association has been very active for many years because we've had to be active in different markets using the embassy network to raise our issues working through the European Commission using world trade organisation mechanisms understanding that language and so there's definitely in the coming months a challenge for government to put in place that capacity and expertise but also for business to better understand what the opportunities are in trade policy to make some progress on the issues just a couple of quick comments on that so we're crystal clear what our export priorities are and we have an export strategy which covers all assets with the exception of whisky so this is our model here of what the future might look like if we get things right and there are North America, the Nordics, France, Germany Middle East, Singapore and South East Asia, China and Japan and that's where we've put in these specialist and that's where we want the resource to go on the point about sharing that knowledge within the industry that the beauty of having within our family of food and drinks in Scotland the global model for premiumisation and market development is that we can access that expertise we've not been very good at doing that actually over time I don't think either as I would say we've been very good at doing it over time but we now have this collaboration charter in place we've got 10 specific commitments within that to give an example of the kind of things they are the Scottish Whisky Association running seminars around IP protection and protecting brand which they do very well and it's becoming a rising issue for our new success rounds like salmon that are finding Scottish salmon which actually isn't Scottish salmon being sold in some markets using whisky companies to potentially mentor and drink companies using their incredible network of brand ambassadors and whisky in market when they're doing events to profile Scottish food as well as the whisky so that we're trying to improve and transform that level of collaboration in the sector but on your main point we are very very clear what the priority markets are obviously one of the outcomes of the enterprise review was this doubling of STI resources in Europe and I think that will be valuable but we really need to think beyond Europe Thank you very much Well that comes to the end of our session so I'd like to thank all of our witnesses very much for taking the time to come today and we'll now I'll suspend the session and we'll move into private session allowing time for the gallery to clear Thank you very much