 Excellent morning and welcome to the fifth meeting of the economy, jobs and fair work Committee for 2018. I have apologies from Andy Wightman, who is not present due to other committee business. We will start with item one on the agenda, which is a decision by the committee to take items three and four in private. Does the committee agree? Thank you. Tyn nhw ydych chi'n gwybod i dweud i'r ysgolain i'r ffordd economiaid yn profeithio, ac rwyfawr anglw해�相信au gwahanol yw'r cychwyn. Welcome to all of you this morning. Rwy'r mirabios i ddefnyddio, ysgol, Lea Hutshian, yw Efo'r cofiannamd cofiannamd, caron pickering, llef y bwrd varyn yma, yna paiddlo argytex, Paddy Collins, mae'r trifóadgrif ddefnyddio, Oben Group, Alison Grieve, CEO ac inventor of G-hold. Sarah Roberts will be joining us later but is delayed due to weather conditions. If I might start with question to our panel witnesses, first of all looking to the past 10 years and how the Scottish economy has performed, particularly with regard to entrepreneurship and business growth and innovation. I am just looking for comments from each of you on how you see matters developing as we move forward. I am not sure who would like to start with a few comments on that. Volunteers, if you wish to put up your hand, if you wish to come into the discussion if you are not getting in, otherwise simply just join in the discussion as we move on to the other questions from my fellow committee members. I will kick off. I speak from a little bit of a bubble coming from the north-east of Scotland, so I cannot really speak about the rest of Scotland. I think that the north-east, we have been quite effective at being entrepreneurial and we have seen a lot of businesses grow and flourish. I think that to some extent we have overheated. In Aberdeenshire and Aberdeen, we overheated a bit and there was an element of correction, but I do not think that there is necessarily lack of entrepreneurship or desire to do to be entrepreneurial. I think that there may be more difficult challenges in money and resources and infrastructure. I should say that the sound desk will operate the mic, so there is no need to press any buttons. I would absolutely back up what you are saying. I think that from an entrepreneurial standpoint the past 10 years, looking at the recession and certainly the last five years has been a real growth in the start-up culture, real support for start-ups and scale-ups. We have benefited from the Scottish Edge award, which I think has done a lot to impact those very early stage start-up companies and to encourage that kind of growth in early stage companies, which then will start to power the economy in a more impactful way. Over the past few years, having more of a collaboration around the enterprise agencies has really impacted as well. I think that we are setting off into the next 10 years a lot better than things we are looking back in 2008. I see that we have been joined by Sarah Roberts, the founder and CEO of Healthy Nibbles. Welcome to you as well. We have just started off with a question about the performance of the Scottish economy over the past 10 years and how our panel members see matters moving forward, particularly with regard to entrepreneurship, business growth and innovation. Anyone else who wishes to comment before we move on to the next question? Alison Greed? I have seen a lot more support for the start-up stage of businesses, but I still think that perhaps the scale-up phase is suffering somewhat for the Scottish business community. I am caught with that opinion because on the one hand I can understand the need for a small country like Scotland to back certain winning horses, so certain categories of businesses that benefit a lot from investors coming to Scotland for that category specifically. Software as a service or Scotland food and drink or textiles, etc. There is a lot of sense in getting behind those categories, but sometimes that is at a loss to certain companies that sit outside those particular categories. I do not know whether the right thing is to continue with that specified support or whether it is perhaps to broaden support out to certain companies that sit on the peripheral of those categories. We will perhaps move on to a question now from John Mason, deputy convener, and the panel member should not feel that you need to respond to every question, but to come in as and when you wish to or are brought in perhaps by committee members. John Mason, what are the companies in the peripheral that are not getting the support that they need? There was a huge exit recently of a company that was a hardware company. It is not public knowledge who they exited to, but I will say that it was a US major and it was quite a few hundred million pounds that they exited, but they were not really supported within the Scottish ecosystem because they were a hardware business. I wonder however how many other Scottish gems are not supported because they do not fit into those categories. We are in accessories, we are a manufacturer, a hardware business, and we do not fit into the categories that are part of particular ecosystems in Scotland, and sometimes we struggle with that. That is why I do not want to speak from a personal point of view, because we will always be losers. I am not necessarily against the fact that there are great categories that investors can go. Scotland equals this fantastic community of businesses, but there are losers in that system. Colleagues will be asking more about how we grow businesses in further questions, so I will not go on to that. For information, you can give your own experiences and your view of the wider economy. I think that we are happy to get both of those on the committee. My question then is really more about how you see the next 10 years. Is it just going to be a repeat of the last 10 years? Are there new challenges? Are there new opportunities? Are there new risks? Either for your business or more widely? Yes, there are certainly new challenges. One of the principal ones is what my wife insists that I call the B word, because we do not allow it in the house anymore. Apart from that is the movement in technology is very rapid. If you think back, what are the major companies that we see now on the world stage, Google, Facebook, these things, they did not exist 20 years ago. It is likely that large companies, the big businesses in 10 years time, will not be the same businesses that we see today. In the industry that I represent work for, the oil and gas industry, we are going to see a lot of changes. We are going to start to see us dismantling our infrastructure in the North Sea and putting it to sleep. That is going to be a cost. For Scotland, there is also going to be another cost, because there are a lot of high-skilled jobs that are not going to be reproduced. They are going to have to be reproduced somewhere else. We are going to have to do something else. I am not sure what that is. Are there opportunities then in there that that skilled workforce can do something else or go somewhere else? Of course. You have got the skills, the knowledge and the abilities. You know a lot about doing things underwater, for instance. There are opportunities into renewables and opportunities in a whole variety of areas in the sea. On the point about picking winners and things like that, I think that it would be possibly more useful if you focused on creating a valuable business environment, one that encourages businesses and small businesses to come for. I can give an example of one of the things I would think about. That would be the issue of cash. Cash is one of the biggest issues for small companies. One of the challenges that I have, possibly probably you have as well, is getting our customers to pay on time, particularly the large ones. Let me give you an example. As a company, we turn over about $12 million. That is about $1 million a month. Our payment terms are 30 days. We need to live for 30 days before we get $1 million. If people pay us on 60 days, we are effectively giving an interest-free loan to our customers of $1 million. If I do not have that $1 million, then I cannot use it to spend money to invest in my company, in my staff, hire new people, invest in new technology and things like that. Is that situation getting worse, or is it getting better, or is it much the same? I think that it is getting worse. Particularly with large companies, they think that those are our terms. They say that they will pay for 30 days, and you turn up in 30 days and they will not do it. They will not answer your phone calls or do everything like that. We are fortunate when you do what we sell are consumable items, so when they do not pay and they order some more, we take the order, they could turn up with the truck for it, and we tell them to give us the money first, and then we get the chemical. It is not the case for a lot of other people. Thank you. Anyone else? Going forward, anyone else wants to give us some thoughts on the next 10 years? Page Park, we are an employee-owned business, and I think that business models should change in the next 10 years. I think that Scotland is very attractive to more international companies, but we need to protect the Scottish companies. Page Park, since we have become employee-owned, we have become more productive. We need to make sure that we protect smaller Scottish businesses from being taken over and being bought up and trying to keep those companies local. I think that some of us visited, although I am slightly biased because you are in my constituency, but we did visit you before some of us from the committee. There was a suggestion that some big construction projects like a big name architect rather than a local one. Is that something that you see as a challenge going forward? What we have found in the past 10 years is that Scotland has become very attractive to global companies. Five years ago, we were very strong in the Scottish market, but over the past five years, we have seen a lot of competitors coming from London, even competitors now coming from America and Australia. It is more and more difficult for smaller Scottish companies to compete in that market. In the next 10 years, it will be even more attractive. Would leaving the EU affect that if we were able to be biased towards Scottish companies? Possibly. At the moment, we have to go through the European procurement process. So, when we bid for projects, the building projects are advertised European-wide, so anybody can apply for those projects. Obviously, you have to go through a selection process and then you have to tender. The competition is just getting tougher and tougher. As we know with construction, it is a very long-term industry. We are the first to get hit when a recession appears, and we are the last to recover. As we know with recent events, with Carillion, it really is quite a competitive market. We just have to be very wary of that. I think that Jamie Halcro John is on someone to come in with a supplementary. Thank you, convener. It was just at the point that, Paddy Collins, you made about cash flow and non-payment or delayed payment. From my experience, it tended to be the larger companies that did it, and they do it as a purpose to, I suppose, as you say, extend the loan. What is your experience? Does it tend to be the larger companies, medium, or is it completely across a spectrum? It tends to be the larger companies, and I generally agree with you. They look at the means of low-cost financing for their business, and it is reprehensible. What would your suggestion be for dealing with that? What would I have got? I can say it in a polite conversation. These people need to be named and shamed. There needs to be some sort of thing. I was thinking about this on the train coming down, because I thought I anticipated somebody who asked this question. One of the things you could do is require companies to publish how rapidly, what their payment terms are, whether they meet their payment terms. These are numbers that they have already. It is not expensive because they are already looking at their days' payment and how efficient they are. They want to get the money in quickly, but they do not want to pay the money out. That is not reasonable. You would suggest that this could, particularly with smaller business, have a real impact? I think that would have a significant impact in helping smaller businesses progress. When you are a small business, profit is not the most important thing that you think of in finance. It is cash. Cash is king. Would you not agree, ladies? I am an athysol amongst roses here. If I only come away with one point that I have made today, we need to get paid on time. If we get paid on time until we can finance ourselves better, if we get paid on time, the bank is going to be more supportive to us. If we get paid on time, we can go and employ people. None of us will get that money in and go, oh, lots of money, let's go and spend it on ourselves. We will stick it back into our businesses, because that is what we do. I am wondering to bring Sarah Roberts in to the conversation. You deal with healthy nibbles, presumably, and you deal with consumables. Do you have a difficulty with payment times? We are actually quite fortunate at the moment, even though we deal with the FTSE 100 companies. Typically, we are finding that they are paying as they should be doing so far. Where we have experienced in bringing in the cash is king issue was more to do with supportive funding coming through the agencies. In March last year, we applied for a small business loan through one of the agencies, which is supposed to take 13 weeks for completion, and we are at week 33 now, I think, roughly. There are issues in terms of accessing to fund when you are going from start-up to scale-up, shall we say? Gillian Martin wants to come in with a supplementary question. Yes, I have some of the use of running a small business. I am nodding along in agreement with Parry Collins about people with late pairs. Do you think that legislation is the way to go? For example, France has legislation that compels companies to pay within a certain window? It could possibly help. You try and persuade people as nicely as you can, but they do not listen. People say, well, we do not really want legislation, but if you have tried everything else, none of that and nobody has paid any attention, then you are left with legislation, are you not? That was another supplementary question. One of the issues that we have been talking about is companies with small businesses being reluctant to scale up and employ other people. Obviously, if you are not getting paid in time and that is a precarious existence, then you have the responsibility for your employees. Do you think that if that was addressed, that that would be more comfortable in employing people more quickly? You are all nodding. I think that I know the answer to that. I would say most certainly around that, because I think that there are a lot of decisions that you can make in terms of advancing different aspects of the business, but there is a certain next step forward in terms of taking somebody on. You can cope with fluctuations for certain things, but not when you are actually risking somebody else's livelihood. The other aspect of that is that you also might pull back a little bit on sales so that your exposure is not so high. For example, if you were rolling a product out through a retail group, you would maybe just go for 10 retail sites rather than 50, because you cannot risk the exposure being so high. You are actually pulling back on revenue opportunities, because you do not want that cash exposure in your business. Some women got the vote, so I am particularly pleased that Mr Collins is indeed outnumbered today. With that, can I ask about automation and technological change, something that Mr Collins himself raised? It has come up as a theme in subsequent evidence sessions that we have had, but we also know that the official statistics tell us that Scotland lags behind other countries in business research and development. I am interested in what the opportunities are, what the challenges are and what we need to do to capture some of that. I am happy for anybody to go first, but we will see a huge change in construction with automation, hopefully for the better, for the quality of the build that we will create, but obviously to the detriment of jobs. Bricklaying can be done by robots, demolition will be done by robots, so there is a whole range of skills that will probably go. There is a skill shortage in construction at the moment, so hopefully it means that the more skilled workers can focus on the jobs that need to have people, but we will see a huge change in construction. I think that you are absolutely right there, but I think that the positive of that is freeing up those manual jobs to focus on innovation. I think that construction is a really interesting area and Scotland has such a rich history of innovation. It would be great to see some of those skills being pointed towards exploring your training from the ground up and looking at new materials, for example, a new way of generating power and such like. I think that automation allows that to happen. As a company, we sell automation in a lot of ways appointed allows small and large businesses to automate the process of making appointments and then pushing those appointments and reporting through the business. The impact that we have specifically on small businesses is amazing. We are quite often being told by our clients that they would not be in business without a pointed or that it frees them up to be doing extra services so therefore they can make more profits. It is undeniable the impact that automation can have. I think that the challenges are adoption of automation and specifically at the larger enterprise side. It is quite easy, small businesses are quite nimble and they know what they need from their business tools and they can go out and adopt quite easily. I think that it is more difficult at larger or at government level. I do think that that will happen regardless of whether we are proactive in adopting or not. I think that I would like to see more encouragement from the agencies to enable businesses of all size to adopt technology. I would love to see encouragement to adopt technology built in Scotland because I think that there are some amazing technology companies based here. It is a shame that Jamie-Fawn code base cannot be here today because I think that a lot of them are housed in code base. A lot have been supported by Scottish Enterprise, Scottish Investment Bank or building these world-class tools right here. It is a shame to see that there are not more Scottish companies using Scottish technology at their heart because that would make an impact on both sides of the coin. You seem to be suggesting that there is very little planning going on. We are looking ahead but not really doing much about it. Would that be a fair characterisation? It is great. We are saying the right things and we are talking about the right things. I think that there are some brilliant examples. CivTex is a great example of looking at how we get start-up or small business engagement with the governmental side of procurement. I think that it is probably not as joined up when you move outside of that. We are doing some really nice big headline things but actually looking. I do not know what the answer is whether it is something that we can look at as whether there is financial incentives or whether there is who knows. However, if we can join that up, it will make a massive impact right along the chain. That is very helpful. Any other comments? We operate against competitors in India and China. We cannot compete on price. We have to be smarter and faster than other people. Otherwise, we are just not going to win the business and win the international trade that we need. As a company, I have been very keen on innovation and we do spend a lot of effort on innovation in our business. We have looked at diversifying out of our core activity and we are developing new products for waste management for subsea applications and decommissioning. Some of that has been our own stuff but we have had help from organisations such as OGIC and OGTC that have helped us to bring that forward. It is not just money, it is the linkages and the ability to meet people. OGIC could get us to meet people in universities. OGTC could make good introductions into world companies to people that we did not know to our companies. Those things help. When I was listening to the lady here, we were talking about jobs are going to be lost because there are going to be robots building house builders or bricklayers. I am thinking why is not anybody making a robot bricklayer in Scotland? It should be possible. The skills are certainly here. I agree. I speak from the perspective of them as a manufacturer. I see a lot of companies in our industry that manufacture over in China primarily for plastic products. I do not think that that is necessary by getting behind certain technological advances. With an emphasis on things like robotics in Scottish manufacturing, we do not manufacture in Scotland, but other companies could also manufacture in Scotland if the cost per unit was reduced by clever usage of things like robotics. It is a very positive thing, but it perhaps needs a bit more support around the manufacturing companies that we use. Conceivably, based on what you are saying, the cost that would be stripped out would be a labour cost. For us, planning and mitigating that, ensuring that people have alternative work, would be something that you would need to plan in advance. Those jobs no longer exist in Scotland. We are fairly labour intensive in what we do and all the manufacturing and assembly in Scotland. For larger companies, those jobs are not in Scotland anyway. They use manufacturing in China or in other places in the first. It is important to acknowledge that there is no loss other than bringing that revenue to Scotland with some clever innovations and optimisation processes. That is a helpful explanation. I do not know if Sarah Boyle would like to add anything. That is a great deal on tech, apart from just to reiterate what Paddy said. I think that what we could benefit from small businesses is a connector block to the various tech companies. Certainly, as we are looking at evolving, part of what health enables to do is healthy vending, but we try to push that in terms of integrating those machines with wearables and devices and how that can push that sector forward. We immediately looked to London, as opposed to necessarily looking to Scotland. I think that there could be an entity that brings the tech companies to the smaller companies. Now to questions from Jamie Halcro Johnston. Some of the things that we are going to ask have been covered, but we talked about the edge funding and the like. I wanted to ask the panel not only how Scotland compares to other countries in terms of creating small businesses, but businesses that will grow quickly and become major success stories. My perspective has been massively supported. We have had a very positive experience of that kind of financial and skills-based training. We were one of the very first Scottish edge winners. That was really how appointed became a company up until that point. It was me and I was outsourcing our development. We were awarded £30,000 and that enabled us to hire our first developer, who is still with us. We have since built a team of 14 of us now. That has been touched at each stage by Scottish Enterprise. We have had match funding through the Scottish Investment Bank, which is one of the most impactful ways that Government money can help business, because it is coming in and allowing private investment. It feels like it is fairly light touch from a management perspective. We have identified match funding investment partners and being able to take the angel money, which we are well provisioned in Scotland from a point of view of angel investors, but being able to take that relatively smaller amount of money to what you might see down in London, but match that with Scottish Investment Bank has been amazing. Those touch points have really allowed each time that we have needed to scale up or to invest in either infrastructural staffing. We have been able to access things that allow us to compete with. There are undoubtedly some restrictions that come from being building a company outside of London or in a smaller region, but I think that the benefits in our case certainly have outweighed the downsides and we have been able to punch above our weight at each time, because we have been supported in that way. Outside of that, there are the other organisations such as Entrepreneurial Scotland or Women's Enterprise Scotland—those people who are able to support around the outside. I think that Scotland is, for me, one of probably the best place in the world to build a small business and to take that from an idea to a point where you are making a positive impact on the economy. Can I just come up very quickly and mention like touch? Is that important to you in terms of things like the funding and support that you are not being able to jump through to many hoops? Absolutely. From a point of view, I think that one of the things that we maybe do not do as well is in the early stages where—it is kind of what Alison was saying earlier—I absolutely understand that there needs to be a rigour around accessing money and it needs to—there needs to be a process and there needs to be areas of which are supported over others in a strategic decision that the difficulty is when you are kind of asked to jump through hoops and then perhaps either the end goal is not there or it is not as impactful as it would have been. There have been occasions in the earlier stages of appointed where perhaps had we have focused on selling stuff rather than trying to raise money or support that that could have been more impactful. So I think it is just really important to be aware of the impact of whatever activity you are doing in a small business. At the very beginning, you are one person where there is an opportunity cost to whatever you do. So I think allowing fairly light touch and impact and allowing the companies to have control over—so, for me, that is why Edge was so impactful because it was not about accessing £5,000 to do branding exercise, for example, or £2,000 to do this and you are kind of trying to jigsaw together a company that fits in with where the support is. Instead, it was about here is a pot of money, you know your business best, yes, we want to collaborate and we want to know what you are going to do with that money and there will be touch points to make sure that you are spending wisely but, by and large, get on and do it because you have a business plan, you have gone through the process to be awarded this money, so go and spend it in the way that your business needs it and I think that is really important. We need to trust businesses at an early stage that they will do the right thing for their business because, like you said, there is a need and a want to reinvest and to build ambitious companies here. Did you find that the support that you were getting, whether that is financial or advice, was coming quickly enough, it was coming as you needed it? I think that it is mixed and I think that one of my biggest frustrations is that it can often depend on who you are working with. In a Scottish enterprise sense, it can often depend on your account manager or your particular needs, what sector you are in, so I think that it is not consistent across the board. There will be things and we are lucky in Scotland. I think that the entrepreneurial community is very joined up and there is collaboration and so people do hear about things but, more often than I would like, I hear about opportunities from other startups or consultants or that community, rather than hearing it from SDI or Scottish Enterprise. I know that there is work being done to do that but I think that is really important work. There is a level playing field and the people who benefit most from the support are getting to know about the support. Sorry, I better look at other questions of other people. If anybody has got anything particularly on that because you all have experiences of different sectors, I think that a couple of touching on your sort of geographic haven't done a great deal outside of the UK but certainly I am split between here and London and have found that we have a much better stronger ecosystem for the entrepreneurial community than down there. Even whether it be down to the smaller grants like they have mentioned as far as for branding or whatever, just that being able to access those small pots of funds along the way is really encouraging for businesses and really I get a lot of positive comments when I am down south about that. I would also reiterate about the inconsistency in terms of the advice and support that you can get from agencies. Initially, when I first started Healthy Nibbles, I was speaking to an advisor who was based in Edinburgh who had actually never worked outside of the support gateway and really the stipulation was that I wouldn't be able to get access to any funding. As we were setting business up, we actually moved out to Midlothian and I was then able to get access to a lot more funding and support. What I have found as being a struggle in our journey certainly has been the lack of being able to places so we are not quite tech. We are tech to a certain degree but we are not quite tech and we are a retail but we are not quite retail either. Being able to pitch in holders has meant that we have not been able to access certain funds. In addition to the loan, there have been various other situations where we found that it has been incredibly delayed in terms of being able to get access to relevant advice and support. It is all fair and well being a strategy session but that might not be at the time what we actually need. We could do with other support and just being able to almost bespoke fit to the company in terms of what that company needs because we might have internal strengths that we can draw on that means that we do not necessarily need certain things but we need other areas of expertise. Do you think that that comes—not being able to access that funding or having issues accessing that funding comes because of the sector that you fall into or do not fall into? Is there also a question or a gap in terms of the size of the company that there are some companies that the size of companies are perhaps, you know, they may be bigger than, you know, a start-up from business gateway but not quite up to the level where Scottish Enterprise will be coming in and having an account manager? I think that that could have been one of the potential gaps. We are just sort of hitting into the, shall we say, the account manage level of SE but there has been that gap where we are clearly in a high-demand sector because we deal with corporate well-being. So we have got a lot of draw on as most of our customers are sort of foot to 100 top businesses that we are dealing with and there has been a massive demand in that but it is then being able to sort of drag this smaller business alongside and people, you know, we have had to sort of handle that through lower employee numbers when actually we really do probably have the role for another five or six people to join the team, just not the funding yet. So yeah, I think there is that sort of divide where you sort of separate yourself from business gateway into SE which could do with bridging a little better. I was just going to kind of add a little bit to essentially how we get to be take successful small businesses up to, you know, scale them up to larger medium or large size successful businesses. One thing that I have found curious recently is that people don't talk so much about sales when you go through an investment round or when you get Scottish Enterprise grants. Once upon a time, I think about eight years ago, I had an investor who called my customers that's a fairly basic thing to do in due diligence to check that you're dealing with, who you're dealing with and what kind of level of business they would expect to do with you, and yet none of that happens now. So there's much less of a focus on people actually selling their products and services and more of a focus on how many staff they employ or how much investment they have managed to bring on board. And I think that's a failing in Scotland right now if we're not focused on the actual revenue that is taken in through sales of goods and services. Is that coming from the agencies moment also? That's the investment community, it's the agencies, it's pretty much any route to funding it feels that it's a lot more about are we going to be the next Facebook and get these massive investment rounds on board, it's become more of a vanity thing than actually are we doing business with real life companies outside of Scotland. It's a massive problem as far as I'm concerned, I think that there should be a focus on revenue brought from sales more than above and beyond anything else if we actually want to reduce our trade deficit. I've got some experience of doing business overseas, we've done business in the United States and we've done business in the Middle East, we do a lot of business in the Middle East, we have about five or six people work for us based in Dubai, about 65% of our business is in the Middle East and Saudi Arabia, UAE, Iraq, Oman, Kuwait, those parts of the world. And I think one of the things we forget here is that we do have quite a lot, there are quite a lot of plusses to being in Scotland, we have a sensible legal system, so when you have a deal, you know you have a deal. We have a reasonable infrastructure and we have significantly less, and you'll be surprised to hear this, bureaucracy than many other parts of the world, not just the Middle East but also the United States of America. There's a lot going for us in being able to do things, being efficient and everything like that, so that goes back to what I said earlier about creating the right infrastructure and not creating more problems, because one of the challenges that we've seen, I've had a number of people come down from bigger companies to come and work for us and one of the, from senior roles in large companies, one of the things they discover is actually all the things they had to do in the big company, they still have to do in the small company, they just don't have the same amount of money or resources to do it in, so you still have to comply with the Bribery Act, you still have to comply with COS, you still have to comply with the HSE laws, you still have to meet ISE 9001, you still have to meet all of, do all of those things, but you don't have anywhere near as much money, so you have to be, and now I've just said, I've said two things, one thing is much, the bureaucracy is much less, and now I've just reeled off a whole load of bureaucracy, but believe me, compared with other parts of the world, this is an easier place to do business than elsewhere, and you often find that when you speak to foreign companies and they set up in Scotland how much easier they find it to get things done and get stuff happening. I did have a question, sorry, just on that, because part of understanding the complexities, do you use Scottish Development International or have you been, do you tap into any of? Yes, we're an account managed company with Scottish Enterprise and we've used, we've done it, been on a number of trade missions with SDI, and they've been very useful because SDI can get you into beat people that you're not going to get into meet on your own, so we've had assistance in going and looking at business opportunities in Algeria, for instance. Now I wouldn't really know how to start doing business, looking at business in Algeria, but through SDI I can go in there and we can meet Sonnetrach and those people. We're looking at opportunities for Norway, which is rather closer to home. We haven't done a lot of business in Norway, but SDI can help us to do things like that and they can introduce us, and what's more that they can introduce you at a higher level than you might otherwise go, so there is some significant benefit in that. Often it's just like ringing up Scottish Enterprise and saying, I'm trying to do this, is there any way, any way you know, do you know anybody who can help us in this area, and they'll often be able to say, well, there's this person or there's that person, or why don't you talk to Fred, he might know someone. On that point, perhaps we could move on to questions from Dean Lockhart. Thank you very much. I'd like to explore this a bit further, this line of questioning about specifically what support you have found helpfully in your business, be it from the enterprise agencies or angel investors, and covering anything like the incorporation of technology, or export, export finance, or increasing productivity in your business. Perhaps if I could ask each of you to highlight maybe one specific example or more, if appropriate, of where the enterprise agencies or external investors have helped, and on the flip side, perhaps some cases where intervention from the agencies might not have been helpful, because it's very helpful for the committee to understand you guys on the front line, to understand directly from business what actually in practice works and what doesn't work. We got assistance from Cooperative Development Scotland to help us become an employee on business, and I think if we hadn't had that help and input, we probably wouldn't have gone down that route, because we didn't really understand that the kind of different business models that were out there, so that was a great help to us. Actually, we've been employee owned now for four years, and we've actually seen our productivity increase, so really that small amount of assistance. We've got financial assistance, and business advice has really transformed our business, so we've increased our staff numbers, we've increased our profitability, and because we're a service industry, it's difficult to measure productivity, but I think our architecture has improved. Our staff are more innovative. We've got different groups now that previously, when it was a traditional partnership, we all just worked away and told what to do, but now we're actually our own bosses. We've found that we've got a lot more innovation within the business, that we've got a graphics group that's set up, we've got an innovative architecture group that's set up. Through that small amount of advice, we had a huge transformation in our business. The others want to comment. I would always say that any support for trade shows is really valuable from Scottish Development International. I can't think of a single trade show that we've been supported in that hasn't brought an incredible return on investment, so I think that any contribution towards actual selling activities is the most important and helpful in growing a business. I know that Scottish Development International is supposed to be growing as an organisation or at least retaining the same budget as it had previously, but I'm seeing a lot of budget cuts in the number of trade shows that are attended by Scottish Development International, so I don't know where that money is now going, but it's not going into trade shows. I've already talked about the impact financially of the Scottish Investment Bank investment into us, but I think that one of the things that came along with that was a board of observer who got involved in the business and has been a fantastic impact on the way we've grown. In our case, it was a female board observer, which was a fantastic impact on my board, so it turned us into a 50-50 board, although it was in an observer capacity and that was a fantastic impact. On the negative side, I think it kind of speaks to a bit of what Sarah was speaking about earlier around the support that you get at an early stage that sometimes could potentially lead you down the wrong path. We had some supported marketing consultant work where they come in for five days or however long, and actually the advice now, knowing what I do know about growing a business and building a business, I look back and I'm horrified that we were given that advice supported by government agencies because it was just negative. It was negative both from a creative standpoint and I think at worst could have put us off. It could have made us think that we couldn't do business and that we had no future and I think that's so dangerous when you're at that very early stage, you're much more likely to fail than succeed. Having a really rigorous process of making sure that anybody who comes into contact with those early stage businesses is aware of the restraint and understands the context of the business and is able to advise with that in mind because I think that it's really dangerous if not. I agree with that. I think that I did come into this opportunity with a reasonable amount of experience, of commercial experience behind me and having had supported a lot of startups previously or advised on startups and I think that on a positive access to funding and support is obviously going to encourage people to give it a go but I do think that they need to be that sort of awareness of what it takes to run a business, what you're going to have to face, the pitfalls, the opportunities but also being able to manage that in a really cautious sort of controlled way as well rather than just spread and then go. Having said that in terms of I think the sort of I would say the big feedback is consistency from the agencies and timeliness but timeliness in a commercial sense rather than a sort of agency sense you know for us a 12 week lead time for something I could have changed direction of the business in 12 weeks almost it sounds rather erratic does that but it's just sort of keeping up with the sort of the speed at which startups and scale-ups move would be a key. We've had benefits in a different way, we've had periods where we wanted to grow and we needed to get key individuals on board and we've had the benefit of Scottish Enterprises manager for hire so we've got some assistance in that to get us over that first big gulp gosh he's a bit expensive can we really afford it oh yes we can let's do that we get the person the individual on board they help transform the business and you move on to the next stage because businesses are built by people. I'll be a bit cheeky and say we're not finding when we don't think we're getting great deal of help we just drop it and move on and say thanks very much and to give back so we don't so we haven't seen that that problem and I perhaps it's the degree of the benefit I had was I came into this my business having run businesses many top for a number of years before so I had a lot of experience so when people would experts would tell me that that wasn't going to work I didn't necessarily always believe them and probably just as well. Thank you there's a couple of supplementaries from Gordon Macdonald and then Tom Arthur. Thanks very much Kivina. Just getting back to the point about trade shows international trade shows there was a comment made about the number of SDI trade shows possibly dropping but what other agencies are involved in carrying out trade shows it's not just SDI that carry out trade shows. In last session we actually carried out an inquiry into the amount of duplication there was between the different agencies and I was just wondering if you thought that that amount of duplication had reduced and if it had was that part of the reason why Scotland was now the third fastest growth rate for export and businesses in Great Britain according to Scottish Parliament information service. Who would like to? Well I mean that's fantastic if that was the issue previously. Perhaps it's made perhaps in the area of food and drink where there'd be Scotland food and drink and Scottish development internet I mean I don't know the specific examples of duplication but. Chamber of Commerce UKTI etc. Attending international trade shows yeah I mean but that could perhaps be the case but certainly I just came back from CES which is plastered over the world's media every year and is the largest consumer electronics trade show in the world and there was no official Scottish presence at all not a meeting room nothing and no Scottish company was told that UKTI would have any presence at all last year they didn't have so much of as a meeting room last year and so I did know Scottish companies to go out there but they went there on their own accord there was no kind of official presence which is quite a shame given that it's a trade show that has every single industry in the world represented there and the future of technology I thought that that was perhaps falling short. Were you able to make inquiries to find out why that was a situation? Well yeah I actually spoke yesterday to Scottish development international on it you know I'd certainly all the individuals I know within that organisation are fantastic they just deal with what they have but they said that what the mobile world congress in Barcelona which is a by comparison smaller show but it's more expensive so they said that it was because mobile world congress is more expensive that's why Scotland has a stand whereas CES is cheaper so Scottish companies should be able to go there so I don't know I mean it was a confusing message to get and I thought that it was a shame as well for the the Scottish development international account managers were not able to attend CES themselves even just to walk the show because again there's just so many opportunities at that show so yeah I know it's a difficult decision but at no trade show that I've ever been at have I seen duplication between Scotland stands I haven't seen that but clearly if that's been an issue in the past then that's that's an issue Again on trade shows I'm just curious as to what the relative importance of trade shows within the European Union are particularly for businesses that are just taking their first steps in internationalisation. So in terms of people attending trade shows that fall within the European Union I mean again I'm kind of biased 90% of our of our export goes to the United States so we're used to the complexities of incoterms and taxation and so for us it makes no difference to us whether we're exporting to Europe or whether we're exporting to the States whether we're in in a trade union or not and so I mean there are for example Mobile World Congress that's in Barcelona I don't know how that would impact people going over to a trade show in a European location because generally these shows are international trade shows so you'll have representation from all over the world at them not necessarily it's in Europe and therefore there's only European companies in attendance. It's purely actually more specifically to do with the customs union and the imposition of colonies which would you know as a consequence I'm certainly going to let it debate on Parliament and the impractice we'll have in musicians touring it will be far more pronounced but I appreciate for larger than more established companies they have the capacity in terms of dealing with that adib bureaucracy it was just specifically if there are certain companies who benefit in particular from taking their first steps internationalisation at European trade shows and making sure that if we do find ourselves outside of the custom union there's that additional support in place to support companies. Yeah I do I think that there was a programme I don't know whether it still exists that was called smart exporter when I started the company and that was very useful about going through what encoterms were how to export goods and services and I actually don't think it's that much more complicated if we suddenly have to deal with that there's a percentage on you know whatever goods you've got going out there it's annoying to have to queue in a visa line it's you know there's a little bit of an added complication but I might be on my own here but I maybe as well because we do so much over in the States I just don't think it's going to have as much of an impact as people are freaking out about it and I think that it's just another stage of learning. Oh that's fine certainly for musicians it can actually have a severe impact on the profitability of it too but I'm quite keen just as we go through this pre-exit process to explore how it impacts on different sectors. Well in terms of the visa requirements they need to. Visa is essentially the carnies as well because clearly obviously if you're taking a certain number of goods in you have to demonstrate that you're taking them back out. Back out yeah and again that's just for particularly for a potential in business engaging in its first international trade show where models very tight will need to be additional support because when it's obviously safe and the most established organisation is a company that's not a problem but for someone taking that first step it could be prohibitive. Yeah I mean definitely there will need to be agency support there I would imagine I mean as I say there was when we started with this smart exporter you could call up chambers international and say look I'm thinking about taking goods but for display only and then I want to take them back out of the country and certainly there was nothing it's always easier to say in hindsight oh it was easy you know maybe I find it a bit more complicated at the time but yeah certainly we'd not like to see musicians suffer financially by the fact that you know it's become more complicated but generally goods are just they just have a documentation as long as the documentation is in order then it should be fine for them to take instruments in and take it back. Well there's a significant charge on it. Is there? Yes well there will be about with the customs union but I won't take up any more of the case. Okay sorry I wasn't aware of that that does science. Perhaps a topic for another time I'll just come back to Dean Lockhart before we move on to questions from Colin Beattie. Thank you first of all thanks very much for your invaluable feedback in terms of specific help that you've had in the past. We've heard in other sessions that companies trying to access enterprise support have found it quite a cluttered landscape with difficulty establishing where to start in terms of where do I start the process lots of agencies involved. Is that something you've experienced when you started your journey? Put simply yes there's a lot there's lots of support and there's lots of things but unless you have a guide like an account manager you're never going to identify what support is available for you and which is the most appropriate support. For somebody coming from outside from a starting up in business it's very difficult there are a lot there are lots and lots of different schemes and some and a lot of them overlap and some of them are a little bit contradictory or they appear to be and so it can be very difficult to work out which is the right one. We're very fortunate we've got a very good account manager who looks basically looks after us and shows us points as well as this this thing you can go after or are you aware of that or perhaps you should be going to look at that that would help you in your business. If you don't have that resource it's going to be very difficult to get money from the Scottish Enterprise. That seems to be agreement amongst the witnesses that's the case yes. I think that's what I was talking to earlier where that isn't consistent across all companies so that's amazing that you have that. I think it's not in place for all companies so you'll find some companies who are fantastic at getting that support and of course will flourish because of that but others that don't know about things that they probably should. I'd like to move on to something a wee bit different. This committee has taken evidence that Scotland in recent times at least has had poor productivity growth. The Scottish Fiscal Commission believes that since the so-called great recession this has become structural rather than cyclical. The Scottish Fiscal Commission believes that Scotland, like other advanced economies, is moving into a long-term poor productivity growth period. Do you agree with that? I disagree with that. I think there's a lot happening around the startup side of things. There's a lot happening in scale ups. I think there are challenges and of course there are, as you say, come out of a recession or are coming out depending on what you read. So I think yes, it's not without its challenges. But I think Scotland is well placed to fight those challenges. I think there's a lot of appetite for fighting those challenges. I think some of the stats around the amount of companies that are starting up and those companies that are starting to export and we're seeing that growth. It's not going to happen overnight and I think there needs to be a support and an understanding that large companies that can help us grow. We've seen some fantastic ones here with Sky Scano and Fandral. Those companies that have the ability to scale, it takes time and I think there needs to be the support and understanding that that's a longer-term journey. No, I would absolutely disagree. Can I just clarify then what you're saying? You're saying that you don't believe that low productivity growth is structural? That it is still part of the cycle of coming out of the recession? So I think what I'm saying is that the appetite for growth and the ability to grow is better here than it is in other countries, probably better than it is in England. The moment I think there's a real opportunity and appetite for growth here and I think that that will continue. I don't think there's a product. Let me put it this way. The northeast of Scotland has some of the highest productivity not only in Scotland but in the rest of the UK. There's a reason for that. People are expensive and they're difficult to come by. If your people are expensive, you want to get the most possible value out of them that you can. You'll train them as well as you can and you'll give them all the tools to make them as productive as you can because you can't get very many more and if you do get more people, they're expensive. There's a link between high pay, low pay and poor productivity and I think there's some evidence to suggest that. It's well known. If we can be successful and have high levels of productivity in the northeast of Scotland, you can have high levels of productivity in the rest of Scotland and the question is why aren't you getting the same levels of productivity in the rest of Scotland that you see in the northeast? That's a question I was going to ask you. Well, thank you very much for asking me that. I think it comes back to the one you have to invest in people in training, in skills and equipment. If you don't give a person the right tools, they can't do the job so you give them the right tools. You buy the right computer to allow them to work on the thing. You give them access to high-speed broadband. You send them on training courses to learn how to use software programmes to do things or in my case, you hire chemists, you hire high quality chemists and you give them and you build fancy labs for them to work on and to do their stuff. If you don't do those things, you're not going to get high productivity. The high productivity is to my mind linked, the low productivity is linked to low investment. If people don't invest in their businesses, they are not going to get the productivity they need. There's a lot of people go around going, oh, we're not so good at this, we're not so good at that. Well, yeah, but, jeez guys, foreign companies come here and they get much more product, they get higher levels of productivity from Scottish employees than local companies. Why is that? They spend more money on them, they train them better and they give them the right equipment. If you don't do that, you won't get the productivity. If you do that, you will get the productivity. So can I say that we took evidence last week from Jim McCall and he believed that the key to productivity was happiness, job security and a fair wage in broad terms? Is that correct? Is that what you're saying? Well, if you invest in people and you invest in their skills and you give them a decent place to work in and you give them the right tools to do the job, you're going to get happiness, all of those things that Jim said. So I would generally agree with him, but from coming from a slightly different perspective, you have to generate an environment where people enjoy coming to work and are productive. But if you don't spend the money, if you don't invest in people, you won't get the productivity. It's unreasonable to expect people to just work harder. It's much better to give them the right tools to allow them to get through their work much more efficiently and be more productive, rather than just working harder. Is there evidence in your mind at least that in the Scottish economy, Scottish companies are not making that investment? Well, again, I live in a bit of a bubble working in a company in rural Aberdeenshire that does make that investment. I go and see other companies I'm going, I don't think they're much gop, because they don't make that investment in those sort of things. You read about things, you visit other companies and you become aware of that. You go and see your companies in other parts of the world and you can see where people are making those investments and they do get those results. It's not for me to say, are other bits of Scotland not doing that. My contention is, if you don't spend the money, you won't get the productivity. If other parts of Scotland aren't getting the productivity, then I would suggest possibly they're not spending the money. Could I maybe add in as well? I mean, because we're an employer in business, I probably own a little bubble as well, but the other employer-owned businesses that we deal with, they do have great staff morale, great staff happiness, and that, hence, brings better productivity. What we have in our businesses, every employee has a voice. We regularly meet, we communicate, so everybody feels as though they're in control of their own destiny. I think that if employees feel like that, they put more into the business. I don't think that's a necessary requirement to be an employer-owned company. It's quite, I mean, that you are an employer-owned company really helps, but it comes back to another bag bear is, a lot of companies in Scotland are not very well managed. I mean, you know that yourselves. We've all been to businesses the way we've seen them, not very well managed, and you look at the guy and you say, well, if you're clearing off at three o'clock in the afternoon to play golf and you're leaving all your staff working away, why do you think they're going to be breaking their necks for you, matey? If you turn up at 10 o'clock and everybody else has got to turn up at eight, they ain't going to make an effort. If you're turning up at eight and you're the first person to get there and you're the last person to leave, everyone else is going to think that, yeah, you're making a bit of an effort and they should make a bit of an effort too. Given that we have a lower productivity growth rate here in Scotland, even compared to the rest of the UK and many European countries, does that mean that this is a problem that is endemic in Scotland, that it's something that needs addressed urgently? Well, I think you kind of answered your own question there, didn't you? If you want Scotland to be strong and successful and wealthy and we want to have all the resources for the teachers and the nurses and the social care that we want, we need to have a good tax, we need to get more taxes. We will only get more taxes if we have a strong business sector. So, yes, I think there is a structural issue and, yes, that is something that you need to think about. Is it an education issue should more business training happen in schools? I mean, at what point do you start to change the culture, especially if some people think that it's become a structural rather than cyclical thing, then surely the earlier we get into training, the better? To what degree do businesses actually engage with schools at this point? There are various programmes? Yes, there are, so I think that that's definitely a positive thing. And there are interesting pockets of activity happening and there's things like digital schools. So it will be interesting to see how that starts to play out in five years' time, ten years' time, when those students are actually out in the business community. How do you feed this back to the powers that be? I mean, you clearly think that there needs to be more engagement from schools to develop those business skills. How do you feed that back? Well, the last time I gave evidence, I had an idea of a scheme that was more about international trade actually and to create an international mindset in Scottish schools. So I think that that is being fed back again in pockets of activity. I don't know whether there should be more of a formalised process, but surely that's part of why we're here today. I mean, I'm not sure. Who do you feed that back to? Do you feed it back to Scottish Enterprise that there should be more engagement with schools? Or what would you suggest? I'm not answering the question, but there are different agencies for that. We want something just slightly different. What do you think are the top most challenging issues for new or expanding Scottish companies, firms, and what do you think policy makers both in Scotland and at UK level could do but on a practical basis to help them? I don't know. I just want to sort of go nip back to the other conversation as well and then link into this. A couple of things on productivity. One of the things that health enables do is work within corporate wellness and that's the predominant driver of our customers. What we're finding is building on what Paddy said as far as keeping your employees and your team happy is that where there has been sound nutrition has actually been a 66% increase in productivity and 15% less days off taken per annum from people that have got healthier diets, which is one thing. Just in terms of what Alison said, as far as the younger audience, in our personal experience what we have been through over the last year is the end of 2016 we were going to take on a modern apprentice and it was something that I was really passionate about feeding back into the youth. There was a change of circumstances in the business so we couldn't do but at that stage it was I think from recollection around 75% funded by I think it was Edinburgh Council but it was through the business gateway network. When I came to take on our current modern apprentice the support infrastructure around that had changed in as much as to get support the person had to be what I would have said is highly emotional dependent on their infrastructure so they had to have had a drug issue or you know release from prison, had been a child carer which for a younger business going through from start-up to scale-up was very very challenging in terms of taking committing to taking somebody I mean in the end we just took somebody and paid the full price for them so that's that's actually worked out. I think in terms of sort of moving forward in terms of improving the situation I think access to support for I think we've all reiterated it many times but the consistency of support that you can get whether you are a women-led business whether you are a high achiever whether you are in a different sub-sector that doesn't quite fit the bill in a certain category or even accessing underachievers so those that are maybe not doing it, fairing so well at school that there is an opportunity for them to get involved in in the business of some description whether it's part support. I certainly know the modern apprentice we've got at the moment we took him on at 16 years old and he had left school with significant issues in the schooling but he's been an absolutely tremendous blessing and support on the company so I think more sort of youth engagement would be really beneficial. Anyone else got a view on what policy makers can do to tackle the top barriers for Scottish companies? I mean I thought the cash flow point right at the beginning was actually really interesting so access to finance and cash management cash support is always useful whether that's some form of national ledger of non-payers or however you might roll out that process but also recognition of the fact that for a lot of Scottish companies that started in a very challenging recession there is still nervousness around bank funding a lot of companies are very cautious about what they take in terms of bank funding which at the scale up stage is actually quite challenging because traditionally that's the space that banks used to dominate and where you have that nervousness around taking that finance there needs to be some kind of replacement for that but there are equity finance investment and that's very well supported but where a lot of investors draw back a little bit is where you have the EIS scheme which is the enterprise investment scheme so it's fantastic tax relief for investors but for things like loan notes or loan finance they're not eligible for that great tax break and actually there used to be HMRC used to have a scheme whereby you could potentially still tap into that tax break as an investor giving a loan to a company at the point of scale up now now you can't it's very complicated so where investors would maybe have stepped in where a loan was most sensible almost like bridging finance neither not doing that because they don't get that extra tax incentive so that's just one example of where perhaps there might be some kind of provision around loans rather than you know companies finders continually selling off equity in their businesses would you consider the environment for new and growing Scottish companies at the moment is from a policy makers point of view where it should be in spite of these different tweaks and so on that you're talking about do you think that the the the the startup community is where it should be or or i'm just talking about the general environment and support that's available for new businesses yeah i think that scotland will always face that point of scale up scale up is where it's most challenging but that's not anything new i think that that's that's indicative of being quite a small country and so it's easy to grow startup businesses in that kind of environment but it's very difficult to support a raft of scale up businesses because we're just a small country so i'm not entirely sure what the answers are but perhaps just some more funding mechanisms around that point of funding customers and funding stock you know traditionally bank finance kind of zones and that that could be helpful if there were certain policies looked at around that and where you know the other countries have got examples of that right i'm mindful of time and a number of other committee members who like to come in i'm thinking perhaps just in that last point jackie bailey had a question that might tie in with that for the second panel not this one oh well that's that's fine then um john mason did you have a question okay yes well quickly um i mean i do notice that we have four panel members are female today which is fabulous out of a five but are there particular issues facing women in setting up businesses and growing businesses i think there are unique challenges um to being a female led business i think there are unique opportunities as well um and i think the numbers speak for themselves um from a results um point of view i think it can be difficult um in the early stages i think there are challenges around um so i have just had a baby and my husband and i did shared parental leave which worked fantastically for us and actually was really easy to access and understand and navigate um and i think it's fantastic what the Scottish Government is doing around um increasing access to childcare and such like one of the things i think that could make an impact is allowing access to that sooner rather than having to wait the the three years to to access that just to shorten or to allow parents to to go back to work more quickly you mean before the child is three years old yes yes yes so just being able to access that and i i don't know whether it has to be about there being more of it just having more of a flexibility one of the things that really impressed me with the shared parental leave was the flexibility of just again having that light touch and being able to manage it to how it works for both your business and your family because i do think you know it's the traditional mindset but it is often the case that that the childcare falls to the the female caregiver um so i think there's that that side of things i think the other side is just looking we've all talked about the consistency um and i think looking at how we report on on the female on the gender um spread of support so where you know where agencies are spending their money and looking at i think you know 2050 by 2020 is amazing if we started looking and taking that mindset when looking at support agencies and where the money and the support we had the suggestion before at committee that some of the agencies like Scottish Enterprise were just they just wanted jobs no matter what and they weren't really looking very much at whether it was women led or how many women were involved in that kind of thing i think that's that's possibly true um i mean we've been really lucky we've we've had great support and in some ways it's fantastic that it doesn't matter whether we're a female led company or not but i think in order to get to where we all want to be and where we want to see the numbers and you know the impact that that will have i think it would be good if if there was a look at that and you can't work on what you're not measuring and i think at the moment and i know it's difficult i know there was some talk around you know at the moment actively Scottish Enterprise isn't allowed to support things that they think will will specifically help female led businesses and i think removing some of the constraints i don't know whether that's you know tying in with the EU and that side of things maybe that would be something that that will change but i think there is there's a lack of female led businesses it is amazing that there are so many here today okay thanks so much yeah and i think it depends on the industry and as well because obviously in construction i mean just even the employees in the construction industry it's very male dominated to so to actually have a female led business would be difficult so i think it is down to education as well that we really have to educate you know girls in in schools that you know there is opportunity out there in construction or any other of the technology businesses one of the ambassadors at women's enterprise scotland and certainly through one of the thoughts around that is some stats but just that Scottish Enterprise the high growth businesses only reflect 3.2% of the account money to ones that are women run run but also looking at the diversity of the roles that a woman typically does in terms of not just bring it raising a family but then the the other side of that where they've got aging parents potentially and typically it can fall on the woman to sort of navigate that side of things as well so i think there are a number of sort of i was actually talking about it on radio this morning again a couple of incidences where it was only last quarter last year where two women were trying to raise funding and they were unable to so they actually dressed up as men went in got the funding and so i know that is definitely on the extreme but it does show that there are some issues that we we may be on the centenary but we need to be making some light years ahead i have heard it spoken of in fact in the business and parliament event i heard that apparently research shows that women want to be treated differently by support organisations that do not speak to me i just want to be treated the same on certain things around education as you say certain industries that are male dominated going into schools and speaking to girls to get them into stem subjects i think it is important that the that men are asked to do that as well as women because if you just have female entrepreneurs going into schools to talk to girls it's not giving a fair reflection of what the landscape is when they get into certain manufacturing or construction jobs so it becomes this kind of false cosmetic promotional activity which i don't think i think it's probably counterintuitive so certainly we all i think agree that women need to be paid the same and that there needs to be the same opportunities but i don't think that we'll get that by preaching to the converted and having the pressure put on women to answer the question about what how to create more gender equality i'd quite like to see my male peers being asked that question thank you ladies gosh okay well i'm probably taking a number of boxes there i work in the oil and gas our businesses in the oil and gas industry and we do do chemistry so it's a stem subject in fact we've got about 50% of our staff are female and that operates throughout the organization so the cfo my number two is a lady and a lot of our technical staff are female as well the buyer is a pre-med the supply chain manager is a female people in charge of quality assurance are female you know that it's fairly mixed i've been told in the past that i am prejudice when i hire people i tend to hire too many women um and for the reason and the reason it is is that if somebody come for a young woman comes to want look for a job in the oil and gas industry well good for her um because we need more people in more women in the oil and gas industry so i'll encourage her to come and come and work for us i have had the experience recently of how the young woman quit on me to set up her own business um as a personal trainer but she has a much bigger bigger game plan on that i was i was not very pleased because she's very good chemist and i didn't really want to lose her but anyway there she goes at the end of at the end of the meeting i wished her well and i do hope she does welly well because i think she will she's a very determined individual and i think and she's very capable she's also 24 so there's um she she wants to get into nutrition and healthcare and helping people to be to be better and okay i think we could probably explore this a bit further but i think we're a bit pushed for time so back to the convener yes well i think um some some questions may have to wait to the second session um and i see we're we're rather um pushed for time here so i'd like to thank this panel very much for coming in today and i'll suspend the session to let the next panel take their places thank you very much thank you well good morning again and thank you to our second panel for coming in this morning um from my right to left we have professor Gary McEwen chief executive of elevator vicki brock who's the founder of clear returns lori russell chief executive of the wise group and johnny can ross chief executive of the grass market community project so good morning to all four of you we'll start off with a question from um jackie bailey i know to this panel rather than the the previous one um many of you will know that i'm a long time long time fan of social enterprises um so i'm keen to know in in your words what you contribute to developing a stronger economy and what more you would expect government to do to help you in that process and i'll start with lori russell because i've probably known you the longest line i suspect so that's just because i'm the oldest um i think we have a huge role to play in creating an inclusive Scottish economy because social enterprises tend to contribute to the economic success of scotland and tackle social issues at the same time and often environmental issues i think we are a business model that makes sense to scots we are creative we're innovative we're entrepreneurial but at the same time we care about the impact we have on communities and on vulnerable groups many of us including the wise group are set up as supported businesses which in the eu definition means that we employ a proportion in our case it's 32 percent of our employees our 240 odd employees are either living in the most deprived communities in scotland have got a background that might involve them being homeless or addicted or in prison or have a health issue or a disability and i think that is a key element to scotland's success in the future because that does demonstrate that we are inclusive in terms of what we could do more i'm going to use a word that one of the panellists used this morning trust us more we are more accountable we demonstrate what social impact we make we can often measure that we save the public purse often money that would be spent on individuals because we can reduce their re-offending for example or keep them out of prison or get them into employment when they've been out of employment for a long time and we can demonstrate that in a way that actually lots of the public sector agencies that get public money don't do particularly well and it's not normally a requirement on the private sector so i think we have a huge role in in the next 10 years in demonstrating that scotland could really achieve an inclusive economy i would just echo everything that lori said there and i mean basically feel that again it's really good to hear the first panel and their experiences we do exactly same as them but more in my opinion in the sense that we are creating jobs our contribution to employment is huge i think especially for the sides of our sector we are creating opportunities for people to generate it create skills that they can set up their own businesses that can work in other people's businesses when they move on and most importantly for me we work with the people that so often certainly this is a grass market community projects situation that the commercial sector doesn't want and the public sector doesn't really particularly want either because they're complicated and because of our particular business model and because we tap into huge social capital and availability of volunteers and resources and all those sorts of things we can actually work with people who would otherwise just be excluded from the scotland economy and wouldn't be able to work and contribute to the scotland economy and they're the people we work for similar to lori's organisation we're also a supported business approximately 40% of our staff team it's a much smaller organisation but approximately 40% are people who would otherwise really struggle to find work and we have the skill set and that social capital to get them into work with us initially and then move them on into mainstream commercial employers i suppose maybe i could focus the question a bit more for vicky brock and for Professor McEwen what is it you want more of that would help you be more successful so you know i've heard the value of social enterprises and i've heard lori say that trust and actually giving you more work is is helpful but but is there anything institutionally you need more of that that would help everything that's been said so far is entirely true the what motivates and drives a social enterprise can be quite different from a commercial enterprise so um so i run a social enterprise which delivers business gateway across probably about a quarter of scotland scotland startups as an enterprise trust we seek to to create surplices that we can then put back into to fulfill our objective which is really to make the economy much better and so i think last year we had about 370 000 went back in but that then unlocked over a million pounds of private sector money coming in to support startups too and that recycling of wealth that happens within social enterprise is a really interesting thing structurally what we need more of is that belief that a social enterprise and it's it's aims and objectives to to do what it sets out to do and then possibly give back into a community and unlock more private sector support and engage a more collaborative country is something that doesn't really exist too much within the commercial world and so i would say that you know to trust us to to do the right thing is it would be a wise thing to do so i'm in a slightly different position in that i'm a serial entrepreneur i'm all of my experience has been entirely commercial so i've i've set up entirely commercial companies i'm about to launch my fourth um which i have used the business model as i'm going forward which is for profit for good because i was actually terrified of the concept of setting up a social enterprise i couldn't understand how to make business model work and i applaud anybody that that does i didn't want my next business to be trapped in a loop of constantly needing to be raising money from potentially capricious sources or for sources that would change on a cycle that didn't map to my business so i've spent quite a long time trying to figure out a business model where i can do what i want to do on the social good side from a what i feel is a slightly safer and therefore probably more understood to me business model where i make commercially sustainable money in a replicable way on a time frame i control my deploy over here i suppose what would have made me more comfortable going all right i can set this up as a social enterprises is a very clear understanding of the financial mechanism and the timeframe and the consistency of how long that support might be around for had i chosen to go that route to financial certainty is a key issue for you sorry lori i can back on the specific point about what i think the public sector and government could do more and it's about commissioning and procuring contracts we bid for contracts in employability and skills in justice and in sustainability we compete against all the big companies whose names are now in the public environment with the exception of carillion but capita inter-serve who there's been profit warnings about circle g4s we compete with those companies who run a number of contracts in scotland and the wise group operates in the north east of england as well as across scotland and there's no benefit that government sees in social enterprises against those companies you could introduce much more demands on open book accountancy accountability on measuring social impact which we do and is often demanded by government rightly in our contracts many of these contracts are payment by results so we've the same cash flow issues as people in the first panel talked about if it's a payment by results contract the scottish government have just procured employability contracts that were devolved from the UK government and there is a cash flow element to that that we get no extra help with compared with these large internationally owned several billion pound turnover companies that are in our market and i think there are better ways of commissioning and procurement there's good examples the scottish government has some good examples and there's others south of the border but i think we need to learn about that across the public sector and about how we then look at the track record and the type of companies that we are procuring to carry out services on behalf of the public sector right i have a number of committee members who'd like to come in i think first of all Gordon MacDonald then Dean Lockhart it's just about a point carrying on from Jackie Baillie's question Laurie we're talking about inclusive growth etc i mean how do we ensure that every section of society benefits when there is economic growth i mean what would you see the steps that are necessary i think that the kind of people that social enterprises will tend to work with have other issues about their life other than being able to get straight into work relatively short term unemployed people won't get back into the labour market quickly because they're used to working they're motivated they've got work experience they've got a cv they've got a track record if you like we tend to come across a lot of people whose challenges could be health confidence it's not usually lack of skills but sometimes it's the more softer skills have been able to to work as in a cope with a working environment they may have caring responsibilities etc so i think we've got to see individuals in a holistic way and resolve some of those issues in their lives before expecting them to be able to to get into the economy but they are essential because we are spending public money on supporting those individuals anyway if we don't get them into the economy then we'll continue to do that potentially throughout their lives and there are various programmes that work we tend not to spend a huge amount of money on the people with the greatest issues about getting into the economy i benefited from higher education but if you look at what an individual who comes out of school and goes into further or higher education will get from the public purse against an individual who comes out of school with no qualifications it's very it's very small compared to to the investment in further and higher education and it's got too small it's got too tight i think when i first started in the wise group about 12 coming up for 12 years ago i think the amount of money on average we have to get a long-term unemployed person into work is about a third of what it was now it's about a third now of what it was 10 12 years ago and that's relatively small okay nice to watch for me there's an element of the robustness about social enterprise which is encapsulated in this idea of once you bring somebody who has got complex needs somebody has been at a work for a long time who faces all the sort of things that lori alluded to there and you bring them in to your organisation although it may be harder in the short term that you face more challenges as an employer that you will never get a more loyal member of staff and you'll never get anyone who's more grateful for a job i've had people sitting in my office telling me they would do anything for the grass market so hugely privileged position to be in to have someone in your office saying that about you that's because you literally in their view saved them you saved their life and that you won't get a harder working individual in terms of productivity and you won't get somebody who's more willing to contribute to the growth of the Scottish economy than those people that put their heart and their soul into the survival of an organisation in a business a business model so that's one of the key contributions that social enterprise can make to growth is including people you're missing a trick if you don't include them because it's one of the most talented hardworking individuals and you're missing a trick i think it's really important to recognise that not everybody can afford to be an entrepreneur and i kind of have this entrepreneur hat do this whole startup thing i work with startups from schools through to in incubators is a very narrow section of the population that can afford to work for a year for nothing on the hope that their idea might work and that is the reality of it you're you're working 60 70 80 hours a week for an indefinite period for no money for something that might not work and it's a very narrow little elite of people which you know has educated person who's worked in tech i am one of and it's hard enough when people are leaving a decent salary you know they're leaving a 40 50 grand job to go do this startup adventure that's hard but if you've not if you're in a position where to go and do that you're not available for work if you're doing that you are working full out full time on your idea that may not even become a business you're not available to do anything else and there are there are is actually very very few people outside the the stereotypes and to say which i'm one that can afford to do that and my kind of crazy idea is the you know i think that that first year when you are founding a company that should be that should be a minimally salaried job that is an insane amount of work provided you are in a structured environment if you're in if you're reporting into an incubator you're sending your metrics back you're showing up and you're doing the work why the hell should that be something that you're supposed to do for free um i don't know the mechanics of that it's like fortunately not a politician but i do think that that would massively open up the potential for other other people to unlock their potential and bound stuff and be entrepreneurs because they have the skills for a lot of our people that we train up in our woodwork shop for example the natural step would be to make their own furniture and there's a market for it but trust me there's a definitely a market we're overwhelmed and um the the difficulty would be for someone who has been unemployed for a significant period of time comes in with trains and volunteers with us to go into that something as insecure as that i mean coming off benefits to go into something as insecure as that even the benefit options not the ideal option for any of those people the thought of working flat out for very little money not knowing when the next order is going to come through you're not knowing how to manage your bookkeeping all that sort of stuff the kind of stuff that we can't do it would be just terrifying to most and it well i know it is terrifying whenever we have these conversations with the members of the grass market so i totally agree with you i think self-employment having been self-employed for five years is for a lot of people overrated and misguided as an option for and we have to be very careful about saying this is where everyone should be self-employed entrepreneurial and everything that's great for the right individual but it's terrifying for a lot of people to go down that route i think for a for modern businesses the the notion of fairness and equality being a luxury i think we know now that it's it's not it's actually crucial it's reputationally it's crucial apart from anything else but if we get the fairness and equality part right that gives us real productivity change because as employers we need to we need to have people who are completely ingrained in our business that we can attract the right people and retain them and people don't hang around where they feel that there's an inequality or a lack of opportunity or and so a business that's founded upon greed or exploitation ain't going to get very far in these days because we have you know high levels of employment now and people do have choices and so they want to work in the right environment and if they don't find that they will move on so it's not longer a luxury a week inclusive fair working practices is just a crucial part of today's business but just on that point we've seen an increase over the last couple of decades of the ratio between the lowest paid in an organization and the highest paid in an organization actually growing i mean how do you address that issue if you're saying people would walk if they don't see fairness and equality yet in the background to that we're seeing that increase in ratio and a lot of people don't have a choice to walk you know they're in secure employment and the concern is if i want to support my family i need that secure employment regardless of what the salary level is i think that the issue we've seen since since the downturn in 2008 it's been a tough 10 years for business it's been a very unstable time where employees have i mean one of the the key things for retention is that the employees feel both valued and invested in and they feel secure in that employment um and i think businesses have in some ways i think our growth has been stunted in the last 10 years quite significantly so the the chain reaction of people moving from the bottom up has has stalled in some way and that the leaders have had to become you know much more robust and innovative and how they go about certain things but there is a middle ground that has created a void i think it will be something that will have a an impact soon with with automation taken over many of the somewhat more mundane tasks economically i have i have no real answer to why that divergence has happened but if that scene has been an unfair oppressive type of organisation then ultimately you know that that will come that will come through because there are too many organizations working cleverly now to to ensure that that doesn't happen this is actually an area where the social enterprise sector leads the way has to be said that the ratios we're now highest and lowest paid are significantly smaller i think it's one to two point five i'm correct and the last social enterprise census which is you know pales into insignificance in terms of the the private sector's commitment to this ever widening gap between the rich the largest the highest paid and the lowest paid in their organization so you know it's we're leading the way in that sense and we also have far more women going back to your previous panel in our organizations heading up our organizations working at all levels of our organization so we we are leading the way in that kind of stuff without any doubt we also have a voluntary code it is in in scotland of signing up to maximum of one to seven i think so ratio between the lowest and highest paid we sign up to that and we pay the living wage and also we'll tend to have good conditions for staff we have flexible working flexible hours we invest significantly in staff development and training so that's part of the culture and as garrie said i think that doesn't necessarily only apply in this the social enterprise world but we do sign up to a voluntary code that has a maximum on the salary of the highest paid individual in in line with with the lowest paid and i think that's something that businesses should be doing generally it would be good to see that across the commercial sector you know signing up to some of these voluntary codes that we sign up to you don't see as much of it um it's almost like um you know they don't feel the need to you know so they you know even that the fair tax voluntary code which is just literally paying the tax is just supposed to pay let's see more businesses shouting about the good things that they do which they're supposed to do and like less maybe can sell themselves with CSR and all that kind of stuff let's just talk about the great things that they're doing because they have to um because it's good right we'll move to questions from Dean Lockhart before coming to Casio Doug do thank you i just wanted to clarify what we mean by social enterprise because there is a lot of terminology involved CSR etc how there's no legal definition as i understand it in Scotland of what a social enterprise is how does the sector itself distinguish what is a social enterprise and what is not is it driven by the voluntary code do you have to have signed up to the voluntary code in order to technically qualify to be a social enterprise you don't have to it's a voluntary code but many of us do most social enterprises are set up as companies limited by guarantee many have charitable status that's the the structure we adopt and have done since the wise group was formed 34 years ago i think but there's also a legal model called a community interest company that many adopt i think that the key to is openness transparency and accountability so our mantra is that everything we do is open so people see a lot more about what we do but you're right there's no specific legal definition of a social enterprise but i would imagine the bulk of social enterprises are companies limited by guarantee with charitable status i think the code is a step forward whether you whether you wanted we would extend that and exclude groups or organisations that call themselves social enterprises that didn't sign up to the code i'm not i'm not i'm not convinced but it does give a really good definition about an asset lock for those who aren't familiar with the code so all your resources all your assets are locked into a community benefit and that you're not putting your profits into private investment unless it's being reinvested in your business it's really clear and a cut and drive for me and my organisation so i don't see any reason not to do that and especially if you're going to enjoy what some of us do financial incentives or preferential treatment in terms of tax or grants or that sort of thing it's good to have a robust definition like that gives transparency and to what you're doing however i'm totally for i'm totally for businesses that want to enjoy being part of a movement for fairer working practices and better ways of doing business more inclusive ways doing business who don't want to call themselves a social enterprise i'm totally i mean it's all about collaboration and working with all sorts of business models for me you mentioned i guess grants and i guess that might be one of the questions i was coming on to when it comes to Scottish enterprise or the Scottish Government do they apply a particular definition or guidelines as to how you qualify for funding or social enterprise assistance as as a as a social enterprise lots of social enterprises including ours get no grants at all if we do get we can get a grant through the big lottery but it's competitive grant maker we don't get any nor you know we don't get any regular support through grant aid for our core activity and that's the general model often charitable status is the criteria for grant making bodies so trusts and big lottery for example we'd want to see charitable status so there's i think most social enterprises realise that the grant world is not sustainable and that they have to be able to generate income either through competitive tendering and winning contracts or through customer facing activity commercial activity and the key is as i think johnny and i and others have been saying that that what march you out is a social enterprise is what you're doing and that there is an asset lock so we have to make a profit every year we go out of business like any other business but that asset is reinvested in the business and it doesn't isn't doesn't go to shareholders or owners and that's that's the key difference and my final question are you comfortable not having a strict definition do you think it helps the sector having that flexibility rather than have a a black and white definition of what a social enterprise might or might not be i'm personally comfortable i think we heard earlier in the first panel the page and park architects model which is an employee owned company i think there are different models around vikies described other models i don't think it matters i think what matters is what you do and how you do it and that in scotland we have an opportunity for different kinds of companies to play a role in generating inclusive economic growth in in scotland i think there should be restrictions on some of the companies that are making excessive profits particularly if they're running government contracts and particularly where that involves working with vulnerable people so i do have a personal issue about some of the companies that get taken on by the UK and the Scottish Government to run employability programmes for example that don't declare where their profits go and may be owned by investment companies that whose main aim is to sell them on of the winner government contract and that's a personal issue for me but apart from that i'm pleased if a company has a model that that cares about their people their communities their social impact and the environment i think the general notion that a social enterprise has the ultimate beneficiary of being the population of our country rather than shareholders is a is a broad but very good one but it was mentioned earlier on i think it's maybe worth reiterating all of our income is commercial we have to to bid alongside many of these commercial organisations and if lorry may be the same but when you look at the we do a lot of stuff with the scotland government and se when we apply the our tendering process there's no notion of benefit to being a social enterprise the waiting never seems to even in a in a small way tip its hat towards that notion that we're actually here for the benefit of scotland not for the benefit of shareholders and so i would if there's one thing that could change it would be nice if that was recognised when these contracts are being delivered but what's actually happening to the the surplices here where is it going and how is that unlocking other money within the sector and we know that these things are you know that they have to be economically competitive we understand that and we will always try and be but where there's little difference it should it should make a difference to the decision makers about where that money is going one thing is interesting because my previous most of the companies i've done have been data technology in some way and and my next one is so ip patenting is important and i have leveraged r&d grants and smart awards and you know the shape of that type of company is the equivalent of winning the support lottery because you just take everybody's box in every way shape or form it was one of the things as i was thinking about how i was going to structure the next one i didn't want to preclude myself from smart awards and all the assistance you get when you're building technology and when you're building ip by the way i'd chosen to structure the company so i was i was very wary of the term social enterprise full stop because i just thought that's gonna rule me out of so much free money that i've leveraged so well before i know that sounds ruthless sorry apologize to all the the non-evil people i have one of the point on this idea of definition i do i do think there's a place for a shorthand all of our businesses are customer facing and it's really good i think for you know a bit like the fair trademark which is now very well established everyone in the room would understand what the fair trademark you brought fair trade coffee which hopefully you have then you understand the benefit of buying that instant and people can have a conversation about about that and i think there is a place for some kind of kite mark or you know easy way in logo whatever you know with a obviously with a concept of conditions attached whether it's the code or whether it's something that consumers can get an instant like for like cafe for example the grass market cafe sits beside other cafes which aren't social enterprises if you enjoy our cafe which hopefully you all do at some point you may well choose it on the basis that a decent coffee plus it has added benefit and same with serenity in places like that so yeah where that kind of shorthand for consumers to cut through some of this gray areas i think would be really useful i'm not suggesting for any one moment that should come from the scottish government necessarily it might well be an industry thing but you know i do think i was sick to think do you think it'd be useful okay right i'm bringing in kizzi dugdale to be followed by tom Arthur thanks convener i want to develop that point with you in a second or so but before we do that and just go back to something lori said earlier lori apologies if i didn't catch this in the exact words that you used it but i think he suggested that the amount of money that we spend on reducing long-term unemployment or people who first removed from the labour market is a third of what it was 10 years ago i think he used the word we do you mean we the government we scotland what does that mean and how did you get to that statement um as many as a collective way if you like but through the public sector contracts that are available for organisations like us to bid for in broad terms um we get around about a thousand pounds to work with somebody over a longest period of time to not just get them into work but sustain them in work and the groups of people that quite rightly are being targeted are those people that have been unemployed for a longer period of time or who have health or other issues that affect their ability to get into work i believe that my experience in the wise group is that that's about a third of what was available 10 years ago in similar kinds of contracts from government that's really helpful clarification lorry thank you but just going back to the more generic point about um you know what constitutes good business and you also mentioned earlier lorry you know the key to this is maybe cracking the procurement system and allowing a broader range of companies and organisations to access at least the scotland's procurement system and again reflecting on the evidence that i know most of you heard from our first panel in many of the things which constitute a good business whether that be paying your bills on time having community impact being a good employer looking to employ young people having a diverse workforce they're all in the Scottish Government's business pledge the ones that haven't been mentioned so far things like innovation and internationalisation so what do you think of the Scottish Government's business pledge is that the platform johnny for your kind of badged mark the fundamentals are already there i'm just struck that you know only 15 percent of the government's current contractors are signed up to the business pledge is this a model that works if so what more should we done to promote it or if it's not working what should replace it should it be mandatory just some reflections in the business pledge would be great i support it and we sign up for it and the most recent tendering we did with the Scottish government asked if we were signed up to business pledge i don't think there was enough due diligence done and so it's easy a tender is like sitting in exam you fill in the form and it goes to somebody who scores it and a result comes out there's no interview for the rarely interviews or it's called a negotiation i suppose over tenders and i don't think we're doing enough around the business pledge i think it could go further it follows up gardens sorry garris point about tendering tendering should look at the type of business you are as well as whether you've signed up to the pledge it could include for example the ratio between the lowest and highest paid person it could be open book accountancy if you are making a profit where is it going we the international business companies that bid for government contracts across the UK often are owned by us australian whatever and they're often equivalent of private equity companies investment companies that will sell on those companies if they win sufficient government contracts and you see that by just looking back at the ownership of all the ones that are in the news over the last 10 years or so i don't think you government we government either at a uk or scottish level is doing enough to determine what kinds of companies in the business pledge is a very good start but i think it could go further and yeah i would make it mandatory comments from others i totally make it mandatory i mean we didn't actually deliver any government contracts and so we're in a different position but i have tended before and i'm really aware of how my business in terms of my business practices stack up in terms of the pledge much more than some of the others that maybe are tendering for for that particular contract i know for a fact they are in terms of where they're coming from and where they invest their money when they're not tendering for local contracts i also feel very strongly that so many local contracts particularly around employability and i'm sure you'll agree lorry it's about relationships it's about relationships particularly with that complex needs group the long-term unemployed which is going to have a huge saving a huge benefit to the scottish economy long term if you get them into work then the relationships are held within these local organizations often social enterprises that are already doing the work you know so they should be given much greater opportunity to participate in that tendering process differently the multiplier effect you will get from government by procuring services from organizations who not only sign up to that but live to those values would be colossal so i would have it mandatory too but i'd make it count there's always that there's a saying that you know what gets measured gets done so if you make that a measure within the tendering process about how will you shape up against those criteria then you'll get much more value for the money that's being spent because we'll become more productive we will become more inclusive and i think it would be it would level the playing field a little bit more against organizations that are very much driven by commercial shareholding so you said earlier garrie that you might give weighting to social enterprises within the procurement system or within the tendering system is that your preferred model to making it the business pledge because of course if you make it the business pledge it's broader in terms of the number of private companies that could sign up to but it might have further reach and just i'm aware that not everybody will be familiar with the contents of the business pledge i've studied a lot in the last 24 hours but just for everybody's benefit you know there are nine qualifying elements to business pledge but in order to sign the pledge you only need to be doing two you just need to commit to do the rest of it over a period of time so it shouldn't be that difficult for a larger number of companies particularly ones the government's already funding to sign up to that pledge would you agree with that absolutely the these are these values that you talked about there are are crucial whether it's a commercial organization or a social enterprise and we should be doing that stuff and you shouldn't be engaging with organizations that don't i think the the status of a social enterprise of what exactly happened to the the money is something that should be almost separate from that to say okay if all things were equal if we had two organizations that were compliant with all nine of these pledge items then let's go with the social enterprise because at least then there's there's an additional value being created but yeah every organization who you engage with should be active in those those areas if there's an underpinning framework within the data collection so if if data is disaggregated as you're capturing it so gender and social markers are being exposed in the ongoing data that you're capturing you can actually get to a place where you can measure the social return on the social return on investment a little more easily now that's massively complex but if the basic underpinning of data capture is a little bit more robust than it is now you would be able to more consistently measure social return on investment which means you could more consistently wait into the procurement process what is the potential social return investment from this bid and underneath all of that it's it's accurate boring consistent data capture and exposing the granularity in that data right thank you and now Tom Arthur and to be followed by John Mason thank you very much convener and good morning my questions relate back to some of the some methods discussed earlier following Jackie Baillie's line of questioning and particularly around capacity building for social enterprises I am fortunate my own constituency of Renfrewshire South have some fantastic examples there's the local energy action plan based on the winner to do a lot of great work in supporting the uptake of a renewable energy sources energy efficiency act of travel and co-barking as the old library centre which has taken a former liberal club and converted it into an excellent community facility and the newstone there's a newstone development trust to a really outstanding example took over a bank about 12 years ago converted it into a cafe it's now a centre of excellence for psycho repairs a cycling hub newstone and upland were first responders are based there and indeed they were involved with newstone community wind they've had about a 28 percent stake which they've recently shared generating two million pound surplus which are now going to be able to invest in a charity community fund so they're really fantastic examples but I know some speaking to other social enterprises in my constituency there can be some challenges there um challenges around capacity building um and also a sense that people can feel when they can the process I suppose of heuristic learning can get them to their goals eventually but perhaps with more support we could expedite that journey so I'm just wondering it do you think support is there um to enable to allow social enterprises to flourish in Scotland and in particularly as well with relation to a kind of a supposed shared desire for greater community empowerment certainly the ideals are there but have those ideals actually been translated into the support on the ground um my view is that there is a significant amount of support it's a similar response to the one that you got at the first panel I suspect there is a bit of duplication some of the support and some of the advice that new businesses or new social enterprises will get will be relevant some less so um there's a there's a model in Scotland of um supporting start-up social enterprises through an organisation called Firstport but I suspect some of the ones you've just talked about in your constituency will go through um and there are other supports that come on come on I don't believe that Scottish Enterprise understands social enterprise we were account managed by Scottish Enterprise for a while we had an individual that did it did understand us and we got some good support we got passed on to somebody else that we were just we were a form a box ticking exercise for them so we we no longer are account managed by Scottish Enterprise there's funding around through social investment models sometimes it's quite expensive and for larger social enterprises like ours it doesn't go high enough um we haven't we would get a better rate through the commercial lending than we would through the social investment models I think south of the border there are more creative ways of funding social enterprise again particularly larger ones and more innovative ones on the whole there's quite a broad support mechanism but also critically social enterprises support each other and almost every local authority you'll find there's a local social enterprise network and there's social enterprise Scotland at Scotland wide level that provides information and support organisations like ours the wise group I maybe said earlier that we employ something that 240 people at the moment in the contracts that we run we have formal agreements with over 100 smaller organisations to help deliver those contracts and that is a model that we use for almost every contract we have a partnership model that will allow organisations in that deliver specialist services or particularly local services to take part in a contract that they wouldn't be able to bid for on their own and we think we've created around 200 jobs in the last 10 years amongst smaller organisations that are working with us so if we get a contract it won't just be jobs in the wise group it will be jobs in those organisations that help us deliver it and that's an important element of how social enterprises will work and support other social enterprises to grow and develop I think you're absolutely right there is differently a challenge around capacity particularly when we're a small much smaller social enterprise my previous social enterprise was smaller still and some of the talk earlier on scale up and step on up and all that sort of investment stuff it frightens hell out of a lot of board members and social enterprises and charities you know taking on investment loans and that sort of stuff it's not a culture because people are very genuinely worried about the impact it'll have on some of the small communities and people just like an entrepreneur in the commercial sector put their heart and soul into whatever enterprise it is and would be everything for it to succeed so they're very very anxious about you know that kind of thing so capacity is definitely an issue and that's why I would encourage Scottish Government and anyone really who's in a position to make a difference to to invest much more in those individuals especially when that kind of young stage of with an innovation a social innovation an idea there's fantastic organisations like melting pot in Edinburgh you know incubators these these are the organisations because we should be investing as much as possible in those individuals rather than getting too embroiled in decision by committee and to risk averse boards and stuff these are the people that should be bringing forward these these new social innovative ideas so that helps a lot with capacity because it comes down to those individuals driving the downside of that of course is you've got succession issues when those people move out of that community or out of that job to their next business the social enterprise can really struggle because it's displacement because that key individuals moved on so about so that's where you need to put in some additional support but I totally agree with Lloyd there's a lot of support out there and I totally agree with the panel earlier on as well that it's cluttered I noticed someone used that word that's exactly the word that I would use um you sometimes you have to navigate your way you get advice from this person to go to this organisation you go to them and they say oh we don't work with startups and you go oh really the networks are where I got predominantly my support with my adventure and continue with the grass market that's why I sit on the board of Edinburgh social enterprise network because it's that kind of mentoring that we provide for each other I do a lot of paid and unpaid collaboration with other social enterprises there's a wonderful culture it's much less competitive in my view in the commercial sector where we look after each other but we help each other we'll be maybe share training maybe share facilities in a way that's maybe not felt so much in the in the wider commercial sector I don't know what you think but there's possibly not that different from the the commercial sector I mean a social enterprise is very much like an enterprise of any other kind perhaps the beneficiaries ultimately may be different but its ability to become established build a reputation build credibility and grow and be sustainable it will face the very same challenges that entrepreneurs do when they start commercial businesses so we see I mean when you have someone with huge amounts of passion and you know no stranger to hard work and dedication and resilience you have the the embryo of of a social entrepreneur as much as you do any entrepreneur and that will always get the business going whatever form it is the skills and attributes that are required to become growth orientated or or sustainable are actually quite different because that passion will will get will get you so far but it doesn't get your own way you know you have to bring in structure you have to bring organization and it becomes a whole education process and if we can intervene in in any way it's to provide the interventions to convert these very passionate entrepreneurs into skilled people who have the capability of creating great social enterprises that will be around for a long time giving back to their communities one more some conscious of time just as a supplementary to the previous conversation about the scottish business pledge and the fair work agenda I just wonder if the panel have any direct experience of the carer positive employer accreditation scheme and in just in terms of what experience you have in terms of employees who are working carers and what support you put in place for them the panel can potentially comment on that. We've a flexible hours and flexible week system that any employee can ask to be considered to do their work within hours that would suit their family life or outside work life if they have caring or other responsibilities so we react to an individual we promote that within our organization it's sometimes I think working in an organization isn't just about what you're paid although that's absolutely critical so we are signed up to living wage but it's also what other benefits you will provide as an employer to individuals and I think one of the main ones that staff feedback that they like is flexibility around their daily working hours within a structure and their working week so they can do compressed hours or they can ask for time off people can ask for temporary time off if there's a temporary issue that they're dealing with in a caring issue sometimes is. I would say that as an SME it's an area around flexibility in particular where your customer facing where you face huge challenges it's all well and good for us to say you'll be as a fairer employer as possible and support all your staff and whatever kind of issue that they're dealing with and etc etc but commercially that can make that very challenging if you don't have people turning up for work for childcare reasons or caring reasons or whatever you've still got to serve coffee you've still got to run a business it's just exactly the same challenge as any other SME we have exactly the same challenge so it is very difficult like Laurie we promote it it's also part of our living wage accreditation to commit ourselves to fairer working practices more inclusive working practices but in reality that can be very challenging for an organization like us and well we we get around it by using social capital using a lot of volunteers to help prop up the business when it's struggling and also we have a lot of you know someone might work in one part of the business and then move into another part where where we can still you know support them so we're very lucky we have that those options but for a lot of SMEs including us on a bad day it's a huge challenge to be as flexible and supportive a supportive employer as you'd like to be. As a startup a tech startup flexibility was one of the few things we could compete on because I was employing a lot of people who potentially could go and work for JP Morgan and Glasgow if they wanted to but they they didn't or they may have many things in their life which meant they couldn't so I actively recruited from returners to work and I actively recruited for people who perhaps who had not been as engaged with work because they were on the Asperger spectrum autism spectrum because that that was somewhere where I could really build a good team and that was that worked extremely well until I had raised a certain level of money and now I was one of five board members and I was no longer the majority shareholder of my company and I was answering essentially to the people that were funding the company and these nice little fluffy things were a distraction and that was a huge mistake on their part of course because I feel that very much damaged our growth potential it broke one of the reasons we were working but it was it was viewed as a indulgence which is really sad thing. A quick follow-up from Gillian Martin before we come to John Mason's question. Yeah this is something that I was hoping to get into in the previous panel as well because productivity has been talked about in such terms is like the amount of hours worked but what you've just said there is that productivity is a lot more than that and that's about actually getting the best out of your employees. Flexible working hasn't been mentioned particularly boldly so far what you're just talking about the ability to work remotely flexibly to fit in with other people. Do you feel that that's a productivity issue or is it just a socially conscious issue? Do you think there's actually a value to that? I felt there was a huge value to that so I had teams that just functioned on completely different body clocks to me and to many people and I wasn't forcing people to work late but there were individuals who did their best work after their kids had gone to bed sat down and then did four hours flat out. Now I was not expecting them to be answering an email before lunchtime. It worked it took a lot of people management on my part it was a bit flight control because you know sometimes you just need to get something out of the door and everybody doing the same thing at the same time and that is a challenge with flexible but if you have it at the heart of your culture you actively recruit for it people get more done in the four hours that is there four hours of being in the zone then they do locking them in a fluorescent lip office for 12 hours. That has an impact on the bottom line of a company. Yeah absolutely because if people are getting the most out of people in four hours and you've got a small tight team that are operating really well together you are getting the same amount done but sometimes the measures are different so you know often more people is looking like an indicator of growth you know if we if we double our workforce like clearly we're doing great well not if we don't produce anymore um so the you know the measures can be funny it depends who's success criteria you're working towards and I certainly think that flexibility was at the heart of our fastest best most economically productive work in that it was the most profitable work as we got more expensive people and more traditional hours and structure our profitability fell our productivity fell actually so in terms of business support do you think that that has to be recognised more that that is a measurement could be a measurement that would actually increase productivity of companies across the board so that more companies would actually see the benefit of this as you have I think so and I don't think it takes a lot of I don't think it takes a lot of training for a manager or or a company leader to get their head around that I think I'm a data driven person so I'll always show me the numbers show me the output if it works I love it if it doesn't work I'll try something else so for me it is super important to measure that um but there's great I mean I wouldn't take it too far at one point I had an initiative where people started tracking their hours and that was just that was just pointless it it undid the it undid whatever the magic was okay thank you thank you John Mason okay I think I've got question two the um the next 10 years I mean if we can widen it out a bit how do you see from your angle how do you see the Scottish economy going in the next 10 years but I'm also happy to hear how you see it going for social enterprises or whatever what are the challenges what are the risks what are the opportunities you know I have to say Brexit but I don't I'm quite know how in what way I don't know enough about the Scottish economy and about the impact of Brexit but it scares me um um it scares a lot of my team some of whom are from Europe um and um enjoy working in Scotland so I have concerns about Brexit and it's just a complete gap of knowledge for me so that's uncertainty about your workforce basically yeah that's uncertainty yeah and also we enjoy uh EU volunteers we have funded EU volunteers uh through uh uh Erasmus scheme and um we really we love having them in our team they come fully funded through the European community they they're basically residential in Edinburgh and full-time worker and they're of really high quality these are often students in between their degrees and going into work so they've got maturity about them stuff so that we will lose that I can only presume or lose that after Brexit so there's some real practical things about how we tap into that or what we do once we lose that resource but there's also the fact that the vast majority of my cafe customers are from Europe as well um they they flock to Edinburgh it's a great city and they're tourists and they come into our cafe and we're customer facing and we've created 11 new jobs in the last three years just from that cafe just from a contract we have with local tour guides predominantly serving the Spanish community so it's been a huge partnership with that commercial organisation to develop that and they are scared as a as an international tour company that's bringing Spanish people about the impact of Brexit so that's definitely an uncertainty in terms of social enterprise and broader issues um the the there is this uh um concern that was mentioned earlier on about definitions and about um commercial organisations uh peddling or suggesting that there are social enterprises when they're not and making it a bit unclear for consumers and it being a bit you know uncertain and in that culture of uncertainty we can all stop buying from social enterprises because we cannot trust it so there's an element of trust around the label social enterprise that that is something that I would like to see addressed in the next five ten years so there's a bit more clarity about if you're a social enterprise just like Laurie's saying you're open here is what here is how we spend the money the profits from our enterprise that's that's critical for me um I think that's the main the main areas for me on the last 10 years we have a we have a scottish government target of 10 000 new businesses supported each year um it's been that number for a long time my organisation elevator sport it's almost a quarter of them and we see a very vibrant entrepreneurial culture around certainly our areas I don't know if that's universal across Scotland but on travelling around the world we find that the the most vibrant economies have a trademark which is is such a vibrant startup community the two seem to go very hand in hand if you if you create a very vibrant startup culture then it's a signifier of a healthy economy and I think in many ways we have achieved over the last 10 years on that front I think where we have bigger issues is around how many of those organisations go on to grow to any significant degree we have a we have a growth issue we seem to sell our businesses quite early by comparison to many other economies we we seem to have a fear of heights in that respect whether it's a lack of we don't have too many people in this country who have experience of growing global companies and therefore that means that the sort of slight immaturity of our entrepreneurs means that we we get out while we can while the going is good which is often too early so we don't have quite as much issue around growth than we do around scale up I see the two has been actually quite different the ability to grow a company ability scale are two different things we have big issues around scale which we need to you know think seriously about addressing but in terms of the opportunities there are lots of them around if you the there was a recent study of the CEOs of the Fortune 500 in the States and three quarters of them had said that their biggest fear and challenge was the rapid pace of technology change they realised that 90% of the Fortune 500 from 50 years ago wasn't there anymore and they reckon that in the next 10 years 40% of those there now won't be there and so the ability to disrupt markets with technology has never been greater and so our current entrepreneurs have can ask is that more of a challenge for social enterprises and that kind of business or is it do they just face exactly the same question I think commercially if when it boils down to the businesses that we we run as social enterprises they are to all intents and purposes the exactly the same challenges possibly even more so around investment because investment into a social enterprise when there's no outcome is difficult but we have a challenge in Scotland around how we how we get a little bit bigger and how we challenge more in a global stage but technology has the ability to do that like never before. Businesses tend in the whole to be people based businesses whether it's startups working with people to to start up businesses or to include individuals in in the economy or to tackle environment environmental issues so yes we're not immune to any of the the global factors that will hit any business but maybe a bit less directly affected by technology change. A lot of our customers are people that we work with are we talking about a digital divide they're still away behind the people around this table in terms of the use of technology and yet we expect everybody now on benefits or not everybody but we expect a very high proportion of people on benefits to be doing that online and a lot of our customers don't have the capacity to do that they don't have the equipment that they're not attached to the internet they're maybe on their phone but so there are big challenges still I think with a group of people in our society that we need to integrate into into the economy in a way that expands who takes part in the economy in Scotland and makes it more inclusive. Just quickly looking back over the last 10 years I'm an optimist I think we've come a huge way in the last 10 years in terms of social enterprise we didn't really use that term 10 years ago we were starting to think about social enterprise in other words putting the economy and social part of Scotland together and so we've at least we know what I think we know what we're doing now we've got an understanding of of that it's a business it's a professional business we're just as good as any other business where we're we're quality social enterprises and can compete we can beat and we have beaten people like circle to win contract business contracts so it is possible and it's not just us there's others can do that but I still think we need we need to go further and we need to move quicker because there are still a lot of people in Scotland excluded from any quality of life but we expect to enjoy if the economy is doing well and I think that's still a challenge for us and still going to be a challenge for the Scottish Government over the next 10 years. I think to build on that obviously from a slightly different perspective because I don't have the social enterprise background it is absolutely going to be a structural disruption driven by technology particularly around rapid and repeat decisions making type tasks and repetitive tasks that will the driver behind so many sectors will be to automation and machine learning first to many of those things which means that some of the sexiest sectors right now that get support will actually become really commoditised I mean data taken AI and IT a lot of that will become a automated machine task in itself which is interesting because it means it has to be said that coffee seems to take more people to make a cup now than it used to well this is the interesting thing right so it's all the undervalued sectors hospitality care tourism all of these things are actually the ones that will be least automated and they will be the place where human value will be really really important and they are the ones that right now are the least sexy the least supported and the least on anybody's agenda to try to hey let's make sure that we're developing more experienced businesses and more hospitality businesses and more care businesses because they're perceived as low value I think that will shift because they will become higher value okay I think there'll be some of my colleagues will be going into that a bit more because that's an interesting area thanks thank you thank you any further questions from committee members Jamie Halcro Johnston yeah thank you very much computer it was actually a question about the sectors that social enterprise are involved in what are the kind of are there strong growth sectors particularly or areas that you think there is a lot more potential for social enterprise to have an involvement in and also regionally I represent my highlands and islands are there particular regions of scotland where actually where the nature remoteness rural communities etc there's more potential as well for social enterprise to deliver services or deliver a local business the recent social enterprise centre census found that actually that's where a lot of social enterprises are doing very well in the rural communities but that might not necessarily be out of any choice because it might be about saving a local shop or a local pub or facility of some sort of kind or providing childcare after school clubs that kind of thing so that it's definitely a growth area in terms of social enterprise in the rural communities but not necessarily for the most positive reasons because everybody else has left but it's great and the other thing that you're asking there about the particular sectors my understanding again is that social care and in healthcare is where you'll see significant growth in social enterprise again not necessarily for the right reasons so although I am an advocate and a strong proponent of social enterprise in all its forms I would always want the public sector to be considered as one of the best providers of public services considered you know where social enterprise can genuinely authentically provide a fantastic better service in the public sector then bring it on and we do often do that however I do think it's really important that some services are not put out to tender and that public services will remain in the public sector personally so I wouldn't want to see too much in that growth in that area but that especially if it's motivated by saving money and that's the sole motivation to put that particular service out for tender and then a social enterprise is going to fall into the same trap as any other commercial organisation they're going to go in, drive the price down and provide less of a service so some things cost money for the right reasons and should be left. I flipside to that because we very often the role of government and local government is is to really engage the private sector and perhaps in the context of this the social enterprise is to be able to fulfil some of the some of the roles it's not government's place to do everything there are things which we are perhaps more capacity and knowledge to be able to deliver and you know there are times when some things are delivered conversely to what you just said by local authorities that aren't best delivered by them when they would get much better value but you know there is a certain amount of retreating back to local authorities because of austerity and because of the preservation of work within the local authority which is a bit worrying when in fact social enterprise could be engaged to do it much more cost effectively and perhaps better. It shouldn't be ideologically driven that's for me and it shouldn't just be about price driven that's the key because I totally agree I mean social enterprises deliver some fantastic services that would have been provided previously by the public sector and we do a better job in those certain services but we have to be very cautious about going down that route of just replacing public services tendering them out and then either private sector or the social enterprise sector coming in providing them more cheaply. If we're doing a better job that's great but let's be careful. I think to be growth in the ability for the private sector and social enterprises to work in partnership more I don't particularly like the term corporate social responsibility I prefer community benefits where the private sector I think have an opportunity to work with us much better to help them deliver some of their objectives in a way that I think is in line with the business pledge and in line with what government wants to see and where we can potentially get the benefits of where the private sector have got expertise and where social enterprise has got expertise working together. Thank you very much. Hopefully a very short question but the Scottish investment bank would you think that could mean to social enterprises what would you like to say that mean to social enterprises given that you've made time and time again you've talked about what you save the public purse do you think that some assistance from the Scottish investment bank could help you do more? It needs to start with a recognition that the social impact and saving the public purse is something that the government wants to purchase whether it is through the investment bank the Scottish investment bank or not and I'm not sure that we've quite got to that stage yet I'm not sure that that's legitimised as a way of investing in something that benefits the public sector and there's very obvious examples justice is probably the most obvious one where in my view 60 percent of people in prison are there because their behaviour is bad and we haven't worked out a better way of dealing with them and they come out of prison no better able to quote in society than the fact usually worse off than when they started yet if that investment was getting and they're usually young males if we were to invest in that group of people's training workability getting them into work supporting them for a while whether it's to set up businesses or do different things because often they're entrepreneurial then we would be saving the public purse huge amounts of money and benefiting families and communities now you can't start to put a price on that but if that's the kind of thing that we could invest in through an invest Scottish investment bank then absolutely I think it would be brilliant but I think we're a couple of steps away from that yet okay Scottish investment bank was absolutely transformational for us receiving that I mean each round we did we were getting match funding they were a useful guide to us in our business and the value absolutely was caught in me being located here and locating my businesses here and it's it's a shame you know if there's a whole swath of equally commercial entrepreneurial businesses who are excluded from that because it was it was fuel and it was a bit of guidance and you need that to you and I think it's one of the things that of all you look at all of the areas of of Britain nobody else is doing anything like that to that degree there's london angel co-investment fund and a few bits and pieces like that but there's really nothing in the way that it's been benefiting the early stage companies because the high street banks we've heard in a previous session have kind of taken a step back from investing from supporting small businesses we've heard four years in we got a £30,000 loan for which my chairwoman and I had to put our houses on the line to guarantee that and we had £100,000 in voice waiting payment so that was as low risk as it came and that's the one one of the few startups I knew who ever got bank loan and boy that was stressful the guarantee that came with that I think SIV was a real revelation what it was so needed when it was brought into force and it's done an amazing work with so many businesses in Scotland but as with usual you know it's what gets measured for things it's done if they're chasing you know investments where there's a return to be made then that's what they'll do until they get directive from government level that the social impact of businesses is also important then it's hard to see how they will orientate themselves towards taking that sector seriously there is quite a few social investment funds now available to social enterprises which we're currently looking at for a development that we're involved in and they are that they aren't the cheapest so that would be a big issue for me and that would be a big barrier for us looking at investment from the Scottish Investment Bank would be about the level at which that investment is and again like Gary says if it's tied to huge economic targets and you know that kind of financial stuff and ignoring the social benefit stuff then we wouldn't be able to give it a look in in the same way that we can with some of the other investment social investment funds like social investment Scotland and people like that who who pick up the importance of that in the kind of business model thank you all right if there are no further questions from committee members thank you very much to our witnesses and to the panel for coming in today and I'll now suspend the session and move into private session