 Rwy'n iawn i'r Our main item of business this morning is an evidence session on support for economic recovery. I thank the panel for joining us today. I would like to welcome Charles Hamilton, who is the chief executive of force ports, Kenneth MacDonald Russell, the head of policy and external affairs with the Scottish retail consortium, Martyn Reid, director of Scotland in Northern Island Road-Hallage Association and Andrew Richards, member of the Construction Scotland Industry Leadership group from Construction Scotland. Welcome everybody. The purpose of today's evidence session is to consider what policies and actions are needed to promote economic recovery as we come through a very difficult period. Our evidence today will also help to inform our consideration of the Scottish Government's budget for 2022-23. First of all, I would like to ask a question on road haulage to Martin. At the moment, Martin, you can't read the news or open a newspaper without reading about the difficulties that are in haulage and supply issues. It does have significant coverage at the moment, and we're familiar with the debates around the shortage of drivers and other issues. Could you say to what extent is this an issue that is particularly sharp in the UK and in Scotland, or if we are experiencing pressure that is felt across the rest of the EU? I think it's fair to say that it's pretty acute over here, and there are very few supply chains that are not affected in one way or another. It would be again fair to say that it's not one particular factor that's caused this but a number of contributors. Obviously, we've had the changes from 1 January. We estimated that, pre-January, we were, as an industry, about 50,000 to 60,000 drivers short at that time. We also had about 15,000 EU nationals working in and out of the UK. Some of them went home with no intention of coming back, others it was difficult for them to come back. We also had Covid, which was a major issue, which meant that DVSA, which would normally put through about 75,000 HDV tests per year, were unable to operate at the same levels, and so we reckon that around about 35,000 tests took place. The pass rate is just slightly above 50 per cent, so those two factors make a difference. We also had legislation that came in surrounding IR35 and self-employment. Again, a number of the EU nationals that came in would do so as self-employed or agency workers. The changes that came there, in terms of their tax status, meant that they would either renegotiate higher rates or just not do it because there is easier work to be had on the continent without the bureaucracy and hassle that comes along with working in the UK. Those are three factors. We also have an ageing workforce and have done for many, many years the average age of an HDV drivers from about 55 years old. We have a lot of levers, whether that be through finding another career, whether it be retirement or ill health, and it has traditionally been very difficult to attract new blood into the industry. Only 2 per cent of the HDV drivers are under 25 years old. Those are all factors that have come to a head, along with many others that I am sure the other candidates will speak about that, that is added to the issues. At the minute, around about 85 per cent to 90 per cent, maybe more than that of every good that is delivered, consumed, worn, eaten, etc., spends some time in the back of a truck. The shortage that the industry is feeling is being felt right the way through many supply chains. Thank you. In the previous Parliament, I was on the European Committee, and at the time we heard concerns that the road haulage sector had about what the rules were going to be under leaving the EU and concerns that that would have a negative impact. Since then, we have had Covid that has added to the pressures, and you have described how everything has come to a head at once. The first question is when do you think that this can be resolved? Is it going to get worse before it gets better? Well, again, that is a really difficult question to answer. If we are not getting access to the labour markets that we had before, then it takes time to grow your own wood, if you like. Right across the UK and certainly in Scotland, there is training growing on left, right and centre to either up-skill existing workers or to bring new drivers into the industry. Through the apprenticeship scheme that is available, we are a number of trainers that are trying to bring new blood into the industry. Those things are going on right across the UK, but they take time. We have short-term issues, medium-term and long-term aspirations, but I do not see things improving any further for the next short term. Other members will want to pick up on some of the issues that you have identified this morning. Can I turn to Ewan Macdonald Russell? It is a very specific question, Ewan. It is about the you have a budget proposal. You have made recommendations for the 2022-23 Scottish budget around how to support the retail sector. Can you give us an idea of what are the key measures, what are the key challenges that you face at the moment and what are the key measures that you would look for in the budget to ease some of the challenges that you are facing? Thank you, convener, for the opportunity to speak this morning. To answer those questions in turn, the first one really about the challenges, the Covid pandemic has absolutely smashed the Scottish retail industry. Our sales 18 months on remain below pandemic levels. Footfall is a fifth below pandemic levels in town and city centres. We wreckage physical shops because they were closed for so long and missed out on something like £4.5 billion. That has been incredibly difficult, and I do not need to exaggerate the realities. We have all seen the high streets and the big shops that sadly no longer trade because of that. In terms of all that happening, what we would say firstly is that Government, both at West and Strannat Holyrood, has done immense work to support us. In particular, the business rates relief in the last two years has been fundamental to many shops surviving. That has been huge. A business rates therefore segues into the budget. We obviously would not anticipate a similar 100% reduction next year. I do not think that that is feasible or realistic for the public finances, but some sort of modest reduction from what the return to full 100% rates, particularly for those retailers who are still recovering, is probably our big ask. On top of that, we remain concerned about consumer demand and consumer spending. It is still pretty sluggish. We know that retail sales are very sluggish. We may come on to inflation later, and that challenge is really real in that. If there are measures that firstly protect consumers, we have asked that there be no increase in income tax rates for lower medium earners, and that has been a priority for us for some years, because those people tend to have less discretionary spend. Furthermore, can we take action to stimulate growth? Can we get people back to town and city centres safely? In North Nile, they have brought in a voucher scheme to encourage people back to physical shops. That is the sort of idea that we would be really interested in exploring, particularly as we come into the crucial golden quarter of trading. I understand that Colin Smyth has questions on retail. Thank you very much, Clare Eamon. Can I follow up on the question from Clare Eamon on retail? How great are the short-term supply challenges that retailers face in terms of stock level? What does this mean for families as we gear up to Christmas and we are going to have particular shortages of any items on our high streets? We cannot hear you enough, if the microphone could be... Thank you. Apologies, Colin. I was speaking in the wilderness for a moment. Martin explained that the reasons why the shortages have come in from HDD drives, we would acknowledge that. In the short term, that has provided a huge structural challenge, keeping stores stocked. A lot of retailers already, you will notice, will prioritising ensuring that they have lines in place over specific products. You might see a certain product line that does not have the range and choice. That is something that, at the moment, unless we see action on, for example, visas for a new HDD driver, something that we may have to live with them rather than Christmas, and something that becomes quite frankly harder as we come into Christmas because volume is going into store go-ups. That is on a grocery side. More broadly, on non-food lines, particularly Christmas presents, there is a real challenge. Retailers will be absolutely desperate to get every product into store. It is, as I mentioned, the big trading period of the year. However, there are huge international challenges. Shipping costs are up. Shipping makers have been disrupted by the pandemic and a huge amount of other things as global challenges. However, when combined with the problems with HDD, and indeed with the on-going economic challenges, it is going to be really hard. We have been quite candid that, if people are preparing for Christmas, this is a pretty good year to be organised in your Christmas shopping. That is obviously a big problem for me as a Christmas eve shopper. Is this the new normal? Are the challenges that we face, frankly, in many cases, here to stay? Is this going to be rethinking the just-in-time stock approach? Are we going to be basically—what does this mean also for our high streets as well? You walk down any high street at the moment and it can be quite a depressing experience with shop closures. Are these long-term challenges or is it a short-term phenomenal? I think what we are seeing at the moment partly is a culmination of years of pressures building on the retail industry. We have been saying for years that the impacts of running property, the cost of employing people, those things would come to a head when digital technology hit into it. The pandemic has created a perfect opportunity for that. At one point, digital sales were up to 65 per cent. They have dropped back to about 40 now. There has been that kind of pressure on the retail market, a lot of the store side of it, and then all these supply chain challenges are coming through because the competition and the way the industries work has meant that there has never really been any slack. Retailers and producers of all these businesses are running really lean operations with pretty minimal profitability, to be honest. When these economic shocks—and Covid is a huge economic shock in that way—are rippling through and we are seeing those consequences coming to a head. I would caution that in retail we are probably very much at the apex of that challenge. I would hope that, moving forward, as the industry adapts, the businesses that are there are able to become more productive. Our models hopefully should be able to adjust and adapt, accepting that in the short term we are really, really struggling at that. Indeed, this week the CO2 challenges indicate just how little slack there is in the system, but that may have impacts upon the wider economy and, particularly if we see lots of different measures and costs coming in, it is going to be very hard for those costs not to be passed on to consumers in the future. That is something that we really want to avoid, but it is looking harder and harder to avoid that. I will bring in Maggie Chapman, then I will bring in Gordon MacDonald. Thank you for what you have said so far. I wonder if you could just say a little bit more about how you and the retailers that you support and work with see the changing nature of the high street. I know that, pre-pandemic, we saw significant moves around local identity and placemaking in the high street. In the same way that you were talking about protecting and encouraging consumers back into the high street, what is it that we should be doing to support and encourage local businesses and local retailers to generate places that people want to be? It is not only about financial incentives to get consumers back on the high street, it is about placemaking. I would be interested to hear your thoughts about the changing nature of the high street. It is a fabulous question and the answer is that there is not a one-size-fits-all approach that works for different areas and different places. If you look at some of the places in Scotland that are amazing at this, they do not necessarily have a big shopping centre, but they have either some sort of natural asset on top of my head. St Andrews has come to mind with a huge golf course at the university, which is a very unique example, but you see lots of town cities where they have got that distinct identity. There is a good reason. From a customer perspective, what consumers are really looking for is that it is easy to get there, whether that is private or public transport, but it is about making sure that they can get to that. We will not take a view on that. What are the other reasons to go? I think that also accepting that what the retail offering looks like in different towns and cities is not going to be perhaps how it was five or ten years ago, where we used to have, I would say, a relatively identikit approach. That is because a UK retailer ten years ago would have needed 600 shops to have a nationwide presence. It probably now needs 150 shops to have a UK-wide presence, and it may not even need that many because of the way digital interacts with it. It is about those businesses that find that unique opportunity. From a retail perspective, what can I do that is great? Firstly, can I do it physically, but is digital working for me, too? We see digital on one hand as this terrible threat to the high street, but, of course, if you have a great proposition, it gives you a huge customer base, too. To come back to that town and city centres principle, it is good planning and clear vision. It does not always just have to be retail. What are the other things? Are there great hospitality options? Are there visitor attractions, museums or parks? However, it is having that reason to go there. I think that retail alone is certainly not going to be the answer. There are going to be fewer shops in the future as well, albeit that, hopefully, we pass the crest of the wave. My question is for Charles Harmond of the Fourth Ports. I wanted to ask you about an article that you had on the Fourth Ports website of June 2020, where you called in the UK Government to have a national resilience strategy. Within that article, you said, we need a long-term strategy underpinned by in-depth analysis that examines a range of weaknesses from the frailties of our supply chains, future skill shortages to the residual capability required to maintain critical supplies. My question would be what has changed in the last 15 months to address these issues that you highlighted last year and what would be the role of Scotland's ports in dealing with the frailties of our supply chains? Thank you very much for the question. Good morning, convener, ladies and gentlemen. I made that comment as the chair of the UK major ports group. We were in the height of the pandemic at the time, and we were starting to see, I should say first of all, I want to thank all the operators in our industry, particularly across the UK, for delivering out essential goods and supplies during the pandemic. That is a good starting point. We started to see a build-up in stocks in our ports. You can almost look at the ports as the last line of defence. We need to keep operating to get goods on the supermarket shelves, but we also need to keep operating to make sure that Scottish exports get out to markets. Our answer to that was to continue to invest. Since I made that comment, we have run the Grangemouth as Scotland's largest port and a big percentage of Scotland's GDP. Since that point, we have commissioned new warehousing, satellite storage areas, a training centre at Grangemouth and a new rail terminal. The answer from the ports industry is to create more capacity. We are probably on average holding double the amount of stock of goods that we were holding pre-pandemic, because people are moving from a just-in-time supply chain to a just-in-case supply chain. They want to know that goods are on the key side and we are distributing those goods when there are slots in warehouses. I also made the comment because I am consciously aware of the shortage of HGV drivers as well. One of the things that we have tried to do is to manage the peaks with the driver shortage by extending our operating hours so that we can receive goods at all hours, particularly for exports. I would tend to agree with what Martin said. There is no quick fix, but one of the things that I would like to highlight, as well as having a training centre, is that we are talking to the Scottish Government about creating a simulator centre beside the training centre. We have one of those down at Tilbury for returning ex-servicemen for apprenticeships. It does occur to me that some simulator training may also help with the HGV training problem. That would be one measure that we would be keen to get implemented as soon as possible. That was funded through LIBOR, so it is a charitable trust down at Tilbury. Something similar could be done in Scotland and the investment would probably be around £1 million to £1 million and would complement the training facilities that we already have. Sorry, I have a slightly long-winded answer to your question, but I think that the short answer is to be operationally more efficient, create more capacity and continue to invest. You quite rightly said that Grangemouth carries a large proportion of Scotland's GDP through its port. I think that it is about 30 per cent and about 70 per cent of Scotland's population lives within one hour of Grangemouth. The last time that the committee examined this issue, we visited Grangemouth. I think that it was back in 2015, and we were concerned that investment in port infrastructures lagged far behind that of continental Europe in handling of containers. I wonder if you could say a wee bit more about the level of investment that you have put into Grangemouth in recent years, given the £1 billion that you have invested into Tilbury in the past eight years? Yes, in terms of the container terminal itself, we have got around about £250 million of projects across all our ports. Since you visited, I would say that the investment at Grangemouth has certainly been over £50 million, but some of the investments have highlighted it. It was an on-going programme of investment for equipment, and it is probably worth my saying that we did not agree with that observation at the time. We felt that we were well invested and we would continue to invest and provide more capacity, drainage, shadow carriers, warehousing and rail terminals. We have continued to do that on an on-going basis, but we pointed out to the committee at the time that the productivity at Grangemouth, Scotland's largest port, is... Mr Harmond, we have a problem with your connection at the moment. We will try to resolve that. Can you hear me okay? We can hear you now. We missed the last few sentences of what you had to say recently. If you want to just maybe return to Gordon's question. Sorry, I am not quite sure how much of it you caught, but my answer was effectively we have invested significantly in capacity at Grangemouth, over £50 million. I just wanted to make the point as well that the productivity at the container terminal at Grangemouth is better than a number of continental ports. Though we too, we are well invested, we are almost in a continuous building programme of warehousing capacity. We can take the longest trains in the UK and we have adequate drainage and resources for handling the peaks of anything that has thrown at us just now. We have also invested recently in a border control post in readiness for Brexit as well. Do you acquire a significant level of investment since you last visited? My last question is about LEATH. Evidence in previous parliamentary sessions has suggested that a lack of capacity in Scotland has contributed to holding back the development of a Scottish supply chain in renewable energy, particularly in relation to onshore and offshore wind. Does the proposed development at LEATH address the capacity issue or do other gaps remain? A lot depends on the frequency of development of offshore wind. I think that LEATH goes a substantial way towards addressing that capacity issue. I say that because we are about to finish the first purpose built renewable site in any Scottish port at Dundee. LEATH will replicate what we have at Dundee, so we will have two renewables hubs and there are facilities elsewhere at Nigg and a number of facilities planned. The real game changer at LEATH is the fact that we are releasing 150 acres of cleared land for manufacturing, supply chain and also start-up businesses. The local content that we are all looking for, particularly in the Scotland leasing ground and some earlier developments, can happen at LEATH. I would say that a lot depends on the supply chain and the pace of development, but LEATH will make a substantial inroad into that. It is important that we get that development off the ground as soon as we possibly can. I have a number of questions for different panellists. If I could start again with Charles Hammond on the points that you have made there, we have obviously seen over the last few years a number of Scotland's ports and harbours specialising in certain areas, whether it is freight or tourism or fishing or renewables. Do you think that there is a co-ordinated enough plan for Scotland in terms of what the country needs from its port infrastructure or harbour infrastructure, or is there the kind of approach that each will prioritise a sector working well enough? I need to be careful in how I answer this question because 75 per cent of the port industry is now in private hands, but there are fewer private operators in Scotland. What I would say is that port operators are perfectly capable of investing in their own port infrastructure. The cost of money and the attraction of capital into the ports industry is not a problem across the UK. We attract capital from overseas, from the Commonwealth, from the US, with long-term pension-based shareholders. Investment capacity is really not an issue. My view is that infrastructure has to be built against the market demand and a proper understanding of the market that it is operating in. As long as you are doing that, I think that there is a level of co-operation for ports that are infrastructure-ready, particularly in renewables. We will get delays in the supply chain if people can work together to try and iron out those delays. We are doing that at the moment with Nick. It is difficult to say that it should be more co-ordinated, but I think that the Scottish Government has to take a more holistic view of what is going on and encourage investment in infrastructure in ports, because the capital is there to do so for the right markets. Just on your opinions of both your market here in the UK but also more globally, I think that there was a suggestion that the volume of freight coming through UK ports was down 10 per cent in the first two quarters of this year compared to 2019. Has there been a reduction in global freight capacity? Are there fewer ships operating? Are there fewer containers available to use? Has that been part of increasing pressure on availability and prices? When you look at container freight rates, to give you an example, the cost of moving a container from the far east into Europe has gone up from the last 18 months from something like a couple of thousand dollars to nearly 20,000 dollars. Deep sea lines are pretty much at the moment at capacity, but they are also extremely profitable. Ports are starting globally to get to capacity as well because of that just-in-case mentality. When you take the effect of the pandemic, people thinking about stockpiling for Brexit but also the disruption in the supply chain, which is the grounding in the Suez canal, because the container shipping market is at capacity and therefore it is important for the ports to release more capacity in that particular market. That is what we have been trying to do, if you like, at Grangemouth to make sure that the supply chain continues to run smoothly. I would say that some of the bigger players globally are starting to look at their own shipping solutions to try to get around that capacity, so markets usually do find a way. Things are not log jam yet. We may be at greater capacity than we were before the pandemic, but the operations generally across the UK, as far as I can see, and in Scotland are working satisfactorily at the moment. Thank you for that. I know that my colleagues will come further on that. If I could turn some questions to you and the SRC, Charles Hammons just talked about a shift from just-in-time to just-in-case. Do you see that becoming an issue for your members as well? The old traditional storage above a shop or depositories, can you see that becoming more an issue where more is being stockpiled? I think that there are huge challenges in moving to that model because of the inherent cost that it comes to it. The reason for having just-in-time is not just because it is making us look at it, it is that efficiency in the system has two big effects. Firstly, it reduces waste enormously, and that is both sustainability good, but of course, bluntly economically, it makes a huge difference in that it just allows everything to run more efficiently. If you are talking about creating warehouse spaces, warehouse spaces has actually been at a premium over the last couple of years anyway for various reasons that you have articulated. Moving to that model has pretty significant cost changes. I guess that there is a caveat to that, that as we shift more and more to online, particularly in non-food, particularly in certain categories, to a degree that can happen easier because we are not really putting stuff above shops. Indeed, the storage space in shops is pretty much at a minimum because you want it in a single big distribution hub. I guess that you might see some sort of element to that, but I think that it again comes back to how much cost we want to add into the model and then where does that cost currently fall. That is why I think that there will be a bit of resistance that it is always an attempt to how can we improve, how can we repair the system we have got rather than necessarily wanting to wholesale change things. Thank you. Can I just ask in terms of the supply lines and stock availability, because we talk about supply lines like it just happens within the United Kingdom? Particularly say, for example, toys, because there has been a huge amount of press coverage about Christmas and toys availability. Are there issues here in terms of manufacturing abroad, the actual transport of products to the United Kingdom, the increased cost in manufacturing abroad? Are there cases now where some of your members just simply recognise that the price of something now is not suitable for the UK market? How is all of that impacting on what might or might not be available? Firstly, you are completely correct. There are global prices and global commodity changes that are driving an awful lot of these things and capacity and demand across the world. The way that we have seen particularly with the impact of the pandemic on different nations, how they are operating, all those changes have shifted at those demand opportunities. In terms of products, ultimately, it is consumer driven. I know that that seems like a sort of pop-out. It is not so much. It is that if consumers continue to really want things, continue to pay for things, retailers will find a way to do that. It is really whether those prices remain stationary. I suddenly know that the August CPI figures show that things were going up. We were seeing toys, electricals, and those kind of global prices are coming up. Those prices will, I suspect, eventually be passed along. Whether we see that in food is a different question. I think that there are distinct reasons to be very nervous about food inflation, because, of course, that is inherently regressive when it happens. Bank of England, of course, is quite confident that there is a lot of transitory pressures. Things will peak around the end of the year, and I very much hope that they are correct. We are a bit nervous that there are some quite structural things coming in, particularly we have particular labour shortages partly in the UK at the moment, although it is not unique here. Those tend to drive up costs overall. That would be our nervousness around the cost impacts coming through. I have one more question. If I can ask it to Andrew Richards. It is just a very brief question, because I know that Fiona Islop is going to talk about this or certainly other members of the committee are. There is unpredictability about the residential and commercial property market at the moment. I just wanted to know where you see, from a construction point of view, the sector going over the next few years in terms of where the opportunities to build will be and how that demand or perhaps lack of demand, in some cases, will be met or addressed or dealt with. Good morning. Can you hear me okay? Okay, you are fine. Thank you. Good morning, everybody. It is interesting that the demand profile globally and locally is quite strange in that, I suppose, globally most countries have projects that are way behind where they should be because of the Covid pandemic. They have projects that are already coming through the pipeline that have continued to come through the pipeline and then there are a number of countries who are seeing construction as a route to improving their economies from a Covid recession to accelerating projects. There is a massive increase in demand for construction globally, which inevitably causes an impact with supplies globally as well. Scotland is not immune to that whatsoever. There are more local issues in that a lot of construction products and materials are not made in Scotland, and they are imported from England, Europe or wider than that. They are not manufactured in Scotland. The other thing that you have going on is that you have a very rigorous standards regime in terms of all the components and products that are used in construction that have to pass huge amounts of testing, groundfell aside, but that has quite a bearing in terms of what can ultimately be supplied. You have also got a low-cost procurement regime where you have an industry that is constantly trying to beat itself up against each other to try and win work, and it is almost killing itself by trying to win work. That is even the frailties of the Covid pandemic—the frailties of the industry have been highlighted by the pandemic. It is quite interesting that you have an industry that is not going to be transformative as you would want it to be, but it has a huge amount of demand. Residential markets, both the affordable side and the private sales side in Scotland, are quite buoyant. The same applies in Scotland in terms of older projects that are still being finalised and built in the construction phase that are struggling in terms of supplies. You have your current projects and your additional projects. You have additional demands coming through in terms of net zero carbon and carbon reducing measures in terms of retrofit and not just new build. It is taking the existing buildings and trying to improve them as well. The demand side of things is huge. The issues that we are dealing with are probably more supply-based issues in terms of where we are getting that product from and how we get it into and on to our sites. That is reasonable prices. Thank you very much for that. I better let other committee members come in, but thank you for the input on that. Thank you for joining us this morning. I have got my initial questions for Andrew Richards from Construction Scotland, but I will want to come to all the panel about the cumulative impact of supply chain pressures and resilience planning, just mitigations immediately, but also for the future. To start with Andrew Richards, I thank Construction Scotland for your hard work during the pandemic and continuing for safety measures during the pandemic. I am very conscious that, as you have just set out, that for many countries and including in this country, construction can be seen and is a way to drive economic recovery. I want to explore a bit more some of what you have just been setting out. Please feel free to set it out in more detail with examples of the impacts that you are currently seeing of supply chain pressures on our drive to try and secure more economic recovery through construction. I suppose that a specific example is that, with net zero, everyone is talking about air source heat pumps and using hydrogen as an energy supply, rather than gas and electricity. That creates an issue in terms of where we get all the components for air source heat pumps, for example, and there is no other than Mitsubishi in Livingston or any other area in Scotland that produces those technologies. They do not do enough for everything that we require in Scotland, but the wider issues that are never really thought through is that when you use an air source heat pump, you need bigger radiators. Nobody in the world is currently making the radiators that you need to heat homes and offices, because the nutritional size of the radiators does not get hot enough through those measures. I guess that the public sector and private sector demands are in respect of net zero. Net zero is so wide in terms of what people actually want, so you have not got the investment in manufacturing delivering exactly what we need. Everyone knows and understands that we have got 26 coming. It is absolutely right on the tip of everyone's tongue in terms of what we need to be doing in terms of whether we want to have the aspiration of being net zero, but how that equates to buildings and into a proposition that makes somebody want to invest in Scotland to build those radiators has to have a demonstrable pipeline of opportunities for the next 10 to 15 years. Without that, you are not going to get the business case for manufacturing capability to be reinvented ultimately in Scotland. Those are the challenges that are happening regularly. We know what we want, but we do not move the industry forward in a transformative way, partly because of that uncertainty. The other issue is that the industry, as I highlighted to Jamie Greene before, is such a low-margin industry. The way in which construction is procured is that it forces the industry into trying to chase work at lower and lower margins and at lower and lower costs. That does not leave any slack in the system for investing in itself or finding new ways, because there is a race to the bottom going on currently because procurement on the basis of massive amounts of risk transfer to the private sector from the public sector and lowest cost always prevails forces people into taking whatever shortcuts they possibly can to try and win that work. That more often than not involves going to try and source as many of your materials from places that are not in Scotland at all. When you are trying to drive the circular economy, you are doing the complete opposite with a procurement regime that exists as it does. There is something about the construction sector being a source of resilience but also transformation, but there are real challenges in the supply chain to deliver that. Is that your message to us? Certainly, you need money to transform and you need to be in a pretty healthy position to be able to start investing in yourself. The position that has been, I guess, exposed by Covid in terms of just how weak the industry is, but it would love to be in a much stronger position to be able to invest in itself and try to move itself forward. The procurement regime hinders rather than helps with the transformation. The other issue that you have touched upon in earlier conversations is that those things cannot just be changed overnight. You cannot just suddenly grow more trees, you cannot suddenly just come up with a new innovative technology that does not have to go through rigorous testing. A lot of the resilience that we have actually got is almost having to look at it from a medium to a longer term rather than having anything that we can—we set up a material shortages working group with the Government. It still is another two weeks to go headed by Ivan McKee. It has done a hell of a lot in terms of understanding the position that we have in terms of the shortages. The one thing that all the discussions that have happened with key material manufacturers and suppliers in Scotland is that it has highlighted the fact that you cannot do what you did with PPE, which is trying to divert resources that are currently being used elsewhere to try and give you what you want, because the components that are used in construction are so complex and so well tested. It is not the same at all. We have a short-term problem that we are recognising and knowing that we are going to try to address through budgets and other means. The longer term is using Covid positively as a catalyst to get some of the transformative bit of buffering from you just now. We will try and get you. The question that I wanted to ask all the members of the panel was the cumulative impact currently of supply chain issues across the different sectors. What can be done to mitigate that and also what resilience planning that you are aware of, either at the Scottish Government level or UK Government level? I am conscious that I have three supermarket distribution warehouses in my constituency that are very aware of the cumulative impact, potentially of whether it is of Covid but also of Brexit and labour supply, etc. If you can think about it in terms of some of the immediate interrelationships that you have and what can be done to help to mitigate some of the immediate issues. If you can think about what we need to do to build in resilience to what we have experienced just now for the future. I am glad that we have got you back, Andrew, but we are just going to move on to the panel's view on the cumulative concurrent interrelationship of those pressures and what can we do to build in resilience to the sectors. Martin, we have not heard you for a while. Is there anything that the other sectors can do to help you or what do you see in terms of resilience planning that is needed? Thank you for coming to me, minister. We, as we are all finding out now, are the glue that keeps the other sectors together. That is not to say that it is now being recognised just how important the sector is. The UK logistics sector employs 2.54 million people and it is worth £127 billion to the public purse. We have a number of requests into the Government. Some short-term is appointed, but some medium and some long-term. At the minute, we need short-term answers to fulfil existing orders. We have asked that the Government look at temporary or seasonal visas to allow access to different markets. We have looked at things such as expanding existing, such as the youth mobility scheme, in order to help to bring people back in. The perennial issue that we have faced is the image of the industry itself. We could be bringing a lot of people who have left the industry back in on the short-term to help with the existing problems. We have asked for a review of CPC. We have put a proposal into the Government, which we call one for one, which would be rather than having a block of five CPC days before coming in, then one day could work for one year on a temporary basis. Those proposals are already in, but we can ask for help from a number of different quarters to help with the image of the industry. We, as an industry, have had to hold ourselves under the microscope and look at terms and conditions, wages and so on. However, the feedback that we are getting is that the wages—although very welcome the additional money that has come in for the wages—is that that is not necessarily the major problem in attracting people back into the industry. Part of that is largely about how drivers are treated on the road network. Within the delivery and pick-up scenarios. I totally understand what Andrew McLean was saying there about the race to the bottom in terms of money, but also the legislation side of things as well. Drivers have to look at their driver's hours regulations as well as their working time director. They have legal requirements in terms of how they operate their tachographs and just how they go about their business—the time that they are allowed to work, the time that they are allowed to drive. What we are finding, as the microscope is shown on all aspects of how we are doing things, is that the efficiencies are being missed because of the amount of delays that are happening at pick-up and drop-off. That is right across the board. We have worked very closely with Charles and his colleagues at four ports on the vehicle booking system, and that has been largely successful. There are obviously times when faults on both sides could be remedied, but the same goes with the retail distribution centres. The Governments from both countries were keen to label HV drivers as key employees at the start of the pandemic, because it was them that was keeping the PPE, the pharmaceuticals and so on, moving around the country. We are still finding scenarios where drivers are denied welfare facilities and we are also seeing fairly unreasonable delays in terms of loading and unloading at certain places. Also, there is not a lot of flexibility on the time slots. For example, if something has happened on the roads that facilitates the delay in the missed slot, then we could often be waiting a couple of hours to do the same, which impinges on the working time directly of the driver's hours regulations, etc. It means that the trucks are not running as efficiently. We as an industry have to look at ourselves. The wider industry that we are delivering to need to look at ourselves, but we also need to help from the Government on a number of different things. We lag so far behind the rest of Europe when it comes to welfare facilities on the network, safe and secure parking overnight. Freight crime has been growing again over the past few years and curtain-siders are seen as an easy target when they are resting up. We need safe and secure facilities on the network and that is something that the Scottish Government could help with us to put pressure on the UK Government to deliver. If we can maybe move on to Charles, you already talked about some of the practical things that you are doing, particularly with the HGV side of things, but I am interested in your view of interdependencies and resilience planning, whether it is satisfactory or do we need to do more in that area? In terms of the immediate situation, we are doing pretty much all we can in art and highlighted things such as vehicle booking systems. They are all designed to make the flow of information as efficient as we possibly can get it in the supply chain, extending capacity, satellite storage and more warehousing. In fact, using the ports more flexibly, almost as trading zones. Those are all things that will help us to get through the immediate issue. When you look more longer term, one of the things that I would like to see is the Government highlighting transport and logistics across all the industries as a good career to go into and something that people should be encouraged to go into. It can be a rewarding career, it can be a long-term career and it is not seen necessarily as aspirational or attractive at the moment but to fix this longer term. I say that because for the best of all in the world in Scotland we are a small economy and we are a little bit peripheral to the main markets of Europe. That means that we have to be even more efficient in our transport and logistics, particularly given the fact that we are quite well export dominated and some of these exports will drive the economy. I think that a general shift of encouragement for the industry facilities for training, apprenticeships, better networking with higher educational institutes as well. That to me is a good long-term measure, it will not be a quick fix. The other thing that I would highlight and I would say this particularly around Grangemouth is that there are not too many areas in Scotland or in fact the UK where we make things anymore and we have to start encouraging people to make things again. I was quite interested to hear the construction perspective that we need. We need trading zones around our ports, around our manufacturing centres and to capitalise on the skills and the expertise that people have in those areas. Grangemouth is the largest petrochemical complex in the UK. I would say that there are many skills and great announcements by any of us about investment. Those are very important. Equally renewables is an area where we can give people opportunity to make things as well. Creating the capacity for renewables and the supply chain for renewables. Those are all long-term measures that help to build resilience into our economy. Thank you very much, Charles. Can I maybe ask Ewan and then I'll come back to Andrew to finish? That's okay. I do have to make some progress, Ms Islop. Have you put the question to the retail consortium and then I'm going to move to Andrew Beattie? Okay. To Ewan and sorry, Andrew, I think that we're getting cut off. So, Mr MacDonald Russell. Sorry, apologies. I was waiting for the microphone to magically open up. Thank you for the question. I think probably that the first thing to say is it's not so much a surprise that there are resilience challenges now. It's that it took so long for it to happen. The last couple of years, retail industries faced structural change. It's faced the impact of the COVID pandemic and restrictions and the impact of EU exit. Any one of those would be an enormous event for any industry to absorb. Taking on all three simultaneously has been really hard. Despite all the challenges, we're still seeing stop coming through. We're still seeing an industry that is able to respond. I think that what we've seen in recent weeks is that these pressures are becoming to a point where they are nearly impossible to bear. Now, in the very short term, in terms of the measures that would help, I think firstly we've had support from Government on delivery hours, delivery times, allowing shops that don't have that thing. That's quite small but actually quite important to ops. Obviously in the last year, one of the big things that makes a difference in terms of our operations is actually the short work protection legislation that's come through. Giving a bit of protection to shop workers enforcing a huge number of rules and difficult circumstances and a bit of confidence and quite frankly, a bit of morale support for people who've had a really tough couple of years. I think the third one I've probably come to on support is, as Martin said on HDB drivers, we would agree that there's a need for a short term fix that no matter what we do to training to testing the investment that my members are making, we simply can't magic up the necessary drivers we need for the next couple of months out of thin air and we couldn't even take people who aren't fully trained or supported. That wouldn't be safe, I think, for anybody to be in that situation. We would absolutely support that, some sort of visa system or support in that area. I think also it's probably worth acknowledging the recent delay to import restrictions from the European Union. That's really, really helpful on food and drink as well, that helps to keep supply chains moving. Again, how we resolve some of those challenges is long-term going to be pretty there. In terms of what government perhaps in the medium term can be doing, it's about giving the industry a bit of time to breathe. It's about looking at some of the measures that perhaps the government might like to do at this discussion. For example, about a ban on year-stay trading, we have the potential deposit return scheme coming in next year. There's quite a lot of these areas where I think we need to have a pretty candid discussion about, whilst these are perhaps virtual or maybe good or not things, is this the time to increase burdens? We see lots of tax measures, for example, the UK government's proposals on national insurance. All of these things are adding more cost at exactly the point that businesses are under enormous, enormous pressure. I guess finally to just finish the two, the biggest things our industry could probably do. One is this coherency from governments and the retail strategy that the Scottish Government are working on at the moment. There's a great opportunity to develop that up here. Finally, it's a bit of economic growth. The single biggest thing that will help the retail industry is that we can get the economy moving again, get people out about, get a little bit of that growth and that tends to see concurrent rise in sales. A lot of our challenges go away if we can get a bit more growth and productivity. Without that, it's going to be a really hard couple of years. Thank you. Colin Beattie, to be followed by Alexander Burnett. I'd like to look a little bit about how industry is actually absorbing the increased cost of freight and transportation. I'd like to look at some of the major components of that. Charles Hammond has already shown us the exponential price increase for a container coming from the Far East, moving from $2,000 to $20,000. During Covid, we were told that because of Covid, what's happened is that the transport system has been discombobulated and that all the containers in the wrong place and all sorts of fallouts from that would gradually rectify itself over a period. I don't know whether that's happened and I'd appreciate a comment on that, but the UK Department for Transport has indicated that, in fact, compared to pre-Covid, volumes of freight to the UK have dropped by 10 per cent. Is that due to reduced demand? Is it because of the lack of ability to get a hold of containers and to ship to the UK? Perhaps I can get a little bit of information on that and maybe Charles Hammond might be able to enlighten us. I think that when you look at the freight statistics across the UK, a lot of that decrease is also a result of issues between the short straights, the channel, down in England. What we're saying as well as a result of Brexit is also a move from a company driver, a company freight, coming from the EU towards an accompanied freight. I don't think that the decrease in freight is quite as large as 10 per cent as we stand today because there is an element of recovery, but what we're also saying is a movement from a company freight, particularly into an accompanied container routes. We're absorbing those changes at the same time. You're right to say that empty containers aren't always in the right place, but that's quite an important issue for Scotland in particular because of the export domination of our trade. Finding cost-effective ways of repatriating empties is something that we're constantly aware of and looking at. The answer isn't always to drive those across the country. Sometimes the answer is to ship them and to store them, and that's why we're creating more storage opportunities, if you like. At the moment, we don't see trends that are set in stone. It's fair to say that we're still in that process of recovery, but we are going to see changes in supply chains. I suspect also a more regional pattern, the haulage and a greater use of rail. Those are all things that we're featuring at the moment in how we're handling trade. You were talking about Brexit and the impact with EU trade. There's also mention made of congestion in our ports. Again, if the volumes are down 10 per cent, why is it that we're not coping? Why is it that we're not able to handle it when there's a reduced volume? I think that you can't take the 10 per cent as being across every single port, so that move from a company to an accompanied means that, for a lot of ports, volumes aren't actually down 10 per cent. I would say that in terms of our operations today, our volumes are higher at the moment than they were at the same time last year. In addition to that, because we're holding more stock in the ports, the density of container stats has increased by at least 20 per cent in that period. The move that I was talking about from just in time to just in case means more stocking. Therefore, for longer stay boxes, we have to create outside storage areas to make sure that product flows through. There are congestion issues, predominantly, I would say, probably at Felixstall as a deep-sea port, but for a number of the other ports around the country, I don't think that those congestion issues are being managed with higher levels of stock on the ground. Just to pick up on what you mentioned about the increased volume of freight over last year, the Department for Transport says that freight increased by 13 per cent compared to 2020, but is down 10 per cent compared to 2019, the comparable periods there. You're saying that the issue about port congestion is focused on Felixstall. Why is that? Again, it's the size of vessel going into Felixstall. The amount of facilities available and the fact that boxes are staying around longer, and I think that the aftermath of the two is grounding as well, are all, if you like, issues. As well as that, and I think that we've heard about the trend away from retail, massive growth and e-commerce and people buying things online as well. Can I maybe ask Martin Reid to come in and, since the haulage industry moves the containers around, what's your take on that? Well, I'm certainly not going to argue with anything that's been said there, experts in far cleverer than I am. I know from feedback from members that, particularly in the southern ports, there's been greater delays in moving goods, greater waiting time. Part of that, I guess, is because there are skill shortages right across the board, and I don't think that warehousing numbers are down as well in terms of the staff working there because of the issues that we've already outlined. It's a concern, but the industry that we have, and there's a reason why road haulage has the hegemony, because it is flexible and nimble enough to cope with issues such as that. However, I know that the southern ports have had difficulties. I guess that the easements that were due to come in—or sorry, not the easements—are the additional checks that were due to come to incoming goods at the start of next year, now that they've been delayed. It gives us, as a country, more time to try and get the flow of goods moving better than it currently is. Maybe just coming back to the first thing that I mentioned about industry and business, absorbing increased costs of freight and transportation, maybe Ewan MacDonald Russell can maybe comment on that from his perspective. Thank you, yes. I'm very happy to. I guess in our industry there's two elements. The first one is that costs are predominantly being kept down by competition. Last month, despite the fact that fashion has been a really hard hit category, fashion prices were down 9 per cent in our shop price index. That's because of price cutting between people desperate to get some sales. We're seeing that competition thing as putting that kind of cap, if you like, on the top of price increases and the ability to pass it on, because retailers are still very much there. Bloodly that is waning, and that's partly waning because the models in place have proved too difficult for some retailers. We know that some big department stores simply no longer trade. What we're seeing also is that the way that costs are being absorbed at the moment through other ways, we're seeing fewer shops, often fewer workers in those, and that shifts to digital. Digital is not a more profitable platform, but it is a much cheaper platform to be able to operate because you don't have the same property costs and you can be more tech-efficient, more productive. Those things are where some of those costs are going at the moment. As we've said, how long that can be done for what's left to be able to absorb those things, particularly in light of, of course, increased transport costs as others have articulated distribution centres. Again, there are rising wages there because of labour things. The ability to absorb that, I think, goes. That doesn't mean that we're going to see a massive uplift in prices month-on-month. This picky price theory, I suspect, kicks in and that you'll see gradual increases as retailers see exactly what they can manage to keep within the market. I think that the other thing, just on that terms of volumes, though, certain volumes and certain products simply haven't been selling over the past 18 months. People's fashion tells is a good one. Nobody's really been buying formal wear because we've all got, no, we're exciting to go. Nobody's buying smart shoes for the office because we're all wearing slippers in the house. I think that that does have an impact in terms of the ability to manage some of these things. We're not really fully open yet, and even now, because, as we've said, our sales are still below, we're not probably getting the same products through. You see businesses who have kept certain ranges and have simply reused things that bring ranges, not buying a new one because, of course, at start of the year, we've no idea if shops will be open at all. There's lots of these very unusual things going through. Hopefully those will shake out, but that might have some quite big consequences for costs going down the line. What you're saying is that, at the moment, the retail sector is absorbing the additional transport costs, and that's likely to continue maybe with narrowing margins to the point where they have to increase. Would that be correct? Yeah, that's much more articulate and succinct for the cake. Can I move on to Alexander Burnett? Time at the end. Alexander Burnett, and Alexander is remote, so hopefully he's able to join us. Thank you, convener. I'll have some microphone on now. Just a couple of questions for Andrew and one for Charles. Andrew first, and I know my register of interests around construction. Over two years now, since this committee, which I wasn't on in the last Parliament, completed a lengthy and thorough inquiry into construction, culminating in a 92-page report of around 30 recommendations. Given that many of those recommendations from two years ago are addressing exactly the same problems that are being raised today, I just wondered if it would be fair to say that there's been little progress by the Scottish Government on those recommendations, and if there had been sufficient progress, it would have certainly alleviated some of the issues that we're facing today. I can indeed. Can everybody hear me and see me at this time? Connections are back, hopefully. There has been a significant amount of progress. The Scottish Government and the construction industry have probably never been closer as a result of Covid, having set up the construction leadership forum in 2019. Over the course, or certainly 12 months ago, set out a recovery plan with almost 100 actions, a number of which have either been ticked off or are in the process of still being worked through. I certainly feel that from our perspective, relationships have never been better. Most important, the Scottish Government understands the sector better than it ever has. Covid highlights exactly how many different Government departments and public sector bodies are impacted when you shut construction down. I think that the issues are very much—the right people in Government do know and understand the issues. The biggest one that we've not quite solved yet, I guess, is procurement. We are trying very, very hard to try and move heaven and earth to try and get into the equivalent of median pricing. We have to prevent the race to the bottom, which is killing the industry and almost killing the hands that feed you. All the extra warehouses and all the other facilities that are going to be required for renewables ultimately have to be built. You need to have a very point and healthy industry to be able to deliver those and all the other net zero carbon initiatives. We are nowhere near fixed, but some of it is not fixable by the Scottish Government at all. It is a global issue, as I said earlier, and we are having to operate within it. I think that the short-term issues that we are trying to overcome are current projects where they are fixed-term, fixed-price, and where clients have very little manoeuvrability to be able to help out on cost and time pressures. That is certainly hurting a helluble lot of the industry, the vast majority of whom are SMEs within the supply chain. The new projects that are under development at the moment are having considerable issues when it comes to budgets, because, essentially, quite a number of materials have increased pricing-wise to give or take about 30 per cent when you average it out. That 30 per cent increase is roughly about 10 per cent overall when you take into account the fact that construction pricing is not just about materials, it is about labour and other things, too. 10 per cent increases in construction costs cannot be borne by the industry that only makes one per cent margins. There are some difficulties there, and there is a real need for increased budgets, both in terms of current projects and new ones. However, we have engaged hugely with the Scottish Government, the economic development director in particular, Dermot Rattigan, Sharon Miller and Elizabeth Stark, who have been excellent in trying to get to the bottom of what, if anything, they can do to assist. Thank you. Delighted to hear that. I think that it was one of the specific recommendations that was improving our relationship, so it is good to hear something positive around that. On the other thing that you mentioned this morning, you mentioned your issues around supply procurement. You mentioned it again. You spoke earlier on specifically about radiators. I wonder what other opportunities you have identified out there for the production of some of those products closer to home, and what we can be doing to try to deliver some of those opportunities? That has been looked at. The difficulty that we have is purely if you are looking at demand from a Scottish perspective. When you are putting manufacturing facilities in play, there is not enough demand for construction, whether it be affordable homes, office building, hospitals, schools or what have you, to create facilities that literally just serve Scotland. The issue that we have here is that we have quite a number of manufacturing facilities that, over the years, have closed down because they were not profitable. It was more profitable and better, from a lowest cost perspective, to get your bricks, your blocks, your structural timber and so on from elsewhere. Ultimately, it does come down to money. If you really want to drive the circular economy and drive manufacturing in Scotland, I guess there is going to be a recognition that maybe there are going to be some components that could and should be built in Scotland, but they are going to be slightly more expensive. When you look at that from a volume from money perspective and a circular economy perspective and the reinvestment of the Scottish pound, it makes more sense to do that within Scotland. However, most of the investment cases for any manufacturing in Scotland are very tight, purely because demonstrating the demand potential within Scotland is a tricky one. Charles Highlight said that the Scottish economy is smaller than other countries. If you are going on a lower cost, it makes more sense to import rather than trying to create things yourself. I am going to bring Maggie Chapman in for a supplement on that question. I will come back to you to ask a question of Ewan. Thank you very much, Kate. Sorry to cut across you, Alex. Andrew, you were talking there about the circular economy. I was just wondering what your view would be if there was some kind of local content requirement to shorten supply chains but also, importantly, to catalyse local manufacturing. Is there something in that space that the Scottish Government should be looking at to ensure that we have the drivers to ensure that we are supporting local manufacturing and driving up demand for it, if demand is the issue? We have been asking the Government for assistance there. There are some slight difficulties when it comes to interpretations of European law in terms of what you can ask for within tenders and what you are able to do to encourage local involvement. Different countries take different approaches to the same law, but the approach that is being taken in Scotland at the moment is very difficult to try and be specific about that. We are not giving up as an industry. I know that the Scottish Government is not giving up as a route to try to encourage that very point, you mean. Mr Burnett, I will bring in Michelle Thomson. Thank you. As I was going to add at the end, I was very much in agreement with Andrew in his last comments. We could see additionality and environmental costs priced effectively. We would not just be looking at some of the lowest cost imports. My final question is about Charles. You mentioned the importance of developing economic zones around trade ports. How disappointed were you to hear that the Scottish Government rejects working on the UK free ports? How could that affect yourselves? For me, it is always disappointing when, to the Scottish Government and the UK Government, we are not able to reach an agreement. The reason for that is that we have already launched the Thames Free Port and it is quite an exciting venture. We understand how it works and we are already starting to get inquiries and interested parties who will undoubtedly make and distribute goods down in the south-east of England. For me, I think that there is great potential, particularly in the Firth of Forth, to create an economic free port style zone that attracts the type of incentives that the UK Government has talked about. Obviously, we will need to wait and see what form that takes. I do not have any detail, but we are still extremely keen to promote some kind of trading zone and free port zone in the Firth of Forth in whatever form that takes. In terms of the ambition—I will leave you with that figure—our preliminary assessment indicates that a Firth of Forth green port zone could create something round about 50,000 direct and indirect jobs. Good morning. I want to address some questions to Charles Hammond. You made a comment earlier in the session about Scotland being peripheral to Europe. I wondered in terms of comparative shipping figures. I do not know how up-to-date they are now, but some years ago there were reports that Recuric in Iceland, with a population of about 350,000, shipped as much as Grangemouth. What is the current comparable and what might be the reason for that? The reason for that is that Iceland, to trade, has to ship everything. In terms of Scotland, a lot of our trade is with England. I think that it is around about 40 to 45 per cent. I think that it was the last figure that I saw. There is an easy way of transporting goods to England, which is usually by road or by rail. By definition, because of our geographic connection with England, we will end up shipping less on average. To give you a stat to support that, 95 per cent of goods worldwide are shipped, but in Scotland that percentage is down around about 75 per cent. I think that that is probably the reason. In terms of the performance of all the ports that you own, where does Grangemouth fit relative to all the ports? What ranking would you give it? 55 per cent of our business is down south, 45 per cent is Scotland, but Grangemouth is Scotland's largest port. On that basis, I would say number two, but it is extremely important not only for the Scottish economy but for our group to be successful. That is something that we want to see grow. In terms of the stats of your group, where does Grangemouth fit in all the measures that you apply? Particularly, I imagine, around profitability. Where does it fit? I do not mean relative terms to Scotland's economy. I mean relative terms to the group. That would be the same answer, so it would be number two within the group. I just want to clarify that. For volumes, revenues etc. In terms of leakage, where stuff is shipped out of ports, some of your other ports down south, do you have a sense of what percentage that leakage is? If you are thinking about Scottish goods that then get exported from English ports, sometimes we are also shipping those goods to English ports, so we feed our connections with both Felix Stowe and London Gateway. Essentially, most of Scotland's goods to the rest of the world, other than Europe, will have to be shipped to meet the larger vessels that call Felix Stowe, London Gateway or Rotterdam. There are also rail services that move goods down to some of the deep-sea ports, but also down to Teesport. We have set up our own rail service and rail terminal at Grangemouth. In terms of market share, our market share is about 40-45 per cent, so there is certainly scope to increase that market share. Obviously, there are also other container ports in Scotland such as Greenock and other ports in the UK handling Scottish exports, sometimes with assistance from us and sometimes in competition with us. It is difficult to put a figure in the leakage, but certainly, if you said to me, can we grow our market share at Grangemouth, I would say to you, yes we can, by greater investment, greater efficiency and more warehousing. Funnily enough, you must have sensed what I was coming on to. My question was going to be for you to move Grangemouth to number one. What would you do, and in particular, what structural issues would you seek to overcome? The issue that we have is that Grangemouth is serving Scotland's economy. In Scotland's economy, at the moment, it is going to be smaller than the south-east, which Tilbury serves. Sometimes it is a question of population, but if we say to grow Grangemouth in isolation and move it forward, investment by ourselves, which we are doing, creating an efficient trading zone with great incentives around Grangemouth, would also be something that we would do and also making our operations more data efficient, which is something that we are currently working on as well. That would be the three things that I would highlight. Just finishing off on that, in terms of the current structure of the owning company, does the level of debt leverage limit investment? No, it does not. Our shareholders are long-term pension funds. Effectively, we are generating funds to pay people's pensions. They are perfectly happy to invest in any proposition in the business directly or through long-term private placement bond holders, which we have as well. There is no capacity issue for investment in our group. We have a few minutes. If the panel has anything that you feel you have not been able to say this morning, you would like to—I do have a couple of supplementaries. I will move to members. I will take Maggie Chapman to be followed by Jamie Halcro Johnston. I am sorry to jump in again like that. That is probably a question that is most appropriately directed at Andrew. Andrew, you were talking about the race to the bottom and the shift in risk from the public to the private sector, and also the need for investment in the construction industry more generally. What is it that the Scottish Government could be looking at in terms of mitigating some of that shift in risk and thinking about some of the broader issues around driving up demand around the retrofitting of the house building that we know we need to see? Is there space around a national construction company or something like that that allows us to focus and target investment and therefore limit the risk shift that you have described? The Scottish construction industry has had 50 per cent of its income is derived from public sector procurement. It has had a very welcome amount of money being spent, which it has then been having to deliver upon. It never reminds me of the economic value that is created by spending that money. The value of social benefits that are achieved through new hospitals, schools and areas needs to be fully considered, too. The big ask is whether the demonstrable pipeline continues and becomes more demonstrable in terms of what it is that the public sector genuinely wants the construction industry to deliver on. That first and foremost needs to happen. We need to have a pipeline of projects that allows the industry and its supply chain and all the other manufacturers to understand and know what is coming forward and in what form such that we can train the appropriate people, whether they are in manufacturing or on-site, to make sure that they have the right skills. A retrofit skill is completely different to a new-build skill in terms of what it is that you are trying to do. The other big ask is whether the huge swath of money that is being put into construction is making sure that it is being directly used. It comes back to your point about the economy. It is not just about putting money into construction, it is about putting money into construction in the right way that encourages the right behaviours. That is the bit that we have not quite managed to get ourselves into an agreed position yet, partly because of the complexity of it all. There has not been a lack of will on both parties, but you are genuinely trying to drive the economy, trying to do stuff that helps to drive transformation, drive fair work and huge amounts of investment into making sure that people put forward the right apprenticeship opportunities on what I mean. Those all need to be part of the procurement process. At the moment, we are still irrespective of whether it is subcentral government or devolved local authorities. There is still just this tendency to stick to what the industry has done for years, which is to go out and get the cheapest tender that you can. We are looking after the public sector that offers the best that we possibly can. Our view is that that is just so narrow-focused, I suppose, ultimately, as it might suit your own specific needs in that local authority. The wider implications are that you are killing the industry further, you are not encouraging transformation, and there is a huge amount of digitisation that needs to go on in the industry. The money is not there to facilitate that principle, because of the drive for procurement and the way that we are doing it currently. It is a question for Martin Reid. You talked about the shortage of available HDV drivers. There is a problem across Europe. The salary has reduced in terms of comparable with some other comparable salaries. It was supermarket cashiers that it was cited against. There is also a large issue in terms of a shortage across Europe. If the HDV drivers were added to the shortage occupation list, why would Scotland, and why would the United Kingdom and, say, Scotland particularly, be an attractive destination for people to come here and work, given that, but also perhaps additional costs in terms of travelling here, additional costs in terms of living here, and what would your expectation be in the event that HDV drivers were added to that list? What would your expectation potentially be of numbers? Thank you for the question. In terms of numbers, it could be anything. At the end of the day, there are no positions and logistics on the shortage occupation list at all. The numbers that I said earlier seem crazy, because there are shortages not just in HDV driving but right through the sector. Just by law of averages, we should have at least one position on that. At the end of the day, that is not necessarily going to be the panacea that we would hope that it would be, because Europeans are finding it easier to live and work in other parts of Europe now. There is no guarantee that they will want to come back. One of the reasons that we want HDV drivers to be on the shortage occupation list is that it is another avenue. As I said at the start, there is no silver bullet that will cure that. What we need is a number of solutions. I would like to return to a point that Charles made earlier on about the promotion of the industry through the UK Government, the Scottish Government, Irish and Welsh. We are all in the same position here. We need to look at the rhetoric that comes out when we are talking about the industry. In a lot of different releases, trucks are seen as big dirty smelly things. That is no longer the case since the Euro 6 engine came out in 2013. The industry has dropped its emissions by about 75 per cent, which is more than any other industry. We need to show all levers to be pulled to try and get more people in. We, as an organisation, have a national lorry week that, conversely, will run over a month. Activities will be a week in each country. We will be doing in Scotland last week in October. However, I encourage the members of the committee and any of your party members to help by dropping a 20-second iPhone message just to say that they support the industry and that it is a career that should be of choice. It offers a lot of different opportunities and options, so that we can get the message out through social media to try and attract people to come in. The shortage occupation list is a lever, and it is not a silver bullet, but we welcome all the levers being pulled to try and alleviate the immediate problems. I will take one final question from Colin Beattie. Just a quick one for Andrew Richards. I will ask much the same question about the ability of the industry to absorb not just the freight and transportation costs, which are common to all, but the specific extremely high increases in raw materials that have been identified in the construction industry. Is the industry absorbing that? Is it already passing it on to its customers? How is it coping? The answer is, I guess, a bit of everything. The current projects that were already procured, but were still to be built out, were essentially procured on fixed-term, fixed-price contracts, and a lot of pain and angst is being taken by the industry. Unfortunately, there are a few casualties off the back of that. In terms of projects that are currently in procurement, the specialists in terms of their architects and designers, as well as the construction specialists themselves, are trying very hard to mitigate those cost increases by designing some of the more expensive materials out and designing out some of the materials that are not expensive. However, there is an availability issue to try and get deliverability as much as you possibly can. That sometimes means getting rid of the nice to have and leaving the buildings that you are creating on the need to have type structures. It requires the public sector procurers and the construction industry teams to be working very closely to mitigate that. In terms of a 10 per cent increase in overall construction costs, i.e. a 30 per cent increase in materials cannot be taken on by the industry that mostly earns 1 per cent margins. Can I confirm what you are saying? The industry is substituting quality for utility in terms of the construction that is delivering? I guess that it ultimately depends on your definition of quality, but what they are trying to do is use measures that exist and levers that exist to try and get projects back into budgets that allow the project to still go ahead. I do not think that any shortcuts are being taken in terms of how the guys ultimately on the ground are wanting to deliver. They are not taking any shortcuts in terms of structural risks in terms of what they build. That is more about the final specification within buildings, where some of the nice to have specification is gold taps or now silver taps, for example, or areas in which they genuinely can. They still have the same level of quality, but it is not quite at the price that was envisaged. I would like to thank Charles Hammond, Ewan MacDonald Russell, Martin Reid and Andrew Richards for attending this morning and speaking to the committee. That concludes the public part of the meeting.