 gradd. Welcome to the fourth meeting of 2021 of the Economy and Fair Work Committee. I am pleased to welcome Maggie Chapman, MSP, who is now joined the committee as a full member, replacing lawness later MSP, and I look forward to working with Ms Chapman. The first item of business is a declaration of interest from Maggie Chapman and I invite her to declare in interest that are relevant to the committee. Thank you very much Claire. I've got no financial interests relevant but I refer members to my register of interests and I am a member of Unite to the Union. Thank you very much. Our next agenda item is to agree to take decisions, sorry, agree to take items 5 and 6 in private. Our member is content with that. So our main public item of business this morning is an evidence session on support for economic recovery. I thank our first panel for joining us today and I'd like to welcome Adrian Gillespie, who is chief executive and Douglas Calhoun of, sorry, chief financial officer from Scottish Enterprise, as well as Malcolm Ruffhead, the chief executive of Visit Scotland. Today's evidence session will enable the committee to consider what policies are needed to promote economic recovery and it also will be helpful to inform our pre-budget input to the Scottish Government's budget for 2022-23. Good morning to the panel. I would first like to ask—obviously we've come through an extremely difficult time through the pandemic and your organisations have been vital in providing support for businesses across the economy and particularly also within tourism. Last week—sorry, not last week—a fortnight ago we did hear from the Federation of Small Businesses and Chamber of Commerce, who made some comments that they felt that Scottish Enterprise wasn't visible enough. They did feel that the system was still too complex and prone to duplication. It has been a very challenging year and I do appreciate that decisions have to be made quickly and often funds have to be put out quickly. However, the sector did express some concerns that the way in which they interact with Scottish Enterprise could be improved. Is there a lesson that you have learned during the process? Can I put that question to Douglas, please? Thanks for the question, convener. Yes, there is always lessons to be learned in the situation that we faced last year, but the criticism is a little bit unfair. We delivered record levels of support to businesses last year, investing £568 million into Scotland's economy. We pivoted very quickly to deploying staff into supporting businesses that have been affected by Covid. We put out £220 million of emergency Covid grants that provided a critical lifeline to approximately 4,000 businesses and helped to safeguard more than 70,000 jobs. On top of all that, we continue to deliver a lot of what we call our businesses' usual activities in economic development. It is a fairly extraordinary year in terms of our performance. Personally, I have got 34 years of experience with Scottish Enterprise and I will look back on last year's perhaps the most extraordinary year of delivery that we have experienced, considering that our staff were all working remotely. That takes me on to the point about visibility, because in that situation the more traditional methods and opportunities for networking have decreased over the past 18 months or so in terms of dealing with Covid. However, a lot of colleagues were involved with various industry groups right across the spectrum in terms of either helping to develop some of our responses to Covid or just keeping people informed. We had people representing us and dealing with international policy on the committee of SEDI. We had very frequent Covid-19 business update calls, which were facilitated by the Scottish Government but attended by SED, the Federation of Small Businesses, SEDI, Scottish Food and Pring, etc. Almost on a daily basis before moving to weekly and then fortnightly, as things moved on. There was a large, although slightly different, period of engagement with industry bodies and industries and sectors across Scotland. That is helpful, and I do appreciate the response. There was an Audit Scotland report that was published this morning. I appreciate that it has only been published this morning. You have possibly not had a chance to be aware of it. Stephen Boyle was on radio this morning talking about the amount of funds that were put out during the Covid pandemic. There was a need to deliver funds at pace. I recognise that, but he has raised some issues around transparency. I hope that we have not lost Adrian if he is still on the call. I would like to ask you both how challenging it was to administer the funds. If you are confident that there was a robust decision-making process put in place and that there is enough transparency about how funds have been delivered. If I go to Malcolm first of all, thank you. Thank you, convener. I think that we benefited from coming in late in the process in terms of delivery of the funds. From our perspective, because it was bespoke for the tourism sector, it allowed us to work very closely with the various industry representative bodies so that, although it may have taken a little bit of time at the front end, it just meant that getting the money through the system and making sure that the applicants were aware of what they had to do was speeded up at the back end because what it meant was that we had fewer rejections and we also had fewer appeals which actually speeded the whole process up. From our perspective, we have also been on every single fund. We have had our own internal audit people looking at it, taking on board all the lessons learned and then feeding those in an iterative process into the next delivery of any of the funds. Douglas, would you like to respond to the question? I do understand that Adrian is back. I am a big of Adrian a chance to contribute as he has managed to join us in the meeting and understand his connectivity issues there. I think that that is a brief... Good morning, Adrian, as you would have done. I hope that you heard the question. The question regarding the Audit Scotland comments this morning about transparency within the Covid funding delivery. I was asking if you are confident that there was enough robust scrutiny and transparency around that. Do you appreciate that funds had to be distributed at pace, but do you have confidence in the systems that were put in place? Thank you and my apologies for missing at the beginning of the meeting there. I met the convener of our audit committee and he has told me about the scrutiny that various funds have received. Our internal audit team were very satisfied with the robustness around the whole process, given the pace at which everybody had to move. Some of the uncertainty that we are dealing with was very pleasing to hear. On that basis, I am very reassured that, in the circumstances, the process was as robust as possible. Are you able to briefly respond to the comments that we had from FSB and Chamber of Commerce, who considered continuing complexity around the funding issues? I caught the beginning of that just before I lost connectivity. I was disappointed to read that. I am new in post, and I will be engaging very broadly, including those who submitted things to you. Given the amount of activity that you will see in our submission, that was put out during difficult circumstances, I think that that is slightly unfair in terms of Scottish Enterprise not being out there. I think that we were extremely connected into sectors, into the business organisations that we co-created a lot of those funds with. However, we can always do better, but sometimes companies are often interacting with Scottish Enterprise and actually do not realise that they are, so they find business support websites that Scottish Enterprise operates was taking tens of thousands of phone calls, dealing with 40,000 inquiries to the website every month. That is not Scottish Enterprise branded, but it is Scottish Enterprise people who are manning that service. In fact, around 70 additional staff were brought into that service during the crisis. That can often not be appreciated that companies are speaking to Scottish Enterprise. What we are trying to do there is to make sure that it does not matter who you come into, it is about the support that we help companies to find and that we can help companies actually to support from a broad range of partners. However, sometimes it is not always clear that Scottish Enterprise is the person that you are speaking to. Thank you. I am now going to hand over to Jamie Halcro Johnston. Thanks very much, convener. Good morning to the panel. We have heard today that there is obviously a particularity from Scottish Enterprise at the point of view that you continue to deliver growth. Throughout the pandemic, there has obviously been a film supporting existing businesses and supporting them through extremely difficult times. I just wanted to get an idea, and perhaps if I could come to Adrian Lesby first and then maybe on to Malcolm Ruffhead, how that focus may have impacted on long-term growth in terms of a focus away from perhaps new businesses. As you go forward over the next few years, how will you balance supporting existing businesses that are still struggling or still need that support, and how will you look to develop and support new businesses and entrepreneurship? I think that that will be something that we are just going to have to working as a team with the other agencies. I am staying very close to companies to be very agile with that whole process. Clearly, there are some parts of the economy that are still dealing with Covid, and there are some challenges, particularly in tourism and hospitality. Malcolm Ruffhead may come back to that, but still in sectors such as aerospace, we are still supporting companies through talent. At the same time, we are helping companies to find markets and to negotiate international markets, which are uncertain either due to post-Brexit changes or particular Covid conditions in that country. We are having to be very nimbo and agile in terms of how we deliver that support, but often it can be support around dealing with some of the problems arising from Covid and at the same time looking for new markets and growth opportunities. I think that, as we set out in our submission, there are seven national opportunities that provide good focus and opportunity around growth in the future, while still helping companies around issues on skills shortages, on finance issues. Sometimes that can be about dealing with coming out of Covid conditions and facing quite high growth and some of the financial challenges that can go along with that. The short answer is that we are going to have to be very agile in how we deliver that support particularly through what remains some uncertain times, but we do have a strong focus on the future opportunities at the same time. We are in a hybrid situation where some businesses have not been able to trade at all, some have had limited trading and some are seeing green shoots of recovery. They all need different types of support on an ongoing basis. There are a number of challenges that Adrian alluded to. There are a number of things such as labour shortages across the board that we are going to have to collectively look at and plan not just in the immediate future but also for the medium and long-term future, because I think that those have been underlying issues. We have issues around in the cities where food fall is increasing, but spend is still well down on pre-Covid levels. It is about looking at how we can attract people into the cities and help businesses to survive. Obviously, there is uncertainty around what is going to happen post furlough and what the impact of that will be once loan repayments come in. On my own perspective, we have been taking the time to help people to increase and enhance their digital capability, which means that their digital competitiveness is greater. We have been working on the digital boost on the £25 million programme. Continuously, we are looking at online bookable products, so we are supporting businesses to become more responsible once we get through this period. The research and insights that we conduct on an ongoing basis are able to share with businesses to determine where sentiment is strong towards visiting Scotland, but we are also looking at where some of the issues are in those markets. We have to remember that particularly international inbound has been no business to speak of whatsoever for over 18 months. Each individual market has its own circumstances. It is about keeping people informed about the opportunities around our core markets, such as Germany, France, North America and so on. The collaboration and partnership between all the agencies and the industry has been exemplary. We are working together through the Scottish tourism emergency response group and the events industry advisory group, which were set up and have delivered against a number of serious issues, but we are getting to a point where we are able to start the recovery phase over the next few months. I am getting quite a lot of feedback, so I hope that you can hear me okay. On the point that you just made, you said that you, as agencies, have had to do things differently. I was just wondering how much you are having to focus on supporting businesses to do things differently, perhaps to the way that they may have done before the pandemic. We have heard a lot about more businesses needing to go online. That has been a fundamental issue that a lot of businesses do not have a strong enough online offering. I appreciate that it may be different between the general business side and the tourism sector side. If I could ask Adrian first and then Malcolm, how you are supporting businesses in your sector to do things differently and how important that is going to be going forward. If the question is answered by Adrian, first of all, unless you have a problem with it, I will hand it over to Malcolm. Okay, thank you. You are absolutely right. The interesting aspect over the last 18 months has been, and you rightly pointed out, behind the curve in the industry in terms of digital capability and competitiveness, but over the last 18 months we have had to progress and we have had to learn and we have had to become more adept at using digital media. What we have seen in terms of businesses that are online bookable has been a remarkable growth. It has been single digit growth for a number of years, but over the past 18 months we have seen about 15 per cent of points. That is good and people see the benefit of that. What you are now doing is taking away perhaps some of the hesitation about getting into that particular arena, but we are also seeing diversifications. We have seen businesses that were business to business, suddenly becoming business to consumer by selling direct online. I think that that has been helpful. We have also been able to identify different channels, so we have been helping businesses to look at how their own websites are competitive, the type of content that they have, how capable their search engine optimisation is. We have been taking the time to get them ready to a state of preparedness when they are able to convert the interests that undoubtedly is out there into actual bookings. Again, that is all down to circumstance and whatever is happening, not just in Scotland but also in international markets. I am afraid that we will need to make some progress. I will hand over to Michelle Thomson for the next questions. Good morning to everybody. I want to take us back a bit and explore budget positions. Obviously, you have submitted some information, so I want to keep this quite snappy, this section. For both of you, it may well be more appropriate than Douglas comments and yourself, Malcolm. I am interested in a brief summary of what you believe your current budget positions to be. Of course, you will be looking at next year in the light of a very uncertain trading environment for everybody. I am particularly interested in that forward looking thing, what mitigations you are anticipating and your confidence about them, given the uncertainty over Scottish Government funding. If I could come to Douglas first on that. In terms of the current year position, as we set out in our submission, we established a business plan budget of just over £404 million. That figure increased marginally to about £409 million once the final budget for the energy investment fund has been confirmed by the Scottish Government. As we noted in our submission, we identified the income anticipated from financial transactions funded loan repayments, amounting to about £20 million, based on two organisations that were effectively looking to financially restructure and therefore looking to delay the loan repayments, and one, a much more positive position, where we had made an investment and companies actually went to do an initial public offering and has listed and voted that will result in a substantial uplift in the value of our investment. It means that, effectively, that £409 million has gone down to approximately £389 million at the moment. Against that, our expenditure forecast is holding up very strongly. We have got about £386 million of activity forecast at the moment, and approximately 80 per cent of that planned expenditure is currently legally committed. At the beginning of the year, when we set the budget, we made provision for two large inward investments. Unfortunately, one of those, which was tied to the High Speech 2 development, is no longer progressing this year, and that releases some money back into the capital budget. We have reallocated that budget in some very small slippage across the wider capital budget into our growth investments team that deals with the early stage investment activity, so that we have effectively maintained their ability to support the Scottish early stage growth market through that. We had a very pleasant experience towards the tail end of last year. We had anticipated that a lot of our income generation perhaps would fall away because of the impact of the pandemic. In some isolated instance, we have had significant returns from equity investments that we have held. We anticipate that there is the likelihood that that will happen in the second half of this current financial year, which would generate some additional income and perhaps reinstate the budget back up closer to the £409 million. You have given a lot of very clear data, and I thank you for that, Douglas. I suppose that what I want to establish with you is your confidence level for your future projections in the light of an uncertain settlement. How confident are you that you have all your bases covered? In terms of next year, 2022-23, we received a five-year capital budget allocation for last year and this year. That is a resetter capital budget at £80 million next year, and that includes £10 million for the green jobs fund. It is a slight increase, a £7 million increase—not a slight increase—on the current financial year. As you have noted, we have the uncertainty of the comprehensive spending review relating to resource budgets. We will not know the outcome of that until later this year, but we are making representations to the Scottish Government about our requirements in terms of some of the national programmes, recovery and the growth plans that we have for next year. We have that continuing uncertainty about the financial transactions budget, and we are working very closely with the Scottish Government to get a better understanding of what the amount will be at the moment. We have a confirmed figure for capital. We are working on the basis with the Scottish Government on a flat line settlement in terms of the resource element of our budget, which is about £135 million. We are working on the basis of about £21.5 million for financial transactions, which we will augment by recycling income of about £5.5 million. We are also part of our growth investment portfolio, equity portfolio. We now have quite a substantial listed shares portfolio in terms of companies that have moved through the various parts of the growth cycle to the part where they are now publicly traded. We will wait and see the outcome of the spending review, and then we will need to use that income to either make up financial transactions funding or a wider issue in terms of funding. I hope that that answers your question, Michelle. Yes, it does. I appreciate that you might want to take it up a level in your capacity, but just to reiterate, if you could just give me a sense of your current budget position and future projections on your confidence level. In 2021, we look at quarterly re-forecasts based on the intelligence that we are getting from the market. Our case is slightly different, obviously, from Scottish Enterprise. We do not have equities, etc. However, for us, the risk is actually where we can operate and where we can generate the maximum value. That means just to use Adrian's word earlier. We have to be very agile in terms of how we deploy our resources, and that is why we do it on a quarterly basis, and it is all evidence-based. In terms of future plans, our budget was increased from £41 million to almost £132 million, which was to help with delivery of the £80 million funding package that was announced last December. We will also be delivering on behalf of the task force recommendations of fair proportion of the £25 million that has been allocated for recovery, and that work is under way. In some cases, it is being implemented as we speak. Going forward, it is very difficult and probably a bit easier for us to be fleet of foot in terms of where we shift our resources and our emphasis, but equally, it is as uncertain as it can be until we get a bit more clarity, particularly on the international front, because that is where it will also generate not just revenue but also seasonality and geographic spread. That is important to us. I appreciate that that is very complex for you. I am conscious of time. For both of you, although I suggest that Adrian might want to come in on this one, we had some quite alarming stats presented to us from Women's Enterprise Scotland. There are a couple of questions off the back of that. One, an incidental one, because I am also on the finance committee, I was quite shocked to hear that only 1 per cent of private equity investment goes on women-led businesses, so obviously 99 per cent on male-led businesses. I would like to know from Adrian and Malcolm do you routinely disaggregate your data by gender and do you therefore interrogate that data to get a kind of map of what your territory looks like in business support or business investment? Off the back of that as well, we have had commentary that the ability of women-owned businesses to access enterprise agency support has been harder because they tend to operate. Perhaps the beauty sector, for example, which is not necessarily the focus for growth. I would like a bit of commentary on that, but starting off, do you routinely disaggregate data and then do you interrogate it? Adrian, perhaps you would like to go first? Thank you. Yes, we do monitor this closely. Carolyn Currie has sent me the data that you saw, and we will engage closely with Carolyn. Yes, you are absolutely right. There is more that needs to be done here. We monitor it closely in terms of the funding that we are involved in. Our high-growth spin-out programme, for example, our high-growth ventures, the support for fast-growing companies. We have around 24 per cent of the companies involved in that. A female led is not enough, but it is growing. We have several initiatives, for example, principally women, where we work alongside other organisations supporting the leadership development of women into business. We have had six cohorts now supporting 87 women. We have a locking ambition, which is an entrepreneurship development programme. It has supported 107 entrepreneurs. Half of those are women. We are making progress, but there is much more to be done here. To answer your question, yes, we do monitor this. It is slightly difficult for us because there is no compulsory registration of businesses. If you think about the make-up of the tourism industry with its bed and breakfasts all the way through to self-caterers, it can be very difficult to get a handle on who the actual owner is or who the claimed owner is. For us, it is very much about working around careers in the industry. We work very closely with women in tourism, for example, but we do not invest in businesses in the way that the enterprise companies do. It would not be an area that we have addressed, but we cannot have a look at any data that we do have. I remind members that we have a busy session this morning. If questions and answers could be succinct, that would be helpful. There are a couple of areas that I would like to ask a bit of question on. Probably the first one is for Malcolm. The tourism recovery plan, phase 1 and phase 2, can you provide an update on that as to where we are on that? Is the expected funding for phase 2 going to be in the scale that you would hope for? If I take the second part of that question first, that is actually being submitted now to the Scottish Government, so we just await the response on the phase 2 proposals. Phase 1 is well under way, as I mentioned. There is an international market in that dimension, but it starts in what is called Scotland is calling. It is focused in on the key markets, as I mentioned earlier. The UK and Scottish focused activities have been under way for quite some time now. In terms of data, one of the projects is about a data observatory, based loosely on the Portuguese model, whereby it is more about forecasting and looking at demand and matching that with supply. The current issue that we have with data is that it is historical and usually out-of-date of little value, apart from possibly identifying historical trends. Data is one of the areas that we have all accepted that there is a dearth of, and we need that for future planning and future proofing. In terms of the other activities that are on-going, the Skills Development, Scotland and the HIT and Scottish Tourism Alliance recruitment campaign for the industry has now come to a close. The results of that will be made known very shortly, just in terms of the number of applicants, the number of hits on the website, the number of jobs posted, etc. I am more than happy to provide the committee with that data, as soon as it is available to us. How are you monitoring the success or failure of the different elements of phase 1? The evidence, as I said, is in terms of participation, conversion and a lot of the activity that we run. We are able to give evidence in terms of referrals into businesses and where businesses are booked directly through, for example, the likes of an intermediary, say Expedia. They will share the data as well, so we are able to get a return on that investment and make sure that, as we say, we are able to maximise the return that we want to generate. When do you expect to... I am sorry, Mr Beattie. Colin Smyth, do you want to come in particular on tourism? Thank you very much, convener. It was just a follow-up question to Colin Smyth and the questions for Malcolm. The summer was obviously incredibly busy with staycations. A lot of people who would normally have gone abroad for obvious reasons did not and stayed in Scotland, and the result prices were quite high. Can I ask what Visit Scotland did? Maybe more importantly, it will do differently to promote those areas that are not obviously the most obvious destinations for mainly historic reasons, rather than because they do not have a lot to offer. There are parts of Scotland that, if we are being honest, do not need a lot of promotion, but there are others that are still very much untapped, and that whole interest in staycations gives us an opportunity to really promote those areas and boost numbers and make a big contribution to inclusive growth. I am sure that Malcolm, although the areas that I am talking about have done this in other Scotland, but there is real potential that we have got a chance to really dig into. You are absolutely right. We are working with the various destination management companies—SSDA in the south and across the whole of the country. We have been working at A support them to get through this period, but B also to look at their own capability. I mentioned earlier about helping them with content, looking at searching engine optimisation. We have regional takeovers, where we will feature an area. Just recently, it has been Aberdeenshire, where all our social channels, which are quite extensive in terms of global reach, feature a particular region. We highlight key things to see and do. We are encouraging people to make sure that they post their availability in their opening times, because right now, at the moment, there is uncertainty. People do not want to travel to places that they do not know if they do not know that something is going to be open or that there are things for them to do. There are some fairly basic things that need to be put into place, but we have also been looking at the destination management company fund, which is to look at inbound tourism. We are working with GMOs and tour operators to make sure that they can reach these different markets, but in a responsible way. It is looking at itineraries. I get people around the country rather than just in one place, so that they can get out and explore what there is to see and do in the region. There is quite a lot of work that is on going at the moment. As I said right at the very beginning, the collaboration across the industry and between the various partners has never been closer or more productive. Can you give me a flavour to the extent that you are moving back to being a marketing organisation as opposed to a funding delivery organisation that was inevitable during the pandemic? We have never stopped being a marketing organisation. What we were trying to do during the pandemic was to keep Scotland top of mind, as opposed to the conversion bit. It was very much around Visit Scotland when you can and when circumstances allow. Obviously, we dialed down the level of expenditure so that we could put money into supporting industry at the same time. We were in a slightly fortunate position in that a couple of our business units, such as the quality assurance team and the information centres, could not operate, so we were able to redeploy them into business support. It has not impacted on what we are able to do, it is just the amount of what we do and the message at the end of it. Clearly, on our events side, through the events directorate and, in particular, through events Scotland, that had been particularly hard hit because events just couldn't take place. Again, a lot of that was looking at helping the supply chain through the Scottish Government funding that was granted to us. I would like to briefly ask Adrian a question on the criticism that there has been of the enterprise boards in relation to the levels of contacts and interface with the various trade organisations, the FSB and others. Do you recognise those criticisms? There is a feeling that during the pandemic, in particular, the contact was very poor. I think that we have lost connection with Adrian, so if Douglas maybe wants to briefly respond to that. I hope that he is there. Could we have Douglas's microphone, please? Sorry, can you hear me now? Yes, we can hear you. Did you catch the question? I did, thank you very much. I think that Adrian covered it in an earlier response to be looking and he will reach out to FSB and others in terms of some of the comments that they have made to you. I think that it was, as I covered in my earlier answer, a unique circumstance. As Malcolm covered, we work closely with a whole range of industry bodies and representative bodies in terms of trying to agree how we respond to Covid, etc. The criticism is a little bit unfair and possibly, as I said earlier, we had a Covid response group set up, extensively in the Scottish Government umbrella, but involving the FSB and others, and we were there too, so there were opportunities to engage with all those groupings. However, as Adrian will take on board the comments that have been made, he will reach out to those groups to improve their relationships with them. Thank you and good morning. Good to see you, Malcolm. I also congratulate Adrian on your recent appointment and good to see you, Douglas. I want to ask about supply chain resilience. In Scottish Enterprise's submission, you highlight your work in increasing the PPE supply chain, and that was really significant. I am interested in what you are doing going forward in other areas, but, specifically, you will be familiar with the recent decision by the UK Government in relation to Valneva. Obviously, there was a significant promise of investment in that area. Clearly, I do not expect you to comment on the rationale or the inconsistency of the UK Government's decision making on that, but it is a major opportunity in terms of life science investment globally going forward. I would be interested to hear what you are doing specifically now to support the business minister in his engagement with the company, and if Scottish Enterprise could talk about your wider work in supply chain development and resilience. To Malcolm, if you could comment on supply chain resilience for the tourism sector, there is clearly a great deal of pressure there, so perhaps you could give us some initial comments on what might help to mitigate some of that. In your mind, some of those issues might be outwith the control, for example, of Visit Scotland. First of all, maybe if I can come to Adrian. Thank you. I apologise about my connection. I will try to answer this and hopefully the connection will drop in the meantime. We learned a lot from the Covid experience and I am putting that into practice, particularly around the new opportunity areas that we are seeing in emerging areas such as hydrogen, health technologies and health manufacturing. We are involved in several initiatives that are specifically looking at supply chain development. For example, in medicine manufacturing, the medicine manufacturing innovation centre that is currently being built outside Glasgow airport is going to bring together supply chain of all different sizes, and we are increasingly putting supply chain practice into the development of our clusters using the range of companies that we work with but also with companies that our partners are working with to bring that together. On Vanleva specifically, we are connected into that. I am closely engaged with the minister and I believe that there will be further meetings on that today. We will stay very close to that and support whatever emerges out of the current discussions. I suspect that we might want to hear more about that wider supply chain development, but we might not have time for that. I am sure that we can follow up with Scottish Enterprise to get more detail on what you have gone through. It sounds very promising. Malcolm DeGooey, do you want to comment from a tourism industry point of view? Thank you very much. You will be very familiar with one aspect of it on the event side. Clearly, it is great to see events starting up again, which will relieve some of that pressure because there are micro-businesses in many cases, and the support that was given to them to get them through to this point was very gratefully received. Many of those businesses would not have been here had they not been for that. Equally so, on the wider tourism side, the whole love local aspect has been incredibly successful, where we are seeing local suppliers being preferred over some of the more corporate type of businesses. That all adds to the authenticity and the sense of ownership in communities. The more we can promote that, the better. I would really like to see that as an on-going situation, as opposed to people suddenly going back to how it used to be. It has just brought so many people together. It has opened up—I mentioned the word diversification much earlier on—new business opportunities for businesses that had two parts that were slightly one-dimensional in their business model approach. That also allows for local employment, because it creates those opportunities. Talking about people, of course, we have a big issue right across many sectors, not just in the tourism hospitality sector in terms of the labour shortage. I think that there is a question about whether we need a national task force or a sector specific task force to look at what we can do now and how we prevent that from happening further down the line. I am very conscious of time, but I am sure that we might want to come back to the agencies at some point about those issues. Thank you, that is much appreciated. Thank you for the information that you have all provided so far this morning. I want to pick up on something that allows us maybe to look ahead and see how planning is shaping up for the immediate future, but also longer term. The transition to net zero is expected to be a significant theme across the new economic strategy for Scotland. A question that is possibly fought for both Adrian and Malcolm. How aware and prepared do you think businesses in your areas are and what is your organisation doing to support this transition? Do we need to be thinking about different approaches around increased conditionality, for instance, with notions of fair work and that move to net zero as we look ahead? Thank you. Adrian First and then Malcolm. Thank you. The transition to net zero is a huge opportunity. It is central to our current business plan and it is central to our next business plan that will be published next year or through your plan. In terms of business readiness, it is a mixed picture. We have surveyed businesses that we work with around half are advanced or have taken large steps towards net zero, but that leaves half for whom this remains something where a large amount of Scottish Enterprise support as part of our partners is essential. We do that in a number of ways. We have funding mechanisms in place—the low-carbon transition funds, for example—and we set an example as an agency in terms of our targets around net zero and our practices. However, there is much more to be done. We have, within our key new opportunities areas, low-carbon opportunities such as hydrogen being front and central in terms of where we think the future opportunities lie and we will be focusing our activities. It is hugely important and it is a big area of focus for us. Thank you very much. Prior to Covid, the 2030 tourism strategy had the responsible tourism at its heart. All that has been done is to accelerate the necessity to get that up and running and back on track. The whole issue around leadership is about what Visit Scotland is going to do. It is all very well talking the talk, but we need to walk the walk. If we are going out there talking about the opportunities and the need to get to net zero, we have to deliver ourselves. As an organisation, we, through our board, have just agreed our own strategy going forward to 2030 to become a net zero organisation by then. However, I would like to see the opportunity when we look at our impact assessments in terms of the activity that we also build in a view on the carbon emissions from that activity and how we can mitigate those. I suppose that there is a link there with what you said in answer to a previous question about diversification and the love local. There is a huge opportunity there. Just extending this a little bit and looking maybe a little bit more broadly, decades of business support and economic development have not really changed systemic issues in our economy—low productivity, stagnation in rates of entrepreneurialism and so on. What is it that we could be doing better so that we do not just keep doing more of the same in the coming years? How can we do that better in a way that we drive the change in directions that we need to see not only around net zero but longer term, thinking more broadly as well? Adrian and Malcolm MacDonald, if I can ask about organisations, thank you. Thank you for that question. You are correct in what you said in terms of some of the significant measures that we need to shift them. The work that is underway at the moment around the economic transformation plan, I am sure, will be focusing strongly on that. In terms of my thoughts on the matter, some of the indicators are absolutely key and something I want to put much more focus on over the coming years is the measure around the amount of innovation and the amount of research and development that happens in Scotland as well. If we have innovative companies, we have significant impacts on measures such as productivity, investment and, in particular, internationalisation and levels of international trade. Although it is important that we focus on those markets, it is even more important that we work with companies to give them all the support that we can around being innovative, adopting innovative work practices, harnessing all the assets that they have, particularly the creativity and the skills of their workforces. That is something that we have made significant steps on over the past few years. We established the workplace innovation team, and we work very closely with companies and partners around ensuring that everybody can contribute, that there is an employee voice, and that is critical for innovation. If there is one thing that we need to put much, much more focus on, and I want SE to put much more focus on, it is working with many, many more companies around becoming more innovative and developing the workplace practices. That can make a significant difference, but it will take focus. Those are not insignificant challenges, and, as you said, they are long-standing challenges. However, it is one that we have conserved the effort that we can start to shift, in fact, around some of the focus on innovation, which we have put in place in my last fell in Scottish Enterprise. We started to see those numbers of innovative active companies really starting to shift in the right direction. I am optimistic that we can make a big difference here through focus and extending our support to many, many more companies. Thank you, Adrian. Milken, do you want to come in on that? Yes, I would agree wholeheartedly with Adrian, but what we need to remember is that tourism is a people business, and it is about interaction. It is about, as I said, that authenticity, which comes from community ownership. We have to make sure that the conditions are right and that the support mechanisms are in place. I have mentioned many times today the use of technology, which allows people not only to be more competitive but also to reduce their own costs, which can then be encouraged to invest in their businesses. I think that business support advice is going forward is going to be very important. I would only caution that productivity in certain sectors is not going to be the same as in, for example, highly mechanised and automated sectors. To compare, for example, life sciences with tourism is giving a false picture. Thank you. Can I now bring in Alexander Burnett for his question? Thank you very much, convener. I can start by thanking Malcolm for his recent spotlight on Aberdeenshire. I hope that when he has had a chance to relate some of those figures, we can hear how that work went on, particularly for Tour of Britain, is set to benefit the north-east for the next decade. My question is for Scottish Enterprise. From the recent annual report, I am looking at a table produced by Spice for us around your primary outcome measures. Whilst for planned R&D investment, planned capital expenditure pretty much held their own in the circumstances, growth funding and planned international export sales have halved. The first question would be to Douglas to comment on the figures of what the projections are and what we could expect in the coming year. For Adrian, what are you going to do to improve our export sales? What kind of interaction goes on with the Department of International Trade, the new investment offices and the new export support services that are starting up? How does that interaction happen between yourselves and them? What would you ask of MSPs in finding businesses in our constituencies and regions with export potential and recent problems with connectivity? What are the major impediments that we have to improving exports? Douglas First and Adrian MacDonald. As you pointed out, investment in R&D and capital investment held up rather well in the situation last year. Obviously, in the combination of factors, the EU exit and Covid meant that it was much more difficult for exporters to reach the markets, etc., and develop new markets, so that is an area that Scottish Development and International is very strongly focused on in terms of economic recovery this year. We still think that trading conditions are being affected. We still think that there will be something along the lines of £1.1 billion in terms of exporting activity. In terms of investment activity, which you referred to, we invested £76 million last year through our growth investments team. We remain one of the top 10 investors across the UK in the early-stage growth investment, and we will continue to do that in the current year. That is the situation that we find ourselves in. We are a gap funder. We are dealing with the riskier end of the market, and we are relying on private sector partners to bring forward deals to enable that to happen. Thank you. What metric do you have for the international export sales in terms of money that is spent by ourselves to the return? We monitor the support, financial and advice that we provide, and then monitor, along with the companies that we reach out to and engage with, to see how their international sales have increased as a result of that. That is the metric that we are looking at. The direct financial support tends to be very little. We delivered a lot of support last year virtually. It is referenced in the response to you, our submission to you, given the situation. A lot of trade events, as Malcolm did earlier, were also cancelled. We found different ways of dealing with that, hosting virtual meetings between overseas buyers and Scottish companies, and using our global Scots network to facilitate some of those introductions. Thank you. Adrian, how are we going to improve the export situation? That is okay. To comment on the measures that we are seeing in recovery and inward, investment is starting at the moment and some positive signs there. I mentioned earlier about some of the complexities around international trade. We work very closely with the Department for International Trade, particularly in markets. Our staff are co-located in the majority of cases, and we share information and we work together. I mentioned earlier that one of the most significant impacts that we can make on the number of exports is on more companies innovating for international markets. That is critical. We know that innovative companies are much more likely to export, so the more focus that we can put on that early stage is on the pipeline. I think that the support in the market is very good, and the contacts that we make in the market are very good, but we need more pipeline and companies that are innovating for international markets. As I mentioned in my last response, that is where we will put a big focus. Okay, thank you. If there are companies within our constituency or regions, what advice and direction should we be giving them, just sending them to yourselves? Yes. Initially, we find business support websites as the best way of accessing the support of all of the partners, and between us we will find the best and most appropriate support for them. That would be the first point of entry. Thank you very much. Okay, thank you Alexander. Gordon MacDonald, do you wish to come in to ask the panel any questions? Thank you very much. I would like to thank the panel for their time this morning. That brings us to the end of this evidence session. Thank you to Adrian Gillespie, Douglas Colhoun and Malcolm Ruffhead for attending. We will now have a short break to allow for the changeover of witnesses. We can now turn to the second panel of witnesses this morning and I welcome Carol Buxton, interim chief executive with Nick Kenton, director of finance and corporate services from Highlands and Islands Enterprise and Jane Morrison Ross, who is the chief executive and Anthony Day, director of finance from the south of Scotland Enterprise. Welcome to the committee this morning. I start by asking the chief executive of both organisations. We have been through a very difficult time with the pandemic and the difficulties that are for businesses that the committee recognises. What do you think are the most pressing challenges that are facing businesses within your regions? If I go to Jane first, please. Good morning. We know that businesses within the south of Scotland are struggling at the moment with some of the impacts of leaving the European Union. We are seeing challenges around supply chain, we are seeing challenges around skills shortages but more than skills shortages, actual shortages of people to take up some of the posts, particularly in haulage, in manufacturing, in tourism and hospitality as well. We are seeing some major impacts across all those areas. A secondary one that we are seeing at the moment is an abundance of applicants for some jobs, particularly in professional categories, but a shortage of housing across the south of Scotland is now also coming into play. Jane, there are obviously significant challenges. Are there any immediate responses that you can see the enterprise agency offering to ease some of those, or are they just too difficult to address in the short term? No, we are working across a number of areas to address those, both in the short, medium and longer term. We are working on some aggregated supply chain solutions. We are working with our regional social landlords, we are working with our tourism businesses to look at aggregated supply chain solutions in both those areas. We are looking at solutions around energy, we are working with the construction industry and the construction industry innovation forum as well as supporting training and additional opportunities in haulage and additional measures to help to address driver shortages. We are also working with both colleges and the tertiary education providers across the region to identify and address additional skills gaps that we can close quickly. The housing challenge is a slightly more difficult one, but we are working with both councils and the regional economic partnership to look at what can be done there. Thank you very much, Jane. Can I put the same questions to Carol, please? Thank you. Although there are still significant challenges in the region around Covid and Brexit, there are signs of optimism now. Our recent business panel survey, where we survey a thousand businesses from across the region in all sectors, met more than half, well over half, felt much more positive now about the economic recovery in Scotland. That said, the impact of the pandemic was felt very strongly in the Highlands and Islands. We have a very high dependence on sectors that were probably hardest hit by Covid and Brexit, such as tourism, food and drink and the creative sectors. In the main, the challenges have been very similar to those that were outlined by Jane. Recruitment challenges, particularly in rural and island areas, where anecdotally we do not have figures at the moment, but staff shortages have resulted in reduced opening hours or maybe closing on certain days or not providing specific services in certain days. Similarly with Jane, housing, 40 per cent of employers who were citing labour market or workforce supply issues cited availability of housing or access to housing as a key constraint. Similarly, supply chain issues, we are all very well aware of supply chain issues and construction, both in terms of material shortage and an increase in price. That said, businesses have been innovative in how they address that. For example, in the food and drink sector, we have worked with some businesses to look at a logistics platform for businesses, to help them to work together collaboratively to ensure that they can get their goods to market and to their customers. Those are probably the key ones. Finally, I suppose that there still is, particularly in the SME sector, uncertainty around what is going to happen next, which does have an impact on how they plan and how they feel about the future. Thank you very much. I will bring in Jamie Halcro Johnston. Thank you very much indeed, convener. Good morning again to the new panellists on that. Can I ask firstly Carolyn and then perhaps Jane Morrison Ross, as well as the chief executive of the two organisations. Throughout the pandemic, there has been a need to support businesses in terms of getting them through the pandemic, but has we come out of that? How will you balance the need to continue to support certain sectors but also to ensure that new businesses and new startups are entrepreneurship? Just particularly to Jane Morrison Ross, as a relatively new organisation, whether you feel that you have both the budget and the resources to be able to do that. If I can go to, say, Carol Buxton first and perhaps Jane Morrison Ross. So specifically on budget initially, is it Jamie, you are asking about the potential to support? When it was real, I mean, if you have got a concern over your own budget then I am happy for you to raise it here as well, but the question really was about how you provide that balance between supporting businesses and, as I say, still continuing to support new businesses and entrepreneurship. I think we as an organisation run entrepreneurship programmes and they are always very well received by entrepreneurs in the region. We have got some specific programmes, entrepreneurship programmes aimed at young people called impact 30, which is primarily focused on the under 30s. As I say, those programmes are very well subscribed and very popular. As an organisation, as you know, we are very place-based, so we do look at a range of businesses across the area. We will look at business startups where there is an opportunity to do so, for example, when there is no displacement. I think that we have a very good range of supporting startups alongside business gateway and we have a very good relationship with business gateway, we are co-located in certain areas, so they can move businesses through the system, maybe from a very early start-up stage to high. We provide advice and information to start-up businesses, mainly through the Find Business Support website, which you have already heard about, but also about direct engagement with staff in our area offices. In terms of our budget currently and into the future, we will maybe talk more about that later, but we have capacity to support both growth businesses and smaller start-up businesses. We have a client segmentation model that looks from almost a pyramid of support starting with international global businesses at the top. We do not always engage with them on a financial intervention basis, but more about making connections, working with them to find solutions to any issues that they may have. Then we have our high-impact clients, where we see that there is a lot of opportunity for growth and we will have development plans with them, which can have a bespoke programme of support. Then, as I mentioned previously, our place-based organisations, which may be a business that is vital in a particular community and sees an opportunity and we can intervene with them on a one-off transactional basis over a period of years to support them to either pursue opportunities that they have identified or to address barriers. We have already talked about barriers in terms of logistics, for example, in some of our more peripheral areas. I think that we have capacity to do both. Jane Russell-Ross Good morning, thank you. It is a very interesting time for us. As we have come out of Covid response, we have lived long and hard at our organisation at the end of year 1, as you would do normally. We have done an organisation redesign and restructure to make us a simpler organisation to engage with and more efficient and effective use of our processes with the ambition to be as lean and green as we possibly can. As part of that, we have appointed a new head of innovation and entrepreneurship and a new head of digital development. Those two areas are working very closely together to look at what we need to do, not just in terms of start-up and scale-up but pre-start-up spark support, if you like. Looking across the south of Scotland at the opportunities for innovation, not just technology-enabled innovation but innovation in traditional industries, perhaps enabled by technology and innovation in the supply chains around those traditional industries—in natural capital, for instance, forestry, agritech and other areas like that. To make it as effective as possible, we have also done a complete review of our client journey and client experience from first point of contact onwards to make that as efficient and effective as possible. It is a huge area of opportunity for us. As part of that, we now have business gate will be in-house in the Scottish Borders, and we are working with Dumfries and Galloway Council on opportunities to do something different in that area. However, it means that we are able to develop a one-stop shop, a one-window, if you like, to the support services that we are currently developing and currently delivering because we are doing two things in parallel at the moment. We are also working with a number of partners from chambers to small business federation, women in enterprise and others to look at how we can grow and increase women in enterprise and also support underrepresented founders across all of the industry sectors to in terms of budget. Much as Carol has said, we are able to do what we need to do within that at the moment. We have not finished recruitment. We were forecast originally by the end of year 2 to be around 170 people. We believe that we can come in under that figure but still be resourced to deliver and resourced to deliver in new areas that are going to be critical going forward, like internationalisation and export, not expert, which is an area that we believe offers huge opportunities for companies and organisations across the south of Scotland. I think in terms of areas where we will need to look long and hard at our capacity to increase the support and the funding that we have available to businesses in the south of Scotland digital is going to be one area where we will want to ramp up that support. Again, we are not going to reinvent wheels and we are working with a number of partners from census and data lab onwards. That is great. I am very conscious of time. If I could just ask one question to both of you. You have talked about some of the limitations and you have just highlighted their digital. We have seen some of the issues around it today. Given the issues that are facing rural, broadband and the nature of the two areas that you cover, can you tell me what we need to do and how you can work to try and deal with some of those barriers particularly around digital? You have mentioned the rural, housing issue and what we need to see from the Scottish Government to address that issue. As you say, you can have jobs in a place but if you have not got the broadband, if you have not got the rural housing and some of the other services, that makes it very difficult for businesses to grow, to expand and to encourage people to come in and move in. If I could go to Jane Morrison Ross on that first, please. Certainly, thank you. We are looking hard at the connectivity landscape in the south of Scotland just now. The full roll-out has only been in play in the south for a number of months, so part of it is managing expectations. We are not as far ahead with broadband roll-out as some other areas, but it is in progress now. Our new head of digital has been looking at that. We believe that we will hit around 87 per cent coverage when that has finally rolled out potentially higher. We are looking at the potential for closing some of those gaps in partnership with existing businesses in the south of Scotland that provide additional last-gap services around that to address how we can close that final mile to some of the businesses and organisations, particularly in our more remote and rural locations. That is a newer issue for us than it is perhaps for high. We have already written to the Scottish Government to ask for consideration of the number of houses, the targets for a number of houses to be built across the south of Scotland. We are working with the regional social landlords just now, and we are also looking at the capacity for reuse of derelict buildings, which could be an interesting project that we believe particularly to support the regeneration of some of our towns across the south of Scotland. There is a real opportunity there. Thank you, and Carol, I am very briefly as well, please. Yes. Again, we have been heavily involved in digital infrastructure for some time. There is still a little bit of a journey to go on in the Highlands and Islands, as you know yourself, and we are working closely with the Scottish Government and others to try and fill what gaps remain. In terms of uptake of digital, we have been very active in promoting digital uptake, encouraging people to sign up for improved connectivity, and then trying to demonstrate to them what they can actually do with that digital connectivity, because it is a means to an end, not an end in itself. Over the past year, we have run a series of digital enablement grant teams, which is encouraging businesses to invest further in digital hardware, software and skills. They can use those grants for a variety of things. On the housing issue, again, we have been working with a number of partners in both the private, public and social sector to look at different models of providing housing. We have done some surveys into whether the housing needs demand assessment works in rural areas for small developments. We are looking at, as I say, different models, maybe supporting the private sector with housing development in areas of greatest need. More importantly and also importantly in the Highlands and Islands is our work with communities and how we can support communities to develop their own houses. There are some very good examples of that, for example in Collinsay and other more peripheral areas of our region. I think that there are opportunities there to work with community landowners, community organisations to undertake development at their own hand. I will start first of all with the two FDs, Antony and Nick. You may have seen in, if you watched the last panel, I wanted to explore to what extent you were confident about your projections for your next year's budget, given considerable uncertainty, what you would look at in your scenario planning and your confidence level around that. If you can keep it brief, I do not need to go through every single budget line. It is really just to get a sense of where you are at with that. Perhaps, Antony, you might like to go first. I guess that, in terms of confidence in next year, we are slightly different from the other two agencies in that it is our second year, and we have been talking with Government about what the plan was going to be. In terms of capital, there is a five-year capital plan, so we expect a slight increase in capital next year and some way in revenue. We realise that Government are currently embarking on that spending review. We will seek clarity with that process as soon as we can. If that is the settlement that we get that we expect in terms of £17 million revenue in capital and £5 million in FTE, we would see that as sufficient to meet the needs, as we are forecasting in scenario planning just now. However, as you indicated, it is dependent on conversations with Government on how that spending review goes. Therefore, if you do not get what you have done your projections on, have you got mitigations in place? In terms of the scenarios that we would do, the first part is to continue to talk to Government about trying to meet any gaps that arise. The second part would be some of what Jane had alluded to in indeed Carol, partnership working, where we can leverage other funds that are out there and working. The Team South of Scotland approach with councils, a part of the Team South of Scotland regional economic strategy, so how we do that with both councils and NHS and other partners. Jane mentioned people like Datalab and whatnot in terms of digital. Those are the steps of the mitigations in terms of filling any gaps that may arise as a result of the spending review. How about yourself, Nick? Thank you for being with Capital. As others have said, we have notification of our indicative capital next year. It shows a slight increase from 25 to 20.6 million on baseline and an increase on the green jobs from 800,000 to 1.4 million. We also expect some from regarding the green statement of the Finitula railway at Cairngorn, which is a particular pressure for us. There was obviously a close dialogue with the Scottish Government about that. At the moment, we are not fully, nearly committed for the next one last year, but that is always the case in six months away. When I say, leave commitments, I mean projects that are, as it says, worthy. We signed on the dotted line, but what we have really is a strong pipeline, and that is what we are working on, just to make sure that there is a really healthy pipeline, to make sure that we can use lines of all the projects. I do not think that there is a problem in terms of being over committed. Of course, we have always discussed with the Government any opportunities that we have, but we have sufficient to meet our current pipeline of capital, brain and mind, and all the pressures that we have heard on capital funding. We have had to be very free-to-foot to move things around quickly. In the year that we have just finished, for example, we secured £6 million of additional funding in the past two months from the Government, which we were able to get that out into the economy, so being free-to-foot is really important. I would also emphasise the points that were made earlier about not just about our own funding, but about its signposts and other funding that is available. On revenue, we do not know what that will be yet. We are modelling a flat cash scenario. At the moment, we are not fully committed, but I would not expect us to be at that time. We have worked on that, and we are particularly revisiting all our pipeline projects at the moment in the light of net zero. If they work to make sure that all those golden threads are featuring all our pipeline projects, we are still working on that. In terms of the financial transactions, that is still quite a new budget for Hyde. We have got £2.6 million this year. If we are seeing the same next year, we will have headroom. We have actually struggled to spend that in the last couple of years. It is probably a combination of it being something new to Hyde, being focused on Covid funds, and probably a lack of appetite for debt out there. That is something that we still need to work on. We are in discussion with the Scottish Government about how we make the best use of the financial transactions budget. It is probably a summary of what we are at at the moment. Very helpful. Thank you. I am moving on next to bring in Jane and Carol. Nick used the term the golden thread. I suspect that one of my golden threads to obtain diversity in our economic output is to make sure that women-led businesses are adequately represented. There has been a lot of chat. We know that women have been disproportionately affected. I suspect that women-led businesses have been disproportionately affected. I would like some commentary, probably from yourself first, Jane, and then bringing in Carol some commentary about what your observations are. We see that as an area of opportunity in the south of Scotland and recognise some of the challenges in the research that Wes recently published. We are working with them, as well as other partner-organising and specific interventions and specific support that we can give, not just around start-ups but around, as I mentioned earlier, that pre-start-up spark. We know that there are women out there with amazing ideas, but perhaps lacking in the confidence or the channels to take that further. We are working on that just now, and that is part of the remit that comes under our new head of innovation and entrepreneurship. Again, we are working with appropriate partners to identify and deliver that across the south of Scotland. In addition to that, the underrepresented founders generally come under additional areas of potentially diversity and inclusion. Carol? I know that we looked at some of the information that was provided by Wes recently. Probably the levels of grant award were kind of tracking the number of women-owned businesses, but, obviously, we want to increase those. We have a very good proportion of women participants across our business support programmes, for example, entrepreneurship. Across the programmes as a whole, there is about a 45 per cent female participation, but that rises to nearly 60 per cent on leadership programmes, for example, which I think is very positive because it is from those programmes that businesses can move to accessing other services and support from high. We have also run and participated in a really positive women entrepreneurship programme down on the west coast of our area, which provides more gender-sensitive support and helps businesses to look at how they can access finance from other lenders, etc. Good participation rates at a programme level that we are seeing beginning to filter through into other forms of support, such as financial support. Thank you very much, Claire. Thanks to the panel for joining us this morning. I have two questions in two different but connected areas. The first is around place-based economic development. The advisory group on economic recovery suggested that we need more regional place-based approaches to economic development, as the current system is perhaps a little bit too top-down. Do you expect to see regional place-based approaches in the new economic development strategies that are currently under development? Given that you are regional-based organisations, what learning can you give us for thinking about this more genuinely? We have been involved in the consultation around the development of the 10-year transformation strategy and understand that that strategy will be designed to be truly transformational. We have been strongly encouraging that a place-based focus is part of that. A sectoral approach is perhaps not as useful for us in the south of Scotland. We have industry clusters that are probably part of national sectors, rather than sectors in their own right. We find it extremely useful to be able to tailor interventions to our place. We have dispersed and rural economies across the south of Scotland. We have real innovation in multiple sectors from manufacturing to natural capital to agriculture, but they need slightly different mechanisms of support and perhaps a more tailored one-to-one approach. We also recognise that a number of the organisations and communities that we work with, which are as important to us, need longer-term support and intervention to get from where they are now to a place where they can fully take advantage of the support that we can provide and the support that partner agencies can provide, whether that is one of our sister enterprise agencies or SDI, or indeed DIT or others. The ability to tailor and focus by place is hugely important to us. That has also reflected in the work of the regional economic partnership that has now published for final approval the regional economic strategy for the south of Scotland. There are six thematic areas in that that we believe will dovetail well with the current national strategies that are in development, but they also reflect place, very strongly, specific needs of place and the ambition that we are seeing reflected right across the south of Scotland, too. I endorse and agree with everything that Jane Sayed said. As you would expect, high is advocating very strongly not only a regional but a place and a more locally based approach to economic transformation in the upcoming strategy. We are a regional organisation, we are a dispersed organisation, we have offices and staff based across our region, which is a very large region. It also has within it a number of fairly distinct economies. We do not look at the economy of the Highlands and Islands as one big economy does not necessarily work. There are very local disparities across the area, which require a much more tailored and responsive approach to both business and community development, and we do that through our structure. I would say that, at a Scottish level, we probably need to look at collectively at how we assess outcomes and impacts relating to specific investments. As you can imagine, a relatively small intervention in a small community or a more peripheral area can have a very significant impact on that area. It might not be hundreds of jobs but, in some places in our region, a handful of jobs can make the difference. We need to look at return on investment in a slightly different way. We are also working at the moment on a tool to help us to prioritise and assess very much that different type of development. How do you compare apples with oranges? We are looking at various aspects and features of particular communities or economies in our area, to see specific interventions. How could we measure the comparative impacts within those to help us to prioritise decision making? Thank you very much for that. Carol, we might come back to you on that tool and the learning that you get from that, because that sounds really interesting. In some ways, what you were talking about linking economic transformation to community wellbeing is really important, and that is a feature that is a strand of work that is in development around the wellbeing economy. My second question is on that. How are you supporting businesses and how are you modelling the leadership to enhance activities in line with the wellbeing economy? I am particularly interested in the links to community wealth building and the fundamental transformations that will change how people relate to their local economies, never mind in any broader economic system. Carol and then Jane. The themes that we would look at as contributing to that wellbeing economy are fair work, procurement and our whole approach to inclusive growth, trying to make sure that opportunities are open to all across our region. As you know, there is probably no specific funding allocated to the wellbeing economy, but we have a very strong focus on fair work across our whole agenda within high. We are encouraging all businesses of all sizes to contribute to the fair work agenda and to sign up to fair work principles. In terms of our procurement, we also look at that and also look at our supply chain about how they can bring community benefit and contribute to the wellbeing economy through how they operate their businesses. We are working, for example, with the supplier development programme on that to build that in, because it should be something that is endemic in our communities and in our businesses. We are also working with the Scottish Government on the sustainability test in our own tender strategies to make sure that we are operating on a level playing field and giving businesses and indigenous businesses as good a chance as others to participate in those procurements. As part of our restructure, we have placed even greater emphasis on our community's team. We have also been part of the Scottish Government's pathfinder on community wealth building and have been working with Cles, who have given us a report recently, so we are looking at exactly how we can embed and take that forward. We do have fair work written into our charter, and we now have a fair work team. We are looking internally to make sure that we are doing everything that we can, but also externally, because fair work is a conditionality of our funding. However, we are taking a very tailored and bespoke approach, recognising that micro-businesses, communities, SMEs and others will all be at different points in that journey. We want this to be a constructive and positive approach to supporting them through that, because the ambition generally is there from organisations to make those changes. We are doing the same with net zero at the moment as well, and we are actively looking at how we can engage and support micro-businesses, SMEs and communities in that net zero journey as well and raise awareness, because there are a lot of businesses that we have discovered in the south of Scotland that are already doing things, both in terms of fair work and net zero and communities also, but they do not necessarily realise that they are doing it. We are looking at how we amplify and turn a spotlight on that as well. We have specific teams and funds available to communities, and we are working in a very hands-on way to try and grow those, but also to grow the awareness of the support that we can give, because being set up on 1 April just as Covid hit was concentrated as were the other agencies, but it was absolutely concentrated on crisis response and support, so we are now trying to ramp up awareness across the south of Scotland of the support and expertise, as well as funding that we can provide to help in all of those areas too. I just want to follow up on the point about fair work that was touched on by both Jane and Carol when the legislation was going through Parliament to establish that the south of Scotland enterprise agency included that requirement around fair work in the bill, and I press very heavily, so I very much support that, but it is obviously a condition of grants for the south of Scotland enterprise agency to have fair work there. Jane, first of all, does that bring challenges around a level playing field? You have that criteria, but Highlands and Islands and Scottish Enterprise do not have that criteria. Can I ask Carol to follow up? There is a lot of work in the Highlands and Islands around fair work, but you do not make it a condition of grants. Is not that something—I appreciate that, because your legislation is quite old, but surely you should be making that a condition for grants in the same way that south of Scotland enterprise does. Jane, would you like to come in first? Certainly. Colin, I will let Carol come back on that, because I do believe that Highlands and Islands do have a conditionality around fair work funding, but just set it a different ceiling to us. I will let Carol respond more accurately than I do. The key for us is the spoke tailoring of what we are doing, because we recognise that to become a living world lawyer without the support from us to realise different mechanisms to release profitability or to reduce costs in other areas to make that leap. There are also other areas of fair work that are important as well as that, living wage peace. We have a team who are experienced and specialised now to help organisations through that path as efficiently and effectively as possible with timescales that will be set by each organisation, but reasonable timescales. We do not want to extend that in a way that does not add value to employees across the south of Scotland, so it is something that we are hugely focused on. Just to clarify, we have fair work conditionality attached to financial interventions over £100K. We strongly advocate businesses committing to fair work, undertaking the fair work assessment tool and developing an action plan for all our levels of assistance. We very much promote and advocate a fair work approach. For example, we recently extended our graduate programme using Covid consequentials funding, and all businesses wishing to apply for graduate support were being encouraged to undertake the fair work assessment and commit to improvement. As an organisation, we work with all our clients on business values. Although they might not have signed up to the pledge, they can contract their progress along the adoption of fair work practices over the period of time by discussions that we have with them, looking at that fair work assessment tool and plotting against the various criteria to see how they are improving. Fundamentally, it is about promoting the benefits of fair work, which are seen very much to enhance productivity and increase staff retention, which at the moment are pretty critical and fundamental to business success. I would like to expand a bit on the question of conditionality. Typically, there have been two criteria that are looked at in the programmes that are in place to focus on, which are the jobs that are created in the turnover growth. Should we move away from that completely? We talked about fair work, but there is also inclusive growth, there is net zero transition, all those things could legitimately become conditions. Should we increase conditionality? If we did, how would that impact on the businesses that you are supporting? I can ask Carol to comment first on that. I think that we have said before at this committee that in terms of encouraging businesses to adopt certain practices, we sometimes believe that carrot is better than stick. That said, I think that conditionality is appropriate in circumstances. It has to be proportionate and we have to try to avoid unintended consequences, which in some cases could potentially put businesses off. You have talked about turnover and jobs supported. I think that those are very important, but they are only the part of the picture and need to be put in the context of a place-based approach, as I touched on earlier. Some investments that we make may not necessarily create large numbers of jobs or huge increases in turnover, but they could have significant impacts on the sustainability of a community, for example, or on a supply chain in a certain area. In terms of conditionality, yes, where it is appropriate, but just to ensure that it does not impact adversely on, for example, a certain size of business or a certain sector. Do you believe that you could have a standard, if you like, portfolio of conditionality that would apply to all applicants and others that would apply perhaps more selectively to the business concern? I think that that would certainly be worth consideration. Every time we enter into an agreement with a legal agreement on undertaking with businesses, it will have certain conditions attached to it, which are appropriate to that business and that development. That is quite tailored and bespoke. However, if I am understanding you by saying that we should have a range of levels of intervention or of conditionality across a spectrum of business-sized business development, I certainly think that it would be worthy of consideration. Is it something that you are considering? Well, certainly in terms of fair work, yes, I think that that is. In terms of net zero, we are currently, when we are looking at business development, trying to encourage our businesses and our staff to look at everything through a net zero lens to see if a proposition could be improved or if there is a better way to help a business to make that transition to net zero. Those are all things that we are looking at. If we are looking at an inclusive economy, should we also have that incorporated as perhaps inclusive growth within the conditions automatically? Fair work or inclusive growth? I am talking about that. Overall, we are looking at growing an inclusive economy, so should there be some conditionality that relates to that within the conditions for all applications? Well, I think that in the way that high-operate is a regionally based organisation that looks at a range of sizes and types of projects in a specific place context, I think that that is working very much towards inclusive growth. We would look at different projects through a different lens in a very peripheral area or potentially in the island community, for example in the centre of Inverness. Appropriate conditionality, as I said at the beginning, is the right way to go. I think that having hard cut-off levels, which are applicable blanket across our economy, probably would not be appropriate, but I absolutely agree that we need to look at inclusive growth, which I think is the way that high do try to do things. Jane, perhaps I can bring you in now. In responding, could you perhaps comment on your submission, where you stated that, in designing your processes, you have looked at things differently by not putting too many, if any, criteria against anybody applying for them? Could you give us a bit more detail on that and what it means in terms of any conditionality? Certainly. We do have conditionality specifically at the moment around fair work and, as Carol mentioned, other conditions that apply on a project by project organisation by organisation basis. We are currently reviewing net zero and looking at how we introduce that in an appropriate and again tailored by each individual case way as another measure of conditionality as well. We are of a scale with a number of resources that means that we are able to tackle each submission at the moment on an individual basis. We work, as Carol highlighted, to do with each organisation, with each community to assess what is appropriate and applicable for each one on an individual basis at the moment. However, it is something that we are continually monitoring. We look at each potential support mechanism through three lenses, which all have wellbeing at the heart. That is through the community, the environment and the economic wellbeing of each individual project. The other side of that coin is something that Carol highlighted earlier, which is that we are looking at and redesigning our own performance measurement criteria to make sure that, if we are not applying something as a conditionality at the moment, that we are ensuring that we are measuring how successful we are in using it as an intervention. That includes things like fair work in net zero. It includes inclusive growth. It includes things in some cases such as generational return with some of the longer-term investments in projects that we are working on. However, it is something that is very much a work in progress for us just now, and we will need to adapt and evolve as we grow as an organisation but also as the number of businesses and communities that we work with across the south of Scotland grows. We are a bit short of time, thank you. I am prepared to bring Colin Smith in for a brief question as it is region, but then I will move to you on a hislope. Thank you, convener. I was just following up on the question around the flexible approach to grant criteria. It is something that I very much support. I wrote to your predecessor, Jane, pushing for that earlier in the pandemic because it was clear that businesses were slipping through the gaps when it came to government support during the pandemic. However, I am conscious that approach makes it difficult for businesses to know, first of all, what is available. They cannot just jump on a website and see the criteria for a grant, for example, and I have lost track of the number of businesses that I have directed towards you to look at the crisis fund and so on. Secondly, it is a good approach but it gives you challenges around governance. I am often asked by businesses how that business has got a grant and I did not and it is not easy to tick the boxes around criteria. How do you tackle those two particular challenges? I think that it is an approach that we should be rolling out across other agencies. Thank you. To come to the first part of that, we recognise that. I think that that is part of that pivot from crisis response to our focus on business, as usual, as the enterprise agency that we want to be and to become. We have undertaken that client journey review. We have undertaken that from our website, through all of our processes, from first point of contact, call centre, emails, the lot. We are now in the middle of a complete repurposing and refocusing of all of those direct methods of communication and in training the front-line staff so that, in a short time, when people go to our website, it will be clear that we are there to provide expertise, support, consultancy and, in some cases, funding and grants and loans as well. We are simplifying all of that to make the messaging much clearer as the focus on crisis management and hardship funding etc reduces. Governance is something that we take incredibly seriously and we have panels that look at each application and review them using the same approach, although tailored to each individual submission. We have a number of bodies that we work with from our Audit and Risk Committee to committees involving a number of our boards to make sure that all of our governance, all of our processes are transparent, are auditable and are clear. We do not have a tick box checklist for organisations but we work with each individual organisation to make sure that the criteria that need to be in place are there and to support them to make sure that we know where any gaps are and to close those before they come forward for that funding. Thank you and good to see you all. I want to ask about the transition to net zero and it is to get insight from you as to what your sense is of SMEs generally, not necessarily all those that you work with in terms of a grant position, what their position is in relation to the transition to net zero for themselves as businesses but also for their product and services and what are you doing or plan to do to help support that transition to that wider SME community and in terms of financing, how do you think this can take place, bearing in mind many SMEs are carrying Covid debt so it's a big challenge. I know it's a big question, we can only cover it so much today but I'd be interested to have your perspectives perhaps. Carol, if I come to you first and then to Jeane Cymru, in terms of SMEs I think it's a mixed picture. I think there's a widespread understanding of the climate emergency however I think there's maybe less understanding about what everybody individually can do. I mean we've had a number of discussions within high and with clients about how net zero is everybody's business. In the Highlands and Islands we have huge opportunities in terms of some of the blue economy, the green economy but how we can encourage businesses in some of our more traditional sectors. We rely heavily on tourism, food and drink and we see it as a key part of our job to help sectors like that to understand what they can do to help towards that transition to net zero and that may be things like the circular economy, like developing their supply chains. We've had examples of local food supply chains being developed to support the tourism industry so I think a key part of our role is to raise awareness of what can be done. We've been promoting a number of real case studies which demonstrates to other businesses maybe operating in the same sector the types of things that they can actually do to contribute. In terms of enterprise company support we have been working with businesses to look to move into for example new supply chains. We've had businesses approaches about moving into the servicing of electric vehicles of ground source heat pumps and air source heat pumps rather than you know more traditional types of heating supply so I think developing those supply chains and helping them move as well into a more net zero approach is something that we're very keen to do. Raising awareness I think is also critical. Can I maybe just follow up the point about how as businesses themselves as their own organisations the things they have to do for their own heating, their own transport etc. How that might be financed if you can maybe touch on that as well, Karen? Well I think there are a number of organisations that can provide finance to businesses. There have been a number of government schemes in terms of boiler replacements etc. I think what we're looking to do when we're supporting businesses is one, we can help identify other forms of support for them and we've done that both directly with businesses but also there's a huge amount of information on fine business support. Sometimes some would argue maybe too much making it a little bit difficult to navigate. However we're always there at the end of a phone line and in terms of their business development as I think I said earlier very much looking at every development they undertake from it with a net zero lens to see is there a way we can do this better in terms of that overall transition. Thank you I'm not necessarily expecting either organisation to resolve this issue it's more your insight because you work with so many different organisations and it might be your perspective not just with those businesses that you give grants to, so Jane that wider perspective as well please. Thank you, we have appointed our first director of net zero and are building a team around him that will work both internally we've put our board and senior leadership team through net zero training which has been hugely beneficial I have to say but also we have set up our first net zero commission for the south of Scotland working with partners like Zero Waste Scotland SIPA and a host of others to help us with the strategic input that we need for the south but also to help us identify tools that are already there so our team can put together a really constructive toolkit in the same way we have with fair work for SMEs, micro businesses and communities to make that journey to net zero so some really targeted tools and interventions are in process of development now working with all of those partners we've also outfound it really important to take the message out using that team so we're running a series of events and seminars as well as producing information for frontline staff that will reinforce all of that as part of that what we've been doing is going around the south of Scotland actually filming some of the companies and organisations that we work with in lots of different industry clusters and sectors who are already doing really innovative things on the journey to net zero but some of them are very practical tangible small step interventions as well and we're just started pushing those out and publicising those so businesses can relate to some of the direct things they can do that they realise that there are small steps that can be made that it doesn't have to be a big bang approach and that if we all make the small changes it can have a huge impact we're also working on things like the power and change report that we published in summary pre-election we are in the planning stage to take that forward and as part of that we are looking at aggregated interventions across different industry sectors and clusters to make some of the changes that carol highlighted to look at how purchasing power for instance with groupings like our original social landlords can be brought together to make a more powerful change in terms of energy supply or the sourcing of ground source heat pumps etc we're also working hard on some innovative projects in hydrogen and other areas that we believe will be of real value to the south of scotland as we move forward so i think it's the golden threads but it's the warp in the west approach as well that's very informative thank you thank you very much that now brings us to the end of the evidence session and i would like to thank carol buxton nickenton jane morison ross and anthony day for their time this morning that's much appreciated it will now move on to the next item of business so we now move to agenda item four which is covered in paper three the committee is invited to consider the consent notification for the recognition of professional qualifications amendment eu exit regulations 2021 the Scottish government gave consent during the campaign recess the purpose of the instrument is to make minor amendments to revoke savings provisions made in respect of the alert mechanism under the recognition of professional qualifications amendment etc eu exit regulations 2019 si 2019 number three following the end of the transition period the european commission confirmed it had withdrawn all sorry all alerts made by UK regulators making it necessary to amend the 2019 regulations to remove these now inoperable statutory obligations are members content to note the consent notification thank you we will now move into private session for the remaining agenda items