 Good morning, everyone. Welcome to the 14th meeting of the Economy, Jobs and Fair Work Committee. I may ask everyone to remember to turn off all electrical devices that might interfere with the sound system or turn them otherwise to silent. The first item is to take a decision by the committee to take item 3 in private. Are we all agreed on this? Yes. Thank you. I welcome our witnesses from Highlands and Islands Enterprise. First of all, Charlotte Wright, interim chief executive, and Forbes Duthey, director of finance and corporate services. Good morning to both of you. No need to work the buttons. The sound desk will take care of that, and if you want to come in, simply raise your hand or do so as you're able to. We'll start with a question from committee member Gordon MacDonald. I think that Charlotte Wright has a brief opening statement, so perhaps you could give that first and then Gordon will ask his question. Okay. Thank you very much and thank you for the opportunity to be before this committee. In particular, thanks just to give this short statement, as I am aware that none of the members of the committee represent any part of the Highlands and Islands, so it is helpful just maybe to give you a little bit of background about the Highlands and Islands and the work of high. The region that we represent, Highlands and Islands, is a diverse and beautiful region, and the economy and geography of our region present us with both challenges and great opportunities. The region covers half of the landmass of Scotland, but contains only 8% of the population. Therefore, the population is quite dispersed, apart from the main city of Inverness, which is a fast-growing city. We have over 100 inhabited islands. Some of those islands have residents of less than 100, for example Fula, Papawestrae and Fair Isle. It would emphasise in the 50 years since our predecessor, HIDB, was established the significant progress that we have seen in the region, particularly around that population growth. In the late 60s, when HIDB was formed, population was in absolute freefall, and that has been pretty much turned around. There are still some areas where that gives us cause for concern. In Argyll, there is still some loss of population, and in areas such as the Western Isles, where they have enjoyed some population growth, there is still a concern about the impacts there for working age and young people, so we aren't complacent about that continuing to be a challenge. Highlands and Islands Enterprise has a unique remit combining both social and economic development. We find that that attracts a lot of interest from around the world, and we host a lot of visits to see what we do and how we do it in the Highlands and Islands. Our role is to deliver Scotland's economic strategy, and we do that through our four operational priorities, which contribute in turn to one or more of the four eyes within Scotland's economic strategy, and I'll just very briefly describe those. We look at supporting businesses and social enterprises to achieve their growth aspirations. We do that through our account management approach and support over 400 businesses and over 50 social enterprises within our account management portfolio, so they receive tailored support through dedicated account managers who have access to a range of programmes and powers, including financial investment, programmes to support leadership and management, innovation, international trade and whole range there. In deciding who is brought into account management, our choice there is about those that have the greatest opportunity to grow, and that will vary across the region in terms of size and scale. In a fragile area, a business growing from three to four or five is as significant as one growing from 20 to 30, for example. We look at supporting the growth sectors. Our focus there is ensuring that we focus in on those that offer place-based distinctiveness, making the most of our assets, which give us a competitive advantage and contribute to Scotland's economy. Just to give you some brief examples of those sectorally in life sciences, we have LifeScan, Johnson & Johnson company based in Inverness, which employs more than 1,000 people. We have recently supported them with research and development, which is helping to anchor that significant company within the Highlands and Islands, focusing all of its diabetes research in Scotland. We also have the world's leading chemical company, the ASF, based on the west coast of Lewis, perhaps not the obvious place where you would expect to see such a company operating, but they bought over a small business that we had supported for a number of years, which produced a very high-quality omega-3 fatty acid. We own the site there on investing in that site, which has enabled BSF to currently employ over 70 people at much higher than the average wage, and with the site investment that will grow to over 90. Compare that to that kind of impact in a city, and that would be equal to many thousands of jobs and is really significant in that part of the western Isles. Food and drink is clearly an important sector in the Highlands and Islands. I would maybe just flag up aquaculture as an example. We have currently been supporting the industry, which has devised a new strategy to lead aquaculture through to 2030 and develop a new industry leadership group. There are some great opportunities there to increase the productivity of aquaculture, but also for us to support a growing indigenous supply chain in that sector. In tourism, naturally, we focus on the natural environment and our culture and heritage, but we see world-leading niche tourism businesses in areas such as adventure tourism and marine tourism, again, building on the assets of our region. Energy is clearly critically important to us. We are delighted to see that the wind tower is planned in Kintire, which is an area that has had problems and challenges taken over by Korean company CS Wind. Again, it is investing and protecting employment in that fragile area. Great news to see in the Pentland Firth, Mae Gen, now generating electricity from the world's first commercial scale tidal array. Creative industries is a vibrant sector in the Highlands and Islands. Our focus here is around music, fashion and textiles, which come together in the international showcase, which is Expo North. In business services, there isn't a financial services sector in the Highlands and Islands. We have developed a niche in business process outsourcing, with a number of key companies operating there. For example, Capgemini, who in fact now occupy Highs former office in Venice and are expanding there. Our third operational priority is around strengthening communities. That is where we bring together that social and economic remit. The work that we do in strengthening communities is central to Highs inclusive growth approach. We support creative, capable, sustainable communities by supporting them to own and manage income-generating assets to develop both services and employment locally. We also use our account-managed approach with communities and have that relationship with around 50 communities and 115 community organisations to extend that reach. Our fourth priority area is around creating the conditions for a competitive region. That is a focus on some of our main infrastructure investments. The key one of which at the moment is the delivery of the £146 million investment to roll out next generation broadband in the Highlands and Islands. Without that programme, led by High in partnership with BT, supported both by Scottish and UK Governments, next generation broadband would only reach in the lowest 20% of population across the Highlands and Islands. When that programme is completed towards spring next year, that will have reached 86% of the population, making a significant difference. However, the work does not stop there because the key thing is realising the benefit of that investment in digital skills and digital businesses operating effectively. Other examples include the development of the Inverness campus flagship investment in the region's capital. We also are extending our reach for higher education in the region. We have been a long-term supporter of the university of the Highlands and Islands, having finally got a university in the region and are currently working with them on a new school of health project. However, there are a number of other universities operating in the Highlands and Islands. For example, the world-renowned Glasgow School of Art has opened a campus in Murray, which would be fantastic to see students having the opportunity to access Glasgow School of Art from the Highlands. We are also capitalising on the presence of Heriot-Watt University in Stromnes in Orkney alongside the European Marine Energy Centre to focus on energy developments. A couple of final things that I would like to mention. First, the Audit Scotland report, a report that we are very much welcomed, noted that it stated that high is performing well, with a clear well evidence-based strategy and positive attitude to risk. Naturally, there were some recommendations and we are actively addressing those recommendations, which are specific to high. On the same note, on the enterprise and skills review, we equally welcome the opportunity to positively shape and influence the next steps as that review process moves into phase 2. Finally, convener, I would like to welcome any member of the committee, or indeed the committee itself, to come to the Highlands and Islands to see any of the projects or the work of high, and we would be delighted to host you. Thank you very much, Charlotte. Just to note at this stage also, we have apologies from committee member Andy Wightman. Now we will come to our first question. Thank you very much for those open remarks. I was wanting to ask you about comments that were made by Mackay consultants to their written evidence to the enterprise review that is currently taking place. I believe that Scottish Enterprise and the Highlands and Islands Enterprise have generally made very good use of their budgets, but their contribution to Scotland's economic performance has declined recently, particularly that of high. It goes on to say that, indeed, it could be argued that both Scottish Enterprise and high have become too risk averse in recent years, and that their failure rates could have been higher. What are your views of that? I mentioned it at the end of my remarks at Audit Scotland's comment about a positive attitude to risk. It is critically important for an economic development agency to have the right approach to risk. I would not say that we are risk averse. We are certainly risk aware, but we take risk. We have had business failure and project failure, and we would agree with that without taking risk that we are not going to get failure at all. We see our approach to risk as being clear at the outset what that risk is and making sure that our process can put in place mitigation as we work through it. Certainly, we have some excellent examples of where we have taken that risk. In fact, next generation broadband implementation is one. Working with a commercial partner to invest £146 million is actually a challenging process. Through that procurement, we only had one bidder at the end of that procurement process. It is a real challenge to make sure that you get both the value for money and the innovation through that implementation in those circumstances. Certainly, there are a range of things that we have done across the Highlands and Islands, where that risk has occasionally crystallised and that we have seen write-offs in investments in businesses and otherwise. When it comes to infrastructure development, perhaps another example would be our £5 million investment into the £10 million project at Love Boysdale. The community came to us and said, could we support them with £2 million towards the £4 million development? We said, no. Why do not you make it a £10 million development and we will support you with £5 million? I think that that was about pushing the risk and ambition. I could give you a number of examples. One of the other comments that was in submissions from a different company is my experience that their funding is somewhat randomly distributed and only to larger organisations. Certainly, I would refute that with regard to Highlands and Islands Enterprise. We work with a range of company sizes. I think that I mentioned in my opening remarks that some of them are very small, employing less than five people within organisations. Yes, although we have big companies such as LifeScan, we work with a range of very small ones and some of our interventions are in the single thousands of pounds to support those companies. One of the points that you raised at the beginning was about the depopulation in Highlands and how that has been reversed, etc. However, in terms of economic development, is there still difficulty where there is a lack of people and a lack of skills in order to grow sectors? Across Scotland, the economic hotspots are predominantly Aberdeen and Edinburgh, but in your area of high, where would the economic hotspots be? The first part of that, except that, is a challenge in terms of skills and talent attraction. I jointly with Skills Development Scotland, we developed a skills investment plan for the region, and part of that is a talent attraction plan, which we are leading on for exactly that reason. Most businesses that we speak to will raise the challenge of getting the right skills or indeed getting the right people into the area. Actively, it is important to the Highlands and Islands to bring both people and the right skills into the region. That might not be the same as the rest of Scotland overall, so absolutely we see that as really important. In terms of economic hotspots, I guess that the city of Inverness would stand out there as one that has made significant difference to the performance of the region overall. It has been the UK's fastest growing city, and we really see the benefit of that. Our job is to make sure that the success of Inverness is pushed out and that we have an inclusive approach to ensure that we want to see that growth operating effectively across the whole of our region, from Unston Shetland to Campbell Town in Argyll. Do you think that the attitudes are risk averse in terms of the people in the Highlands and Islands who are looking to go into business? That is a good question. It is probably something that we do see, and maybe an indicator of that is businesses accessing finance at the moment. We undertake a panel survey on a regular basis with businesses across the Highlands and Islands, and there are a few key questions that we revisit there, including access to finance, and finding that businesses are much more reluctant to go and borrow capital at the moment, even though banks are apparently willing to lend and that there are other sources of finance available. We do see that as an area where, through account management, we are working really closely with businesses, they need to continue to invest and develop to continue that growth, so I think that that is characterised there. The exercise this morning is part of our budget scrutiny, and my question really is both to Forbes Duthey and Charlotte Wright, but I reflect that the last time Charlotte Wright was here at the committee on 1 November, we had a discussion about the funding as outlined in the Audit Scotland report. I think that what you said, Charlotte Wright, was that you believed that there was a rebalancing between grant-in-aid funding and special project funding. As I look at the figures last year to this year, there have been further declines in your grant-in-aid funding. Do you have an understanding of what the Scottish Government's policy on this is? Is it their policy to move away from grant-in-aid funding and look towards special project funding as a matter of policy? Forbes, I'm sure, come in. We have seen over recent years that we have had the ability to increase our budget by specific ring-fenster amounts for certain projects. Wave Energy Scotland is a good example of community broadband and Scottish Land Fund, which we deliver on behalf of Scotland, have given us the ability to increase the amount of resources that we are able to deploy overall. I think that it's a fair observation to say that over the past 10 years our grant-in-aid has been a bit volatile. I think that that's a fair description of what's happened. That's happened for a number of particular reasons, and some of them, indeed, have been government funding available. We've been through these reviews before. We used to have a quinquennial review where every five years they reviewed the role of our agencies. Those have always resulted in some sort of grant-in-aid movement. The most important aspect of how we manage our grant-in-aid is that, because we've been living in this environment, we have an ability to flex the budget within a certain extent, in terms of how we work with our customers and our clients and, indeed, the Scottish Government. That's why you'll see it as a much bigger element of Scottish Government funding, as you would perhaps call ring-fenster projects, coming through now, because we actively go out and pursue those specific projects where we know that Scottish Government funding is available to support them. You can see that through broadband and the west initiatives as well, which are particularly important to the Highlands, but also, obviously, very important to Scotland, particularly in terms of how we've energy and how that may well be developed and evolved. One important thing that Charlotte mentioned is that digital connectivity is primarily important to make sure that the Highlands and Islands are connected. As I always tend to say, technology eliminates distance, so if you're in Papawestria or wherever, if you've got a good digital link, you can actually limit that, then that should start to have some sort of business scope. Obviously, you need the rest of the infrastructure in terms of developing that. However, as we sit here, we had a paper at our leadership team yesterday, which, yes, we spent £146 million on broadband to date, or the project of closing that project. That's going to get us up to 86 per cent of the coverage. It's going to take at least another £150 million to get us to 95 per cent of the coverage. It's the incremental cost of that final distance, which just reminds us of the cost of remote and rural communities that we need to get to that. In terms of what we need, it's good to have those ring-fenched projects, but it's also good to have a solid grant and aid base that we can build on and have that discretion to invest where we need and see the priorities locally. As we look towards the budget, I hope that there's an element of grant and aid increase. Whether that achieves, I don't know. I'm looking forward to next week to finding out. I'm not completely unrealistic perhaps, but there is also a scope for budget cuts. I do live in the real world in that respect too, but we don't quite know yet. Can I interrogate a couple of the lines of the budget that appear in your appendix 1 as part of your submission? You're saying that the marginal cost of broadband investment will increase as you try to install it in the more difficult to reach areas, but your budget between 2015-16 and 2017 on broadband investment went down from £30.9 million to £21.4 million? Absolutely. That's coming to the end of phase 1. We haven't got phase 2 funding yet. That's a project that we need to discuss with the Scottish Government. That's what we're starting to see. That's why we had that particular paper yesterday. That's moving to phase 2. That's a final element of getting to the 86 per cent target. The next funding that we haven't actually got in any budget plan yet, that's where we're working with the Scottish Government to see what they can fund us. Do you have any early indications of what the budget for 2017-18 is going to be for broadband investment? Obviously, there's talk about potentially £400 million allocation being available in the Scottish Government, but that's the second hand that we've got. We haven't actually seen the budget papers or anything that would suggest that it's there or not. That relates to the Government's commitment to the 100 per cent coverage. We are completing the project that we had, which takes us to the 86 per cent coverage. The Government is then deciding what it's going to do about honouring the 100 per cent commitment. At this point, we've yet to determine what high's role we'll be in that with Government. Just a couple of short questions on two of the budget lines. First of all, on European funds, again looking at the years outlined in this appendix between 2015-16, the budget and the outturn, there seems to be a considerable drop in expenditure derived from European funds, presumably. If I'm looking at the 2016-17 original plan versus full-year forecasts, there's an even greater drop in European funding. Could you explain the reasons for that? The reason is quite similar. The majority of European programmes are now coming to an end in the current phase, where we're putting funding forward for the next phase. That's to make the friction devil teal off, that we've had the projects, they're now coming to fresh and they're coming to close, and that's really why you see that drop off in marriages. Budgeting for £5 million, and actually you're likely to spend a million. So, presumably when you made your budget, you had an idea of whether things were coming to an end or not? Yes, we did, but I suspect what we actually did was we normally just have a £5 million line, because European funding can be quite volatile in that respect, in terms of the projects that are coming forward and not always at our own hands, so we don't have the control of when these projects are made. So, we tried to get into European funding of £5 million, but it doesn't often, if the projects aren't actually out there to try and develop that from the private sector, it's hard to actually deliver that. But there's no blockage in the system? There's no blockage in the system that is causing that artificial situation in terms of slowing things down. It's actually just changing the projects when they're coming to fruition. The final quick question, if I may. Looking at the investment line, again, your forecast in investment expenditure down by about 20 per cent this year compared to last year, again, perhaps could you reflect to us the reasons why you think that is? I think that the reality of the investment demonstrates the sort of flexibility that we have within the budget available. As the budget flexes, because we start off, we have the operating plan, which is a three-year document, so that's a figure that you would initially see. Then we go into the actual operating plan itself for that particular year, and you just see there was a three million drop in our grant and aid this year, so we had to reflect that, and that's the way we then move that forward. Some projects inevitably ebb and flow in terms of the things that we've got. For instance, we've got, as you mentioned, the broadband project that slips and slides, and also we have a very weak project with Norwood out in the Invent in Mary Firth, and again, that's an £8 million project, and again, that's moving, so that enables our budget to move, and we can manage that in a positive or negative way, depending on the resources that we've got available at a particular time. That's right. Just one final question. You talk about volatility in ebb and flow, but, as I look at those figures, they're all going downwards, aren't they? You start with your operating plan budget in 1516 of £27.3 million worth of investment, your outturn is £23.6 million, your budget for this year was £21.3 million, your forecast in £18.8 million. That's not volatility up and down, that's down, isn't it? It is down, yes, yes, and that reflects, obviously, as you'll see that there's a reduction there in European funding there as well, so we didn't spend, the European projects that were initially thought of there weren't, didn't spend, because European funding matches spend, so that way you'll see if the European funds are down by £2.5 million so would the investment funds be down by £2.5 million as well because they're not matching off. Okay, thank you. Thank you. Liam Kerr. Thank you. Good morning. I have a couple of questions relating to the forthcoming budget. You mentioned, Charlotte, the Audit Scotland report, and just looking at that, so they say the full range of public sector support for businesses is not known, which creates a risk of duplication and inefficiency. Public sector support is not well understood by businesses and there is scope to simplify arrangements and clarify roles and responsibilities. So my question is, do you know what analysis is being done to rectify that as presumably there's a danger that the Scottish Government is unable to accurately assess the value add of HIE and that could have a negative impact on your budget going forward? I have to say, in discussions with Audit Scotland, we did actually push back on some of those statements, as we didn't recognise those remarks in terms of being able to establish what is there in terms of our expenditure or indeed that that is not able to be known. So we did actually push back on that. I think it is quite clear and that's in all of our operational documents. We also didn't fully recognise the remarks about whether businesses found that difficult as well and did push back to Audit Scotland on that area. However, we'd certainly recognise that it is feedback from business about being able to articulate more clearly how they navigate their way through the business and enterprise skills system. Then it is really important that we listen to that and make sure that that is as clearly articulated as possible. It is really important to us that businesses and community can well understand what we do, why we do it and how we do it. Do you think that the Scottish Government understands that, your push back such that? Presumably, it's as important that the Scottish Government, when it's budgeting, understands that you've pushed back and made that clear. Yes, indeed. I think that it fully understands how we use our budget and what we are doing with that and have a close relationship with our sponsor team in understanding that. On that, looking at the Audit Scotland report, despite the enterprise body's budget reduction since 2008-9, there's little change in the Scottish Government's expectations on you, which creates a risk that your resources are spread too thinly. What was your response to that and what impact does your answer have on your requirements from this year's budget? In terms of, yes, I guess there's always an increased or increasing expectation of what we can achieve and we would hold that ambition internally as well. I think that it is important that we continue to make sure that we ring every ounce of value out of every penny that we spend and we'd see that as our job to do that. Yes, I guess that becomes tougher when we've had some pressure on budgets and indeed when we've seen some of the challenges and opportunities that face our business and communities that we really want to be able to respond to and lead on. I guess that's a question of choices for us in terms of prioritisation and how we manage that. In relation to what we'd like to see as budget settlements next week, in reality, we'd love to see an increase because we could well use any additional resources and have a list of ambitious projects and support to businesses that we'd like to implement. As Forbes mentioned, in reality, I think that we would find at least the same settlement as this year as a good outcome. I'd like to move on to your relationship with Highlands and Islands University. You have said that you are doing work with the University to increase innovation with your account-managed companies with the University. Can you give me some detail on that and what those projects are? I am focusing in for a second on the University of Highlands and Islands. The growth of the University of Highlands and Islands has been hand-in-hand with that of Highlands and the growth of the region overall. A particular project that we are working on at the moment is a health and wellbeing pilot that has come out of the work of the Scotland Can Do Forum in terms of innovation. That is offering up some really interesting opportunities for businesses that are working in the digital health space along with NHS and the universities that are working together. That is a key focus for us in the Highlands so that we can see the opportunity to deliver healthcare to remote and rural areas and the role that some small businesses with innovative approach to digital health are able to play into that space and hits that innovation agenda overall. The University provides a range of support to businesses and is keen to respond to us. I mentioned earlier the work that the aquaculture sector is doing on setting out its strategy through to 2030. We have talked to the UHI about the opportunities to deliver in to some of the skills gaps that have been recognised by that industry, for example in fish husbandry and other areas. You mentioned skills gaps and one of the issues for rural areas is having the labour force to plug those skills gaps. What are you doing there with the university? For example, you have a huge potential in your area. You mentioned tidal energy, some massive projects happening there. Largely driven by companies outwith Scotland investing in our natural resources, what are you doing to increase innovation there and plug some skills gaps that are going to be able to drive that industry forward? I mentioned in relation to the European Marine Energy Centre in Orkney where we have Harriet what university they have been there for a number of years and the development of a campus in Stromnes, which will bring together the academic expertise and research and development capability of Harriet what sitting alongside the actual piloting and deployment of marine and tidal devices into EMEX test facilities. That is a real living laboratory out in the sea and the coast of Orkney, which is really fulfilling that. That is absolutely cutting edge. Innovation EMEX is the world's only grid connected tidal test station and is something that we have a real great opportunity to grow. As well as looking at that, they are looking at the development of hydrogen capture and storage, again really leading the way globally. They are absolutely inundated from visitors all around the world who want to learn from what has been done in EMEX. In terms of skills gaps, generally absolutely, both with universities and colleges and working with the SDS and Business Direct, an area that I would highlight would be digital skills. I do not think that that is unique to the Highlands and Islands as something that we see as a challenge in the 21st century to ensure that all of our businesses can operate as digital businesses. It also means for remote and rural areas of the Highlands and Islands that anybody can then work from those areas and link in and sell to the world, but we need to have first the capability and capacity of next generation broadband, but we need to have the skills. We are also working on a project that is part of the Inverness city deal for a science skills academy. We are seeing fantastic potential for that, particularly reaching into young people. Throughout the summer, that has run a number of coding clubs and some of those types of events that I am sure you are aware of, which help to build that interest in the next generation on what we can do with digital skills and really build that in at the outset. That has been taking place within the building that we occupy in the Inverness campus. It is fantastic to see just the huge amount of enthusiasm from young people there. We also, within our building in High, have a digital marketing suite. We have had over 1,500 businesses through that Hello Digital facility, as we call it, which have been able to demonstrate both to businesses and to the wider public things like virtual reality, use of drones and a whole amount of events that excite and interest people's interests and the opportunity in that arena. You have mentioned retaining talent in the area. Universities help you to retain that talent. People do not leave to go to other universities. That is a big part of that. One of the issues is that you have mentioned that the population is quite low compared to other parts of Scotland. How important is—I will rephrase that. What do you see has been the impact of the Brexit situation with regard to that and having the labour force for all those fantastic opportunities that you are developing in Highlands and Islands and that having them staffed and managed? In talking to businesses, there is a concern about the impact of Brexit on particularly EU nationals who work within sectors, particularly tourism and food and drink, which are very highly reliant on those individuals. Many of those industries do really rely on that manpower. In fact, that is the history of both food and drink and tourism across the Highlands and Islands, although it is predominantly European migrants at the moment in the past that has been all around the world. Australia, New Zealand and other places have helped us to support some of those key industries. We are working with businesses to reassure them in the short term of the situation. You are a point about how we deal with our population challenges. One aspect of that is to make sure that we continue to create opportunities for our own young people to want to stay to live, work and study in the Highlands and Islands. We undertake a youth survey—we have done that twice now with a five-year gap in between it—and the last survey showed a marked difference in the attitudes of the young people in the Highlands and Islands to what they thought about living and working in the Highlands and Islands in a very positive sense, where they have a massive sense of pride and commitment to belonging from the Highlands and Islands, but specifically that they are much more optimistic about the opportunities to study and to take up employment opportunities in the Highlands and Islands. That is something that was great news to us, and we really need to make sure that we capitalise on by continuing to work on those opportunities both within further and higher education, but particularly about employment prospects. I would have to say that maybe there is a wider context there, economic context, because for that to all work properly, there are other elements that are equally important. For example, when we met with our board with a group of businesses in Avymor as part of their high board work, we had 50 at a business breakfast, the key things that came out of that discussion for them that they were concerned about in the economy were about housing, roads and connectivity, and it is that whole package that is important to young people as well. Earlier on, you mentioned how good it was to have these high-quality jobs, and I think that that was an overseas owner in the west coast of Lewis. So can you tell us how do you balance up between any jobs and good jobs, and I don't know if there's such a thing as a bad job? Does ownership matter? Would community ownership be something that you feel is important, and what are you doing about that? It's absolutely fantastic to see businesses that can offer significant wage rates and particularly opportunities that really maximise the use of skills, and certainly BSF that I mentioned on west coast of Lewis is a great example for being able to do that. However, that is there because a local entrepreneur started off trying to use the skills that he and a small group of people had, which went on to this high-profile omega-3 fatty acids enzyme that they worked on, which became a target for investment for a BSF. The fact that we have BSF now looking to provide 90 jobs on the west coast of Lewis is based on long-term investment that we made in a small company, an indigenous company, which went on to grow, and we would not have been able to achieve that significant growth without that further investment, which has come from an international company. However, those examples, to be honest, within the Highlands are fewer and far between. Really, the meat and drink, if that's not a pun, in terms of our food and drink industry, is about small companies that are indigenous, which are growing and adding two or four people to their employees overall. They can make significant differences, particularly in our rural areas. In terms of good and bad jobs, well, as long as we are clearly making sure that we've got employment is the most important thing that we can see, where we can influence that in terms of wage rates and what those employers do is really important to us as well. I think that you also mentioned community ownership. Clearly, that's something that we've worked with and have a fantastic track record in terms of the community ownership of land and assets. To support that, many of those communities create important jobs within their communities in managing, owning and developing those assets. Some of them are very successful in what they do. Do you have a particular angle on who should own a project or a business, or is it really just what's appropriate for that particular business? Would you be encouraging women to own and run businesses and set up businesses? In terms of the ownership, you're absolutely right that it is what is appropriate. That might change over time, as in my example of BASF in the west coast of Lewis, coming from a small business run by an entrepreneur into what is now part of a multinational company. That is about making sure that we can support the growth of a business and it may go through those changes as part of its own life cycle. In terms of your question about women, yes, we are working really hard to support that. We are working with Women's Enterprise Scotland and our own work on equality to try to influence that. To be fair, there is still a long journey to go there in seeing the kind of improvement that we would like to see overall. We do see that there is a difference between the social enterprise world and business in terms of where women stand and the numbers in terms of management overall. We have provided some figures to the committee that set that out. You have stressed the whole thing about social development and strengthening communities, which I think is unique to HIE, as compared to, say, Scottish Enterprise. A cynic might say, why do we need to strengthen communities in the highlands and forget by the ones in Fife or somewhere else? How would you answer that kind of question? Why is there a need and what difference are you making? HIGB and then HIE were set up to deal with the specific challenges of the highlands and islands. While, granted, there are other parts of Scotland that are rural, the highlands and islands are really quite unique in terms of its geography, its islands and its remote mainland populations on remote peninsulas as well. For many of those communities, the opportunity of ownership of their own assets and supporting those communities is absolutely integral to that economic development. We see that they go critically hand in hand by creating those small job opportunities that you are investing in those communities. By those communities, working to retain and develop local services, for example, social care, the one shop on an island, they are also important to the fabric of life. Without people having that community facility, they would have a difficulty in being able to have a full and sustaining life. I am also on the rural economy committee and we have been looking at crofting a bit. Our understanding is that, some time ago, responsibility for developing crofts was switched over to HIE, but there is some feeling that it should go back to the Crofting Commission because HIE have not created many crofts and surely crofts would be part of developing a community. Our role in crofting is quite narrow in relation to the development of the crofting township, so it is quite specific there. What we are doing is working, particularly in those community land owned territories, to encourage them to look at new croft entrants. We have seen that in some of those communities where they own the land or in new farms where that is appropriate. The final one, which is linked to evidence that we had at the rural economy committee, was that I asked somebody last week—we had community broadband Scotland there—if a village got connected presumably through fibre. They did not seem to be too worried if the richer people in the village can afford it and the poorer people in the village cannot afford it. Does that come in with HIE's remit? I suppose that, in terms of our roll-out of the broadband contract that I talked about, that is within the work that we do with BT. In relation to community broadband Scotland, some of those solutions will be very unique and bespoke and can have some challenges about how they are delivered overall. I think that our point here is about making sure that that is inclusive and equal as possible. I think that I would have to follow up with CBS to see exactly what was meant by the feedback that you were just giving there. When you are using a word like inclusive, so you are wanting—you would say that it is part of your vision that everybody would be able to connect? Yes. Indeed, the Scottish Government's commitment is to that 100 per cent target. Is the 100 per cent target just mean that it is in the village or does it mean that every person in the village is connected? That is true. That is it. Just to make sure that I am clarifying this so that what we are doing at the moment will take us to 86 per cent and that is the end of that programme. The Scottish Government has made a commitment that is about 100 per cent. It is working on that at the moment. We have yet to determine what high role or CBS's role would be in that final 14 per cent. I do not want to be pedantic, but does 86 per cent mean that 86 per cent of people are connected in their houses or does it just mean that there is a cabinet nearby? 86 per cent of population are actually connected, right? Thank you so much. When you last came in to appear before the committee, phase one of the skills and enterprise review had just been announced and you said that you welcomed the opportunity to have strategic oversight across the agencies, but we have yet to see exactly what that will mean for the boards of the individual agencies. Since then, there has been a statement made by the Government that a strategic board will replace individual agency boards while each of the agencies will retain their individual legal status. Can I get your understanding as to how that might work and what issues or concerns you might have that the individual boards of the agencies such as HIE, with their very different remits, might be replaced by one overarching board? I suppose that we are still waiting to hear some more detail from the Scottish Government about the implementation of phase two. As I indicated, we welcome that phase two will be done in a different way than phase one, which will include much more input from the agencies who are part of that review. We welcome that as an opportunity to influence and shape what that looks like going forward. There has been a fairly strong reaction across the Highlands and Islands to a message that there would no longer be a High Board as we understand it at the moment. For us, what is critically important is that we are able to articulate the benefit and input and the role that the High Board has taken over the past 50 years going back to HIDB and the role that it has played in the progress of the region and ensure that in whatever is to come. I am fairly sure that there will need to be some kind of arrangements that will sit below that statutory board. That ensures that we retain those important and essential ingredients that have contributed proactively and positively to the progress of the region. Thank you. Just to follow up on that, what would you say the main principle distinctive features of the High Board are in comparison with the boards of the other agencies? I can only really speak about the way that the High Board operates and I do not have detailed knowledge of how the others operate. In terms of part of the executive of HIE, I think that we have found that the High Board has been very beneficial to us in their role in helping us to prioritise where we implement strategy across the Highlands and Islands, their own knowledge and expertise from the walks of life that they come and their insight into the Highlands and Islands. In particular, the way that we operate is when the High Board meets, we ensure that they spend a fair amount of their time meeting and engaging with businesses in communities in the Highlands and Islands so that they are part of the visible face of HIE. That is recognised and appreciated by the communities that we work with and that they have the opportunity to talk to the High Board, to influence the High Board and to ensure that we recognise the challenges and opportunities that are facing them. Thank you. Just on a slightly different area, your paper highlights opportunities in tourism, food and drink and other areas going forward. In terms of the impact on Brexit and the opportunities that might arise from that, can you talk us through the steps that HIE is taking to explore those opportunities and help companies that you assist in looking to capture those opportunities? In relation to tourism, all indications would be that this year has been an extremely good year for tourism. Clearly, that is related to a couple of things that have a Brexit link. For visitors from overseas, we have looked like a more attractive location in terms of how far their money goes. I think that we have also seen more people choosing to holiday near home rather than going away. Working with tourism businesses, many of whom have felt challenged in terms of being able to cope with some of that capacity. That produces challenges for islands in terms of making sure that ferries are at full capacity to get everybody across to the islands to enjoy that boom. A fair bit of work with tourism businesses has gone back to digital as well. That is making sure that they are fully utilising their digital capabilities in terms of marketing but being able to transact fully with tourists using digital means. Food and drink clearly is benefiting from the export potential. In the short term, our work is alongside SDI in maximising that opportunity and taking the longer term view about what other markets out with the EU could be targeted for the future and working on strategies to maximise opportunities there. We spoke earlier this morning about the potential impact on workforce and making sure that businesses have in place strategies for developing and maintaining their workforces that are really critical to them. Gil Paterson, how many more new exporters are there in your area since last year? How does the HIE budget help to support increased exports? In terms of our account managed businesses, we have seen at the moment a further 20 per cent who are looking at exporting for the first time. That is really important to see that that is growing. We have a programme international at Highlands and Islands, which we are operating to bring as many new exporters into the whole internationalisation agenda. That can be quite a slow process. The first time that business considers looking at exporting can take up to five years before they are fully transacting internationally. We need to work through a series of supports to make sure that the right choices are made in terms of market, product and capabilities so that people can absolutely maximise those opportunities. I think that you have already mentioned that one company that I take at the BASF product is really an export. It is almost entirely for the Japanese market, where there is a strong interest in the omega-3 fatty acids. That is amazing to see again for that part of the western Isles, where you have a substantial high-value product that is entirely going into an overseas market in Japan. General comments that you can mention on specific new-export companies exporting? New opportunities. Ones that have already happened since last year? Since last year. Let me think of some examples. We have seen a lot of growth recently in terms of micro-distilleries and breweries. A range of quite exciting developments. I was on Isle of Harris last week. Isle of Harris distillery is a significant investment near Talbot. Their whisky is not ready yet, but their gin is. If you try this great product, they are seeing fantastic traction with that gin overseas. Whilst their whisky is not ready, they have pre-sold quite a lot of barrels into their second phase, which is not even barreled yet, and their first phase is fully sold out. Also in terms of beer, we have seen huge growth for new markets in micro-distilleries and micro-breweries. Black Isle brewery, for example, has been reaching out to US and other markets. There is some really great opportunity out there. It's funny that you're talking about these dishes. I'm a lifelong tea totaler. However, I support the industry quite considerably. At the end, that leads to another question that John Mason touched on. I wonder what emphasis and importance you put in the prospect of exporting and perhaps against companies that may have no opportunity or no interest in exporting, but might be the prospect for the importance to the community by assisting them to sustain the community or help them to grow. Have you got a judgment to make there or have you got an emphasis? If a business is able to expand its markets, naturally it's a market that is only Highlands and Islands or Scotland, and that is immediately limited, so that any business that has significant growth aspirations will need to look at how it develops its market. The rest of UK might be a great place for a business to start in going on that journey, but, as I said earlier, we need to work out a really clear strategy with a business so that they make the right decisions. It might also be useful to give perhaps what you could term the flip side of that, and I mentioned aquaculture earlier. One of the opportunities that we've worked through with the industry leadership there is the place of the supply chain in aquaculture, so as you're probably aware, the leading producers in aquaculture are mostly Norwegian, and a lot of the supply chain is Norwegian as well. There are great opportunities there for some of that supply chain to be filled by Indigenous businesses, so the flip side of what we're doing on exporting is also what are opportunities in import substitution and how do we see those as great opportunities for our strong Indigenous companies, which still support, ultimately, in my aquaculture example, increasing productivity and value from what is an important sector to us in aquaculture, but brings a more local supply chain into play? My question should have been more pointed. Would you make an emphasis on an exporter or someone that wasn't an exporter but actually delivering in a community that needs either to be sustained or aquaculture? Sorry, I didn't understand what you were getting at with your question. No, the answer is no. Clearly, we want to increase exports overall, but business growth is a critical thing for us. If we're looking at opportunities, particularly for our remote and rural areas, if a business has got the opportunity to grow and that growth is based on markets within the Highlands and Islands in Scotland, that is absolutely important to us. I wonder whether I could follow up on exports, because you've talked about your ambition and aspiration. I'm curious to know how many account managed companies are currently exporting in your portfolio, how many you expect next year and whether you've set any kind of internal target for that. I suppose that the piece that goes with that is how much budget you actually devote to this as a percentage of your total budget and whether there are constraints within budget to your realising your ambition. I might not be able to give you detailed figures on all of those and will come back to anything that I can't answer off the top of my head, but 57 per cent of our account managed portfolio of 455 of whom include social enterprises are currently exporting and a further 20 per cent are starting that process. We can see that there is a growth trajectory there. In terms of growth for next year, a lot of that will be realising that ambition of the 20 per cent who are starting the export journey, although we will continue to try and grow the top of that funnel, if you like, so that more who are interested in exporting can come into that process and start working the way through that. As I said earlier, it can take a number of years from thinking about exporting to actually exporting. Was the second part of your question about? The second part was about the budget, but can I just go back to tease that out? Is your target to grow exporting by the 20 per cent of companies that you have identified for next year? You are saying that it takes longer, so I am curious to know if you have a target for next year. The way that we have set it out in terms of our top-line measures that we report to Government on is about value and about the value of company turnover that goes to international sales. That is the key target, but I have to say that beneath that it is quite important because whilst the value target is clearly critical to the performance of the economy overall, in any case, there are always a number of big companies that will contribute significantly to that target. It is equally important that we continue to ensure that we are increasing and broadening the base of exporting companies overall. Even if some of them are coming in at fairly slow and low levels in terms of value, they are starting that exporting journey, so increasing both the volume and the value are part of what we want to achieve there. In terms of resourcing, we do not chunk our budget up exactly in that way because we look at what we support to business overall, but if there are figures that we can extract for you, we will pass them on to you. That would be very helpful to know. Can I turn, convener, to productivity? I think that we all agree that it is key to economic growth. There is the national performance target, which is that Scotland should be in the top quartile of OECD companies for productivity by 2017. There are weeks to go to the commencement of 2017, when the 19th well-off target in the third quartile. I am curious to know what contribution high made to increasing levels of productivity last year and what you are going to do next year. Is it more of the same? Are we creating a step change? How does the budget relate to that? The proxy for productivity is around GVA. We certainly give you the number in terms of our GVA. The reality is that productivity in the Highlands and Islands lag behind Scotland, which lag behind the UK, so there is definitely a challenge for us in productivity. Some of that is pretty structural. It is about the size of the business space. Again, whatever is written for Scotland is written larger for the Highlands and Islands in terms of the size of businesses within that business space, tending much towards the micro-business, so there is a challenge there. The makeup of sectors in the Highlands and Islands, although I have referenced some of those such as life scan and BASF, clearly some of the structure within food and drink and tourism means that they tend to be in lower wage rates and therefore in productivity terms also make a lesser contribution overall. What we have to do there is make sure that we are supporting developments that target sectors where both the skill level and the pay rate are higher. We look at investing in productivity in companies, so using services such as SMAS to increase efficiency. We have seen that with the investment that I spoke about of CS Wind in wind towers in Kentire, where they have identified efficiency improvements, which is part of CS Wind's target overall when they took over that factory as they recognised it previously. That factory had not been running as efficiently as it could be, so we are moving that forward. However, I would not underestimate the challenge in significantly closing the productivity gap. I would also just like to say that our view of productivity, and it is back to our discussion about skills, is also about the productivity of the individual. In the Highlands and Islands, we have a challenge of under-employment for people as well and making sure that people are as productive as they could be and that their skills and capabilities are fully utilised is equally essential both to productivity but also for the wellbeing and effectiveness of our communities and businesses. I turn to gender, a theme started by the Deputy convener. Do you do a gender impact analysis of your budget? If you do, can the committee have sight of that during the budget process? I think that that would be very useful. As part of that, how much do you allocate to encouraging women's enterprise directly, again as a percentage of your budget? I appreciate that you might not count it that way, but any exercise that would help draw that out would be very much appreciated. We can certainly undertake an exercise to take those figures for you, but what we do is ensure that any programme that we develop, for example, innovate your business and innovation programme, undertakes an equality assessment so that we look at that and all of our account managers are trained as well in equality assessment so that we are making sure that those things are front of mind for those people that we put before business to talk to them and advise them so that we can support them in making the right decisions about how they can grow their businesses and make sure that they are taking full advantage of all the fantastic talent that is out there. When Charlotte Wright first gave her presentation, she indicated that there was not an MSP on the committee covered by high. If she looks closely, my constituency stretches from Erica and Sucketh to the rest and will be thankful. A tiny bit of my constituency is within high. I am sorry that that is a terrible error to make. I apologise for that. It is very difficult for everyone to keep track of all the boundaries and how they change from time to time, but thank you for that. Excellent. We will now move on to a question from Ash Denham. I am interested in the account management process. You said that your ambition is to support businesses' growth aspirations and that you choose the businesses that you put into account management based on their growth potential. I am interested in how you judge the success of the account management process. Do you set targets? You have talked quite a bit about a number of employees. Would you set targets for that so that you would be able to judge that progress, say, over a year, two years? We look at that in terms of tracking our measures, which are about job creation and turnover, including international turnover, but we also undertake periodic whole evaluations of account management. We have done one reasonably recently, so I can make sure that you have a copy of that full evaluation, if that would be helpful. The value of the exports or how many companies are exporting would be one of those judgments of success. You said in answer to Jackie Baillie's question that 57 per cent of those that you are account managing are exporting. Will you be able to tell us how many that was last year and the year before so that we can see if that is an upward trajectory? Yes, certainly we can do that. The same thing with a number of employees. Are you able to say if they have gone up as well? We track the projects that we support that create jobs. In terms of those investments, we can see what jobs have been added. We also track, with the businesses that we work with, what employment there is. The only challenge in that is that the account management portfolio is dynamic, so that people will come in and go out of that, so that we are not actually just, so that you would not be working with the same group, so there would be a challenge about how you are tracking that information that way. If there is anything that we can add to that, specifically, we will have a look and see if we can provide you with a bit more detail. Is there any push to the businesses that you cannot manage in terms of taking up the Scottish Government's business pledge? Is that something that you try to encourage them to do? Yes, so again, account managers will promote the benefits of working to the Scottish business pledge with account managed businesses. Would you be able to give me a percentage on that of how many of them it has signed up? Yes, it is 24, I think, for the Highlands and Islands overall, of which 17 are account managed. Thank you very much. Thank you to both of our guests today. We will conclude this part of the session and we will then have a brief break to allow you to leave and our next guest to take up their position. Thank you very much. Welcome to Dr Lena Wilson and Ian Scott. I think that, Lena, you are the chief executive officer of Scottish Enterprise and Ian, your chief financial officer. Welcome to the committee today. We will start with a question from Ash Denham. Oh, sorry, again. I think that one of you has an opening statement. My apologies to Ash Denham. I will let Dr Wilson make the opening statement. I will be very brief. Thanks for having us this morning. Good morning, everyone. It is nice to be in front of fresh faces on a new committee. I always look forward to this. We are in very challenging times. I do not need to tell you that. I welcome the opportunity not just to present what Scottish Enterprise is up to, but even though I have been at economic development for a very long time, we are certainly not the front of all knowledge. I look forward to discussing with you your ideas on what else you think we could be doing to support growth that we are not doing. We are in a very challenging global economic climate. We are seeing economic growth in the US, which is Scotland's largest market. It continues to be robust, but we all know that there are uncertainties around that in the future. China continues to grow, albeit at less pace, but we would take that growth, wouldn't we? However, there are moves in China to a more domestic agenda and building up the domestic companies in China, so that is an issue as well. We are still feeling the impacts of oil and gas, but all the data would tell us that we seem to have reached the bottom of that and that there seems now to be very good efficiency around the new normal of $50 a barrel, and then we have uncertainty around our relationships with the EU. That means that trading conditions for Scottish businesses continue to be very tough, although there are two sides of the coin to where sterling is at the moment. We are seeing the increased international competitiveness of our exports, but we are also seeing increased costs of imported goods and services. Our job, day and day, is to be mindful of all that and to be as fleet as foot in reacting to it as possible and to help the companies, particularly that we support, to be aware of that and to have it in front of their minds to react. Our role still remains, and that is the role that we have been given from Government, is to find and focus the best opportunities on growth. I have been saying to all of our staff recently, regardless of where we are in this global turmoil, that we are paid to find opportunity, and that is what we must do in any circumstances. We have worked very hard in recent years to drive much greater returns for investment that we make on behalf of the taxpayers. Since 2008, you know that our budgets have gone up and down, but approximately a 16 per cent reduction in real terms. However, in that same timeframe, we have increased our international footprint around the world by a third. We have seen high-value jobs that we brought to Scotland up 32 per cent. The companies that we work most closely with have continued to grow. The turnover on the account-managed companies has increased 20 per cent since 2010, up to £3.6 billion. The new investment that we have secured for growing Scottish companies through our co-investment funds has increased threefold. Export support has nearly doubled. In 1112, we were supporting 1,300 companies to export. That is now 2,600 companies. I just caught the tail end of one of the questions to high, so the percentage of Scottish enterprise account-managed companies that export is now 70 per cent. It was 60 per cent around 18 months ago, and we are hoping for 80 per cent next year, such as the importance of internationalisation on a company's competitiveness. We have also driven a whole range of new services and innovation support, much more small grants to get companies thinking about new markets, because too few of our companies are innovating new products and services. After the financial crisis, we have earmarked a lot of people resource for financial readiness, helping companies to understand how to get finance and what would help them to grow. We have developed a high growth market unit, so tailored support for markets such as China and India. We have launched a workplace innovation approach to help to stimulate excellent employment practices. That does not have to always cost very much, but innovation is not just products and services. It can be how you deal with your people. In the next three years, we want to go further still responding to the enterprise and skills review. We want to use technology more to transform our model, so how can I make sure that all of those assets that Scottish Enterprise has in terms of our knowledge, expertise, can go as far as possible to as many businesses as possible, not just the ones that Scottish Enterprise supports? How can we give even more support to local and regional economies? Local authorities tell us that they value our input. We work with every single community planning partnership in Scotland. As a national agency, it has sometimes been difficult for us to meet all their demands for input and support, so how can we do that digitally? We want to invest in a new system to join up all of our efforts in Scotland internationally. There is lots of activity internationally in Scotland, but the whole is not always greater than the sum of the parts, so we are working with Visit Scotland to join that up. We will want to discuss new activities that are targeted at inclusive growth and new measure and new approach last year for the enterprise agencies. For example, a new leadership programme specifically targeted at women in account managed companies, delivery of productivity plans for high employment sectors but low-paid sectors such as tourism, food and drink and construction. Food and drink can also be very important for rural areas. We are facing into new challenges, but we have faced lots of new challenges before. I will ensure that we have a relentless focus on the actions that will deliver impact for Scotland. There are lots of things that people would like Scottish Enterprise to do. There are lots of things that we could do. Our job is to do the things that give the greatest return to the economy. That is the role that the Government has asked us to fulfil and it is my role as a countable officer. Thank you very much for the opportunity to make some brief remarks. I hope that they have set the scene and I look forward to questions and discussion. Thank you for answering some of my questions in your opening statement. I am quite interested in the account management of Scottish Enterprise just as much as I was for high. You have said that you turn numbers up roughly 20 per cent in the last six years. You have said that the number of companies that are exporting is also up and that 70 per cent of your account managed businesses are exporters. Do you have any figures on the number of employees? Have they also increased over the last five years? I think that we have created around 7,000 employees. I cannot remember if that is in the last three years or the timescale, but I will certainly get that to you. Employment growth is a big factor. I always say to companies that our job is to help them to make more money and or save more money, preferably both. Increasing top-line growth, improving efficiency, and that generally helps them to create better employment. However, the quality of employment is really important as well. Now we are working with all of our account managed companies. Over 1,000 of our companies meet the requirements of the business pledge, although only 100 have signed up to it. Sometimes, companies do not want to sign up to something official, but they are doing it anyway. We want to have discussions around gender equality. That helps growth. It is not either or. It all helps growth. Yesterday, Gordon Lindhurst and I went to visit a tech incubator in Edinburgh. I suppose that if we are thinking about the fact that the UK and Scotland are not improving in terms of productivity, as much as we would like them to. Obviously, that is a key driver for levels of growth and improving the economy. The new tech companies could be quite significant in that. What he was saying was that very new tech companies are looking to be disruptive, so that was the way he described it. They are literally doing something that just has not been done before. They are not improving things or making things more efficient. It is just a completely new thing. He was saying—he did mention Essie, and he was saying that, if we are talking about account management, the old rules for starting and managing and growing businesses do not apply for those type of new companies. Are you focusing on those type of new companies, or are you sticking to the more traditional companies? Are we looking for the next sky scanner? What are we doing in that space? I really believe that Scotland has the capability to have many more unicorns, so companies that value £1 billion over five years, as we have seen with Sky Scanner and with Fangell. We were a major investor into Fangell. We were not an early investor into Sky Scanner, but we helped them enormously along the way, including helping broker introduction to their new partner in China. Our most prominent account management support and investment support is in the tech sector at the moment. I would argue that that is what economic development is about. It is about taking risks. It is about working with companies pre-revenue before they have even formed. If you think that in the School of Informatics at Edinburgh University, we have the 12th highest ranking school of informatics out of 800 in the world, it is just a jewel in our crown not to exploit. We put more resources, for example, into California, because I truly believe that we could get born global companies coming to Scotland. I met in London just two weeks ago with a company from Boston that we are trying to persuade to start up in Scotland in the tech space, because we have better software engineers, they are very productive, they do not move around as much and they are more cost effective. We are doing a lot in this space. Most of our venture capital is into tech companies. The supply of graduates is really important to that. The risk capital is really important to that. This mindset about understanding these disruptors, but Scotland has a terrific asset here. I would argue that data and technology could be our next industrial revolution in Scotland. I am very, very willing to lead from the front on that. As far as the challenges—this was mentioned yesterday as well about skill shortages and the ability to recruit from other EU countries, but also from other places in the world—do you think that that will be a concern for some of the tech companies that you have mentioned, about being able to get the right people as a result of Brexit? Scottish Enterprise has a resource called Talent Scotland. That very role is working with companies to help them to find ways to identify talent from around the world. However, yes, I would be particularly worried about the attraction of talent or the challenges to that or the barriers that are being put there because we have a really excellent record in talent attraction to our universities. We have an excellent record of our university graduates from overseas staying in Scotland and we have a great offer in terms of quality of life. A company like Avalok, who is one of the leading companies in the world for software development for the financial services company, came to Edinburgh on the back of no financial assistance at all in competition with the Philippines and in competition with Brazil purely on the back of our talent. I will ask a follow-up on that. One of the things that was mentioned during that visit was a risk averse culture in Scotland and an unwillingness of people to risk starting a business and failing. Failure is part of the learning process. What are you doing to address this? First of all, would you agree that there is a risk averse culture in Scotland? Second, what are you doing to address that issue? I think that the risk aversion is changing. As we see more business stories being given to start-up, as we see more role models who have started businesses. If you live in California, you are used to words like pivot, so that is when a business starts to invest to do one thing, does not give up, realises that that market is not right and does another. As we get more used to that and not see that as a failure, we are in the risk business. Economic development is not a dead cert. We should only be doing stuff that would not happen without us. We had £19 million of write-offs. That is criticised, but that is risk. At the same token, we had about £36 million or £30 million of gains. Inherently, what we do is risky. We, as a country, have tried to get behind—I have just been very open and transparent—wave technology because the market was not ready to do it. That does not always work. I would argue that a lot of the pre-revenue investment that we make is inherently risky. Not everything that we do will work, but the more we talk about that, the more we understand it, the more we are a country that fails fast. We do not want to be cavalier with taxpayers' money. I would not be sitting here today if I were found to be that, but it is an issue. I think that younger people—and certainly I can only speak for the young people that we bring into Scottish Enterprise—we have an apprentice programme now. I want to get at least 5 per cent of our workforce under the age of 25. They are much more technologically aware, they are very fleet of foot, they teach us a lot, and they just understand that a bit better. It is really important. Gordon MacDonald had a brief follow-up. A very quick question on the back of the question that Ash had. You have mentioned a number of times about the importance of tech companies, but one of the written submissions to the Enterprise Review said that, I think that Scottish Enterprise has never really embraced micro firms and their needs. So many schemes are all about leading cutting-edge technology, and in my mind that is muddled thinking. If you concentrate on making companies incrementally better at what they do, then you would see a real improvement in our competitiveness and export success. Do you see that as your role to support companies that are doing well but need that support to increase their growth, increase employment opportunities and increase their exports? It is a debate that I often get involved in. The role of Scottish Enterprise that has been given to us by government is transformative growth. The role of supporting micro enterprises in the last review was given to business gateway. It is the role of local authorities through business gateway to support micro enterprises. Then it is our role to work really closely with business gateway to make sure that, if there is growth potential in any of those micro enterprises, that we have this pipeline of support where they come to us and that is increasing all the time. We support quite a lot of pre-revenue companies if we think that there is market potential, product potential, and we make a lot of investment in that. We have a dedicated high-growth support team that looks at companies that have not even formed yet. A lot of that is in the tech space because that is where the world is going, but we support a massive amount of food and drink companies, tourism companies, construction companies and textiles companies, because we have such a great offering there, too. It is not either or, but it is important to say that the role of supporting micro businesses is not the role of Scottish Enterprise, it is the role of business gateway. Dean Lockhart, you had a follow-up on that as well. Good morning. One of the findings of the phase 1 enterprise review was that there is a cluttered landscape in terms of enterprise support and confusion over sources of finance. The Government recently announced a Scottish growth scheme of £500 million, which will take the form of guarantees and loans. There seems to be a bit of confusion in the community as to how that is going to operate. Have there been any guidelines issued or any criteria issued about how companies can take advantage of that? Do you have a breakdown of the £500 million? Do you have a breakdown of how much will be in the form of loans or other forms of financial help and what percentage will be guarantees? I think that the detail of that has been worked out at the Scottish Government scheme, and we are working with them on that. I do not have all of that detail to hand, but we are making sure that all of our staff know about it, all of our account managers know about it. We do a lot of continuous professional development with our account managers, so they can start to talk to companies. What we have is a whole raft of financial readiness advisers who, as soon as we have the detail, can get out there. Through the Scottish Business Development Bank, we have been working with the Scottish Government in expanding the reach, co-investment funds and loan funds. That will be a welcome addition to that, but we do not yet have all the detail. Of the companies that you manage or assist over a three to five-year period, what percentage of those companies will fail talking about market failure? I am just looking for a ballpark figure in terms of the companies that you have assisted financially or otherwise. We would assist about 12,000 companies a year in total. We would account manage in the region of two and a half, 2,600. Every year, a few hundred would come into that portfolio and a few hundred would go out. They would not go out because they had failed, but they might go out because actually they have reached a plateau on their growth or quite simply they do not want to work with us anymore or they do not want to go into other markets. There is an in and out, but it does not mean that they have all failed. As I said to you, we have had some significant understandable write-offs for companies that have gone down, but we have also managed to rescue quite a lot of companies. We would have all of that detail and I can absolutely get it to you, but the companies that Scottish Enterprise Account manage on every factor do better than those that are not account managed, including employing women, employing graduates, employing young people. They are more efficient, more effective. I want to see us being able to account manage as many companies as we would be eligible for it. We need to grow the pipeline in Scotland of companies that are willing and ready to grow so that we can account manage them. You mentioned earlier that you had supported a couple of the major success stories. What percentage of investment is equity-linked where you have an upside as opposed to a direct grant or a direct loan, so that, if a company likes Guy Scanner, it goes through the scales that you have some kind of equity-linked upside at the end of the day? All of our co-investment funds are equity through the Scottish Investment Bank. We would have a few hundred million pounds worth of assets under management there, Ian. I think that it is about £450 million or something that we are at at the moment. It is about £80 million a year that we put in through investments by way of shares. Is that all equity? If the game is crystallised, can you talk about how, just in terms of budget, is there a line item where that is accounted as a profit or income? Yes, it is accounted as a profit, which, up to a certain threshold, we are allowed to retain and therefore reinvest back into similar companies going forward. We have never reached over that threshold yet. Should we sell one of the ones that Lena talked about earlier, we might well do that, but at the moment we reinvest it in the following year or the year, sorry that we get the income and the surplus coming back in. Last year, for example, we realised that £33 million was realised from those investments back to the public purse to be reinvested. A couple of final specific questions, if I may. Phase 1 of the review announced a new board of trade to be established to oversee the enterprise agencies and other agencies. Since then, we have had an announcement by the Government that a strategic board will replace the individual boards of the enterprise agencies and other agencies. Obviously, there is a bit more analysis to be done here, but can we get your initial view on the fact that the board of Scottish Enterprise will be replaced by an overarching strategic board? My view on that is that we will work really closely with Government to make that work. It is my job to make all of that work. I welcome any efforts to co-ordinate what we all do across Scotland better. I welcome every effort to declutter the landscape. We just have to make sure that we design that well and that we get the right people on board and that we meet all of the needs of the Scottish economy. It is my job to not so much have a view but to make it work. Final question, if I may. You mentioned Global Scots, the Global Scots Network in your paper. Can you tell us how effective you think the Global Scots Network is and if there are any proposed changes coming up to the structure of the Global Scots Network? I think that the Global Scots Network is a real jewel in the crown in Scotland. I have been involved in it since its inception. Those people are unpaid. I always say that our job is to ruthlessly exploit them for the value of Scotland. They are all over the world. We are increasingly using our Global Scots to try and attract new foreign direct investment because that whole world of FDI is going to get very challenging. I met the software company that I talked about earlier. I cannot go into any further detail, but that introduction was made by a Global Scots Network. Increasingly, we are seeing some of our inward investment leads given to us by Global Scots Network. Our last evaluation said that Global Scots helped Scottish companies to generate somewhere in the region of £30 million of additional business. We are trying to evaluate it as much as possible, but we are highly positioned in a lot of our key sectors and companies around the world, and we use them as much as we can. I think that we should be thanking them all very much. Thank you. Gillian Martin had a question or questions. I genuinely do have a supplementary question. Don't hesitate to follow up with a supplementary supplementary. I want to come back to something that you said earlier about identifying young people to start up in business. I convene a cross-party group called Women in Enterprise, and one of the things that we found out very early is that female graduates are one of the demographics that are not setting up in business related to what they are studying. As a former college lecturer myself, what I found with my students is that they were going into the world, graduating without any idea of how to set up in business. I wonder whether that is something that you are tackling in getting in early into colleges and universities at the point where people are graduating to assist them in looking at enterprises as a natural possible route. That is a very good question. I served on the board of the Princess Youth Business Trust for 10 years, so I have a huge passion in young people in starting up business. The issue of women going into business generally, we will tackle that if we get girls thinking about going into business now. This is not a specific limit of Scottish Enterprise, but we do as much as we can on that. A lot of our staff speak in schools, and I have done lean-in events for young girls. I am meeting tomorrow morning three young women who want to meet me and grill me. There are three of our graduates this year. I am considering a reverse mentoring programme with a young woman between the ages of 17 and 21. If we can do that as role models, that is really, really important. The Scottish Enterprise does not have a specific programme for young girls. Skills Development Scotland is working in this space. However, we have identified an area in which Scottish Enterprise could do more in targeting. The most risk-averse people in our society are probably people who are at the point when the cusp of leaving education and going out into the world. They do not have mortgages, they do not have families, they do not have responsibilities, and surely there could be a health housing opportunity there of encouraging that. I am satisfied with that in Scotland with all of our incubators. We are seeing a lot of young women. Increasing numbers of young women go into them all over Scotland. They are not run by Scottish Enterprise, but we work very closely with them. We have agreed a 10-point action plan with Women Enterprise Scotland on a whole range of things that we could do. One of the things that we could do is maybe better communication and marketing and role models. I would be very willing that, if there is anything specifically that I said that we are considering a special programme for a leadership programme for women and account managed companies. If there is anything that we could do that would evolve young girls, the other thing that we do is that we have mentoring Scotland. Actually, only a very small percentage of the mentors are women, less than 15 per cent, yet 30-odd participants and mentees, if you like, are women, so we need to match that. Scottish Enterprise, what we can do, Gillian, is to bring a lot of influence. Even if we are not delivering it, we can bring a lot of influence. We have a lot of reach, we can use our global Scots, so I would be very willing to see if there is anything else that we can do. We are working very closely with Women Enterprise Scotland on this 10-point action plan, and I participated in the investing women conference, so that was how young women can get start-up capital. That was the first of its kind, and we are working with them on how they could access international finance for that as well. Ownership and how different ownership models for businesses. Is that a factor in how you look at things? There is a bit of a push for should there be more social enterprises, should there be more co-operatives, or do you tend to favour the traditional one-owner or a group of owners or share owners or whatever? I am very interested in innovation around business models, and part of that is ownership. I spoke last year at the big employee ownership conference that we had in Scotland. Co-operative development Scotland is part of Scottish Enterprise. We are working with Social Enterprise Scotland now on a particular scaling programme on how we could scale up social enterprises. One of our renewable energy investment funds was to a housing association on community energy to reinvest into social housing. We work with the Homeless World Cup on their global ambitions. I think that a rich economy has many ownership models. Also, a big way to counteract some of the problems that family businesses have with succession when there are not family generation for the next generation is employee ownership. We have been working with a couple of great companies, engineering companies, who are moving to employee ownership. I can think of one company in East Kilbride, and getting as many role models as possible there. Employee ownership, social enterprises with global aspirations. However, although we do not have a specific community development role, I think that a rich economy has a very diverse economy, so we can bring our expertise to any of that, particularly in rural areas when we do that. Seeing that you mentioned HIE, because I was asking them about their social development strengthening community role, is that something that you think that you should have or that they do not need to have, or is it just too different? I would not presume ever to say what HIE should or should not have. I think that they are a fantastic organisation. Scottish Enterprise's role is economic development, particularly growth and transformative growth in sectors, in the business infrastructure and in companies, and then it is our job to influence as much else as possible. I am always very willing, John, to push the envelope for Scottish Enterprise as much as possible. We do not have a specific community development remit. Regional economic development was given to the local authorities and, as I said, small business and micro business development was given to business gateway. However, we participate in every single community planning partnership in our area. We are working with the city deals. We have done a tremendous amount of work with North Ayrshire, resulting in Team North Ayrshire, which is a great blueprint for how we can work with the wider community. I think that it is very important for the economy, and we will do everything that we can. However, community development is not a specific remit of Scottish Enterprise. If we go back to the ownership question, we were talking earlier on to previous questions about getting your money back out when you sell a stake. Does that suggest that there is a bias on Scottish Enterprise for businesses to sell out rather than continue to grow with a Scottish Headquarters? I see Sky Scanner as a failure because we have lost a Scottish Headquarters. I saw Scottish Power as a failure because we have lost a Scottish Headquarters. You are relaxed about that? I am rarely relaxed about anything, but we are in a global economy. We want to grow global Scottish businesses. We have Scottish businesses who go out and acquire other businesses all over the world. We are very happy about that and we are relaxed about that. The quid pro quo is that not every business that grows in Scotland will end up owned in Scotland. However, what Sky Scanner will have is allowing us access to a huge Chinese company for the first time. I will be seeking other investment from that. They are committed to Scotland as their European Headquarters. They are committed to growing Scotland. The trend is that most companies that are acquired have deeper pockets and they still grow in Scotland. That has been the trend. Although I would love all our companies to be Scottish owned and global, the reality of the world just is not like that. We want to do everything that we can to encourage that. However, to the first part of your question, a relatively modest part of what Scottish Enterprise does is to venture capital and risk capital in terms of our total budget. Most of our budget is supporting Scottish companies to grow. We are looking for a return on the risk capital because I do not want to lose public money. I want to get a return so that I can reinvest it. The other section that I wanted to look at was—we are looking at this in relation to the budget, so we are interested. We do not know what the budget is yet. However, how sensitive is the work that you do to a change in the budget? If your budget went up 5 per cent, could you do a lot more? Or would it just be tweaking things if your budget went down 5 per cent? Would that make a big impact? Or would it just mean tweaking things a little bit? I keep going back to what my job is. My job is to do always the best with whatever budget we are given and not to complain about it but just to get on with it. However, we are probably reaching the levels that we can get to in terms of efficiencies. We have tried to be as efficient as possible. We have tried to be as effective as possible. We could always invest more in helping companies to internationalise. For example, I have said that we have increased our offices' footprint internationally by a third. That is very expensive. That was several million pounds. If we wanted to significantly increase our international footprint, that would require additional budget. That would be an example. We would never just take a salami slicing approach, so a 5 per cent budget cut means we just cut everything 5 per cent. We would go back again and look at the things that are most likely to yield the biggest return for the Scottish economy, try to protect those and be as efficient as we can. However, it is not as easy as that. I think that I started by saying that even though our budget has increased by 16 per cent in real terms by 2008, we have done what we ask every business in Scotland to do. We have actually achieved more. There has to be limits to that, though. I wonder what the general attitude to Brexit is at the present time with your contacts with Scottish business? I can tell you that because we monitor it. Every quarter, we go out and speak to 500 companies to see how they are doing. I think that the general attitude is that businesses—I can get those specific numbers to you—are very uncertain about the general attitude that businesses are very uncertain and that they just still do not know how that will affect them. They tend to think that it will more negatively affect them. That is our economic trends review. It might be useful for the committee to get that every month. I would be very happy to give you that. It is just a snapshot of—I am not suggesting, Gil, that you can read it from here, but—if I could read it. The companies that we work with tend to be more positive by virtue of the fact that they are growing companies and that is why we are working with them. I have to say that up front. There is a lot of uncertainty. More of them think that Brexit will affect them negatively than positively. However, it is really important to understand that it does not affect all companies in the same way. It affects financial services companies greatly because of issues such as passporting and the movement of people. It does not affect some of our larger multinational companies so greatly because they are in lots of markets all over the world. It affects companies such as textiles companies and hospitality because of the movement of people. It depends on the sector, but there is a lot of uncertainty. Uncertainty is the enemy of confidence and a lack of confidence is the enemy to investment. That is why we are seeing this hesitancy and slowing down even for companies that might have some cash in the bank. I can understand that because I do not know if anybody really knows what Brexit actually means in the long term. However, the one thing that we do know is that when you touched on it, the strength of the pound, I am wondering with the feedback that you have got, how is that impacting right here now? Is it negative or is it positive? I can tell you about my business but I am nowhere to do that. I am wondering what you are getting back from Scottish Business. We are out actively encouraging companies where they are already exporting to really up the ante on exporting and take advantage of where we are with the pound because exporting is going to be more beneficial in terms of returns. Where companies book their currency and book their profits in other currency, that is quite advantageous to some of them, but those are just short-term gains. The import substitution issue is a real problem because that becomes much more expensive. Companies buy ingredients or raw materials or parts of the supply chain, but the optimist in me would say that it is our job to think of what we can do for Scottish companies to get into that supply chain. We have to be a bit more forensic about this. There is opportunity and there is a cost and we need to focus on the opportunity but be very realistic about the cost. In the oil and gas turn, we had to work with companies on the oil and gas supply chain just on their financial resilience. We have never seen that before, so we are used to doing this and, if companies are really struggling as a result of this, there is lots that we can do in advice to help them to eke out their cash, to help them to ride some of this out, to help them to be more efficient and we will do that as well as the opportunity side of it. Thank you. Liam Kerr. I am interested, like John Mason, in the forthcoming budget. I was interested in your opening remarks. You said that oil and gas have reached the bottom of that, but you will be aware that the EY Scottish item club report came out yesterday talking about the future for Aberdeen, in particular, saying that the oil and gas hub continues to be affected by fallen oil prices and that total employment in the city is expected to fall by 1.6 per cent in 2016 and 4,000 through to 2019. What is Scottish Enterprise's response to that? You have just said that you have done quite a lot of work on financial resilience up to this point, but this is obviously new information. Does the news change your spending and budgeting allocation in your projections going forward? For oil and gas specifically. Sure. Offer to the north-east for Aberdeen. I also have the privilege of chairing Scotland's oil and gas jobs task force. I go to Aberdeen tomorrow for two days. I have spent probably more time in Aberdeen in the last year than I certainly have in the city I live in, so it has been really important. We have just redirected a massive amount of people and budgetary resource. We have worked with 700 companies in the oil and gas supply chain. We have had a whole series of events in Scotland. We have got a pipeline of about 30 innovation projects in Aberdeen at the moment. We have worked with Ian Wood in his team on the new one north-east board, and we are on that board. We have worked on the city deal. We are working on diversifying food and drink, tourism and life sciences. I think that there are huge opportunities for Aberdeen to be the world's global hub for all technology around sub-sea. Even when the oil is gone in 40, 50 years time, we should be the global hub for sub-sea. There are massive opportunities in decommissioning. I have met with 30 companies specifically. I go and meet Nexon tomorrow. As I say, I chair the task force. We are doing absolutely everything that we can because oil and gas and food and drink have been to massively important sectors for Scotland. I have been an advocate of don't waste a crisis, so use this terrible time to be more efficient, more effective, help the industry to become more cohesive, more collaborative, more standardisation of products. I have had three trade union representatives on the task force, working on workforce relations. We have a fact sheet on everything that the task force has achieved, and I am happy to get that to the committee as well. The reality of this is that it has been very challenging, but I have never seen such collaboration from an industry for a very long time. I think that this is focusing the minds on the other opportunities that I have mentioned in the other sectors for the north-east as well. It is really encouraging. It is good to hear that. In the budget round, you have projected on the current situation and how it looks like it is going to develop, but we have had the news now that there may be more to come. Does that mean that you will need more budget from the Government to carry out all those good measures? I have asked everybody and I want to thank all political parties because we have largely resisted it. I begged everyone not to make the task force a political football because we are just trying to do everything that we can for the sector. My job is also to get other people to spend the money, if possible, and for it not to be Scottish Enterprise, so encouraging the industry to step up, working with Skills Development Scotland to redirect their budget, and they have been absolutely terrific at working hand in hand with Highlands and Enterprise. Often, it is not just about throwing extra budget at something that is about a level of collaboration and being more efficient. The Oil and Gas UK is working with them to see what we can do through their members, the Oil and Gas Authority, who are also on the task force. I do not jump to increase budget as the first answer, but it is my job also to find opportunities that can only be matched by budget, so it is my job to talk to the Government about how we might meet that. So far, I cannot say that we are not able to do anything because of a lack of budget so far. Just one final quick question, just to clarify something for me. We have been looking at the Enterprise and Skills review. There will be the creation of the new South of Scotland agency. How does that impact on Scottish Enterprise? In terms of budget, how will that be funded for? Is there any risk that it comes out of your pot? I cannot answer that because we do not have the answers to that yet. I suppose that that is all to be worked through and we will work very closely with it in the next stage of the review. Scottish Enterprise does a great deal in the South of Scotland. We account manage a significant number of companies in the South of Scotland. We work with the South of Scotland Alliance. Actually, Ian is our most senior representative. We have someone on our top team covering important areas and Ian covers the South of Scotland, so he may wish to add to that, but we are not at the stage where we know anything about budgets yet. Scottish Enterprise spends £6 million a year in the high region. Scottish Enterprise is currently the national agency, so Scottish Investment Bank, the Manufacturing Advisory Service, the Reef Fund and Scottish Filming International are all pan-Scotland services. I would imagine that that would continue, so it is really important that you understand that Scottish Enterprise also covers the whole of Scotland from much of what we do. There is strength in that national approach, but we still have to work that detail out. Do you want to add anything, Ian? If I can maybe add a couple of things. On your last point, it is about just over 50 per cent of Scottish Enterprise's operational budgets are available, and pan-Scotland at the moment is available in the Highlands and Islands region. I cannot imagine that anybody would not want those available in the South of Scotland region going forward, as Lina says. SDI, the Scottish Investment Bank, S-Mass and a number of others cover that. I have had initial discussions with both councils now. I was at a South of Scotland alliance meeting yesterday, and it is just too early to say as to what that vehicle may evolve into. However, there have been good discussions about making sure that it was very focused for the key issues that are unique to the South of Scotland, and that Scottish Enterprise maybe has not focused as much on the past. It should absolutely be focusing on that, but not losing the integration that it can have with the wider sector team experience and some of the other operations that Scottish Enterprise continues with. I am sure that we will work together with the Government to come up with a good answer that will be a model, perhaps even for other areas in the country thereafter. Julian Martin I supplementary to Mr Kerr's question about oil and gas. It is afternoon that you will be aware that we are having a debate on renewable energy, and the emerging energy technology in Scotland has a massive opportunity to capitalise on that with the skills base that we have in the north-east. Looking at diversification into new markets for people in the north-east from the oil and gas industry, what has been done to maximise the opportunity that there may be is for construction, manufacture and working in the renewable sector, particularly in tidal, given that we really have a head start on that? We have been doing quite a lot in tidal. The Maidgen project, which is the first commercially operating tidal project, the UK environment for energy policy has changed, brought some uncertainty into the future of that. Offshore wind, in terms of offshore wind platforms, if you look at stat oil and what they are planning for the north-east in terms of those floating offshore wind platforms, there is a lot going on in renewables. One of the positive factors of the last year with the oil and gas companies is that many of them are now looking to utilise their skills in renewables. We knew that the application of oil and gas, experience and technology could reduce the cost in renewables by about 25 per cent, and we had to bring those costs down to make it a reality, but now I see more of the oil and gas companies themselves going into that. We work very closely with Scottish renewables because a lot of the skills are transferable as well. I think that tidal offshore wind is too important. Carbon capture and storage, and then you go in off renewables into the decommissioning opportunities as well, so we are working on all of those. Renewables is not just for the north-east of Scotland, renewables down in Hunterson with the Fife energy park with the turbine, so it is something Scotland. We have 25 per cent of Europe's wind on our coastlines. You look at a country such as Denmark, which is a world leader in wind technology, and a lot of Danish companies are coming over to Scotland to use our natural resources. What do you think could be done in Scotland to ensure that we become a world leader in tidal technology in the way that Denmark has manufacturing the hardware in Denmark and then exporting that to other countries? What opportunities do you see there for Scottish companies? Currently, we are a world leader in the technology and the knowledge around weaving tidal. In AEMEC, in Orkney, the European Marine Energy Centre, we have a world-class facility there. We have probably got some of the world's world-class test and demonstration facilities. We have got the best university knowledge, some of the stuff that Strathclyde, for example, Robert Gordon and Aberdeen are doing around renewables, Harriet Watt, Edinburgh. We are world-class, and our job is to make sure that as much of that as possible is commercialised in Scotland. A lot of that investment is pre-commercial, so it is risky and it will not all work. We saw that with some of the wave investment that we made, but as a country we have to go for this. I see that this is still very important for Scotland as part of our overall blended energy portfolio for our energy mix, as well as our economic advantage. We are a world leader in the technology and the innovation, but in the manufacturing side, there is not, to my mind, enough manufacturing of the hardware that has been done in Scotland, which is a traditional engineering and construction world leader, shipbuilding, oil and gas, and now we could potentially be in renewables. What has been done there to attract the contracts? For example, we have got contracts with Scottish companies, but they have been manufactured in Belfast. What has been done to get that construction here? We need to make sure that we are building the supply chain here, we are building the opportunities here, so we will be working with, for example, Statoil on an open innovation programme to see what kind of technology we would need and to see if Scotland can respond to that through the supply chain. Our board has made a very significant decision to make a significant on-going investment in Fife energy park that would put better loading into that site and do a lot of stuff on the key side, because a lot of it is infrastructural. Those would be examples of the kind of things that we are doing—infrastructural, supply chain development—and then matching that with our inward investment opportunities. CS Wind would be a very good example of bringing a Chinese investment to Scotland in that field. To encourage that, what would be your key asks of both the Governments in order to facilitate that? I think that we have done very well in Scotland by pinning our colours to the mass here and saying that that is a country. We have had policies and targets around renewable energy, and we have matched our economic development to that. When Amber Rudd was the Secretary of State for a DECC, I went down and met her and petitioned on behalf of Scotland, because I think that the way the UK policy is going is quite challenging for us in that regard. I would ask that we do everything we can to influence the right kind of policies that allow this to be financially viable and allow this early-stage development to be financially viable. Can I return to exports? I understand absolutely that SEs have a role in providing funding and having an overview of SDIs, and therefore are in the lead on exporting. Obviously, Scotland's economic strategy had a target of increasing exports by 50 per cent by 2017, and as I remarked earlier, that is but a few weeks away. How is your budget aligned to deliver on that? I think that I maybe picked up you asking Charlotte some of that. I was making a note jacket to try to disaggregate that for you while I was sitting there, but I did not have the resource to do it. We do not manage our budget in that way that we would have a pot for exporting and a pot for export, because we have a very blended approach to our account-managed companies where we are just trying to do everything possible to make them grow. Obviously, we have put a lot more money into SDIs because we rely on too few exporters. You would be amazed to know that under 100 companies probably account for 90 per cent of Scotland's exports, so the trick really is to get many thousands of companies exporting. That is why we have gone to another 1,000 companies over 2,000 companies each last year. I can get you the figure for that. We are throwing everything at it that we possibly can, but it is really important that we do not just see this as an exporting pot, for encouraging the new companies to export, but that it is much more complex and sophisticated than that in terms of how you get a company to be ready to export. You have to have the right product for the right market, the right leadership team, the right financial resources, and the worst thing that we could ever do is encourage a company to go into an export market—we have discussed this before—where it just was not ready to do that because it will fail. Charlotte said earlier that it takes some time to do that. I have said this at the time that I am always a fan of a big, hairy target that is challenging and that you might not reach than an easy target that you surpass. We should, as a country, set stretching targets, hold people to account and do everything that we can to achieve them. We have to understand the circumstances because Scottish Enterprise is looking at only two targets that we might not make this year. One is foreign direct investment and the other is exporting. That is wholly down to the global environment that we are in in the world and the levels of uncertainty that I spoke about earlier. If people want to beat me up for that, that is fine, but that is where we are. It does not stop us going for it, but it is going to be challenging. I accept some of that. The target was from 2010 to 2017, so the challenging global conditions did not really exist to that same degree before now. I am curious as to whether it seems to be an admission that we are not going to meet the target. As policy makers, we need to understand why in order that we can set equally challenging and ambitious targets in the future, but ones that people might be able to achieve. I am interested in what budget is applied to this. Your own business plan for 2015-18 gives SDI, I think, £42 million this year and £43 million next year. The First Minister has made announcements around priorities that she would like to see in terms of doubling the European exporting staff from 20 to 40. Are you anticipating new funding from the Scottish Government to cover that in its entirety, or are you expected to provide any in-kind support? I am expecting 100 per cent additional funding for those new markets and new resources. I would point out, though, that 2010 was just a year after the financial crisis, too. It was very challenging. I think that we have come very far in exporting. I will never be satisfied with how we are doing in it, but we will never get to exporting unless we all work on the levels of ambition in business, in young people, in the country. That underpins absolutely everything. Can I pick you up on foreign direct investment? You said that you are likely not to meet your target for that. Can you refresh my memory of what the target was and what the reason is that you have not been able to achieve it, just as we understand it? For the last seven years, Scotland has topped the UK for foreign direct investment. We have more than punched above our weight. When you consistently punch above your weight, there will be one year in which that is not going to happen. Ian is going to refresh my memory of what our specific target for that is. We said that, by 2018, we will have attracted between 22,000 and 28,000 planned jobs for the consumer investment. For 2016-17, we would have attracted between 7,000 and 9,000 jobs. We may meet it, but it will be at the bottom of the range. It is the global environment. Foreign direct investment throughout the whole world is going to change this year, it is going to fall. We are seeing more protectionist policies from the US, we are seeing more domestic agenda from China, there is the uncertainty around Europe, the UK is a destination for countries, companies looking for Europe. It is just much more challenging, but Scotland has done remarkably well in foreign direct investment in the last seven or so years. Top region outside London has the highest amount of R&D per capita for foreign direct investments, so we have done very, very well. I turn to productivity. Obviously, there is a national performance target here. The top quartile of OECD countries for productivity was the ambition by 2017. It looks like we are going to remain at 19th, which is well off pace, it is in the third quartile. What was your contribution to productivity and where did we go wrong here as well? This is a real challenge for Scotland. Ambition and productivity are the crux. I think that Charlotte said that there are some structural aspects to that in our economy, so where is Scottish Enterprise? Productivity is a blend of many things. It is a blend of innovation and investment. If you look at where we are in terms of business innovation, we would need a 200 per cent increase on our innovation levels to get us to the top quartile. That has a big effect on productivity. We know that companies that export are likely to be more productive because they are competing against best-in-class, so the fact that we do not have enough exporters is a place to that as well. The fact that we have so many micro businesses in our economy does not get the scale. We do everything that we can with companies through things such as the Scottish Manufacturing Advisory Service, which works on productivity, our workforce innovation, because treating your employees better, fairer work tends to be more productive. We are training all of our account managers in that, and I am talking to all the companies about that. The 102 RSA awards that we have made since February last year, all of those companies have signed up to an invest in young people plan. That is going to help productivity. By the end of this year, we have launched productivity plans for the food and drink sector, tourism and construction. Those are three high employment sectors in Scotland that have significantly lagged behind in productivity, so we are now working with them at a sectoral level to address that. Those are some of the things that we are doing, but we are all going to have to work very hard at this. I wonder whether it is not just a sectoral level, but also a regional level, because I am conscious that we have had world-class productivity gains in oil and gas as a consequence of the downturn. However, if you compare the GVA for Aberdeen as opposed to Glasgow, there is a significant difference there, so I wonder as well as sectors whether there is a regional approach as well. I think that the city dealing in Glasgow is a great opportunity around the focus on innovation, for example, because we know that that leads to greater productivity. The work that we have done with the Three Ayrshire councils is that we have ended up with more companies into the account management pipeline, which means that those companies are inherently more productive. There is a lot that we can do. I have always said that there is no secret sauce in Scottish Enterprise. I will give away all of our knowledge, all of our expertise, the taxpayer owns this to anybody who wants to understand and work with it. We have worked very successfully with some local authorities on the particular local and regional challenges. A factor in productivity is also your ability to connect with—transport is really important—so the ability to connect with Glasgow or Edinburgh becomes very important. It is not about taking always productivity opportunities to every part of Scotland. We will never succeed if that is our mentality. Okay. Finally, convener, it does not require a response, but I know that you do do a gender impact analysis of your budget. I wonder whether you could provide that to the committee as we scrutinise the budget when it eventually comes out? We do do that, yes, and I am very happy to do that. I am also happy to say that 56 per cent of my top team is female, 47 per cent of the wider leadership is female, and nearly 60 per cent of our board is female. I believe in leading from the front on that regard. When I became chief executive seven years ago, I was the only woman on the top team. Does that mean that your gender imbalance is the wrong way in another sense this time? Pendulum swing all the time, do not they? I always say that it is really important to our young graduates that young men feel very valued and boys feel very valued too, but let us face the fact that women are underrepresented in the economy, and we are 51 per cent of the population. In simple terms, we are just missing a terrific asset that I want to make sure we exploit. The point that I was making is perhaps that things come and go, and it is not always a 50-50 precisely gender balance, but merit and ability also play a part. I am an inherent meritocrat. I get the best people, but I encourage everybody to fulfil their potential. When we do that, truly, we will have balanced workplaces anyway. Come on to Richard Leonard now. A specific budgetary point, which I will come on to in a second, but just on the subject of pendulums and something that John Mason was alluding to earlier on, do you not get any, are you not concerned at all with the fact that 34.6 per cent of the Scottish economy is now externally owned, overseas owned, compared to a UK average of 27 per cent? The south-west of England is 20 per cent, the next nearest to us is the west midlands of England with 30 per cent. Does that not cause you any concern whatsoever? We cannot on the one hand say that we are doing brilliantly well on foreign direct investment and that Scotland is a brilliant place with rich assets to exploit if we are going to complain that we have too much foreign ownership. We have to decide what we are, so it would worry me if those companies were just coming because we were cheap, because they could make a fast buck and go, but they are coming to invest in our assets, our people, our natural resource, our universities. They are a massive contributor to our exports, they are a massive developer of our supply chain, they employ most of our graduates and lead from the front. They become intrinsically Scottish companies. If you are here in Scotland, you are a Scottish company. Our track record is not that those companies take flight, it is that they continue to invest. I am not blasia about anything. My job is to maximise the Scottish economy. Would I love it if we had so many global homegrown companies in Scotland that there was no room for foreign direct investment? Of course I would, but we have to be realistic. We do very well in high-value jobs. We have seen the highest growth in the UK for high-value jobs and are indeed jobs as a result of foreign direct investment. That tells me that that is a terrific investment in the economy, not a fly-by-night investment. You are a long time in economic development and you know that the electronics industry, for example, came and went. A lot of the claims that you have dislaid about the current crop of inward investors was attributed to the electronics industry and that went. May I challenge you on that? I worked for that electronics industry. My first job was an inward investment, as was my sister's, who was in semiconductors. Those came for cheap labour. That is not why foreign direct investment comes to Scotland now. When we were making most of Europe's computers, it was because we were cheaper than other countries. Then Czechoslovakia became cheaper, and Asia became cheaper. We have moved up the value chain. We have learned a lot. Our first call centres were just to get people a start and a ladder. Now we have tri-lingual, bi-lingual, tri-lingual technical support centres. Now we do not manufacture computers, but we are the heart of software development. IBM has now got several thousand people in software development. Hewlett-Packard that used to manufacture computers is cyber security, software development. We have moved up the value chain considerably through foreign direct investment. We have learned a lot. We have given a lot of people who have lost their jobs in the industrial decline in Scotland new jobs in the 50s, 60s, 70s and 80s. I have not been around that long, but I have been around since the 80s. That is a valid point that you make about that manufacturing environment. I have worked for two of those companies, but we have significantly up the value chain now. In life sciences, in energy, in software, in technology, in financial services, 50 per cent of all the financial services that come to Glasgow are, as a result of US investment, and they are largely there to support the fall of the sun, global investment, down to our skills base. So you do not have any concerns about whether you are going to be a branch plan economy? You are trying to pigeon home me to one or the other, and I do think that that is fair. My job on all of our behalf is to get the best value for the Scottish economy. I believe that our strategy is that. I believe that the foreign direct investment that comes to Scotland is very high value and is here to invest in Scotland. It is not either or. At the same time, we must do everything that we can to grow Scottish global firms. I do not want either or. I want both. I want everything for the Scottish economy, for my children, your children, so I think that it is unfair to be as black and white as that. I will move on to another issue in which I will try not to be black and white, but forgive me if I am. You said earlier on about the importance of supporting local and regional economies. We have been to California during the course of the last hour, but can I bring us back to Causyside Street in Paisley? You are closing the Paisley office, the district office of the Scottish Enterprise. I wonder whether—I suppose, as I understand it by Renfrewshire Council, the PCS trade union and so on. My question is, one, why are you doing that? Is that as a result of the budgetary constraints that you face? Secondly, what are your plans for the other 11 district offices that you have? I will start at the end. We have no plans to close any other offices, and then I will start at the beginning. PCS supported this as part of our collective bargaining. They then came out and did some stuff with the press, which was unfortunate, but I have all the documentation. We consulted them fully and they supported it early on. This building has got health issues. It is old, we rattle around in it, it is not safe for our staff, it is overly expensive from an energy resource and not even six miles away we have an office in Clydebank, an office in Glasgow and lots of space. We are not cutting any of the resource that we spend in Paisley or Renfrewshire. We are looking to join with our partners, whether it be the council or Skills Development Scotland or whoever it be, for hot desks or for any staff that are there. Most of our staff do not work from an office, they are out with their customers and out with their clients. I am just trying to do what any business would do, be as efficient as possible, no customer will suffer, no client will suffer, no opportunity will be missed. If someone needs a desk in Paisley, we will work with one of our partners to get it and we have lots of other offices nearby as well. The building itself is very costly and not safe and it is my duty of care not to keep it anymore on behalf of the taxpayer and on behalf of our staff. If we are going to have the attitude that we have to have an office everywhere all the time when we are such a small country, most of our staff now work all over Scotland. They may be just based from one office, but they work all over Scotland. Nick Shields, who is our director of our Scottish Manufacturing Advisory Service, is notionally based from Paisley, but he works all over Scotland all the time. We do not have little close boundaries around parts of Scotland now. We use our talents to work throughout Scotland. If that is your approach, why should the people who live around the other 11 offices be confident in their future? I have told them that I have no plans to close any other offices. We have a massive approach to staff engagement. We are one of the few public sector companies in the Sunday Times and top 100 places to work for. We care about our staff, we have healthy working lives gold, we have investors in people gold and I have met about 600 staff in the last three months on a range of meet-lena sessions, meet our staff and I have told them that we have no plans and I am not in the habit of telling lies. Just to go back to your previous point, and I will try not to ask a pendulum question, is your point that Scottish companies abroad or need foreign companies investing here, there can be mutual benefit? It is not a simple matter of a company coming from abroad and taking from Scotland or a Scottish company doing the same abroad, but in fact trade and those sorts of things can be of mutual benefit to countries depending on how companies conduct themselves. Yes, and ultimately I think my only point is that we are in a global economy, so I do not want to appear that I am relaxed about anything, that I do not care. The job is if you anchor investment in Scotland then because of our assets it is less likely to go. Let's remember that there are a number of Scottish companies that have faced the wall in the last year and an overseas buyer has come in, injected capital and helped them to stay and helped the job to stay as well. Thank you. Gordon MacDonald. Thank you very much, convener. Earlier on you said that despite the lower budget you have achieved more, but one of the submissions to enterprise reviews from a Mackay consultant said that I believe that Scottish Enterprise in Highlands and Islands Enterprise have generally made very good use of their budgets, but their contributions to Scotland's economic performance have declined recently. I am just wondering if that was your view and what the reasons would that be for? I do not hold that view. I do realise that I have a job that most people have an opinion for and many people think that they could make a better fist of it, so I welcome—there was a lot of opinions given in that, but the facts remain that I said earlier on that Scottish Enterprise has helped to create over the last four years or so 55,000 jobs. Our investment for every pound that we have invested, we generate about £9 back. The Audit Scotland review said that we are very good value for money, governed well and have a transparent and serious impact on the economy, but I welcome any challenge on how to do it better, any data, any evidence, if there is a better way to do it. I do not know it, I would be very willing to look at it. In terms of the 55,000 jobs that you mentioned and also the fact that there has been a growth in export sales, another comment from a different organisation said that the model adopted for grant-based funding is one based on number of jobs as opposed to amount of investment for capital investment processes such as agricultural chemicals productions. That is a disadvantage, even though the amount of export sales is considerable. Is that competing demands? If so, what takes priority? What I do not know is specifically who that was from and what kind of grants they were talking about. Our innovation grants would be around the kind of things that you talked about. RSA, regional selective assistance, which is a European grant, is obviously jobs-based, so it depends on what we were talking about. The one thing that I want to do is make sure that our grants process is as least cumbersome as possible, as transparent and easy, so we are doing a lot of work with customers to make that faster and more digital. I am happy to talk to you, but I do not know the specific grant. If it was RSA, that is jobs outcome, and that is a European issue. In terms of growing the Scottish economy, what research is carried out by Scottish Enterprise in order to identify where the growth areas are and where you should be putting that level of support in? We have 85 people, not in Scotland and around the world, and we use them a great deal for intelligence. We connect with our universities all over the world, we use our global Scots, we have a world-class economics research and evaluation team, and we work with all the growth sectors on a plan for each sector that identifies global opportunities. It is no point just to identify global opportunities, but we do not have to understand what Scottish assets we have that we can exploit. Our job is to find disproportionate growth in the world and match it to a Scottish asset and then to explore it. Again, another contribution said that this is in relation to support to make it simpler and clearer and help to deliver Scotland's vision. It says, I rarely see Scottish Enterprise or other agencies leveraging best-in-class techniques used in other places or publish studies on enterprise and skills support. Instead, I see all those agencies to be too keen to commission their own novel research, which generally involves asking, relatively speaking, non-experts for their opinions rather than evidence-based analysis. Given the pressure on your budget, is that a fair criticism? I do not know because I do not know who it was from, was it anonymous, what was the detail? There were 600 nods of opinions given to that. My attitude would be to sit and meet with anybody who had a better way of doing that. We do not spend a lot of money on other experts, and we have our own evaluation team. I am quite obsessed with evidence because it is often the only thing that I have to explain why we do one thing and not another. If you bring it back to the GVA, what is the gross value to the economy? That leads to Scottish Enterprise to make our investments. If someone does not get money from us, I can understand and sometimes they understandably get annoyed at that, but I would be happy to improve, but I do not recognise it as a theme that other customers tell us. Thank you very much to both of our witnesses, Dr Lena Wilson and Ian Scott. Thank you very much for coming in today. I am not sure of the correct word. I move into private session now, so I would ask those in the public gallery to leave at this point. Thank you very much.