 Welcome to the 7th meeting of the Economy, Jobs and Fair Work Committee for 2018. I may ask everyone, particularly in the public gallery, to check that all electrical devices are on silent so that they do not interfere with this morning's proceedings. Item 1 is a decision by the committee to take items 3 and 4 in private. We all agreed. We continue our inquiry into Scotland's economic performance. This morning, we have Norah Sr, the chair of the strategic board for enterprise and skills, as our guest. Good morning to you and thank you for coming in today. I would remind members to keep their questions succinct and also that if there is any issue that you feel you have not been able to cover adequately, you can feel free to submit in writing to the committee following the session. The microphones will be operated by broadcasting, so no need to press any buttons. I will start with a general question, and that is perhaps if you could give us an update on the development of the strategic board. The strategic board has met twice. The board was formally brought together on 13 December. Our first meeting focused in on looking at the economic context that is prevalent in Scotland at the moment, so taking into consideration Scotland's economic strategy, growth commission, fiscal commission, national performance framework, looking at the performance gaps between Scotland and the OECD countries, and looking at the policy and political context in which the agencies are operating. We also had an overview and insight into each of the agencies and what their particular areas of intervention were. It was felt that that was something that we had to do. We have a board that comes from a diverse range of businesses and other sectors, so we thought that it was necessary that we all had an understanding of Scotland's framework and agenda. The second meeting was held in January. That was a strategy day where there was the opportunity to have more of a discussion around topics for us as a board to look at key areas of challenge, priority and areas that we would like to look at in greater detail. There were a number of areas that we identified, everything from skills alignment through to future skills needs reskilling, also looking at the work that is already happening in those areas and finding out what other information we would need around the context of work happening in those areas, not just by the agencies but by other organisations and indeed by government. There were a number of outputs that we had on that. It became quite obvious that there was a difference in the planning timetables of the different agencies, so a piece of work has been done in the interim to look at aligning the planning timetables of the agencies that has now been done. The board adopted the actions or work streams that had been identified within the interim plan, which the implementation group had worked on and published last November. The board agreed to endorse the work streams within that around collaborative working, so that the agencies could keep the momentum up in terms of the work that they are already doing in closer working together across a number of areas. That is probably where we are at in terms of where the board is at the moment. You talked about various things in your initial answer. In the coming months, if you could tell us what the priorities are, you said that you would endorse the work streams, so maybe you could expand a wee bit on that as to how the board is going forward in the next few months. The current interventions are around the five key pillars of skills, innovation, investment, internationalisation and enterprise. I think that the board is very keen to look at any strategic plan being centred upon the customer experience or the learner journey. What tends to happen at the moment, and that is why there is always feedback, I think, and indeed some of you at the last panel members, I know, reflected on the fact that sometimes they have a disjointed experience as a business or a learner going through the system. The board is keen to look at how we can make this a much more seamless process, much more joined-up experience for a business to go through, particularly given the make-up of Scotland's workforce and business community, where we have a predominance of small, medium-sized enterprises and indeed micro-businesses. Those businesses are under great time constraints, and they are very focused on their own profitability and productivity, keeping the doors open, as it were, so that they do not have the bandwidth to be able to look at different or go through different systems every time they need to or they want to develop, so that one of the priorities will be on making that customer or learner journey much more seamless for the user. Another priority is to engage with some of the work that is already being undertaken, and not just looking at the alignment of the agencies, as I said, but also looking at alignment of government. One of the areas that the board looked at was digital. We feel that that is one of the key priority areas that needs to be looked at in terms of both existing and future skills. As we looked at some of the context around the whole digital discussion, the agencies are doing some work, such as SDS, SFC, colleges and digital enablement. The Government also has its digital skills, capacity and digital challenge fund. There is a confusion there about where, again, a business would go in order to get the kind of help and support that they might well need in order to develop to the next step. One of the other areas of focus will be on building up our base of evidence. We feel that there is, to a large degree, a lot of data, an enormous amount of data, but most of the agencies use the data for preparing their own plans. There is not a central focus and not a sharing of data to use it in the sense that I might say that you could use it as an effective big data analytics type exercise. We are looking at how we can build our analytic capability not just as a comparator with the UK but more broadly on a global playing field. We feel that, going forward, that is where some of our needs are going to be. Customer journey, gathering evidence and honing in on the areas of focus that we want to develop as part of the strategic plan. That is very helpful, thank you. Just looking at those strategic priorities and performance targets, the interim strategic plan published and looked at some of the performance targets and the performance gaps in the Scottish economy. Some gaps were identified in internationalisation, innovation and investment in terms of what is needed to take Scotland to the top quartile of OECD countries. Can you talk us through what will be done differently going forward to make that step change in economic performance to take us from where we are right now to the target, the first quartile? Is that a viable target to reach the first quartile? That is a very interesting question. It is one that the board is obviously discussing probably at length at the moment. There are challenges around OECD gaps and the countries who are in that upper quartile, who obviously have a different economic mix than Scotland. If we look at Norway, Denmark and Ireland who are all in that upper quartile, those are fast-growing economies that Norway has focused their economic strategy around oil and gas and energy. Ireland has focused it around exports and attracting large companies that they can then hub in Ireland, where they grow small clusters of other companies around about them. Their economic make-up is quite different, because Scotland is more of a low-wage, medium-to-higher-skill economy. The challenges around productivity, sustainability and so on are going to be challenging, I think. We have to remember that those top OECD countries, as they keep growing because they are not going to stop, Scotland is going to have to work even harder to get up into that to keep pace. The challenge is, could Scotland grow at least 1 per cent faster than those other growing economies who are in the upper quartile of OECD countries? Not my gut feel, but I know and I'm sure Mr Roy would support that. There is no other advanced economy at the moment that is growing at that rate that it would overtake or at least get on a par with that. The challenge is that the aspiration is right, but I think that the reality of reaching or closing some of those productivity gaps is that the gap is always going to stay or be challenging to close or indeed overtake. I think that there are challenges around that. Part of that is understanding what the gap analysis is around where we are in terms of productivity or sustainability or inclusive growth. Of course, Scotland is looking at inclusive growth as one of the criteria to make it the best society, but that's not necessarily one of the criteria that are included in top OECD countries. I think that the aim will be to look at the objectives of where we want to get to and create a goal that is achievable, which will drive productivity and closer alignment across the agencies and will have an effect on inclusive growth, but productivity and inclusive growth are slightly different. I follow up on those two points. Productivity was given as one of the reasons by the SFC for the challenging forecast over the next four years. We have seen in the past eight quarters productivity in Scotland declining, whereas in the rest of the UK it has started to increase over the last two quarters. What are the particular reasons in the Scottish economy that productivity is so challenging? In terms of inclusive growth, that is obviously one of the core pillars of the economic strategy. We have heard from different witnesses that inclusive growth can mean different things to different people. Is there a recognised definition of inclusive growth that is used by the boards and the agencies? Taking your first point, productivity and the challenges around that. Again, productivity, I think that there are many reasons why I am not an economist. Those are more my opinions rather than those of the board, because we haven't got to that part where we have been able to sit and drill down into our final definitions of some of those. In terms of productivity and challenges, Scotland has one of the lowest investments by business in not just in R&D but in innovation and in training and skills, and the adoption of digital technology. Many of you may have heard me say before that 87 per cent of our businesses in Scotland have a website and use email and think that they are digitally or technology enabled. If we look at the percentage of businesses that adopt customer relationship management or supply chain management or resource planning, we have between 7 per cent and 9 per cent of businesses who will adopt those types of programmes and embed digital into their businesses. Our competitor countries and those Scandinavian countries that I mentioned, their minimum is 43 per cent, so there is already a huge chasm, if you like, in terms of business approach to it. I do not think that that is something that the agencies will be able to flick a switch in suddenly business. I think that there are certain areas where we need to focus in on in terms of skilling and reskilling. In terms of productivity, for those companies who have adopted technology automation, for instance, that has resulted in job losses. Although some individual companies may become more productive, when you look at the average and the GDP per capita as one of those measurements, we are still behind the curve. Measurements will have to change in terms of how we look at productivity. Maybe we move away from GDP or we look at GDP per capita and make a measurement of raising wages by x amount by x amount of time. There is still some discussion to be had round about that. Inclusive growth means different things to different people. We have not bottomed out as yet whether inclusive growth means is it the whole of Scotland on a par. Does it mean that some areas can have better quality jobs, high-skilled jobs while others suffer more? There is a discussion to be had around the definition of inclusive growth, whether it is focused on gender, on geography and on generation. We have not reached a final conclusion on that. The strategic border was set up to a line and streamline enterprise policy across Scotland. We then had the announcement of the Scottish National Investment Bank. It might be early days, but do you have a sense of how the bodies will interact and work together? Particularly around growing companies, I see that there will be a very close working together. There are some areas that we are looking at, say, around gender and getting women back into business. Some of the Government programmes at the moment only start or don't start early enough to allow women to get back to the workplace. Social enterprises are kind of on the cusp at the moment. They do not fall into any one criteria box for investment, so some social enterprises really struggle to get the investment that they need to grow. It would be really helpful if there was a mechanism whereby I have an instance of a company in Dundee where it is a social enterprise that is very focused on early years childcare. It would like to expand, but it cannot get the financial backing because it is mentoring or business mentoring that it perhaps needs in order to take its enterprise to the next stage. Because of what it provides, it would make a complete economic sense to me to support that type of business that could provide a service at lower cost for women who want to get back into work. That ignites another part of the economy. That is where I see that there is particularly for growing companies that there would be more overlap in feeding into one another. We have talked about productivity and the difficulty of getting into that top quartile. We heard evidence last week that seven countries have been in that top quartile for a long number of years. Just to put it in a bit of context, could you say what quartile Scotland is in and other countries that are in the same quartile as Scotland? Scotland is about 17th in the rankings. There are some areas in which Scotland ranks quite highly, but we do not rank highly in digital, we do not rank highly in investing in our mid-growth companies. Part of the problem is that we do not have a significant amount of mid-growth companies. For some criteria, we are in second quartile, some in third quartile, and some we are operating in the upper quartile. On average, we probably are more in the second or upper third quartile. Is that the same quartile as countries such as Austria, Finland, Italy etc? Well, I suppose that it changes. I am trying to think who we would most align ourselves with. When you say that some of those countries in the top quartile are the ones that have been there for ages, there are some newcomers in there as well, such as Singapore and Ireland. It does fluctuate and it does change based on… Although we are probably more rank below Austria, our aspiration should not be to look at those kind of countries that we are already on a par with. It is to look at what are the countries that are in the upper quartile, what lessons can we learn from them and what are the areas that we could look at as… I am just trying to identify having heard the evidence last week about a large number of companies that have been in that top quartile for a long number of years. We are in the second quartile for a whole range of reasons, including productivity and GDP per capita etc. Obviously, these countries that are in the second quartile have the same aspiration as Scotland to try and be in that top quartile. While we may rank slightly lower than Austria, there are a whole range of countries that are larger than Scotland that are in the same quartile as Scotland. I am just trying to put where Scotland is in context. I think that I would have to refer to our economist to give us more background information. As I say, I am not an economist but I am more than happy to put that forward to you if you want some more specifics about comparators between each of those countries. We have some comparison material, but the reality is that it goes back to, is OECD the right measurement that we ought to be looking at? Is it the right framework for Scotland to operate in? Scotland's make-up and workforce are very different and the economic environment in which it competes is very different as well. Going back to your question, is OECD the right measurement? It is a measurement, but it is one of a series of measurements. I would like to pick on some of the things that you were saying in response to Dean Lock, how you were talking about skills and upscaling and you mentioned that in your first answer. Do you feel that there is enough links with FE and HE with businesses? I tend to get the feeling that people upskill and re-skill when they reach a crisis in a situation, whether they might be lost at their job or they cannot find work, when in fact there could be closer links between the two, almost like a shared CPD between businesses. Is that something that you have been looking at? It is quite difficult for people to upskill when they are holding down a job. Unless the business supports them in doing it. At the moment, there is not enough training budget given by businesses in general towards upscaling or re-skilling. It goes back to the adoption probably of digital technology. There is a reshaping of the workplace that is one of the things that we are looking at. Part of it is a generational challenge as well. Older workforce, businesses having a reluctance to employ younger people because it adds to their salary line. Therefore, it is an add-on cost. We need to perhaps look at different workplace policies that might have an effect on older people reducing their working week, while bringing in younger people, apprentices etc. In that way, you do not lose the knowledge, but you also bring people on, which means that you are training on the job. There are obviously different opportunities that come along. There was a very interesting piece of work that was done at the World Economic Forum on re-skilling and upskilling and what types of skill sets could be changed and flexed to work in other areas. I think that that whole in-job training is very important. Colleges are ideally based on what their local business communities need. Sometimes, where there is a bit of disconnect, businesses in this country are quite poor about forward planning. There needs to be training around management and leadership skills on basic things such as budgeting and business planning. Very few businesses have a three- or five-year plan. They may have a one-year operating plan to get them through, but they very rarely look forward. Therefore, what the agencies, when they research the skills and needs of businesses, are looking at a point in time and then apply their knowledge to colleges and colleges that allocate places based on the knowledge that they have or the feedback that they have. However, when those students graduate, they might not have jobs because the job landscape has moved on. Reskilling and skilling on the job is certainly one of the areas that we are looking at. I am just looking at the broad sweep of those performance gaps. I am wondering to what extent there is crossover or interdependency between them and how you manage that. If you look at the individual gaps, for example, we need another 85,000 people to participate in the labour market. Obviously, there is a knock-on effect from that into other perceived gaps, for example in skills, job quality and so on. How do you manage that? Sorry, I am still not quite sure what you mean that we have a skills gap but we have a productivity gap. If we look at the individual performance gaps, obviously there is a discussion about each individual. However, by succeeding—I picked an easy one here with participation of 85,000 more people—if you succeed in that, there is obviously a knock-on effect into other performance gaps, positive or negative. How do you manage that? The analytic unit is not quite information yet but we are trying to scope out a series of areas that they might look at. Going back to the make-up of our business community, we have a small number of large businesses who are very successful and probably drive most of the export activity in Scotland. We then have around 20,000 medium-sized businesses, which is quite a small number. I have asked for more information about how we decide what a mid-sized company is. When you look at small and even micro businesses, it is estimated that there are around 198,000 micro businesses in Scotland who are not paying VAT or PAYE. Does that mean that if you do an analysis on that and you have a funnel of those companies that can be moved into small business territory or even mid-sized territory, then paying VAT, paying tax revenue, that has a knock-on effect on investment or inclusive growth activities in other parts of the country? The aim would be to look at areas like that and see whether we invested in micros, which at the moment is not under the agency's remit. That would come under a business gateway remit, but what are the areas that would impact and cause a ripple effect over each of the other areas? I completely agree that it is the same with exports. We need 5,000 more companies moving into exports in order to move up into OECD upper quartile. There are initiatives that are round about that, but we are doing an analysis of whether we know where we are and are viewed as being who wants our services and who wants our products. We are very good, as far as I can see, about doing economic comparators with the rest of the UK, but we do not always do comparators with other global economies. Sometimes, Scotland thinks that we are really good at it, but it is not what other overseas economies think that we are really good at. I think that there is a bit of disconnect there. We need to do another piece of work around what Scotland has as its real asset base and then be able to plan round about that in terms of where the investment ought to go. We will also be looking at the work streams, what is high importance, what is of low importance, what is making an effect on the economy and what cannot make an effect on the economy. If you map out your interventions in that way with the help of the analytic unit, we should be able to identify some of those areas of activity in which we should just stop doing it or do much less of it. We should look at those areas in which we are going to drive higher results and impact the economy in a much greater way. The debate will be round about, and it is probably a bit of both, investing in high-skilled, high-paid jobs, which are probably driven by universities and R&D, or investing in those areas such as construction, retail and health, which employ large amounts of people. If you made a 1 per cent shift in those areas, it may have a bigger effect than making a 10 per cent shift in the smaller high value. There is a debate there to be had, but that has to be done on evidence. A lot of what we have looked at in the past has not been based on evidence. Can I infer from what you are saying that we are lacking information, and that seems to be a fairly common thread running through everyone that we speak to? I would say that we have lots and lots of information. I think that what we are not quite clever enough about is making that big data make sense and make it work for us. I think that that will be one of the key aims of the analytic unit, to scope out how we embrace all the data that is out there and use it for making better sense of it. A final follow-up from Jackie Baillie and then on to a question from Jamie Halcro Johnston. I am not quite sure that it is a follow-up convener, but I am curious whether the strategic board has had any discussion or debate about why it thinks that the Scottish economy is underperforming that of the rest of the UK? We have had that discussion, but we have not reached a consensus on it. I guess that those are my opinions rather than anything that the strategic board would be saying, yes, we think that it is definitely because of X, Y and Z, but I cite the things that I have mentioned before, which are around lack of digital take-up, lack of investment in people and training, a lack of investment in management and leadership skills, which impacts on motivation, morale and ways of working. I think that we do not adopt innovation. Innovation takes many forms. You can be innovative in the workplace with individuals making their own job more efficient. You can develop bespoke programmes with teams of individuals in businesses, or the next phase is that you come up with a programme or some piece of technology that you would then commercialise. Scotland is very poor at that. The number of start-ups is behind most of those other advanced economies, so I think that, again, there is something round about that. I think that there is a raft of areas. I do not think that there is any one thing that we would turn to and say that it is because of that. In the past, we have looked at sectors and we have had a focus on sectors. Again, having looked at some of the evidence over the past 10 years of where we invested and what economic impact those sectors have brought, it is very marginal. I think that we have not been clever enough about evidencing, reviewing and being flexible enough to change where our focus is. You cannot do that unless you have the information. Going back to what Mr Beattie said, I think that the evidence and the having data that you make sense of is absolutely critical. I would not have an operational business plan without evidencing what I was going to achieve. Let me ask you then. Given the sectoral approach, I think that perhaps six out of the seven sectors that we were targeting actually have not grown at all, they have gone the other way. What would you change, if anything, about the enterprise bodies and about the skills agencies that set the direction along with the Government of travel? First of all, the agencies can only do what the Government asks of them. I have to say that it starts off with having your economic strategy right at the top, because enterprise and skills agencies are only one part of that whole economic driver. I think that there has to be a very clear and joined-up articulation of what the Government wants the agencies to do in order to drive the objectives and the end goals of their strategy. That is the first thing. I think that there needs to be more joined-up guidance within the briefs that are given to agencies. The agencies will respond to that. Sorry, what was your second part of your question? It is essentially what would you change about them to make them better? I am not at the answer of that yet. I think that there are a number of ways to explore. For me, the starting point has to be what is going to ignite the consumer or the customer. What is going to make them feel as though they have a really good experience? What are the themes that go across all those five pillars of skills, investment and internationalisation that make that experience much easier for a business or a learner coming into it so that they do not have to feel as though it is not a disjointed experience that is seamless? That is when a business has a good experience. It is going to grow quicker, it is going to go faster. More importantly, its peer group is going to look at it and go, that is interesting what they have done with their business. I will do a bit of that as well. You start that whole mentoring thing where business learns from one another and we have to drive that much quicker and much faster. I think that the alignment between the agencies is going to be critical. One final point, convener, would you include business gateway in that? That is a really interesting point and goes back to what I was saying about micros. Again, I cannot answer that but it is on the list for discussion to maybe come back and make a recommendation. There is certainly a discussion to be had around how you help those start-up businesses, how you get them into the funnel and how you help micros to move up or scale up. Some of what I was going to cover has actually been covered by Jackie Baillie. If the Government is driving the objectives and setting the strategy, how much influence will you have as a board in directing day-to-day policy within the agencies? I do not think that day-to-day we would have influence or more around if I were doing something about gender and trying to get more women into work or geography with rural economies and how do you get businesses to function within a rural environment? For me, digital connectivity is something that would be of paramount importance. My feeding might be that we need to ensure that, if we are going to make a recommendation that you invest more in digital skills or flexible working for rural economies, that can only work if they have the infrastructure to enable that to happen. We would feed into that. Similarly, on transport and connectivity, how do you get people from one place to the other? We might make a recommendation around geography that, if some budget was put into rural infrastructure, it would enable the part of the enterprise and skills system, support system, to work more efficiently. How practically could that happen? How practically could that information be given all that direction and given to the agencies? I was thinking of feeding into government policy, not agency policy. What interaction could you have, say, with the agencies to direct, as I say, not day-to-day policy perhaps, but where you see a priority for Scotland in the Scottish economy as a whole, or you see an area around productivity or skills gap? How could you feed that information into the agencies to make sure that they were lining more with how you felt that the needs of the government would be met? I align the strategic plan rather than my own business planning. We start off with a big strategic plan, a vision of where we want to get to, and then we work back to an operational plan of what we are going to do now, and that is how we are going to get to that end goal of what the strategic plan has. I do not see that as being any different. The operating plans, the strategic board does not have any input to, but we can review it and we can measure it. The chairs sit on the board and I would see them as being the lead into their own boards and their own agencies to ensure that whatever elements in the strategic plan were identified and that they were then integrating into the development of their own operating plans. The strategic board's role would be to set measurements and performance framework reviews so that we could analyse what had been done or what had been achieved. In terms of measurement, Audit Scotland at present audits all the agencies individually, so there is no overview of the collective impact that those agencies make. That, again, would be a recommendation that we would probably be coming forward from. With the analytic unit, we are looking at consistent and core measurements that would go across all areas of the agencies. Can I just ask a very quick question in terms of future skills alignment and reskilling? Do you think that perhaps we, as a country, need to focus a little bit more or at least give more attention to post-24 skills? You have talked about job-in-work retraining and training. Do you think that that is an area that we could see more focus given? I think that it is an area to look at. I would not commit to anything at the moment until I have had a look at any of the data or analysis about gap analysis on what makes a significant difference. What the strategic board does not want to do is just run after the next shiny new thing. We have a very diverse, broad set of agencies, public and private organisations with lots of great ideas and all doing good things. If Scotland cannot do this, I do not know which country can, because we are a nation that is small enough to be able to get people around the table and discuss this. However, we need to be able to work out who are the best people. Where are we going to make the most difference? Who is best to help to make that difference? I think that we will have to create a series of informed choices with priorities, because we only have a finite budget and we need to make some clear recommendations in a strategic plan around where we ought to be focusing, which will make a shift. I do not think that you can do that unless you have some data behind that, because otherwise you are just saying that this is a great idea, which it is, but it is not necessarily the one that is going to make a significant difference. In your opening remarks, you mentioned that the strategic board in its first meeting has reviewed the existing landscape and you mentioned the economic strategy. You also mentioned the growth commission. What is that? I understand that there is a growth commission that is looking at different aspects of the economy, but its findings are not yet published. That is the SNP's growth commission. You have not seen it or anything, you are just aware. The budget this year shows that the Scottish Government will be investing about £2.4 billion in enterprise and skills. I have also been indicated that the strategic board will have some influence in the budget process and the budget allocations for each of the agencies under which you are providing strategic coordination. How do you see that working? Is that a relationship that you will sit down with the finance secretary or will it be subject to some formal protocols between the strategic board and government? No. The strategic board will not make any of the budget decisions that are out with our remit. No, I know that it will not make any decisions, but there has been a suggestion that it will have some influence in the budget allocations for each of the agencies. Is that your understanding? I would imagine that, as part of the strategic planning process, we would be giving recommendations as to where we think are the areas of high priority and most importance, but that decision around budgets would then be given over to ministers to decide that it would not be for the strategic board to decide. It is more that the finance secretary will be better informed, if you like, of potential budget allocations in light of the work that the strategic board is doing. I think that they would be aware of the areas of priority where we think that investment in enterprise and business support in that system and where we have made recommendations about where the priorities are. It would be up to ministers to be able to decide how they wanted to allocate that provision. That is very helpful. I want to move on to wider economic policy. The strategic board's focus is on the enterprise and skills agencies and what they do. There is clearly going to be some linkage between that and wider economic questions, so I wonder whether the strategic board will take an interest in things like the National Investment Bank and how it might contribute to Scotland's economic performance, or aspects of fiscal policy such as the small business bonus scheme. I note that that is costing £226 million this year, but the total of regional selective assistance is only 16. That is a small business bonus scheme that has cost £1.3 billion, but there has been no economic assessment whatsoever of the economic impact of that. There are lots of other aspects of both Scottish and UK Government policy obviously impact on Scotland's economic performance. Do you see your role as very much restricted to providing strategic co-ordination for the enterprise and skills bodies? Or do you see a role in providing some leadership and some guidance and some views on wider economic matters? I would hope that the strategic board might feed into and perhaps act as a catalyst for engagement with some of those other bodies. You make a very good point about other frameworks and agendas that are embedded in different parts. I think that the strategic board has to have an understanding of what those policies are and the frameworks that are around about them. There may well be that there has to be one of the recommendations that we might make is around closer engagement between the Fiscal Commission or the National Investment Bank, or there should at least be a joined-up thinking on it because one will impact on the other. Okay, that's helpful, thank you. Thank you very much, convener. Some of the questions that I was going to ask have already been covered, but just as a general question to start with, how do you think the Scottish economy has performed over the last 10 years and what areas have shown improvement over that period? What do I think has performed well? I think that inward investment has performed well and we have attracted a good amount of external businesses to come and locate here. I think that the research of the universities has been done well. There has been some expansion of high-growth companies. What haven't we done well? Again, going back to business adoption of technology, I think, has been very poor. I think that our rate of start-ups has been poor. We have not got into exports as we probably should and we haven't invested in people. Taking that question of exports, we have seen an improvement in exports over the 10-year period and the recent report that Spice provided suggested that Scotland is the third fastest growth rate for exporting businesses just behind Wales and East Midlands, but ahead of the other nine regions of the UK. You said earlier that Scotland needed to get another 5,000 companies to become exporters. Looking at the analysis of businesses in Scotland, two thirds of no employees and 98 per cent have less than 50 employees and the vast majority of exports, 83 per cent, are from medium and large companies. Given that the base that we have of medium and large companies is just over 6,000, how do we get another 5,000 companies to export when we only get a base of 6,000 to one country? It depends what sector they are in. I agree with you in your analysis there. Exports have grown in Scotland, but mainly because the larger companies have gone into more territory. We still are depending on a small number of large companies to drive our export activity. Services are much greater in terms of exporting potential probably than tradable goods. Therefore, we have to look at what kind of tradable services we have. Tradable services do not necessarily have to employ large amounts of people. It can be accountancy or creative services. There are enablers that we should look at in terms of technology to be able to widen out that scope and perhaps get some of those micros, as I mentioned earlier, into the tax-paying environment that feeds into the wider community. Although it says 5,000, the definition of those companies and what they are exporting will be different. However, we do not have the data around what the real asset base is and what the tradable goods in Scotland are that our overseas colleagues in different countries want. We need to have a better or more clear idea of what that is. Scotland has traditionally been a supply chain. I do not think that we should overlook how important we are in our place in the supply chain, not necessarily being great the people that do life sciences, but where do we fit in that whole supply chain thing? One of the things that I know from chambers of commerce is that the size of companies that you have mentioned, the micros to the mid-sized companies, what holds them back is A, the time resource. Large companies always have export managers, so they are the ones that will do trade agreements, they will do government agreements. Smaller companies do not have that facility, but that is an area that perhaps some private sector can take over. I know that there are initiatives going on with chambers of commerce at the moment to do or to facilitate business-to-business relationship growth. That is really important because the way that they do business is that they find somebody who is already there and say, how did you get into that country? They learn from experience and they learn by personal introductions, so it is facilitating and making that route much easier and a much more comfortable environment. The exporting side is one side that I would like to drive because it opens up new opportunities for Scotland. In terms of the introductions that you were talking about, because you do not have the export managers and so on, how important is the global scot network? They are all important chambers of commerce with places in 120 countries. Global scot A, they have the enthusiasm to want to do something, to engage with other businesses. All of those facilities are important. Last point, you talked about the scope for increasing exports, which probably lies more in tradeable services. Is it any tradeable services that are unique to Scotland or is it part of financial services that are part of the wider UK financial services? Financial services, but we also have a lot of creative industries that are mushrooming. A lot of the oil and gas companies are diversifying into the knowledge space, so there are opportunities there to take existing basis of industry and look at how they are developing or facilitating. There are large businesses such as Amazon and Google that can help and facilitate getting small businesses into traded environments, which are service-orientated or tradeable. There are mechanisms that we have not joined up yet. We have heard from quite a few people over the time that I have been sitting here anyway that some businesses are saying that the support is patchy across Scotland. Now that Business Gateway is down at local authority level, it is not going to have a consistency of approach. There are reasons why that is a good thing, but we would also find that there is an inconsistent approach. We are also hearing from people such as Women's Enterprise Scotland that it is high on the Nails Enterprise, Scottish Enterprise level, that in terms of account managed companies there are not that many women-led companies. You have touched on both of those things slightly. Do you see the strategic board having a role in assessing where that is happening? Obviously, Business Gateway is often the initial contact for business support, so if it is not happening at that level, there is potentially a problem. I think that you make a very good point. I have not got the answer to that yet, but it is an area that we are looking into, which is the whole customer journey and how it becomes who it is appropriate for for Business Gateway, who it is appropriate for for the agencies. How do you join up from point of entry going through that full system of getting the help and support that you need at the time that you need it, whether it is start-up, whether it is skills or investment or help into exports? Gender is one area. Geography is another area. Generation, as I mentioned, is another area that we would also look at as well as global. To answer your question, yes, but I have not got the answer to that yet. It is early days. It is early days. Another thing, coming back to linking in with my previous question around skills, as a former further education lecturer, I found is that you mentioned creative industries. We have got rafts of graduates coming out with the skills to get into the creative industries, and the creative industry is traditionally one where you are self-employed. However, not many of them have the skills to set up a business, even in terms of doing tax returns, incorporation or whatever. I see that as a potential gap in skills. Is that something that has come up in your early discussions on the strategic board? Yes, a very good point. I work a lot in China personally, and I am very interested in the fact that, in Chinese universities, they will invariably supplement whatever the core subject is for the student with a business management module or an international module, so that the individual, when they set up their own—they are very geared towards setting up individuals in business, a lot of social enterprise as well. However, it is having that knowledge about how to not just have your core skill, but how to manage and grow a business. I think that you make a good point about digital. Digital, at the moment, we cannot get graduates fast enough. I think that our whole approach to probably how we provide digital knowledge within our skills system is something that the strategic board will look at and how that is developed. One of the key areas is that I was at a university in Scotland recently and went to visit some of the businesses around about it. They had employed a very small proportion of those who had come out with technology degrees or computing degrees. The reason was that technology that they were using in those businesses had moved on from what was being taught. We need to look at a more flexible system of how we integrate learning with business workplace-based placements so that that will help businesses to embrace more technology in the way that they run their businesses. It will also help the skills and knowledge, if you like, about not just what you can do on a computer, but about soft skills, about how you work in the workplace, which is often what businesses complain about, that they do not have the right skills for the workplace. Are you having an overview of the agencies that already exist that are supposed to be facilitating enterprise among young people graduates? I mean, there are some. Having a look at how they integrate into the chalkface, as I suppose it used to be called. I haven't got to that bit. That will be one of the areas that we will look at in terms of who is doing what. There is no point in reinventing the wheel. We want to eradicate duplication, and we want to align both public and private sectors and other organisations in who is best suited to do that, so let's not fall over each other and let's look at whatever else we should be investing in as a priority. Are there any other brief questions from any committee members? Andy Wightman and Dean Lockhart, very briefly please. The strategic board, I think that there was suggestion at some time that it might be given a statutory underpinning. It doesn't have that. Do you have any sense about how long it's designed to last and when your job might be done? I can't answer that. It will be one of the things that we're looking at. My term is two years. The strategic board may still be in the same form. We may make a recommendation that it ought to look like something else. To your earlier question about the other frameworks and agendas, we need to look at this as a point in time, so there will be flexibility and mobility in terms of the shape of the strategic plan and the shape of the board and the performance measures that will be put round about that. Dean Lockhart, you mentioned briefly earlier that the enterprise agencies can only implement the guidance that they're given in terms of central government economic policy. Do you think that the four I economic policy gives enough guidance, sufficient detail, in terms of what's expected of the enterprise agencies? Good question. Do I think that it gives enough guidance? Within the framework of the individual portfolio, it gives good guidance, but it's not joined up all across each of the ministerial departments, I don't think, so I think that it confuses the agencies as to what they are, and there are different outcomes and measurements. We need to have consistency of measurement. Thank you very much for coming in today. Before I suspend the session, I have another committee commitment, and therefore the deputy convener will take the chair when we resume, so I'll suspend the session now. Welcome back to the committee looking at Scotland's economic performance. I'm currently in the chair just to explain because the convener will have to go away to another committee at some point during this session. I would very much like to welcome the witnesses this morning. We have Linda Hannah, managing director of the strategy and sectors at Scottish Enterprise, David Oxley, director of business and sector development at Highlands and Islands Enterprise, Sarah Deas, head of inclusive models at Scottish Enterprise, Gordon McGinnis, director of industry and enterprise networks at Skills Development Scotland and Dr Stuart Fancy, director of research and innovation at the Scottish funding council. Clearly, we have five on the panel and 10 on the committee, so there's potential for this running on, and we'll try to keep it reasonably tight. If both questions and answers can be reasonably succinct, that will help. Witnesses, you do not need to feel you're all five of, you have to answer every single question if you don't want to, but I'll try to give you every opportunity if you do want to. I think that a number of you have been here before, but the microphones you don't need to worry about will be dealt with by others. To move on to the questions, I'll start off with a fairly general question to get us going, but we've asked this question, I think, of most witnesses we've had here over the sessions we've been doing. What is the feeling? How do you feel the Scottish economy has done over the past 10 years? Do you have any thoughts on that? If you just catch my eye if you want to speak, or I might just choose someone mistroxly, yes. I think that, speaking for the Highlands and Islands Enterprise, the last 10 years have been a characterised by a period of resilience. We have had a recession during that time, but consistently the Highlands and Islands economy has outperformed some of the employment measures in terms of very low unemployment, very levels of employment, but we have seen some challenges, particularly around wage growth, which has been quite poor. I think that that is partly a reflection of our economy, which was even more dominated by micro and small businesses and sectors that are traditionally not high payers like tourism, food and drink. On a positive note, we have seen productivity gap closed. It's from 87 per cent back in 2008—87 per cent of the UK average in 2008 and up to 94 per cent in 2016, so we have seen that, which is a positive sign. In terms of success, it also pointed out that investment success organisations such as Capgemini and Atos are coming to the region, as well as big industrial companies such as the Liberty Group in Fort William. We have seen a lot of activity in that space, but there remain challenges in terms of population growth. Like many parts of Scotland, we see an outmigration of young people as they go for further education and higher education opportunities in the rest of Scotland and the UK. The University of Highlands and Islands has improved its offering over the past few years, but we still have a net outflow of young people. Do Scottish Enterprise see the picture much the same as Highlands and Islands? We see a similar picture in terms of the challenges and opportunities that we have seen over the past 10 years in the economy. We have seen particular challenges around oil and gas and financial services, but we have also seen opportunities in those sectors, so the diversification on the back of the task force work that was being done in financial services. Scotland has continued to do well, particularly in terms of inward investment and R&D-related inward investment that is coming into Scotland in those sectors. We have seen a mixed picture around that. What we have also seen is some things that have been emerging in terms of matching to where Scotland can compete globally. Things like the Edinburgh digital cluster, which is clearly a big part of the Edinburgh city deal in terms of data-driven innovation and Edinburgh being the data capital of Europe. Over the past 10 years, we have seen that really develop in terms of the assets at the University of Edinburgh and Edinburgh as a city, about the Stanford link, the Edinburgh-Stanford link and then, on the back of that, a cluster of companies really beginning to grow with very small companies, but also very large companies coming in and investing on the back of what they can access here in terms of the capability and skills. We have also seen something around the confuding drink exports. We have seen that hugely grow over that 10-year period. That is right across Scotland, as is Highlands and Islands as well as the rest of Scotland. We have seen that grow something like about 56 per cent since 2007. That has been a real concerted effort by the industry in terms of looking at where the market opportunities are, the types of products that we have in Scotland and how that would play out internationally, and then making sure that they delivered it through on that. There is a real mixed picture, but there are challenges that we have been looking at, and that has definitely helped that piece that David was talking about in terms of closing the gap in productivity and some signals of where the economy could be going in the future that we have to build on in Scotland. Some of my colleagues will come in with much more detailed questions as we go on, but I could maybe just add in at this stage, as well as looking back over the last 10 years you yourself mentioned the future, what are the key opportunities and risks, do you think, over the next 10 years? Just in a kind of general sense, not getting too specific. Mr Fancy, you are nodding. We talked in the earlier session, the committee talked in the earlier session with North Senior about the need to be growing exports in Scotland. We are building on the opportunities that Linda highlighted there, particularly around emerging industries, where Scotland has a domestic growth. We are generating data-driven, innovation-led companies. We are generating new food and drink businesses, and I think that the future is most definitely to build on that expertise. If I could take back to your previous question, what I would have said was that over the last 10 years we have seen a consistency in the support for research in Scotland, which has given us a university base, which has given us the platform from which the kinds of development that Linda was referring to have grown. Thank you. Mr McGinnisius? In terms of the economic performance, I admire much of what has already been said. I think from a labour market point of view, we have seen a growth in what we would term as non-standard employment. Someone referred to it as a gig economy, but I think that there is a fragility around the elements of employment, particularly for young people, and also in their employment. Gillian Martin mentioned us around graduates and their skill sets. I do not think that we are necessarily getting the best return from that. In general terms, we have seen an increase in the number of self-employment registrations, but not companies that are up in trading. There is a fragility to aspects of the labour market that we need to take nice and so on. Would you say that fragility is a risk going forward, or is it in some ways an opportunity? It is a risk, and there are obviously unknowns related to the impact that that will have on the workforce in the future. The policy activity around inclusive growth and fair work are things that we need to promote to employers on the benefits of having a better job quality. There is a lot of evidence there that leads to better economic performance at a company level. I lead Corporative Development Scotland, and one of the models that we are most actively promoting is employee ownership. If we want to look back, we have made a lot of progress over the recent years, admittedly from a low base, to bring the model to the fore in terms of increasing awareness in Scotland, such that we are optimistic, looking forward, that a lot more business owners will now actively consider this model. Its attributes are about rooting businesses in Scotland, driving performance—it is very relevant to this inquiry—and sharing the wealth of enterprise more widely. It is a model that inclusive growth is absolutely in the DNA of the model. It creates opportunities for all and drives growth across the population. There will be more detail. We will go into some of these points in more detail, so our next question is going to come from Jimmy Halcro Johnston. I am interested in looking back in terms of the agency's roles within economic performance. I wonder whether you could point to, in relation to each of the agencies, one or two specific examples from each agency where your policies or your projects have had a material impact on Scotland's economic success? Yes. I am quite happy to kick off there. Just a couple of examples from the Scottish Enterprise. Taking some of the evidence that you have already had at this committee and looking at our own evidence, particularly in terms of the gaps in terms of the OECD quartiles, two things that we would point to. One is around innovation—the gap that we have moved up a quartile in Scotland. We are now in the second quartile, and we used to be in the fourth quartile back in quarter three in 2012. One of the things that we have done is particularly look at how we support more companies to be the definition that OECD uses around innovation active. Really what that means is that companies are actively taking forward different types of innovation. It could be products, it could be processes, it could be the ways that they work. We have particularly looked at how we could make sure that we are investing more, how that is leveraging more from companies investing, partly around R&D, but also just in terms of other things that help to take that forward to market. One pound out of every £4 that is spent on Scottish R&D comes as a result of an AC-supported project. That has been a huge increase in that period of time. That kind of shift that we have had in innovation active is incredibly important, partly because of the number of companies that are now doing that and because part of the discussion in your last session, the level of innovation and the level of exporting are inextricably linked. Making sure that we support companies to innovate and to enter new markets is really important. That is something that I certainly would point to and the work that we have done to work with individual companies, groups of companies and industry sectors through the industry leadership groups. We have looked at how we can make that journey easier for companies. Food and drink is a good example of that, so lots of engagement that we have done there. The second example that I would point to is about maintaining Scotland's position around foreign direct investment. We have maintained our position in the first quartile, which, given the global market, is quite challenging. We have also become the top location particularly for R&D inward investment in the UK, and that is something that speaks very much to the approach that we have got around how we can build on the strong academic strengths that we have in Scotland, the company base, the supply chain base and the skills base that we have coming through colleges, schools and universities. Those are all things that we have helped to and have maintained either a good position for Scotland or have helped us to move up in terms of that quartile position. Is that about marketing Scotland better abroad? What are the specifics behind that? It is a mix of things. On inward investment, it would be about understanding our strengths, so it would be about saying what is Scotland's capability compared to other parts of the world and then targeting those markets, particularly in terms of types of inward investors that might want to come to Scotland and about putting in front of them why Scotland is a good place for them to come and do business. Once they come here to talk to them about the support that they would have available, that is not just about the university base, it is about the supply chain, it is about the skills base and being able to lay out a proposition about why this is a great place to do business. On top of that, it is looking at what types of incentives we might need to provide. There is absolutely a marketing element to that and that is not just about us, that is about all of our partners and about universities and others, talking about what Scotland is good at and that is something that we very actively work on with our partners. In terms of innovation, it is about individual work with companies, one-to-one support that we do. It is also about working with industry leadership groups, as I was saying, about the industry starting to set out what some of those innovation challenges would be. Some of the work that we do is working with very large companies to put out almost like an innovation competition, so put out there something that they want solved and then asking Scottish companies if they can come forward and do that, and then about how we help them to support them to do that. Anyone else want to comment? Yes, Mr Oaksley? Support, everything that Linda said, I think it's fair, I'd like this to focus on, is a number of the programmes for support. We've run, which touch many businesses across the region, programmes which are trying to tackle some of those challenges about getting more folks innovating, getting more folks trading internationally. Over the last two and a half years, we've run a programme called International Highlands and Islands, which has engaged nearly 500 companies in taking their first up-step or increased steps to export more and more product or services. We've run similar programmes on innovate your business, where we're looking to encourage businesses to take relatively small steps and think about innovation and deliver some of those programmes. Another focus has been leadership development, I think both ourselves and Scottish Enterprise would say that folks often approach us for money. Quite often what they need is some of the softer but harder to deliver stuff in terms of leadership training. We've worked with many businesses who have great ideas, maybe coming up universities or standard businesses, but they need to understand how to operate in a business and commercial environment, so a lot of that leadership programme has been very useful. If I could just highlight one particular example where maybe that's all come together in one project, the Islay Forest Distillers, Newstart Distilling Business in the West Niles, started off in 2015 and is approaching £3 million turnover already just from the sales of one product, the gin. They haven't started selling the whiskey yet, so we expect that company to be supported further in growth. We've looked at traditional support in terms of CAPEX development, leadership and international trade support. Mr McGrath? For myself, I think that I have sustained focus in the promotion of work-based learning, so I've further developed apprenticeship model, but I've also introduced foundation apprenticeships in schools, and I think that that's going to build a stronger link from young people with a work experience element with employers, the real experience there. I think that in particularly in rural environments it will create stronger connections between young people. David talked about young people moving away from rural areas. I think that the foundation apprenticeship will already start to see an impact there of relationships being built. The graduate level apprenticeship has well been developed over the last three years in partnership with many of our universities and employers, and I think that we're seeing real benefits in that, and that's changing the dynamic, getting more young people molded into the types of characteristics that employers are looking for. A wider service offer, and I'd point to the development of our career management skills within our careers service, and that will be a longer term aim, but around issues, particularly around the qualities and gender, we need to start further down the pipeline, and I'd point to the two of those. Thank you. Jackie Baillie wants to come in with a supplementary. Just a small supplementary, because Linda Hannah talked about maintaining inward investment, yet we've recorded the fewest number of jobs since 2010 from that inward investment. Mr Oxley talked about productivity gap closing, but is it not the case that it's because the UK's performance has weakened rather than the Scottish performance improving? When I listened to all the wonderful things that people are saying, I'm wondering why, then, is our economy flirting with recession if you're doing all these good things, or is it actually that sometimes there's nothing we can do to stop it? I'll take anybody. I'll kick off on the inward investment piece. Apologies, I've got a bit of a cold, so my voice is kind of giving out. On the inward investment, our approach very much is looking at when you look at the global flows that there are now around investment and where Scotland can compete. A number of those projects, as I was saying earlier, are much more around R&D-led, so it does tend to be fewer jobs, but it's better jobs in terms of the value of those jobs that are coming, so higher value, higher wage, higher skill. So in terms of the number of projects that are coming, that is holding up in terms of the R&D projects that's coming, and I think what we are looking at is how we can make sure that Scotland can continue to compete on that stage, and how we can make sure that we keep bringing that to Scotland. But it is the fewest job since 2010. I don't have those figures in front of me. I mean, I can also say if there's any questions, specific questions or numbers around anything that people can come back to the committee afterwards in writing, if you'd like to do so. Does anyone else want to comment on that, Mr McGinnis again? I think that the market for fund direct investment is competitive just now. There's a very active pipeline just now, which is healthy. However, I would probably also point to the fact that if the agencies weren't doing all the good things that they were doing, then the situation could be worse than I could point to things like the under jobs task force and Aberdeen and the response that's been made there, not just for the skills agencies, but for business development that's helping to diversify and opening up new markets. There's an overall picture, but I think that if you look at individual activities, then there's good storage to be told. Dr Fancy, do you want to come in on that? Brief point, Linda. I made the point that many of the inward investment jobs that are arriving are at high-skill end at the R&D end. Of course, part of our job then is to build supply chain relationships so that Scottish suppliers can gain, if you like, a broader spread of value from that investment and create jobs at a number of levels. I would be interested, convener, if possible, that we have a breakdown of those jobs and whether they are all in R&D and what supply chain connections have been made. I think that that would be very useful for the committee to know. Right, so a fork for whom that's relevant if you can come back. I think that Ms Dees you wanted to say something. Just responding to your question in terms of material impact, we're very conscious that as you look at the life cycle of a business, particularly Scottish-based businesses, succession is a key issue. Particularly as we look at what we call the succession time bomb as the baby boom owners are coming to retirement, it's projected that in the next five years there will be 16,000 businesses in Scotland where succession will need to be addressed at an ownership level. We've introduced a new service called succession expert support, which is available to all businesses in Scotland. We're working with the account managers in Scottish Enterprise and Halisyn Islands Enterprise to reflect upon the succession planning within their businesses and bring forward this service. The aim is to root and sustain and use this turning point within a business to drive future growth. Okay, thank you. Jamie, did you want to come back in? Yes, just quickly. It follows really up on that term. It's estimated that Scotland spends £120 a head more on enterprise and economic development than the UK average, given the slow economic growth that we're experiencing. Is that value for money? Are we going to return investment on that? Anyone? Mr Faginnis, you're always putting your hand up. That's an answer from my point. Mr Halcro needs to see where the figures are coming from. It's not a figure I broadly recognise the work that SDS is doing just now in the earlier session with Nora. The question was asked around evidence. As an example of how we're trying to evidence the return on investment, we've worked with OECD to create an evaluation framework. We're going to be linking our data and our flow of young people into the labour market to both the DWP and the HMRC data, which will give us a longitudinal view of the return that we get on investment in young people around apprenticeship programmes. We're working through the centre for work-based learning with colleagues in the funding council to see if that model can be applied to other areas. That should give us a much better picture of what the long-term investment would look like. Our individual evaluation with those individuals is also looking at their wellbeing in terms of the benefits of work as well. It's a fairly broad study, so it's good quality data. I responded from my perspective. Scotland has seen to be punching above its weight in terms of co-operative development. Yes, we are investing more in the work of promoting co-operatives and employee ownership, but it's playing off in terms of the number of businesses that are now actively looking at the model. It does give us the opportunity in terms of progressive business practices and positioning Scotland in the world to differentiate our economy based on the desire for inclusive growth. Mr Oxley, do you want to comment on that? I was just going to say that we have made a big difference in the value of money that we deliver. We support many big projects in a slightly different way. Our core budget is relatively small in the scheme of things, but we have invested £146 million in broadband infrastructure through the Externational Broadband programme. That has set the foundations for business growth across the whole region. If we hadn't invested that, there would be no superfast broadband in many of the island locations in Scotland. There is now, in Highlands Islands, more than 90 per cent in most areas. That is an investment that we have spent now when we will see the benefit in the future. Things like that take a long term to develop. Are you okay with that, Jamie? Well, the next question comes from Andy Wightman. Thank you very much, convener. We have heard, in fact, that we touched on it in the earlier session about the weak performance of business research and development in Scotland. I am sure that you have any insights as to why that is the case. I will kick off on that question and then probably hand over to Stuart to add to that. Just in terms of business R&D, Scotland has a particularly small manufacturing sector in terms of the totality of that sector. Traditionally, quite a lot of R&D would come from the part of the economy that makes things increasingly changing in terms of service R&D, but particularly in terms of research and development. Most of that is carried out by our manufacturers. Within what we have been doing is working with the manufacturing population to look at how they could improve that. As Dave has hinted, a number of the things that impact on both our export performance and our innovation performance has often to do with management and leadership capabilities and also levels of broader investment going into companies. To invest in R&D to get into new markets, you need to make sure that the business is well financed and has a very clear plan for action. That interdependency that was talked about in the last session has an impact on R&D and the level of R&D in Scotland. To improve R&D performance, from our perspective, we are looking at how we can grow the parts of our economy that are much more likely to do R&D and be more successful at it. A bit of that is about manufacturing, but it is about service development. We know that foreign-owned companies of which Scotland is competitive and we just talked about that. We know that they are much more likely to invest in R&D, so how do we make sure that we continue to bring in even more inward investment that is R&D and then grow that in terms of the supply chain? How do we encourage more of the sectors that traditionally have been low R&D performers to make sure that we encourage them to do that and we have been doing quite a bit of that? The other thing is just about making sure that the mid-sized businesses that Nora was talking about earlier, as we start to see companies start to keep growing mid-sized and growth, that they build into that very much a focus that is outward looking international and R&D focused in terms of being innovation led. Dr Fancy, did you want to come in as well? The company based in Scotland, as Linda has described it, is not traditionally investing a huge amount in R&D. Some of the things that we have been doing in partnership with Scottish Enterprise and Hans Nines Enterprise is to open up the support mechanisms at the universities and increasingly the colleges that they are able to offer to the small and medium-sized business base in particular, where that culture of investment in R&D or perhaps a confidence to invest in R&D has been lacking. We have been using mechanisms such as interface, for example, which is an introduction agency, a place for small businesses that can be helped to find support to introduce the value of R&D investment and to reduce the risk and expense of making those initial steps. Over the past years of interface operation, 4,000 small Scottish businesses have met a university and worked with them for the first time as a result of that activity. We have looked at specific sectors where either there are emerging R&D-intensive business areas, as Linda mentioned, such as data science for example, or indeed Scottish industries, where innovation is most definitely necessary in order to solve challenges of competitiveness or to improve the value of what businesses are producing, such as the areas of agriculture, those kinds of areas. We have built innovation centres around them, which are university business partnerships to help businesses to work with universities more closely. That has been a partnership again across the strategic board of the past four or five years to make those opportunities available. However, it is an incremental business of helping businesses to recognise that value and then to broadcast that value to each other. We are acutely aware of the business-to-business communication that building clusters brings, and we see that universities and colleges are being integral to those clusters that hopefully help with generating some kind of self-fulfilling confidence boost. Specifically, in relation to the Scottish Funding Council, do you see the strategic board as providing an opportunity to enhance the role that higher education plays in R&D? Absolutely. Positioning the higher education sector and also the colleges in the economic support system of the country is extremely important and one that we looked at the strategic board to help us with and to lower any possible barriers to them participating fully in that. I want to ask a question. In being in mind what you have said, about 4,000 small companies are now researching development projects under way. Traditionally, it tends to have been larger companies that have had the resource in order to spend on research and development. Given that Scotland only has 0.4 per cent of all its enterprises that are considered to be large businesses, how much of an impact does that have on the lack of R&D spend in terms of the small number of large businesses? Is there any aspect in terms of the number of Scottish headquartered businesses because decision making is no longer within the Scottish area? I am no economist but I have no doubt and my understanding is that that is relevant, absolutely. Our role in helping the further and higher education sectors to contribute to the growth of the Scottish economy is to help those sectors to work primarily with smaller businesses, which is challenging because smaller businesses do not have R&D directors, they do not have the capacity to do that kind of thing. We are trying to take, almost offer them that support outside and to integrate it with the work that the enterprise agencies do so that smaller businesses feel that they have wraparound support from the Scottish public sector. Again, that is where the strategic board is critical in helping us to work with each other to help that to happen. You mentioned getting companies to grow and be more outward looking. I mean, as Gordon MacDonald said, the economy is dominated by small and medium-sized enterprises and, as Nora Senior said, even by micro enterprises. How do we compare with other countries in terms of the structure of the size of business and particularly the rate at which they grow? I do not have the figures on all of those and we can follow up and give those to you, but certainly from what I am aware, our self-employment rate is growing and growing faster than other parts of the UK. That is good because that is a high level of entrepreneurship. It often gives people quite a lot of flexibility and independence at a point of their career when they are doing that. As Nora senior highlighted, what we are not seeing is that those start-ups are then growing, keep growing, getting to mid-sized businesses and scaling. That has been a persistent challenge for Scotland for certainly since the last 10, 15 years, so we know that that is a challenge. The structure of our business space in terms of a high number of self-employment, a small number of micro businesses and a small number of businesses that carry on growing to scale is something that has certainly been an area of attention by the enterprise agencies for a number of years. We need to make sure that we look at and you mentioned other economies where they are able to look at how they support companies to do that. The work that we have been doing certainly around scaling up programmes at the start-up end, then the mid-sized and then into global companies is beginning—we have seen some examples of success there—and what we need to make sure is that we continue to do that. We also need to learn from companies to do that, not necessarily with public intervention. As Nora has mentioned, this needs to be private sector led as well and how we can encourage much more of that. The patient capital and something that we have advocated for quite a long time, having patient capital around those businesses, is really important. We very welcome the attention of that in the Scottish National Investment Bank, so we need to make sure that all the ingredients that are going to be there to encourage the entrepreneur to be mentored. It could be by the public sector, but preferably peer-to-peer is what makes the difference. Those kinds of things in place, finance in place, access to markets and, increasingly, around our export approach, what we are thinking about is not just saying to companies, here is a range of trade opportunities. It is actually about saying, here is how we will help you in terms of the specifics of that trade development for your business and about how we help them to do that. Certainly a big part of the support around food and drink was about making sure that the people in market could then talk to food and drink companies in their language about how they would be able to access that. There is a range of things that we need to make sure that we do around dealing with some of those structural issues that we have in our economy and how we are able to deal with that. Link to that is the fact that we have a rural and geographically dispersed economy, which can be different to other countries. It is also just about how we make sure that we play that into the needs of those communities, businesses and, increasingly, it has come up a lot this morning the role of digital and being able to get on to digital platforms can start to dissolve boundaries that used to be there. The more that we can make sure that infrastructure is there, digital infrastructure, digital skills and that businesses know how to use it, the more it can start to overcome those issues and actually help businesses grow much faster than they were ever able to do before. We have seen in recent years some businesses in Scotland that have come startups that have grown very fast. I will not mention any names, but some of them have been sold. Is that a concern in terms of Scotland's economic performance going forward? Would we rather have companies remained under Scottish ownership or does that not matter? We have seen companies grow like that. I think that what we have seen from a local perspective in some of those is that when that sale happens, quite often you churn employees there who go off and start their own business, and they have got that great experience from going through it, starting off with a small company and ending up with a very large company. They want to do it again. We see that particularly in the life sciences sector in Inverness, where Inverness Medical, 20 years ago, grew and grew and became a life scan and we have had a number of companies that have come out with the R&D facility of Inverness Medical and a life scan to grow and develop. They get that experience in first hand and what it is like to go through that. I do not see a huge amount of folks going away and sitting at home with the cash in the bank. They usually want to invest again. We are seeing increasing interest in employee ownership from business leaders who are concerned about acquisition of their businesses as they retire, either from within the UK or internationally, and who are concerned about rooting it within its community in Scotland and are choosing employee ownership for that reason. Just taking one example, I know that there are a few businesses that have submitted evidence to this inquiry and each one has raised that as a concern. One of those was Clansman Dynamics. When they came to address ownership succession, they were being approached by three international competitors, two from Germany and one from Italy. Their concern was that, with 97 per cent of their output being sold out with the UK, in the robotics and foundry sectors, that that could have led to a concern that an acquisition would take the production from Scotland and the jobs also. In their evidence to this committee, they have highlighted what has happened over those subsequent five years in terms of those competitors and the implication that it would have had for Scotland. Routing businesses and driving performance and sharing the wealth is the attraction of this model. Looking at it from the perspective of the structure of the economy, it enables us to steadily grow more businesses into that mid-size that is the gap in terms of our industrial structure in Scotland. I think that Gillian Martin has got a supplementary on this. Ideal point for me to ask my next question, which is about steadily growing. One of the bits of feedback that I get as the convener of the women's enterprise cross-party group from female-led businesses is that, when they go for business support, they are being asked to grow too fast, then they are comfortable with, that the targets are things that willy them, and that they are more interested in having steady, sustainable growth that they are comfortable with. Therefore, they feel that, when they go for business support, they are being asked to come out with their comfort zone, because the focus is always on super-fast growth. I would like to hear your responses to that, particularly Scottish Enterprise, because you are mentioned in those testimonies a lot around that. In terms of our approach to working with companies, I would be surprised if we are pushing people much beyond their comfort zone. Our job is to be challenging and ambitious and to make sure that we support any business, whether it is women-led or not, in terms of looking at what their growth plans are and how that sits in the market and bringing things to the table that we challenge them. At the end of the day, that business is run by that entrepreneur or that management team, and our job is to support them to achieve that. I would be interested in hearing some of those examples, in terms of where that is led to and why those businesses have then not taken that forward. If women's enterprise Scotland publish reports around that frequently, what we find is that some women-led businesses are saying that they have not been able to access support because their targets have not been at the super-fast growth level that they feel is required. Therefore, it is almost like they have to talk up a business beyond what they can achieve in order to give and get through the door. That has been something that has come out from quite a lot of people that I have spoken to to us. We are trying to work with businesses that have the ambition to get over, rather than a specific turnover or jobs creation level. We do not have huge numbers of big businesses or even medium-sized businesses, so we work with a portfolio of clients that is generally smaller than Scottish enterprise. However, there are challenges in the number of women in business, certainly at senior level. Social enterprise tend to do more. It is not quite the 50-50 split in social enterprise, but it is not far off. For other sectors, tourism and food and drink, it is reasonable. Oil and gas is very low in terms of female-led entrepreneurs and chief executive officers. However, we are trying to utilise good examples of where a female-led company has grown and developed in traditional sectors such as brewing and distilling. We have a number of small companies in that sector that are female-led. We have ambitious growth aspirations, and we are utilising those to encourage and promote that opportunity to more companies. Is that true? Can I just come in and ask you—you use the word ambitious there—are you open to people expressing their ambitiousness in different ways? Absolutely. If we created 100 jobs in Inverness, that is great, but is that more important than 10 jobs in Stonaway or two jobs in Barra? We look at all that in every investment that we do. We recognise that creating all the jobs in Inverness is not the right answer for the Highlands and Islands, because we do disproportionately invest more in the more rural areas. Sorry, Gillian. You were going to come back in. You asked my supplementary question, John, and I'm nodding along. Apologies for that. Back to Andy Wightman. Were you finished? You're okay with that now. Right. The next question is from Dean Lockhart. Thank you. I wanted to ask about performance targets. We've heard today about inclusive growth being one of the Government's priorities and looking at the letters of guidance from ministers to the agencies. Inclusive growth is prioritised in terms of the guidance given from ministers to agencies. How does each agency define inclusive growth for the purpose of pursuing the agenda? How do you measure changes in inclusive growth on a year-to-year basis? On that, particularly in terms of inclusive growth for Scottish Enterprise and something that was relatively recently introduced as a term in Scotland. It's quite fair to say that that definition is not a common definition across the different parts of the system, and everyone's been looking at particularly in terms of our unique contribution of what that means. I know that Scottish Government has been looking at an inclusive growth framework, which it's still developing, and we're hopeful and interested just to see how that's going to align with the national performance framework that's happening at the moment. From our perspective, what we think about is particularly about inclusive growth. It's something that encapsulates both economic and social values. It's not just about create growth and then make it inclusive, it's about the ways that we deliver growth that will be inclusive for people and different communities and geographies. We've thought along the lines of what Scottish Enterprise does. What we do is work with companies, sectors and geographies or places, if you like, and different communities are more comfortable with different words. The work that we do with companies is very much about looking at the workforce and the workplace. We're thinking about in the conversations with companies about their growth plans. We're talking to them about the types of progressive workplace practices that they have, the type of business model that they have and how inclusive that is in terms of the growth opportunities. We will talk to them about investing youth policies. That could be about employing young people, but equally it could be about whether they talk to their schools, whether they're engaging with the colleges, whether they're thinking about those kinds of things as well, whether they're mentoring young people. We will talk to them about that. We have been looking at monitoring the number of or beginning to track some things around inclusive growth, which I'll come back to. That kind of conversation with companies is very much about the workforce and the workplace in terms of fair work. In terms of sectors, we've been working with industry leadership groups to help them to build and embed in their strategy different ways of looking at inclusive growth going forward and about how that starts to make sure that stretches that. Particularly in terms of the productivity plan work that we've done with construction, food and drink and tourism, that was very much about the industry for the industry starting to say how are they going to tackle, particularly in lower productivity sectors, some of the big issues that there are around making growth much more inclusive in different communities. Certainly in terms of the agenda around regional and place, we're absolutely engaging on an individual level, partly with local authorities. We do that around community planning partnerships. We look at community benefit clauses as part of the work that we do in big projects. If we take something like the Edinburgh BioQuarter, which is not far from here, we've very much thought about how that will engage with the community on all sorts of levels, schools, graduate routes and all sorts of other things, as well as engaging with that community that's on site. We're very much engaged in the regional economic partnership work. Either a good example would be Ayrshire, but also in terms of the city deal work and about how that will make sure that the people and the different parts of that community are able to engage with it. That's the way that we look at it and we embed it in what we do. What we have done is that we don't have a single measure on inclusive growth, not least because we've been trying to make sure that what we have we're going to be able to track through. This year in our business plan, we're going to be introducing a number of tracking measures around inclusive growth, which I can follow up and share with you, that will give us a baseline around some things that we can learn from, as well as then use as a baseline to track and then help us to understand what's, because you give the wrong measure, it can set the wrong behaviour, what's the right kind of measure that would actually help us to be able to track our performance on inclusive growth going forward. Yes, Ms News. To give one example, one of those measures is the number of co-operatives, employee-owned and social enterprise businesses that we support. We're setting the measures just at this moment. From looking forward from that, from my perspective, where I'd like to take some further research in Scotland is around the productivity benefits, particularly associated with employee ownership. There's international research that shows that employee-owned businesses are 5 to 10 per cent more productive than their peers under a more conventional model and that that productivity benefit is sustained. Given where we are in terms of the adoption of this model in Scotland, it will be very interesting to start to track that productivity benefit in terms of Scottish employee-owned businesses. Can I ask you, would you say that an employee-owned business understands inclusive growth better than other forms of business? It's very much part of the DNA. Principally, when a business moves into employee ownership, a trust is established and it's that trust that acts as an anchor for the business for today and to tomorrow's employees. It addresses succession immediately. The employees all then have a stake in the business either directly or through owning shares. You can have a combination of both. It's that sense of ownership, that sense of purpose and understanding the mission of the business, that makes it an inclusive model and brings forward ideas, driving innovation or reduces inefficiency, also driving productivity, that makes the model particularly high performance in terms of productivity gain. Clearly, in terms of the inclusive point, it's about sharing the wealth more widely. It's keeping profits and dividends within a community that drives a multiply effect in that community in terms of local spend. I think that the actual model is still evolving. My team has a meeting with a Government team this afternoon. On this, we've piloted work with the three Ayrshire local authorities around it and taken the inclusive growth model down to a locality planning basis. That was highlighting things such as the lack of digital skills as a barrier to the labour market accessibility of childcare. For us, it's about fully understanding our customer base. The level of targeted services that we would have for young people with protected characteristics and understanding how we can support them through the system, making sure that the system connects up better, particularly when we're working with partners, probably around earlier intervention with that client group. I touched on the development of the foundation apprenticeship model earlier, which just creates a different operating model and gives more exposure to young people with additional work experience and real-time experience. Applying that into the attainment gap in schools is a big focus for local authorities in education Scotland. There are a number of areas where we need to work across organisations in terms of partnerships to make sure that our systems connect up and at a local authority area, but I think that it is still an evolving framework for us. I think that inclusive growth can mean many things to many people, but Nora earlier mentioned gender geography and generational. That's a pretty good definition of how we want to try and reduce inequalities across those three areas. We do a lot of work in monitoring where our businesses and social enterprises account for roughly 25 per cent of our account managed portfolio, how they are in terms of their business values and their progressive practices within that, and that could be everything from young people, gender equality on the board. In particular, in terms of social enterprises, we often invest for the social impact rather than the financial impact. We encourage businesses and social enterprises to focus on the enterprise as much as the social, because it's important to get the balance right. We are increasingly looking to put the social impact benefits into many of our construction projects. For example, I can't give the deal of the name, because we're in a 10-day stand-down period on the last project that we've been announced, but the company that won that was head and shoulders above the other competitors in terms of their social impact, and that's only helped. Thank you, Dr Fancy. Perhaps the greatest meaning of inclusive growth in the work that we do is recognising that the biggest significant contribution that universities and colleges make to the economy is through the graduates that they produce, the people who are educated in those institutions and then enter the economy in one way or another. Therefore, inclusive growth and inclusivity for us is very much bound up with ensuring that the opportunities for people in Scotland are inclusive and that the access to further and higher education is fair and equal to everybody. A huge amount of our work in this area has been around working with the commissioner for finding access, working with our colleagues in SDS and with the universities and colleges directly on widening participation, on ensuring that we don't let up on giving the same opportunity to all young people. That's hugely important for us. It doesn't mean that we aren't interested in other things, but I'm very pleased that, in the work that we do to help universities to start companies—we're extremely good at spinning out companies from Scottish universities and that's something that they should be proud of—the participation in that spin-out process, when we look at it, for example, through the Converse Challenge competition, that's very increasingly gender equal, and it matters hugely to us that that is the case. Therefore, the more businesses that we can start that are led by people from all backgrounds and from all genders, the better. Thanks for that feedback. One of Audit Scotland's findings in the enterprise review was that it's difficult to measure the impact of enterprise and skill spend in Scotland. We have a budget of £2.5 billion a year or whatever it might be. Given that the definition of inclusive growth is not settled, given that it means different things to different people and given that it's difficult to measure changes in inclusive growth, do you agree with the concerns that the focus on inclusive growth does not necessarily address the concern that is raised by Audit Scotland, that the impact of enterprise spend will continue to be difficult to monitor the impact of the spend? Maybe Scottish Enterprise can start. If you want, yes. Thank you very much, convener. We will continue to track from a Scottish Enterprise perspective for every pound we spend what return we get. We do that as a combination of evaluation evidence through real-time insights that we get on working with the companies that we have and obviously tracking individual projects. It's a combination of those things that we bring together for our evidence base and you'll have seen that here at this committee. The strategic board gives an opportunity for us to be able to, I think, in the work that's going to be done around bringing that together across all of the agencies, around what are we doing separately and collectively, so what are the things that we're doing individually and what contribution is that making to the outcome that we seek for the economy and what are the things that we're doing collectively? Innovation centres would be a really good example where we are certainly Highlands and Islands Enterprise, ourselves and the funding council working together around those innovation centres to tackle particular opportunities and challenges with Scotland and with the business base and that links to a number of things that were already being discussed around R&D and innovation and exports. I think that it's collectively, so it's making sure that certainly an individual agency needs to be able to hold ourselves to account for every pound that we're given to spend of the public purse and demonstrate that impact, but I think that the strategic board needs to then collectively be able to demonstrate that. Having said that, there are a number of dependencies that are out with our control that happen in the economy. The impact on that part of it is the whole system piece and we talked about Business Gateway earlier. We've talked about local authorities and city deals as well. There is a combination of other levers that have an impact on the economy that we need to make sure that we understand the totality of that in terms of driving forward the whole Scottish picture that we're looking for. Anyone else wanting to come in on that one? I think that in terms of measurement, we're pretty clear that we use the national performance framework. There might be an issue around articulation between the KPIs and the inclusive growth framework, but I'm pretty clear that we've got a good set of measurements there in specific areas, such as the quality action plan. We manage and measure that well. We'll have the participation measure, which is the common measure now of where young people are in their journey into employment. That's a shared dataset with DWP in the colleges and local authorities. We've got good metrics around how we measure performance, so we need to look at the context of the Audit of Scotland statement. We've talked an awful lot this morning about productivity. We've heard that productivity compared to the UK average is improving, and we're certainly better than a lot of other parts of the UK in terms of productivity. My question is, what are the sectors that have low-skilled and often low productivity, and what are each of the agencies doing to try to improve productivity in those areas? Everyone is looking down at the moment. Does anyone like to go with that one? It's always you, Ms Hanna, starting off. I have to get that off. I mentioned earlier that some of the sectors where we definitely have low productivity and high employment are construction, food and drink and tourism, and the work that we've all done as agencies working with the industry leadership groups has been to set out some productivity plans about how they construct and address that. I think that the three that are currently in place were all launched in 2016, so we're beginning to see some of that work coming through in terms of the type of action that they're taking. Some of that is about investment in leadership and management, some of that is about application of technology. Construction is a brilliant example of that around the construction innovation centre that is invested in by the public purse to make sure that things like off-site manufacturing and about the advances of that globally, also making that industry much more attractive to young people and women because of the shifts that that makes about making construction-related things in a factory as opposed to on-site. Some of the efficiencies that that brings in terms of doing that and about the opportunity to address societal challenges like using sensor technology plus the construction fabric that then creates homes that can start to link to some of the challenges that we have today. Construction is a really good example of where that has happened. Food and drink, a big part of that productivity challenge has been about helping companies to grow and about moving up the value chain and what that means that they can then do in terms of wage levels in that industry. I think that there are certainly some things there. Tourism, the work that we have done particularly looking at destinations as part of that kind of tourism productivity. We have certainly worked with places like Glasgow and Dundee and Aberdeen to look at the destination and how we can work with tourism businesses to collectively work together. We have worked with about 800 of those businesses over the last couple of years and what that again has done with the adoption of looking at data and digital approaches. Tourism businesses are getting online, how they are able to sell and promote their business online, as well as the kind of destination development of that. That has allowed that kind of growth. There are a couple of things there. I think that there is definitely an opportunity for us to be taking the learning from that and now that those have been in place for a couple of years and think about what are some of the common themes coming out of that. There are common themes about investment and digital and leadership. How could we apply that to some of the other sectors, such as retail or care? What would it take to do that? In the new system that we have in terms of enterprise and skills, what would we need to do to take that forward? Before we go on to the other witnesses, I want to ask you about construction in particular. About five or six years ago, I had the opportunity to go and visit CCG in Canvaslang. That was a fantastic resource, but I do not see that there has been a lot of improvement on that. The benefits were obvious in terms of downtime, due to weather, on-site and the fact that they could put together a house or a flat within a very short period of time that was wind and waterproof. However, there does not seem to have been a huge change if you go around building sites today. It still tends to be the timber frames and working on site that has the usual downtime. We know that there is a model out there that would make construction more efficient, but we do not seem to be moving very fast away from the traditional model. Is there any particular reason for that? Some of that is just about the length of time that it takes for an industry to completely change the model that it has. If you have not been out to the construction innovation centre, I encourage you to do that, and we can set that up for you. However, some of the work that we have been doing with them has set up something called Offsite Solutions Scotland, which is absolutely looking at how Scotland will be able to take advantage of both the Scottish and UK aspirations around new house building and how do we start to do that? You are right that the whole industry has not moved yet, but there are definitely some things that we can build on. It is then just about how we start to make sure that that is known. A big part of the innovation centre is about raising awareness in terms of the companies that it works with. It has a membership model about working with construction companies to come and see, and it has demonstration facilities so that you can see the equipment and play with it. It is then just about making sure that we help many more companies to think about how making the investment that they will need to make for the long-term is the right route, rather than doing what they have always done in the past. In terms of tourism and food and drink, we have put a huge amount of effort into enabling businesses to take advantage of the broadband roller that I mentioned previously. It is what many companies do to think more about their customers around waiting for folks to turn up and targeting the right level of customers, who are going to spend more, often international visitors, and who are having a proper marketing approach to that. In terms of a couple of other sectors that I mentioned, sectors such as forestry and timber, there are great opportunities for the use of technology so that you can choose the land that is felling a whole wood. You choose the right trade that you fell at the right time, which gets you a better yield from that particular product, and it increases the productivity of that so that we continue to work with a number of the big forestry companies in the region. Finally, the creative industries is a sector that is dominated by individuals, so often there are productivity challenges with that. We have had success in the creative industries networks that we run, which are increasingly becoming, rather than being just a network of writers or musicians or games producers or whatever it is, working together so that you can get a games company that needs a musician to write the music for their game. That is what we have seen a lot of success. That collaboration amongst very small companies, often individuals, is a really important way of getting growth because you cannot really grow a musician from one person to two people but you can get them to work in a different way by using their talents. My team works with the sector teams within Scottish Enterprise and Hansins Enterprise, helping to promote collaboration using the consortium co-operative model. The majority of our clients are in the tourism, creative industries and food and drink sectors. A couple of examples of strategic projects would be Argyll and Owls, the tourism alliance, which is helping tourism businesses to collaborate and achieve more in terms of scale. Recently, in the food and drink industry, they made in Scotland consortium, which is helping Scottish food and drink companies to take their products internationally, pulling their resources to access international markets. One more sector to this discussion, which is health and social care, particularly social care in that lower-skill end. There is a huge opportunity for increasing both the quality of care and the efficiency of it through using technology and rethinking some of the models of the way in which it is delivered. Another one of the innovation centres that we support with the two enterprise agencies is the Digital Health and Care Innovation Centre, which is absolutely looking at questions of remote support, questions of using technology in the kind of construction of houses that Linda was referring to, so that we can improve the quality of care whilst, at the same time, improving the value of money to the Scottish purse of providing that care in Scotland. The resources that the universities and colleges are providing to those innovation centres is critical for underpinning some of that improvement. However, a point that I think cannot be stressed enough is the link between the improvement of technology or the improvement of processes and the skills that the future workforce needs in order to operate in that environment and make it to ensure that it has the maximum value is very important to us and across the strategic board and through the devices such as innovation centres, we are making that link as strongly as we can. Mr MacGyllus, do you want to comment on this? I think that all the contributions that I have reflected through those partnerships through the industry leadership groups and some of the late Scottish tourism alliance has been a great industry partner, as is Food and Drink Scotland. At the end of the day, you still need individual business leaders or management teams to make that commitment to make the changes. You have a central approach, but you also need to work at an individual company level in the SMAS, Scottish Manufacturing and Advisory Service, which does great work in that space, but you need the commitment to come from the companies. Nora touched on that a little earlier, just about getting up with the level of the value chain, which is a bit more sophisticated in terms of their approach. Too many companies stick with the same old process, which is what you are describing in construction. I really want to concentrate on skills, as I always do in Gordon MacGyllus's in the room. I mentioned the senior around the issue of people that are not young having to reskill, people with family commitments, with mortgages and in-work upskilling. I am very conscious of the work that has been done around apprenticeships. You have mentioned that today and you have mentioned young people a lot. What about the people who are maybe preparing to change career? That is a real issue. We had focus groups recently, and there were a couple of people at the focus group that I was at who felt that they had missed the boat in terms of training, and it is very difficult to get back in, whilst maintaining a job. It is an area at a UK level where there has not been huge amounts of resources spent on that. We have recently re-introduced the individual training account, which gives a subsidy of up to £200 as a kickstart to some of that training. That has been received well. We have tied in the criteria a little just to make it more probably focused on labour market requirements. Personally, I think, and Jamie touched on it earlier, moving through a process where youth unemployment was bad, and we have focused a lot of resources on young people, particularly through the colleges. I see that colleges are a mechanism for that second chance back into learning. We have got a fantastic college estate now. We need to think constructively on how we free that up. Most not all, but most college buildings are closed at the weekend, and that is when people who are in work or do have family commitments can create a bit of space. We have seen some colleges respond differently sitting on the board of Clyde College, and they have put up a programme for childminders just now, because childminders are occupied Monday to Friday normally. That is a good take-up. We need to think constructively on how we can use the resources that we have. The issue with the flag is all-in-line learning. We have seen some innovative practices coming to the market through a commercial route. There is definitely an angle there, but it is an area that we begin to look at the impact of technology and changing and how we help people to adapt. Rather than waiting until we are helping them through a pace intervention, there should be an earlier framework of engagement for them. We provide all those guidance, so the one thing that is available as a constant is that guidance process is to help people to think about their skills, but we could probably do more on the delivery of those. I know that the senior mentioned that she felt that businesses maybe weren't doing enough to upskill their employees when they were there. I would be interested in anyone's views on that. Certainly, that was something that chimed with me. Yes, I think that it is often a challenge. We try and work in a holistic way with all the companies that we work with, so we identify the opportunities and the challenges that they have. Often, leadership is one of the big things that they need. We are running a leadership programme with various levels within an organisation. The most popular part of that is emerging leaders. Those are people who are doing their first career, the first job where they have had to supervise staff. That is really popular with many businesses from small companies to big companies. It enables individuals to get their transferable skills, which will help the company that they are with. However, if they move on to another company or for whatever reason, positive or negative, they have a better skill base with which to get a better job, so we encourage an awful lot of that. One of the important things about that is that it is not just going away and doing a training course with a provider, it is going away with other businesses. You can learn from as much from other businesses as you can. Linda mentioned earlier that there is a collaboration among businesses. You can have the same challenge about a staff issue or a productivity issue in a different sector, and you can learn from somebody else who has just gone through that. Are businesses engaging enough with FE and HE for their in-work training? I think that we are all honest. No, and I think that there are a whole bunch of barriers that are probably in there. Partly Gordon mentioned that in the timescale that colleges and universities have a huge provision that they have to make, so it is about having the right model that is both a win-win for the educational establishments that have a whole set of needs and the businesses that have a whole set of needs. It is finding a way to do that. It is also just about in today's world, in digital technology, what type of courses, what type of skills do companies need, what type of courses, what type of way does that individual who is going to learn it need to find that? I think that other economies do a bit of that, particularly in coding. We have seen the success of those short courses in coding in Scotland and about those people who have re-chained how quickly they get into higher value jobs in the labour market because we have got a demand. It is just about how we scale up some of those things quicker, but how do we make that awareness much higher? How do we make sure that the financial challenges that might be for the individual are going to be able to overcome that? There is quite a lot in there that we are already looking at as part of that alignment piece, but we need to think about the role of the private sector in that much more. Giving businesses the confidence to invest in the skills of their own workforces is a hurdle, if you like. It involves risk and money. In addition to the work that we are doing, as Gordon described with the college sector, to help colleges to build a more nuanced relationship with businesses in order to do bespoke training and the like. We have also been supporting for quite some time mechanisms by which businesses can look at what it might mean to bring a much higher-skilled employee into their workforce through, for example, knowledge transfer partnership and to see whether that is something that is transformative for them. In the majority of cases, it turns out to be enormously transformative to bring a graduate in for a fixed period of time, subsidised by UK and Scottish Governments, to carry out a project, change something. Those graduates, those highly skilled workers, tend to then be employed immediately, and that changes the business attitude to the skill level that it needs. There are many ways in which we can help businesses with that, and we should be coming at it from a variety of angles. Just to mention of the other aspect of things of our graduates not having business skills when they are in creative industries particularly, which is something that I mentioned in the receipt and written in just your thoughts on that, whoever wants to answer. I think that it is something that we need to be doing a piece of work with Creative Scotland just now around the screen unit. The sector itself, I would call it non-traditional employment, and people need to have the skills to be able to adapt whether it is a portfolio of work or a bidding for work, but they will need to do more in that space to make it more commercial both in terms of their approach but understanding the value that they add and where their market price is in that area. It is something that we have recognised. We have the creative industries skill investment plan and there are aspects of that portfolio type working in there that we need to do more on. David Ewing said that we often invest in social enterprises for their social impact rather than their financial impact. In the first session this morning, we heard from Nora senior who told us that very often social enterprises fall between the gaps because they do not neatly fit funding models. I wonder if the panel could share with us exactly what you are doing to support social enterprises and how you can continue to see them as businesses with growth potential rather than just organisations that do social good. As I said, we can't manage more than 100 social enterprises across the region often doing great things, whether that's getting young people into employment opportunities or providing social caring on one way or another. Often, that's activities for people with physical and mental disabilities, so it's absolutely fundamental to what we do. Where we are often focusing a lot of our support is to enable social enterprises to own assets and use those assets, whether that's a community asset transfer from a public sector body or whether it's a development of something that they need to do. Once they've invested in that asset, they've got it to use to create activities going forward. That's your area? Yes, indeed. I should say that there is quite a broad spectrum of support available for social enterprises. As you'll be aware, the ecosystem of support is quite diverse. In terms of Scottish Enterprise, we're part of that, so we're not trying to play a part that is somebody else's part. We're trying to play the appropriate role, which is to help those social enterprises that have ambition for scale to access our camp management support and, more widely, to make available our specialist support to those businesses that would benefit from it. For example, we've been running some cohort programmes for social enterprises, focusing on innovation, helping social enterprises to become more innovative and then providing one-to-one specialist support for those who wish to then embed innovation in their businesses. We're also promoting collaboration between social enterprises. There's a new initiative called Partnership for Procurement, for which Co-operative Development Scotland is a partner, and we're working to help businesses social enterprises to collaborate in bidding for public and private sector tenders. There's some very specialist support orientated at that need. I mean, if I can just come back to the idea that social enterprises should be considered as businesses, or at least some examples of them should be. I'll give you one. Project 42, a social enterprise I visited in Edinburgh in Leith last Monday, they operate like a pure gym type model. They've got the potential to franchise. They've gone in their first eight months from employing one person to 24. They're just about to take on a piece of land worth £1.4 million. What they need is support for capital infrastructure, and they need help with access banking, much like any other fast-growing business would, but they can't get it, because they're viewed as a social enterprise that does public good rather than a potential high-growth business. What can the agencies do to support an organisation like Project 42? In the natural start-up… The point for them would be with FirstPort as a high-growth start-up, so hopefully they're within their good. FirstPort did the visit, but they still need that access to capital. And then Social Investment Scotland, who is the specialist funding arm for social enterprises, and there's a number of other organisations in that space as well. If once they've pursued the journey through the specialist agencies, they are clearly the mainstream, and agencies are also a possibility. You see it all also a possibility, but to them it doesn't feel like that because they don't feel like they're treated as businesses. The important aspect to this is a point that was made earlier in terms of the navigation of the support system, the ecosystem, and how we, as different support organisations, are working together to make that journey easy and transparent for the client. That's the key point that we should take from your point there, is ensuring that they don't need to know every part of the support ecosystem, what they need to be is being supported in the round to meet their need. Okay, thank you. I think that we've given that very thorough look over quite a range of issues, so I would like to thank the panel, the witnesses very much indeed, for your input. Oh, sorry. I thought you were indicating to me that you wanted the minute to finish quickly. No, no, no. I was indicating that I would like to come in after Kezia Dugdale. Clearly the hand signals are not working today. I misunderstood your hand signals, I'm new to this. Please carry on. Thank you, convener. I am much obliged to you. I wonder whether I could come back to issues that I explored with Norris Sr and start with, whether you have an analysis of why Scotland's economy underperforms the rest of the UK, and whether you agree with the fiscal commission's projections for how our economy will perform in future. I'll start with Gordon McGinnis, because he's looking at me. That was a mistake. Not at all. I just think that, since the big financial crash, things have been sluggish, and we've seen—I'll make a point when it has been said earlier—I'm not an economist. But particularly areas have been sluggish, and others have shown growth, and we've went in things like oil and gas, from real-skill shortages to a slump in the price of oil for a whole variety of reasons, which has made that sector particularly challenging. Some of the issues that we will face around Brexit are going to make things better, or actually going to exacerbate and make things a lot worse. I think that some of the unknowns that are in there, particularly for businesses and how they react to that just now, we're working with an increasing number of companies that do have larger numbers of foreign EU-based foreign workers and starting to try and work through the potential implications for the MR. Working across the sectors, and we were touching it earlier, some go through really good times. If you look at food and drink, there's been really strong performance in others, then there's been ups and downs in it. I think that as an organisation, we can only respond as best we can, working with industry leadership groups, taking some soundings and taking some insights from the AM and then taking that into the skills plan and what we're doing in conjunction with the funding council. In fairness, though, Brexit's impact is likely to be across the UK, I don't think that you were suggesting that there was a differential impact in Scotland, or were you? We keep the answers fairly brief for this. We have spent quite a lot of time in this session, so I think that that's the next one. I think that that could be a challenge around some of the rural regions when I look at the highlands of the islands and the number of people who have EU nationals working there could have a disproportionate impact, I would think. I think that one of the things that we've not really talked a lot about in this session is the attitude of companies to investment. I think that many businesses would classify themselves as happy non-borrowers, so they maybe could get investment from the banks, but they're just a little bit nervous about going to take that step. I think that the more we try and work with businesses, the more we encourage them to do that. Just to reflect on our latest business panel, which we do every three or four months, 70% of the 1,000 businesses that we surveyed had had good and steady performance over the last year, and virtually the same number were optimistic about the next 12 months. We don't forecast what they're going to do in 10 years' time, that will be a little bit optimistic, but they are showing resilience and signs of optimism in the economy still. If I can just add, I'm probably going to summarise some things that we've already previously said, but I think that in terms of that productivity level in Scotland and looking at the rest of the UK business investment levels, I think that particularly we do have challenges of that in Scotland. The gap is massive in terms of what we need to do to make sure that we can hit the OECD. That's partly R&D, partly capital, but it's also just that risk appetite. We've seen that particularly around the work that we've been doing around manufacturing and the manufacturing action plan, where we've been talking to very small companies about their appetite for investment, both in terms of the building, the envelope that the company is in, and then the kit that's within it, and certainly the management risk in terms of being able to go and borrow money. People are happy not to do that. If they don't invest, we don't see the productivity coming forward. I think that we are seeing some differences in Scotland and the UK around some of that profile. Innovation levels, we've seen that going up in Scotland, but we need to see it go up even more. I think that that has been an issue around productivity, the management and leadership skills that we talked about, and trade and exporting, we know that there are some kind of challenges, but also just in terms of in a period of uncertainty, people begin to think that the best thing to do is hunker down. Actually, the best thing to do would be to look outward to Innovae and to start doing some different things, and without that ambition to do that and some of that kind of appetite for risk, I think that that has impacted on our productivity levels, and certainly the job for all of us is about how we encourage industry-level but individual companies to be able to take those things forward. Okay, any final panel want to take part in it? Do you want to say something else? One final question is a very quick one. If you were the minister, what changes would you make to your organisation? Right, one sentence each maximum. Okay. Thank you. Never be able to silent. It's in models, sorry. It's in models, right? In the full. Dr Fancy, have you got a word? I couldn't go further in collaboration, it is exactly the right word. Okay. Final word, Ms Hannah. Was that a sentence or a word? I allowed you a sentence, yes. You can do a sentence, you can do a paragraph. I can do a whole paragraph. So I think it is about collaboration but I think it's about really investing in the economy. I do think we're at the point in terms of the strategic board where we've got an opportunity collectively to be ambitious for Scotland and then make sure we really invest behind it. Our job then is to make sure we work together but I think it's about collaboration and investment. Okay, well thank you very much and you've all given us very full answers which we're appreciative of and will be very useful in our report. So thank you very much and therefore I draw this session to an end and suspend the meeting as we move into private session. Thank you.