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When business is successful, Scotland is successful : Scottish Chambers of Commerce New Year message

When we look ahead to 2015 a major question confronts us. It is searching in implication and demanding of answer. This question will engage all of us in Scotland.

We have had a truly extraordinary year in 2014. Seldom before has Scotland so captured world-wide attention. The triumph of the Commonwealth Games showed ‘Team Scotland’ at its best. The Ryder Cup was an unqualified success. The national referendum on our future brought a breath-taking voter turn-out, one of the highest ever recorded in a modern democracy.

Scotland has become a great global story. Awareness of Scotland - its successes and achievements, its products and services - has seldom been higher.

So the question we face in the New Year is this: how can we build on these achievements and secure further advances for business, our economy, our society and for our quality of life?

I start from a fundamental premise: that when business is successful, Scotland is successful.

That is my article of faith, but you don’t have to take my word for it.

The past year has seen great advances by the business sector. Despite continuing problems from the financial crisis and problems with funding, there has been a surge in new business start-ups. The number of new businesses has risen to a record 30,263, a 19% increase on the 2012 figure.

According to the Scottish government, more than 335,000 businesses are now active in Scotland, the highest total since records began.

And the 2014 registered business stock rate per 10,000 adults is up from 362 businesses to 377 – the highest rate recorded since the start of the series in 2006.

Why does all this matter?

The outstanding development of 2014 – one that took almost all forecasting groups by surprise – has been the continuing surge in numbers employed in Scotland – and growth in private sector employment in particular.

Latest figures show employment in Scotland now stands at over 2.6 million - the highest level since records began in 1992. Our overall unemployment rate has fallen to 5.6 %, youth unemployment in Scotland has fallen by over 26%, and is now at its lowest level in the last five years.

Female employment has increased by 21,000 over the quarter to reach 1,288,000 – the highest female employment level ever.

How have these impressive employment figures been achieved?

The news headlines have been dominated by stories of government spending cutbacks. So from where have these new jobs came?  Government statistics show that over the last 12 months those employed by the public sector have decreased by 37,900.

At the same time, employment in the private sector in Scotland increased by 72,900 to 2,048,500. Indeed, the proportion of Scots employed in the private sector is at its highest since records began in 1999.  

Furthermore, the latest labour market reports from the Bank of Scotland show  that vacancies are continuing to rise – indeed, firms are reporting a shortage of applicants to fill the advertised posts.

These figures show that Scotland’s businesses have had the resilience to cope with the deepest recession in our modern history and are continuing to succeed in the face of challenges in the economies of many of our key export markets.

So: More people in work. More young people finding opportunities. More women in work. A record number of companies, a rising number of business start-ups, and strong growth in self-employment.

All of these factors help lift people out of poverty, helps household incomes, powers consumer spending on our high streets, generates more revenue for the government’s social goals, helps more people onto the housing ladder, lifts our overall economic growth performance, and above all - lifts our quality of life.

That is why I cannot emphasise enough that when business is successful, Scotland is successful.

So I return to the question: how can we build on these achievements and secure further advances for business, our economy, our society and for our quality of life? 

An early challenge will be to secure clarity, resolution and speed on the recommendations of the Smith Commission concerning more powers for the Scottish parliament.

Scottish businesses have been extraordinarily patient over a protracted period that has seen political attention dominated by constitutional politics. While the political battle raged little attention was paid to the daily endeavours and achievements of business.

For many businesses, survival is a touch-and-go affair: orders to be filled, bills paid, suppliers secured, deadlines met, budgets adhered to, staff hired and a mountain of regulatory paperwork to be dealt with.

In all this there is a continuing process of innovation and adaptation to cope with and challenges ranging from changes in consumer taste to hectic, disruptive advances in information technology.

Throughout the referendum campaign many felt that lip service was paid to the business sector. This has to change.

We need to ensure, not just that we are creating more businesses but that we grow our medium sized businesses into tomorrow’s corporate giants.

There is one outstanding truth backed up by research - time and time again, the small business sector has led this country out of downturns and recessions.

Businesses are great drivers of innovation - they are adaptable, dynamic, innovative and opportunistic. Truly, without a thriving business sector, our chances of economic and social improvement are slim indeed.

This needs to be recognised in the latest phase of constitutional change. Many of the Smith Commission recommendations – particularly on changes to rates and level of personal taxation - will have wide implications for business.

So it is vitally important that as the proposals advance towards legislation there is full and extensive consultation with businesses and business organisations and that we are listened to.

It is vital that changes to taxation do not prejudice the ability of Scottish companies to attract skills and talent from across the UK and overseas as well as within Scotland.

The Scottish Government has, since 2007, placed the goal of increasing sustainable economic growth as its central purpose.

We believe this is the right approach for our government because as my figures show, it is business that will deliver that growth - creating employment, opportunity, innovation and wealth.

It is these successes that enable our various tiers of government - local, Scottish and UK - to deliver on their social agendas.

In simplistic terms without business growth, governments would have to borrow more or increase our taxes to fund their plans.

We have more than enough public debt on our hands as it is. Piling on more debt for our children to pay is neither desirable nor sustainable. This is a matter not only of financial but also moral solvency.

There are other headwinds that we face. We absolutely still have an extreme level of fragility which should not be under-estimated as we move into 2015.

Evidence of this can be seen in the slowing pace of global growth in recent months.

Of particular concern has been the lacklustre performance of the Euro zone - a critical theatre for Scottish exporters. We have an interest in seeing progress towards financial stability and a return to robust and sustainable growth in the single currency area.

Over the past three years forecasts for the Scottish economy have consistently under-estimated the strength and resilience of the private sector. Can we reasonably expect another year of outperformance?

Politics will again cast a deep shadow. The outcome of the general election in May is deeply uncertain, and with a hung parliament likely, we could see legislative gridlock and adverse implications on financial markets.

The final months of 2014 saw an extraordinary plunge in the price of oil. A collapse of more than 40 per cent in the price of Brent crude in barely four months brings severe problems for our North Sea oil industry.

The fields off the coasts of Scotland are among the most costly in the world and extraction costs have risen sharply in recent years. Many fields are not profitable at an oil price of $70 and lower. Retrenchment and cutbacks there will almost certainly be.    

Across the wider economy though there will be significant benefits for households and businesses alike. A fall in fuel prices is particularly welcome to many of Scotland’s rural businesses and those with high transport and distribution costs. An oil price forecast to average $80 a barrel over 2015 could help to counter the wider global slowdown. But we do need governments to be assisting this sector with real and tangible support.

But amid all these uncertainties, of one point we can be sure: it is the continuing performance of business that will be critical in sustaining further gains in investment and employment, and in generating the tax income that will enable the Scottish government to meet its objectives. Prominent among these objectives must be continued improvement in education and skills training as the most effective way to address poverty and low incomes.  We will work to ensure that the Wood Commission’s recommendations are implemented – and every business in Scotland must come on board. 

In 2015 this article of faith will never be truer: that when business is successful, Scotland is successful.