Ewan Mearns
Scottish Enterprise

The story so far ...
What kind of economy has been sustaining
Scotland’s communities in the recent past ?

1950’s
 25 Shipyards
 113 Coal mines
 6 Steel works
 0% world’s oil
 Employment:
 35% manufacturing
 45% services
 6% business services
2000’s
 4 Shipyards
 0 Coal mines
 0 Steel works
 3% of world’s oil
 40% of EU’s PCs
 Employment
 15% manufacturing
 75% services
 21% business services

Manufacturing and Service Sector Employment
2,000,000
1,750,000
1,500,000
1,250,000
1,000,000
750,000
500,000
250,000
0
Manufacturing
Services

Public Services
Retail & Wholesale
Business Services
Manufact. (ex. Elect)
Hotel & Catering
Construction
Other Services
Transport/Comms
Financial Services
Electronics
Agriculture
0 5 10 15 20 25
%
30

170
160
150
140
130
120
110
100
90
Growth in GDP (1975=100)
20%
SCOTLAND UK

8
7
9
%
4
3
6
5
ILO Unemployment Rates Scotland and Great Britain
Great Britain Scotland

A changing (but under-performing) economy ...
 Relative transition from a traditional manufacturing to a service and knowledge-based economy
 importance of foreign investors to manufacturing employment and productivity
 Scottish GDP growth and productivity lagging behind UK (and competitors) … and gap widening
 declining unemployment during 1990s

… but with encouraging signs of future growth
 the emergence of new sectors of economic activity
 strong growth in service-sector jobs
 commercialisation of academic knowledge
 more young people entering FE/HE
 more recently, a stable macro-economic environment

New jobs and activities
 Financial services
 Scotland 6th largest equity centre in Europe
 Biotechnology
 home to 20% of UK biotech companies, employing 24,000
 Optoelectronics
 employs 5,000 people, 60% output exported
 Creative industries
 digital media, games, Edinburgh Festival injects £120m annually

Financial Services
Business Services
Other Services
Construction
Hotel/Catering
Chemicals
Retail/Wholesale
Electronics
GDP
Public Services
Manu (ex. Elect)
0 1 2 3 4

More people entering FE/HE
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
1981/82 1985/86 1989/90 1993/94 1997/98
Total
HE
FE

Some drivers of future economic change

The changing nature of ‘value’ in the economy
 Increasing importance of ‘intangibles’ in creating value:
 software, services (with products), speed, ideas/creativity, brands/trust, experience etc.
 New ways of doing business
 mass customisation eg Dell, Dulux
 knowledge management eg Skandia
 innovative business models eg Egg, e-Bay, Dyson
 brands and values eg Intel, Nike
 experience eg Disney

A more global, networked economy
 differential cost of labour
 the end of the ‘assembly plant’ era in Scotland
 much closer ties between national economies
 vulnerability to economic shocks
 a smaller, ‘connected’ world
 agglomeration effects

More demanding and prosperous consumers
Household income and expenditure
35
30
25
20
15
10
5
0
1968 1978 1988 1998
Food & Fuel Leisure Real income (right axis)
Source: ONS
From mass production to mass customisation
60
40
20
0
120
100
80

People, skills and talent
 Importance of ‘know how’ vs ‘know what’ in the knowledgebased economy
 Future skills trends
 core skills : basic skills; communication skills; problem-solving, planning and teamwork; IT skills
 occupations : managers; public sector professionals; elementary caring and service occupations
 Talent as key; diversity as driver
It’s not the strongest of the species that survive, nor the most intelligent but the ones most responsive to change
Charles Darwin

The rise of the creative class
 Richard Florida says: innovation flourishes in places that attract creative people, places with the following attributes :
 critical mass of cultural and natural assets
 open attitude to new and unconventional ideas and people
 cultural eco-system - many forms of creativity take root and flourish
 attract new and different kinds of people
 make rapid transmission of knowledge & ideas easy
 have low barriers to entry – economic, social, civic creativity drives innovation innovation is the key to sustained economic growth

Thousands
'Prime' Working Age Population (20-34 years),
2000 to 2010
1,080
1,060
1,040
1,020
1,000
980
960
940
920
900
Year

19
18
17
16
22
21
20
2000 2001 2006 2011 2016 2021 2025

How can Scotland’s communities become more successful in the future economy ?

Foster a supportive environment for enterprise
 more new and growing small businesses
 host to new/emerging activities eg social enterprise, digital media
 more diversified local economies
 exploiting academic knowledge
 no low-tech industries, only low-tech companies
 new sources of value … not just high-tech
 importance of global connectivity

Be home to diverse and adaptable people
 openness, willingness to change
 attracting, retaining - and losing - a diverse range of people
 new ideas and influences
 making the most of our human capital
 enthusiasm for learning - across all ages