The UK: right for business, right for Scotland
Michael Moore talks about building a stronger, more vibrant, more sustainable Scottish economy in which all businesses can grow.
The people in this room underline how diverse the Scottish SME (small and medium enterprise) community is - and how important you are to the health of the Scottish economy. Your businesses make up 99% of enterprises in Scotland. You provide more than half of Scotland’s jobs. And you produce more than a third of turnover in the Scottish economy. Our economy - the jobs that provide families with a home and a future, the services that make our daily lives better - all of that relies on your hard work and dedication.
And the message I want to convey today is that the UK government supports you in your efforts to thrive and to grow - we are on your side. I want to take the economic issues head on and then set out where we are on Scotland’s other great challenge - our constitutional future as part of the UK or separated from it.
Challenges
The theme of this Convention is ‘Real Challenges, Real Solutions’. Those challenges are clear, just as those solutions are essential.
From the financial crisis in 2008 to the cardiac arrest in the banking system.
From the hangover following the UK’s largest ever peacetime deficit to a succession of external shocks, including commodity price spikes and the euro crisis.
Indeed, the uncertainty in the euro area is the biggest challenge to the recovery of the UK economy today. The EU is Scotland’s biggest international export market - £9.8 billion of all Scottish exports outside the UK go to the EU. Almost half our international exports. All of these factors have been damaging to the Scottish and wider UK economy.
Nobody is denying the scale of the challenges.
And the government will support you in finding real solutions to those challenges, creating the conditions that allow you and your businesses to thrive. Returning the UK to sustainable, balanced growth is at the heart of why we formed the Coalition - and it remains our overriding priority. So we keep listening to businesses, large and small, across Scotland and the wider UK. We are taking decisive action to support you.
Access to finance
So let’s not duck a big issue for most of you - access to finance. Most SMEs I meet raise this: it’s a matter of financial life or death for some. I get that. The government understands it. And we are taking action. We are kick-starting bank lending through the new Funding for Lending scheme to enable banks to support businesses such as yours, and families aspiring to own their own home.
The scheme, which has no upper limit, reduces the funding costs of banks and building societies, allowing them to make loans less costly and less scarce. No doubt Ken Barclay will tell you more about what the Royal Bank of Scotland (RBS) is doing. I welcome Ken’s appointment as Chair of the RBS Scotland Board, and I look forward to working with him to ensure that RBS is supporting SMEs in Scotland.
I am pleased that RBS, thanks to the government’s scheme, will waive fees for every SME given a loan and reduce borrowing costs by 1% on average, or 1.6% for smaller SMEs. That is welcome - and we should expect all the banks to support this key part of the market. And not just existing players, but new entrants, too: we want a more competitive lending market and our bank reforms will deliver that.
We don’t just want the cost and availability of loans to improve; we want better terms and conditions, too. Less unilateral re-writing of terms and conditions, more genuine negotiation. Less remoteness in decision making, more interaction with knowledgeable bank managers.
It’s not too much to ask. Or expect.
For the past two years we have been removing the obstacles to lending. Now we’re using the government’s balance sheet to allow an unprecedented step change in making credit available. And we are moving ahead with radical bank reform too.
We are on your side.
Tax system
But it’s not all about lending. You want a better deal on tax, too. So, we are putting in place a stable, competitive tax system, which provides greater rewards for your hard work, drives investment and encourages innovation. A fair tax system which rewards wealth creators, but punishes tax-dodgers and evaders.
As well as cutting corporation tax to the lowest rate in the G7, we have cut the small profits rate to 20%, and introduced tax simplification for small businesses. We have increased tax credits for research and development for SMEs to 200% in 2011, and 225% in 2012, as well as providing a new patent box that means companies can pay 10% corporation tax on profits from patents.
We have announced the new Seed Enterprise Investment Scheme, which will offer tax reliefs to investors who purchase shares in small early-stage companies. And we have introduced the Regional Employer National Insurance Contributions Holiday, to help new businesses in Scotland with the costs of employing staff.
Regulation
In my conversations with small businesses across Scotland, one of the things that almost always comes up is regulation. We are cutting red tape. We introduced a new one-in, one-out rule, so no new domestic regulation can be brought in without regulation of an equivalent value being removed. In April last year, we introduced a 3-year moratorium on new domestic regulation affecting micro businesses and start-ups. And under our Red Tape Challenge we have committed that 50% of over 1800 regulations will be scrapped or improved - saving businesses such as yours over £350m per year.
This is a key issue for UK competitiveness, and recently Lord Heseltine, who is reviewing the public sector’s impact on competitiveness, was in Edinburgh to listen to business leaders. He asked for examples of burdensome regulation and within 48 hours we had some substantial material sent to us - if you have more ideas, please let us know.
Industrial policy and the ‘green economy’
More broadly, we are taking action to boost investment and rebalance the economy, creating opportunities for companies to start up and grow. We made money available to the Scottish government, allowing them to introduce 4 Enterprise Areas in Scotland - with 100% capital allowances for investment in Irvine, Nigg and Dundee, and the potential to deliver 4,000 new jobs.
And we are revolutionising the energy market and putting Scotland at the forefront of the green economy. Introducing the world’s first Green Investment Bank, headquartered in Edinburgh, to drive forward the UK low carbon economy.
Exports
To promote sustainable growth, exports will be hugely important - and we want to support you in your efforts to break into new markets.
UK Trade & Investment (UKTI)’s new 5-year strategy sets out programmes to link SMEs to trade finance, credit insurance and venture capital, as well as work to bring high value opportunities home - bringing major supply chain opportunities for SMEs across a wide range of sectors. The UK government will spend £35 million to double, from 25,000 to 50,000, the number of SMEs that UKTI supports. But we are on the look out for further ideas too.
That is why I have asked Brian Wilson, the former Trade Minister, to bring his many years of business expertise to bear on a review of support for Scottish exporting. The review will report in autumn 2013, and will consider how to ensure that Scotland’s export performance improves.
Priorities
These are real solutions to the real challenges we face. But if there is more we should be doing, then tell us.
I repeat - we are on your side.
Scotland’s two governments
One other thing I should stress. You rightly demand and expect much from those of us who serve in government. For my part that means Scotland’s two governments working together.
- in efforts to promote trade, where SDI works closely with UKTI and its network of over 150 offices in 100 markets, covering 98% of world GDP (gross domestic product).
- in our consistent focus on youth unemployment where Skills Development Scotland (SDS) and Jobcentre Plus work hand in hand.
- in delivering broadband fit for purpose in the 21st century.
- in making sure that part of the legacy of the Olympics is a business-friendly environment for the Glasgow Commonwealth Games.
I am committed to ensuring that for you in business, politics does not get in the way of your two governments serving your needs. We will continue to do everything we can to ensure that businesses within Scotland, and the UK as whole, have a prosperous future.
In that context, I want to talk about the importance of Scotland’s place in the UK to your businesses. And let me concede straightaway that, on this one, Scotland’s two governments don’t see eye to eye.
Economic benefits of Scotland in the UK
Crucially, as part of the UK, Scotland has a trusted currency, record low interest rates and a competitive business environment. These are the things that will help us weather the economic storm in Europe, that will put our economy back on the road to recovery and that will generate the jobs we need. All of us in Scotland, individuals and businesses alike, are better off as part of the UK. Stronger together, weaker apart.
Let me highlight 3 key areas:
First, the single market. As part of the UK, Scotland has access to a hugely successful single market with no boundaries, borders or customs, but a common currency and a single set of regulations.
Secondly, international influence. Scotland’s influence on the international stage as part of the UK is undoubtedly greater than it would be if it spoke alone. The UK is one of the ‘big 4’ member states in the EU and a member of the G7, G20 and IMF (International Monetary Fund). In today’s global economy these are the arenas in which decisions affecting your businesses are taken.
Thirdly, the pooling of risk. If the events of recent years have taught us one thing, it is that crises and shocks will happen, and we have to deal with them.
As part of the UK, we benefit from the size and diversity of the UK economy, providing security when global or local economic conditions require the UK government to provide support. This included injecting capital in excess of the entire Scottish government budget into RBS and HBOS during the financial crisis.