A Changing Nation - how Scotland will thrive in a digital world: progress report 2021 – 2024

3. Objective 2: A strong digital economy

3.1 What was the aim?

Businesses of all sizes, and in every sector, need the capability to respond to the opportunities and threats that digital offers. Our joint objectives were to:

• make it possible for all businesses – not just the digital technologies sector – to be digital businesses, and to support them to adapt and be secure and successful; and
• create the conditions for the Scottish digital technology sector to grow, thrive, create jobs and attract investment.

3.2 How are we delivering this?

The Scottish economy

When the Strategy was published, Small and Medium Enterprises (SMEs) accounted for 40% of private sector turnover and employed 55% of private sector employees^[14].

The Strategy made commitments to support the digital capabilities of SMEs to improve their productivity by:

• increasing their ability to analyse the data that they hold to improve their decision making, and operate more effectively;
• upgrading their IT systems so they are faster, more resilient, and enhance the customer experience; and
• developing the digital skills of their staff to use digital technologies securely and effectively.

The Strategy also recognised the threat from cyber incidents, and the need for all businesses to improve their cyber resilience to guard against cyber-attacks and have robust plans in place for a rapid response to get back online if subject to attack.

The Scottish digital technologies sector

The Scottish digital technologies sector has an impressive reputation globally. When the Strategy was published, the Scottish tech ecosystem contributed £4.9 billion Gross Value Added to the economy^[15], and we made commitments to:

• support the recommendations of the Scottish Technology Ecosystem Review (STER), so start-ups have the sufficient support to become future SMEs;
• ensure that the sector can optimise 5G technology, by introducing a network of 5G Hubs, to attract investment (a potential estimated £17 billion contribution to GDP of the Scottish economy by 2035); and
• ensure that CivTech, our award-winning public-sector tech accelerator, continues its key role by creating opportunities for entrepreneurs to develop solutions to public sector and third sector challenges, which create new jobs and embed innovation.

3.3 What progress has been made?

The Scottish economy

Over the lifetime of the DigitalBoost Programme nearly 40,000 people attended webinars/workshops with 4,000 businesses receiving intensive one-to-one support via the Programme. An independent impact evaluation showed that, in 2021, the £1.6m invested in the Programme that year resulted in 800 new jobs and £40m of net additional GVA. DigitalBoost funding was reduced by 25% in 2022/23 and the programme was discontinued the following year. Given the ongoing demand for digital support from Scottish SMEs, in 2023/24 COSLA’s Business Gateway National Unit secured Council Leaders’ agreement to use some limited resources to continue to deliver as many digitally themed webinars as possible and will continue this through 2024/25. In addition, some councils are using the UK Government’s Shared Prosperity Fund to deliver intensive one-to-one digital support.

The 2023-24 Programme for Government set out a new way for the Scottish Government, Local Government and our agencies to transform the way we support small businesses to make it easier for businesses across Scotland to access the support available to them.

Case studies - how small businesses have been supported via Business Gateway

Through the Digital Development Loan we have provided £12 million in zero interest loans to businesses to adopt and optimise for new digital technologies, improve productivity and grow business. This assisted 200 businesses and created 1,200 jobs. This is in addition to over £40 million of grants which were disbursed to over 5,000 businesses through the Scottish Government’s Digital Development Grant^[16].

These digital support programmes were vital to help businesses survive and thrive through the Covid-19 pandemic. In a post-pandemic world, foundational digital technologies should be regarded as a necessity for all businesses, and therefore digital should now be considered in all forms of business support. This is being taken forward via the Business Support Partnership.

The new Scottish Cyber Coordination Centre (SC3) is a significant leap forward for Scotland and will raise our capabilities and capacity to tackle the threat, risk and harm that cyber incidents pose and cause. It is an integral part of our multiyear national strategy to build a cyber resilient Scotland.

Cyber “Exercise in a Box” has helped organisations understand how resilient they are to cyber-attacks and lets them practise their incident response in a safe environment. This was delivered between April 2021 and February 2024 to 800 organisations. Private sector organisations made up the largest proportion of this number.

The Scottish digital technologies sector

In support of the STER recommendations that start-ups have the sufficient support to grow and become future SMEs, in July 2022 we awarded a five-year £42 million contract to Codebase to deliver a national Techscaler Network to support tech start-ups in Scotland, and to help them grow to scale.

To promote and accelerate 5G adoption we have invested £14.5 million in the Scotland 5G Centre, including its network of seven 5G innovation hubs. And recognising that Local Government has the potential to be a major market for IoT technologies, the Local Government Digital Office is working in partnership with CENSIS, Scotland’s Internet of Things Innovation Centre, to promote and accelerate adoption within Local Government.

During its first seven years, CivTech has set 92 Challenges for tech entrepreneurs and companies. Over 900 companies have responded to these Challenges, with 107 progressing to the accelerator stage (over 90% of them being start-ups or SMEs). Of the teams participating in the accelerator stage, 86% are currently operational – this survival rate is far higher than the private sector norm in which 20% of new businesses go under within 12 months, and 60% within three years. Current private sector investment into CivTech companies stands at over £100 million, and as of March 2023, CivTech companies reported 330 jobs created.

Case study – Sentireal, CivTech 7

Immersonal worked with CivTech and Victim Support Scotland in 2022 to develop a Virtual Reality experience designed to familiarise first time court attendees with the often difficult and stressful process. Not only is their solution being rolled out across all Scottish courts, but it has been presented at the Victim Support Europe conference in Berlin with the potential of serving 72 VSE members in 35 countries. They have also been given a contract to develop solutions for the International Criminal Court.