Team Scotland's inward investment support: evaluation

3. The support process

Scottish Development International (SDI) is Scotland's trade and inward investment agency, helping businesses from around the world do business in or with Scotland. SDI promotes Scotland as a place for investment and trade, helping to create a more dynamic and globally competitive economy in Scotland. This is achieved by providing information, partnering with businesses and investors that want to set up or invest in Scotland, and helping businesses find the connections they need. Support includes:

• Property searches and advice to help businesses find the right facilities
• Academic connections to Scottish universities and colleges
• Supply chain development to identify partners and suppliers that can support business
• Links to intermediary business professionals
• Talent, recruitment, and skills advice to access the skills and experience businesses need
• Flexible workforce development to support staff development needs
• Links to local and global business networks
• Business support and advice from dedicated advisers who help strategize and signpost businesses to the right support
• Financial support to locate, expand or maintain operations in Scotland.

The approach is supported by a unique 'Team Scotland' partnership, which sees the public sector, including delivery partners, working together with academia and industry to promote the very best Scotland has to offer.

Graphic text below:

Team Scotland

Scottish & UK Government

Enterprise Agencies (HIE, SDS and SoSE)

Local Authorities

Intermediaries & Delivery Partners

Industry Partners

Networks

Early-Stage Ecosystems

Academia

Partnership working at local, regional, national and international levels underpins work to develop and implement a Team Scotland approach to amplifying efforts to build Scotland's reputation and reach in strategically important international markets. Analysis from the beneficiary survey highlighted the following key headline findings when considering the impacts of this support.

3.1 Impact analysis

3.1.1 Attracting Investment

A significant volume of inward investment projects come to Scotland without assistance, however, in a global environment with competing locations, a more focussed and targeted approach to inward investment promotion can favourably influence the choice of location.

The evaluation has shown that delivery partner support has been a key factor in delivering inward investment projects that are benefitting the wider Scottish economy through innovations, supply chains and embeddedness in the economy, supporting domestic suppliers, and engaged in knowledge exchange with higher/ further education institutions and businesses, resulting in a variety of impacts such as new and improved business processes and further R&D.

It is also clear that investment companies valued the offer of financial assistance and assigned a high degree of impact to it, with 50% believing that they would have definitely not, or probably would not have, carried out their project without public sector support, and a further 28% responding that they would have carried it out but not as quickly.

3.1.2 Nature of Investment

An important finding is that almost half of respondent investors stated that their operations in Scotland were strategic, with investors establishing central offices or headquarters. These projects exhibit a higher level of autonomy, more importance in the global value chain, a greater degree of decision-making capacity and integration into crucial knowledge exchanges with higher and further education. HQ functions typically offer higher wages and increased decision-making functions. This is in contrast with historical waves of inward investment which tended to be 'branch-plants'.

3.1.3 Jobs Impact

Key emerging themes from the results show that the majority of firms (54%) reported that the support helped them to deliver their investment project (new/expansion projects only), with more than 9 in 10 businesses reporting that they increased the number of people employed and/or safeguarded existing jobs as a result of the support. Moreover, 73% of businesses anticipate the number of people employed by the company in Scotland to increase over the next three years as a result of the support.

Inward investment impacts take time to materialise both in terms of job creation and wider economic benefits. Delivery partners therefore monitor the planned jobs outcome measure over a three-year period after receiving support, for businesses to achieve their projections. Only a third of respondents to the survey had exhausted this timeframe beneficiaries were yet to achieve the planned number of jobs created at the time of the survey. Therefore, taking anticipated job creation over the next three years from survey data into account, 73% of supported firms are expected to increase jobs in the future (ranging from 60% to 86%). This could result in additional 6,289 new jobs over the next three years (ranging from 4,193 to 8,703). Average estimates would indicate a 34% higher than planned job creation.

In addition, analysis was conducted to estimate whether jobs associated with inward investment were realised in practice. Over the period, businesses planned to create or safeguard 13,947 jobs (62/38 per cent split between new and safeguarding jobs). Inferences were drawn from the share of respondents that reported that the support had an impact on their job creation/safeguarding. This resulted in total actual new jobs estimated to be 5,297^[9] over the evaluation period, while actual safeguarded jobs were estimated to be 5,863^[10]. Compared to the planned jobs measure, this suggests that businesses are yet to achieve their outcomes when it comes to new jobs but had already exceeded plans for safeguarding jobs.

The achievement of spillover benefits was a key part of the Inward Investment Plan. Even though much of this analysis relates to the period prior to the publication of the plan, the evaluation did find that spillover effects were in evidence. Specifically, these relate to supply chain impacts and knowledge exchange. Survey results show that approximately 9 in 10 supported firms buy goods/services from Scottish suppliers and that, on average, 40% of all goods and 50% of all services were supplied by Scottish companies. Fifty-nine per-cent said they had bought more as a result of the support provided. Approximately six in ten sell their goods/services to the Scottish market.

3.1.4 Spillover effects

Of those that responded about half reported that knowledge and/or expertise transfer activities took place between them and different stakeholders in Scotland, for example:

• 50% of firms reported that knowledge and/or expertise transfer activities occurred between their firm and their Scottish suppliers
• 48% reported that knowledge/expertise transfer activities occurred between their firm and their Scottish business customers
• 45% of firms reported developing partnerships / relationships with Scotland's universities and/or colleges as a result of the support

The outcomes of these transfer activities included: reduced product costs and improved product quality (47%); improved product quality (29%); and other outcomes such as functionality, environmental technology, network, and IP (18%).

When asked about alternative investment locations, 70% of firms considered the option of investing elsewhere instead of Scotland but landed in Scotland (for new and expansions projects only), with the principal factors to firm's decision cited as:

• Skilled workforce availability (28%)
• Scottish Government support^[11] (16%)
• Technology & innovation (13%)

3.2 Implementation and process analysis

The process analysis sheds light on how support led to these outcomes and how satisfied respondents were with that support. In addition, a key consideration for any investment decision for a potential investor is location. Data from the interview respondents provided a deeper sense of "why Scotland?"; this included factors such as skills access, DP relationship management, positive experience with the delivery partners and more attractive financial support.

On average companies rated their satisfaction with the way the support was delivered quite highly at 8.3 out of 10 (ranging from five to 10). About a third (34 percent) of businesses rated the way the support was delivered at below 8. Their reasons for this were mostly of a financial nature, such as wishing for greater financial support, grant not having been allocated or being unsure if it will be allocated. Other factors included bureaucracy and administrative burden, timescales, speed of work, and a desire for greater engagement.

Respondents were positive about the quality of the support provided describing it as "good" or "very good". Of those that elaborated, some specified reasons such as delivery partners' responsiveness, engagement and professionalism, consistency of quality, and contribution to achieving results.