National Economic Forum: March 2022

Host: Kate Forbes, Cabinet Secretary for Finance and the Economy

Facilitators: Sean McGrath, Chief Executive, Entrepreneurial Scotland Foundation

Scribe: Ellen Black, Scottish Government

Introduction

Increasing the rate at which we produce new high growth companies can transform the Scottish economy. High growth start-ups and scale-ups can create skilled jobs, pay higher wages, drive increased productivity and radiate innovation across the wider economy. Entrepreneurial thinking in the public and third sectors can improve services, increase efficiency and result in the commissioning of new products and services that can then be exported across the world or help to address societal challenges.

Perhaps more than any other domain of the economy, it is in the creation of new companies, and the scaling up of successful companies, where data shows the greatest gap between current performance and Scotland’s potential. Scotland currently lags most OECD countries in indicators of entrepreneurial dynamism, with a total rate of early-stage Entrepreneurial Activity (TEA) of 7.3% in 2019, compared with 10.5% in England, and 12.4% in Ireland. Scotland would need another 60,000 businesses to match the equivalent rate for England.

Despite some high profile successes, Scotland’s entrepreneurial potential is largely unrealised - our ecosystem does not consistently produce outputs comparable to similarly profiled economies such as Ireland or those in the Nordics. But this gap is bridgeable: these competitor ecosystems achieved dramatic economic change through the kind of sustained collaboration and focussed economic policy currently being proposed in Scotland.

The Scottish Government has identified Scotland’s entrepreneurial potential as a substantial economic opportunity and, since the onset of the pandemic, has announced a series of major new policy initiatives focussed on its fulfilment:

• the National Strategy for Economic Transformation (NSET) sets a 10-year vision for the Scottish economy and includes a stretching ambition to establish Scotland as a world-class start-up nation
• the Scottish Technology Ecosystem Review (STER) was published in August 2020 and made 34 recommendations aimed at establishing Scotland as a world-class tech hub. The report was acclaimed by industry, investors and academia. A delivery programme is well underway and is making good progress
• the Stewart Review was announced in February 2022 and will deliver recommendations on widening access to entrepreneurship and investment for women

While this session is principally concerned with the NSET recommendations, the interventions noted must not be viewed as separate or incoherent – they are expressly designed to be implemented in concert as an integrated national system. Operating as a system, they are intended to represent a structural and systemic shift in Scotland’s economic strategy.

Background

The entrepreneurship chapter of NSET makes 19 recommendations across four projects.

Project 1: embed first rate entrepreneurial learning across the education and skills systems. This project is focussed on systematically generating the entrepreneurs of tomorrow

Key actions include:

• embedding project-based entrepreneurial learning across the education and skills systems
• embedding entrepreneurial learning into the Young Person’s Guarantee
• adapting Scotland’s apprenticeship system to meet the needs of start-ups and early scale-ups, focusing in particular on providing opportunities for women and other under-represented groups
• developing an entrepreneurial campus infrastructure, working with the college and university sector to establish campuses as hotbeds of start-up creation
• developing innovative, industry-led pathways to redirect the best corporate entrepreneurial talent into building new companies

Project 2: create a world class entrepreneurial infrastructure of institutions and programmes

This project is focussed on establishing a world-class development environment for Scottish start-ups.

Key actions include:

• expanding the scope of the current tech-scaler programme, shifting its focus over time from software-based technology businesses to become “start-up scalers” – world-class incubation and developmental environments for all high growth start-ups irrespective of their sectoral domain
• creating a national system of “pre-scaler hubs” to stimulate the very earliest stages of high growth commercial and social entrepreneurship and provide the expanding scaler network with a steady supply of promising new businesses. This will widen access to entrepreneurship by providing a clear entry point for very early stage founders, supporting them to conceive new ideas, start companies, design and develop products and support early tests of market traction
• focussing on providing access to support programmes from amongst the most under-represented groups, particularly women, those on low incomes and those without qualifications at further or higher education, including the six priority groups at greatest risk of child poverty

Project 3: attract and retain the very best entrepreneurial talent from at home and abroad

This project is focussed on establishing Scotland as a globally recognised destination for entrepreneurship. Key actions include:

• attract international entrepreneurs to Scotland by rolling out an international marketing and engagement platform for Scotland’s start up scene
• attract entrepreneurial students from around the world by supporting Scotland’s universities to provide post education pathways that help retain their expertise in our country
• enhance Scotland’s profile at key international set pieces such as international conferences and make use of Scotland’s strong international networks and diaspora that can help attract talent and investment
• build strategic partnerships with key entrepreneurial ecosystems in other countries to create company exchange programmes, new commercial partnerships and international trade opportunities for Scottish businesses

Project 4: build an entrepreneurial mindset in every sector of our economy

This project is focussed on the value of applying entrepreneurial thinking and technique across the wider economy. Key actions include:

• expanding the application of entrepreneurial thinking and approaches to public service reform, ensuring staff at every level working in the public and third sectors are exposed to entrepreneurial training as part of ongoing professional development
• implement metrics to reward entrepreneurial approaches and activity within public sector bodies
• make the use of the CivTech programme a mandatory part of the way in which the big change programmes of government are delivered and launch a new National Challenge Competition for Economic Transformation

Suggested discussion questions

• the NSET seeks to fulfil Scotland’s entrepreneurial potential. Are there any further reasons why Scotland does not perform at the same level as comparable economies?
• how can we stimulate the support and direct involvement of the private sector in delivering these recommendations?
• if these recommendations were implemented as described, would this deliver the Scottish Government’s ambition to create a world-class entrepreneurial ecosystem?
• many of the recommendations build upon global best practice – is there anything missing that the Scottish Government should consider incorporating into this programme of action?
• the recommendation on pre-scalers is especially important and there are many different ways in which it could be implemented. What is the group’s advice on how this idea could be implemented as powerfully as possible?
• in what ways can businesses work with the public and third sectors to help build an entrepreneurial mindset in every sector of our economy?
• how can we gain maximum benefit from the National Challenge Competition for Economic Transformation?