Scotland's International Strategy

2. Economy, Trade and Investment

2.1 Our Aims

Scotland’s centuries-old economic links with the rest of the world are broad and deep. Our solid reputation for innovation, collaboration and being true to our values resonates with the international community and encourages potential partners to work with us. We provide world-class goods and services, from items rooted in our traditions such as whisky and salmon, to our pioneering satellite manufacturing industry and dynamic financial services. Engaging internationally in these areas is crucial to making the transition to a wellbeing economy that is fair, green and growing. An economy that serves the collective wellbeing of people now and in the future sets us on a path to a greener, more prosperous nation, and helps our international partners do the same.

In March 2022, the Scottish Government published its National Strategy for Economic Transformation (NSET) which sets out the priorities for Scotland’s economy, and the actions needed to maximise the opportunities of the next decade. NSET commits us to achieving the vision of a nature-positive economy founded on wellbeing and net zero, and based on the principles of prosperity, equality, sustainability, and resilience for current and future generations. Our international activity will help achieve this.

In this chapter, we will outline how the Scottish Government, in collaboration with its partner organisations and businesses in Scotland, will deliver its international trade and investment objectives, the key sectors, priorities and geographies of focus, and the vital role played by the Scottish International Network in delivering for Scotland.

2.2 Our Approach

In January 2021 we published Scotland’s Vision for Trade, a strategic policy framework to guide our decisions in a way that supports wider economic, social and environmental ambitions. It sets out five principles – inclusive growth, wellbeing, sustainability, net zero and good governance – which guide our actions both on the devolved elements of international trade, and where we are seeking to influence UK Government actions.

Overseas engagement and relationships are crucial to achieving these ambitions. It requires a Team Scotland approach in which the Scottish Government works in tandem with partner and enterprise organisations across the country, supporting and collaborating on international activity with businesses, universities and other organisations to meet the goals of NSET.

We are also proud to collaborate with other nations to achieve these goals. For example, as one of the founders of the Wellbeing Economy Governments group (WEGO), we work with our fellow partner countries to share best practice and our valuable relationships with Finland, Iceland, New Zealand, Wales and Canada are helping to take forward our work in this area.

Our network of offices in Europe and around the world work to deliver for people in Scotland. Scotland’s International Network, operated by both the Scottish Government and Scottish Development International, makes vital contributions towards our NSET goals to supporting the growth of Scotland’s economy. This Network will continue to focus on high-potential sectors, while at the same time developing long-term strategic economic diplomacy focused on high-potential areas of growth, including leveraging the GlobalScot Network and our Trade and Investment Envoys.

We will continue to apply internationally agreed standards, respect international law, support human rights, and build trade-based international relationships which support developing nations and address global inequality. As part of this we also aim to better understand and address the differential impacts of trade across our society in Scotland, such as in relation to gender. We will continue to support and promote fair trade, building it into our wider model of social, economic and environmental balance, driving better trading conditions for marginalised producers and workers globally. We will also support strong trading relationships by applying good regulatory practice (in line with the New Deal for Business Group recommendations[12]). To deliver Scotland’s Vision for Trade, we will:

• Publish our annual progress in applying our principles to decisions on trade.
• Hold the UK Government to account in its decisions on trade, including all Free Trade Agreements and World Trade Organisation business, using our trade principles.
• Take a range of concrete actions, in Scotland and overseas via our International Network, that support NSET delivery, net zero targets and the alignment of economic growth with the ambition to build a wellbeing economy, including:
  • Improving the trading environment for Scottish businesses, such as actively supporting the resolution of market access barriers.
  • Continuing to develop our policy on international regulatory cooperation and using the Scottish Services Trade Forum to inform our approach to trade in services, supporting the aims of the New Deal for Business.
  • Advancing more equal access to the gains and opportunities from international trade for people in Scotland, such as by improving our evidence base on the differential impacts of trade in Scotland and engaging with the recently established Centre for Inclusive Trade Policy’s research agenda.
  • Developing Scotland’s influence in global trade policy and the WTO.
  • Driving further coherence between climate and trade ambitions, including in relation to the energy transition, and continuing our consideration of human rights as part of trade policy.

2.3 Export Growth

The Scottish Government’s publication A Trading Nation sets out our approach to increasing Scotland’s exports by focusing support on the markets with the most demand, and the companies best able to meet that demand. This plan is aligned to the principles set out in a Vision for Trade, optimising the Team Scotland approach to build the performance of Scottish exports. Our overarching approach to trade is rooted in our commitment to fair work, inclusive growth, and supporting the wellbeing of our people.

The products and services that Scotland has to offer have long been in high demand across the globe with Scottish companies showing high levels of resilience in the face of challenges such as Brexit, the pandemic and rising inflation. Latest figures show that the support provided by our enterprise agencies[13] to companies across Scotland in 2022-23 will result in £1.73 billion of planned international sales over the next three years – a 20% increase compared to 2021-22.[14]

Our goal is to increase our exports as a proportion of the Scottish economy from 20% to 25% by 2029. While Brexit has made this more difficult, with additional costs and bureaucracy, achieving this would increase Scotland’s GDP by around £3.5 billion and create 17,500 more jobs in Scotland, with an increased tax take of around £500 million per annum. And over the decade, we will deliver on a number of internationally focused objectives which will further demonstrate Scotland’s ambition for excellence in a number of sectors and fields, and build on our strengths. To do this, we will:

• Showcase Scottish expertise, particularly in renewable energy and net zero, to the world at major events such as COP and through the Brand Scotland partnership.
• Deliver our Sector Export Plans in technology,[15] life sciences[16] and renewables[17] to capitalise on new market opportunities.
• Continue to target export support to business to increase trade and grow our export capacity, capabilities, international reach and profile.
• Deliver a robust programme of trade missions and ministerial visits with agencies and partners in key markets to promote and further internationalise Scotland’s economy and strengthen our trading relationships globally.
• Support NSET ambitions by strengthening Scotland’s position in new markets and industries, focusing on the international economic opportunities stemming from decarbonisation and net zero, where Scotland can become world-leading and secure first-mover advantage.
• Our International Network will cultivate strategic relationships with key stakeholders to help unlock areas of high potential growth for SDI colleagues to pursue, utilising Scottish Trade and Investment Envoys and the GlobalScot networks to their full potential.

Case Study 1: Food and Drink

2022 was a record year for Scottish food and drink, with food exports worth £1.9 billion and exports of whisky alone worth £6.2 billion, demonstrating the excellence of Scottish products and the esteem in which they are held by the rest of the world.[18] Our overseas experts support Scottish companies through the practicalities of doing business abroad and build relationships with international customers. We have in-market specialists based around the world – including in the US, France, Spain, Italy, Germany, the Middle East, Singapore, China and Japan. We want to build on this success and will:

• Undertake a review of Export Plan delivery, looking at how best to support exporting Scottish food and drink companies in the years ahead.
• Make the most of our networks, expertise and reputation – using our platform to capitalise on the potential that exists in export markets, as outlined in the industry strategy Sustaining Scotland, Supplying the World.

Host an international food summit to promote the sector and consider a range of issues including food systems and supply.

2.4 Inward Investment

Scotland is internationally recognised as a prime destination for investment. With our world-class universities, dynamic businesses, and highly educated and motivated workforce, it is not surprising that Scotland is consistently the UK’s most favoured destination for foreign direct investment outside London. As a key driver for economic growth, inward investment helps to create a more open and outward-facing economy, which is why we have clear ambitions for increasing the amount of high-quality inward investment, as articulated in our Inward Investment Plan. This paper emphasises the important role inward investment plays in our economy and in the creation of a fair, sustainable, inclusive and net zero future for Scotland by contributing high-value jobs to the Scottish economy.

The Inward Investment Plan identifies nine[19] opportunity areas with the greatest potential to maximise the delivery of additional benefits to the wider Scottish economy and strengthen the opportunities for Scotland to continue to be an inward investment destination of choice. These opportunity areas align with Scotland’s strengths and values, and to global demand, with the goal of attracting international investment that will shape our future economy. This means focusing on sectors which provide significant growth potential and delivery of high value jobs. Examples of these are outlined below.

Case Study 2: Space

We have a significant opportunity to build on our strengths and make Scotland the home of NewSpace, maximising the economic, environmental and societal benefits of this thriving sector. Our ambition is for Scotland to be Europe’s leading space nation and to have a £4 billion share of the global space market and 20,000 jobs in the sector by 2030. With Glasgow already recognised as the largest producer of small satellites in Europe, and with two spaceports under construction aiming to come online over the course of 2024, Scotland is already making headway on realising our ambition. Our Strategy for Space in Scotland outlines the necessary steps and key actions to get there.

• Scotland’s ambition to become Europe’s leading space nation by 2030 is supported by a group of space industry experts from around the world. The Scotland International Space Advisory Committee (SISAC) will provide advice and identify opportunities to realise this ambition.
• We will facilitate new business and industry growth by helping Scottish space companies enter new international markets. And we will enhance Scotland’s growing reputation for dynamism, competitiveness and innovation by implementing the world’s first Sustainable Space Roadmap.[20]In doing so, we will further encourage inward investment into innovative research, solution provision, infrastructure and value chain development, focusing particularly on priority markets in the rest of the UK, the Americas and EMEA.
• Mangata Networks, an innovative satellite-enabled cloud services company, has chosen Prestwick International Aerospace Park as the location for its new research and development hub. This investment will create up to 575 new jobs at Mangata’s state-of-the-art engineering and operations hub for satellite manufacturing. The majority of these will be highly paid, highly skilled technical engineering positions.

Case Study 3: The Digital Economy and Artificial Intelligence

Scotland recognises the immense potential of building a thriving tech ecosystem to fuel economic growth and drive innovation. By developing a robust tech ecosystem, we aim to improve our international profile as a hub for technological innovation and expertise. For example, AI is being used in the financial technology (FinTech) sector to add economic value. By providing insights and intelligence, better assessing financial risk and helping people to better manage their money, FinTech is just one of the possible use cases where AI can transform the lives of people in Scotland for the better.

The links between Scotland’s universities, inward investment, and innovation are fuelled by: knowledge transfer, a strong talent pipeline, collaboration, and an entrepreneurial ecosystem. By improving Scotland’s international tech profile, creating an environment conducive to investment, and supporting start-ups and scale-ups, we aim to attract global attention and position Scotland as an attractive destination for tech companies, investors, datacentres and talent.

To achieve this, we will:

• Implement our AI Strategy[21] which adopts the five OECD values-based principles for the responsible stewardship of trustworthy AI and UNICEF’s policy guidance on AI for children.[22]
• Provide support for our major tech conferences to make them more international.
• Further strengthen inward investment in Scotland and in the technologies required to deliver our ambitions in areas such as energy transition, focusing on ScotWind, Hydrogen and Space.
• Continue to work with hyperscale datacentre operators to locate in Scotland.
• Continue to deliver more high-quality inward investment, improving Scotland’s attractiveness as a location for inward investment.

2.5 Capital Investment

The Scottish Government recognises that public sector investment alone will not be able to respond to the global challenges we face in the 21st century, particularly the climate emergency.

That is why in the National Strategy for Economic Transformation the Scottish Government committed to establishing an Investor Panel bringing together experts in investment finance to advise on how Scotland can create the right conditions to attract global capital investment to support the physical infrastructure required for a Just Transition. The Panel published their recommendations in November 2023 and the Scottish Government published our initial response alongside the Panel’s report.

The Panel recognised that to achieve our climate change ambitions, investment on an unprecedented scale over many years will be required, and the public and private sector will need to work together to achieve this. The Panel’s insights will now help to inform the strategic direction of the Government in driving investment in Scotland.

The Panel’s recommendations include:

• Fully considering the views of and implications for investors and investor sentiment when developing and delivering policy and regulation;
• Establishing a pipeline of planned, costed and shaped Infrastructure priorities; and
• Developing a streamlined and focused approach to building and managing relationships with investors across the public sector.

We will now work closely with public and private sector partners to drive forward the Investor Panel’s recommendations and will provide a progress update to the Scottish Parliament in June 2024.

2.6 Tourism

Increasing travel demand presents opportunities for Scotland’s tourism industry but underlines the importance of developing the connectivity and the quality offering to ensure our competitiveness in key markets. Scotland Outlook 2030, Scotland’s national tourism strategy, sets out the shared ambition for Scotland to be the world leader in 21st century, responsible tourism and to be one of the most economically, environmentally and socially sustainable destinations in the world. We want Scotland’s tourism industry to shine both within our own borders and internationally, attracting visitors and new generations of our workforce, while contributing positively to our communities and protecting our natural and cultural heritage for generations to come. The National Events Strategy seeks to ensure Scotland is recognised nationally and internationally as the perfect stage for events by supporting and securing a portfolio of events and festivals that deliver sustainable impacts and international profile for Scotland. To help achieve this, we will:

• Work closely with key partners, led by VisitScotland, as part of the Brand Scotland strategic partnership, and with our international offices to position Scotland as an inclusive, year-round destination.
• Support Scotland’s tourism businesses to develop the product offering to exploit these opportunities and to internationalise.
• Prioritise key markets and audiences to grow Scotland’s share of global travel in a sustainable way and drive value from every visit.
• Make the case for Scotland as the ideal stage for international events.
• Collaborate with international tourism bodies and other countries with similar goals to enhance our profile and reputation, and exchange best practice.
• Work with Scotland’s airports to improve our international connectivity and secure new routes that are essential for inbound tourism, business
• connectivity, exports and the economy as a whole, including destinations in markets such as Germany, France, North America, China, and India.