Scottish Business Growth Group minutes: September 2020

Attendees and apologies

Attendees:

• Colin Boreland, Head of Devolved Nations, FSB
• Andrew McRae, Scottish Policy Convenor, FSB
• Graeme Jones, Chief Executive, SFE
• Tracy Black, Director, CBI
• Malcolm Cannon, National Director, IOD
• Helen Martin, Assistant General Secretary, STUC
• Ian Wall, Chair, SCDI
• Matt Lancashire, SCDI
• Tim Allan, Scottish Chambers of Commerce (SCC)
• Charandeep Singh, Scottish Chambers of commerce (SCC)

UK Government:

• Iain Stewart MP, Parliamentary Under-Secretary of State for Scotland
• Nadhim Zahawi MP, Minister for Business and Industry
• Greg Hands MP, Minister of State for Trade Policy
• Paul MacNaught, Director of XO and Policy in Transition Taskforce
• Rebecca Hackett, Deputy Director, Policy Division, OSSS
• Jonathan Darby, Head, Strategic Engagement OSSS
• Steve Thompson, Team Leader, Business and Trade, OSSS
• Ashleigh Osborne, Policy Advisor, Business and Trade, OSSS

Scottish Government:

• Fiona Hyslop MSP, Cabinet Secretary for the Economy, Fair Work and Culture
• Jamie Hepburn MSP, Minister for Business, Fair Work and Skills
• Joe Brown, Head of Strategic Business Engagement, DED
• David Barnes, Scottish Deputy Director for Agriculture and Rural Development 

Items and actions

Welcome and introductions

Iain Stewart welcomed members to the Scottish Business Growth Group (SBGG) meeting, in particular, Fiona Hyslop, Cabinet Secretary as his co-chair, and Jamie Hepburn, Minister for Business, Fair Work and Skills. He mentioned that Paul MacNaught, Nadhim Zahawi, Minister for Business and Industry and Minister Greg Hands Minister of State for Trade Policy will speak for the UK Government on the agenda items.

Iain Stewart made apologies for not having a Cabinet Office Minister available to speak but this was due to the Joint Ministerial Committee between the UK Government and the Devolved Administrations being held at the same time as this meeting. Fiona Hyslop mentioned that this also meant that Michael Russell was not able to attend the meeting as he was representing Scottish Government. Iain Stewart commented that also the UK Internal Market (UKIM) consultation had only just been completed so a substantive update could not be provided until the consultation had been reviewed and the UKIM Bill was published. He therefore suggested that an additional meeting was held to cover these points as the next SBGG meeting was not until February which was after the end of the transition period. Fiona Hyslop said she was disappointed that a substantial part of the agenda could not be fully discussed and that the timescales were already very tight. 

EU transition arrangements

Paul Macnaught (CO): Recognised this as a challenging time for businesses in regards to the transition period. With or without a FTA with the EU, there will be a lot of changes coming. At the end of the transition period, we’re leaving the single customs market and there will be changes on the border and the UK will not ask for an extension. In July the UK Government released a new UK border model with funding to grow the customs sector to encompass EU trade at the end of this year. There are plans to build new border checks with the first phase ready for December. Aspects of the Northern Ireland protocol are still being negotiated between the joint committee. Some further information was published a couple of weeks ago on the Northern Ireland protocol, which touched on citizens’ rights etc. The EU settlement scheme has already granted rights to 3.8 million people so far. The UK Government is working with the devolved administrations on citizens’ rights and to ensure continuity with social security rights. 

Business readiness and citizens’ readiness are where the biggest challenges arise. There is a recognition that some businesses are having a sense of “Brexit fatigue”. There is no precise figures as yet but UKG officials believes less than half of business think they need to prepare. 

The UK Government launched a national communications campaign on 13 July which produced good feedback however recognises more work is needed in this area. 

On the UKIM: On 13 July the consultation finished. All the devolved administrations have  responded. The aim of the UKIM is to maintain free trade within the UK and it is not about cutting across devolved settlements. The UK Government is committed to maintaining high UK standards without putting new barriers within the UK. The two principles are mutual recognition and non-discrimination within the UK. The Bill is due to be heard next week. UK Government is working with Welsh Government and Northern Ireland Executive and an open offer to do with the Scottish Government. A consultation response is due shortly. 

Fiona Hyslop: Stated that she was concerned about a further delay in a discussion about the end of the EU transition and that the time frame is very tight. EU exit was challenging pre-Covid 19, but the current crisis has only exacerbated the issues. There needs to be as much more clarity and information as possible for businesses to prepare. 

Regarding UKIM The Cabinet Secretary stated that there is a significant amount of concern regarding the UK’s proposals. The view of all the devolved administrations is that it is undermining devolution. From a business point of view, the UKIM will add in extra legislation and give external bodies the ability to overrule business decisions. There are concerns from National Farmers Union Scotland (NFUS) and other bodies. The Cabinet Secretary stressed that Governments should legislate only when necessary. Common frameworks, once established would work well, without the need for extra legislation. Businesses do not need extra legislation in decision making, contracts or having a third party for referral. The priority for the UK Government should be to secure a FTA with the EU.

Andrew McRae (FSB): Recognised the level of “Brexit fatigue”. From a small business perspective the feeling remains we’re still in crisis. Small and medium businesses do not have the resources to prepare nor can they get appropriate advice on the end of the transition period. The main priority for FSB members is to preserve the business and the jobs during the current crisis. The most recent data suggest 50% of FSB members do not think they will survive. There are 3 months left to digest and prepare but more clarity is needed. Members want to get on with business and do not want any more barriers. 

Helen Martin (STUC): Said that from a workforce point of view the worry is the practicalities of this all. The feeling is Brexit denial. Also there needs to be time to prepare the workforce so people can understand what this means for day to day activities and time is running out. This conversation has not started in a lot of places as people have been focused on Covid. Brexit is an extra issue and there is no time to prepare. There is a need for speed, clarity and information on economic support provided for businesses to make these preparation. 

Matt Lancashire (SCDI): Set out that the priorities at the moment remains on Covid and protecting jobs and kick starting the economy which has decreased by 17%. Matt, asked whether there is an chance of an extension coming into play? To give businesses time to prepare and kick start the economy after Covid.  

Tracy Black (CBI): Out of 7200 firms surveyed 58% noted no change in terms of preparedness and 21% reported going background in preparedness since January. Communication is going to be essential and businesses need detailed guidance to help the during this period as a lot is going to change in 12 months. On UKIM, the bill is welcomed by CBI and when discussed with members there was a level of shock and surprise that as we leave the customs union changes within the UK could impact on trade between the four nations. An example of this was the bottle retention scheme. Sectors such as food and drink, agriculture need the UK and Scottish Governments to work together. Members do not want new barriers, extra layers of complexity and delays in responses. The timescale is tight, there needs to be more communications  and transparency.

Charandeep Singh (SCC):  Noted that there are a lot of challenges facing businesses post Brexit, especially on documentation and certification on exports. On the UKIM SCC echoes support for Tracy Black. Charandeep asked what considerations had been given to the submissions provided to the UK Government during the recent consultation? 

Paul Macnaught (CO): Stated that the results of the consultation were to be published shortly and agreed with comments that businesses were facing challenging times. 

Fiona Hyslop: Stated that she understood businesses need to deal with the reality. A lot of time and bureaucratic focus on the UKIM rather than use of the common frameworks. If the UKIM bill was not to progress it would not be the first bill to not progress. Other dangers of the bill included that it would cause extra difficulties in the constitutional space and the Scottish Government would prefer to avoid that conflict. The Scottish Government is prepared to work with the UK Government on the common frameworks. 

Malcolm Cannon: echoed previous thoughts on businesses. And asked if there had been any thoughts or progress on free ports? 

Iain Stewart:  replied that he has a meeting with Ivan McKee in the coming weeks concerning freeports and will feedback to Malcolm Cannon. 

Recovery and business support

Fiona Hyslop: Stated that challenges remain for the UK and the Scottish Governments in sectors such as in tourism and hospitality events, oil and gas especially during the transition to net zero. The impact of Covid has been significant on the tourism industry and particularly the aviation industry.

Jamie Hepburn: Commented that Rolls-Royce announced the loss of 700 jobs in Scotland. The Scottish Government have established an aerospace response group which cuts across industry and workforce sectors. The purpose is to work through ideas for a better sustainable aerospace sector. There has been no engagement byUK Government, and a representative from BEIS would be welcome. 

Iain Stewart: Said that he would take the issue of UK Government engagement up offline. 

Fiona Hyslop: tated that with the industrial strategy update there comes an opportunity to press the importance of these sectors. It creates a major investment opportunity for both Governments to work proactively together on issues such as electricity, oil and gas, transportation and green transportation to build good capital opportunities.  Scottish Government has been engaging with Northern Ireland Executive and the Welsh Government on these issues.  

Nadhim Zahawi (MP): Provided an update in UK Government Support. He recognised that Covid had been the biggest threat to the UK since the WW2. There have been regular quad calls between the four nations.  UK Government is working closely with businesses on the job retention scheme and self-employment scheme on a comprehensive spending review. There is an assurance that this will be a green recovery, prioritising the sectors that will lead the green revolution, but also supporting sectors which need to transform themselves to meet Net Zero. BEIS is currently working on a refresh of the 2017 industrial strategy. UK Government remains committed to supporting Scottish businesses and ensuring that there is engagement. Regarding the particular sectors BEIS acknowledges that aerospace and tourism have been the hardest hit. 

Colin Borland (FSB): Observed that FSB members are focused on the practicalities of the next stage of recovery. Three important things to note. 1) Economic stimulus – he was surprised at the success from schemes such eat out to help out and the way it boosted consumer confidence. Colin asked if there would a similar schemes, for example “work out to help out” get people back in the gym. 2) Green recovery particularly focusing on electricity and decarbonising. 3) Procurement rules and revitalising the economy with the support of the public sector to see economic activities and growth in local areas. 

Nadhim Zahawi (MP): Said that 65 million people used eat out to help out it was a resounding success. This scheme provided much needed support for this sector. He stated at the beginning of the pandemic there was a focus of protecting the economy, this can be seen with the furlough scheme and the bounce back scheme. The next stage is now here were we look to support growth, for this section UK Government is look to promote the green recovery and support SMEs.

Matt Lancashire (SCDI): Noted that the procurement point is vital, when looking at sustainability, supply chains.  He also emphasised that SCDI members are very happy with refreshing the Industrial Strategy. Matt said he would like to see support provided to key sectors included energy in the north east, with skills and jobs around hydrogen production. 

Helen Martin (STUC): Stated that the STUC believe we are seeing higher quality jobs being replaced with jobs which pay less. She asked how can we incorporate mechanisms that promote high quality and skilled jobs. She stated that there should be a focus on sectors such as retail and hospitality. The Youth Guarantee Scheme should not just be about any job it should be about good quality and anti-poverty jobs. Also Helen said that the impact of lockdown can still be felt and there are increasing concerns amongst unions.  She asked what can be put in place to support businesses and sectors have been hit hard by Covid?

Nadhim Zahawi (MP): Replied that Covid has seen the UK Government focus on refreshing the Industrial Strategy, promoting a green recovery and ensuring we reach Net Zero by 2025. He stated there needs to be a focus on the energy sector particularly the North Sea; to reskill and upskill in the workforce for a future economy. BEIS was producing an energy whitepaper to be delivered end of this year. He said we have seen a shift in digitisation in SMEs, they have digitised in 3 months what would have taken 3 years. He recognised the point on good quality jobs and emphasised that engagement is needed with Scotland on themes such offshore wind, hydrogen, and aviation. He added that the Kick-start scheme allows people to gain 6 months experience of working within businesses. Nadhim also highlighted that there has been an announcement on the job retention scheme and businesses can get a bonus of £1,000 per person if they employed people until January. 

Tracy Black (CBI):  Emphasised the point that businesses are still in crisis. She said CBI members fear another national wide lockdown could be the death for small companies. Test and protect needs to be right before winter to ensure the future of small companies. A change of payments for people who cannot go to work because of Covid may also be necessary. Tracy added that working from home has been great for many, a recent discussion with a company saw that 78% were happy and 22% were not. There is a lack of data in regards to sickness absence, including mental health and wellbeing. Tracy said that Scotland has a history of being under-employed or over qualified for the job and this is going to be exacerbated post Covid. She continued that we cannot ignore we’re still in the crisis and learning. She also said that a refresh of and the industrial strategy is positive. She asked that the UK Government looks UK wide in terms of high speed transports from Scotland to London and added that local infrastructure for example on buses and trains was also needed. 

Trade negotiations update

Greg Hands (MP): Provided an update on the main four Free Trade Negotiations. He said that for Japan talks are going well and are close to completion. Last month Japanese Minister for Foreign Affairs Toshimitsu Motegi was in London. The UK Government is planning on agreeing a new Free Trade Agreement (FTA) with Japan which will go further than the FTA currently agreed with Europe. This agreement should be finished within three months and the devolved administrations will continue to be kept involved.

He added that there have been three rounds with the US and the talks are progressing well. The fourth round of negotiations will take place on 8 September. Both sides are keen to do this well with a focus on financial services, levelling the playing field, removing barriers, continuing to assist with regulation and Business visa.  It is currently harder for a business visitor from UK to travel the US than it is for business visitors from  Canada or Singapore.

Greg Hands also said that the first round of talks with Australia and New Zealand had gone well, and there had been a focus on innovation and clean growth. He expressed a desire to hear from the broad spectrum of Scottish businesses.

Fiona Hyslop: Stated that Ivan McKee is in regular contact with Mr Hands. She said that the Scottish Government had been supporting businesses in Japan and had seen promotion of exports in Scottish lamb and that food standards were vital to promoting Scottish food overseas. She added that the US tariffs remain an issue for Scotland, she said there had been a small win with the shortbread biscuits however the continued tariffs on single malt whisky are a big concern

Tim Allen (SCC): Said that there needs to be an improvement in internet for businesses and people working from home, everyone needs access to the web and currently it is inadequate. 

Greg Hands (MP): Stated that there will be no compromise on food standards, and that the UK would continue to retain ban on hormone injected beef and chlorinated chicken. On Tariffs, he stated that he hopes the EU and the US would resolve this dispute quickly as the ongoing tariffs were hurting businesses in the UK, across Europe and in the US. The UK is investigating what can be done between UK and US in terms of a good deal on tariffs. 

Graeme Jones (SFE): Noted that the banking and finance sector in Scotland have been delaying contingency plans with the EU for two years as they have been dependent on how negotiations progressed. He added that there are established links with groups in the US but there needs to be some more flex. 

Greg Hands (MP): Replied that there had been a tremendous amount of work with financial services but that the UK Government could further support the industry with a US FTA.  

Fiona Hyslop: Said she that continued engagement with Scottish Businesses is key to a successful FTA. She added that procurement is an interesting topic, for example Scotland had become self-sufficient in PPE early on in the crisis. She also stated that the main concern currently is the UKIM bill which will stop businesses being innovative in domestic procurement. 

AOB

Arrangements will take place to organise an additional meeting to discuss the end of the transition period and UKIM.

SG/OSSS
September 2020