The paths to prosperity for Scotland: First Minister's speech - 22 January 2025

Thank you for your words of welcome and thank you for the commitments that  JPMorgan Chase has given to the City of Glasgow, to Edinburgh, to Scotland – representing the significance of the strength of the company, and the attractiveness of Glasgow and Edinburgh as destinations for investment.

It is a huge privilege to be at this marvellous facility and see the opportunities that are created for the people of Scotland.

This is a technological jewel in the crown for JP Morgan Chase, but also for our country and a testament to the skills and expertise that make Scotland such an attractive location for international investment.

Looking around this room today, I see many other ambitious Scottish businesses represented.

Like me, I know you will be conscious of just how much we have going for us as a country.

That optimism, of course, is not to deny some of the immediate difficulties.

The economic headwinds are strong, with ongoing cost-of-living concerns impacting on consumer confidence.

There is much uncertainty over the emerging nature of the global economic order.

And I know that the impact of the recent employer National Insurance Contribution increases at a UK level is significant for many Scottish businesses.

The skies are certainly darkening over the Treasury in London with economic confidence in this new United Kingdom Government ebbing away. Change has to be more than a slogan, and I believe that we urgently need a new economic direction, and different choices at a UK level.

Alongside the challenges there are undoubted successes, not least of which is the tremendous success of the International Financial Services District here in Glasgow, just one of the transformative developments that have taken place in our economy in the last fifteen years.

And there are opportunities aplenty in energy, fintech, biotech, space, AI; we have world class universities which produce not only cutting-edge research but also a wealth of capable graduates; we have our colleges which are working with employers to upskill our population to meet the challenges ahead; we have a reputation as a world-class entrepreneurial nation, with the number of start-ups, spinouts, and scale up companies growing at pace.

I recognise all that is going well – collective efforts that have seen GDP per person in Scotland grow faster than the UK, and productivity increase at more than twice the rate of the UK as a whole.

I acknowledge the many fruits of your enterprise and innovation, and I commend you for it. But I am left with the sense that Scotland’s economy is not performing as well as it should.

Given all that we have, all the advantages we enjoy, quite simply, Scotland should be wealthier than it is.

And that is what I want to talk about today. Not to wallow in that assessment, but rather to begin a conversation with you about how we act to change it.

There is a danger, of course, when a politician admits that things are not going as well as they should, that such a statement launches a furious political row. My words today may be thrown back at me when I stand up at First Ministers Questions tomorrow. However, I think the people in this room are wise enough to understand what I mean and to hear my invitation to work together to make Scotland better.

Scotland’s unfulfilled economic performance – compared to both peers and pure potential – is not a recent development. It has been our national reality for decades.

It is as complex and systemic a challenge as poverty in our land, and indeed I believe that the two are fundamentally connected.

We will not properly address the scourge of poverty in Scotland until we get Scotland’s economy performing at the much higher levels where we all know fundamentally it should be.

There is so much that is good in Scotland’s economy. But that should never stop us acting to ensure that ‘good’ can and must become ‘better’.

I began this series of speeches last week by talking about my Government’s top priority, which is the eradication of child poverty.

I said then that a Scotland where no child lived in poverty would have to be a very different Scotland from the one we know today.

It would be a wealthier Scotland, a Scotland that was making the most of its natural and human capital. And it would also be a fairer Scotland, with the fruits of higher economic growth enjoyed not only by those who already have, but also those at the bottom end of the wealth and income scales.

How, therefore, do we build this wealthier and fairer Scotland?

Many of you will have heard ministerial speeches that are often just a list of ongoing actions and future commitments – an infrastructure project here, targeted support for a company there, tax and spending choices. These ongoing actions are important. They deliver positive results – concrete, meaningful progress, as I have already noted. But they are not enough for the times that we face.

They will not move us beyond the current economic paradigm.

It is time, I believe, for Scotland to think big, so we can act bold.

Today, therefore, I want to talk about three more fundamental choices we face as a nation.

First, our huge energy opportunity. Second, our significant population challenge. And third, the nature of our relationship with the European Union.

I have been struck by an image offered by Jane Jacobs, a name some of you will recognise from her seminal work, The Death and Life of Great American Cities.

Jane Jacobs is a woman who challenged the accepted wisdom of her time by insisting on a person- and community-centred vision of the places in which we live. Cities as we know them today, have been shaped by her ideas.

She asked us to compare a barren desert with a flourishing forest. In a desert, the energy of the sun goes in and there is nothing to hold it. It scorches the ground by day and dissipates quickly as night falls. It comes and it goes with no discernible benefit.

But in a forest, the sun is absorbed by a host of plants, which in turn provide food and shelter for a host of animals. The energy is absorbed, put to good use, recycled again and again within the eco-system, producing ever more life, ever more growth.

Her image was from nature, but her lesson is an economic one.

If money flows into a community and there is nothing to hold it there – if the nearest shops are miles away, if there are no locally owned businesses – it becomes, in effect, an economic desert.

However, if money flows in and is kept for longer within the community, whether through a community centre hosting classes, childcare, small businesses, or locally owned and run shops, creating jobs for local people, with profits reinvested and new opportunities created, then there is economic life; there is economic growth. 

The image works not only for the parts, but for the whole, for our communities and for our country.

And it makes me think, in particular, about our energy opportunity – energy not primarily from the sun, unfortunately, as you can see today, but from our wind and our rain.

If the generation of our energy wealth results in little more than turbines, pylons and cables taking that energy from source to support businesses and opportunities elsewhere, then we have the risk of a desert.

But if that energy generation results also in a supply chain within Scotland, in manufacturing, research and development, and a range of support services – nationally and locally – then the benefits of the wealth are multiplied and begin to spread.

And if the abundance of low-cost, clean green energy we are producing results also in some of the lowest energy prices in Europe – with a fair return for generators matched by a better deal for households and businesses – then we are beginning to see the circumstances for true flourishing.

An economic paradigm shift becomes possible.

Think, just for a moment, how transformational it would be for your business if the fruits of our energy activity could generate wider economic benefits within the business community in Scotland. Think of the inexorable growth in manufacturing opportunities, skills developments and infrastructure enhancements.

More made in Scotland, more competitively priced.

Our country an even more attractive location for inward investment.

Households with more disposable income to spend on our high streets.

But where stands Scotland today?

I think that for many of our communities, they would see us very much on level one. They can see the turbines and the infrastructure but wonder where the benefit is for them. That is simply not good enough.

Yes, some progress is being made, in particular around manufacturing investment and supply chain growth.

In the draft Budget set out by the Finance Secretary in December, we took a strategic decision to invest £150 million in offshore wind development with the aim of unlocking an additional £1.5 billion in private investment.

The Japanese company Sumitomo is investing £350 million in the new subsea cable manufacturing facility at Nigg – an investment which will directly create 150 jobs in the Highlands and contribute the critical infrastructure that we need for our energy transition.

It sits alongside one of the largest industrial regeneration projects in the Highlands in decades at the port of Ardersier.

And there are others, including XLCC, whose Chief Executive I met yesterday. Their plans for a subsea cable factory at Hunterston will create 900 jobs, with substantial supply chain benefits across Scotland.

Both Ardersier and Hunterston are made possible because of the investment made by the Scottish National Investment Bank.

All good, but not yet good enough, if we are to get our energy wealth working fully for the benefit of Scotland.

I want to work to create a national consensus on how we can develop the energy resources of Scotland and ensure they generate sustainable, long-term benefits for all of Scotland.

An approach that will enable investment to be made primarily by the private sector – encouraged and enabled however by investment from the public sector – coupled to enterprise and skills activity that will embed the benefits of this investment in Scotland.

The reality, of course, is that some of the factors influencing our energy potential are governed at the UK level.

The big decisions about grid connections and essential infrastructure, the big decisions about that impact on the energy prices you pay, that we all pay, are taken in Whitehall.

But that does not mean we are powerless in this discussion.

I have found that when the Scottish Government speaks, it can be all too easy for the UK Government not to listen.

But when Scotland speaks with one voice, with reasonable proposals for a good and necessary purpose, then it is significantly more difficult for UK ministers to say no.

So let’s find our voice.

Over the coming weeks, I would like to work with people in this room, and with the wider business community, to identify what we need to do to maximise the economic benefit from our energy wealth.

I can give you a firm commitment that we will work collectively to agree the actions we need to take to put the economic success of Scotland front and centre in a way that ensures communities really feel the benefit of our enormous energy opportunity. 

Scotland’s energy potential is huge.

Over these coming decades it will be, without doubt, our greatest opportunity.

But over this same period, our country will also face a significant population challenge.

Scotland’s population is aging. The number of deaths registered here in 2023 was greater than the number of births. The difference has been getting wider each year, and is expected to continue.

The number of people aged over 65 is projected to grow by nearly a third by the middle of 2045. Meanwhile, the number of children is projected to fall by nearly a fifth. 

For the wellbeing of our society and the future success of our economy, this trend is simply unsustainable.

When I was first elected to the Scottish Parliament, the fear was that Scotland’s population would dip below five million. Thanks in large part to European Union enlargement and the arrival of tens of thousands of young people from countries like Poland, Hungary, and the Baltic States – young people who chose to settle here and build their families here – Scotland’s population trajectory shifted.

Indeed, the 20 years between 2003 and 2023 saw the largest increase in the Scottish population since the 1940s.

The lesson: projections are only projections. The future is not set. It is possible to shift the dial once again.

That is why we need a renewed focus on an immigration policy that works for Scotland.

 Have no doubt, right now we need people to come here to live and work to bolster our working-age population.

We need them to address skills shortages and to increase our productivity and our innovation. 

They are welcome for who they are, for the contribution they will make to our land – their distinct perspectives, their hopes and ambitions – but again, have no doubt, they are essential for tax revenues, for the sustainability of public services like our NHS, and for the future success of your businesses, whether as paid employees or as paying customers.

In recent years, nothing has impacted migration in Scotland more than the disastrous decision to leave the European Union.

With the end of free movement, it became much more difficult for European Union citizens to come to Scotland, to make a positive contribution to our economy and our national life.

And the current dominant political narrative in the United Kingdom, which in turn drives policy choices within the UK Government, is only making matters worse.

If we are to make the most of Scotland’s economic opportunities, we need an immigration system that understands Scotland is different from the UK as a whole. 

I have spoken in relation to energy about paradigm shift, because I believe such a step change is achievable if we make it our collective ambition and goal.

However, given where we are on immigration, I think all we can hope for at this point is some first tentative steps.

One such step would be retaining the skills of those who come to Scotland to learn at our world class colleges and universities.

Twenty years ago, the Scottish and UK Governments worked together to launch a tailored migration route designed to enable international students to stay in Scotland after they graduated.  

I see no reason why this cannot happen again.

I stand here ready to work with the UK Government to develop a tailored visa route for international graduates from Scottish universities or colleges who want to stay here in Scotland.

This Scottish Graduate Visa would be linked to a Scottish tax code and be based on a requirement to live and work in Scotland. 

It would directly support skilled individuals who want to stay here following graduation.  And – given the significant increase in the salary threshold of the Skilled Worker Visa – it would give us the means to hang onto those skilled graduates.

All of this would go some way to ensuring that Scotland can continue to attract and retain international students. It would benefit our colleges and our universities before their graduation and it would benefit our economy after their graduation. Indeed, the latest available figures show international students generate £4.75 billion for the Scottish economy.

It would help us to grow our entrepreneurial sector and ensure Scotland continues to be an attractive destination for private investment.

In small but important ways, it would make our economy more robust, and our public services more sustainable. It would play a part in making our communities more prosperous.

Today, once again, I ask all of you here to play your part in helping us to make this happen.

When Scotland is united, when we coalesce around sensible, reasonable proposals, progress happens in a way that is not possible when we are all pulling in different directions.

That is how our parliament was set up to operate – consensus not as a lowest common denominator, the least-worst option, but as a mobilisation of the mainstream.

If we want an immigration policy that meets Scotland’s needs, then let’s come together to make that case.

My final reflection today is on what I believe is one of the most fundamental choices Scotland faces over these coming decades.

I believe that Scotland is a European nation and that our future lies within the European Union.

And I believe also that rejoining the European Union should be our clearly stated goal and national mission.

Why? Because the opportunities presented by open access to a market of 450 million people with a collective GDP in the order of 17 trillion Euros are enormous for an outward-looking economy such as Scotland.

And as the threat of a more restrictive global trading environment increases, it becomes all the more important to have access to the European single market and all that that entails.

For our security in an ever more uncertain world, the European Union is the answer.

Recognising our demographic challenges, the renewed opportunity of free movement within the European Union is the answer.

Whether it is more lucrative trade, higher economic growth, more effective collective action on climate change, increased opportunities for learning and exchange for young Scots, for me, the European Union is the answer.

There are some immediate steps that we can take and, once again, I recognise what is possible given the reality of politics elsewhere in the UK.

My aim today is not to look backwards in order to refight the Brexit debate. Brexit, for all its folly, has happened.

Instead, my wish is that we turn our eyes to the ground that lies ahead and determine to choose a new path, and a different course.

Simply put, remain was the past, rejoin is Scotland’s best hope for a more prosperous future.

For those of you in the food and drink sector, the immediate priority is veterinary agreement, so that barriers to trade in Scotland’s world-beating produce are reduced.

Entry into the customs union, renewed participation in the single market, all of these a challenge to achieve unless the politics of the UK changes or we choose to walk this path ourselves.

Of course, I recognise that rejoining the European Union is not going to happen tomorrow. It will take significant effort and choice to make it happen.

But have no doubt, if that never happens, then Scotland will pay a heavy price. The simple fact is that two of the greatest issues facing the Scottish economy in the coming years are our specific population challenges and the damage being inflicted by Brexit.

On these two issues, the UK Government is being dragged in an anti-growth direction by the prevailing political consensus at Westminster, which is determined to limit migration and is hostile to European Union membership.

That consensus does not represent Scotland’s economic interests. So I want to work with all of you, with wider Scottish society, to draw the UK Government back towards mainstream positions that work for Scotland.

A recurring theme in my remarks this morning is the very simple idea that if we want something, if we prioritise it, if we make it our goal, then, if we work together, we can make real progress towards achieving it.

I have set out three areas where I believe clear choices and collective endeavour are not only important but also necessary, and also vital, if we are to truly prosper as a nation, if we are to see that paradigm shift that I think we all know in our hearts is both possible and within our grasp.

If we do not make the most of our energy opportunity this time, if we do not act now to address our looming population challenge, if we do not commit ourselves once again to Europe and its single market, then a heavy price will be paid not only by this generation, but by all future generations.

So yes, a step change for Scotland is possible. Not easy, but achievable. And in my view, critically necessary.

Looking around this room, looking around our country, I am in no doubt that we have all the ingredients we need, as a society and economy, to flourish and prosper in this coming century.

But if we want it, we have to choose it.

We have to work for it.

There is no way of getting away from that reality.

I choose it. I am ready to put in the hard yards to deliver that.

And I invite everyone determined to make the Scottish economy better, to join me in this national endeavour.