Enterprise and Skills Board: strategic plan

2. Missions and Strategic Focus

Policy missions bespoke to Scotland's opportunities

As with every country, Scotland performs better in some areas than others. Scotland secures more inward investment projects than any other region in the UK outside London. The employment rate is high - remaining close to its record level - and the unemployment rate is close to its record low. Scotland is highly-qualified by international standards with one of the highest percentages of the population aged 25-64 with tertiary education among the nations and regions of the EU.

In contrast, we still need to tackle skill shortages that result in recruitment difficulties for businesses and the fact that skills are not fully utilised in the workplace. Business investment remains low, as does business expenditure on research and development (R&D). Scotland also has a smaller business base, in large part because of that a lower number of high growth firms, and fewer exporters than many other UK nations and regions. Across each of these parameters, there is geographical variation - often significantly so - within Scotland.

The Board considered a wide range of issues that could impact positively on productivity - sector specific initiatives, innovation and increased R&D amongst others. It identified four initial, interconnected missions where economic performance could be improved both rapidly and substantially. These are not the only areas where a mission-led approach could pay dividends, and the board is likely to turn its focus to other priority areas in the future.

While increasing productivity has been the primary focus of these missions, they have also been developed with attention to:

1. Impacts on equality, wellbeing and sustainability fostering an inclusive society where more individuals and communities benefit from the value created by growth, and ensuring that growth is complementary to environmental sustainability.

2. The importance of place, including national, regional and local implications.

Business Models and Workplace Innovation

The Strategic Board will harness the full potential of progressive business models, work place innovation and Fair Work to enhance productivity, equality, wellbeing and sustainability. This will be achieved by promoting and supporting the development of highly capable businesses with long-term strategic orientations who utilise progressive workplace practices, technology, skilled resources and innovation to remain competitive.

Pursuing inclusive growth requires a focus on where value is created - within businesses and in workplaces. This recognition is at the centre of Scotland's commitment to Fair Work.

"Work and the workplace matters - to employees and their families, to employers, to government and to society. Outside of family and kin relations, work is arguably the most significant domain for most people. The economic value of work as a source of income, profits and national prosperity is evident. Work also plays a key role in individual identity and shared social values."
(Findlay et al, 2016 - the FITwork project)

The role of employers here is pivotal. Public, private and third-sector organisations need to understand better how the best performing companies do business - examining their business models and how they organise and manage people, in order to better influence their practice to support fair work, productivity improvement and inclusive growth.

Across the wide range of business models, there is broad acceptance of the importance of human capital as a potential source of competitive advantage, and recognition of the importance of HR processes and practices. This has spawned a number of best-practice approaches which can improve business performance such as High Performance Working, Lean Production, Employee Engagement and a plethora of leadership approaches.

Yet these approaches are not common across most businesses, and there is a need to create interventions that improve management quality and skills in this area to support Scotland's inclusive growth approach.

In addition, while the effectiveness or otherwise of skills utilisation is driven by employer behaviour, some employers lack awareness of skills under-utilisation or have few immediate incentives to address it. A key challenge is how policy makers can help influence this.

Future economic, political and social challenges are stimulating increasing interest in resilience - the ability to deal with the stresses of a changing work environment and 'bounce back' during periods of challenge or change. In terms of work and business, discussions of resilience often emphasise individual responsibility. This misses the point: facing future challenges will require resilience at workforce, sectoral and economy level. This is consistent with the emerging research agenda that connects resilience with reference to inclusive growth and economic development strategies, focusing on the resilience of interconnected systems.

BusServ (anonymised) is an engineering technology service company who have a diverse customer base and deliver across several industry sectors. They addressed a need to develop a more innovative and collaborative culture to drive business growth and enhance the working life of their employees by creating more opportunities for learning and development across the whole organisation.

Development programmes have given existing managers and leaders the skills they needed to change the organisational culture, introduce more collaborative ways of working and develop processes which stimulate dialogue and idea generation. The workshops and development programmes have resulted in significantly more staff involved in delivering new activities and in developing employee-driven innovation proposals, some of which have resulted in new cross-functional collaboration.

The MD believes that changes to engagement, leadership, management and working practices have put the organisation significantly ahead of their competition and helped build a strong digitisation offering for customers.

What the evidence tells us

While Scotland's leading firms are as productive as elsewhere, we have a long tail of lower performing business with considerable opportunities for productivity growth through adopting enhanced management practices and better utilisation of workforce skills (IPPR). Firms also often have a poor understanding of productivity and of the links between wages and productivity (Joseph Rowntree Foundation).

UK management practices are mid-table by international standards^[14], alongside evidence that better management practices can create better business outcomes, potentially influencing productivity more than investment in R&D, skills or technology (productivity premiums can be as much as 30% for those investing in high performance practices^[15]).

In Scotland, 35% of establishments responding to the UKCES Employers Skills Survey reported problems of skills under-utilisation^[16]. Better use of existing skills could enhance productivity, improve motivation and innovation, and diminish the waste of individual and public investments in human capital^[17].

A substantial evidence base exists to show that good job quality can reduce staff turnover and absenteeism and bring benefits in terms of improved morale, motivation, individual performance and engagement in workplace innovation^[18].

Digital literacy is one of the most important investments in creating resilience. However 44% of Scottish businesses remain either disconnected or have only basic digital proficiency^[19] and only 26% of Scottish businesses stated that their employees were fully equipped with the skills required to meet the business' digital technology needs^[20].

Shared aims

The aim is to have more Scottish businesses adopting progressive business practices and embedding workplace innovation and Fair Work, investing in and empowering their employees.

Improvement opportunities will be promoted and identified through:

• An 'Innovating Workplaces' campaign to create awareness of existing productivity issues around business models, workplace innovation and Fair Work and promote the benefits of adopting more progressive practices
• Utilising data-led approaches to proactively identify and support sectors and firms who can exploit opportunities for growth or who need to enhance their workforce and business resilience.

Improvement opportunities will be delivered through a programme of activity to be co-ordinated and driven by a new inter-agency division, and implemented with agreed criteria

This will be delivered across five major areas:

1. Developing Innovative Business Models

• Training and support for business to adopt new business models and diversity of practice across the stages of business creation, growth and transition.
• Better alignment of support across business, organisational and workforce development to deliver improved performance and workforce engagement.
• Support creation of high performing workplaces and learning organisations that focus on innovation as a driver of performance.

2. Driving Workplace Innovation, and Fair Work Practices

• Assist businesses to develop a fair and innovative culture in terms of management, people development and HR practices.
• Support firms to design and deliver Fair Work through employment and jobs that provide opportunity, fulfilment, security, respect and effective voice.

3. Enhancing Everyday Leadership & Management Capability

• Support through training and coaching to develop leadership models (including responsible, and value driven leadership) and management.
• Encourage distributed leadership that enables staff to make full use of their skills, experience and creativity at work.
• Provide a suite of productivity tools and interventions to develop high-performing teams and enhance the effectiveness and efficiency of business operations.

4. Improving Skills Planning and Utilisation

• Help employers to develop their capacity for growth via assistance in areas such as an analysis of the people needs of the business, utilisation of skills, talent attraction, recruitment and retention, job design and work organisation, and the adoption of fair work practices.
• Support key sector opportunities such as Data and Advanced Manufacturing.

5. Increasing Capacity and Resilience

• Expand accessibility of the Flexible Workforce Development Fund, Individual Training Accounts and Workplace Innovation Fund.
• Increase the availability of facilitated Peer to Peer programmes and broaden access to specialist support to develop the capacity and resilience of businesses to respond to strategic change and maximise growth opportunities.

Our commitment to the customer

• Scotland will have distinctive workplaces that value people and their skills and are implementing work place innovation and Fair Work practices as outlined in the Fair Work Framework.
• Industry, employers and trade unions working together will actively promote, demonstrate and share best practice.
• Greater empowerment and funding to invest in their own upskilling.
• There will be a highly-aligned, integrated and streamlined offer to businesses that includes a data- and intelligence-led approach to identifying and providing proactive support to sectors and companies at risk.
• Increasing focus on interventions to address gender disparity at senior executive and Board level and actions aimed at reducing the disparity in the pay gap between male and female employees.

Actions and Recommendations

Actions to be taken now are:

BMWI (A1). Deliver an 'Innovating Workplaces' campaign at national, regional and local level to create awareness of existing productivity issues around business models, workplace innovation and Fair Work and promote the benefits of adopting more progressive practices. To create singularity of purpose, shared principles will be developed, shaped by best practice, that underpin all future investments in support of business. We will engage with partners to identify best practice and how to integrate it into educating the future workforce.

BMWI (A2). Utilise data-led approaches to proactively identify and support sectors and firms who can exploit opportunities for growth or who need to enhance their workforce and business resilience. This will build on the SMAS Manufacturing 4.0 diagnostic, which supports companies to understand their resilience, readiness for change and future skills, leadership, and management needs.

BMWI (A3). Co-ordinate a programme of business models and workplace innovation activity that is driven by a new inter-agency division. This is to be implemented with agreed "Fair Work" criteria to Enhance Everyday Leadership and Management Capability; Develop Innovative Business Models; Drive Workplace Innovation, and Fair Work Practices; Improve Skills Planning and Utilisation; and Increase Capacity and Resilience.

Additional recommendations to the Scottish Government are:

BMWI (R1). Embed progressive business models, workplace innovation and Fair Work in all instruments of government and agencies, ensuring business support is conditional on a commitment to fair work.

BMWI (R2). Task the agencies to oversee world class management/leadership training programmes accessible across Scotland which aim to capture a targeted number of business leaders each year. Delivery options to consider include a virtual leadership academy or use of colleges/universities as centres of excellence.

Skills for the Future

The Strategic Board will encourage and enable a shift to a more demand-led skills system that better responds to the current and future skills needs of employers and individuals, including expanding work‑based learning, and increasingly supports individuals to upskill and reskill. This requires building on our existing strength of a highly qualified workforce to address the under-utilisation of skills, graduate under-employment and growing and persistent skills shortages.

Scotland's people are our main asset. Young and old, born in Scotland or recently arrived, we want everyone to flourish in a country that is inclusive and prosperous. Skills are essential to this.

The availability of the right skills within the population - and the full utilisation of these skills - makes an important contribution to raising productivity and enabling businesses to reach their potential.

Yet the world of work is changing rapidly. Scotland's skills system will need to have sufficient flexibility to develop new skills and capabilities to meet the challenges presented by demographic, environmental and technological change. While the future is hard to predict, we can anticipate that across advanced economies like Scotland:

• Digital technology will permeate all places and forms of work, providing new ways of connecting and collaborating on a global scale^[21].
• The volume of data and information will continue to increase exponentially^[22].
• The use of Artificial Intelligence will increase, with machines increasingly carrying out technical and routine tasks^[23]
• Employment forecasts for Scotland to 2027 suggest a continuing increase in new service sector jobs and decrease in manufacturing jobs. An increase in new jobs is expected for all occupational groups but replacement demand (to replace those employees who leave the workforce for a number of reasons, including retirement) is strongest for professional and elementary occupations^[24].
• An ageing population will leave fewer people of working age and an increasing need for people in caring professions^[25].
• The boundaries between jobs and industries and between manufacturing and services will continue to blur, with jobs continuing to emerge and evolve^[26].
• The types of skills that will become increasingly important are so-called 'meta skills' such as self-management, social/emotional intelligence and innovation skills^[27].
• And in Scotland, future population growth will be heavily dependent on immigration, with uncertainties around Brexit posing additional risks^[28].

The importance of skills in attracting Foreign Direct Investment

Foreign direct investment (FDI) is important for growing both the number and quality of jobs. In turn, access to a highly skilled workforce is a significant component of Scotland's offer to foreign direct investors. In the 2017 survey, Scottish Development International (SDI) carried out with investors, the availability of skills was cited as a key factor by many in the decision to locate in Scotland.

What the evidence tells us

Scotland already has a highly qualified workforce - including the highest percentage of the population aged 25-64 with tertiary education within the EU. Four of the world's top 200 universities are in Scotland - per head of population, this places Scotland among the top performing countries in the world.

Graduates from higher education are more likely to be in work and to earn higher wages than non-graduates. However, there is evidence to suggest that some graduates are employed in non-graduate jobs, as has always been the case, not least as people find their way into the job market. The percentage of graduates in Scotland who were employed in low and medium-low skilled occupations was 19% in 2017^[29].

Compared with other countries, the UK has a high proportion of people whose qualifications and skills are underutilised and more than one in three workplaces in Scotland (35%) say that they have at least some staff who are both over-qualified and over-skilled for the job that they do^[30].

In Scotland, we know that there are now critical skills shortages in key areas including Digital, Construction, STEM, Health and Social Care and Early Years.

There are also ongoing regional, sectoral and equality disparities. While employment rates are at a record high, productivity growth has been slow, real wage levels have flat-lined and part-time work is more prevalent. Significant gaps in gender pay remain, with barriers to participation for under-represented groups.

Skill shortages were already biting in 2017 - and the impact of Brexit is likely to make this worse

• 6% of workplaces reported skill shortages, with 24% of vacancies (c.18,000) hard to fill because applicants lacked skills.
• 5% of employees were said by their employer to lack full proficiency in their jobs.

Shared aims

Transformation of education and training provision to create a highly responsive upskilling system is already underway at a global level. This includes the rapid expansion of Massive Open Online Courses (MOOCs) - in which several Scottish Universities are partners in the leading platforms - and the more recent development of augmented reality and virtual reality contextual learning environments.

This plan recognises this transformation and points towards a coherent customer-led system that serves learners, employers and the economy and is founded upon the following principles:

1. A demand-led skills system that responds to industry and learner needs and critical skills as set out in robust and agreed demand evidence. Success will also depend on the ability of industry to articulate and effectively forecast its skills needs within workforce planning (Skills Investment Plans; Regional Skills Investment Plans; Regional Skills Assessments and other evidence.)

2. Our wider education system should be driven also by well-informed learner demand, assisted by access to lifelong careers advice that addresses the future realities of constant change, ever evolving occupations and the critical requirement for lifelong learning. Learners, employees and those seeking work should be able to access high quality, well informed, independent careers advice on demand.

3. The system should encourage lifelong learning and have routes to suit people of all ages providing the capacity to upskill and reskill quickly.

The speedy and accelerated implementation of the five-stage skills alignment model^[31] agreed by SFC and SDS will be a foundation of this system, as will a new level of cooperation.

Our commitment to the customer

• Colleges and universities will have a wider and improved offer to employers and people who want to reskill.
• Greater choice in 'unbundled' courses and work-integrated learning opportunities that skill people for high demand employment and address specific skills gaps and workplace requirements.
• More courses containing the skills people will need for the changing economy, increasingly integrated to every course.
• A greater variety of non-traditional routes - including work-based routes - that lead into work at the right pace and at the right time.
• Learners and employees will have access to a personalised learner journey that is right for them - in terms of pace and content.

Actions and Recommendations

Actions to be taken now are:

FS (A1). Fully implement the joint 5 stage skills alignment planning model, aligning provision with industry needs and critical skills as set out in the demand evidence. SFC and SDS will collaborate further to create a seamless, one system approach for learners, employers and the economy.

FS (A2). Define the 'meta skills' required to thrive in the future economy as the basis for future skills provision.

Additional recommendations to the Scottish Government are:

FS (R1). Use funding for colleges, universities and training providers to provide more agile support for employees and employers to upskill and reskill, increasing provision of in-work learning. SFC and SDS will jointly plan and deliver new models of provision.

FS (R2). Transform our skills system by integrating and expanding existing upskilling and reskilling interventions. This should be aligned with the work of the new National Retraining Partnership and aligned with consideration of a redesign of existing initiatives such as the Individual Training Account and the Flexible Workforce Development Fund.

FS (R3). Create a flexible and sustainable funding model to meet the future expansion of demand for both work-based and work-integrated learning (e.g. qualifications and training augmented with work placements or live business projects). SFC and SDS should work together to ensure there is a flexible, and sustainable funding model for all such pathways, in advance of the withdrawal of EU structural funds.

FS (R4). Accelerate implementation, and set a timescale for delivery of the Learner Journey Review recommendations, in particular where these reduce duplication and accelerate the pace that people can proceed through the school, college, university and apprenticeship systems, creating more effective pathways to productive employment. SFC and SDS should jointly draft advice to Government on the Learner Journey, including consideration of aligning existing funds.

Business Creation and Growth

The Board will promote business creation and growth through helping to create a nation of dynamic and high achieving entrepreneurs, targeting global market opportunities, capitalising on Scotland's unique assets, and using innovation as a key driver of growth.

Businesses play a central role in creating wealth within communities and driving economic growth. In doing so, they create job opportunities and contribute towards the public finances.

Culture and ambition play a key role and our longer term aim is to develop a nation where entrepreneurship flourishes in all areas of Scotland and is recognised for its contribution to the success of the country. The entrepreneurial ecosystem is central to this success and will involve the contribution of many public and private sector parties, in addition to the skills and enterprise agencies.

There is particular potential to do more to support fast growth businesses, 'scale-ups' and mid-size companies. Scaling companies have an immensely positive impact on the economy, helping to drive productivity and act as role-models for our aspiring entrepreneurs and broader business base. In ensuring that support for scaling companies is world-leading, it is crucial that the wider support environment helps the broader business base to realise its potential and grows the pool of scaling potential.

"Getting our ecosystem to produce a greater number of scale-ups is more ambitious and challenging than producing a greater number of start-ups or celebrating entrepreneurs"
The ScaleUp Institute report, 2014^[32]

Understanding the characteristics of fast-growth companies helps to find and exploit the specific 'triggers' that underpin them and spark growth in companies. A key component of this is the development and strengthening of leadership and management skills for all stages of business growth.

Some Characteristics of Scotland's Fast-Growth Companies*

• High growth can occur anywhere across Scotland and spans all sectors of the economy.
• Companies within the £5 million - £10 million turnover bracket are less likely to achieve high-growth and then to sustain it over multiple years.
• Once companies reach £10 million+, the chances of them continuing to sustain it begins to increase.
• Growth among companies is "episodic" - periods of rapid growth are often interspersed with periods of slower (or no) growth.

* Results of recent research by Scottish Enterprise

Innovation, and the adoption of digital technologies, is also associated with faster productivity growth. Building on initiatives such as the Digital Boost programme, there is scope for significant further improvement in this area.

Digital economy maturity index, 2017^[33]

• 44% of businesses remain either disconnected or have only basic digital proficiency.
• Larger businesses and younger businesses with growth ambitions are more likely to embrace digital technology.

What the evidence tells us

Scotland's business start-up rate (as well as the number of businesses relative to population) is significantly behind the UK - and has been for many decades. That rate varies across geographic areas and is particularly low in former industrial areas^[34]. Scotland also lags behind the UK in terms of the proportion of high growth firms and high growth firms in Scotland contribute less to economic and productivity growth than those in other parts of the UK^[35]. Our businesses are less ambitious in their overseas expansion than their international counterparts^[36].

There could be significant benefits to Scotland in the short-, medium- and long-term if we were to close the scale-up gap. Only a small proportion of new firms grow in a meaningful way, yet it is this scale-up activity that makes the most significant contribution to economic outcomes^[37].

Businesses in Scotland also do not make as much use of advanced digital tools as international comparators. Two-thirds of Scottish businesses report a digital skills gap amongst their staff, and the lack of digital skills training may be a barrier to wider adoption. Further, digitally skilled employment currently suffers from a heavy gender bias, with only around 20% female^[38].

Shared aims

Different parts of the public enterprise and skills network will naturally offer the most appropriate service to the needs of different parts of the business base. Regardless, it is crucial that a business is able to interact with the public service as a single system and that the system is in turn able to respond to the real needs of the business, whatever the stage of their development. Progress will therefore be delivered through tailored support to:

1. Create a greater number of private businesses and social enterprises that have the potential to scale with particular focus on inclusivity (women, rural, minority ethnic groups), while working with partners to generate a larger number of businesses at every stage of development. Embrace learnings from failure and encourage a 'bounce back' approach as part of the culture of ambition.

2. Focus on initiatives to reduce the rate of narrowing between growth stages through tailored programmes of support at each stage with a key focus on the development and application of the entrepreneurial, leadership and management skills required at each stage, including helping businesses recognise the potential benefits to their business.

3. Enable businesses to accelerate through the different stages more quickly providing focussed account management support from trained and experienced professionals especially in dealing with the scale up phase and access to capital markets and co-investment through SNIB in overseas acquisitions.

4. Continue to encourage businesses to work with colleges and universities to accelerate growth and nurture future talent to develop our skills, capabilities and ambitions at all levels of the funnel.

5. Embrace digitalisation, including increasing digital capability in our people and encouraging greater business investment in digital technologies. This will require a shift in the relative focus towards digital skills, including upskilling of the existing workforce.

Key to improving our rate of sustainable scale-ups creation is the concept of a start-up/scale-up funnel as detailed by Mark Logan, former COO of Skyscanner, one of Scotland's 'unicorn' companies.

Our commitment to the customer

• Easier access to relevant support at all stages of business evolution with a clear focus on your needs.
• A broader range of support tailored around developing and accelerating your growth and ambition.
• A Scotland-wide, collaborative approach to business growth. There will be no wrong door.
• Cross-agency teams delivering seamless, nationally available services tailored to regional needs.
• Better access to suitably qualified talent - public and private sector.
• improved awareness of the impact of adopting and integrating technology (e.g. decreased costs and increased turnover) and access to focussed support to achieve this.

Actions and Recommendations

Actions to be taken now are:

BCG (A1). Work with partners to establish a campaign to foster ambition and entrepreneurship across society. The enterprise and skill agencies must be entrepreneurial and align with the growth mindset.

BCG (A2). Creation of a main online entry point to direct businesses to the right support. An initial version in April 2019 will be the first milestone in this wide-ranging programme of transformation towards a truly digitally-enabled business support environment across Scotland, helping to reach many more businesses and open up new routes to growth. A common environment and ways of working will aid real-time understanding of the capabilities, needs and ambitions of Scotland's business base, enabling tailored support.

BCG (A3). To increase the number of companies making overseas acquisitions, a collaborative team (involving private and public sector, and the new Scottish National Investment Bank) will provide dedicated specialist support focused on key steps in the scale up and expansion process.

Additional recommendations to the Scottish Government are:

BCG (R1). The agencies should focus as a priority on scale-up and frontier businesses, including more targeted support aimed at both: i) young, ambitious and capable businesses with realistic aspirations to internationalise, and ii) high-growth potential businesses that contribute to our ambitions for a sustainable, carbon-neutral economy.. As colleges and universities are a major source of self-employed entrepreneurs and scalable spin-out ventures, provision of existing successful programmes should be expanded.

BCG (R2). The agencies should review if there is greater scope for working with Business Gateway, and specifically regarding the best way to support start-ups. Through so doing, they should provide leadership in strengthening an ecosystem of private and public sector collaboration. A particular focus should be given to supporting rural and under-represented business start-ups (e.g. women, disabled, minority ethnic groups).

BCG (R3). Build on the existing Brexit readiness work of public agencies and business organisations to strengthen the Scottish-level response.

BCG (R4). Developing stronger support for, and greater agility in, accessing the Industrial Strategy Challenge Fund is key and should be incorporated within agencies' strategic and operational plans.

BCG (R5). Develop and promote Scotland as a Digital Nation, that offers access to the skills, capital and partners required to set up and grow digital businesses that are globally competitive, with a public sector that offers businesses opportunities to innovate and build products and services that meet key social and public service challenges.

BCG (R6). Increase investment in college and university spin-out venture programmes and in organisations focussed on driving entrepreneurship, innovation and research (such as Scotland Can Do and Scotland is Now).

Exports

The Strategic Board seeks to increase export growth through the number of businesses and value of exports - sustaining and growing the value of Scotland's trade with new and emerging markets by better understanding product, services and in-country demand and increase the number of exporters through broader and deeper reach at regional levels.

Firms that export tend to be more productive than otherwise similar businesses that do not export; the Fraser of Allander Institute suggests that businesses that export account for 60% of UK annual productivity growth and are, on average, 70% more productive than businesses that do not export^[39].

Among advanced economies, sustained rapid export growth is unusual. However, things that do cause more businesses to export and/or export values to grow include:

• Innovation, especially when linked to skills development.
• Better-managed businesses are more likely to export and to do so more successfully.
• Being located within countries with positive international images.
• Firms that have growth ambitions are more likely to become exporters.
• Export credit agencies are effective ways to increase exports.

Exporting leads to higher business productivity and growth

• Much of the productivity boost comes from preparing to export, which very often means innovating and/or investing in the skills of the workforce. Either innovation is needed to succeed in new markets and/or exporting is a by-product of successful innovation.
• Competition encountered through trading in multiple markets leads to a more intense focus on cost and quality and exposes firms to new ideas and techniques resulting in more investment in innovation, investment, skills and other factors that influence productivity.
• Achieving increased turnover by selling into more markets allows fixed costs to be spread.

Many of the barriers to exporting are challenges that well-led and innovative businesses already address. To help more of Scotland's businesses become exporters, it is critical that our services integrate support for innovation, harness ambition and boost management quality alongside more conventional export support.

Food & Drink exports hit record high

Food & Drink is now Scotland's number one exporting sector, with phenomenal growth over the last four years - food exports increased by 46% to £1.64bn and food and drink grew 18% to reach a record high of £6bn. This has been driven by strong global demand for our premium products and is underpinned by an innovative partnership model - the Scotland Food & Drink Export Plan - which is funded by the industry partners, SDI and Scottish Government. The plan focuses the collective efforts of SDI, SF&D and key trade associations on 10 priority markets (mature and emerging), with a unique team of F&D in-market specialists who open doors for Scottish businesses by connecting them with buyers and distributors.

To significantly boost our trade performance we need to continue deepening our trading relationships with priority mature economies whilst also diversifying into emerging fast-growing markets.

In the short-term, it is crucial that Scottish companies are prepared for the uncertainties of Brexit, and that we continue to build resilience in the system by accessing more markets and building company capacity to export, and by growing the number of exporters. We also need to look outwards and whilst sustaining current business, harness the opportunities in fast growing markets around the globe. This needs to be underpinned by the right skills, infrastructure and a global mindset.

What the evidence tells us

• As in most countries, a large proportion of Scotland's exports come from a small number of exporters and it has been estimated that half of all Scottish exports come from around 70 companies.
• Scotland's international exports are less than 20% of GDP, the third-lowest share among OECD countries^[40].
• Exports by Scottish universities stand at £882M^[41], and there is significant scope to grow that even further.
• Maintaining and growing our international student population is likely to be significantly constrained by Brexit and the introduction of post-study work visas by competitor providers such as Australia, New Zealand, USA and Canada).

We also know that Scotland currently sells its goods and services predominantly to mature, stable and sophisticated but slowly-growing economies. In contrast, and compared to many of our competitors, we export less to emerging fast growing economies.

Shared aims

The Board welcomes the fact that, since its establishment, a new ministerial trade post has been developed as well as the recent Scottish Government commitment to publish an enhanced export plan 'A Trading Nation - our plan for growing Scotland's exports'. Similarly, there are positive steps being taken to improve international connectivity, including reducing air departure tax and consideration of expanding air routes.

Building on this, and also complementary to existing activity such as Scotland is Now, Innovation and Investment Hubs, and the International Trade Project pilot, the plan proposes to:

1. Build resilience in the face of Brexit uncertainty and reach more exporters. It aims to grow the current level of exports to the EU while also seeking to maintain and grow the proportion of Scottish companies who export.

2. Transform our trade performance and perception in priority markets. This includes increasing Scottish exports (volume and value) to markets such as the USA and Asia, and improving Scotland's score and rank on the Anholt-GfK Roper National Brands index from 15th position. An important part of improving our trade performance will involve a substantial increase in the number of exporters

3. Encourage a global mindset, with the aims of Scotland being viewed globally as a progressive country with positive attitudes to migration, appreciation of the value of learning a foreign language, and significantly increasing the number of Scottish students who gain international experience.

There may now be additional value in SFC adopting a stronger interest in the international dimension of colleges' and universities' export earnings, international activity and soft power of international alumni networks.

Our commitment to the customer

• Increased trading opportunities.
• A more co-ordinated and aligned support system tailored to address specific challenges such as Brexit and local and regional demographics.
• No wrong door - simpler and streamlined support system.
• A more internationally focused student base and skill-set emerging from the education system.
• An increased awareness of Scotland in future key markets - our research, innovation, creativity, goods and services.

Actions and Recommendations

Actions to be taken now are:

Exp (A1). Co-ordinate a new 'national exporting service' - a one Scotland approach to export delivery organisations and services, strengthening national and regional partnerships and enhanced digital support services to engage more companies and address known barriers to exporting, including sales skills. This will include the delivery of an international programme of promotional opportunities, including around the new Scotland is Now campaign to work, live, study, invest and visit Scotland, and focusing networks in fast-growing and priority markets.

Exp (A2). Explore a new public/private sector partnership to provide support to scale-up, and refresh, export support resources utilising the expertise and global connectivity of the business community.

Exp (A3). Develop digital, sales and international language training programmes for exporters.

Additional recommendations to the Scottish Government are:

Exp (R1). Working in partnership with colleges and universities, build on the good work already underway across the education system to: ensure international awareness within schools; encourage an international focus in more college/university courses; encourage more young people and students to learn a foreign language and to take-up opportunities for international travel and work experience; encourage universities/colleges to work together to identify mechanisms to encourage more inclusive student mobility post-Brexit; and build a collective focus to support and champion the re-introduction of the post-study work visa to allow international students to extend their stay and work, for example, for a Scottish company on an international export project

Exp (R2). Develop an exporting partnership plan which will increase the involvement of private sector expertise and world-wide resources to growing our exports and imports (e.g. through 'Global B2B exchange partnerships').

Exp (R3). Increase ministerial visibility in existing and potential trading partner countries and fast growing priority markets, creating stronger government-to-government and business-to-government networks.

Exp (R4). Explore the full potential of the international dimension of colleges' and universities' export earnings, international activity and international alumni networks in supporting economic growth.