Sandy Begbie: Finance sector can help drive economic growth

Sandy Begbie: Finance sector can help drive economic growth

Sandy Begbie

Sandy Begbie, chief executive of Scottish Financial Enterprise, examines the challenges facing the Scottish economy, emphasising the need for government intervention to stimulate growth, particularly in the financial and professional services sectors which are “ripe for the kind of productivity growth needed”.

The recent publication of Scotland’s latest gross domestic product (GDP) estimates was rather overshadowed by the political maelstrom that ensued following the collapse of the Bute House Agreement and the resignation of the First Minister. But as John Swinney emerges as heir apparent, those top-line economic figures should make for sobering reading. Scotland’s onshore GDP is estimated to have contracted by 0.3 per cent in February. Despite a small rise in January, the economy is now said to have fallen by 0.5 per cent over the last three months of 2023.

The Scottish economy has been struggling for too long. To really grow and thrive, we will require policy prescriptions that prioritise economic growth and create a more conducive environment for business. It is well understood that the economic and fiscal levers at the Scottish government’s disposal are limited, but with the powers it does have, the Scottish ministers could make all the difference to our economic performance, by tackling structural issues like skills shortages and low productivity or taking steps to drive up high value job-creation. As the government attempts to reorient itself in challenging circumstances, it could improve confidence and restore credibility by opting to play to Scotland’s strengths.

The financial and professional services sector is ripe for the kind of productivity growth needed. We have the ambition to add between £4 billion and £7bn gross value added (GVA) to the Scottish economy over the next five years, but to do so we need the help of government to attract talent, secure investment, and overcome regulatory obstacles.

Our sector already contributes more than any other to the Scottish economy, employing around 150,000 people and generating £14.3bn in GVA last year, accounting for around 9 per cent of Scotland’s total productivity. We hope the new incumbent of Bute House will recognise our ambition, and bring forward a fresh policy approach that enables and prioritises sustainable growth by fostering an environment in which businesses can flourish.

There needs to be a proper debate on tax strategy and how best to increase the size of our tax base. Whether it’s non-domestic rates, land and buildings tax, or personal taxation, the Scottish government has had opportunities to steal a competitive edge – but has not taken them. We would echo Sir Tom Hunter’s call for a realignment of tax with the rest of the UK, ideally going further to become the lowest-taxed part of the UK to attract even more well-paid jobs and investment.

Likewise, we want to see a different approach to business regulation that removes unnecessary complexity and increased costs. Business is not looking for any favours from government, but rather a framework based on simplicity, certainty, proportionality and efficiency. At this juncture, brave and creative decision-making on tax and regulation would inject some much-needed confidence into a business community rather weary of responsive rhetoric that has not translated into positive policy change.

And we all stand to benefit. Working together to drive growth will not only strengthen our economy and create jobs, it’s vital to expand the tax base. We all want to see better-quality public services, but there needs to be a recognition that this can’t be achieved without sustained economic growth.

Supporting the sectors with the greatest growth potential also means grappling with some hard questions around higher education funding. Our world-class research institutions are a significant national asset, driving innovation and developing the workforce of the future. However, the stress points in the business model are increasingly apparent. The government needs to engage in an honest conversation on how to maintain an inclusive and sustainable system, while ensuring we aren’t pushing talent out of the country by limiting spaces to young Scots.

John Swinney put economic growth front and centre when announcing his SNP leadership bid. As he now steps into the role, he’ll find Scotland’s financial services industry a constructive partner in helping to realise that goal.

Sandy Begbie CBE is chief executive of Scottish Financial Enterprise

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