Scots economy must regenerate in changed landscape
IT'S A NEW YEAR, time for New Year resolutions; and maybe it’s a good time for a completely new approach.
In fact, I’d go as far as saying, we have to take a bold new approach, after all, the old Scottish economy, which was overwhelmingly dominated by giant financial institutions, has been blown to bits by the great Credit Crunch of 2008.
Life in Scotland is so relatively comfortable, and the sun keeps coming up each morning, that many of us might not realise what has just happened, but as we start 2009 we really must force ourselves to survey the wreckage wreaked on our economy.
Both Scottish & Newcastle and HBOS, with their centuries of proud tradition and business leadership, have gone forever.
The UK Government now owns the Royal Bank of Scotland, which until very recently alone represented well over 50% of the Scottish economy.
The leading independent opinion formers for Scotland, such as STV and Johnson Press (owners of The Scotsman) have share prices that are so battered and beaten that they are in no position anymore to do anything imaginative or creative.
And we are unable to offer any financial support to ensure that genuinely new and innovative companies such as Microemmissive Displays (MED) can survive to build new technology business.
The last time our economy was in such a state was in 1945, at the end of the Second World War when huge chunks of our business infrastructure had been literally blown to bits by the Nazis. We needed to rebuild, and the post-war Labour Government asked the UK major banks to invest in British Industry.
When the bankers, as usual, showed no enthusiasm for doing so, the Government threatened to nationalise them – it was, after all, nationalising lots of other businesses, such as coal, steel and transport.
In order to retain their independence, the major UK retail banks instead agreed collectively to set up the Industrial and Commercial Finance Corporation (ICFC). The ICFC became one of the world’s leading investment companies that later became 3i, and was the backbone of the growing Venture Capital community which later flourished in the UK.
The UK today has a diverse and powerful Venture Capital community, but their funds tend to be limited and short-term, which often forces companies to sell out too early.
The two technology companies that have managed to become public corporations in recent years in Scotland, Wolfson and Optos, were both over 15years old when they floated. It is very, very rare that traditional venture capital investment has the stamina to support businesses for such a long time.
Since we have lost so many of the former giants of the Scottish economy we need to somehow find ways of supporting new businesses in Scotland, innovative companies such as MED which just went bust for the lack of sustained investment.
US President Lyndon Johnson used to say that it was all very well trying to win over the hearts and minds of reluctant supporters, “but when you have them by the balls, their hearts and minds will follow.”
Well, now we have the attention of many of the major banks, so to speak, it might be time for a dramatic initiative – to take a leaf from the post-war Labour Government.
How about a £500m fund, with no short-term goals for returns - perhaps called the ‘Scottish Innovation’ fund - with a brief to regenerate our economy, and to support innovative Scottish businesses to compete with the rest of the world.