w w w . s c o t l a n d . g o v . u k 9 780755 982714 ISBN 978-0-7559-8271-4 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY WEALTHIER & FAIRER SMARTER HEALTHIER SAFER & STRONGER GREENER © Crown copyright 2010 This document is also available on the Scottish Government website: www.scotland.gov.uk RR Donnelley B63580 03/10 Further copies of the document are available on request Please contact 0131 244 3342 or EconomicStrategyDirectorate@scotland.gsi.gov.uk 3 March 2010 The Scottish Government, 2010 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY © Crown copyright 2010 ISBN: 978-0-7559-8271-4 The Scottish Government St Andrew’s House Edinburgh EH1 3DG Produced for the Scottish Government by RR Donnelley B63580 03/10 Published by the Scottish Government, February 2010 Further copies of this document are available on request Please contact 0131 244 3342 or EconomicStrategyDirectorate@scotland.gsi.gov.uk 100% of this document is printed on recycled paper and is 100% recyclable 1 WEALTHIER & FAIRER SMARTER HEALTHIER SAFER & STRONGER GREENER THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY CONTENTS FOREWORD 2 1. INTRODUCTION 4 2. THE ECONOMY 11 The global economy 11 The Scottish economy 12 Impact on industry sectors 14 Impacts by age group and occupation 15 Impact on the regions of Scotland 16 Future prospects for the Scottish economy 16 3. INVESTING IN INNOVATION AND INDUSTRIES OF THE FUTURE 18 The low carbon economy 18 Scotland’s Key Sectors 22 Infrastructure investment 26 The central importance of internationalisation 27 Planning 29 Access to finance 31 Management and leadership 32 Procurement 33 Innovation 35 Remaining responsive to business concerns 36 4. STRENGTHENING EDUCATION AND SKILLS 39 Support for skills and training 39 Preventing new long-term unemployment 42 Providing additional opportunities for young people 44 Tailored learning support for those furthest from the labour market 45 Managing increased demand for education 45 5. SUPPORTING JOBS AND COMMUNITIES 47 Public sector capital investment 47 Supporting the regeneration and growth of our town centres 49 Maximising the community and employment impact of new housing 49 Supporting households 50 Public sector efficiency 52 FOREWORD This is a time of transformation in global and domestic markets. As economies around the world strengthen, new competitive pressures will shape the structure of our economy. The labour market pressures that emerged through the deepest recession in living memory may continue for some time, but the next phase of the economic cycle also heralds new opportunities for Scottish businesses to develop new markets, and grow existing ones. Across the public sector, our task is to remain responsive to the new conditions. We must align behind the task of accelerating our recovery and meet the challenge of maintaining the most supportive environment for a strong recovery. This update to the Economic Recovery Plan sets out a number of priorities for the coming months. Scotland’s future lies in the development of a low carbon economy. We are starting a conversation on what that will mean in practice. Our commitments on renewables and carbon capture and storage will help lead to the development of major new industries in Scotland, and major new sources of employment. In rapidly developing global markets, Scotland’s competitive exchange rate brings the prospect of developing larger international markets for Scottish goods and services. We will deliver additional support for Scottish businesses to internationalise. Building on the success of Homecoming, we can also capitalise on the current conditions to bring new visitors and new inward investment to Scotland. Development in Scotland will be supported by an improved planning regime to streamline support for new investment, continuing the major progress made since 2007. 2 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY 3 WEALTHIER & FAIRER SMARTER HEALTHIER SAFER & STRONGER GREENER Contraction in the availability of finance lay at the heart of the recession, and access to finance will be a necessary condition of a strong recovery. The latest Scottish Access to Finance Survey shows some improvement in conditions for SMEs seeking finance. We will reinforce this improvement through the continued development of the Scottish Investment Bank this year. Scotland’s natural and intellectual assets are world class, but for some time we have failed to turn this into commercial success. We will scale up our support to commercialise innovation in Scotland. And with our partners across the public sector, we will place a renewed focus on improving leadership and management skills in Scottish business. Our major package of skills and training support, ScotAction, has supported flexibility in the Scottish workforce through the pressures of recession. As growth returns to the Scottish economy, employment risks remain. The Scottish Government can achieve a great deal with the levers at its disposal, but as we attempt to accelerate our recovery, we are undermined by the UK Government’s decision to remove its fiscal stimulus in 2010. The Treasury has an opportunity to support our Economic Recovery Plan by releasing funds for further capital acceleration, allowing us to directly support businesses and jobs across Scotland. We will continue to make the case in the run-up to the UK 2010 Budget. John Swinney MSP Cabinet Secretary for Finance and Sustainable Growth 1. INTRODUCTION This update to the Scottish Government’s Economic Recovery Plan is the first to come at a time of rising UK GDP output. The Scottish economy, in common with that of other developed countries, has not been immune to the stresses of a major recession, with falls in output and increased pressures on employment. But as the rate of decline in output eases and growth begins to return to areas of the economy, we can now reflect more accurately on the long-term impacts of recession, and on the outlook for the post-recession economy in Scotland. The Plan has developed through an ongoing dialogue with Scotland’s businesses, academics, community groups and individuals. With our partners in local government and the Third Sector, we have developed a deeper assessment of the impacts of recession across Scotland. As the public sector aligns behind a central theme of accelerating recovery, a number of central priorities emerge for the coming year. Our efforts are centred on stimulating lasting improvements in Scotland’s long-term economic performance – in line with the Government Economic Strategy – through three broad themes: Investing in innovation and industries of the future; Strengthening education and skills; and Supporting jobs and communities. Accelerating recovery Optimism as As the world economy emerges from the deepest recession of a growth generation, a global recovery is now underway. In Scotland, returns growth returned to parts of the economy in the second half of 2009, with signs of further improvement in the last three months of the year. As the recovery takes hold, there are still uncertainties: growth in Scotland is only in its fragile early stages and the fundamental impacts on the ‘real’ economy of a recession rooted in financial market turmoil will not be fully apparent for some time. But this is also a time of new dynamism in global and domestic markets, where new trading links between partners can be forged. The rebalancing that has already begun across the global economy, will bring new opportunities for Scottish businesses in new markets. And within Scotland, the domestic economy has also begun to adapt to the post-recession conditions. There are grounds for optimism in this new dynamic environment. Scotland can continue to develop and exploit its rich comparative advantages. We can further expand our international trade, taking advantage of a newly competitive exchange rate to enter new export markets. Scotland is a world-class destination for visitors and for new investment – our tourism industry outperformed the rest of the world in 2009 – and our education and skills base continues to provide a platform for new employment opportunities. 4 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY 5 WEALTHIER & FAIRER SMARTER HEALTHIER SAFER & STRONGER GREENER Alignment across the public sector The private sector will lead Scotlands recovery; the task for the public sector is to maintain a flexible, responsive approach as changes unfold over the coming months. Through the alignment of key services and activities, and by maintaining our focus on those key sectors that best exploit Scotland’s global competitive advantages, we can create a supportive framework for sustained improvement in our future economic growth. Priorities as The Economic Recovery Plan has mobilised a range of cross-public we enter new sector activities, designed to support the Scottish economy growth through the pressures of a deep global recession. The Plan has supported employment – directly through accelerated public sector spending, and indirectly through our support for skills – and it has mitigated some of the worst impacts of recession on Scotland’s communities. These steps were part of the immediate response to recession, but they have been designed to leave a lasting positive impact. As we begin to enter a new period of growth, a number of new priorities emerge for the coming months. Developing a low carbon economy Scotland’s primary new economic opportunity lies in the development of a low carbon economy. Addressing the major economic costs of climate change is an economic and environmental imperative. We have already taken a lead with the most ambitious emission reduction targets in the world and the move to low carbon is a necessary condition of meeting these obligations. Opening Scotland’s enviable natural resources, research expertise, and discussion on industrial base provide the foundations to capitalise on the future low carbon growth of renewable energy, carbon capture and storage, and improvements in energy efficiency. We will shortly publish a discussion document on the implications of the move to low carbon for the Scottish economy. Renewables The recent consent for the upgrade of electricity infrastructure from Beauly to Denny releases huge potential to develop Scotland’s renewables sector, where over 600MW of additional capacity has been consented in the past 12 months, with a further almost 2.7GW in the planning pipeline. 6 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY Offshore Offshore wind is the biggest near-to-market opportunity in wind Scotland’s low carbon economy. The recently published National Renewables Infrastructure Plan identifies a range of near-term infrastructure needs and investment opportunities. We are now developing a comprehensive off-shore wind route map with key industry and public sector bodies, which will detail the steps to create tens of thousands of new Scottish jobs and over £20 billion of investment by 2020. Carbon capture The Scottish Government will shortly publish a roadmap for the storage development of a carbon capture and storage industry in Scotland, setting key milestones for the creation of thousands of additional jobs in the future. Environmental The Scottish Government, Scotland’s Enterprise Agencies, the and clean Scottish Environment Protection Agency (SEPA) and the academic technologies sector are working together to develop a strategy to support the development of the environmental and clean technologies sector in Scotland. In the Spring, we will begin engagement with key stakeholders to inform the development of this strategy. Supporting internationalisation A number of factors now come together to make increased internationalisation one of the central priorities for the acceleration of the Scottish recovery. Correction of It is now apparent that there were major, unsustainable global imbalances within the world economy as it entered recession. imbalances These were most obvious in the financial sector, but they have also influenced other globally traded sectors. As these imbalances are corrected, we are likely to see a repositioning of individual economies in the global economy, and restructuring of industrial sectors within these economies. Financial and trade flows will alter, bringing new opportunities for Scotland to exploit its comparative advantages. Developing Pre-recession, demand was supported by relatively cheap credit, new sources and wealth generated by a decade-long boom in house price of demand growth. Post-recession, we will have to look particularly to foreign markets to support further growth in the demand for Scotland’s goods and services. 7 WEALTHIER & FAIRER SMARTER HEALTHIER SAFER & STRONGER GREENER Competitive The movement in exchange rates over the course of the last exchange rate 18 months now makes Scotland even more competitive in export markets. The competitive exchange rate will act as a platform to attract new visitors to Scotland, and new inward investment. The latest business surveys suggest that the decline in exports from Scottish firms may have started to bottom out, with some sectors experiencing an increase in export activity in the second half of 2009. There was also some encouragement from the small increase in manufactured exports in the third quarter of 2009. Scaling-up Across the public sector, we are capitalising on these conditions, support for scaling-up the promotion of Scottish business abroad, and exports providing new support for Scottish businesses to look to international markets. Scottish Development International (SDI), and its partners, will boost its international activity with a focus on raising the international aspirations of more Scottish businesses to trade globally, a broader engagement with Scottish businesses and a more intense focus on helping Scottish firms to understand international market opportunities in their sector. This is accompanied by a renewed strategy to target inward investment opportunities where Scotland has a strong global position. Tourism The interim evaluation has demonstrated the success of last year’s Homecoming Scotland initiative in raising tourism revenue and delivering a range of wider benefits to the Scottish economy. Scotland outperformed the rest of the world in 2009. On average global tourism declined by between 7 and 9% but in Scotland, revenues remained relatively constant with only a 1.6% decline by the third quarter. The movement in exchange rates continues to make Scotland an attractive destination for overseas visitors to Scotland and has also boosted the ‘staycation’ effect, encouraging domestic UK visitors to Scotland. The Scottish Government will roll out a series of further initiatives to ensure a legacy for Homecoming. Continuing the improvement of Scotland’s planning system Aligning to Since 2007, the Scottish Government has made a series of support improvements to the planning system in Scotland, recognising its development central importance to the Government Economic Strategy. Subject to Parliamentary approval, planning fees will rise by 10% in April 2010 in order to ensure planning authorities are appropriately resourced to contribute to economic recovery. [...]... and skills across the public sector more broadly 9 10 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY Over the course of the coming year, we will continue to align public sector activity towards employability and the maximisation of employment opportunities We will build on the recent success of the Integrating Employment and Skills pilots – which have brought together the services of Skills... months 17 18 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY 3 INVESTING IN INNOVATION AND INDUSTRIES OF THE FUTURE One of the major impacts of recession is to reveal the extent of imbalance within the global economy As these imbalances are corrected, we are likely to see the repositioning of economies within the global economy, and restructuring of industrial sectors within these economies... of 51,000 over the year 78 Scottish & UK Employment Rate 77 76 Percent 75 74 73 72 Scotland UK 71 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 13 14 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY Impact on industry sectors Broad-based The recession has impacted on most sectors of the Scottish decline in economy, with the majority experiencing a decline in output output The sectors, which... 12 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY Continued weakening in the labour market The rate of change in labour market conditions has also varied considerably across countries, although the most recent figures indicate a general easing in the rate of increase in unemployment rates across most countries The US has witnessed one of the sharpest increases in unemployment, with the. .. PLAN: ACCELERATING RECOVERY The ECT strategy will integrate with the development of a broader low carbon strategy for Scotland and provide a framework to align public sector support behind the areas of greatest potential economic opportunity Scotland’s Key Sectors The Scottish Government is working across the public sector to support the development of the key sectors identified in the Government Economic. .. downturn in recent memory in the second half of 2009 with many advanced economies returning to growth The Scottish economy has performed broadly in line with the UK throughout the downturn and the latest evidence suggests that the economy was close to emerging from recession in the final quarter of 2009 The recovery in the Scottish and global economies is expected to gain further momentum in 2010, although... with CPI rising to 3.5% These inflationary pressures are expected to fade in the coming months as the excess capacity in the global economy created by the recession is predicted to have a downward effect on price pressures in the second half of 2010 and into 2011 The Scottish economy1 Scotland The Scottish economy has been in recession since the middle of remains in 2008, although the rate of decline has... line with the UK with both economies contracting by around 6% from their previous peaks The latest evidence from the Scottish business surveys suggest that the Scottish economy is close to moving out of recession, with the monthly PMI survey for January 2010 reporting that private sector output in Scotland has grown for the seventh consecutive month Further rise in The rate of decline in Scottish labour... – which unemployment coincided with the slowdown in economic conditions – accelerated towards the end of 2009 following a period of moderation in the middle of the year The Scottish unemployment rate rose by 0.4 percentage points to 7.6% in Q4 2009 Over the year to Q4 2009 Scottish unemployment levels increased by 65,000 There was a corresponding decline in the Scottish employment rate which fell to... uncertainty of the current economic conditions economy The UK Government’s decision to withdraw its fiscal stimulus package in 2010 risks undermining the fragile early stages of our recovery Above all, the latest unemployment figures demonstrate the compelling case for a continued economic stimulus package in the UK Analysis by the International Monetary Fund (IMF) indicates that the UK is the only country . GREENER THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY CONTENTS FOREWORD 2 1. INTRODUCTION 4 2. THE ECONOMY 11 The global economy 11 The Scottish. 3342 or EconomicStrategyDirectorate@scotland.gsi.gov.uk 3 March 2010 The Scottish Government, 2010 THE SCOTTISH ECONOMIC RECOVERY PLAN: ACCELERATING RECOVERY ©