Foreign Direct Investment

– in the Scottish Parliament on 25th May 2017.

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Photo of Kate Forbes Kate Forbes Scottish National Party

4. To ask the First Minister what action the Scottish Government is taking to attract foreign direct investment. (S5F-01316)

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

The 2017 Ernst & Young attractiveness survey on inward investment to the United Kingdom, which was published on Tuesday of this week, reported that, with 122 projects being successfully secured during 2016 and three Scottish cities—Glasgow, Edinburgh and Aberdeen—being in the top 10, Scotland has continued to be the most attractive location for foreign direct investment outside London in every one of the past five years.

We continue to work with Scottish Development International to engage with potential investors across the globe to ensure that they are fully aware of the many strengths of the Scottish economy and the range of support that is available to help them to grow their businesses here.

Photo of Kate Forbes Kate Forbes Scottish National Party

I agree that the EY Scotland attractiveness survey is a very positive sign for the Scottish economy. Does the First Minister agree that a further positive sign is the number of high-value projects, particularly research and development projects, that Scotland now attracts and that, although they may not bring as many jobs in their first phase, they are the basis for a high-value, knowledge-based economy that will lead to more and better-paid jobs in the future?

The First Minister:

Yes, I agree very much with that. The attraction of high-value jobs to Scotland is a very positive sign. The EY survey says:

“Scotland was the clear leader for R&D ... in the UK, attracting more projects than any other UK region in 2016”.

R and D projects attract high-skilled, high-value jobs, and our excellent performance in the face of what we see as reductions in R and D investment elsewhere is testament to the strength, among other things, of our academic excellence.

However, we must not be complacent, and we remain very focused on ensuring that Scotland continues to be seen as a highly attractive place to invest.

Photo of Jackie Baillie Jackie Baillie Labour

Although growth in foreign direct investment is absolutely to be welcomed, the increase was 2.5 per cent last year compared with 51 per cent in the previous year. Our growth was less than that of the UK as a whole and the total number of jobs secured fell by almost 50 per cent. The EY survey also says that Scotland’s perceived attractiveness to investors has decreased for a number of reasons, which I will not rehearse. Can the First Minister offer an explanation as to why there is that difference in FDI growth and say what action she is taking to close the gap?

The First Minister:

I think that it is very difficult for anybody to read the EY report from Tuesday fairly and come to the conclusion that it is anything other than positive for Scotland. If we look at the comparisons with last year, we see that in 2015, which is the year that the previous report was based on, we recorded our highest percentage share of UK projects of the past 10 years. It was a particularly strong year, so the improvement this year on last year was always likely to be slightly less than that.

However, the 2016 result is still excellent. The fact that 10.7 per cent of all projects came to Scotland still places Scotland significantly above our population share in what is an extremely competitive inward investment environment. We should not be complacent about that, but we should all absolutely celebrate it.

The point about jobs goes back to the question that Kate Forbes just asked me—Kate Forbes absolutely put her finger on this. A number of the projects that are reported through the EY study did not have figures for jobs. That obviously reduces the number, because we do not know how many jobs there are for some of the projects.

One of the other issues with numbers of jobs is that so many of the projects that we attracted last year were high-value projects, particularly in R and D, and, as most people know from their own experience, those kinds of projects do not necessarily bring the large numbers of jobs that others do, but they do bring huge value to the Scottish economy.

The future success of our economy is based on attracting high-skilled roles in areas such as R and D and software, which deliver that higher value. Actually, we should see the success of R and D not as a negative, because it perhaps brings fewer jobs, but as a positive, because of the value that it adds to our economy over the longer term.

Photo of Mike Rumbles Mike Rumbles Liberal Democrat

Foreign direct investment is absolutely essential to Scotland, but before the Scottish Government invests any money in companies that are based abroad, will it carry out checks to ensure two things: that those companies pay their proper taxes; and, as important, that they have a level of pay for their workforce that is legal and appropriate?

The First Minister:

Scottish Enterprise carries out robust due diligence on companies before it invests. It carefully assesses the companies that it invests in, not least so that we can ensure that we get the greatest value for taxpayers’ money.

On the two particular points that Mike Rumbles raises, the Scottish Government’s position could not be clearer. It is absolutely the responsibility of all companies to pay the tax that they are due to pay. Responsibility for this is not for the Scottish Government, as it is not within our powers, but I believe that there should be in place much more robust rules and regulations on tax avoidance by companies.

We are absolutely crystal clear about the importance that we attach to payment of the living wage. We are now in a situation in which a higher percentage of people are paid the real living wage in Scotland than in any other nation in the United Kingdom, but we still have work to do, so we will continue to use all the levers at our disposal to ensure that we encourage companies to pay the living wage or set out plans by which they can move towards paying the living wage.