Learning from the Scots

From a recent column in the TJ:

There was an excellent article in the Economist magazine this week discussing Scotland’s efforts to attract business investment and create jobs by luring multinational firms. While most inward investment into the United Kingdom ends up in the London area, Scotland has done remarkably well attracting its share, much to the annoyance of other regions such as northern England.

According to the article, Scotland spends around $300 per capita annually on economic development, but this money is not targeted for lavish subsidies. The CEO of Scottish Development International says the bulk of the money is spent on its 27 overseas offices, which scout for business, and on looking after the multinational firms after they set up in Scotland.

New and expanding multinational firms are given a wide range of support services, including help with local staff recruitment, support for workforce training, efforts to address supply chain problems and a general commitment to remove roadblocks.

This”aftercare”service has been very important. Almost half of the multinational expansions in Scotland last year came from existing investors.

It’s hard to develop a comparative per capita spending amount in New Brunswick, but between the federal government (the provincial portion of ACOA spending) and the two provincial departments, Invest NB and the Department of Economic Development, the total annual spending is in the range of $200 per person on economic development across the province.

The big difference between Scotland and New Brunswick is that approximately 90-95 per cent of all government spending on economic development here is targeted at New Brunswick firms – mostly small- and medium-sized firms (and some larger ones as well). There are programs to encourage people to start businesses. There are other programs meant to support firm expansion, productivity improvements and trade development.

There are several hundred people in the province who earn their living trying to coax more investment and jobs out of New Brunswick businesses and a tiny fraction of that number working to encourage national or international firms to expand here or grow their existing operations.

For many New Brunswickers, government should be spending 100 per cent of its time and money on local firms.

We heard this chorus again last week when the multinational firm Salesforce.com announced it would be laying of a portion of its New Brunswick workforce as part of a global downsizing. Within minutes, bloggers and tweeters were decrying the province’s efforts to attract firms such as Salesforce to the province.

It was a real New Brunswick moment: When one multinational firm downsizes, the fingers start to point; when a dozen multinationals expand in the province – not a peep.

As I have said ad nauseum, we should be spending our time trying to convince firms to invest in New Brunswick no matter where they have their head office. Some of these entrepreneurs and firms will be New Brunswick-based, but others will be located far and wide. We want firms to use New Brunswick as a place to build export businesses.

Scotland has 27 foreign offices with sales staff working to convince companies abroad to consider them when looking at European expansion. New Brunswick has no foreign offices. The federal government has dozens of embassies and consulates across the world, but they have never been a source of investment leads for New Brunswick.

I love the idea of “aftercare.” I was in a meeting recently where a New Brunswick business leader called this a “red carpet service.” If we were really serious about growing the economy, we would spend our time and effort rolling out the red carpet for firms considering expansion here – firms based in Minto, Montreal or Mumbai.

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One Response to Learning from the Scots

  1. mikel says:

    First of all, can we put to rest the idea of ‘red carpet’ treatment affecting investment? Are hookers next? Maybe if we instituted the idea of calling executives “Lords” while they walk down the street then they’ll love the idea of expanding into ‘serfdom NB’. Maybe if we change criminal laws so that investors can run down pedestrians with impunity. IF businesses won’t invest based on costs, then you REALLY don’t want them.

    Second, I didn’t read the economist article so can’t comment on it, but its either a bad article or else you are jumping to conclusions. I HIGHLY doubt that companies are flocking to Scotland because of the foreign offices. You certainly have a point about ‘selling from outside the province’, but we really don’t know how often that is being done. Most Premiers spend most of their time doing exactly that, well, maybe no so much Alward or Graham. Alward made big noises about changing Invest NB, but since then we haven’t heard much about it, even though we were supposed to see constant updates.

    In any case, you state that almost HALF Scotland investment comes from firms already IN Scotland, which shows that the foreign offices are bringing in just over half, whether thats good or not I don’t know. HOwever, I suspect the REAL reason for that investment can be explained by these quotes from their website:

    “Businesses can claim up to 100 percent rate relief under de minimis meaning savings worth up £275,000 per eligible business over the policy’s five year timeframe.

    “Grants and tax credits available include: Research and Development Assistance and Regional Selective Awards”

    “Certain types of university intellectual property can sometimes prove difficult to commercialise through traditional routes, usually because it is at an early stage of development, or because it presents enough uncertainty for companies to risk an investment.

    University Technology’s Easy Access portal offers access to this type of intellectual property at no cost, to enable companies to evaluate it and put it to use quickly, with reduced risk.”

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