UK Government policy has devastated Scottish owned business

In a speech on Scotland and the World Economy in November 2003, Jack McConnell, the then Scottish First Minister, said, “For Scotland to be globally competitive, we need more companies that are global players. Internationally successful companies will be crucial to Scotland’s future economic growth. That means Scottish businesses need to be increasingly global and internationalist in their outlook”, (Imrie, 2006). Depressingly for Scotland this vision has not been realised and the reality has been quite the opposite. Since 2003 many of Scotland’s major companies have been swallowed up by international competitors who were obviously following Jack McConnell’s advice. To be fair to Mr McConnell, this loss of Scottish ownership had started long before 2003. When writing in 1992, McCrone identified many well-known names such as Distillers, Britoil, and Patons as casualties of the move of decision making outwith Scotland. As he stated “In terms of private capital, the tale is of virtually continuous decline in indigenous control. By the early 1990’s a mere five of the top fifty manufacturing companies [producing in Scotland] were controlled from Scotland”, (McCrone 1992). This trend was still being observed fifteen years later. “A much bigger proportion of the biggest Scottish-registered companies is now wholly owned by external companies … Together they make up over 40 per cent of the biggest nonfinancials”, (Baird et al, 2007). The roll-call of companies lost by Scotland over this period is quite shocking, General Accident, Scottish Widows, Scottish & Newcastle, Bells Whisky, Scottish Power, not to mention HBOS.

The big debate that has taken place over this predicament is whether indigenous ownership really matters. Many have argued that indigenous ownership does not matter and that creating jobs from overseas investment, in the form of takeovers if necessary, is what really counts. The need to create jobs for the people of Scotland is not disputed. However, the types of jobs that are created, and the standard of living that people have as a result of these jobs, does matter. There is clear evidence that maintaining the headquarters functions of major companies does have a positive impact on the economy and on the quality of employment. “The contribution of headquarters functions to the strength of regional economies is well-established. They tend to result in high proportions of inputs being sourced locally, especially in high-value purchases such as legal, accounting and other business services. In the absence of headquarters functions demand for these services is lower, with adverse consequences for economic performance and prospects. That means not only lower income but also the absence of the dynamic and innovative influences that arise from the presence of key decision-makers”, (Boyle, 2002).

It must be acknowledged that when operating in a global economy the loss of national ownership of companies is to be expected, but government policies that help to support and develop indigenous companies is also expected. Relatively dynamic regional economies continue to exist and provide the main motors for national growth in countries such as Germany, France and Italy, (Baird et al, 2007). These local economies are based on regionally-anchored networks of ownership and are sustained by long-term strategic synergies in manufacturing and services. Baird and his colleagues recognised that this type of economic model once thrived in Scotland, but no longer. They highlighted the irony of this situation by pointing out that in these other countries “these regional economies are still growing quite effectively in the environment of the twenty-first century”.

There is a clear argument that the economic policies adopted by UK Governments have had an adverse effect on the indigenous ownership of Scottish enterprise. In a report to the Scottish Parliament’s Business Growth inquiry in 2005, John Firn discussed the location and nature of ownership and suggested that “it may indeed have an impact on an area’s economic sustainability”. (Baird et al, 2007). Baird and his colleagues concluded by stating, “Political devolution has gone hand in hand with a sharply reduced ability to influence the economic basis of Scottish society. If there is to be a rounded debate on power in Scotland, this needs to be part of the agenda. Where economic power is held remains critical”, (ibid).