Meeting of the Parliament 08 September 2015
There is a range of surveys on business confidence. One of the surveys that I look at most closely is the Bank of Scotland purchasing managers index, which has shown a sustained level of growing confidence in the Scottish economy among the business community. I look so closely at the Bank of Scotland PMI because, in my experience, it has come closest to predicting some of the economic challenges and difficulties that we have had to experience. I therefore think that what the pattern of the index reflects in terms of economic confidence is worth listening to.
The foundations around foreign direct investment have been well expressed, but we have also seen business research and development spending in Scotland increase in real terms by 29 per cent over the past six years. Our business base is also growing, with the number of registered businesses in Scotland growing by 10 per cent since 2007 to an all-time record level. However, we know that there are areas in which we can do better and improve performance. In particular, we need to address structural challenges around productivity in order to ensure that skilled and well-paid job opportunities continue to be created within Scotland.
Productivity has been a consistent theme in our approach to the economy since this Government came to office and it is an area in which we have enjoyed some success and made significant progress. Since 2007, the productivity gap between Scotland and the United Kingdom has been significantly reduced, but we still lag well behind countries such as Sweden, Germany and France. At the same time, many economically successful nations of similar size to Scotland have achieved greater levels of equality and better social outcomes.
Although income inequality in Scotland, as measured by the Gini coefficient, is lower than that in the UK as a whole, it remains higher than that in many strong-performing northern European countries. We must do more to increase competitiveness and ensure that we also achieve a fairer society in which the proceeds of growth are more evenly distributed. Those mutually reinforcing priorities are central to our updated economic strategy, which reaffirms our commitment to boosting productivity through investment, innovation and internationalisation.
Our strategy also sets out an approach to the economy that is based on partnership and on a commitment to tackling inequality, not just as an important priority in itself but as a means of boosting productivity in the economy. There is a growing evidence base that delivering sustainable growth and addressing long-standing inequalities are objectives that reinforce, rather than compete with, each other. That has been supported by recent work by the World Bank, the International Monetary Fund and the Organisation for Economic Co-operation and Development. For example, OECD analysis found that rising income inequality in the UK reduced GDP per capita growth by 9 percentage points between 1990 and 2010.