Q&A: Finance Secretary Derek Mackay on future growth in the digital economy

Finance secretary Derek Mackay - Image credit: David Anderson/Holyrood

What does Scotland have that gives it the potential to be a significant digital hub?

Firstly, our people. We have a sector that employs over 100,000 across a range of digital roles. The majority of them are highly qualified and in 2017 we saw an increase of eight per cent in the number of students who enrolled at higher education institutions to study computing science.

Secondly, the seeds have been sown, with Edinburgh in particular a leading hub in this field already, with such companies as Skyscanner, Fanduel, Codebase and our digital academy CodeClan all located in a thriving scene within the city.

Moreover, the sector specialises in a variety of areas from research, innovation, design and programming to implementation, delivery and management and it is an important driver of innovation and inclusive growth.

Many tech businesses in Scotland are small start-ups. How do you support them to scale up?

The Scottish Government acknowledges that scaling companies is a critical part of Scotland’s economy, and it is committed to empowering businesses of all sizes and sectors to scale. Scotland CAN DO articulates our vision to be a world-leading entrepreneurial and innovative nation. This shared platform allows us to draw on the collective expertise of our partners and provide world-class support for scaling businesses.

Furthermore, as part of our ongoing Enterprise and Skills Review, we are committed to working with partners to ensure that the CAN DO Scale movement is firmly established and aligned with wider work. Other initiatives which support businesses to scale include the Unlocking Ambition Challenge and the Scottish EDGE.

Besides fostering ambition and growth among businesses, the Scottish Government is also committed to ensuring that businesses can access the finance necessary to scale up. Through the Scottish Growth Scheme, we are utilising European funding to provide new and high growth technology companies with access to early-stage equity investment, working alongside the Scottish Investment Bank and private sector investors. 

How do we ensure that we do not lose good people and companies from the digital sector in Scotland to other countries?

By continuing to invest in the digital infrastructure to ensure that Scotland remains the best place in which to do business from and demonstrate that internationally renowned companies can be run from Scotland.

However, Brexit raises particular concerns. The importance of digital skills to the Scottish economy cannot be overstated. The supply of technical skills and digital expertise, a challenge in normal circumstances, is likely to be exacerbated by EU exit. The digital tech external market is extremely competitive, and this may become more difficult should the supply of EU nationals be restricted. It is therefore imperative that our business leaders continue to have their voices heard on the matters that concern them – and Brexit does concern this thriving sector – and I would urge that they do so.

What is needed to make Scotland a leading international centre for fintech?

Scotland is already a leading international centre for fintech. We’ve been ranked at number 15 in the world – and of course, we have the ambition and the capacity to go further. We are building on Scotland’s global reputation for banking, asset management and insurance, underpinned by academic and research expertise.

Scotland is an important location for many multinationals, including JP Morgan, HSBC, Morgan Stanley, NCR, Ingenico and Avaloq. Our universities are already world leaders in many of the technologies driving this revolution, including artificial intelligence, data analytics and blockchain. Moreover, they are also providing a stream of graduates with world-class technical skills in these crucial areas.

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FinTech Scotland was launched last year with £250,000 Scottish Government and Scottish Enterprise funding combined with financial and practical support from the University of Edinburgh and the support of strategic partners from across the sector. This exciting, collaborative initiative sees us work with industry and academic partners to unlock the economic benefits of a successful fintech sector.

In-work training in digital skills has been repeatedly identified as an area that needs to be addressed for economic growth. How can that be resolved?

By continued support of the service provided by Skills Development Scotland and also by listening to what the sector needs. The recent launch of the Digital Development Loan was an area whereby we spoke to the sector, listened to what they required and tailored our support accordingly.

We’ve also been backing CodeClan and it has been a real success story, with its graduates continually being hired by the private sector after their 16-week course.

Within the Scottish Government, we also acknowledge the importance of in-work training and the impact this has on developing and expanding digital skills. Recent actions have ensured Scottish public sector staff have access to coherent learning and development programmes that cover essential and in-demand digital capabilities.

In your budget speech, you predicted Scotland will be “at the forefront of the digital revolution”. Are we putting too much faith in digital to turn Scotland’s economy around?

No, I don’t think so. Of course, there is much more to Scotland’s economy than digital, but it does have an impact on everything that we now do and, whether we like it or not, that impact is only going to increase. Digital has transformed the way we live and it is essential that we explore every opportunity we have at our disposal to help us stay ahead of the game.

The work we are doing with regards to R100, to the reforming of public services, CivTech and the data capture all play a part in that. However, we are also supporting our SME base through Digital Boost and the Digital Development Loan and through tailored support by Scottish Enterprise and HIE, as well as through Skills Development Scotland, where we are furthering our quest to have digital skills embedded from early years right through to retraining in the workplace.

We want to be prepared for what we know is coming. The current value to the economy is over £5.2 billion per annum. The GVA per employee is some 60 per cent higher than the economy as a whole, as is productivity, and the sector is expected to be the fastest growing by 2024. 

A report commissioned by Scottish Futures Trust found that becoming a world leader in digitalisation could increase GDP in Scotland by £13 billion per annum. So, focusing on digital seems not just a smart thing to do but the correct and necessary thing to do.

The Scottish Government’s CivTech programme has been praised for its innovative approach to procurement, but how do you scale up that approach across the public sector?

The CivTech programme deliberately started small to test new ways of working in its approach to procurement and use of small companies to develop innovative solutions to public sector challenges.

Having two successful cohorts under its belt, with 16 out of 18 companies still operational and challenge sponsors benefitting – for example, Stirling Council has made a cost-avoidance of £1.5 million – the question turns to scale. The CivTech team, along with its cross-sector advisory board chaired by Colin Cook, are working on plans for this.

On a practical level, this will explore different locations, increasing the number of challenges, increasing the number of cycles per year. On a cultural level, our intrapreneurship programme helps public servants adopt an entrepreneurial mindset to spot opportunities to create ‘public value’ in the same way an entrepreneur seeks to create private value.

On a pan-public sector level, it is important that the lessons learnt in innovative environments around procurement methodologies, adoption of innovative technologies are not confined to ‘innovation programmes’. These lessons are applicable to many conventional ways of working and our public sector must be receptive to these.

In European countries such as Estonia, patients can access and update their own medical records via a mobile device. Can that happen in Scotland?

Of course it can. It is something I/we definitely want to see in Scotland, but we want it to go further than just a traditional medical record. In the recently published Digital Health and Care Strategy, which was a joint endeavour with local government, we made it clear that the primary focus of the strategy is on providing citizens access to all the information that they need to improve their health and wellbeing. This includes their current health and social care information, as well as data from any personal monitoring devices that they are using where there is a benefit to that data being part of their core record.

Work on this is well underway, with the West of Scotland health boards recently completing a proof of concept examining the technical, operational and legal requirements for a patient portal.

There are great promises for better use of public and citizen data in the digital strategy. What progress has been made on making that a reality?

Data-driven innovation is becoming more widespread in Scotland.

For example, people’s health and social care history is being used to predict who is likely to be at risk of a delayed discharge from hospital, with social services being put in place sooner for those most at risk, saving time, money and lives.

We are training up many more data scientists: 155 MSc data science students in 2018-19, with over 1,000 Scottish workers being trained in data analytics and securing value from data.

We also know that making open data available can drive innovation. So, we have now released over 200 datasets in open formats covering education, health, work, justice, attitudes and experiences of people in Scotland, whilst preserving people’s anonymity.