Going for growth: The potential is there for Scotland to diversify its exports

Scotland has a long history of exporting its goods and products worldwide, from wool and foodstuffs to six decades of experience in oil and gas. It has contributed to what was, until relatively recently, a strong and reasonably fast-growing UK economy. However, the export landscape is subject to change thanks to geopolitical shifts, economic conditions, regulatory changes, and broader market trends, and it’s not unreasonable to say businesses that export goods and services to foreign markets have had their fair share of challenges over the last two decades.  

The implications of Brexit, for example, have undeniably changed the export landscape, and businesses have responded to that.  

Snag Tights, an e-commerce hosiery company founded in Livingston in 2017 that sells comfortable garments in diverse sizes, was one of those companies forced to respond to the implications of Brexit. The product quickly resonated with customers not just in the UK but across Europe. 

Two years after beginning operations, Snag Tights had experienced significant growth and its sales had skyrocketed. Reportedly, it had sold two million pairs of tights over the period and served as a great example of a small business that was exporting on a large scale in its early years.  
But with no trade deal between the UK and the EU, it prompted many companies that sold products to European customers to begin operating in part from the European mainland. Uncertainties around potential European trading tariffs ahead of the UK formally leaving the EU were causing a great level of fear for businesses and countries like the Netherlands saw hundreds move operations there as a result. 

Snag Tights would have incurred a 12 per cent tariff from 1 January 2021 as its tights were made in Italy. It was reported at the time that this would have been “devasting” for the business. The lack of a trade deal forced it, like many other companies, to react to this shift in market conditions and begin distributing EU orders from Venlo, which brought in 30 jobs to the Dutch town.  

It’s an example of some of the challenges UK businesses have had to overcome in the last two decades and was an issue the Scottish Government’s 2019 publication ‘A Trading Nation’ recognised. The strategy committed to increasing Scottish exports and ensuring the government’s trade and investment agenda is front and centre of its economic growth strategy, and set out how it planned to support businesses in adapting to new trade arrangements and navigating the complexities arising from Brexit, alongside a lofty 10-year ambition for the country’s exports to make up 25 per cent of GDP by 2029. At that time, Scotland’s exports represented around 20 per cent of GDP.  

The plan highlighted figures from the Office of National Statistics which suggested that while only around three per cent of businesses at the time “actually exported products and services”, these businesses accounted for 60 per cent of UK annual productivity growth and were, on average, 70 per cent more productive than businesses that don’t export.   

The key objectives of the growth plan centred around focusing on traditional areas like food and drink, whilst placing importance on sector development of key industries such as renewable energy, technology, and life sciences as well as supporting businesses that already export and encouraging new companies into existing markets.  

Then trade minister Ivan McKee said at the time: “As Scotland takes on more tax raising powers, it’s critically important that we expand the business base and ensure that Scottish businesses fulfil their growth and productivity potential.” 

He placed an emphasis on creating “the right conditions” and “the right support” for Scottish companies to expand their exports to international markets and he argued that doing this would help to create a more balanced, sustainable economy bringing greater prosperity and jobs. 
Co-chair of the New Deal for Business Group Dr Poonam Malik says recently there has been “more focus” on consistency from the Scottish Government to create the right environment for businesses to grow their export capability.  

She says the policies and the national plan set out by the government are “the cornerstone” to improving the economy, but she acknowledges challenges that have arisen since the publication of Scotland’s export plan, pointing to Brexit, the pandemic, and the energy crisis. 

“There is no doubt businesses have faced tremendous challenges, and as a result we have made progress in certain areas, and not so much in others.  

“There have been internal business challenges around spending on research and development, which impacted productivity. That’s one aspect in which we have not performed well. We need to put more effort into that so we can make sure Scotland not only keeps pace with the global competition but also leads in certain markets.” 

Aside from Scotland’s strong traditional exports of food, drink, and oil, both Malik and the director of global trade at Scottish Enterprise, Jan Robertson, point to three areas in which they believe Scotland has the potential to grow its economy: renewable energy, technology, and life sciences.  

With massive potential in the renewable energy sector, Scotland is already a global expert and is aiming to become a key player in the export market, particularly green hydrogen and wind power, Robertson tells Holyrood. 

“Looking at Europe, there are countries like Germany, for example, that are looking to import green hydrogen and other countries looking at offshore wind.  

“And we’re well placed to supply that, with a policy environment that our renewable energy companies operate in, academic strength, and building on 60 years of oil and gas experience, we have so many transferable skills and knowledge and there’s a big demand for that around the world.” 

Scottish Enterprise, which is the national economic development agency, has a mission to create an internationally competitive green industry in Scotland by 2030, and “exports are a huge part of that”, Roberston says.  

Offshore wind and hydrogen are the two main areas of the plan; however, it also involves carbon capture and storage technologies, tidal, and low-carbon heating.  

“A lot of countries have put their stake in the ground, particularly in offshore wind, and we are seeing a huge demand for our services. We expect to see about 28 per cent growth in offshore wind over the next five years. There are huge opportunities for companies there. 

“We are seeing a lot of these opportunities in Europe initially and Asia. We hope the Americans will come on stream later, but with Trump’s administration we’re not quite sure what will happen. Although there are opportunities in the US for hydrogen, it’s definitely Europe first and foremost we’re thinking about, as well as Asia.” 

Malik points to Scotland’s technology and life sciences sectors as areas that will contribute to growing Scotland’s economy.  

She highlights the potential of computing science exports that are emerging predominately in Edinburgh, which is also home to a number of space data companies that are contributing to Scotland’s rapidly growing space sector. 

Scotland has seen an explosive expansion in this sector in the last few years and now has more than 180 space-related companies, employing over 8,000 people. The sector’s growth rate is one of the fastest in the UK and it has the potential to become Europe’s space capital, as Glasgow produces more satellites than any other European city, while space data companies are heavily involved in using satellite data for various applications, including environmental monitoring, disaster response, and urban planning.  

Scotland also has enormous export potential in medical technology and life sciences more generally, Malik says. She highlights that universities in Glasgow, Edinburgh, Aberdeen and Dundee all are making great strides in medical tech applications, cell therapy, and other aspects of life sciences, but warns elements are missing if Scotland is to reap the economic benefits.  

“What is missing is a presence of large industry players. Because they drive the uptake of innovation, they are the ones that are connected to the industry, and the ones with clients. The big players left Scotland in the 1980s and haven’t come back. Look at other areas like the financial sector, where Scottish Enterprise has been really successful. We now have Barclays and JP Morgan in Glasgow, the latter wanting to open offices in Edinburgh as well. Sumitomo coming to Scotland recently will have the same effect on the renewables sector. 

“We need that big type of player in life sciences here in Scotland to be an anchor in which jobs can be created, products can be utilised. We have the NHS but it’s a public sector body and has less of a drive to take innovative products and use them because of the obvious constraints it’s under. You look at the private sector and see it thriving; that is the way to the international market.” 

As Scotland looks to expand its exports, there is an emphasis on reaching growing markets, and this has been brought sharply into focus with Brexit and the threat of tariffs between the UK and the US as Donald Trump’s administration took office last week.  

As Robertson suggested, Scotland has been focused on exports to more traditional partners in the initial phase of its plan for increasing exports, but Poonam suggests “the big wins” will be found in emerging markets, particularly in India and other parts of Asia.  

“We need to not look at where the trend has been and look at where the world is going,” she tells Holyrood. 

“If Scotland wants to compete with the big established players, we need to be better than them. But if we go into the untapped markets there is so much potential. At a UK level, there have been efforts to make a free trade agreement with India. And that makes a lot of sense for Scotland – there is little language barrier between the two countries, for example.  

“Take the education sector, we have students coming here and naturally they become global ambassadors for Scotland, and we do a great job of attracting international students here. Utilising the Global Scots programme, whether that’s by heart or ambassadorship, creates access to new markets.” 

Malik points to the size of the Indian market and suggests that, with a rapidly growing middle class as well as 65 per cent of the population under the age of 25, this should be a key target for Scottish exporters. She also suggests that with the threat of potential tariffs from the US, the whisky sector may have less of a footprint in the US market in the coming and could turn towards selling more to its second largest customer, India.   

“Even if we could tap a small percentage of the market, it could be hugely important for the Scottish economy. And we are seeing movement here, the consul general of India is very keen on expanding collaboration between the two nations and in March he is setting up a bilateral meeting between Scottish and Indian leaders. 

“So far, our efforts on emerging markets have been low and we have focused our tight resources on traditional markets. But looking to the future, the big wins are going to come the emerging markets, where our companies haven’t sold that much historically.”