MSP polling: Has Humza Yousaf's business reset paid off?

When Humza Yousaf replaced Nicola Sturgeon as first minister last March he pledged to reset the government’s relationship with business. His administration would, he said, hold “urgent discussions” on a New Deal for Business, the aim being to determine “how government can better support our businesses and communities using the policy levers we […] have”.

He moved fast, too, with his then economy secretary Neil Gray swiftly assembling a panel with whom to have those urgent discussions. Scottish Financial Enterprise chief executive Sandy Begbie, Fraser of Allander director Mairi Spowage and Tata Consultancy Services Scotland head Gopalan Rajagopalan were among those taking part. By October they had come up with a plan, the main thrust of which was to ensure that ministers work collaboratively with industry. An “open and honest dialogue between business and government” would, Gray said at the time, “provide certainty and consistency for business across Scotland”.

It does not appear to be going well, though. In exclusive polling carried out for Holyrood by Total Politics Research, the majority of MSPs who responded said the Scottish Government’s relationship with businesses in their area is poor. A total of 39 parliamentarians took part in the survey, which was conducted in the first two weeks of April. When asked to rate the government’s relationship with local businesses, 10 per cent said it was very poor while just five per cent said it was excellent. Though 15 per cent said they felt the relationship was acceptable, a far greater proportion viewed it negatively than positively. Indeed, while 26 per cent of respondents rated the relationship between slightly good and excellent, more than double that – 59 per cent – said it ranged from very poor to slightly poor.

The vast majority of respondents – 87 per cent – said they meet with businesses in their constituency at least every few weeks and an almost equal proportion – 85 per cent – said they were concerned about those businesses’ future sustainability. 

The findings chime with the fears expressed by business leaders earlier this year. Back in January, Scottish Licensed Trade Association managing director Colin Wilkinson told Holyrood that pubs were closing across the country at an alarming rate, in part because of regulations imposed by the Scottish Government.

“What we’re seeing now is pubs closing at twice the rate of those in England,” he said. “Since Covid, about 170 pubs in Scotland have closed for good – more than that have closed but some have been taken on by someone else. A lot of that is to do with the Scottish Government not recognising the importance of the licensed hospitality trade because it didn’t get the 75 per cent business rates relief that pubs in England and Wales get. We didn’t have that last year but we did the year before and that really helped a lot of businesses get through.”

Similarly, Jamie Mackie, policy and public affairs officer at the Scottish Grocers’ Federation, said the retail sector had been hit by various external challenges the government had no control over – “there’s been Brexit, energy costs and the war in Ukraine, inflation, high interest rates” – but that their impact had been exacerbated because of “a doubling down on policies like business rates”. Despite the promises made in the New Deal for Business, there was a sense that the government was still not listening to business, Mackie said, with plans to introduce laws on everything from how foods high in salt, sugar and fat are promoted to restrictions on vaping and tobacco having a knock-on – but broadly ignored – detrimental impact on retailers.

Though the SNP and its government partners the Scottish Greens are often perceived to be anti-growth, in his introductory speech to parliament Yousaf begged to differ. He highlighted the importance of economic growth to the wellbeing of the general public as well as the important role businesses will necessarily play in driving that growth. Noting that he is “the proud son of a business owner”, he added: “Businesses, and small businesses in particular, are the backbone of our economy and government support for business is essential for the delivery of a wellbeing economy. We need businesses to grow to create the good, well-paying jobs that will enable us to reinvest in initiatives to eradicate poverty. We also rely on businesses – and their workers – to pay the taxes that our public services rely on.”

It is a point that all MSPs appear to agree on. When asked in the Holyrood survey how important they believe economic growth is to Scotland’s future, three-quarters of respondents said it was very important. Indeed, having been asked to rate their response on a scale of one (not at all important) to 10 (very important), all respondents chose a number of six or more.
Yet they indicated that the government needs to do more to help drive that growth. A total of 83 per cent of respondents agreed with the statement that ‘in order to help them thrive and create the jobs the economy needs, businesses should be given government assistance, for example through tax breaks, or grants’ – 29 per cent agreeing strongly and 54 per cent agreeing somewhat. 

Similarly, when looking at the energy sector in particular, a majority of respondents said it should not be penalised through punitive taxes. Windfall taxes look to be one of the key battle areas of the looming general election campaign, with the Tories and Labour committed to raising the amount of tax charged on the profits made by energy companies while the SNP has said it is opposed to the move. Just over a quarter of those responding to the survey (26 per cent) strongly agreed that the sector should not face punitive taxes while 37 per cent somewhat agreed, 14 per cent had no opinion, a further 14 per cent somewhat disagreed and nine per cent strongly disagreed.

Although the windfall tax is set at the UK level, it is something energy companies, led by industry body OEUK, have been keen to get support on at a Scottish level. Yet the Scottish Government has not proved adept at engaging with energy businesses. As revealed by Holyrood earlier this year, all five of the leadership groups that underpin the Scottish Government’s just transition strategy were left without ministerial input after Gray was moved from the energy and economy brief to health during Yousaf’s February cabinet reshuffle. That was prompted by the decision of Michael Matheson – who had for several months been embroiled in scandal over his misuse of a parliamentary iPad – to stand down from the health role, and it has left the government exposed on business. Having begun to win the trust of the sector Gray, who, the ministerial engagements record shows, was the busiest member of government while covering the economy, was replaced by Mairi McAllan, who is due to go on maternity leave in the summer.

For Fergus Ewing, a former business minister who regularly speaks out against the government, part of the problem around the perception that the Holyrood administration is disinterested in business stems from the fact that MSPs are rarely given the chance to debate the sector “and how we can help it”.

“We debate gender reform and no doubt conversion therapy until the early hours of the morning but don’t have enough time to debate and consider seriously the real issues facing various parts of our economy,” he said. “This trend of zero focus on the businesses that make up our economy started under the last government and has accelerated under this one. We used to have debates on oil and gas, finance and investment, life sciences and biotech, whisky and so forth. We used to want them to grow and succeed. Does the Scottish Government want this anymore? Why is business a no-go area? Do we encourage entrepreneurialism? It certainly doesn’t feel like it.

“We have fairly perfunctory and superficial debates, occasionally on tourism, agriculture or very widely renewable energy, but we never really even try to grapple with the very real problems each sector faces, nor indeed the marvellous opportunities that exist.”

According to the MSP survey, respondents – 80 per cent of whom said either they or a family member had run a business – are clear on what those “very real problems” are. Achieving net zero – one of the government’s key priorities – is one. 

In addition to its National Strategy for Economic Transformation (NSET), which was drawn up by former finance secretary Kate Forbes, the government is looking to finalise its Draft Energy Strategy and Just Transition Plan by this summer. The former is focused on driving economic growth and the latter on, according to Yousaf, “capitalising on the enormous opportunities offered by becoming a net-zero economy”. Essentially, the government wants to grow the economy but in a way that helps it achieve its net zero targets. That means the energy sector will be required to transition away from fossil fuels to cleaner energies while all businesses will be expected to contribute to the overall lowering of emissions.

Survey respondents indicated that this is going to require significant input from the businesses in their local areas. Three-quarters (74 per cent) said the move to a net zero economy would have a big impact on local businesses with a further quarter (23 per cent) saying it would have some impact. None thought there would be no impact at all. At the same time, the vast majority – 94 per cent – said that businesses would require more government support to help them reach net zero.

In terms of other challenges, by far the biggest issue MSPs are hearing about from businesses in their constituencies is the hiring and retention of staff. The bulk of the jobs in their areas are in the health and social care (86 per cent of respondents said this was a top-employing sector), hotels and restaurants (73 per cent), wholesale and retail (59 per cent), and construction (54 per cent) sectors, all of which have faced significant recruitment issues since Brexit and the pandemic (three-quarters of survey respondents said the pandemic recovery had been too slow in their local area). For 84 per cent of respondents, hiring was the biggest challenge facing businesses, with 43 per cent saying it was inflation, 38 per cent saying the cost-of-living crisis and 35 per cent saying supply-chain issues.

Tim Eagle, who became a regional MSP for the Highlands and Islands earlier this year after Donald Cameron stood down to join the Scotland Office, said the issue of recruitment is acute in the area he represents. “Professionals are very difficult to recruit, as are health and social care carers, which I know is a Scotland-wide issue,” he said.

The Scottish Government has attempted to take action to address the skills gap, commissioning former Scotland Food and Drink chief executive James Withers to lead an independent review into Scotland’s skills and training system. His report – Fit for the Future – was published last summer and found that the current skills system is failing to deliver because it is so fragmented there is no clear vision of what the gaps are, who should fill them, or how they should be trained to do that. He recommended a major shake-up of the way people are prepared to enter the jobs market, noting that he “does not believe that the current landscape is working to best effect for those who use and rely on its services”.

The government is yet to give its full response to the report, whose recommendations included moving responsibility for national skills planning away from Skills Development Scotland and the Scottish Funding Council into the Scottish Government; establishing a new funding body that has responsibility for all post-school learning and training funding; and “substantively” reforming Skills Development Scotland to focus on the development of a national careers service that will “embed careers advice and education within communities, educational settings and workplaces across Scotland”. How that response tailors with NSET and the Draft Energy Strategy and Just Transition Plan – and how the government engages with businesses to ensure all three work for them – will determine the success or otherwise of Yousaf’s reset.