Business is back in Scotland's blood

THIS afternoon I will leave Scotland after almost eight years reporting on the highs and lows of the business scene. And I am gutted to be going, because it seems to me that Scotland is a much more exciting place for enterprise than it was when I moved here in 2000.

It all started well enough. I was hired to report on the technology sector, which was booming at the time. Everything else was known as the "old economy" – and traditional business types like Sir Tom Hunter, Sir Tom Farmer, John Boyle and Sir Angus Grossart were busily piling into the new scene.

But within six months everything had started to unravel. Every day brought a fresh dotcom company failure or electronics plant shutting down. I lived by two lists: one of firms which were running out of money – names such as NMT, Atlantic Telecom and PPL Therapeutics; the other had a running total of jobs lost in the sector, which reached about 14,000.

The boss of one former star firm, Orbital Software, phoned up to harangue me for leading an article with the fact that his company had lost money. He was out of work within months.

I could hardly gloat. My wife lost her job at an internet company and then my newspaper at the time, Business a.m., went bust.

Looking back, though, it is amazing how little impact the tech downturn had on the rest of the economy. Electronics factory workers found other jobs. The decent hi-tech companies like video camera developer IndigoVision survived. Internet tycoons who failed, in many cases, picked themselves up and started again.

The small business sector kept going fine, and non-technology PLCs forged ahead with just a couple of exceptions – notably cashmere maker Dawson International, led by Paul Munn, who later re-appeared at Farepak. Bad luck. But compared to the devastating effects of pit closures and the loss of heavy industry in the 1980s, this was a breeze.

Now the country is looking at another potential slump. This time, the culprit is banking rather than technology. That is worrying, because the banks are rooted more deeply in Scotland. They also tend to pay better than electronics firms. But I believe Scotland can take the hit, because the economy is better prepared and more diverse than it was back in 2000.

Aberdeen's oil industry is booming, and crying out for graduates who often, until now, opted for a career in finance. Manufacturing has been quietly growing for years, and should benefit overall from a weaker pound which will make exports cheaper, even if the price of some materials goes up. Meanwhile, the whisky industry has not had it so good in decades.

Underlying those big sectors there is a raft of smaller companies – some niche players, such as the privately-owned distilleries, and others providing services to the public or the bigger firms.

Times will be tough for some. But one lesson from the tech downturn was that the best companies sought new markets when their business models collapsed. They included Intense, the laser company, which shifted out of telecoms and into defence and printing.

Such nimble footwork was rare decades ago, when smaller companies tended to make one type of product or service for one market, which they would live or die by. Innovation is the game now even at traditional firms like Walkers, the shortbread company that makes biscuits for Disney, and the iconic coat maker Mackintosh which is turning out some stunning high-fashion garments.

Individually, these firms are taking a risk. But the bigger risk for Scotland would be if everyone just stuck to what they knew. Thankfully something has changed for the better in the national psyche.

The public sector will help. Under chief executives Robert Crawford and then Jack Perry, Scottish Enterprise has set up a series of grants and investments to provide sums ranging from £10,000 to £5m to growing companies. I am not keen on squillions of pounds of taxpayers' cash being pumped into private companies when the markets are already awash with money. But if funding dries up as the credit crunch starts to bite, then schemes such as the Scottish Venture Fund, which invests alongside private institutions, will start to make a difference.

By supporting companies during the lean times, they should ensure that there are a few promising firms around when we start to look for the next generation of Scottish companies to float on the stock market.

Some complain that the public sector is too heavily involved in Scotland's economy already. But I cannot believe it is stronger than it was back in the 1970s, when the then massive coal industry, the steel industry, electricity and telecoms were all state owned.

That said, there needs to be some support from the private sector. And again it looks like things may be improving. Scotland boasts more business angel investors per head than the rest of the UK, and a culture of "putting something back" is starting to replace the old approach which was more like "get oot while ye can".

Then there is the political culture. After years of unenterprising enterprise ministers, culminating in the robot-like Nicol Stephen, Scotland has a political team which looks and sounds like it understands business.

Of course, Finance Secretary John Swinney cannot set interest rates and his sidekick Jim Mather cannot conjure up a defence which would ensure that Scottish & Newcastle stays in Edinburgh. But the pledge to slash business rates for thousands of small firms, delayed though it may be, along with a programme of relentless consultation, is the best start possible. And the positive vibe will hopefully encourage would-be entrepreneurs to leave their steady jobs and strike out alone.

They should be encouraged by the results of a Strathclyde University report, first revealed in Scotland on Sunday two years ago, which trashed the idea that most start-ups fail within a few years of being established. Sir Tom Hunter gave his backing to the study which showed that just one company in 300 goes bust within a year of being set up.

Strathclyde's Jonathan Levie dug deep into business failure statistics to reach his upbeat conclusions. But I suspect January will not be out before another lazy report blandly asserts that most companies go bust just after they are set up.

There will be a few challenges. Mather's plan to give Scottish Enterprise's local services to councils could lead to a patchwork of business support across the country. Alistair Darling's corporation tax reforms might take the edge off the start-up culture which has taken hold over the past eight years. But business is in Scotland's blood now in a way it has not been for half a century.