Embargoed until 0001 hours Wed 23 Feb 2011
Scotland could add £12bn to its economy, create 20,000 additional high value jobs and create 1,000 new businesses over the next five years by embracing digital technologies according to a report published today, “Enabling a Digital Scotland” (Wednesday 23 Feb 2011) by ScotlandIS, the trade body for Scotland’s ICT industry.
These economic benefits could be achieved by implementing the recommendations in the ScotlandIS report and would position Scotland amongst the best digital economies. However ScotlandIS warns that if action is not taken urgently, Scotland will lag even further behind other economies, including the rest of the UK with disastrous consequences.
The ICT industry contributes £3.4bn to GVA, employs 108,000 people, generates significant and growing export earnings and creates highly skilled high value jobs. ICT is also the enabler of significant productivity improvements and underpins innovation and competitiveness across the Scottish economy.
Given the current economic climate, ScotlandIS is calling for the Government to implement a range of initiatives to improve Scotland’s economic performance and competitiveness. These include the appointment of a Digital Champion, providing and facilitating export finance to SMEs and introducing a tax incentive scheme. ScotlandIS is also calling for the installation of a direct telecoms connection to mainland Europe. This connection would provide resilience to Scotland’s national communications network which currently is over-reliant on London for connectivity to Europe and the rest of the world.
David Cairns, Chairman of ScotlandIS said:
“At a time when economic hopes are pinned on private sector expansion and export-led recovery to counterbalance the reduction in public sector spending and employment, Scotland’s ICT industry holds the key to drive growth, improve productivity and generate export income. But if we carry on as we are, we will be left in the dark ages.
“Our vision is for Scotland to rank amongst the best of global economies, where the majority of citizens are skilled in using digital technologies, where public and private sector organisations fuel growth and improve productivity by understanding and exploiting technology. As well as helping to combat social and geographic exclusion, we would create a digitally skilled nation which would add billions of pounds to our economy every year.”
“To achieve this vision urgent action is required. Many other comparable countries are leapfrogging us. Indeed other parts of the UK have jumped ahead of Scotland. In turn these tech savvy countries are enjoying greater economic benefits, including productivity gains, improved competitiveness and a greater ability to export through increased ecommerce.
“This is very worrying for Scotland’s economy. Delivering the required strategies to protect and grow our economy needs a major drive by both the public and private sectors and we are calling for action now.”
The UK is now the world’s leading economy for e-commerce. According to the Office for National Statistics (ONS) the value of e-commerce sales by non- financial businesses was £408.3bn in 2009, an increase of 24.9 per cent on 2008. A report last year by Boston Consulting Group identified that UK businesses are using the internet to expand their sales overseas. The UK now a net exporter of e-commerce goods and services, exporting £2.80 for every £1 imported. According to Boston Consulting, this is the opposite of the trend seen in the offline economy, which exports 90p for every £1 imported.
However by any measure Scotland is underperforming in e-commerce in relation to the rest of the UK. Despite the opportunity ecommerce offers to level the geographic playing field, Scotland is under-represented and this needs to change, says the report.
Some Scottish businesses, from Barrhead Travel to Donald Campbell Meats, GuitarGuitar to Toolstop, have transformed their performance by exploiting e-commerce. By encouraging more businesses like these, the opportunity exists to dramatically increase Scotland’s share of this lucrative market, giving businesses a competitive advantage and generating an additional £4bn in ‘export’ income.
Scotland-wide strategy for ICT
According to the report, the Scottish economy could also benefit from an additional £5bn in productivity improvements through smarter use of digital technologies. This is of particular relevance given the recent public sector spending cuts.
In its earlier findings, the ICT Forum for Scotland proposed the Scottish Government should lead a partnership of stakeholders to create a culture change, such that Scotland’s citizens, businesses and public sector organisations see smart exploitation of ICT as being a critical enabler of economic success and a valuable mechanism for improving their lives.
The appointment of a Digital Champion to drive through a major programme of change across all areas of Scotland, will enable concerted action.
The ICT sector in Scotland contributes 5% of GVA, creates high skilled jobs and generates significant export earnings. However compared with other countries, the speed of growth is sub-optimal and more needs to be done to accelerate this important sector, according to ScotlandIS.
Recommendations to support this include a more supportive tax regime for technology businesses and world class connectivity. The UK Government target for broadband is 2MB per second by 2015. In contrast, Finland and Sweden are committed to 50 times that amount at 100MB per second. The benefits of implementing these recommendations include 20,000 additional jobs and a doubling of export income to £3bn.
Donald MacRae, Chief Economist at Bank of Scotland commented:
“Scotland needs to be connected for growth. We need a modern digital communications infrastructure available to all our communities as much as we need schools, roads and airports. We cannot change our geographical location on the edges of Europe but we can ensure we are at the heart of a global digital communications network. Competing successfully in the economy of the future means having access to the tools and the infrastructure of tomorrow. ICT is crucial to securing Scotland’s share of the post-recession economy.”
 Based on £5bn productivity improvements, £4bn ecommerce exports and £3bn ICT exports