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Scottish Agenda: Scotland’s got talent – but can we retain it?

By Ian Fraser

Published: The Sunday Times

Date: April 26th, 2009

Boarded up Gap shop; image courtesy of Urban 75

Closed for business? image courtesy of Urban 75

Many of our native breed of economists have a tendency to be insular. They often obsess about minor changes in the performance of different sectors of the Scottish economy and have an infuriating habit of banging on about the Barnett formula.

Given their apparent inability to see the wood for the trees, one would not necessarily rely on such dismal scientists to identify the best path out of our current economic predicament.

And the situation is truly serious now. There has been talk of “green shoots” in the United States and vague talk of a stock market rebound in the UK, but these are probably false dawns. In reality the near-term outlook for the UK and Scottish economies remains grim.

Alistair Darling, in his second budget last week, predicted that the UK will bounce back towards the end of this year, achieving 1.5% growth in 2010 and 3.5% in 2011. The forecasts were greeted with widespread derision. If such a rebound were to occur, it would most likely be through the stoking up of another consumer-led boom and we don’t want another one of those, do we? Surely there must be more imaginative, sustainable and ingenious ways of restoring some equilibrium to our maxed-out economy?

As I was scouting for answers to these questions last week, I stumbled upon one Scottish-based economist with a more international perspective on the crisis.

His name is Gabriel Talmain and he was actually at a conference in Istanbul at the time I tracked him down. Originally from France, he landed in Glasgow two years ago to become professor of economics at Glasgow University.

Talmain has had a peripatetic career, which has included stints at the IMF in New York and the European Central Bank.

When asked which sectors might be relied up to pull the economy out of the mire — factoring in the near-collapse of Scotland’s two leading banks and the likelihood that the public sector will be cut down to size — Talmain said he believes that tourism is one of our best hopes.

He also said he believes we should make more of higher and further education and the in-shoring of business services. Overall he believes these sectors offer the best prospects for short-term job creation.

He was more sceptical about the possibility that either renewable energy or life sciences would restore us to prosperity — even though both are seen as priority sectors by Alex Salmond’s government. “Both of those sectors are more of a gamble,” said the professor.

What was reassuring, however, was that Talmain said there are only two things that a country needs to achieve long-term economic success. These, he said, are “human capital” and “good governance, which includes having a low level of corruption”.

Even though Scotland has been hit by the implosion of its two leading banks, Talmain believes that we still have these two ingredients. He said: “If the talent can be retained, Scotland should be all right.”

So one priority for the government must be to ensure that talented Scots don’t jump ship. Sadly, however, Darling’s cynical imposition of a 50% tax rate for those earning more than £150,000 is going to force talented Scots into the lifeboats.

Stop the bank-bashing

Frank Blin, chairman of the accountants Price Waterhouse Coopers, was also thinking positively at the Scotland plc awards last Wednesday. Introducing awards that were won by, among others, Tom Cross of Dana Petroleum, Robert Wiseman Dairies, Aggreko, Craneware, Weir Group and ProStrakan, Blin said: “If we are to rebuild trust, the constant bank bashing and media vilification has to stop.

“Huge mistakes were made but we need to start rebuilding trust in our banks . . . carping and handwringing will not help restore confidence or the damage done to our international reputation.”

Blin said the overall strength of Scotland lies in the “richness and diversity of our economy . . . it will take a lot more than a banking crisis to subdue the creativity, passion and entrepreneurship of this country.”

There were plenty of bow-tie wearing business people drinking to that in the Glasgow Hilton last week.

Widows piqued

When Sir Brian Pitman, the former chairman of Lloyds TSB, paid £7 billion to acquire Scottish Widows a decade ago, one of his main motivations was the strength of its brand — epitomised on television by the famous caped lady.

It therefore came as a surprise when I learnt that Lloyds Banking Group, now 65% owned by the taxpayer, appears to have internally “downgraded” the 200-year-old insurance brand to “tier 2” and put it on the same footing as more mundane English peers such as Cheltenham & Gloucester. Sources have suggested this may be a consequence of how Scottish finance is now perceived south of the border — especially by London cabbies.

Given that Lloyds recently hired the investment banking arm of Deutsche Bank to examine all its insurance assets with a view to making some disposals, it does make one wonder whether this might signal the end of a beautiful relationship.

To read this article on Times Online click here

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1 Comment for “Scottish Agenda: Scotland’s got talent – but can we retain it?”

  1. […] the 68-year-old chairman of Lloyds TSB. But James Johnson, banking analyst at Credit Lyonnais, …Ian Fraser – Business and Financial Journalist Ian Fraser …Welcome to ianfraser.org, the website of award-winning journalist Ian Fraser. I write on business, […]

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