Today was the inaugural Glasgow Business Summit at the University of Strathclyde’s Technology and Innovation Centre. Organised by students, it focused on change, challenges and opportunities for Glasgow, Scotland and the global economy. It gathered a very diverse audience of students, graduates and business leaders as well as speakers from the public sector like Glasgow City Council to speakers from the private sector including EY, PwC and Barclays. Also scholars from the Strathclyde Business School and the Fraser of Allander Institute were invited to speak.
In the morning, the Executive Dean of our Business School, David Hillier, opened the Summit with the observation that Scotland is experiencing exiting times after the Brexit referendum. He argued that adaption and exploitation of opportunities are now key to success; hence the focus on ‘Change, Challenges, Opportunities’ for this year’s Business Summit. Another important point of Hillier’s opening was how to actually make the Summit a personal success. For most of the students in the audience – including me – it was our very first business conference. So Hillier gave us three overarching rules for the day:
- Meet someone new,
- Come up with a new idea and
- Learn something new.
With that piece of advice in mind, we started into the first panel discussion. Under the headline ‘Navigating the complexities: What are the realities behind building successful businesses?’ Jim McColl (OBE, Founder and CEO, Clyde Blowers Capital) and Russel Dalgleish (Managing Partner, Exolta Capital Partners) led an inspirational discussion about their journeys and how they have succeeded in growing successful businesses. Especially Jim McColl, who did an undergraduate Business degree at Strathclyde, was interesting to listen to. One could see his entrepreneurial mind set throughout the discussion. He has this particular attitude to never views things as a failure and he, in fact, does not accept failure. He has a clear goal in mind and is a very focused personality. For example, he talked about that he meditates and it seems that this has also helped him to have the right balance between knowing what he can do and being aware of the risks. He also stressed that his ‘stubborn value system’ has been key for his success. Having both a goal and integrity has helped him to progress to where he is now. He also said that by having a clear vision and real belief while working hard, he does not get constrained. Rather he sets an ambitious target and then asks ‘What do I need to do to get that?’. While I personally am not striving for a career similar to his, I was very much inspired by his drive and appetite for action. He serves as a role model for sticking to your principles, always being a person of integrity and believing in yourself and your vision.
Besides the first panel discussion, I was most interested in the talk by Dr. Graeme Roy just before lunchtime. Being the Director of the Fraser of Allander Institute, which is affiliated with the Economics Department at Strathclyde, he talked about the economic implications of Brexit. While his speech was only half an hour, he still managed to give the audience a broad overview of the state of Scotland’s economy with the risks, challenges and opportunities in the short and long term. He began with the four short term considerations for Scotland:
- Economic confidence
- Policy clarity
- Financial Market Volatility
- Pound Sterling Depreciation
First, he stressed that Scotland currently experiences large swings in confidence and there is heightened uncertainty, both of which have considerable effects on the economy (e.g. exchange rates). In terms of policy clarity, it is the discussion about the economic relationship with the EU and whether Scotland remains part of the customs union with a single common market. Financial market volatility is also important to consider as we see strong reactions of financial markets to news at the moment. Lastly, the sharp depreciation in Pound Sterling since the Brexit vote poses both opportunities (e.g. for exports) as well as challenges (e.g. for imports).
Dr. Graeme Roy continued by highlighting the importance of the EU for Scotland. For example, he argued that 40 percent of the country’s international exports go to the rest of the EU. What is more, 180,000 EU Nationals are living in Scotland today and EU firms operating in Scotland employ around 115,000 people here. However, despite the strong ties with the EU, the UK is just as important with 60 percent of Scotland’s total exports going to the rest of the UK. Hence one could say that Scotland faces a very difficult dilemma, being caught in the middle; post-Brexit UK on the one hand and the EU on the other hand.
Roy also looked at Scotland’s economic performance and the institute’s forecasts for 2017 and 2018. First, he showed concerns about Scotland’s recent slowdown in GDP growth. Scotland has been growing at a lower rate, much of it due to the reduced profitability of North Sea Oil, and the last figures of the institute actually suggest that the Scottish economy is stagnating now. Hence with a rather fragile and stagnating economy the Brexit referendum has caused more trouble than it would have with a very strong economy in the back. This is why the institute’s core forecast is slow GDP growth of less than 1 percent for the next two years together with a very uncertain outlook. Roy also stressed that the full economic implications of Brexit are not known yet and will probably not be known not before January 2017.
Having talked about the short and medium term considerations, Roy proceeded to the economic considerations in the long term. These are fivefold:
- Trading relationships
- International investment
- Population and labour market
- Fiscal contributions
- Dynamic effects
Firstly, Scotland will need to settle its trading relationships, including EU and non-EU. Second, it will need to attract international investment. This includes negotiating over the access to EU capital markets. Third, there are important demographic and migration trends to consider as well as regulation. Also fiscal contributions need to be settled and lastly dynamic effects like productivity and competition as well as innovation will be important long term considerations.
In the last part Roy presented the modelling results for 4 scenarios of Scotland post-Brexit. That is: (1) the Norway/ EEA Model, (2) the Swiss Model, (3) the Tree Trade Area, and (4) the WTO Membership. Of all four, the Norway Model would be the most integrated option. However, while there would be no tariffs on Scottish goods and services, Scotland would not be able to shape EU regulation and not be part of the customs union. Meanwhile it would need to retain the EU’s four freedoms, including the freedom of movement of people. The Swiss Model would be less integrated, followed by the free trade area. In the fourth scenario trade deals would only be based on the WTO membership. Overall, for all scenarios the institute found the adverse impact of Brexit to be significant for the Scottish economy and its magnitude crucially depends on the exact deal. For example, in the Norway Model the optimistic forecast is that GDP will be 2 percent lower than without Brexit. In the pessimistic forecast it is 3.1 percent. The negative impact is consistent even in the institute’s optimistic scenarios and there might potentially be dynamic effects. With this results of the institute in mind, Dr. Graeme Roy therefore stressed that the response of policy makers is crucial. Their forecasts are based on the ‘all else being equal’ assumption. It is now the policy makers’ turn to see what Scotland can do to counter that. Thereby Roy pointed towards the need for new opportunities. This includes building links to other countries and markets and also focusing on UK’s top class product, that is the universities and higher education.
In sum, while Roy stressed the challenges of Brexit and its adverse impact he sees room for new opportunities. I must say that this talk was my personal highlight of the day because it exemplified the day-to-day business of an economist at an economic research institute and how their work is meaningful for providing insights for policy makers and society to steer the economy. It was also very interesting to be guided through the institute’s methodology: clearly stating what we know and what we don’t know; what the assumptions are for presented scenarios and how precise the estimates of the presented forecasts are.
After a short lunch break, we headed back to the conference room for the discussion ‘Challenges and opportunities in global markets: A changing landscape for businesses?’ which was also chaired by Dr. Graeme Roy. The discussion focused on global markets moving into the digital age with both new challenges and opportunities for businesses. Challenges discussed were weak demand, particularly in Europe, after the financial crisis and the heightened uncertainty after Brexit. Other challenges are debt, the banking sector and the decline in support for free trade such as the opposition to TTIP. On the other hand, there are opportunities. The depreciation of the Pound Sterling, for example, has boosted price competitiveness. Also the digital age is boosting e-commerce, allowing for micro-multinationals, that is new start-ups that are global and digital. The discussion finished by stressing the importance of inclusive growth and the increasing demand for the ‘social good’. In sum, this panel discussion put Dr. Graeme Roy’s earlier speech on the Scottish economy into a broader perspective and also looked in more detail at what might be the solutions for stimulating the Scottish economy in the near term, i.e. the need for a new global market orientation and for Glasgow, in particular, becoming a major player in financial services and media. Digital services and platforms are also going to be key for staying innovative and having the ability to disrupt.
Overall the day was a very inspirational experience and to come back to David Hillier’s three rules for making the Summit my personal success; I think that I would satisfy all of them. It was a great day and I am sure the Business Summit will become even more popular over the next years.