Scottish entrepreneurs stifled

Scotland, proud birthplace of inventors such as Logie Baird and Alexander Graham Bell, is suffering from a shortage of entrepreneurs. Government policy has payed too much attention to luring inward investors rather than growing job-creating small businesses, according to two papers presented at the centenary annual conference of the Scottish Economics Society yesterday.

Gavin McCrone, professor of economics at Edinburgh University, concluded that Scotland's record on growing indigenous small businesses was about the worst in the UK, itself not very entrepreneurial compared with other countries. Small firms create more jobs, and Professor McCrone said: "Stronger growth in this sector could have rectified many other weaknesses in the economy."

Scotland was left with an unemployment rate above the UK average, and pockets of male unemployment of up to 30 per cent where traditional industries had vanished. Although there had been astonishing success in attracting inward investment, it was only because of substantial emigration that Scottish unemployment was not much higher.

He noted that rates of small business formation are higher in regions where home ownership is most widespread, suggesting the only finance many entrepreneurs can raise is a second mortgage on their house.

Along with Professor Mike Danson from the University of Paisley, Professor McCrone criticised the bias towards encouraging inward investment. He argued that the Scottish economy had been made overdependent on the electronics industry, a notoriously volatile business where companies can be overwhelmed swiftly by new technologies or rival products.

Professor McCrone said: "It is time that the promotion of new business and small business growth was given the same emphasis and support that Locate in Scotland was set up to provide for inward investment."

Professor Danson pointed out that the 1,000 jobs created by Korean company Hyundai in Fife were each estimated to be costing the taxpayer an average of pounds 120,000, yet there was a shortage of funding for local enterprises.

Referring to the fact that 1996 had been the Year of the Entrepreneur in Scotland as part of the effort to boost what was seen as a dismal record in small business start-ups, he said: "We in Scotland are criticised for having a dependency culture, an unwillingness to create opportunities for ourselves."

But he argued that the difficulty lay in the unwillingness of the business development agencies and banks to fund proposals. This was where the "anti- enterprise Scots" were to be found.

It is encouraging, however, that Scotland, the birthplace of the study of political economy thanks to David Hume and Adam Smith, is not experiencing a shortage of economists. There were more than 70 at yesterday's conference.