Has the SNP turned the tide with the business community?

Kate Forbes has been making all the right noises since retaking her place in cabinet as both deputy first minister and cabinet secretary for the economy. Though distaste about her religious views saw her banished from government last year, First Minister John Swinney welcomed her back into the fold when he succeeded Humza Yousaf in the top job in May. The pair have been waxing lyrical about economic growth ever since.

And it seems to be working in their favour. Earlier this year business leaders spoke of their dismay after economy secretary Neil Gray, who had held the role for less than a year, was parachuted over to health when Michael Matheson – he of the iPad scandal – was forced to step down. At a time when business confidence had hit rock bottom on the back of endless policy changes and unfulfilled promises, Gray had been beginning to earn back some trust.

His replacement, Mairi McAllan, had no time to make any mark before announcing her maternity leave. With Swinney and Forbes – both former finance secretaries known for their pro-business outlooks – at the helm, the sector breathed a collective sigh of relief. Here, finally, was the reset Yousaf had promised when he took office.

Earlier this year Sean McGrath, chief executive of the Entrepreneurial Scotland Foundation, told Holyrood that businesses felt the loss of Gray from their portfolio area because, while Forbes had been finance secretary and Gray was on the economy beat, he had been seen as her natural successor.

“Kate Forbes was well liked – I’ve never seen someone so young garner so much respect so quickly,” he said. “She really had a good rapport and had the backing of business. Losing her [when she went on maternity leave then left government when Yousaf took over] was a blow. It was big shoes for Neil Gray to fill but, in fairness to him, he was actually doing a pretty decent job.”

Yet while there is a sense that Scotland again has a government that both understands the concerns of business and values the role the sector plays in driving economic growth, that does not mean a relationship fractured during the Nicola Sturgeon-Scottish Greens era has been magically fixed.

“With John Swinney in the first minister’s seat and Kate Forbes in the deputy first minister’s seat, that’s a strong signal that we’re moving in the right direction,” McGrath says now. “They didn’t bring with them an enormous pot of cash that had been hidden, but now we know we are talking to the most business-oriented people in government […] John Swinney is known in the business community as generally being a decent chap – they don’t feel he’s against them, but he’s also not seen as a rabid capitalist.”

But while McGrath says the combination of Swinney and Forbes is “very interesting”, he adds that businesses are still frustrated that “yet again there’s another person” for them to deal with. “That’s very much softened by the fact we know it’s someone [Forbes] who is getting up to speed very quickly, but there are still reconnections to be made,” he says.

Kate Forbes impressed during her spell as finance secretary | Alamy

Indeed, while Forbes officially held the finance role until March last year, when Yousaf replaced Sturgeon as first minister, she had temporarily stood down from the position when her maternity leave started the previous June. In the two years since then the business community has been buffeted by the government’s refusal to pass on business rates relief enjoyed by the hospitality sector in England and Wales, the introduction of new income-tax bands organisations say are hampering their ability to recruit, and the seemingly aborted attempt to follow though on both Forbes’s National Strategy for Economic Transformation and Gray’s New Deal for Business.

For Mags Simpson, interim director of business membership organisation CBI Scotland, what the business community needs now is a period of certainty so it can make the investments needed to deliver the economic growth the Swinney-Forbes administration has professed itself so committed to. Businesses appreciate what they have been hearing from Holyrood’s top team, she says, but “they need to see the action” – they need to see proof that their concerns aren’t just being listened to, but are actually being heard.

“It’s fair to say they [Swinney and Forbes] earned the trust of business in their previous roles, and we’ve always worked very closely with cabinet secretaries, but there’s something about having a longer-term vision,” she says.

“On a 12-month cycle the Programme for Government is produced and produced and produced but there should be a three- to six-year plan that is tweaked as things come into play. The CBI puts in a submission every year. We go in with costed solutions, but they need to be taken on board. We’re in a very fiscally tight environment and really hard decisions are having to be made, but if we’ve got economic growth at the centre of that it will in turn increase people’s wages, people will get better jobs, the tax base will grow, and the public sector will get more money.”

The job Swinney and Forbes are trying to do is being made all the harder by the fact that, from almost as soon as they took over, there has been a looming general election to factor in. UK Labour, which has played a blinder in opposition, spending the best part of the last two years wooing business leaders, is almost certain to be the victor in the vote.

It is something the business community is keenly anticipating: in May more than 120 chief executives put their name to an open letter that said only Labour could end the “instability, stagnation, and a lack of long-term focus” that had beset the UK economy “for too long now”; in June, billionaire Tory donor John Caudwell, the founder of Phones4U, switched his allegiance to Labour, saying he was “amazed by how [leader] Keir Starmer brought it back from that [Jeremy] Corbyn brink”.   

Rachel Reeves, seen with Scottish Labour leader Anas Sarwar on a recent visit to Scotland, is expected to be the next chancellor | Alamy

Against that backdrop, Rachel Reeves, who will almost certainly be the Labour chancellor come 5 July, was playing to the gallery during a recent visit to Scotland. Promising to give businesses “the tools to succeed”, Reeves said her party offered the “stability” they need “after 14 years of Tory economic chaos and decline”. 

“With Labour, businesses in Scotland will have exactly that,” she said. “Our plans will turn the page on Tory economic failure and kickstart economic growth right across the country, creating good jobs and the right conditions for investment. Business cannot afford five more years of Tory chaos – Labour will ensure that businesses can get on and do what they do best while generating growth in the economy once again.”

Yet despite its promises, Labour remains an unknown quantity. And while not being the Conservative Party will work in its favour in the early stages of forming a government, Liz Cameron, chief executive of the Scottish Chamber of Commerce, says Labour will have to move quickly to show it really does offer the kind of change it has been campaigning on.

“Politics in the run up to the general election has provided little clarity on which promises and pledges are going to see the light of day amid the scare tactics and quick dismissals from either side,” she says.

“Yet the politics of business has never been clearer in the minds of our 12,000 members. Quite simply, without prioritising growth, we can’t create much needed jobs and stimulate our struggling economy. Whoever is in power, they need to boost economic growth and job creation by establishing a partnership between business and government to oversee an ambitious programme of pro-enterprise and pro-growth policies. Not a talking shop paying lip service to employers, entrepreneurs, and innovators – a partnership of equals based on trust, mutual respect and understanding. And that means listening to our concerns and those of voters, who say the economy is a top-three issue.”

Since rejoining government Forbes has taken a conciliatory tone, showing herself willing to work with those who so vehemently opposed her bid to become SNP leader in 2023 and going out of her way to build bridges with the business community. At CBI Scotland’s annual lunch, held in Edinburgh as Swiftiemania swept the city, she extended that olive branch to whoever ends up forming the UK Government, conceding that relations between Holyrood and Westminster have not been great of late and promising to work collaboratively to help create the high-value jobs needed to grow the economy. Addressing immigration policies that are holding the Scottish economy back while creating a “coherent and consistent” regulatory environment are top of her to-do list, she said.

It was music to the ears of the 200 business representatives in attendance, but Simpson says there is plenty the Scottish Government can do to boost business confidence in the here and now without having to wait for a new Westminster administration to bed in. Indeed, Forbes herself conceded that the Scottish Government’s income-tax changes, which saw a new higher-rate band introduced earlier this year, are causing problems when she told The Herald newspaper the change is being kept under review. She is cognisant, she said, of how easy it is “for people to shift” south of the border if the tax environment in Scotland becomes too onerous.

For Simpson, the policy has already created a “big problem” for businesses north of the border, but she stresses that it is entirely within the Scottish Government’s gift to fix.

“We have asked the Scottish Government for a medium-term tax plan and have been assured that that’s coming,” she says. “The CBI on the whole doesn’t get involved in personal taxes, but our members are telling us this is having an impact on their ability to attract people. There are also differences with stamp duty [which applies in the rest of the UK] and the land and buildings transaction tax [which applies in Scotland]. All those things add up. The Scottish Government needs to have a grown-up conversation with themselves about the best way to grow the tax base. Candidates are now saying they can commute from Newcastle and that’s slowly but surely becoming a narrative.”   

For McGrath, the business community is open to working with any government that understands the pressures it is under and is willing to engage to make the environment a better one to operate in. In Scotland in particular, though, he warns that the patience of the sector is wearing thin.  

“The business community are just keen to get back to business, that’s where they’re at,” he says. “Truth be told I don’t think they are terribly bothered who they do it with. Obviously, they don’t want to be dealing with the extreme ends of anything, but with anyone centre-right or centre-left they just want to get stuck in […] Businesses will almost always be open – the natural inclination is to want to work with government but there’s a finite window in which the government can prove it’s part of that. It’s unfortunate for John Swinney and Kate Forbes that the general election campaign has landed in the middle of that.”