ytt fi75 yjt f by fredercast

Blight of the blackstuff

Defying predictions

Crunching tackle

North Sea faces its toughest challenge

Deals activity bounces back

Scottish football’s Covid-struck season

insider.co.uk

THE DRIVE TO NET ZERO Mark Wilson is trying to ﬁll the renewables transmission gap

Vol 38 No.2

Apr/May/Jun 2021

£4.00

PLUS: FOR INVESTMENT THE ONLY WAY IS ETHICS

PLUS HAS COVID-19 DONE IRREPARABLE DAMAGE TO SCOTLAND’S HOSPITALITY SECTOR?

!ǝƏȸǣɎɵ zɖȅƫƺȸ ³! ‫אהחב׎‬

NEW CLASSROOMS

INNOVATIVE LEARNING

P1-P7 AUGUST 2021 ȒȒǸ Ə ɎȒɖȸ ɎȒ ɀƺƺ Ȓɖȸ ȸƺǔɖȸƫǣɀǝƺƳ hɖȇǣȒȸ ³ƬǝȒȒǼِ

www.kelvinside.org

Agenda

HOPEFULLY, A NEW PARLIAMENT WILL EMBRACE BUSINESS AS IT EMBRACES A ‘NEW NORMAL’ Ken Symon’s regular view on business

S YOU are reading this, a new Parliament will have been elected in Scotland. A total of 129 constituency and list MSPs, a new Parliament and administration to face the very real economic, personal and mental health impacts of the pandemic. Many in business will join me in hoping that this Scottish Parliament and Government engages more with business than the last one did. As I write (page 62) there are many businesses who feel that politicians and government are not listening to, or heeding, their very real concerns. There were also major issues in relation to the last administration’s handling of economy and business matters. Supporting business development that aims to lead to significant economic benefits is always going to carry a level of risk. There will be failures. However, the last administration’s support for major enterprises was deeply flawed. A total of about £400m of taxpayers’ cash was sunk into BiFab, Ferguson Marine and

There needs to be a strong commitment to new way of doing things and new, stronger values in the boardroom Prestwick airport, with two out of the three having gone into administration. The bigger question is the future of the Sanjeev Gupta business empire, where a further £300m of taxpayers’ money is at risk as I write. It is not a good record for a party that seeks significantly greater economic powers and that wants to chart a radically different future for Scotland. In this issue Graeme Smith writes of the unprecedented scale of the challenges facing the oil and gas sector (page 23) as the pandemic has caused the demand for oil to plummet and, as a result, has led to the shedding of many jobs. The fear is that the number of sector jobs lost will top 30,000 by the end of the year.

The pandemic has also led to many changes in other sectors, including rapidly advancing the technology revolution in accountancy, as Perry Gourley writes in our annual Accountancy Review (page 35), as firms turned increasingly to cloud computing and other digital innovations to cope with the new reality. Scottish football has also been blighted by the shadow of the pandemic as Covid-19 led to a season just ending that was like no other in history. In truth, the financial effects have only begun to be seen in the financial figures that have so far been reported, with much of the negative impact still to be felt, and there will be some clubs that fare less badly than others (page 40). For manufacturing and engineering, the challenge of the past few months has not been just about survival but about ‘building back better’, not just returning to old ways as the upturn comes but finding better, more productive and more sustainable ways of doing things as I write in our Manufacturing Review (page 45). There are parallel challenges for property as Francis Shennan writes in our special Property Review (page 85). All of this melting pot of issues – and particularly that of climate change which is racing up the corporate agenda – has led to calls for new commitments to ethical investment and ways of doing business. Businesses that do not take this to heart are in danger of being left behind (page 49). There needs to be a strong commitment to new ways of doing things and new, stronger values in the boardroom. Talking of new beginnings, it is also time for one for me, personally. After five eventful years as editor of Scottish Business Insider and insider.co.uk, I am stepping down and heading to pastures new. In that time we have been through much, including launching insider.co.uk as a standalone website and building its coverage and its audience. While you will see articles by me in the next magazine, this will be the last one I shall edit. I would like to say a huge thank you to all our readers, advertisers and sponsors, to my valued colleagues and all those who have supported us in many ways over that time. I hope you will continue to support Insider. ■

contact: editor@insider.co.uk www.insider.co.uk

May 2021 INSIDER 3

ISSUE: APRIL/MAY/JUNE 2021

contents COMMENT 3

Agenda Ken Symon on the business community’s demands for more from our politicians

Ian Ritchie argues for a radically diﬀerent approach for

broadband rollout

REPORTS 18 23

Big Proﬁle: Mark Wilson of Intelligent Land Group Oil & Gas Review: The unprecedented challenges facing the North Sea 27 Analysis 28 Insider’s exclusive tables

Accountancy Review: The technology revolution sweeping the profession

Scottish Football Finance: How clubs are tackling

Manufacturing Report: As the sector bounces back

Ethical Finance: The new approach to investing in

Deals Quarterly: Growing appetite for corporate

Proﬁle: Jacqui McLaughlin – an entrepreneur who

the eﬀects of a season like no other can it build back better? businesses with purpose

18 40

activity as Covid recedes innovated in the pandemic

Funding success: Devolution funding has coped with Covid but are changes needed ahead?

4 INSIDER May 2021

www.insider.co.uk

Science & Technology Review: Collaborating to develop new ways to save lives

Regional Review: Aberdeen and Grampian: Tough times now but better days lie ahead

REGULARS 8

News Brieﬁng: The latest news aﬀecting Scottish business

Quoted Companies: New names join the

Burning Question: Has Covid-19 done irreparable

80 82

International: The promise of growing riches in India Tech Talk: Pandemic heightens the competition

Scottish listings damage to Scotland’s hospitality sector?

for talent

Property Special: The challenge from COP26; 88 Changes on the High Street; 89 Flexible workplaces 90 Escaping the city 91 Improving investment

92 94 95

Wealth: Beating the inheritance tax freeze Appointments: Who’s moving and shaking Personnel: How do employers deal with anti-vaxxers?

96 98

Slainte: Online events, awards and meetings Ten Minute Interview: Praveen Kumar, curry entrepreneur

85 82

www.insider.co.uk

May 2021 INSIDER 5

COMMENT

Research & development tax relief – stepping out of Covid-19 Mark Pryce, Tax Partner at Azets Email: Mark.Pryce@azets.co.uk

Mark Pryce

AFTER a year in which many companies have prioritised mitigating the damage and uncertainties of the COVID crisis, the new financial year offers an opportunity for a fresh start and to think about investment for the future. The Government confirmed in the 2021 Budget that it continues to place Research & Development (R&D) at the heart of its plans to boost the economy, with an ongoing target to raise total investment in R&D to 2.4% of UK GDP by 2027. Generous tax reliefs remain in place to support innovative businesses making investments in cutting-edge products and processes. HMRC’s Research & Development Tax Credit Scheme enables SMEs to access tax relief and cash credits to further invest in their research, or indeed help fund working capital. To qualify for R&D Tax Relief a project must seek to make an appreciable improvement in its field to resolve a ‘scientific or technological uncertainty’. The tax relief can be worth up to 33% of the amounts invested in R&D. The Budget also confirmed a series of new measures around Corporation Tax. As well as introducing a SuperDeduction for businesses that invest heavily in capital projects, HMRC has extended the period that a company’s trading losses may be offset against its previous years’ profits. This has the potential to provide a significant cash

boost to companies who have made losses during the COVID period, or who continue to do so into 2021/22. For companies making R&D Tax Relief claims this change in the “carry back” rules could have a substantial advantageous impact on the amount reclaimable in corporation tax rebates. The R&D Tax Credit Scheme continues to be one of the most attractive tax breaks offered by HMRC to both profitable and lossmaking companies. The new Corporation Tax rules introduced in Rishi Sunak’s Budget further enhance the value of the Tax Relief open to innovative businesses who qualify. Businesses developing new concepts and processes, or seeking to improve upon existing technologies, should consider the relief. Our dedicated team at Azets can identify qualifying R&D projects and how businesses can benefit from tax savings. We have extensive expertise in R&D Tax Credits, having been involved since the tax relief was first introduced by HMRC in 2000. We are part of the HMRC R&D Consultative Committee and regular commentators in the R&D Community.

SCOTTISH BUSINESS INSIDER One Central Quay, Glasgow G3 8DA Switchboard: 0141 309 3000 ISSN: 0952-1488 Editorial Editor Ken Symon Tel: 0141 309 3339/ 07769 164698 E-mail: editor@insider.co.uk/ k.symon@insider.co.uk Researcher Steven Wilson Tel: 0141 309 3338 E-mail: s.wilson@insider.co.uk Sub-Editor Susan Barr Design & production Ewan Lauder Tel: 0141 309 3673 E-mail: e.lauder@insider.co.uk

Advertising Head of Sales Business Insider and Events Aileen Turnbull Tel: 0141 309 4909 / 07825 899187 E-mail: aileen.turnbull@ insider.co.uk Account Manager Debbie Caldwell Tel: 0141 309 1475 / 07789 778 263 E-mail: debbie.caldwell@ insider.co.uk Events Events operations manager Laura Dunlop Tel: 0141 309 1491 / 07783 410 985 E-mail: laura.dunlop@reachplc.com

Total Circulation 11,394 Average net circulation: 7,394 (July 1, 2016-June 30, 2017) Plus other bulk distribution: 3000 copies to selected UK first class rail lounges. 1000 copies to selected UK airport lounges. 3200 downloads of the Insider App product (Android and Apple stores). Enquiries on subscriptions/back issues Tel: 0800 141 3347 E-mail: customerservices@insider.co.uk Enquiries on Top500 and SME300 databases Tel: 07788 168576 E-mail: sme300@insider.co.uk/top500@insider.co.uk

© Insider Publications Ltd. All rights reserved. No parts of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, or otherwise, or stored in any retrieval system of any nature without the prior consent of Insider Publications. While every reasonable effort is taken to provide accurate information, neither Insider Publications Ltd nor its employees and agents can accept responsibility for inaccuracies or omissions, or for changes in the details given. The information should not be used as the basis for an investment.

SUBSCRIBE TO SCOTLAND’S LEADING BUSINESS MAGAZINE

Since 1984, Insider has been publishing in depth business information. To keep yourself up to date with the latest business intelligence for only £24.00 per year. Contact us on 0800 141 3347 or email subscriptions@insider.co.uk or alternatively visit www.insider.co.uk/subscribe.

For further advice on research & development tax relief, contact Mark Pryce, Tax Partner at Azets, accountants and business advisors. www.azets.co.uk

6 INSIDER May 2021

www.insider.co.uk

%86,1(66 352),/(

$& # ($ ( - $& ( $# ! ( ( '( ' ( #)" & $ )' # '' & ( $#' # ( # $ + ' '! (!, & ( # ( $&& '%$# # % & $ ( %& * $)' , & ( ' '( ( '( + ! ' ( ! # ' &( # ( ' '(&$)' "% ( $ & '(& ( $#' $# ( $#$", ) *.' ) 3*/)# !).,!+,!)!/,- ,! . .$! "*,!",*). *" .$%- !0!'*+(!). 1%.$ -%#)%6 ). +,*+*,.%*) ' /) $%)# /-%)!--!- /,%)# .$%- ./, /'!). +!,%* # %)-. .$! * - .$!3 $ 0! #*)! *) .* )*. -%(+'3 -/,0%0! /. .* .$,%0! ) " . -. .%-.% - -$*1 .$ . .$!,! ,! *(+ )3 %,! .*,- #! /) !, . .$! $!'( *"

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

,& !- ,% !- %. - +,*6. "*, #** ! !2+' %)- 5 ) %) ,! -%)# )/( !, *" .$! 3*/)# !).,!+,!)!/,- ,! ,%0!) 3 (*,! .$ ) ( &%)# '*.- *" (*)!3 /. )!%.$!, * .$!3 1 ). .* ,/) -* % ' !).!,+,%-! ) .$! *)., ,3 1! ,! -!!%)# .$! ,%-! *" )!1 .3+! *" /-%)!-- $3 ,% .$ . 0%!1- +,*6. 0!,3 " 0*/, '3 /. )*. - ) !) #* ' %) %.-!'" 5 $!-! /-%)!--!- 1 ). .* /-! .$!%, +,*6.- .* * #** "*, *.$!,- $!.$!, .$ . - ,! .%)# !(+'*3(!). *++*,./)%.%!- -/++*,.%)# .$! '* ' *((/)%.3 *+!, .%)# %) ) !.$% ' -/-. %) '! 1 3 *, *%)# .$!%, %. .* +,*.! . */, !)0%,*)(!). .$!3 %( .* '! 0! .$!%, ( ,& %) 0!,3 +*-%.%0! 1 3 7

& !! ' % &(# & ( # &'$# # &'$# &$+# $#')!( # " & !! $#')!( # ) +++ $#')!( # )

,& '! - /-%)!-- #,*1.$ +,*#, ((! -/++*,.%)# 3*/)# !).,!+,!)!/,- %) .$! %#$' ) - ) -' ) - *" *.' ) %) '/ %)# !,#/- $*( %,! .*, *" %#$' ) ) '! ( )/" ./,!,- %,) ) '! * ! %.!- .$! 6,( - +,%(! !2 (+'! *" .$%- )!1 ,!! *" /-%)!-- 5 %,) ) '! * !- ,% ! 1$ . .$!3 * - ! ,.$ 6,-. ) '! ( &%)# *. *)'3 * .$!3 ,! .! ) ( )/" ./,! .$!%, ) '!- %) -/-. %) '! 1 3 /. .$!3 '-* +' ). .,!!- %) -/ $ , ) ",% "*, ! $ +,* / . -*' 5 $!-! /-%)!--!- "*,( -%#)%6 ). + ,. *" .$! -! %) *.' ) ,! .%)# !(+'*3(!). ) ,!0!)/! "*, .$! *..%-$ ! *)*(3 . - %) /( !). /+*) .$*-! *" /- 1$* -/++*,. .$!-! /-%)!--!- .* /) !,-. ) 1$ . &%) *" -/++*,. .$!3 )!! ) .$! "*,( %) 1$% $ .$!3 1 ). .* ,! !%0! .$! -/++*,. 7 $%- -/++*,. '-* )!! - .* ,! *#)%-! .$ . 3*/)# !).,!+,!)!/,- ,! '%0%)# %) /3 )*1 1*,' 1*,' 1$!,! !0!,3.$%)# %- . .$!%, 6)#!,.%+- . .$! .%(! .$ . - (*-. *)0!)%!). .* .$!( *, %)# .* ,& .$ . $ - %(+'% .%*)- "*, .$! -!,0% ! !'%0!,3 *" /-%)!-- -/++*,. ) !'!, .*, +,*#, ((!- 5 . ) !,-*) ) !,-*) ,*1) *)-/'.%)# 1! $ 0! '*)# !!) 0* .!- *" +!,-*) '%-%)# ) . %'*,%)# */, -/++*,. + & #!- .* (*-. !8! .%0!'3 (!!. .$! )!! - *" */, '%!).- 5 $%'! .$! ' -. 3! , $ - !,. %)'3 ,*/#$. -*(! !2%-.%)# /-%)!-- -/++*,. %).* -$ ,+!, "* /- "!!' .$ . .$! ,! ' (*, ' *" .$! -.*,3 %- .$ . !0!,3*)! %)0*'0! %) -/++*,.%)# )!1 /-%)!--!- ,*-- *.$ +/ '% ) +,%0 .! -! .*,- )!! - .* ,! *#)%-! .$! $ )#%)# )!! - *" 3*/)# !).,!+,!)!/,- ) +. .$!%, -!,0% ! !'%0!,3 *, %)#'3 7

NEWS: BRIEFING News and quotes compiled by Ken Symon

Basis Technologies wins $25m investment SCOTTISH Equity Partners (SEP) has completed a $25m growth equity investment in Basis Technologies, a software developer for cloud computing. Organisations around the world use Basis Technologies’ DevOps technology to support the transition from legacy premises-based SAP software to modern cloud-based SAP systems. The software aims to increase business agility through the fast, effective delivery of business innovation. It currently provides the only automated DevOps and testing platform engineered for SAP. Its global enterprise customers include BP, Procter & Gamble and Booking.com. The software’s aim is to help customers accelerate time to market, adopt new development methods and increase productivity. Basis Technologies has experienced significant growth in recent years and investment from SEP will enable the company to further accelerate product development and increase adoption of its industry-leading software through expansion

CYS becomes employee-owned

Martin Metcalfe, Basis Technology

of global sales and partnership capabilities. The company employs more than 70 people, with headquarters in Richmond and additional offices in the US, Australia, Germany and Hungary. The investment will support the company to further enhance its proposition to address a $1.5bnplus per annum global enterprise DevOps for SAP market. Basis Technologies CEO Martin Metcalf said: “We are delighted to have SEP on board as our investment partner. “We look forward to working together to expand our product, sales and delivery capabilities and to bring our pioneering DevOps

automation solutions to more SAP users across the globe.” SEP partner Keith Davidson said: “Basis Technologies is ideally positioned to benefit from the increasing need to adopt DevOps within SAP environments as businesses transition to the cloud and SAP’s new offerings. “The company has an excellent reputation, puts its customers first and has significant experience delivering innovative automation software to organisations using SAP. “We are pleased to be partnering with the team at Basis to help them achieve their strategic growth goals.”

New rules for prepack administrations NEW RULES that came into force at the end of April will have a major impact on company directors seeking to restructure their business through prepack administrations. The warning comes from Derek Forsyth, head of restructuring in Scotland with accountancy firm Azets, on new legislation that came into force on 30 April. Prepack administrations have been used during the pandemic to seek to save businesses that would otherwise go under. The new rules will seek to impose a new eight-week window in which the assets of an insolvent business cannot be sold to a connected party without the consent of creditors, or a report from an independent evaluator 8 INSIDER May 2021

IN BRIEF

Derek Forsyth, Azets

recommending the prepack is in the best interests of creditors. Such a report would be prepared by an evaluator chosen by the purchaser and will be made available to the creditors. Administrators will have to justify to the creditors if they decide not to follow the recommendations. Forsyth said: “Prepack

insolvencies are a valuable restructuring option for businesses weighed down by debt that could otherwise be viable through a restructure but are not capable of continuing to trade whilst the administrator markets the business for sale. “Although it is expected the new legislation will offer greater transparency to creditors, there is some concern around the qualifications required of the evaluator chosen by the purchaser. “Whilst this could potentially be problematic, we expect this issue will be resolved relatively quickly, with individuals with the required insolvency experience being identified as credible evaluators.”

Scottish architects firm Camerons Strachan Yuill Architects (CSY Architects) has become an employee-owned business. CSY Architects has set up an Employee Ownership Trust that will become the controlling shareholder of the company. It will allow the firm’s 24 staff, who work across offices in Edinburgh, Dalkeith, Berwick and Galashiels, to collectively take ownership of the firm. The move to employee ownership was funded by a loan from Triodos Bank UK and support from Co-operative Development Scotland and employee ownership specialists Co-ownership Solutions. CSY Architects managing director Douglas Strachan said: “As a practice, we are committed to a local service for the communities we serve. By transitioning to an Employee Ownership Trust, we’re ensuring our values remain at the heart of everything we do.”

Gleneagles to add summer sparkle The iconic Gleneagles Hotel in Perthshire had a “roaring reopening” for guests on Monday 26 April. Following the Scottish Government announcement about the reopening of hospitality, Gleneagles said it was aiming to bring the ‘sparkle and joy of the Roaring Twenties’ into its reopening plans. The summer plans include a month-long series of festivities for ‘Jubilant June’ and the return of the Explorers Kids Club from July. From June onwards the American Bar will host live jazz from Thursdays to Saturdays. Head chef Stefano Purci and his team are also offering lunchtime pasta-making masterclasses from Mondays to Thursdays in the Winter Garden. Gleneagles is also expanding its outdoor experiences with off-road guiding tours in the estate’s fleet of Defenders. www.insider.co.uk

%86,1(66 352),/(

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

(14 $11-+0) .#$'..+0) #0& 64#%-+0) #0& 6*417)* 10' 4'.#6+105*+2 4#6*'4 6*#0 /#0; 5*+22'45 %#0 #%%'55 5 81.7/' &+5%1706'& 4#6'5 #0& 2418+&' 6*'+4 190 %7561/'45 9+6* # )4'#6'4 %*1+%' 1( %#44+'4 #0& 5'48+%' &'.+8'4 61 5*12 $'(14' 0':6 &#; &'.+8'4; 61 &#; #674&#; 14 70&#; =!*+.56 *'.2+0) 174 %7561/'45 )419 9' 8' '81.8'& 6*' 2.#6(14/ 61 %18'4 /#0; 16*'4 #4'#5 1( 6*' 14&'4 241%'55 19 9' 8'4; /7%* 5'' 1745'.8'5 2418+&+0) 75+0'55 /2418'/'06 '%*01.1); 4#6*'4 6*#0 ,756 1)+56+%5 51(69#4' @ 1A'4 # 57+6' 1( 6'%*01.1); 51.76+105 6*#6 *'.2 +/2418' 241%'55'5 #%4155 )11&5 +09#4&5 2+%- 2#%- &+52#6%* %#44+'4 /#0#)'/'06 6*417)* 61 &'.+8'4; 61 6*' '0& %7561/'4 7%* 1( 5 6'%*01.1); .'8'4#)'5 6*' 219'4 1( #761/#6+10 %100'%6+0) #0& 5*#4+0) &#6# $'69''0 &+A'4'06 $75+0'55 5;56'/5 0' 57%* #4'# 61 $'0'>6 +5 2+%- 2#%- &+52#6%* 9+6*+0 6*' 9#4'*175' 9*'4' +0%4'#5+0) 6*417)*276 #0& '.+/+0#6+0) /+56#-'5 %#0 64#05(14/ 6*+5 +061 # 5.+%- 8#.7' #&& &'2#46/'06 75+0'55'5 75+0) ('#674'5 57%* #5 0' .+%- +52#6%* #4' #$.' 61 241%'55 14&'45 6+/'5 (#56'4

# #

4':+6 *#5 #.51 *#& # *7)' +/2#%6 10 $75+0'55'5 5*+22+0) 61 7412' *' 4'37+4'/'06 61 241&7%' %1//'4%+#. +081+%'5 #6 6*' 6+/' 1( $11-+0) # 5*+2/'06 %#0 #&& 729#4&5 1( /+076'5 1( #&/+0 6+/' 2'4 14&'4 +/2#%6+0) 6*' &+52#6%* 241%'55 #0& .'#& 6+/'5 ; +06')4#6+0) 5;56'/5 %1//'4%+#. +081+%' &#6# %#0 $' 5'#/.'55.; 64#05('44'& 61 6*' %#44+'4 5;56'/5 /'#0+0) &+52#6%* 6'#/5 01 .10)'4 0''& 61 /#07#..; 4' '06'4 &#6# #0& %#0 (1%75 6*'+4 6+/' 10 /14' 241&7%6+8' 6#5-5 = *' 2+%- 2#%- &+52#6%* &'2#46/'06 +5 # 8+6#. 2#46 1( ;174 $75+0'55 #0& /#-'5 # $+) &+A'4'0%' 61 6*' %7561/'4 ':2'4+'0%' @ #561%- 5#;5 = 156.; /+56#-'5 #5 # 4'57.6 1( 14&'45 016 &+52#6%*'& 10 6+/' 6*' 9410) 241&7%6 $'+0) 2+%-'& 6*' 9410) #&&4'55 75'& 14 6*' 9410) %#44+'4 5'.'%6'& #.. '/#0#6' (41/ *'4' @ ''2+0) 72 9+6* 14&'4 &'/#0& #0& 5*+22+0) 10 6+/' &'>0+6'.; *'.25 61 /''6 %7561/'4 ':2'%6#6+105 $76 &'2'0&+0) 10 6*' %#44+'45 61 2418+&' 14&'4 72&#6'5 %#0 $' 704'.+#$.' /; #..195 $75+0'55'5 61 4'%.#+/ 6*#6 >0#. 2#46 1( 6*' %7561/'4 ':2'4+'0%' 9+6* 6*' #$+.+6; 61 5'0& 56#675 72&#6'5 ? "!' *#8' ;174 14&'4 " 6 5 $'+0) 2+%-'& " 6 5 10 +65 9#; " 6 5 $''0 &'.+8'4'& ? #.10)5+&' $4#0&'& 64#%-+0) 2#)'5 (14 '0& %7561/'45 61 64#%- 6*'+4 14&'4 6*'/5'.8'5 0 &1+0) 51 $75+0'55'5 #4' #$.' 61 ':%''& %7561/'4 ':2'%6#6+105 $7+.&+0) $4#0& .1;#.6; #0& +0%4'#5+0) 4'2'#6 274%*#5'5 08'56+0) +0 6'%*01.1); 61 +/2418' 241%'55'5 #%4155 9#4'*175' &+52#6%* #0& &'.+8'4; #&&5 18'49*'./+0) #0& 70&'0+#$.' 8#.7' &4+8+0) 'B%+'0%+'5 4'&7%+0) %1565 #0& 7.6+/#6'.; #..19+0) $75+0'55'5 61 5%#.' #0& )419

BUSINESS PROFILE NEW ONLINE LEARNING OPPORTUNITY

LEAVING A CLIMATE SOLUTIONS LEGACY What kind of world do we want to leave to our children, and for that matter, future generations to come? This is the question we should be asking ourselves, as Kofi Annan, former chair of the elders, UN Secretary General, and Nobel peace laureate, did before he passed away in 2018. He said: “I cannot say I am very proud of what my generation has done and what we are going to leave, but we still have time to do something, and we cannot afford to fail.” Climate Solutions is a new online learning opportunity which aims to educate middle and senior business leaders and managers on climate change, outlining the actions that can be taken to mitigate the impact before it is too late. A collaboration between the Royal Scottish Geographical Society (RSGS), University of Edinburgh, University of Stirling, and Institute of Directors (IoD) Scotland, Climate Solutions addresses many common questions raised such as ‘What does it mean for our business?’, ‘How do we respond?’, ‘How can we plan and prepare?’, and ‘What are the risks and opportunities?’ Climate change expert and Chief Executive of RSGS, Mike Robinson, is the innovator behind the course which, in simple terms, aims to “raise awareness of the issue in a straightforward, time-efficient way.” He adds: “Climate change will increasingly define this next decade for businesses and policy makers. Every manager should have a minimum basic knowledge and understanding of this critical and wide-reaching issue if they want to operate a successful business.” Climate Solutions provides a quick, simple, and rounded introduction to the fundamentals of

climate change, helping explain how everyone and every organisation can play a role to reduce their emissions, and informing businesses and organisations so they can better plan and predict future trends, legislation, and change. It focuses on the need-to-know information, and most importantly, outlines the key solutions managers can implement to respond to climate change. Sarah Graham, Sustainability Executive at Edrington, who recently completed the course said: “It really served to increase my conﬁdence in terms of bringing me up to speed with all the latest information around climate change. However, the most important aspect for me was that it clearly spelt out many of the positive climate solutions available for businesses to take

Koﬁ Annan

Mike Robinson

advantage of today, and why they make business sense. That really helped me when I was forming the sustainability strategy for The Famous Grouse brand.” Climate Solutions is oﬀered in two ways: Climate Solutions Professional and Climate Solutions Accelerator.

Climate Solutions Professional Climate Solutions Professional consists of four online modules lasting two to three hours long. The four modules will short-cut vast amounts of literature and learning, provide a good basic understanding of the science, and focus on the minimum essential information needed to respond. On completion of the modules, participants will attend an online workshop delivered by expert project partners, in which participants will start to develop the Climate Action Plan for their business. On completion of the course, participants will receive a certiﬁcate evidencing their personal and organisational commitment to climate change. The cost is £300 including VAT per person.

Climate Solutions Accelerator The Climate Solutions Accelerator course is for those short on time, lasting just 90 minutes. Managers will learn direct from the world’s leading experts the practical solutions they can implement to help tackle climate change. On completion of the course, managers will receive a personalised RSGS certiﬁcate. The cost is £120 including VAT per person.

SIGN UP NOW for this new online learning opportunity by visiting www.rsgs.org/climate-solutions, or to ﬁnd out more VISIT www.climatesolutionsnetwork.com

NEWS: BRIEFING

Marine marvel as platform goes Forth ONLOOKERS at the Forth Estuary were treated to a spectacular sight on a mid-April weekend as one of the most remarkable marine operations undertaken on the river unfolded. In an operation spanning two days, Allseas’ Pioneering Spirit – the world’s largest construction vessel at 382 metres long and 124 metres wide – transferred its huge cargo of a topside drilling platform onto the 200-metrelong cargo barge, the Iron Lady. The following morning the Pioneering Spirit separated from the Iron Lady and the cargo barge was towed clear. With its cargo safely secured to its deck, the Iron Lady was then towed westwards along the River Forth by Forth Ports’ tugs – the Craigleith, Inchkeith and

Companies ﬂout ﬂexible working

Fidra – ensuring the structure had sufficient clearance to transit below the Forth Bridge, Forth Road Bridge and finally under the Queensferry Crossing before berthing at the port of Rosyth. It is scheduled to remain moored at Rosyth for six weeks before being towed back east, to

the Energy Park Fife in Methil where its cargo will be unloaded for decommissioning. Forth Ports chief operating officer Stuart Wallace said: “It was a truly spectacular sight to see this huge vessel offloading its cargo within our deep water on the River Forth..”

Nova launches sea-powered car charging LEADING tidal energy company Nova Innovation has created the first electric vehicle charge point where drivers can fuel their vehicles with the power of the sea. Electric vehicle (EV) drivers in Shetland can now ‘fill up’ directly from a tidal energy source. The EV charge point is located on the scenic shores of Bluemull Sound, at Cullivoe harbour on the island of Yell in Shetland. Beneath the water, Nova’s tidal turbines have been powering homes and businesses in Shetland for more than five years.

QUOTE UNQUOTE

“There is growing concern that government ﬁnancial support could be propping up ‘zombie’ businesses.” Ken Pattullo of insolvency ﬁrm Begbies Traynor

The island’s vehicles can now be powered purely by the tide. Nova Innovation CEO Simon Forrest said: “Our technology generates electricity from the immense power of the seas, and it is changing

the way we power our lives – from how we make a cup of tea to how we travel. “We now have the reality of tidal-powered cars, which demonstrates the huge steps forward we are making in tackling the climate emergency and achieving net zero by working in harmony with our natural environment.” The Nova project has received grant funding through Transport Scotland to install the EV charging infrastructure as part of the clean energy transition.

Book Review Title: On Board Writer: John Tusa Publisher: Bloomsbury Price: £20

This is a book on boards like no other I have read. Former BBC Newsnight presenter turned media and arts board non-exec Sir John Tusa has written the perfect anecdote to the typical celebrity memoir. It takes you into the boardrooms of

bodies like the British Museum and American Public Radio. He relates real experience from personal squabbles to ﬁnancial crises and gives a great guide to what you can expect when you enter the boardroom. An excellent read.

Rating out of ﬁve: ★★★★★ www.insider.co.uk

IN BRIEF

Three in four job adverts in Scotland still offer no flexible working options despite pandemic-induced major changes in ways of working. The research was conducted by flexible working specialists Timewise, who analysed 375,000 Scottish job vacancies. By flexible working, Timewise means anything other than full-time roles based in the workplace. Pre-pandemic, 27% of Scottish employees worked part-time and 46% of employees worked flexibly in some way. But, since the start of the pandemic, flexible working has increased dramatically. The proportion of employees working from home some of the time jumped from 18% pre-pandemic to 61% during the first lockdown in 2020. Yet, Timewise, said, the recruitment market was failing to keep pace with the changes happening in workplaces. Only 24% of jobs offer the types of flexible working options so many people need, the research suggests.

Angel syndicates top £25m for year Scotland’s business angels syndicates’ investments in the ﬁnal quarter of 2020 were double those in the third quarter, new research shows. Business angel network LINC said that brought total investment by the angel syndicates for the year to £25m, just a little short of the record £26.9m reached in 2019. In the early months of 2020, angel investment continued at high levels but, as the Covid-19 restrictions started to impact, investment level fell but not by as much as had been feared. Angel syndicates were also able to help many portfolio companies secure funding from Scottish Enterprise’s Early Stage Growth Challenge Fund, set up in response to the Covid pandemic and awarded as a mix of convertible loan and grant. May 2021 INSIDER 11

SHARES: SCOTLAND’S QUOTED COMPANIES information provided by

Positive picture developing as market emerges from pandemic Ken Symon’s regular digest of Scottish stock performance

FTER years in which the stock of Scottish quoted companies has been an ever-reducing number, there has been a rise in activity with three listings on the Alternative Investment Market in recent months. The IPO of Calnex Technology, the Lintlithgow-based technology testing business, in October has been followed by market debuts of AMTE Power, the electric battery manufacturer, and Edinburgh-based ready-meal company Parsley Box, both in March. It is a much more positive stock market picture as Mike Timmins, EY partner and Scotland IPO leader, highlighted in the firm’s IPO Eye report. He said: “With an effective vaccine rollout under way, momentum and confidence in the UK IPO market should continue to build, but future growth may vary depending on the sector.” This healthier picture is matched in some increased share prices as the economy begins to emerge from the effects of the pandemic and its associated restrictions. Craneware, the Edinburgh-based healthcare specialist leads the biggest risers this time on the back of increased sales to hospitals in the US. The AIM-listed shares experienced a 16 per cent plus rise as it reported better full-year market expectations for the year, with revenue of $74m and adjusted earnings of $25.3m. Revenues and adjusted earnings for the six months ended 31 December were more than five per cent up on the first half of the prior year, when revenue was $35.9m and adjusted earnings stood at $12.7m. Craneware provides pricing and billing systems to US hospitals and has had a “strong performance’ against the backdrop of the pandemic and a volatile exchange rate with the dollar. Its performance has also seen a customer retention rate of more than 90 per cent. Beeks Financial Cloud Group saw an 11 per cent plus rise in its shares as it continues its expansion drive. The Glasgow-based fintech business in April raised an additional £5m in capital through a placing of 4.3 million new shares at a 115 pence a share. In addition, Gordon

12 INSIDER May 2021

Biggest risers NAME

% CHANGE 1 MTH

CRANEWARE PLC IDE GROUP HOLDINGS BEEKS FINANCIAL CLOUD GROUP WEIR GROUP PLC OMEGA DIAGNOSTICS MACFARLANE GROUP PLC ALLIANCE TRUST PLC A. G. BARR PLC RUA LIFE SCIENCES PLC STAGECOACH GROUP PLC

16.28 12.5 11.3 9.54 6.21 5.37 5.17 4.89 4.59 4.58

Biggest fallers NAME

% CHANGE 1 MTH

HARBOUR ENERGY* BRAVEHEART INVESTMENT PLEXUS HOLDINGS PLC LANSDOWNE OIL AND GAS PLC JOHN MENZIES PLC IOMART GROUP PLC STANDARD LIFE ABERDEEN CAIRN ENERGY PLC FIRST GROUP NATWEST GROUP

14.29 12.77 5.88 2.78 2.11 2.08 1.69 1.29 1.14 1.02

*formerly Premier Oil, now merged with Chrysaor

With an effective vaccine rollout under way, momentum and FRQğGHQFH LQ WKH 8. IPO market should continue to build, but future growth may vary depending on sector

McArthur, the company’s chief executive sold 434,783 shares, raising £500,000. The increased capital gives the cloud computing and connectivity business firepower for more mergers and acquisition activity, which market observers have been predicting since the company appointed Kevin Covington, a non-executive director with M&A experience to its board. Beeks said at the time of his appointment it was seeking to deliver its cloud services to “a growing global customer base”. Our biggest faller was what is a new name in our coverage of Scottish quoted companies this time: Harbour Energy. Unfortunately, it starts with a negative story, having fallen more than 14 per cent over the past month. The company, which was formed by a merger of Premier Oil Plc and Chrysaor, listed on the main market from 1 April. A significant new player in the market, Harbour describes itself as “a global independent oil and gas company, producing over 200,000 barrels of oil equivalent per day from the North Sea and south-east Asia”. The company reports a loss before tax of $605m for the year ending 31 December 2020, compared to a $102.50 profit before tax the year before as the effects of the pandemic markedly hit the demand for oil. The second-biggest fall was experienced by Braveheart Investments, which saw a near 13 per cent fall over the period, thought to be as a result of significant profit-taking by some shareholders. This followed the previous time’s marked rise of more than 57 per cent with the news from Braveheart investee company, Paraytec that it had seen “significantly better” results for its early stage test for coronavirus. This means that the Scottish-registered investment company, which currently has a total of six investments, has retained a significant part of its increased capitalisation as shareholders hope for further good news from Paraytec as it seeks Medical and Healthcare Regulatory Agency approval for its Covid-19 test. ■ www.insider.co.uk

SHARES: SCOTLAND’S QUOTED COMPANIES

Main Market A.G. BARR P.L.C. ABERDEEN DIVERSIFIED TRUST PLC ABERFORTH SMALLER CO. TRUST PLC AGGREKO PLC ALLIANCE TRUST PLC ASIA DRAGON TRUST PLC BAILLIE GIFFORD JAPAN TRUST PLC BAILLIE GIFFORD SHIN NIPPON PLCY BLACKROCK SMALLER CO. TRUST PLC BMO PRIVATE EQUITY TRUST PLC CAIRN ENERGY PLC DEVRO PLC DUNEDIN INCOME GROWTH INV. TRUST PLC EDINBURGH WORLDWIDE INV. TRUST PLC EP GLOBAL OPPORTUNITIES TRUST PLC FINSBURY GROWTH & INCOME TRUST PLC FIRSTGROUP PLC HARBOUR ENERGY PLC JOHN MENZIES PLC JOHN WOOD GROUP PLC LLOYDS BANKING GROUP PLC MACFARLANE GROUP PLC

LIST DATE 02/04/1970 24/03/1952 10/12/1990 29/09/1997 17/07/1947 07/09/1987 14/12/1981 01/07/1985 25/03/1973 22/03/1999 30/06/1993 21/11/1949 1998 15/12/2003 24/12/1953 16/06/1995 03/10/1962 05/06/2002 20/06/1973

MARKET* VALUE (£m) 576,949 299,715 1,368,110 2,232,161 3,095,016 671,520 1,036,279 772,691 923,860 295,766 838,770 325,551 452,643 1,436,368 108,854 2,041,289 1,111,711 3,554,045 273,152 1,877,102 30,334,826 170,437

SECTOR FOOD & TOBACCO MANUFACTURING BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL METALS & METAL PRODUCTS BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL MINING & EXTRACTION FOOD & TOBACCO MANUFACTURING BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL BANKING, INSURANCE & FINANCIAL TRANSPORT, FREIGHT & STORAGE MINING & EXTRACTION RETAIL BUSINESS SERVICES BANKING, INSURANCE & FINANCIAL TRANSPORT, FREIGHT & STORAGE

SHARE PRICES 5 YEARS AGO 1 YEAR AGO LAST MONTH THIS MONTH 5.60 5.19 4.91 5.15 1.22 1.00 0.95 0.97 10.48 12.48 15.02 15.42 10.87 6.26 8.77 8.72 5.07 9.01 9.29 9.77 2.49 5.28 5.16 5.36 4.51 11.04 10.66 11.14 0.93 2.67 2.38 2.49 9.00 17.40 17.86 18.92 2.50 3.08 3.72 4.00 2.65 2.48 1.70 1.68 2.79 1.54 1.93 1.95 2.24 2.91 2.92 3.06 0.89 3.70 3.28 3.63 2.34 2.84 2.88 2.92 5.86 8.75 8.62 9.11 1.00 0.74 0.92 0.91 0.74 0.20 0.22 0.19 4.98 2.63 3.31 3.24 6.25 3.10 2.71 2.73 0.67 0.36 0.43 0.43 0.69 0.88 1.03 1.08

SECTOR BUSINESS SERVICES MINING & EXTRACTION BANKING, INSURANCE & FINANCIAL PROPERTY SERVICES TRAVEL, PERSONAL & LEISURE COMPUTER SOFTWARE PROPERTY SERVICES TRAVEL, PERSONAL & LEISURE MEDIA & BROADCASTING COMPUTER SOFTWARE MINING & EXTRACTION BUSINESS SERVICES INDUSTRIAL & ELECTRONIC MACHINERY INDUSTRIAL & ELECTRONIC MACHINERY PROPERTY SERVICES CONSTRUCTION BUSINESS SERVICES CONSTRUCTION MEDIA & BROADCASTING

SHARE PRICES 5 YEARS AGO 1 YEAR AGO LAST MONTH THIS MONTH N.A. 0.95 1.15 1.28 0.22 0.04 0.05 0.05 0.07 0.28 0.71 0.62 1.06 1.53 1.24 1.24 0.74 1.01 1.15 1.15 7.95 23.00 21.50 25.00 0.29 0.66 0.72 0.74 0.95 N.A. N.A. 0.27 0.40 0.01 0.02 0.02 2.71 3.20 3.13 3.07 0.02 0.01 0.01 0.01 0.16 0.65 0.81 0.86 0.62 0.18 0.17 0.16 0.23 1.52 1.42 1.48 0.93 1.31 1.49 1.49 4.06 7.11 8.30 8.30 0.60 0.07 0.10 0.10 N.A. 1.35 1.45 1.42 8.75 0.53 0.58 0.55

% CHANGE 4.89 1.79 2.66 -0.63 5.17 3.88 4.50 4.62 5.94 7.53 -1.29 0.93 4.62 10.67 1.22 5.68 -1.14 -14.29 -2.11 0.78 0.65 5.37

Alternative Investment Market BEEKS FINANCIAL CLOUD GROUP PLC BOWLEVEN PLC BRAVEHEART INVESTMENT GROUP PLC CALEDONIAN TRUST PLC. CELTIC PLC CRANEWARE PLC FRONTIER IP GROUP PLC GOALS SOCCER CENTRES PLC IDE GROUP HOLDINGS PLC IOMART GROUP PLC LANSDOWNE OIL & GAS PLC OMEGA DIAGNOSTICS GROUP PLC PLEXUS HOLDINGS PLC RUA LIFE SCIENCES PLC SIGMA CAPITAL GROUP PLC SMART METERING SYSTEMS PLC SPACEANDPEOPLE PLC SPRINGFIELD PROPERTIES PLC ZINC MEDIA GROUP PLC

LIST DATE 27/11/2017 07/12/2004 30/03/2007 29/09/1995 22/12/2005 13/09/2007 21/09/2007 07/12/2004 30/06/2010 19/04/2000 21/04/2006 18/03/2004 09/12/2005 18/12/2002 27/04/2000 08/07/2011 31/12/2004 16/10/2017 30/07/2001

MARKET* VALUE (£m) 66,180 15,360 23,553 14,612 108,501 670,663 40,704 20,458 7,214 335,710 7,644 156,097 16,070 32,833 133,591 937,352 2,001 143,768 8,780

% CHANGE 11.30 0.00 -12.77 0.00 0.00 16.28 2.78 12.50 -2.08 -2.78 6.21 -5.88 4.59 0.00 0.00 2.50 -2.07 -5.17

*Figures to close of market Thursday, April 15, 2021 www.insider.co.uk

May 2021 INSIDER 13

INSIDER: CREATIVE Insider’s regular focus on Scotland’s creative sector by Ken Symon

IN BRIEF Beattie rebrands as Tigerbond and moves to London PR agency Beattie Communications has rebranded as Tigerbond and has relocated to London. The move followed a row in which founder Gordon Beattie posted a “tone deaf” social media post which was accused of being racist and homophobic. The company said it has retained its existing client book, team and oﬃce network across the UK, Ireland and North America. The agency announced that managing director Laurna Woods and her leadership team were taking over the agency, which has oﬃces in Uddingston, London, Manchester, Leeds and Belfast. Gordon Beattie is still chairman of Only Marketing which was a sister company to Beattie Media.

£27,000 digital media prize funds A £27,000 prize fund for digital media content creators has been launched at a Scottish university. George Mackintosh, the Scottish tech entrepreneur, has created the Papple Steading Digital Media Prize competition to support students and recent alumni of Queen Margaret University in Edinburgh. Students have been tasked with producing engaging digital media content celebrating Lothian and Scotland’s contributions to global agriculture between the 18th and 20th centuries. The winning works will be displayed at Papple Steading’s agricultural heritage museum. Mackintosh bought Papple Steading, one of Britain’s historic “model farms” of the agricultural improvement movement, in 2017. Mackintosh plans for the development of Papple Steading in East Lothian to feature an agricultural heritage museum, business destination and a community centre. 14 INSIDER May 2021

How media training was revamped for ‘new normal’

OR JOHN Morrison, owner of Morrison Media, the first Covid lockdown meant part of his business falling off a cliff. An important strand of the business of the PR agency owned by the former BBC TV News Scotland correspondent was media training for many businesses and other organisations. The training focused on TV complete with camera, so it was all done in person with the individual or a small group. But, with Covid-19 rules meaning people could no longer travel and or be in the same room, the media training was effectively just switched off. “All our media training was done face to face with a professional broadcast camera operator and camera equipment so it gave a real feel of what was happening, but all of that came to an end in March,” Morrison explains in his familiar Gaelic tones. “It was August before we began to get enquiries about whether we were able to deliver anything like the training we had done.” Morrison says they worked with IT people to look at how they could deliver training and came up with a way of doing it over Zoom. He points out that many television broadcast interviews and panel discussions are now done via that medium and, therefore, they would again deliver training close to the reality of what people would experience. Now Morrison does all the company’s media training from his home in Glasgow’s west end, where he also contributes to a Saturday morning sports programme on a Gaelic radio station. He says the technology is easy to operate. “I have an app on my iPhone and I have a broadcastquality mic I plug into it and off I go, and I can broadcast almost perfect sound quality for an hour. So the technology has opened up all these possibilities. “So, when we were watching people interviewed, whether on Zoom or [Microsoft] Teams, we thought we can deliver the training on that, and it has worked well.”

Attendance is 100 per cent, people tune in quickly and feedback is just as positive as it was before Morrison says the content and approach to the training is similar, although the in-person element has gone. The approach involves a package explaining the media using slides, clips of TV and radio broadcasts and then interview training. “When we’re doing the radio training we switch off the camera on both sides and give people a feel they are in the radio studio. Then we can record it, play it back and analyse it.” Morrison says that, like previous face-to-face training, they can replicate the real feel of a broadcast interview. “It’s exactly the same as if they were being interviewed by Reporting Scotland, the Six O’Clock News, Newsnight. “One of the things we teach is how to set themselves up. I don’t know if you notice but some people are better than others at

sorting their camera and some people are very good at getting a nice row of books or very pleasant bookshelves behind them. “Some people just don’t pay any attention to it all and we remind them all the stuff behind you does give an insight into your own house, so pay attention to that.” “We do a rigorous interview, play it back to them, then look at how they could have answered the questions better. Then we repeat.” Morrison says that, from September, the media training business he feared had disappeared was back to preCovid turnover levels. The new ways of doing things have also opened up opportunities for seminars on the media, which Morrison and those being trained can do from their own base rather than having to travel. “When I used to deliver training for one client in London I would have to fly down the night before, so you have the cost of the return flight and the hotel room for the night and all the other travel and expense. “But now we all just turn up, attendance is 100 per cent, people can tune in quickly and the interesting thing is the feedback just as positive as before.” ■ www.insider.co.uk

INSIDER: CREATIVE ON THE MOVE

CREATIVE VIEW Allan Rennie

Calling to account Facebook and its monopoly power In 1912, Louise D Brandeis, the godfather of American’s antitrust laws, said all monopolies were born out of “ruthless practices or by an improper use of inordinate wealth and power”. Brandeis slated US robber barons such as American Tobacco and The Standard Oil Company for abusing their power and influence to buy up rivals who threatened their dominance. In doing so, they kept prices and profits artificially high. Good news for shareholders, bad news for consumers. The Sherman Antitrust Act, The Clayton Act and the Federal Trade Commission all combined to break up these giants and end their stranglehold of the tobacco and oil industries. More than 110 years later, Mark Zuckerberg’s Facebook, a $800bn big-tech monopoly, is in the dock on the same antitrust breaches that led to the demise of American Tobacco and Standard Oil. The FTC and 46 states are suing Facebook for systematically buying up competitors – including WhatsApp for $22bn and Instagram for $1bn – with the specific aim to liquidate the competition. If you can’t beat them, buy them. They may all appear to be different platforms, but they share an ocean of data. And it is that control of data, the new oil, that power the algorithms that fuel Zuckerberg’s profits. Nearly three billion people use Facebook every month and, of the $27bn of revenue in the final quarter of last year, 99 per cent came from advertising. The FTC legal machinations will take years before reaching a Federal court and separating the siblings from their parent company will not be easy – a bit like rewiring the Starship Enterprise. If found guilty, Facebook would be forced to sell off WhatsApp and Instagram, who would then become full-blown independent competitors. Zuckerberg cultivates an image of a movement born in a college dorm that helps bring the world closer together. What’s not to love about a free social media service that connects you to friends and family, that binds communities together? The star witness in the case to break up the social network is Zuckerberg himself. According to the lawsuit, he revealed in a 2008 email: “It is better to buy than compete.” Celebrating the purchase of Instagram, he admitted: www.insider.co.uk

“Instagram was our threat.” Meanwhile, Instagram co-founder Kevin Systrom feared Zuckerberg “would go into destroy mode” if he did not sell. At an antitrust hearing, Congressman Jerry Nadler said: “Facebook, by its own admission, saw Instagram as a threat that could potentially siphon business away from Facebook. So, rather than compete with it, Facebook bought it. This is exactly the type of anticompetitive acquisition the antitrust laws were designed to prevent.” Zuckerberg’s denies accusations of a monopoly in the market, pointing to competitors such as TikTok, Twitter and Linkedin and China’s WeChat. But, out of the world top 10, his own platforms rank one, two and three. His mantra that big does not mean bad is at odds with a string of scandals that have plagued the platform over data abuse, fake news and hate speech: Fined for illegally allowing Cambridge Analytica to harvest the private data of 96 million users; accused by the UN of being complicit in genocide in Burma for spreading anti-Muslim hate speech; vilified for allowing the mosque massacre in New Zealand to be livestreamed; blamed by a grieving father for the suicide of 14-year-old Molly Russell, who viewed images of self-harm on Instagram. In the UK they face a crackdown by competition watchdogs who say their market dominance threatens the newspaper industry. Of £14bn spent on digital advertising in the UK, 80% is swallowed up Facebook and Google. The consequence of this dominance is that news brands are struggling to fill the chasm in print circulation and revenue decline with new digital business models – and fund the journalism that drives not just their profits but those of what one editor called “big-tech parasites”. The Government is setting up

the Digital Markets Unit after an investigation by competitions watchdog the CMA into the digital advertising industry. They say Facebook and Google “have such unassailable market positions that rivals can no longer compete on equal terms”. However, the chilling proof for many of Facebook’s abuse of monopoly power was Zuckerberg’s petulant reaction to new Australian Government laws to ensure they pay for content they plunder from publishers. In retaliation, he made the “difficult decision” to block millions Down Under from accessing not just news brands, but charities, women’s rights groups and Covid-19 health sites. Damning evidence that Facebook put profits before public interest, according to legislators. David Cicilline, chair of the US House of Representatives antitrust committee, said: “If it is not already clear, Facebook is not compatible with democracy. “Threatening to bring an entire country to its knees to agree to Facebook’s terms is the ultimate admission of monopoly power. Their ability to dictate terms, call the shots, upend entire sectors, and inspire fear represent the powers of a private government.” At the root is a problem common to any company that witnesses rapid growth in a short space of time – remember Facebook is only 17 years old – and that is lack of control. Corporate governance and risk management principles that worked for a start-up that served just 2000 students in Cambridge, Massachusetts in 2014 do not work for a tech giant serving a global audience in the pandemic world of 2021. Zuckerberg may be well-meaning but has he built a Frankenstein’s monster? Too big, out of control and whose original purpose has been blinded by a hunger for profits and growth. Facebook may not be going away any time soon. But it is no different from monopolies such as American Tobacco and Standard Oil, whom Brandeis described as “clumsy dinosaurs”. And we all know what happened to the dinosaurs. Allan Rennie is honorary professor of Media Studies at the University of Stirling and an associate director of public relations company Hollicom

Neil McIntosh in April took up his role as editor of The Scotsman as the new owners of JPI Media made changes in the group’s titles. McIntosh moved to the role from that of managing editor of BBC Online. He began his journalistic career at the Edinburgh Evening News and The Scotsman before moving onto The Wall Street Journal and The Guardian.

Management changes at Scottish social media agency Hydrogen sees Nicky Logue (above) becoming managing director, moving up from her role as strategy director. Agency founder Mike Scott becomes chief executive and co-founder Daniel Rae becomes chief innovation officer. Scott said: “While Daniel and I will still play an active role in delivering the Hydrogen services, I am excited about the business prospects in 2021 and I’m looking forward to seeing Hydrogen flourish with Nicky at the helm.” The Press and Journal has appointed Andy Philip as political editor. Philip moves to the paper from the Daily Record where he was live politics editor. The move was part of a DC Thomson campaign for greater digital engagement with its readers. Glasgow-based creative agency Made Brave has appointed two directors. Jenny Plant, the healthcare specialist, and Philip Lancaster, a former WPP team leader, have joined the board as the agency seeks to grow its international presence. Jane Robertson has joined online mental wellness platform company Frog Systems as director of communications. A former BBC and Sky Sports presenter, Robertson moved to the Glasgow start-up from cloud computing firm iomart. May 2021 INSIDER 15

THE BURNING:QUESTION

The burning question Q

Has Covid-19 done irreparable damage to Scotland’s hospitality sector?

NO Roland Smyth head of the Scottish Hotels & Leisure Group international law ﬁrm CMS

Hospitality businesses support hundreds of thousands of Scottish jobs and, with the sector and government working closely together, the sector can and will recover. While we cannot overstate the pandemic’s hugely damaging impact, there are reasons to be optimistic. Scottish hospitality was thriving before Covid. The vaccination programme, easing of lockdown and an expected increase in UK domestic holidays this summer should bolster many businesses that have survived. Further support will, however, be critical going forward.

MAYBE

David Hay managing director Compass Scotland

The hospitality industry will recover, but to do it well we need to ensure the next generation of talent is nurtured and retained, so our recovery is sustainable in the long term. Hospitality has always been a good career choice in Scotland and we need to keep apprenticeships and training high on the agenda, to create opportunities for all in an exciting industry. Building a highly skilled workforce should be central to any recovery plan after the pandemic.

NO Leah Hutcheon founder Appointedd

Undoubtedly Scotland’s hospitality sector has suffered with Covid-19, but we have seen some real innovation throughout the sector which may deliver permanent new income streams. For example, Appointedd works with hotel groups who have been creative with their venues; encouraging much smaller events via bookable tours of event space. Also, we have seen office space offered in hospitality venues, utilising bedrooms or shared lobby facilities to meet the new, flexible way of working.

in association with

Stuart Patrick chief executive Glasgow Chamber of Commerce

When restrictions are ﬁnally lifted, I don’t doubt the sector as a whole will bounce back. Hospitality has relatively low barriers to entry so we can expect new entrants to carry on emerging. However, some businesses simply will not have the ﬁnancial resources to survive and the impact will be terminal. We also risk losing some well-loved businesses as a result of entrepreneurial characters – who are usually incredibly resilient – deciding to call it a day.

NO Carol Matthews visitor experience manager Loch Lomond & The Trossachs National Park

There is no doubt tourism has been hit very hard. It will not bounce back but it will rebuild steadily and with a new outlook. Clearly, rural tourism is in a very diﬀerent position from city and urban tourism. The feedback from local businesses varies depending on product type and market. Those who catered to overseas tourists are challenged more than those who previously secured, or who can adapt to attract, domestic visitors. The sector is beginning to see bookings and has to be positive in its marketing to give customers conﬁdence.

Jane Rennie founder & CEO The Extraordinary Training Company

Devastating, yes. Irreparable, no. I would rather look positively on the future, respond to the challenges and seize new opportunities. Customers may be slow to return to old habits, and crowded venues and businesses will have to reimagine the customer experience to re-engage, build, and maintain their trust. The Covid-19 pandemic will eventually fade, the economy will recover and the Scottish tourism and hospitality sector will bounce back and move forward with conﬁdence to a successful, thriving future.

If you would like to contribute to the Burning Question or suggest topics please email editor@insider.co.uk

CMS - local insight and global perspective cms.law/scotland 16 INSIDER May 2021

www.insider.co.uk

BUSINESS PROFILE

HARNESSING THE DEVELOPING NEEDS OF CLOUD ADOPTERS A whole service sector is growing up around the developing needs of cloud adopters, including many examples here in Scotland capitalising on these tailwinds. The types of companies emerging include public cloud integrators, cloud security specialists, network transformation specialists (resell, install, maintain), hybrid private and public cloud providers. This has presented investors M&A opportunities to deploy capital in exciting growth businesses with management teams that have been alive to these trends. It has also driven corporate acquirers to buy-up businesses that possess the know-how and capability they require. EY has created a team of experts to harness these emerging needs and help the Scottish market accelerate emerging opportunities in tech. The team, headed by John Divers who joined EY in 2019 as an Associate Partner with 15 years’ experience in the TMT (Technology, Media and Telecommunications) sector, is pulling expertise from across several specialist disciplines. Joining John is Alan Campbell (Associate Partner in Tax), Adam Broatch (Strategy & Transaction Director), Rachel Chalmers (Senior Manager People Advisory Services), Kay Greenshields (Innovation Incentives Manager), and Kevin Swan (Strategy & Transaction Manager). John said: “We are constantly evolving our approach to address our clients’ needs and indeed the market needs. As a result, we’ve created this sector team here in Scotland. The team brings together deep expertise across a range of disciplines that are relevant to the needs of growing technology businesses – be it early stage fund raising, accessing grants and innovation incentives, designing management incentive plans, corporate and employee mobility tax advice, corporate

finance and due diligence advice associated with an exit or corporate M&A, and much more.” Cloud adoption is just one of the broad macro trends within the technology sphere that is driving significant change right across the business community, including in Scotland. Cloud adoption has increased as businesses become increasingly comfortable with the technology and its security. Trends show business use of cloud is moving from specific use-cases, such as archiving and storage, to housing core business applications with virtually all new software adopted on a SaaS (Software-as-aService) basis. This adoption of cloud has several knock-on effects that businesses need to consider: t )PX UP NJHSBUF UP UIF DMPVE XIJMF NJOJNJTJOH CVTJOFTT EJTSVQUJPO BOE NJUJHBUJOH CVTJOFTT SJTL t /FUXPSL UFDIOPMPHZ BOE DBQBCJMJUZ NBZ OFFE UP CF SFQMBDFE PS VQHSBEFE UP FOBCMF DPNQBOJFT UP BENJOJTUFS UIFJS OFUXPSLT JO UIF DMPVE t 4FDVSJUZ QSJPSJUJFT NBZ OFFE UP CF SFGSFTIFE UP BEESFTT UIF TQFDJGJD SJTLT BTTPDJBUFE XJUI UIF DMPVE t %BUB TPWFSFJHOUZ NJHIU OFFE UP CF DPOTJEFSFE XIFSF HFPHSBQIJDBMMZ EBUB JT IFME JO UIF DMPVE o TVDI BT DVTUPNFS EBUB o OFFET UP CF MPPLFE BU DBSFGVMMZ UP FOTVSF JU NFFUT XJUI DVTUPNFS SFRVJSFNFOUT BOE DPNQMJFT XJUI BQQMJDBCMF SFHVMBUJPOT

John Divers

For more information on how EY can support your business visit ey.com

Oliver Henderson

These trends have been accelerated by the pandemic with increased work from home capabilities expected to be sustained postpandemic. For employers to facilitate remote working there has been more widespread adoption of SaaS applications, which are predominantly hosted in cloud environments. Banks and other large financial institutions announcing cloud adoption strategies and arrangements, including in Scotland, have played a key role in building confidence in the cloud among CTOs and business leaders. Oliver Henderson, EY Associate Partner for FinTech in Scotland: “UK banks and other Financial Services businesses are increasingly implementing cloud-led strategies in which to provide them with greater agility and flexibility to meet the changing needs of customers and the products they require. This has been a key driver in the growth of FinTech businesses, where here in Scotland we already have a fast growing, and globally recognised, FinTech cluster where EY actively supports both FinTech businesses and financial institutions in their strategic objectives. “As the landscape continues to evolve, we look forward to bringing our extensive knowledge and expertise in the FinTech and wider Financial Services community beyond traditional markets.” John continues: “There is sometimes a perception that a firm like EY is focused on working only with the largest businesses in the market - but we see things differently. We work extensively with young entrepreneurial businesses and believe it’s important to forge partnerships at an early stage, particularly with businesses in the TMT sector. “We think the opportunity in Scotland is exciting and here to stay, and we want to play our part in helping TMT businesses and management teams here in Scotland achieve their ambitions.”

THE BIG PROFILE: MARK WILSON, INTELLIGENT LAND INVESTMENTS GROUP

18 INSIDER May 2021

www.insider.co.uk

THE BIG PROFILE: MARK WILSON, INTELLIGENT LAND INVESTMENTS GROUP

EVERYTHING WE ARE DOING IS ABOUT HITTING OUR CLIMATE NET ZERO TARGET By KEN SYMON

HERE is something huge coming out of Loch Ness and it could be really significant. It is not Nessie that I am describing but a renewable energy project that could go a long way to solving the major problem of renewable energy. “It is exciting, very exciting,” says Mark Wilson of the Intelligent Land Investments Group, whose brainchild the project is. “With renewable energy, generally, the issue is inconstant supply from offshore and onshore wind. But here we are talking about a project that just doesn’t have those issues at all.” The technology is pumped hydro storage and the particular project he is referring to is Red John, ILI Group’s £500m development project at Dores on Loch Ness. It is a huge project and one of a handful that together have the potential to create 10,000 jobs and inject £3bn into the Scottish economy. Simply put, pumped hydro storage aims to use Scotland’s greatest natural asset – water – to fill the intermittent power generation gap and keep the lights on. It involves pumping water up to a reservoir when there is more energy on the grid than is needed and store it until the power is needed and the water is released to drive the generators. Red John is the most advanced of ILI’s pump hydro storage projects that also include a 600MW plan at Loch Awe and a 520MW site Loch Tay.

www.insider.co.uk

Those projects are the result of years of work for ILI Group. Mark Wilson explains: “From 2009 to 2016, we were doing onshore wind. While we were on that journey it just became so clear that energy storage had to become part of the energy mix.” This became evident, Wilson says, from the UK Government announcement in 2015 that “unabated” coal-fired plants were to close from 2025. He says it became clear to him and his colleagues “working on the front

You just have to have energy storage. There’s no other way about it. If you’re going to get to net zero, you need it for when the sun’s not shining, the wind’s not blowing line” that there had to be another solution beyond renewables because of the intermittent nature of them as a power source. “You just have to have energy storage. There’s no other way about it. If you’re going to get to net zero, you need it for when the sun’s not shining, the wind’s not blowing. So, we looked at all the different technologies. We looked at green hydrogen, which is good, but it’s just not quite there yet. We looked at pump storage, which is what we’re doing. We looked at lithium battery, which

we’re also doing. And we looked at compressed air. “But the reason we went with pump storage is Scotland’s got the topography for it, and you can do it very big-scale, big-capacity: Red John is 450 megawatts. That’s a big project that will cost somewhere in the region of £500m to build, but it will offset millions of tonnes of CO2 emissions and it will allow significant amounts of renewables onto the system so we hit our net-zero targets. “So, when the sun’s not shining and the wind’s not blowing, it kicks in and powers the grid. It also gives the country – not just Scotland, the whole of the UK – energy security. So, where a lot of the time we’re relying on interconnectors from Europe with the pump storage projects that are looking to get built in the UK, that can give the UK, and Scotland especially, more security of supply, which is vital.” Mark Wilson explains how it will work. “When there’s excess wind on the system, what the grid will do is turn those turbines off – that’s called curtailment and that costs the consumer hundreds of millions of pounds a year. Rather than doing that, we buy that power at a cheap price, or even for nothing, and we use that power to pump the water from Loch Ness up to an upper reservoir in the mountain and it’s stored there. “Then when there’s a need for it, when the wind’s not blowing, they’re able to hit a button, the water goes down the tunnels underground through gravity, goes through the turbines and May 2021 INSIDER 19

THE BIG PROFILE: MARK WILSON, INTELLIGENT LAND INVESTMENTS GROUP the turbines turn and generate electricity and that goes onto the system. It’s that simple and it can be repeated time and time again.” He also argues that the approach is a long-lasting one, providing answers to Scotland’s energy needs for many years to come. “Cruachan, which is up near Oban, I think that’s 65 years old now, and was bought recently from ScottishPower by Drax. That will have another life of maybe 50, 100 years on it. These things are seriously historic bits of infrastructure. Cruachan was opened by the Queen when she was in her thirties.” Indeed, Cruachan has been supplying significant amounts of power since October 1965, when the Queen officially opened what was then the first reversible pumped hydro storage system to be built anywhere in the world on such a scale. In addition to its supply of power to the grid, Cruachan is also significant in that it has a “black start” capability – when there is a total or partial power shutdown it can restore power without relying on an external power transmission network, something that Red John and the other projects ILI are developing would also have. Mark Wilson says: “I’m very proud of what we’re doing in ILI: we’re bringing three of these projects to the market and we’re hoping to have them all built by 2030. And that’s going to create – we are going to create personally – about 5,000 new green jobs. These are big infrastructure projects. It’s all construction, 70 per cent of the capital cost is construction, so a huge amount of jobs. “What is exciting is that, coming out of Covid, obviously you need to stimulate the economy. And if you look back in history anyway it’s always been big infrastructure projects that have done that.” In addition to the three projects with a generation capacity that ILI are developing, SSE, Drax and Buccleuch Estates are also working on pumped hydro storage projects, with SSE having received revised consent from the Scottish Government for its Coire Glas hydro plant near Loch Lochy in Lochaber in the Highlands. That plant would double the current amount of pumped hydro store capacity in the UK. Research commissioned by SSE from Imperial College London 20 INSIDER May 2021

Coming out of Covid, obviously you need to stimulate the economy. And if you look back in history anyway it’s always been big infrastructure projects that have done that concluded that pumped hydro storage could save up to £690m per year on energy costs by 2050. Wilson sums up the impact of the projects: “That four gigawatts in total are enough to power London, Glasgow and Liverpool, so it’s quite significant. There are 40 gigawatts of pumped energy storage going to be needed on the system by 2050, so there’s still a long way to go. It’s not the answer but it is part of the solution.” But even that part of the solution as he describes it comes with significant capital costs – ILI’s projects come with a price tag of somewhere between £2bn and £2.5bn. Wilson argues that, while the capital costs are significant, there is funding out there. “We’ve been approached by more than 18 global infrastructure funds in the past two

years. At the moment there are six global infrastructure funds in our data room looking at Red John.” But Wilson says there is so far a missing piece in the puzzle. “Scottish Government are very supportive of this, it’s on their radar, and that of the UK Government. We’re doing a lot of lobbying and we’re getting there and we believe we’re not that far away, but we need the UK Government to make a policy change now. It’s not a difficult policy change, all we need is for them to put a floor price for long-duration storage.” He hopes the Government will bring in a measure that is technology agnostic, that would cover both hydro pumped storage and other options, such as green hydrogen. “Back in the day there was always talk of a race on between technologies, which technology would win the race. My belief is that you just can’t have that these days with where we are with climate change – you don’t have that luxury of choosing. It’s not a beauty contest any more. You need to get things built that are going to do the job. “If a policy came out next month for long-duration storage that just gave a floor price … so it’s not going to cost the consumer money, it’s not a subsidy, it’s just a floor price to give www.insider.co.uk

THE BIG PROFILE: MARK WILSON, INTELLIGENT LAND INVESTMENTS GROUP investors confidence that they can get a minimum IRR [internal rate of return on the investment]. Those four gigawatts that are out there – not just ours – those four gigawatts will start construction and be operational by 2030. “They’re saying by 2025 consumers are going to be paying £1bn a year in constraints payments – that’s switching off turbines. That’s just ridiculous. This will mitigate against that as soon as they’re operational. We’re so close, all we need now is for the UK Government to get this on their dashboard and say ‘yeah we realise this another important cog in the wheel to get everything moving, to get us to net zero’. The positive is that climate change is very much front and centre now of all governments’ agendas.” I suggest to him that with the capital costs, the different technology option and the length of time – about a decade – the pump hydro storage sites will take to develop this is a big bet for a government to make and perhaps governments are not that good or quick at making such decisions. “It’s not a bet, that’s the thing,” Wilson says. “All we’re saying to the Government is put on a floor price. These things stand on their own two feet. There’s Cruachan up in Oban, there’s Dinorwig down in Wales – these things make money with the market. All we need is a floor price that will get the investors

www.insider.co.uk

all on board. It’s the investors that’ll take the risk. “The government has done due diligence on this. They know that pump storage will not hit that floor price – it will be way above that. But that will get investors to take that jump, it doesn’t need to be government-funded.” He cites a research report, Strategy for Long-Term Energy Storage in the UK conducted by Jacobs, the leading engineering group, that was released in August last year. “It showed that pumped hydro storage is the cheapest form of energy storage,” he says. “If you’re looking at short-term storage, lithium batteries are the way to go – that’s up to four hours. If you’re talking anything above eight to 12 hours of storage which is needed, pump storage is three times cheaper than lithium battery. It’s cheaper than any other forms of long-term storage. So that in itself is a reason to do it, because it’s going to save the consumer money. He continues: “We’re doing two bad things at the moment: we’re stopping the turbines when you could be turning them and making energy. At the moment you’re switching them off, you’re losing that energy. But the

That four gigawatts in total are enough to power London, Glasgow DQG /LYHUSRRO VR LWłV TXLWH VLJQLğFDQW

consumer is also having to pay the wind operator for switching them off. So, it’s like a double whammy. Whereas with pump storage on the system, they can continue to run, you can bring more renewables onto the system, and you’re not wasting that energy, and you’re not wasting the consumer’s money. “I’m doing this because I know it makes sense. We started this in 2015 and we’ve looked at more than 130 sites with Acol, who are one of the global top tech companies, and we whittled them down to what we know are the three best sites because we need to get them built. “This is just part of our journey. We have a goal after this which is a lot bigger than this, but it’s all about stepping stones. Everything we’re doing is about hitting our climate net zero targets. I’m very proud to have a letter on my wall from Sir David Attenborough. They wrote to me personally and said what we’re doing is a really good thing; a huge stamp of approval for us.” Mark Wilson is convinced that, if there is a UK Government move on the floor price, the deal to build the Red John pump hydro storage scheme would become a reality. ILI Group would partner with one of the international infrastructure funds they are talking to from development right through to operation. It would take about £500m to build and would take a minimum of six years. It would create 1,000 jobs, directly and indirectly and over its life, Wilson says, Red John would offset more than 14 million tonnes of carbon emissions. He stresses: “They stand on their own feet, they don’t need to get subsidised, like nuclear or most renewables on the system. But, because they are huge infrastructure projects, investors are saying ‘yeah, we like this, it makes money but, because there is a six-year production period, it’s high-risk’. “We just need some certainty to be able to invest that we’re not going to lose all that money’. “The Government putting in that floor price takes away that barrier to entry and then it’ll just happen. And what’s beautiful about it is that just as we’re coming out of Covid we’re positioning ourselves – not just us SSE, Drax and Buccleuch Estates to bring thousands of jobs to the Highlands of Scotland for the next 10 years.” ■ May 2021 INSIDER 21

REVIEW: OIL & GAS INDUSTRY

NOW IS THE TIME TO TURN THE LOW-CARBON DREAM INTO A REALITY By GRAEME SMITH

HE UK oil and gas industry has, over the past half century, become expert at reinventing itself through innovation. However, it is currently facing a challenge of unprecedented scale. Global lockdowns and dramatically reduced economic activity because of Covid-19 have caused oil demand to plummet. The UK oil and gas industry supports more than 250,000 jobs when induced employment is taken into account and it is feared that, by the end of this year, as many as 30,000 of these could have been lost. As well as the double whammy of Covid-19 and an oil price slump, the industry is facing growing competition for investment from more attractive prospects, not least renewables. That is why the recently approved North Sea Transition Deal (NSTD), a commitment of co-operation between the sector and the UK

www.insider.co.uk

Government to support the industry to a greener future, is so important. The potential the NSTD offers includes: unlocking up to £16bn in investment over the next decade in crucial low-carbon solutions; supporting the creation of up to

Oﬀshore oil platforms in the Cromarty Firth

It will unlock billions of pounds of investment and see government and industry work together to deliver a homegrown energy transition Deirdre Michie, OGUK (below)

40,000 new energy jobs; cutting UK emissions by 60 million tonnes; and kickstarting hydrogen in the UK. “This is a transformative partnership that will harness the expertise of the UK offshore oil and gas industry to urgently meet the country’s climate ambitions of net zero emissions by 2050,” says Deirdre Michie, chief executive of OGUK.

“It will unlock billions of pounds of investment and see government and industry work together to deliver a homegrown energy transition, realising innovative low-carbon solutions that can be exported globally. “The NSTD will safeguard UK energy security, providing affordable energy to millions of households, secure tens of thousands of jobs in industrial heartlands across the country and support the UK economy.” Emeka Emembolu, senior vice-president of BP North Sea, says: “The NSTD is a strong statement of support for our industry as we navigate towards decarbonisation of the UKCS and net zero and fits in with BP’s strategy of developing resilient hydrocarbons in the North Sea. “Since the beginning of oil and gas production in the North Sea we have been pushing the boundaries of what is achievable. “Central to this has been May 2021 INSIDER 23

REVIEW: OIL & GAS INDUSTRY developing the technology and skills needed to operate safely and efficiently, and our work towards net zero will be no different. “Our North Sea oil and gas heritage will continue to play a major part in the energy transition. With decades of transferable technology, experience and skills, this region can be at the forefront of BP’s and the industry’s transformation.” The drive for net zero requires the fast-tracking of the development and deployment of low-carbon energy sources. Key to this could be the creation of a world-leading Energy Transition Zone (ETZ), as set out by Opportunity North East and to which £27m was committed in the Budget. It will be a physical place for research and development, test and demonstration and manufacturing activities in an exemplar net zero environment. It will become the focal point for the development of the new energy transition industry cluster in the region. It will leverage Aberdeen Harbour Board’s £350m investment to create a unique offering of combined marine and onshore support. The oil and gas sector is recognised as a technology pioneer and, with innovation now even more vital, oil and gas technology body OGTC – with more than £160m co-invested with industry – has “Technology Driving Transition” as its mission. Stephen Sheal, OGTC’s external relationship director, says: “From offshore electrification and net zero decommissioning to autonomous robotics and renewable power systems, we have screened more than 1,000 exciting new technologies, completed or progressed 100 field trials, and generated £15bn GVA potential for the UK economy. “We’re seeing significant growth in cleantech, with 50 per cent of the start-ups on our most recent TechX accelerator pursuing net-zero solutions. “Our Closing the Gap: Technology for a Net Zero North Sea report in 2020, identified the critical technologies needed to deliver an integrated energy system – such as affordable saltwater electrolysis to produce green hydrogen at scale and new materials to enable efficient carbon capture (CCUS) – and the huge economic opportunity this creates. “Addressing these gaps can create 24 INSIDER May 2021

Industry and government must invest and act now, or we risk losing our opportunity to become a world-leading hub of energy transition activity Stephen Sheal, OGTC (below)

up 232,000 jobs and deliver £125bn of value to the UK economy. “But industry and government must invest and act now, otherwise we risk losing our opportunity to become a world-leading hub of energy transition activity.” Energy consultancy Xodus is partnering with its clients to help them adapt to the changing North Sea landscape and has recently invested in the growth of its lowcarbon and emissions teams. John Macdonald, OPITO

Steve Swindell, Xodus’s managing director, says: “As the North Sea evolves, the focus on emissions is moving up the agenda as calls for more transparency around reporting and impacts grows. We have made strategic investments and increased our expertise in these areas as a sustainable energy supply requires integrated sources in maximising economic recovery. “Our combination of oil and gas and renewables capabilities is also allowing us to lead the way in helping North Sea clients identify and define options for electrification on both individual facilities and an area wide basis.” Xodus recently delivered a report for the Scottish Government on the scale of the opportunity to develop green hydrogen from offshore wind, which informed December’s Hydrogen Policy Statement and Climate Change Plan Update. The company has also been tasked by Scottish Enterprise to help develop and grow the offshore wind supply chain across Scotland. Energy Industry veteran Mark Patterson has formed Aberdeenbased Carbon Neutral Energy (CNE) to make a major impact on emissions by using a unique mobile battery storage solution to store and deliver green electric power. www.insider.co.uk

REVIEW: OIL & GAS INDUSTRY He is aiming to raise at least £300m and create 200 jobs over the next five years to exploit the opportunity. CNE’s mobile and modular units, with a 10-year life-cycle and storage from 500 kilowatts to several gigawatts, can relieve the pressure on an already overtaxed national grid, while reducing carbon emissions and converting the UK’s current containment payments into power storage. Patterson says: “Capacity has been lacking for years leading to more than £130m of taxpayers’ money being spent last year on paying windfarms to stop producing – this could be diverted into storage and delivering the power when we need it. “Being able to deliver green power to remote sites, for example, is a game-changer for connectivity in relation to electric vehicles. The applications for sizeable electric storage systems are immense and the need is right now.” Despite the changing sector landscape, M & A activity has already surpassed last year’s deal value for the North Sea and is likely to increase this year, according to Norman Wisely of CMS, the commercial law firm. “While there are fewer lenders operating in the market now, there are also fewer buyers out there and the mood is one of increasing optimism. For aspiring oil and gas-focused independents and private equity entrants, there will be likely opportunities to secure attractive deals across a range of assets, from exploration acreage and field developments to mature late-life assets. “The volatile oil price and Covid-19 has, however, created significant changes to the time involved in deal negotiations especially affecting the period between signing and completion. Both buyers and sellers are also continuing to find it hard to secure valuations due in part to the recent period of oil price volatility. It’s hoped the price increases seen so far in 2021 will stabilise the market and help address this issue.” According to Mike Beveridge, UK co-head of Simmons Energy, the energy investment bank, one of the key themes is the emergence of Middle East buyers and investors, with substantial capital and aggressive growth www.insider.co.uk

Mike Beveridge, Simmons Energy

Steve Swindell, Xodus

Emeka Emembolu, BP

While there are fewer lenders operating in the market now, there are also fewer buyers out there and the mood is one of increasing optimism Norman Wisely, CMS (below) Norman Wisely, CMS

strategies, pursuing their own local content obligations by acquiring international technology and expertise with a view to exploiting this capability in their vast region. “Relative to other sectors, oil and gas has continued to perform during the coronavirus crisis. With the industry proving itself essential during lockdown, many oilfield services companies performed quite strongly and are now seeing a recovery in earnings. “The significant existing private-equity portfolio built up during the last ‘super cycle’ will be a key driver of M&A activity over the next few years. Many of these companies will now look to transact so they can generate liquidity for their investors within their planned investment timeframe. “The industry headwinds make larger exits quite challenging, leading some of the private businesses of scale in the sector to consider transformational paper deals. “Fundamentally the oilfield services sector needs a lot more consolidation to remove capacity, achieve genuine synergies and offer more compelling benefits to their E&P customers. “We are seeing substantial deal-making activity driven by the energy transition, particularly in offshore wind. Other more nascent sectors, like electrification of oil and gas production, CCUS, hydrogen and large-scale energy storage will rapidly gain M&A momentum. “Many have written off oilfield services as a tainted ‘fossil fuels’ industry. Oil and gas will remain a key global industry for decades to come, whether the UK wants to participate in this or not, and those that have conviction in this continuing journey may well find themselves making some really interesting financial returns, when others ‘are looking the other way.’” The transition towards a more integrated energy system presents an exciting opportunity for the UK to maintain its position as a global energy hub but a key element will be the availability of a multi-skilled and flexible workforce, according to John McDonald, CEO of OPITO. “We know from OPITO’s Workforce Dynamics: Skills Landscape reports that 80% of our current offshore energy workforce will still be active in the sector in 2025, with many of them positive May 2021 INSIDER 25

REVIEW: OIL & GAS INDUSTRY about the opportunity to retrain for roles in the renewable energy industry. We need to help make that transferability of skills a reality, at all levels, by creating the right platform for green skills, jobs and careers. “At OPITO, we embarked on that journey last year with the launch of a suite of global qualifications and standards. “In further recognition of the collaboration required across all parts of the energy sector, a year ago we established the Energy Skills Alliance (ESA). The group brings together leaders from oil and gas, renewables, nuclear and refining, as well as representation from regulators, trade unions and the UK and Scottish governments. The ESA will deliver key work programmes over the coming months, designed to provide a clear forecast of energy skills demand to 2050, to inform and inspire the next generation, and to lead the creation of an All-Energy Apprenticeship scheme.” Vic Fraser, regional officer for Unite the Union, said he hoped the ground-breaking Energy Services Agreement (also known as ESA) for engineering and maintenance workers in the North Sea would enable them to transition from oil and gas to renewables offshore when appropriate. Fourteen major contractors from the offshore energy sector supply chain have confirmed they will sign up to the ESA with the three trade unions involved – Unite, GMB and RMT – and, for the first time in the sector, the agreement is being supported by the majority of operators. “It will hopefully help put an end to the boom-and-bust cycle offshore, which means our members receive a good pay increase when the price of oil and gas is going through the roof but are made redundant as soon as price of oil and gas falls. Hopefully we can get some stability,” he says. “The operators are the paymasters offshore and must treat the supply chain fairly and consistently. The ESA allows the supply chain to tender at set labour costs, so when a contract is won it should be on the merits of the supplier not the cost of the labour. There is also greater optimism in the UK subsea sector following a recent survey of its supply chain that revealed an improved outlook with 26 INSIDER May 2021

Wind turbines are installed in the North Sea, oﬀ Whitley Bay

Our subsea industry has the potential to become one of the largest and fastest-growing industries in the country and the recent funding will accelerate its transformation Neil Gordon, Subsea UK (below)

fewer anticipated redundancies and new geographical markets. Neil Gordon, chief executive of Subsea UK, says: “This is particularly encouraging given the fragility of many firms before the pandemic hit. It also underlines the resilience of the UK’s underwater industry and the huge potential for it in both the energy transition and

the blue economy. “While oil and gas is still the dominant market for the subsea industry, activity in renewables and other sectors of the blue economy is increasing, particularly offshore wind where our subsea companies have now firmly established a strong foothold. “Both the UK and Scottish governments’ energy strategies present exciting opportunities for subsea. Working with government to ensure the subsea supply chain is at the heart of the country’s energy strategy and measures are in place to ensure it can maximise the opportunity is a key priority for us. “Of major interest to the underwater engineering industry and its supply chain are floating offshore wind, hydrogen and CCUS – all of which will, in some form or other, rely on the subsea expertise which has been honed in North Sea oil and gas and now leads the way around the world.” “Our subsea industry has the potential to become one of the largest and fastest-growing industries in the country and the recent funding from both governments for the creation of a Global Underwater Hub will accelerate its transformation. ■ www.insider.co.uk

REVIEW: OIL & GAS ANALYSIS

HE ACQUISITION of Chevron’s UK North Sea business in 2019 has propelled Ithaca Energy to the top of the offshore exploration ranking table which reveals a drop in profits for six of the top 10. Ithaca is owned by Israel’s Delek Group and the $2bn (£1.6bn) deal added 10 oil and gas fields to Ithaca’s portfolio. The results to the end of 2019 year show Ithaca’s profits fell from £480.6m to £448.1m but it recently reported it had more than doubled its turnover last year to $1bn (£718m). Retaining second place in the rankings is Repsol Sinopec Resources UK Ltd, but turnover was down 17 per cent from £1.2bn to £993.5m. Profits dropped from £1.3bn to £176m. The company is a joint venture between Spanish-headquartered Repsol and Sinopec of China. It is based in Aberdeen, has interests in 48 fields on the UK Continental Shelf and operates 38 of them. Although turnover was down 15 per cent to £857m and profits fell from £185.6m to £86.6m, the Korean National Oil Corporation subsidiary, Dana Petroleum, moved up two places to third. Dana has interests in 22 producing oil and gas fields with 11 operated and 18 non-operated licences. Turnover was also down more than 17 per cent for fourth-placed Apache North Sea Ltd, dropping from £664.2 to £547.1m. Profits fell from £250.3m to £182.6m. Other top-10 companies that experienced a drop in both turnover and profits were Total E & P North Sea UK Ltd, with turnover down 2.9 per cent and profits down £311m to £137.1m, and DNO North Sea Plc, with a 7.5 per cent drop in turnover to £202m and a £1.9m loss compared to a £22.8m profit the previous year. Enquest Plc experienced a drop in turnover of almost 50 per cent (49.2 per cent) for year-end December 2020, but it reduced its losses from £552.9m to £414.6m. Aberdeen-based John Wood Group Ltd, known now just as Wood, has topped the service company rankings. It is one of the world’s leading consulting and engineering companies operating across energy and the built environment and its results to December 2019 show a drop in turnover (4.9 per cent) to £7.5bn but a rise in profits from £42.1m to £112.8m.

www.insider.co.uk

ITHACA RIDES CREST OF A WAVE AMID DIFFICULT WATERS By GRAEME SMITH

Craig Shanaghey, Wood’s president of operations for Europe, Middle East and Africa, said: “We are delighted to be ranked number one for offshore services by Scottish Business Insider, which is testament to our continued focus on delivering differentiated, high-value solutions for our clients in the offshore energy sector. “We continue to work with our clients to ensure safe, reliable and sustainable delivery, all while seeking opportunities to extend asset life, increase production efficiency, and decarbonise operations on the industry’s critical transition to net-zero.” Technip UK Ltd, in second, increased turnover by 14.3 per cent to £903.4m and turned a £98.3m loss into a £47.5m profit. National Oilwell Varco (NOV) provides oilfield equipment, technologies and expertise globally to answer the challenges of its oil and gas clients. By increasing turnover by 15.4 per cent to £346.7m, it increased profits

Above: Ithaca Energy’s Stella platform in the North Sea

from £3.4m to £12.7m and rose from 28th place to fifth. Another high riser was Fugro GB (North) Marine Ltd, which was successful in increasing turnover by 16.8 per cent to £119.5m and profits went up from £3.1m to £12.9m taking it from 86th to just inside the top-10. Shipping and energy service company North Star Holdco Ltd achieved a negligible increase in turnover but managed to turn a £13.5m loss into a £1.9m profit taking it to 22nd from 80th in the rankings. Ashtead Technology rose almost 70 places from propping up the top 100 to 33rd. The company provides technologically advanced subsea solutions, tools and systems from its headquarters at Westhill in Aberdeenshire and offices around the globe. Its turnover rose 6.4 per cent to £21.5m and it turned a small loss into a £5.3m profit. The biggest faller was offshore services company Aker Solutions. It dropped from third in the rankings to 47th when turnover fell by 41.7 per cent to £293.1m and its losses increased from £3.3m to £39.4m at December 2019. ■ May 2021 INSIDER 27

REVIEW:OIL & GAS TABLES Offshore service providers RANK 21 20

COMPANY ACTIVITY

(42)

John Wood Group Plc Energy related services

Aberdeen

Dec-19

7,500.89 -4.89

7,886.42 42.13

112.77 909.95

50,942 -73.49

2,214

Sco

(2)

Technip UK Ltd Offshore engineering; construction

Aberdeen

Dec-19

903.35 14.32

790.20 -98.33

47.51 1.93

741 n/a

64,111

(1)

Subsea 7 Offshore services

Aberdeen

Dec-19

534.69 -35.63

830.66 38.77

33.11 n/a

n/a n/a

n/a

Lux

(4)

GEG (Holdings) Ltd Maintenance and construction

Inverness

Mar-19

300.07 3.76

289.20 4.89

15.73 -43.40

1,882 468.18

8,358

Sco

(28)

National Oilwell Varco UK Ltd Offshore equipment manufacturer

Aberdeen

Dec-19

346.75 15.38

300.52 3.41

12.74 4.63

1,628 257.03

7,826

USA

(7)

Bilfinger Salamis UK Ltd Multi-discipline offshore services

Aberdeen

Dec-19

183.82 1.03

181.95 9.14

12.96 -2.18

1,798 44.90

7,206

Ger

(5)

M-I Drilling Fluids UK Ltd Oil rig drilling services

Aberdeen

Dec-19

145.73 -1.27

147.61 21.39

14.46 2.33

351 -33.94

41,197

USA

(14)

Balmoral Group Holdings Ltd Offshore/environmental equipment

Aberdeen

Mar-20

137.16 26.95

108.04 -8.12

10.31 9.74

687 n/a

15,007

Sco

(6)

CAN (Holdings) Ltd Asset integrity service provider

Aberdeen

Dec-19

97.57 -0.73

98.29 21.51

15.77 1.36

669 -27.69

23,572

(86)

Fugro GB (North) Marine Limited Offshore surveying

Aberdeen

Dec-19

119.46 16.78

102.30 3.07

12.92 1.98

618 313.24

20,906

(8)

Archer (UK) Ltd Offshore personnel and equipment

Aberdeen

Dec-19

115.15 0.49

114.59 12.53

9.86 -9.35

640 -13.18

15,408

Berm

(17)

PD&MS Group (Aberdeen) Ltd Offshore services provider

Aberdeen

Jun-20

95.06 8.10

87.94 6.62

7.31 35.09

154 -18.24

47,468

Sco

(81)

Dril-Quip (Europe) Ltd Oilfield equipment manufacture

Dyce

Dec-19

88.11 27.78

68.96 10.92

9.71 -7.98

323 -3.34

30,062

USA

(13)

Petroleum Experts Ltd Petroleum engineering software

Edinburgh

Sep-20

45.62 -18.67

56.09 36.80

63.54 9.52

92 57.67

690,652

(21)

Hydrasun Ltd O&G fluid transfer; process controls

Aberdeen

Mar-20

80.91 11.93

72.29 4.28

6.69 4.07

435 50.13

15,379

Sco

(9)

JFD Ltd Diving equipment

Aberdeen

Dec-19

70.25 -12.18

79.99 13.93

7.79 -4.40

391 -41.53

19,913

(40)

Howco Group Plc Metal & processing services

Glasgow

Apr-19

108.36 2.57

105.65 -2.49

3.58 2.45

460 n/a

7,783

Jap

(22)

Briggs Commercial Ltd Offshore engineering; fabrication

Burntisland

Mar-19

75.70 29.89

58.28 2.87

4.49 13.49

757 37.93

5,935

Sco

(15)

Forsyths Ltd Oil & gas and distillation equipment

Moray

Oct-19

52.94 13.18

46.77 4.68

7.10 4.15

402 45.65

17,659

Sco

(11)

Sodexo Remote Sites Scotland Ltd Offshore/onshore facilities management

Aberdeen

Aug-19

86.69 5.79

81.94 2.24

2.90 -2.72

1,145 33.16

2,534

(24)

Grayloc Products Ltd Offshore connectors

Aberdeen

Dec-19

25.25 2.09

24.73 4.57

13.49 2.86

36 187.01

374,750

USA

(80)

North Star Holdco Limited Shipping; energy services

Aberdeen

Apr-19

70.25 0.08

70.19 -13.45

1.89 0.00

8 n/a

235,625

Sco

(27)

Odfjell Drilling (UK) Ltd Drilling contractors

Aberdeen

Dec-19

41.68 -6.98

44.81 1.21

4.59 -7.12

326 308.73

14,089

Nor

(71)

Scientific Drilling Controls Ltd Offshore directional surveys

Aberdeen

Dec-19

36.50 -15.84

43.37 -4.51

6.30 -27.17

252 n/a

25,000

USA

(12)

Trac International Ltd Engineering products and services

Aberdeen

Mar-19

60.55 -12.95

69.56 6.89

2.65 -12.00

528 -56.33

5,015

Sco

(33)

Clariant Oil Services UK Ltd Chemicals/services for oil industry

Aberdeen

Dec-19

41.21 18.30

34.83 2.53

3.71 -7.02

53 57.84

70,057

Swi

(36)

Halliburton Manufacturing & Services Offshore services and equipment

Dyce

Dec-19

582.14 13.44

513.15 17.36

-2.04 22.52

1,578 n/a

n/a

USA

(67)

Hunting Energy Services (UK) Ltd Oil and gas extraction

Portlethen

Dec-19

48.48 35.04

35.90 -4.19

1.87 8.47

128 n/a

14,609

(25)

LFF (Scotland) Ltd Offshore fittings and flanges

Aberdeen

Dec-19

50.85 63.14

31.17 0.18

0.93 33.33

40 285.83

23,150

(26)

Saltire Energy Ltd Drilling equipment supplier; oil tools

Aberdeen

Jun-19

21.90 23.75

17.70 6.19

6.36 -7.69

60 11.33

106,017

Sco

(38)

Axis Well Technology Ltd Well technology consultancy

Bridge of Don

Jan-20

24.99 20.28

20.78 1.84

3.90 14.93

77 84.93

50,649

Sco

(39)

Seatronics Ltd Marine survey equipment sale & rental

Bridge of Don

Dec-19

24.30 8.99

22.30 4.07

4.06 15.63

74 -13.79

54,865

28 INSIDER May 2021

LOCATION

YEAR END CURRENT T/OVER £M PREVIOUS CURRENT PROFIT £M EMPLOYEES % CHANGE T/OVER £M PREVIOUS PROFIT £M % CHANGE

PROFIT PER EMP £ % CHANGE

PARENT NATIONALITY

www.insider.co.uk

REVIEW:OIL & GAS TABLES

RANK 21 20

COMPANY ACTIVITY

LOCATION

YEAR END CURRENT T/OVER £M PREVIOUS CURRENT PROFIT £M EMPLOYEES % CHANGE T/OVER £M PREVIOUS PROFIT £M % CHANGE

PROFIT PER EMP £ % CHANGE

PARENT NATIONALITY

(100

Ashtead Technology Ltd Offshore equipment hire

Westhill

Dec-19

21.45 6.35

20.17 -0.03

5.34 1.39

73 n/a

73,151

Sco

(65)

Petrofac Scotland Engineering and construction

Aberdeen

Dec-19

605.78 3.47

585.44 -4.51

-3.96 -4.91

2,420 n/a

n/a

(31)

Peterson (UK) Ltd Offshore logistics services

Aberdeen

Dec-19

179.41 8.15

165.89 -4.62

-2.39 7.74

752 n/a

n/a

(10)

Babcock Mission Critical Services Helicopter operator

Aberdeen

Mar-19

133.72 3.08

129.73 4.38

-2.87 -6.90

432 n/a

n/a

(32)

Entier Ltd Offshore catering and support services

Aberdeen

Sep-19

53.09 0.91

52.61 0.57

0.09 -3.24

538 -83.32

171

Sco

(19)

Stena Drilling Ltd Drilling rig owners/managers

Aberdeen

Dec-19

35.05 -11.15

39.45 3.96

0.60 0.78

130 -84.94

4,623

Swe

(43)

PLM Dollar Group Ltd Helicopter charter

Inverness

Sep-19

20.18 25.25

16.11 2.94

3.38 9.88

89 4.76

38,022

Sco

(56)

Stats (UK) Ltd Pipeline engineering

Kintore

Dec-19

39.06 -10.06

43.43 2.55

0.18 3.91

239 -93.09

766

Sco

(34)

Gyrodata Ltd Wellbore survey technology

Bridge of Don

Dec-19

16.88 4.13

16.21 4.74

3.70 2.04

100 -23.50

37,000

USA

(88)

Tetra Technologies (UK) Ltd Offshore fluid supply

Aberdeen

Dec-19

21.65 3.22

20.98 0.08

1.42 -18.00

41 1961.55

34,634

USA

(102

Nippon Gases Offshore Ltd Supplier of gases to offshore industry

Aberdeen

Mar-20

18.32 8.72

16.85 3.01

3.25 4.65

45 28.97

72,222

USA

(57)

KCA Deutag Drilling and engineering contractor

Aberdeen

Dec-19

1,031.35 3.73

994.31 -120.96

-83.50 34.85

8,249 n/a

n/a

(59)

Oceaneering International Services Ltd Services/equipment to energy industry

Aberdeen

Dec-19

234.62 29.40

181.31 -80.18

-26.63 16.51

2,413 n/a

n/a

USA

(61)

Xodus Group Ltd Offshore consultancy

Aberdeen

Dec-19

36.12 9.92

32.86 0.06

-0.60 26.76

270 n/a

n/a

(3)

Aker Solutions Offshore services

Aberdeen

Dec-19

293.06 -41.74

503.02 -3.29

-39.44 5.17

1,972 n/a

n/a

Nor

(72)

Strategic Resources European Recruitment Agency

Aberdeen

Dec-19

23.88 28.39

18.60 0.25

0.21 25.00

10 -32.80

21,000

Sco

(60)

Sparrows Offshore Group Ltd Cranes and offshore services

Aberdeen

Dec-19

208.03 10.17

188.82 -38.83

-29.41 12.98

1,749 n/a

n/a

Sco

(73)

Vallourec Oil & Gas UK Ltd Offshore tubular goods

Bellshill

Dec-19

65.28 50.97

43.24 -8.73

-3.64 -13.79

175 n/a

n/a

Offshore exploration companies RANK 21 20

COMPANY

LOCATION

YEAR END CURRENT T/OVER £M PREVIOUS CURRENT PROFIT £M % CHANGE T/OVER £M PREVIOUS PROFIT £M

EMPLOYEES % CHANGE

PROFIT PER EMP £ % CHANGE

PARENT NATIONALITY

(1)

Ithaca Oil and Gas Ltd Oil and gas exploration

Aberdeen

Dec-19

885.90 -17.10

1,068.70 480.60

448.10 -23.79

458 22.35

978,384

Isr

(2)

Repsol Sinopec Resources UK Limited Oil and gas exploration

Aberdeen

Dec-19

993.45 -16.97

1,196.46 1,322.22

176.63 5.64

899 -87.35

196,469

Spa/Ch

(5)

Dana Petroleum Ltd Oil and gas exploration

Aberdeen

Dec-19

857.94 -15.44

1,014.61 185.65

86.63 -3.52

247 -51.64

350,729

KorRep

(4)

Apache North Sea Ltd Oil and gas exploration

Aberdeen

Dec-19

547.12 -17.63

664.19 260.25

182.63 n/a

n/a n/a

n/a

USA

(6)

TAQA Bratani Ltd Oil exploration

Westhill

Dec-19

637.12 -9.91

707.18 74.85

81.12 3.56

553 4.65

146,682

UAE

(3)

Total E&P North Sea UK Ltd Oil exploration

Aberdeen

Dec-19

619.99 -2.91

638.60 448.39

137.14 0.00

292 -69.41

469,668

Den

(9)

CNR International (UK) Ltd North Sea oil and gas exploration

Aberdeen

Dec-19

539.25 10.53

487.88 4.22

140.92 -6.13

306 3457.48

460,516

Can

(7)

Enquest Plc Oil and gas exploration

Aberdeen

Dec-20

634.18 -49.21

1,248.68 -552.96

-414.64 -7.62

885 n/a

n/a

Sco

(10)

DNO North Sea Plc Oil and gas exploration

Aberdeen

Dec-19

202.04 -7.54

218.52 22.79

-1.86 -4.65

82 n/a

n/a

Sco

(12)

Lansdowne Oil & Gas Plc Oil and gas exploration

Aberdeen

Dec-19

0.00 -0.29

0.00 0.00

-0.18 n/a

n/a

Sco

www.insider.co.uk

May 2021 INSIDER 29

A Life of

3 ! "53).%33 ,%!$%2 9/5 +./7 4(!4 4(% (!2$%34 #,)-" )3. 4 ),)-!.*!2/ %.!,) /2 6%2%34 4 3 4(% 3 ,%!$%23()0 */52.%9 !.$ )4 3 &2!5'(4 7)4( !,, +).$3 /& #(!,,%.'%3 !.$ /00/245.)4)%3 3%4"!#+3 !.$ !$6!.#%3 %! ! ' # " $ " " /5 #!. 42!6%, 7)4( !. %80%2)%.#%$ '5)$% 7(/ +./73 4(% ,!9 /& 4(% ,!.$ !.$ !. %,)4% 4%!- /& 0%%23 7(/ 6% '/4 9/52 "!#+ /5 #!. %15)0 9/523%,& 7)4( 7/2,$ #,!33 2%3/52#%3 4/ .!6)'!4% #(!.').' %.6)2/.-%.43 !.$ 5.#%24!). #/.$)4)/.3 /5 #!. 4!+% !. !002/!#( &/2'%$ /6%2 9%!23 !.$ 42!6%,%$ "9 3 /& 3-!,, 4/ -%$)5- 3):%$ "53).%33%3 !2/5.$ 4(% 7/2,$ " " " !# " % # ' # !

& #" $ # !" $ "'

# !" $ !" ! "# '

" ' ! & #" $ # !" $ "' 4(% /2'!.)3!4)/. 4(!4 5.$%20).3 4(% 2).'% 7(),% 3500/24).' !24)343 !33)34).' !5$)%.#%3 !.$ #%,%"2!4).' 4(% 2).'% !.$ 7(!4 )4 34!.$3 &/2 !,, /6%2 4(% 7/2,$ ). /6%2 -),,)/. 4)#+%43 7%2% )335%$ -!+).' )4 /& 4(% 3#!,% /& ! 7/2,$ #50 /2 ,9-0)# %6%.4 "54 %6%29 9%!2 ; (% $)."52'( 2).'% )3 ! ',/"!,,9 2%#/'.):%$ 0(%./-%./. . 7% (!$ !,-/34 3(/73 !.$ 0%2&/2-!.#%3 7)4( 2%02%3%.4!4)/. &2/- #/5.42)%3 )4 )3 ,/#!,,9 2//4%$ ). #/4,!.$ 3 #5,452!, &!"2)# "54 (!3 425,9 ).4%2.!4)/.!, 2%!#( =

“

!" # !

(% 2).'% %34)6!, (!3 "%%. "!$,9 !?%#4%$ "9 /6)$ "54 -9 '2/50 !2% !,7!93 &5,, /& 02!#4)#!, !$6)#% !.$ (%,0 2%#%.4,9 #!-% 4/ 4(% '2/50 7)4( ! (5'% 15%34)/. %30%#)!,,9 &/2 ! '2/50 /& 0%/0,% 7(/ !2% ./4 ). -9 7/2,$ ./4 &2/- 4(% #5,452!, 3%#4/2 (% 15%34)/. 7!3 /7 $/ 53% 4()3 -/-%.4 ). 4)-% !3 ! 0/3)4)6% /00/245.)49 4/ #2%!4% 0/3)4)6% !.$ !-")4)/53 #(!.'% ). 4(% /2'!.)3!4)/. ,%!$

4 7!3 (/.%34,9 4(% -/34 2%7!2$).' "2),,)!.4 3%33)/. 6% %6%2 "%%. ).6/,6%$ ). 6%29/.% ). -9 '2/50 2%!$ 4(% $/#5-%.4 3%.4 "%&/2%(!.$ !.$ 4(%9 !,, #!-% 4/ 4(% 3%33)/. 7)4( ! $)?%2%.4 0%230%#4)6% !.$ 3/-%4().' 5.)15% 4/ 3!9 ,%&4 &%%,).' #/-0,%4%,9 %.%2')3%$ !.$ %8#)4%$ "54 !,3/ 7)4( 3/-% 6%29 &/#533%$ )$%!3 4(!4 !2% '/).' 4/ (%,0 -% -/6% &/27!2$ +./7 4(%9 ,, !"3/,54%,9 (/,$ -% 4/ !##/5.4 4/ -!+% 4(% #(!.'%3 7!.4 (% $%#)3)/. ./4 4/ 25. 4(% &%34)6!, 4()3 9%!2 7!3 (5'%,9 )-0!#4&5, !3 )4 !?%#43 4(% %#/./-)#3 /& 4(% 7(/,% #)49 !.$ -!.9 0%/0,% 3 ,)6%,)(//$3 /7%6%2 4(% ,!34 &%7 -/.4(3 (!6% "%%. ! '//$ 4)-% &/2 2%>%#4)/. !.$ 4/ #/.3)$%2 (/7 7% #!. &!34 42!#+ 3/-% /& 4(% !-")4)/53 #(!.'% 7% 7)3( 4/ 3%% ). &5452% &%34)6!,3 9 !)- )3 4/ %.352% 4(% 2).'% #/-%3 /54 /& 4()3 0!.$%-)# ./4 *534 4(% ")''%34 0%2&/2-).' !243 &%34)6!, ). 4(% 7/2,$ ). &!#4 $/. 4 %6%. #!2% )& )4 3 4(% ")''%34 "54 4(% "%34 !.$ +./7 -9 )34!'% '2/50 7),, 3500/24 -% %6%29 34%0 /& 4(% 7!9

777 6)34!'% #/ 5+

“

%80%#4%$ )4 4/ &/#53 -/34,9 /. 4/0)#3 ,)+% 3 !.$ 0%2&/2-!.#% -!.!'%-%.4 "54 )4 /?%23 ! &!2 2)#(%2 %80%2)%.#% 4(!. 4(!4 /2+).' ). 4(% #5,452!, 3%#4/2 9/5 4%.$ ./4 4/ 3%% 9/523%,& !3 ! "53).%330%23/. 3/ !,3/ %80%#4%$ 4(% /4(%2 3 ./4 4/ 30%!+ 4(% 3!-% ,!.'5!'% !3 -% /7%6%2 "%).' ! )3 ,!2'%,9 !"/54 0%/0,% %.!",).' 9/52 %-0,/9%%3 -%%4).' 4(% .%%$3 /& #534/-%23 !.$ ).6%34/23 %4# < 3/ 4(%2% )3 #/--/.!,)49 '%4 %./2-/53 6!,5% &2/- 3%%).' (/7 ,%!$%23 ). -/2% 42!$)4)/.!, "53).%33%3 !002/!#( 7(!4 4(%9 $/

SCOTTISH ACCOUNTANCY & FINANCIAL TECHNOLOGY AWARDS 2021 The Business Insider Scottish Accountancy & Financial Technology Awards recognises the work undertaken by accountants and the rise of Fintech businesses and specialisms that play a vital role in ensuring the effectiveness of both private and public sector organisations. Exciting sponsorship opportunities are available, ranging from support partners through to title partner, to discuss in more detail please contact: Aileen Turnbull, Head of Sales 07825 899187 / aileen.turnbull@insider.co.uk Debbie Caldwell, Account Manager 07789 778263 / debbie.caldwell@insider.co.uk

scottishaccountancyawards.com

#SAFAwards

IN MY VIEW: IAN RITCHIE

IT’S TIME FOR THE GOVERNMENT TO CUT ITS TIES TO OPENREACH AND LOOK TO THE SKIES

ACK AT the turn of the 21st century, I was the “expert advisor” to a committee of the Scottish Parliament reviewing broadband provision in Scotland. We wrestled then with whether we should mandate a 10Mb minimum service. I never dreamed that 20 years later the availability of high-speed broadband would still be an issue. Despite today’s need for Zoom business calls or Netflix viewing, many people in internet “black spots” are struggling to get 10Mb, leaving them unable to undertake everyday online tasks. This is despite BT’s infrastructure division, Openreach – who have the monopoly of most of the UK’s telecom network – receiving large slugs of government funding over the past 20 years. The most recent of these, £5bn, was pledged last December, but it still seems to be beyond Openreach to install a comprehensive fibre network

BT chose to broadcast expensive sports rather than invest in extending broadband to everyone to every premise. A previous target, originally 100 per cent of homes by 2025, has now been watered down to 83 per cent. Instead, BT chose to buy and broadcast expensive sports for wealthy metropolitan customers, rather than invest in extending broadband to everyone. When people talk about future provision of broadband, there has been much talk of the benefits of 5G cellular technology and mobile operators also have their “begging bowl” out for government funding to help them build out their networks. Admittedly, 5G delivers potentially enormous capacity to provide very high bandwidth and low latency over cellular telephony, but along with that capacity comes huge limitations. To deliver high bandwidth, 5G technology uses much higher radio frequencies and with those comes reduced ability to transmit over distance, or through any obstacles such as walls and structures. For 5G to www.insider.co.uk

work well, it will require a massive increase in the number of base stations. Most modern office blocks will also need to install 5G repeaters to enable the signals to reach reasonable coverage within their buildings. It will take a long time for new 5G networks to be constructed and inevitably will first concentrate on the lower-frequency channels to support self-driving vehicles on major trunk roads, one of the key applications driving 5G technology. So high-speed broadband over 5G to remote premises will remain a distant dream for many years. One solution to universal high-speed broadband everywhere – which is not heavily publicised, perhaps because it is not provided by an incumbent provider looking for a government handout – is to look “up”, and to the world’s two richest men. A large constellation of connected satellites in low earth orbit (LEO) is capable of massive amounts of bandwidth delivered at low latency to anywhere on the planet. A small antenna can lock on to the nearest satellite as it passes over, and there will always be another coming after it. Elon Musk’s SpaceX has already launched 1,000 LEO satellites for his Starlink system and plans to take this to 12,000. Meanwhile, Jeff Bezos aims to spend $10bn to build his Kuiper competitor system of 3,236 satellites. And there are others, including OneWeb, now 45 per cent owned by the UK Government, which also promises fast internet service anywhere. But, given both Elon Musk and Jeff Bezos, arguably the two most competitive men on the planet, who both typically employ razor-thin margins to win market share, it would be risky to assume that anyone will make much money for a while – which is great news for the customer. Government should stop subsidising Openreach. High-speed broadband, at a very competitive price, will soon come down from the sky. It’s finally time to “cut the cord”. ■ Ian Ritchie is a leading businessman who advises start-up technology companies. May 2021 INSIDER 33

International Enterprising Leading Local Strathclyde The ﬁnal word in business education

Strathclyde Business School is a top business school within a leading international technological University, recently named UK University of the Year in the prestigious Times Higher Awards 2019. We have a long and proud history of offering an MBA education and we make sure our programme evolves to encompass the latest business thinking. Strathclyde Business School has innovation at its heart and our students are encouraged to be innovative in their thinking and approach to studies. We never know what’s round the next corner but our MBA gives you the tools to work with whatever life throws at you and your business. Our programme can be studied on a full time or part time basis and we are offering a wide range of scholarships for those starting the course September 2021.

www.strath.ac.uk/business

REVIEW: ACCOUNTANCY

PANDEMIC PUTS A FASTER SPIN ON THE TECHNOLOGY REVOLUTION

By PERRY GOURLEY

HE TECHNOLOGY revolution that has seen calculators and filing cabinets all but disappear from accountancy offices over the past 20 years also enabled firms in the sector to quickly adapt to the challenges posed by the pandemic. Innovations such as electronic filing, robotic process automation and digital signing of documents mean the technology to carry out many day-to-day accounting tasks remotely has existed for some time. However, Andrew Walker, chief executive at Johnston Carmichael, says Covid-19 “dramatically accelerated” take-up across the profession. “Change has been under way for the past few years, with businesses increasingly adopting the use of technology following Making Tax Digital, but adoption of cloud accounting truly exploded during lockdown,” he says. As someone who began his career

www.insider.co.uk

in the sector in the early days of Microsoft Excel and well before Zoom, Meston Reid & Co partner Mark Brown says he was surprised at how seamless a switch it was for staff to work remotely while still maintaining client service levels. “The pandemic has certainly accelerated the push we were already seeing – particularly among

Some clients have had to shut down completely, but we’ve seen others pivot and create new opportunities Stuart Clark, Russell & Russell (below)

the younger staff – for more choice around working hours and location,” he says. “Just from the timings of emails I receive from staff I can see they are working much more flexibly than a few years ago. Some of those with family commitments might have a couple of very productive

hours very early in the morning before the kids get up, for example, or late at night when they are going to bed, but they find the pattern that works for them.” Graeme Allan, chief executive of Anderson Anderson & Brown (AAB), says Covid-19 inevitably led to a change in working environments and greater use of technology. But, for those accountancy businesses where change only started in earnest when lockdown began in March, he adds, “it was almost already too late”. Given the hit to the economy and the mothballing of firms in sectors such as hospitality, it is perhaps surprising that research carried out during the first lockdown by Braemar Finance, a Dundonaldbased firm that works with professional services firms, found accountancy practices said they were more likely to expand than contract in the 12 months ahead. Almost three-quarters expected their staffing to be unchanged despite the turmoil. May 2021 INSIDER 35

REVIEW: ACCOUNTANCY Stuart Clark, managing director of Glasgow-based Russell & Russell, says that clients needing help to deal with the challenges posed by the impact of Covid means his firm has been “busier than ever”. Clark says the many Government funding schemes and updates launched in response to the pandemic, coupled with the need for greater cashflow forecasting, meant that, at times, “almost like every day has been like Budget day”, with clients needing a significant amount of support. “We have seen some clients that have had to shut down completely, but we’ve seen others pivot and create new opportunities, which is always the case with major events like this,” he said. Among the Big Four – which account for the bulk of new recruits into the sector – latest intake figures have also provided optimism around future demand levels. PwC took on a record 108 student joiners during its latest recruitment drive, up from 93 in 2019, and taking headcount across its Edinburgh, Glasgow and Aberdeen offices to 1,045. The 97 graduates and apprentices recruited by EY in its latest intake north of the border was also up by 10 per cent on 2019. The Big Four have also been among the first in the sector to signal plans for a different working model for the future. KPMG, which added 56 graduates and apprentices along with 30 experienced staff to its 1,000-plus workforce at its Scottish offices including the recently opened Marischal Square base in Aberdeen, is to introduce a more flexible way of working that will see staff work part of the week from home and part in the office or at client sites. It says the model will also enable the firm to have greater access to a “broader and diverse workforce”. PwC is also rolling out a flexible working policy that will allow its staff to split their time roughly half and half between their home and office or with clients. Staff will also be able to have more control over their working day, by starting or ending earlier, for example. The shift in working patterns is also likely to see a wave of office closures across the sector as firms consolidate their property portfolios. Deloitte has already announced the closure of four of its offices with 36 INSIDER May 2021

The pandemic has certainly accelerated the push we were already seeing – for more choice around working hours and location Andrew Walker, Johnston Carmichael (below)

about 500 staff moving to permanent home-working. Smaller firms are also looking at their office footprints. Dundee-headquartered EQ recently closed its Cupar office, although it stressed the move would not impact jobs across its 65-strong workforce. Managing partner David Cameron says the move came after a review of operations over the past 12 months concluded changes to working locations had not affected client service. “We feel that this decision will allow more flexibility and is in the best long-term interests of our clients and staff,” he says. As well as changes to working patterns, the pandemic is likely to lead to an acceleration of the

digitisation of the sector, which has been gathering pace in recent years. Areas such as AI and data analytics are offering exciting opportunities for accountancy firms to provide new services to clients and add more value. According to Andrew Walker, of Johnston Carmichael, that is also making it a more interesting sector to work in. “The increasing interface with technology is having an impact on the people we are recruiting. These days we are increasingly looking at IT or engineering graduates, for example, in addition to those who have accountancy degrees,” he says. “I also think digitisation is making the profession much more exciting for young people as the more routine tasks become automated, leaving more time for value added activities and more options to diversify into a wider range of roles.” John Docherty, associate director of accounting and finance at financial services recruitment firm CoreAsset in Edinburgh, reports growing competition for staff from outside the traditional accountancy sector. “Interest in start-ups from www.insider.co.uk

REVIEW: ACCOUNTANCY candidates grew in 2020, especially with a burgeoning fintech sector,” he says. “Finance professionals were attracted to the potential growth from the ‘ground up’ and the entrepreneurial culture, along with a more expansive set of responsibilities and greater senior stakeholder exposure.” Paul Buchan, principal consultant for accounts and finance at recruiter Eden Scott, believes the experience of the pandemic will mean employers will have to respond to increased demand for flexible working from candidates. “Clients are already adapting employment contracts for both office-based and home-working arrangements. Whilst there is a need to have people back into offices for team building, employers are cognisant that many people will expect some blended working model. “One of the first questions I am asked by candidates now is the company’s attitude to home-working in the future, which is a strong indicator of where the market is likely to be headed.” Keith Mason, director of Hays in Scotland, says a recent poll carried out by the firm shows that 81 per cent do not think they will return to the workplace the way it was pre-Covid. “The accountancy landscape has changed significantly and employers need to be aware of that and plan accordingly. Jobseekers are looking for flexibility and a hybrid working model,” he says. “Patterns in the workplace have changed and it would be foolhardy for organisations not to recognise this and adapt their hiring strategy accordingly.” Mark Brown, of Meston Reid & Co, says he has witnessed a shift in what new recruits to the industry are looking for in terms of careers and work/life balance, a trend that is likely to accelerate following the pandemic. “There will be still be candidates who see a partnership in the Big Four as a very big goal, but for smaller firms I think the full partnership route is less appealing. “I think the salaried partnership model may be more attractive for many where they are on a fixed salary and possibly a bonus, but they are not committed to the risk and rewards of being an equity partner.” Although there were no significant consolidation moves higher up the league table of Scotland’s accountancy sector www.insider.co.uk

Carol Flockhart, Chiene + Tait

Graeme Allan, AAB

Patterns in the workplace have changed and it would be foolhardy for organisations not to recognise this and adapt their hiring strategy Keith Mason, Hays

following a busy 2019, a number of smaller firms were active. Aberdeen-headquartered Acumen Accountants took its client base to approaching 2,000 after acquiring fellow north-east firms Keltic Accounting and Carnegie Knox. Goldwells, which now has eight offices across north and north-east Scotland, acquired Moray Tax Specialists and Chris Banks Bookkeeping.

Mark Brown, Meston Reid & Co

Edinburgh’s Scotia Accounting became part of larger city practice Steedman & Company after a merger deal. Recent research by Edinburghbased cash flow fintech Float shows there has been a significant shift in the accountancy sector away from sole traders and smaller firms towards mid-to-large players, with a net loss of 500 accounting businesses between 2017-19. Colin Hewitt, Float CEO and co-founder, said: “Accounting firms have demonstrated their immense value during the Covid-19 pandemic, helping struggling businesses stay afloat and informing them of their financial options. “Given that, there may be concern the number of accounting firms is in decline. However, it’s important to note that a lack of growth does not necessarily mean the industry is in poor health, but now has a smaller number of more profitable accounting firms, following years of growth at the lower end of the market.” Although succession is also an issue for many smaller firms, Stuart Clark of Russell & Russell, says innovative structures can be found that meet the needs of both the “old guard” and the new generation. Last year Clark took over as managing director at the firm after he and fellow directors Rosslyn McMaster and Ian McMonagle bought shares in the Glasgowbased business. As it grows, more ownership will transfer from the founding Russell family. “The firm’s legacy was very important to the owners and they didn’t want to become part of a large group and lose that relationship with their clients,” he said. “Between us, we came up with a solution that met everyone’s goals and ensured the business was maintained.” Clark believes there will be no shortage of opportunities for other practices to take a similar approach in the years ahead. “There are going to be lots of baby boomers retiring in the next few years who haven’t thought of succession or for whom Covid is the final nail in the coffin after the major changes brought in by developments such as real time information for payroll, auto enrolment for pensions and Making Tax Digital,” he says. “There are also opportunities for smaller boutique firms like ourselves May 2021 INSIDER 37

REVIEW: ACCOUNTANCY to win clients of some of the bigger practices who have merged or acquired lots of practices and are no longer the practice that clients originally joined. They don’t want to be part of a behemoth and so they will eventually leave.” Graeme Allan, chief executive of AAB, suspects that traditional M&A activity will no longer be the direction of travel for the accountancy sector. “The days of a larger practice acquiring lots of smaller firms with the same service delivery capabilities and succession planning issues are surely behind us. That model certainly creates scale but not necessarily value. “Instead, we expect to see dynamic private-equity-backed investments focused on building regional presence that can deliver tech-enabled business critical services, and we have already seen some early activity in this space. And I’m sure there will be more.” The shifts under way in the sector have been highlighted by the growth of Azets, now the largest SME regional practice across Europe and backed by private equity firm Hg. Since it was established in 2016, it has grown dramatically with deals that included Scottish firms Campbell Dallas and Scott Moncrieff joining the fold. The rebranding of both to Azets late last year meant the disappearance of the latter’s name, the oldest in Scotland’s accountancy sector. Chris Horne, Azets regional CEO in Scotland and north England, said the rebranding marked “a seismic step forward” in the group’s plans to disrupt the sector. “The global scale and reach of resources of Azets will allow us to accelerate investment in the best technology, develop new client services and recruit the best talent. The accountancy market is ripe for disruption and change, and we think that, under one brand, we will be well-placed to drive that change process.” While technology is driving much of the change in the sector, Mark Brown of Meston Reid & Co, argues that a wholesale shift to virtual accounting would not be welcome for advisors or clients. “Meeting a client face to face and having a chat about things is really valuable and you often flush out 38 INSIDER May 2021

IN FOCUS: Audit services overhaul A major overhaul of the market for audit services is in the pipeline after a string of high-profile corporate collapses in recent years. Long-awaited proposals recently announced by the UK Government aim to reduce the dominance of the Big Four in the auditing of FTSE 350 companies, avoid business failures and attract more investment into the UK. Andrew Walker, chief executive at Johnston Carmichael, believes that, overall, the proposals will usher in “significant and welcome change for the audit industry”. “There is no single solution to restoring the belief and trust in audit quality but if firms commit to change and learning from past mistakes, alongside developing a culture and practice of continuous improvement, the audit profession can go a long way to restoring public confidence in its work.” Walker says the proposals should be embraced as an opportunity to establish a more successful and sustainable future for the audit profession. “In doing so the reforms will not only result in ever more rewarding career opportunities for new generations of auditors but also, and critically, restore trust in the audit process,” he says. The proposals include “managed shared audits”, where large companies would be required to use a smaller firm to conduct a meaningful proportion of their annual audit. Graeme Allan of AAB believes that presents an exciting opportunity for challenger firms to take on more of the listed company market. “We are already seeing a noticeable uptick in the volume of larger company audits – a clear shift from where we were three years ago. We currently undertake audits for subsidiaries of listed companies and work with the Big Four on these kinds of projects so we know this model can work,” he says. Carol Flockhart, managing partner at Chiene + Tait, cautions that there is a risk of an increased regulatory burden, which could mean challengers are likely to struggle to compete for the biggest audits due to the capital outlay required to build the capability to take on engagements of that size. “This will undoubtedly push the need for a different set of audit standards for smaller and less complex entities up the agenda,” predicts Flockhart. “How this will all play out will be partly determined by the approach taken by the Audit, Reporting and Governance Authority in monitoring compliance with the rules and the resources at its disposal to enforce these.”

something important that perhaps wouldn’t happen over the phone or by Zoom. I think if you were to lose that face-to-face contact entirely, you would probably end up with a diluted client relationship,” he warns. Chiene & Tait’s Carol Flockhart expects clients will be looking for a blended approach to meetings going forward, depending on their circumstances. “Many have indicated they want to continue with online communications as it allows them more flexibility and closer contact with our teams,” she says. As the economy reopens and practices adjust to the new normal, commentators are predicting significant changes to the way professional services companies operate. However, Graeme Allan, of AAB, believes that, although the future for the most successful firms will lie in acquiring and retaining the best people based on how they want to work, truly hybrid or flexible working will still not be the norm for much of the profession. “There is already a lot of chat around getting back to offices – and probably being in them 9am-5pm – which begs the question ‘what has really changed?’,” he asks. “The impact of Covid-19 on the sector should be that we now have the mindset that anything and everything is possible, but I’m not sure that will be the case.” ■ www.insider.co.uk

BUSINESS PROFILE

KICK GOES FROM STRENGTH TO STRENGTH THROUGH FURTHER ACQUISITION Kick ICT Group was established in 2015 by CEO Tom O’Hara, Group Sales Director Alan Turnbull and Strategic Initiatives Director David Chazan. We provide business applications, network infrastructure and communications solutions, services and support to customers throughout the UK. With strong leadership from Tom and the team, we have gone from strength-to-strength through what has been a challenging period for the industry. With ﬁve acquisitions, the impact of Brexit, and of course a global pandemic, it has been an eventful as well as a highly productive period for the business. Growth through acquisition began in early 2015, with Kick snapping up ERP and CRM software reseller Talon Business Solutions. This was followed by the acquisition of Roxxap in 2016, a specialist Microsoft Dynamics reseller, which was then integrated with Talon. In 2017 we made our third acquisition, Vozero, a boutique Microsoft Dynamics NAV consultancy, further strengthening our position within the Microsoft Dynamics space in Scotland. The fourth acquisition (April 2018) came in the form of Castle Computer Services, providing accounting and ﬁnancial management software, business intelligence solutions, cloud, and managed IT services. In April 2021 we acquired fellow Glasgow-based IT company Clyde Solutions in a deal that resulted in the creation of our new Communications

division. The acquisition of a specialist business communications provider is a key strategic move in our ongoing growth strategy and focus as a leading IT services supplier to the UK SME market. During the year to September 2020, we maintained a solid ﬁnancial performance. We increased revenue by 10 per cent to £14.6m, with pre-tax proﬁts up 12% to £1.7m. This followed an 86% surge in revenues the previous year, when

profits more than doubled to £1.6m, breaking the seven-figure barrier for the first time. We continue to make sound progress in 2021, the business continues to perform well, has good cash reserves, a high-quality client base and outstanding support from HSBC. This excellent platform for growth has facilitated the acquisition of Clyde Solutions and the business is well placed to continue growing and building market share both in Scotland and more widely across the UK. We currently employ 120 staff and expect staff numbers to increase to more than 150 by the end of the year. To support our growth strategy, in 2019 we acquired and refurbished a 20,000 sq. ft headquarters building in Strathclyde Business Park. We are well positioned to help our customers on their accelerated journey to the cloud. Demand from organisations to communicate effectively with their customers, employees and stakeholders and to provide a robust and high performing connectivity platform for their suite of business applications has never been greater. Our vision is to build a sustainable single-source IT services business of scale, with a talented and highly skilled team providing outstanding service and adding value to our customers. As a business, Kick - like many other organisations - will face challenges ahead and we will need to continue to evolve as we face them. But we have exceptional skills, experience and the pedigree to deliver in this sector. Our story continues to unfold.

Find out how Kick can help your business at www.kickict.co.uk Kick ICT Group, Solais House, 19 Phoenix Crescent, Strathclyde Business Park, Bellshill, ML4 3NJ Tel: 01698 844 600

REPORT: SCOTTISH FOOTBALL FINANCE

WINNERS AND LOSERS AS FOOTBALL CLUBS TACKLE ONSLAUGHT OF PANDEMIC By KEN SYMON

HILE Rangers Football Club may have overtaken Celtic FC as winners of the Scottish Premiership, it is the Glasgow east end club that retains the top spot on the business side, according to the Insider Football Finance Index. However, the Ibrox club has moved into second place in the table – up from third last time, marking its rise back to the top of Scottish football from its previous decline. Celtic came out on top in each of the three sub-categories considered in the Index, with clear leads in the finance, management and community areas of the index. But the financial gap between the clubs could narrow with Rangers having signed a new kit deal with Castore and Celtic’s poor performances on the park liable to hit kit sales. Almost as notable as Rangers’ climb is that of St Mirren FC, with the Paisley-based club climbing two places to third from last year’s fifth

40 INSIDER May 2021

spot. The club has seen a marked improvement over the year with the club’s ownership and financial stability now being ensured. St Mirren’s performance on the pitch has also markedly improved, with the club just missing out on a top-six spot to the Perth Saints by a mere two-goal margin. The improvement in Index scores follows a marked increase in

Above: Hampden Park, home to the national footbal team and the latter stages of the Scottish Cup and Scottish League Cup

Our fans have been amazing. They’ve bought their tickets and supported the club the way they’ve always done Jim Gillespie, Kibble

the club’s financial stability, with a significant stake having been taken by Kibble, the major Paisley-based social care charity. That agreement, the first of its kind between a football club and a major charity, paved the way for the fans group, the St Mirren Independent Supporters Association (SmiSA) to take over control with the ownership

of 51 per cent of the club’s shares. As part of the moves, Jim Gillespie, chief executive of Kibble, became vice-chairman of St Mirren at the end of March He says: “This season we have invested differently in the squad. The partnership with Kibble, SmiSA and the board gave us the chance to lay foundations. “The takeover of fan ownership is due to take place in July this year and we’ve always had that in mind. But what we’ve managed to do is support the playing budget more this year, even though we’ve had difficulties with the pandemic. “Our fans have been amazing. They’ve bought their season tickets and supported the club the way they’ve always done, which has given us financial stability. The relationship with Kibble augments that.” Hibernian FC notched up the fourth spot, sliding back from the second place it achieved last year despite the Edinburgh club’s financial results announced in March revealing an annual loss of £1.4m and the fact that almost half its £5.4m financial www.insider.co.uk

REPORT: SCOTTISH FOOTBALL FINANCE reserves having been eaten through as a result of the pandemic. The financial results come despite performances on the pitch under manager Jack Ross which, as I write, looks set to seal third place in the Premiership table for the Easter Road club. A third-place league finish and European football next year would be very significant for the club which, Ross revealed, had deferred some of the wage payments to its players to cope with cashflow issues. The club’s owner Ron Gordon had predicted revenues might be down by about 50 per cent as a result of there being no fans in stadia and wage cuts had been agreed with some players. Jack Ross was quoted as saying: “We have had a lot of challenges this year but we have been resilient. “Things like wage deferrals. There are a lot of people at this club who have still not had the money due to them. We have lost a lot of staff over the past year and things have been stripped right back. “So there has been a lot of pain and a lot of things to deal with but we have still been in the top four all season and got to the cup semi-finals and if people could see us at work every day over the past year, they would see the challenges and how determined we have had to be to get to this stage.” “We know that the fans stepped up and still bought season tickets in numbers, even although they have never made it inside the stadium. So, we recognise they have made

IN FOCUS: Ayr United

New MD harbours ambitious plans Despite the unprecedented financial challenges facing Scotland’s football clubs, one businessman has recently become a new chairman and owner. David Smith, the managing director of Prestwick-based Ashleigh Building, took over in the hot seat at Ayr United. He had been a member of the Scottish Championship club board for about a year and the plan had been that he would take over the owner and chairman role in the longer term. But Lachlan Cameron, the previous owner, was in the US and, with the difficulties presented by the Covid-19 pandemic, Smith was already taking more of the key decisions and they decided to accelerate the passing of the torch between them. As might be expected, some people have suggested that Smith, a lifelong Ayr fan, was mad to take over at this time. He told The Times Scotland: “I have looked myself in the mirror a few times and thought ‘Am I doing the right thing?’. But I’m absolutely positive it was right for the football club. “In a situation like we have now, you need proper leadership in whatever business you are dealing with. Some people might think I’m a bit mad, but it would have been dead easy to sit back and let someone take the flak.” The financial situation at the Somerset Park-based club is far from plain sailing but some significant loans were written off as part of the handover from Lachlan Cameron. The club has also received a government loan and Smith says it is in decent shape to face the future. A development plan for the stadium includes a new hub complete with offices a shop and a social club and development of its north terrace. One question on its future that is not decided is whether or not to replace the current grass pitch with an artificial pitch. Smith has said: “My heart says ‘don’t touch them’, but my head says ‘you will have to if you’re going to make this work’. We won’t rush into anything, but it is something we will need to look at eventually.” But he is determined to modernise the ground to improve the experience of fans on match days. David Smith has big ambitions for the club including seeing its accession to the Scottish Premiership.

Insider Football Finance Index 2020 Rank

Team

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Celtic Rangers St Mirren Hibs Hearts Aberdeen Motherwell St Johnstone Dundee Dunfermline Inverness Partick Thistle Queen of the South Ross County Dundee United Hamilton Kilmarnock Falkirk Livingston Greenock Morton

www.insider.co.uk

Insider FFI Score 67 58 56 50 49 48 44 44 43 43 42 41 41 40 36 36 34 33 31 29

Financial Discipline Score

Corporate Governance Score

Stakeholder Management Score

71 54 49 41 38 51 41 36 20 27 22 31 26 31 17 22 34 25 25 14

54 45 56 51 40 39 41 64 76 57 78 61 63 44 59 56 32 37 40 54

80 90 69 70 88 56 58 29 43 56 30 33 41 53 45 35 35 45 29 22

sacrifices as well and everyone has played their part.” Heart of Midlothian FC were in fifth spot in this year’s index, down from the fourth position achieved last year. But there were signs nearing the season’s end that the Tynecastle club’s finances might be hit after a bad seven-day run at the end of March saw warnings some supporters might pull their financial backing. This followed an embarrassing Scottish Cup exit to Highland League side Brora Rangers. But, despite the unrest and calls for Robbie Neilson’s second period as manager at the club to be ended, as I write, the team is 13 points clear at the top of the Championship and close to winning the title and a return to the Premiership. A club that has parted company with its coaching staff this season was Aberdeen FC, which came in at sixth spot in the index, the same position as last time’s showing. The Pittodrie club revealed in January it would be amongst the first of Scotland’s top clubs to claim emergency help Dave Cormack, the US-based financier and investor who is the club’s major shareholder set out the challenges for his and all the clubs in a video released in February. “Our focus is on the financial sustainability of the club because we’ve still got hardly any income and who knows when income will come back.” He went on: “As stewards of this club, this great club, that’s never gone bust in 117 years and it’s certainly not going to do so on my watch without us pulling out all the stops to get through this.” Ranked seventh in the index, Motherwell FC reported profits of £346,950 in the year to 31 May 2020 – a positive swing of £782,560 from its previous loss of £435,970 in the 2019 financial year. Despite the Covid restrictions, the Lanarkshire club’s turnover rose by nearly £400,000 to £4.95m, up from £4.59m in the previous year. This was on the back of a third-place finish in the league after the decision was made to end the 2019/20 season after only 30 of the campaign’s planned 38 cub matches were played. The Fir Park cub continued to do good business in the transfer market, with it posting a final figure of £1.04m of player registration gains – up by more than £260,000 on the £781,000 achieved the previous year, Since then, results on the pitch worsened and the club parted May 2021 INSIDER 41

REPORT: SCOTTISH FOOTBALL FINANCE company with its then manager Stephen Robinson. Now under a coaching team led by former Scotland international Graham Alexander the club missed the top six cut-off but, as I write, is one of the clubs vying for a seventh place ‘best of the rest finish’. However, the full impact of the pandemic has still to be felt as Steve Brown, chairman of St Johnstone Football Club, has warned. The Perth club – which is in eighth place in this year’s Football Finance Index – in January reported a £20,000 loss for the year to May 2020, which Brown said was “a decent result given the fact there was little or no income during the last fifth of the year”. He warned shareholders then the club was braced for a much bigger impact this season as fans had still not been allowed back into grounds. Despite the warning, the club’s board, which includes Aberdein Considine partner Charlie Fraser as its deputy chairman, is in a better position than many of their counterparts. The club has a £2.8m “rainy day fund” and these reserves will allow them to ease the Covid-19 pandemic economic hit. At the time the results were reported, Steve Brown paid tribute to the club’s directors and his predecessor as chairman, his father Geoff Brown. He said: “The board was required to make numerous difficult decisions during the height of the pandemic. “Without the reserves that have been prudently built up over a number of years, the club would almost certainly have been in dire financial straits moving into the next financial year.” Currently ranked just below St Johnstone in the Scottish Premiership table, although seven places below them in 15th place in the Insider Index, is Dundee United FC. The annual results for the period ended 30 June 2020 announced by the Tannadice club in April showed the vying forces of the negative impact of Covid and the positive one of the continued financial investment made by majority shareholder Mark Ogren. Key positive developments at the club included their promotion to the Premiership and the further development of its youth academy, which has a growing reputation in the football world. The profit and loss account for the period showed a loss of a hefty £3.01m but the club pointed to 42 INSIDER May 2021

Celtic are still ahead in the Insider Scottish Football Finance Index but Rangers are closing the gap

Without the reserves prudently built up, the club would almost certainly KDYH EHHQ LQ GLUH ğQDQFLDO VWUDLJKWV Steve Brown, St Johnstone FC chairman

IN FOCUS: Counting the cost of Covid

Old Firm net financial buffers Celtic FC made a profit of £100,000 before tax, with the club’s revenues decreasing by 15% to £70.2m, a total drop of £13.2m from the previous year. The sale of Kieran Tierney to Arsenal was a major source of income for the club, with the receipt offsetting in part deals for Christopher Jullien, Ismaila Soro, Patryk Klimala, Greg Taylor and Boli Bolingoli.The club said that its financial year end cash net of bank borrowings was £18.2m – compared to £28.6m the previous year. Since then, it increased its revolving credit facility from £2m to £13m to provide a further financial buffer if it was needed. In the year to 30 June 2020, Rangers FC made losses of £15.3m – a figure up from £4.3m the previous year as the pandemic impacted Scottish football as all other areas of business. The club said then it needed £23.2m in funds in by the end of this season, with Douglas Park, the chairman, and John Bennett, a director, providing loans to cover the shortfall in the interim. Club revenues rose by 11 per cent to £59m, with a £20.7m contribution for reaching the Europa League last 16. Douglas Park predicted the absence of fans for this season would cost Rangers more than £10m.

positive financial trends with an increase of turnover of almost £800,00 – up 25 per cent on the previous year – in the largely pre-Covid season covered in those accounts. Gate receipts were up 37 per cent, although the club was hit by a loss of an estimated £128,000 on the four cancelled home fixtures scheduled at the end of that unfinished season. The club’s coffers were also helped by being winners of the Championship, Scottish football’s second top division, meaning their prize money saw a year on year rise of 18 per cent. The club’s turnover was also impacted by the decision with the key decision to bring retail back in house, meaning that more than £500,000 of retail sales went directly into the Dundee United FC coffers. Their story for that year also highlights another key area for the business side of clubs, namely cutting costs with the Tannadice club having achieved reduced administration expenses by more than £100,000 or six per cent on the year. Mark Ogren, the majority shareholder and chairman of the club said at the time of the results: “Due to the Covid-19 pandemic, 2020 will be remembered unlike any www.insider.co.uk

REPORT: SCOTTISH FOOTBALL FINANCE Matches resume at Rothwell Juniors football club as competitive amateur matches take place for the ﬁrst time since restrictions were eased

Mark Ogren, Dundee United

IN FOCUS: Ogren’s long-term goal other year no matter where in the world or what your business is. The impact will continue to extend into the economy and society for quite some time but with the support of our fans who continue to financially support our strategy to take United forward, we will come out of this a far stronger club.” The statement ties in with the messages coming out of the club that once the spectre of Covid-19 recedes and fans can return to the stadium then United’s financial position will be stronger. This is allied with the www.insider.co.uk

Mark Ogren, the owner of Dundee United, clearly looks here for the long term with plans to expand his sporting assets in Scotland. It was announced in March that he had sold his share in The Sioux Fall Canaries, the South Dakota-based baseball team. He said at the time that his commitment to the ownership of the Tannadice club was “unwavering” and it has since emerged that he is behind plans for a multi-million-pound golf resort in St Andrews. The American and his Spanish business partner Hector Pous Rivero have submitted plans to Fife Council after buying the multi-million-pound 97.5-hectare estate at Feddinch Mains last year. Their plans pick up from previous ones by Open champion Tom Weiskopf for an 18-hole golf course, club house, golf accommodation including up to 41 suites and a spa and restaurant. United also have a base in the historic Fife town, training as they do at the University of St Andrews Sports Centre.

board’s hopes of improved play on the pitch as the investment in the Academy pays off and more younger players come through to strengthen the team. The other thing that has improved sentiment is it clearly looks as if Mark Ogren plans to expand his sporting assets in Scotland. It was announced in March he had sold his share in The Sioux Fall Canaries, the South Dakota-based baseball team, and he said at the time his commitment to the ownership of the Tannadice club was “unwavering”. It has since emerged he is behind plans for a multi-millionpound golf resort in St Andrews. The American and his Spanish business partner Hector Pous Rivero have submitted plans to Fife Council after buying the multi-million-pound 97.5-hectare estate at Feddinch Mains last year. Their plans pick up from previous ones by Open champion Tom Weiskopf for an 18-hole golf course, club house, golf accommodation including up to 41 suites and a spa and restaurant. United also have a base in the Fife town, training at the University of St Andrews Sports Centre. It is hoped his commitment and that of other businesspeople will be lasting and will mean better times ahead for the “beautiful game” in Scotland as it emerges from the problems wrought by the pandemic. ■ The Insider Football Finance Index is a complex decision analysis designed to rank the top Scottish football clubs. The Index was originally designed in 2017 based on interviews with accountants, lawyers and financial specialists as well as journal articles to produce 11 main criteria, categorised into three primary sub-sections: financial discipline, corporate governance and stakeholder engagement. The Index research uses proxy measures for the area of study to give high quality secondary where primary data is not available. In previous years we have used fan attendance at grounds in the stakeholder engagement category. Because of the pandemic and with no current fan attendance this has not been possible and so we have used last season’s figures. The research for the Insider Football Finance Index 2021 was carried out by Steven Wilson. In the interests of full disclosure it should be stated the author is a lifelong supporter of Motherwell Football Club and served for a short time on the board of the Well Society, the club’s fan ownership group. May 2021 INSIDER 43

%86,1(66 352),/(

" "

! " # !+( 5(&614 +$5 $4*7$%.; 0(8(4 %()14( )$&(' 57&+ 70&(46$,06; $0' ',54726,10 %76 6+$6 5 016 61 5$; 6+$6 ,6 +$5 $.. %((0 0(*$6,8( %(&$75( )14 51/( ',54726,10 $0' 70&(46$,06; +$5 /($06 12214670,6; !+( $6,10$. $07)$&674,0* 056,676( &16.$0' +$5 %((0 914-,0* 9,6+ /$07)$&674(45 1) $.. 5,<(5 $&4155 8$4,175 ,0'7564,(5 61 +(.2 6+(/ ,'(06,); $0' 5(,<( 12214670,6,(5 14 51/( 6+,5 +$5 %((0 $%176 4()14/,0* 6+(,4 %75,0(55 &1/2.(6(.; 6+417*+ (/%4$&,0* ,0018$6,10 %76 )14 16+(45 ,6 +$5 %((0 $%176 51.8,0* '$; 61 '$; 241'7&6,10 &+$..(0*(5 6+$6 +$8( $A(&6(' 6+(,4 %1661/ .,0( 5 $0 (:$/2.( 6+( (0*,0((45 $0' 4(5($4&+(45 $6 4(&(06.; 914-(' 9,6+ $ 5/$.. %76 *419,0* &166,5+ (0*,0((4,0* $0' 611.,0* &1/2$0; %$5(' ,0 70'(( !+417*+ 914-,0* 9,6+ 6+( &1/2$0; 61 (:2.14( 6+( %(0(?65 1) 0(9 6(&+01.1*,(5 6+( /$&+,0,0* $0' $'',6,8( /$07)$&674,0* 6($/ +(.2(' 6+(/ 61 4('7&( 6+( 4,5- 1) ,0641'7&,0* $0 $'',6,8( /$07)$&674,0* 1A(4,0* )14 ,65 &7561/(45 4(57.6,0* ,0 ,0&4($5(' (037,4,(5 )41/ 0(9 6(44,614,(5 $0' 0(9 /$4-(65 722146 +$5 $.51 %((0 2418,'(' )14 &1/2$0,(5 .11-,0* 61 $''4(55 ,557(5 $4170' 5756$,0$%,.,6; $0' &$4%10 4('7&6,10 6$4*(65 !+( '(5,*0 (0*,0((4,0* 6($/ 4(&(06.; +(.2(' $ (4/$0

.,*+69(,*+6,0* 52(&,$.,56 '(8,5( $ &10&(26 6+$6 &17.' 4$',&$..; 4('7&( 6+( 9(,*+6 1) %$66(4,(5 ,0 (.(&64,& $0' ,06(40$. &1/%756,10 (0*,0( 8(+,&.(5 %4,0*,0* 9,6+ ,6 $ 4('7&6,10 ,0 &$4%10 (/,55,105 $0' 241'7&6,10 &1565 5 ,6 &106,07(5 61 5722146 6+( /$07)$&674,0* &1//70,6; 61 0$8,*$6( &1/2.(: 5,67$6,105 57&+ $5 4(:,6 &.,/$6( &+$0*( $0' 6+( 2156 2$0'(/,& 4(&18(4; ,5 4($'; 61 1A(4 (8(0 *4($6(4 .(8(.5 1) 5722146 61 6+( &1/2$0,(5 6+$6 0((' ,6 105647&6,10 1) ,65 0(9 )$&,.,6; $6 6+( +($46 1) 6+( '8$0&(' $07)$&674,0* 0018$6,10 ,564,&6 &16.$0' ,0 (0)4(95+,4( ,5 9(.. 70'(49$; 9+,.( ,65 52(&,$.,56 6(&+01.1*; &(064( 6+( "0,8(45,6; 1) 64$6+&.;'( 5 '8$0&(' 14/,0* (5($4&+ (064( 5(6 61 .$70&+ ,65 = / 7674( 14*( '(8(.12/(06 6+,5 57//(4 6 $4170' 6,/(5 6+( 5,<( 1) $/2'(0 )116%$.. 2,6&+ 6+( 9,.. ,0&.7'( $ 5-,..5 $&$'(/; $ )7..; ',*,6$.,5(' )$&614; 1) 6+( )7674( $0' $ &1..$%14$6,10 +7% !+( 0(9 )$&,.,6; 0(:6 61

.$5*19 ,42146 9,.. +(.2 5722146 /$07)$&674,0* $0' (0*,0((4,0* ?4/5 1) $.. 5,<(5 $0' )41/ $.. 5(&6145 $&4155 6+( &17064; $0' ,06(40$6,10$..; 61 ,0018$6( $0' *419 6+(,4 %75,0(55(5 6 6+( ,0 0&+,00$0 6+( = / 7674( 14*( '(8(.12/(06 ,5 $./156 4($'; 61 12(0 ,65 '1145 0 4(52105( 61 6+( 4$2,'.; &+$0*,0* '$6$ '4,8(0 /$07)$&674,0* 52$&( 7674( 14*( 9,.. 1A(4 6+( 914.' 5 /156 $'8$0&(' +16 )14*,0* 2.$6)14/ "5,0* 6+,5 70,37( )$&,.,6; 6+( 9,.. &1..$%14$6( 9,6+ 14*$0,5$6,105 $&4155 6+( )14*,0* 5722.; &+$,0 61 $''4(55 51/( 1) 6+( ,0'7564; 5 %,**(56 &+$..(0*(5 70'(45 ,0&.7'( 6+( " (4152$&( (5($4&+ $0' !(&+01.1*; 41*4$//( '(.,8(4(' %; 6+( (2$46/(06 )14 75,0(55 0(4*; $0' 0'7564,$. 64$6(*; 0018$6( " $0' 6+( (4152$&( !(&+01.1*; 056,676( &166,5+ 06(424,5( $0' 6+( ,*+ #$.7( $07)$&674,0* $6$27.6 1+0 (,' +,() :(&76,8( B&(4 1) 6+( $6,10$. $07)$&674,0* 056,676( &16.$0' 4172 5$,' >!+( 2$56 ;($4 +$5 %((0 10( 1) 6+( /156 &+$..(0*,0* (8(4 )14 &166,5+ /$07)$&674(45 $0' 9( $4( +(4( 61 +(.2 6+( &1//70,6; 4()1&75 (/%4$&( ,0018$6,10 $0' 5(,<( 6+( 12214670,6,(5 6+$6 &$0 (/(4*( )41/ $'8(45,6; > 5 9( /18( )149$4' 619$4'5 $ 2156 2$0'(/,& 914.' /$0; &1/2$0,(5 +$8( $.4($'; 4$2,'.; $&&(.(4$6(' 6+(,4 ',*,6$. 64$05)14/$6,10 $0' ',8(45,?(' 61 /((6 0(9 '(/$0'5 $0' 9( $4( $.. 24(5(06(' 9,6+ $ &+$0&( 61 5+$2( 174 190 )7674( 10( 6+$6 ,5 %,**(4 56410*(4 $0' /14( 5756$,0$%.( @

REVIEW: MANUFACTURING in association with

FORGING A BIGGER, BRIGHTER AND STRONGER FUTURE

By KEN SYMON

HE CHALLENGE for Scotland’s manufacturers over the past few months, as with many businesses, has been not only to survive but to emerge from the shadow of the pandemic in a shape and with processes that are better fitted to the future. John Reid, chief executive officer of the National Manufacturing Institute Scotland Group, says: “The past year has been one of the most challenging ever for Scottish manufacturers and we are here to help the community refocus, embrace innovation and seize the opportunities that can emerge from adversity. “As we move forward towards a post-pandemic world, many companies have already rapidly accelerated their digital transformation and diversified to meet new demands, and we are all presented with a chance to shape our own future; one that is bigger, stronger and more sustainable.”

When the plans for the Institute were set out about 18 months ago noone could have predicted it would be operating in these still early days in such an unprecedented environment with such a unique set of challenges for the sector, with not only the impact of coronavirus to contend with but also with those of Brexit and

Manufacturing can either return to what it once was, or it could become demonstrably better in many ways Paul Winstanley, CENSIS (below)

the sharply increasing demands to combat climate change. In this environment, The National Manufacturing Institute Scotland (NMIS) has been working with manufacturers of all sizes across various industries to help them identify and seize opportunities. For some, this has been about reforming their business completely through

The future of manufacturing in Scotland www.insider.co.uk

Above: an artist’s impression of the new HQ for the National Manufacturing Institute Scotland Group near Glasgow Airport

embracing innovation but, for others, it has been about solving day-to-day production challenges that have affected their bottom line. As it has done this work, construction has also been under way on the Institute’s new headquarters at the heart of the Advanced Manufacturing Innovation District in Renfrewshire, near Glasgow Airport. At about 1.5 times the size of Hampden football pitch, the NMIS HQ will include a skills academy, a fully digitised factory of the future and a collaboration hub. The new facility will aim to support manufacturing and engineering businesses of all sizes and from all sectors across the country, and internationally, to innovate and grow their businesses. It is part of moves to create a sector cluster in the area, adding to the existing University of Strathclyde’s Advanced Forming Research Centre (AFRC), which is seeing its own significant development with the launch of its £20m FutureForge

nmis.scot May 2021 INSIDER 45

REVIEW: MANUFACTURING to take place this summer. As manufacturing becomes increasingly data driven, the FutureForge will aim to offer the world’s most advanced hot forging platform. The FutureForge is financed by a group of funders that includes the UK Aerospace Research and Technology Programme – delivered by the Department for Business and Energy and Industrial Strategy, Innovate UK and the Aerospace Technology Institute – economic development agency Scottish Enterprise and the High Value Manufacturing Catapult. Together, they mean that Scotland has assembled a significant amount of firepower to propel its manufacturing and engineering sectors into the future as the domestic – and international – economy opens back up. Recent research suggests output in manufacturing had begun to climb and gained further momentum as the first quarter of the year ended, with March seeing the fastest output in growth since late 2020 with increased new business from both domestic and overseas markets. Mike Thornton, partner and head of manufacturing at RSM, the accountancy firm, said: “Despite uncertainty and supply chain pressures, the latest CIPS Manufacturing PMI shows significant improvement increasing to a decade-high of 58.9 from 55.1. “This optimism is understandable when you consider the latest announcements from the UK Budget, including Freeports, the 130 per cent ‘super-deduction’ for capital spending and the planned review of research and development (R&D) tax relief, which could deliver key tax benefits for manufacturers looking to invest in the UK. “In addition, the Government recently announced the creation of four new trade and investment hubs, which aim to boost exports and deliver better access to global markets for Scotland, Wales, Northern Ireland and the north of England. As part of the Government levelling-up agenda, these hubs could offer a real trade boost for manufacturing heartlands across the UK.” But, as it recovers from the difficulties faced over the last year,

We have seen businesses within our portfolio quickly adapt by taking steps to ensure all employees are able to socially distance and feel safe at work

collaborative network, developing and delivering the right skills, and examining the resilience and complexity of supply chains. “Inevitably, part of this process will be informed by what we can learn from the past year. Among the biggest lessons has been around the Paddy Graham, BGF (below) on-shoring of supply chains. “Early in the pandemic, personal Above: Window Paul Winstanley, CEO of CENSIS, protective equipment (PPE) supply Supply Company, Scotland’s innovation centre for chains had to form very quickly one of the sensing, imaging systems and to deal with the sudden influx of manufacturing Internet of Things (IoT) technologies, demand and limited transportation, businesses receiving says the key question is: what does which saw strong ministerial investment from BGF the industry recover to? engagement bringing companies He sets down this challenge for the together. This is an experience we can sector: “Manufacturing can either draw on for the future and we expect return to what it once was, or it could to see more movement in on-shoring, become demonstrably better in particularly on the back of Brexit. many ways. As difficult as the past 12 “We can also learn how to form months or so have been, we now have new clusters, growing new supply an opportunity for large-scale change and value chains from these. Scotland and it has uncovered what is possible has the expertise and knowhow to do with digital transformation, remote this, which has been demonstrated working and greater flexibility.” in recent years by the sensing and CENSIS has been involved in photonics industries. the development of the Scottish “They also provide a natural Manufacturing Recovery Plan. He base that can be extended into says: “This has largely involved other hi-tech manufacturing areas, looking at how the manufacturing as well as a blueprint for positive sector can adapt and transform development elsewhere.” through the adoption of digital But Winstanley says there are technologies, while addressing key issues of strategy around this. environmental challenges too. “The question is: where should From that, the key themes for the these clusters be encouraged to industry will be around building a form? We are already beginning

The future of manufacturing in Scotland 46 INSIDER May 2021

nmis.scot www.insider.co.uk

REVIEW: MANUFACTURING to see them emerge in sectors such as smart transport and hydrogen – Scotland has a unique opportunity with the latter to be a world leader in the production, distribution, and usage of hydrogen and related technologies.” Another challenge he highlights is the make-up of the Scottish business base with its predominance of SMEs. “We need to make it clear how the principles of Industry 4.0 and digital technologies can be applied to them. Collaboration between businesses, academic institutions and other stakeholders will be crucial in that respect, helping to demonstrate how Industry 4.0 might be applied to multiple SMEs or even throughout an entire supply chain. “This is another area in which Scotland has a unique opportunity to be a global leader, pioneering the application of new digital technologies to entire ecosystems rather than just one large business,” says Winstanley. Paddy Graham, head of the Central Scotland and Northern Ireland team of the UK’s most active investor BGF, says the sector has learned the benefits of flexibility over the past Covid-burdened year. BGF has invested in Scottish-based manufacturing businesses including Window Supply Company, Walker Precision, Moulded Foams and M2 Lasers. He says: “There has been an increased awareness and drive amongst manufacturing businesses to be as flexible as possible to accommodate the different needs of office-based and plant-based staff with Covid-safe environments being a priority focus. “We have seen businesses within our portfolio quickly adapt by taking steps such as altering shift patterns and, in some cases, due to the nature of their operations, additional facilities have been opened up to further ensure all employees are able to socially distance and feel safe at work.” There have also been other changes, he says. “A lot of companies are re-assessing their supplier chain as the pandemic has shown how this can be seriously impacted and have a real knock-on effect, especially to those manufacturing companies that rely on possibly one or two supply chain companies to provide key materials necessary in their production. “Manufacturing companies that have managed to come out the other side of the various lockdown restrictions relatively unscathed tend to be the ones that had sufficient stock levels that allowed them to continue to trade throughout. “While there is a fine balance, shortages of inventory and raw materials can have a significant impact on manufacturing schedules and budgets, and therefore www.insider.co.uk

lead to increased labour costs and production bottlenecks.” Many manufacturing companies that have weathered the pandemic are now facing the challenge of rebuilding their balance sheets, an area where investment in working capital will be key to growth. Graham adds: “Specific improvements in capital allowances, such as the recently announced super deduction, should encourage manufacturing businesses to invest and will ultimately improve productivity and competitiveness. “However, there is concern that some may not have the flexibility to make capital investments, and it will be important to continually assess the extent to which smaller manufacturing companies are utilising these new tax incentives to allow them to invest in the tools they need to grow.” Complicating this picture is the changed funding regime for companies as the realities of Brexit become ever more apparent. Joe Matusiak, grants manager at innovation funding specialists ABGI UK,

While we are seeing an increasing appetite for innovation and R&D funding within Scotland’s manufacturing sector, Brexit has realigned grant funding arrangements Joe Matusiak, AGBI says: “While we are seeing an increasing appetite for innovation and R&D funding within Scotland’s manufacturing sector, Brexit has realigned grant funding arrangements. Scottish firms and their UK counterparts will have continued access to Horizon Europe funding, but they will not be eligible for aspects of the European Innovation Council Fund, nor will they have access to European Regional Development Fund grants. “Scottish manufacturers that require innovation funding should focus on existing channels, including Innovate UK, while those looking to contribute to improving the environment and achieving net-zero emissions, will be able to access support via the Scottish Enterprise Green Fund. Manufacturing SMEs operating within Scotland’s aerospace sector can also apply for up to £300,000 in support funding to increase their global business prospects through the National Aerospace Technology Exploitation Programme.” ■

COMMENT Stewart McKinlay Skills Director at the National Manufacturing Institute Scotland’s Manufacturing Skills Academy W: www.nmis.scot

Shining a light on next generation will deliver a brighter future Over the past year, we have seen employment opportunities, for people of all ages, significantly decrease across the UK. For graduates, this has been no different as one in eight found themselves unemployed in the third quarter of 2020 – almost double the average rate for this group over the past three years – according to figures from the Office for National Statistics (ONS). Looking ahead, it is vital that we do what we can to ensure that those who have lost out are given all the support they need. That is why, with significant investment from the Scottish Government’s £25 million National Transition Training Fund (NTTF), the National Manufacturing Institute Scotland (NMIS) is offering 30 STEM graduates across Scotland the opportunity to work directly with its engineers and researchers. The scheme will provide participants with on-the-job training and equip them with in-demand skills relevant to digital and advanced manufacturing and engineering. As part of this, we are collaborating with small and medium sized manufacturing businesses across Scotland, in a bid to offer graduates invaluable experience to learn from and work with potential employers. We also want to ensure that we are supporting the next generation of engineers locally and that is why we have partnered with Scottish charity, Kibble, in a bid to encourage care experiences young people the opportunity to pursue a career in STEM. Through the partnership we are highlighting the alternative pathways into employment, showing that there really is no wrong path. As an industry rooted in innovation, it is essential that our young people are offered the opportunity to tackle real-world issues. Through our Manufacturing Skills Academy, our aim is to transform the workforce of today and tomorrow, creating opportunities for people to have flourishing careers, while investing in talent to better the productivity and competitiveness of our manufacturing landscape in Scotland.

May 2021 INSIDER 47

BUSINESS PROFILE

ETHICAL FINANCE  A FOCUS FOR 2021 AND BEYOND Once niche, the ethics of borrowers and their debt-funded projects has fast become a dominant theme of the UK debt market in 2021. The focus coincides with an increasing awareness of and market support for the UK and Scottish governments’ commitment to achieving net zero.

tackle the threat of climate change has increased, with the signing of the Paris Agreement at COP21 in December 2015 evidencing a ﬁrm commitment to action. Most recently, the coronavirus pandemic has reemphasised community, society and the importance of universal access to essential services.

What is ethical ﬁnance?

Three key categories of ethical ﬁnance :

The term ethical finance, or sustainable finance, is used to describe finance that takes into account environmental, social and governance (ESG) factors affecting a borrower and/or its assets. Environmental factors are those affecting the natural world and include climate change, energy efficiency and treatment of waste. Social factors concern local and global communities and include working conditions, health and safety and diversity and inclusion. Governance factors concern the internal workings and decision making processes of the borrower, including board independence and transparency, as well as its relationships with its stakeholders, including shareholder rights, antibribery and corruption and political lobbying.

Ethical finance in 2021 Ethical finance is not a new concept, but has long existed and been offered in various forms via entities such as credit unions and lending circles. Ethical principles are also already applied in some specialist financings, for example by certain providers of international project finance to determine, assess and manage environmental and social risk arising from the project(s) (often via the “Equator Principles”). However, the global financial crisis underscored the primacy of responsible lending and in the dozen or so years since, political and societal will to

1. Green finance – where debt is made available for a specific ‘green’ project with clear environmental benefits, such as renewable energy production. “Green loans” are the product generally associated with modern ethical finance. Their use and popularity are however constrained by the availability of investments, and so we are seeing volumes remain steady. 2. Social finance – where debt is made available for a specific ‘social’ project which aims to address or mitigate a specific social issue or seeks to achieve positive social outcomes for target beneficiaries, such as programs designed to alleviate unemployment or improve access to essential services. More familiar perhaps in and to funders operating in international markets, we expect to see more UK projects being funded via social financing products in the short to medium term partly to address issues identified as a result of the coronavirus pandemic. 3. Sustainability-linked finance – where debt is not made available for any particular project, but the ultimate use of funds and/or the borrower entity are assessed and measured against an agreed, documented list of ESG metrics, with positive, metric-compliant behaviours rewarded,

Stuart McMillan is a Partner and Amy McVey a Director in the Edinburgh-based Banking and Finance team at independent UK law ﬁrm Burges Salmon. Contact: stuart.mcmillan@burges-salmon.com +44 (0) 7968 558 978, amy.mcvey@burges-salmon.com +44 (0) 7866 890 232 or visit burges-salmon.com

usually with a reduction in the cost of the finance. We are seeing a significant increase in new financings incorporating ESG metrics, including from the UK clearing banks, and expect these provisions to soon become ubiquitous. Sustainability-linked finance is clearly aligned with the commitments of the UK government and Scottish government to achieve net zero by 2050 and 2045, respectively. This will require wide and early engagement across all sectors, including the financial sector, and positive behavioural changes of the kinds encouraged by sustainability-linked financial products. It also addresses key stakeholder considerations, with investors using ESG factors to assess the asset base and behaviours of finance providers they are considering investing in. Finally, the flexibility afforded by the structure, which as non-prescriptive is easily adaptable to different borrowers, sectors and assets, is a key strength. Once suitable and realistic metrics are agreed, these and the pricing or other implications are able to be incorporated in existing debt products rather than being funnelled via new specialist sustainability-linked products.

Beyond 2021 Political focus on sustainability, with its strong climate change pillar, is acute in the lead up to COP26, now scheduled to take place in Glasgow this November. Funders are therefore under pressure to maintain sustainability standards within the UK in order to both meet political expectations and to remain attractive to potential investors. For both reasons, the focus on sustainability-linked ﬁnance will undoubtedly continue, with ESG metrics soon seen as fundamental provisions of any debt document.

REPORT: ETHICAL FINANCE in association with

THE BUSINESS WISHLIST IS NOW BECOMING A REALITY By KEN SYMON

THICAL investment and a more values-driven approach to business generally have become more and more centre stage in recent years. The effects of the pandemic and the drive to net zero as climate change climbs higher and higher up business boards’ agendas are only likely to increase that. Arlene Ewing, an investment manager at wealth manager Brewin Dolphin in Glasgow, says the first “socially responsible” investment fund was introduced in the early1970s to meet the needs of investors that were becoming more ethically conscious following a period of unrest and large-scale activism. “Fifty years on and world events still bring the ethical issues at the forefront of society into how people invest their hard-earned cash,”

she says. “Unique, hard-hitting documentaries and social media has meant that consumers now have more access to information about how companies are operating and can make informed choices

Above: Jo Haliday and Elizabeth Fairlie of Talking Medicines

We are now seeing a new generation of millennial investors that are more conscious, considered and aware Arlene Ewing, Brewin Dolphin

about where to spend their money. Ethical consumerism has soared over the past few years and society has a heightened awareness of moral issues that can influence their spending choices. In turn, we are now seeing a new generation of millennial investors that are more conscious, considered and generally aware of the companies and funds

they are choosing to invest in, and so grows the demand for ethical and socially responsible funds.” A survey for Wealthify, an Aviva online investment subsidiary, underlined this point. It found that 82 per cent of Scots believe it is important to support ethical or sustainable brands in their daily lives. But the survey also suggested a disconnect between that desire and practice – almost half of the Scots surveyed viewed ethical products as too expensive to shop for in their daily lives. Ironically, the survey also found that, when asked if they would be willing to pay more for a product that is ethical or sustainable, 62 per cent of Scots said they would be. Mike Pearce-Burke, the chief operating officer of Wealthify says: “We know that conscious consumerism is on the

People say it’s not what you know, it’s who you know. We believe it’s both. www.grayling.com www.insider.co.uk

May 2021 INSIDER 49

REPORT: ETHICAL FINANCE rise. Coronavirus has encouraged many of us to shop more locally and ethically than in pre-pandemic times. We also see this reflected in the investment decisions being made by an increasing number of our customers.” “The significant increase we have seen in customers opting for our ethical investment plans over the past year has meant that their uptake is now outstripping our standard investment plans by almost two to one. “What’s more, investment returns on our ethical plans last year actually outperformed our original investments, demonstrating the added value of consuming, purchasing or investing ethically.” This is a key factor in the rise of ethical investments: improving returns on the investment. Ewing at Brewin Dolphin says: “It is often thought that ethical funds receive lower returns than their not-soethical counterparts. But, as more people align their investment choices with their own values, these funds are generally competing and on a positive trajectory of growth. “ESG (Environmental, Social and Governance) reporting requires businesses to disclose their performance across environmental, social and corporate governance measures and allows fund managers to understand investment risk and the impact these may have on longterm returns. “Companies are screened by funds based on their ESG performance to determine whether they should sit within a portfolio, so it is increasingly valuable for businesses to accurately measure their stakeholder and ESG impact.” Jan Gruter, a legal director at law firm Addleshaw Goddard, part of the firm’s wealth and asset management team, says that ESG factors are becoming more and more prominent. He said: “Certainly, on the investment funds side, we’re seeing a lot more focus on environmental, social and corporate governance reporting (ESG). This focus is not just from the regulators, but also from investors, with institutional investors now often asking for

For me, the direction of travel is really clear and it is well reported that there has been a further acceleration during the Covid-19 pandemic Jill Arnold, SIS Ventures (above)

particularly detailed reporting as well as the associated data. We are also starting to see fund manager’s rewards, such as carried interest, being linked to sophisticated ESG metrics and impact indicators. “It is becoming increasingly challenging for fund and asset managers to keep up with Dr Rutger Zietsma of Manus Neurodynamica

Curious. Connected. Committed. We are Grayling. Creating advantage. 50 INSIDER May 2021

developing ESG regulations and voluntary standards on the one hand and very bespoke investor requirements on the other. “The associated challenge is gathering the data on which to report. This presents a particular challenge for fund managers investing in private companies, with data not as readily available as that from public companies.” Jill Arnold, the head of SIS Ventures, describes herself on her LinkedIn profile as someone who is passionate about “delivering commercial outcomes whilst building harmony and consensus”. She says: “It’s very clear that responsible investing criteria absolutely can play a very decisive role in investment decisions and is doing so already.” She highlights an EY report from last year that showed 91 per cent of investors they surveyed said non-financial performance really played a pivotal role in their investment decision making over the past 12 months. “That in itself is really the business case for responsible investing going forward. It’s still a relatively small segment of the market, but we do

www.grayling.com www.insider.co.uk

REPORT: ETHICAL FINANCE know that ESG-focused funds broke through that $1trillion assets under management level last year. For me, the direction of travel is really clear and it is well reported that there has been a further acceleration during the Covid-19 pandemic. “In Scotland, we are already in a really strong position to pivot further towards that impact and ESG investment. The Ethical Finance Hub did some research that showed Scottish-based investment funds actually manage about 11 per cent of the UK’s responsible investment market, whereas we manage about seven per cent of the conventional market, so Scotland is punching above its weight already. “As a whole, I would say there is a real positive momentum and drive and an absolute clear business case there because investors and consumers are completely bought into this.” Positive impact businesses that SIS Ventures invests in include Talking Medicines, a Glasgowbased data tech company that helps capture the views of patients to drive more effective medicines; Good-Loop, which gives a donation to charity on behalf of companies every time their videos are viewed; and Manus Neurodynamica which has developed the NeuroMotor Pen, a medical device that evaluates the fine motor skills of patients with movement abnormalities. Arnold highlights the difference between impact investing and ESG investing. “I think of ESG as being quite different to impact,” he says. “Impact is the main focus of our impact investment fund, Impact First, and of any future funds that we launch and manage but there is ESG in there as well. I see ESG as being really about how the business is run, how do they manage their operations. “Most would agree that ESG is relatively mainstream now. Most business are becoming more conscious about the impact they are having on the environment in particular, really driven by Greta Thunberg and David Attenborough and The Blue Planet before that, and the upcoming COP26.

Justin MacRae, Fortunis Capital

IN FOCUS: Impact Investing

Measuring the impact of investment Impact investing is an idea whose time has come say its proponents. The figures back that up, with impact investing having grown from a niche to a global megatrend worth £2.1 trillion. Justin MacRae, chief operations officer of Fortunis Capital, a leading UK-based impact investor, says: “The world has moved on from the old model and we believe that innovation rather than exploitation is key to delivering value for investors.” He says that impact investing is complementary to but not the same as ESG, which looks at a company’s environmental, social and governance practices. “Impact investing is about the outcome, demonstrating a positive benefit to society while delivering strong returns to investors. ‘There is a lot of ‘impact washing’ out there, so it is vital that we measure the impact through the investment cycle. We were the 101st signatory to the impact investment principles led by the International Finance Corporation, the private arm of The World Bank. That means we are independently audited on the outcome of our investments – on how they make a difference to the lives of millions while delivering outstanding returns.” So, how does a potential investee qualify for support from impact investor such as Fortunis Capital? “It is a high bar,” MacRae says. “They need to demonstrate they are addressing a problem worth solving through innovation, produce a strong sustainable business plan with global potential and have a brilliant leadership team.” He cites the example of Borofree, formerly Karma, which successfully trialled its interest-free payday advances in Scotland, with the backing of the Scottish Government. Its new app, Borofree, launched in March, has the ambition of taking millions out of the vicious cycle of payday loan debt. This is, says MacRae, a perfect example of impact investment at work. Fortunis has also invested in San Diego biotech Stemson, who are pioneering research into the world’s first cure for hair loss, and Clementine, a hypnotherapy wellness app that was rated App of the Day in the Apple store. Justine MacRae says: “In the era of Covid-19, investors are more focused on the outcomes of their investments. Creating a better world and delivering industry leading returns are not mutually exclusive.”

“Most businesses are becoming aware of their impact on wider society and giving consideration to apply good and fair business practices. Businesses that aren’t taking ESG seriously are going to be left behind if they aren’t already acting on that. Investors are not going to be looking to invest in business that aren’t taking that seriously. “Impact investing is much more about contributing to solutions than about avoiding harm per se. It is in its infancy, it is only just emerging and is certainly not mainstream yet, although that is clearly the desire. Certainly we, as an organisation, don’t see it as a competitive sport, it is very much a collaborative space. “Impact is really about the business of strategy as opposed to how they run the operation, which is much more ESG. Assuming the impact is really at the core of the business’s product or service offering, it’s about the positive impact that business can then have on its beneficiaries’ whether that’s its customers, whether it’s society at large. “It is still emerging but it does feel like a very pivotal moment for both SIS Ventures and the impact investment market more broadly, with Covid really shining a light on that need for businesses to help address society’s biggest challenges by looking after people and planet, as well as profit.” All of this creates a moving picture and one that is quite complex. So Arlene Ewing at Brewin Dolphin says that data is key for investors who need to know what they are investing in and whether it really meets what they want. “Not all ethical funds are created equal,” she says. “It is important for ethical investors to really consider what matters to them and find a fund that aligns with their own goals and beliefs, whilst still delivering value and return on their investment. For example, some funds will incorporate environmentally responsible principles whereas others might be focused on supporting businesses within the community. “In terms of choosing their

Britain’s best-connected communications agency. We are Grayling. Creating advantage. www.grayling.com www.insider.co.uk

May 2021 INSIDER 51

REPORT: ETHICAL FINANCE

COMMENT Ross Laird Head of Scotland, Grayling

Amy Williams and Daniel Winterstein, founders of Good-Loop

W: grayling.com

Give your business the edge with a pro-active investment in ESG reporting As many companies take their first steps into ESG reporting (environmental, social and corporate governance), the link between ethical finance, investor relations, communications and your social and environmental credentials on the ground has never been more apparent. However, with the increased focus on targets and analytical reporting that entails, comes increasing scrutiny from investors and the wider public. Such targets and more in-depth analysis of the wider business impacts will undoubtedly put a spotlight on the current and historical practices of many companies. The very metrics which ESG reporting demands will create opportunities for unparalleled scrutiny of companies and their behaviours, as well as their targets. Whereas in the past, ethical investment was perceived to be at the expense of profit, its now viewed as increasingly symbiotic. How you operate and your impact on the environment and communities are increasingly defining company performance, as well as profitability. The pandemic and COP26 have exacerbated this trend, with more and more companies agreeing to environmental and social targets. This is both a collective and individual business endeavour, which will be heightened as we approach COP26. However, while much of the limelight at COP26 will be shared by global leaders, there will also be intense media scrutiny of the activity of participating companies and their ESG reporting. Communicating how to meet ESG targets to a sceptical public and investor audience is rarely easy. The reputation of many organisations in the past have become unstuck by accusations of ‘greenwashing’ or poor labour relations. An increasing number of companies are now turning to science-based targets to try to set limits on green-house gas emissions in order to combat climate change. These set a more measurable, accountable framework. It can be more difficult at a social and governance level to demonstrate such impacts on local communities, so it will be important that companies ensure they have effective monitoring systems and third-party evaluations to back them up. This is a competitive space, often seen through the lens of reputation. Yet the dangers of over-promising or failing to pro-actively engage communities and audiences throughout the business ecosystem, including supply chains, can have significant impact. Taking an evidence-based approach often pays dividends. So for those companies which are perceived to misstep, the fallout can be increasingly damaging, both for the financial bottom-line and reputationally. Yet, for others which are pro-active and invest in ESG, the prizes are potentially ever more significant.

52 INSIDER May 2021

What we have seen is the death of the Chicago School, Milton Friedman economics and ‘it’s all DERXW SURğWł 1RZ LWłV DERXW business with purpose Mary Campbell, Blas and Resilient Corporates

investment, broadly speaking there are a couple of approaches for investors to consider. On the one hand, they can look at positive screening for a portfolio, which would only include investments that meet their particular criteria – for instance, deciding to only invest in companies that have a positive impact on the environment. “The issue with positive screening is that it may inadvertently concentrate your investments around a particular area or industry, which could sacrifice diversification and, therefore, make it riskier. “The second approach is negative screening, which involves excluding assets for a particular reason. To take the same criteria, that might mean excluding oil and gas companies from a portfolio because of their carbon footprint. The challenge here is that this may not eliminate all the investments you may have an issue with. “As with any significant financial decision, the best approach is always to seek professional advice. Wanting to do the right thing with your money may have

a host of unanticipated consequences for your investments, which need to be analysed and discussed. But, what’s clear is that ethical – or ESG – investing is here to stay and it is only likely to become more mainstream as the world’s priorities change on the back of the Covid-19 pandemic.” For companies to pass these ‘ethical investment tests’, then such values will need to be embodied by the business leaders and the boards that support them. There is more and more thinking on business that supports this type of view. Mary Campbell, of corporate finance house Blas and Resilient Corporates who does training for boards at the Institute of Directors, highlights recent academic research by Colin Mayer, professor of management studies at Oxford University’s Said Business School, on trust in business. She says: “The question he was asking, without putting it in these words, was: should directors be taking the equivalent of the Hippocratic Oath? He doesn’t express it in those terms, but when he talks about value and purpose and ‘do no harm’ it is the equivalent of the Hippocratic Oath. “Now, for the last year, I have been asking delegates on the courses if they would say yes or no to this and I can tell you the only people under the age of 40 who say no – mainly lawyers – when you ask them why they say it is because they just don’t know how you would draft it. “What we have seen is the death of the Chicago School, Milton Friedman economics, and ‘it’s all about profit’ to something else and that transition is incredibly disruptive. Now, it is all about business with a purpose.” ■ www.insider.co.uk

MARKET COMMENTARY

THE TRANSFORMATION TOWARDS ETHICAL BANKING

Banks were cast as the villain of the piece in the so-called ‘Great Recession’ of the late 2000s – the last downturn to hit our economy before the coronavirus pandemic. Their role in the subprime mortgage debacle led directly to a global financial crisis and the deepest UK recession since the Second World War. By contrast, in the latest economic downturn triggered by the COVID-19 lockdown in 2020, the banking industry played a crucial role in stabilising our economy. Bolstered by healthy capital levels after the structural reforms of the past decade, banks have acted as a conduit, transmitting essential government stimulus programmes directly to businesses in need of financial support. Their collective response to the pandemic vividly demonstrates how a purposeful banking industry can be a force for good. Banking is undergoing a transformation. The archetypal London banker, sporting a bowler hat, three-piece suit and umbrella, has been consigned to history. Even the red braces that typified the brash City casino culture after the ‘Big Bang’ of 1986 – the deregulation of investment banking – are from a bygone age. But the changes in banking are not about dress codes or appropriate attire. There is a changing perception of what constitutes good corporate performance in the banking sector – a greater focus on the importance of delivering financial services ethically. It is part of a wider shift in society to reassess the role and purpose of commerce, beyond simply generating profits for the providers of capital.

Financial regulators are leading the charge. Last month, Nikhil Rathi, Chief Executive of the Financial Conduct Authority, gave a speech on why diversity and inclusion are regulatory issues, pointing out that a lack of diversity in the boardroom raises questions about a firm’s ability to understand its customers. In essence, greater diversity at the top reduces the risk profile of a financial institution and makes it more resilient. Efforts are being set in train across the financial sector to address shortcomings in corporate culture. For example, Lloyd’s of London, the specialist insurance market that began in Edward Lloyd’s coffee house in the 17th century, has set a diversity policy as part of its work to drive a cultural transformation following a raft of complaints about bullying and sexism. Improvements in diversity and inclusion represent just one strand of a broader transformation, as banks seek to integrate an analysis of environmental, social and governance (ESG) factors into their day-to-day operations and core business strategy. The growing importance to the banking industry of ESG factors cannot be

Peter Alderdice

Peter Alderdice is a legal director in the banking and ﬁnance team at Shepherd and Wedderburn LLP. For more information, contact Peter on 0131 473 5427 or at peter.alderdice@shepwedd.com

overstated. Recently, Her Majesty’s Treasury wrote to the Bank of England and the Financial Conduct Authority with a recommendation that every financial decision should take climate change into account. Those remit letters issued to the UK’s principal financial regulators follow hot on the heels of comments by Mark Carney, former Governor of the Bank of England, that smarter investment is needed to avert millions of deaths from climate change. According to Carney, the number of deaths attributable to the climate crisis will be higher than that caused by COVID-19. Banks are now responding to the call to deliver investment in a smarter way by developing new financial products such as green mortgages aimed at climate-conscious retail borrowers. Green mortgages offer homebuyers a lower interest rate to purchase an energy efficient new-build property or to renovate an existing one in order to make it greener. Corporate lending divisions within banks are also starting to transition their loan books to ensure a greater focus on green loans and sustainability-linked loans, where companies are incentivised to use their borrowings to fund green projects or achieve other sustainability performance targets. The challenge of embedding ESG factors into all aspects of everyday banking is formidable, but significant progress has already been made. There is a genuine appetite within banks to continue the transformation towards a more purposeful and ethical banking industry that serves and supports the economy.

Corporate, commercial, capable. Key Deals Completed in Q1 2021

Wholesale Domestic – Advising Scotland’s leading bathroom supplier in the evolution of the company’s shareholder base to position the business for future growth, backed by Santander UK plc

Cryo Pump Repairs – Advising the shareholders of Cryo Pump Repairs on its disposal to global engineering group Torishima Service Solutions Europe

EKOS Consultants - Advising the shareholders of EKOS Consulting UK, the independent research and creative solutions provider, in its disposal to The Growth Company

High Voltage Instruments – Advising the shareholders of HVIL the designer and manufacturer of test equipment in its disposal to T&R Test Holdings

Contraﬂow - Advising the leading road trafﬁc management specialist, in the evolution of the company’s family shareholder base to position the company for future growth

Mandors – Advising Samira Fabrics (Pvt) Ltd on the acquisition of Mandors, the leading fabric, wallpapers, curtain & haberdashery retailer / designer

KD Doors – Advising the management team of KD Doors, the leading industrial doors solution provider, on the MBO of the business

Nutdust - Advising high growth Scottish body powder retailer on shareholder matters to position the business for future growth

Áã Þ,G:XXsãhjg\ZMãjG:YãjN:jãC:gGã:B\kjãjNGOgãCXOGZjhÃãpGgsãh\XkjO\ZØEgOpGZßÈ Áã Þ.NGsãN:pGãGrdGgOGZCGãOZãEG:XOZMãqOjNãhY:XXãCXOGZjhÃãLg\Yãhj:gjØkdhã\gã kZOpGghOjsãhdOZã\kjhãjNg\kMNãj\ãX:gMGgã\gM:ZOh:jO\Zhã\ZãjNGã- ãhdGCjgkYßÈ Áã Þ GsãhjgGZMjNhã:gGãgGhd\ZhOpGZGhhã:ZEã:jjGZjO\Zãj\ãEGj:OXßÈ Áã Þ \YYGgCO:Xã:ZEãGLwCOGZjãØã:ãC\YBOZ:jO\Zã\LãBg\:EãGrdGgOGZCGã :ZEãhjg\ZMãXGM:XãWZ\qXGEMGßÈ (Legal 500 2021)

Legal 500 Leading Firm 2021 Legal 500 Recommended Lawyers 2021 The Times Best Law Firm 2021 for Mergers & Acquisitions (new entrant) Member Firm of International Commercial Law Alliance from 2021

www.macdonaldhenderson.co.uk e: info@macdonaldhenderson.co.uk t: 0141 248 4957

Q4 DEALS: ROUND-UP in association with

ACTIVITY BOUNCES BACK TO DEFY FORECASTS

By PERRY GOURLEY

ITH THE ink drying on the Brexit trade deal and the vaccination programme getting into full swing, Scotland’s dealmakers benefited from the growing appetite for corporate activity seen in many boardrooms during the first quarter of the year. Agreements to buy two of Scotland’s best-known public companies, two Aim flotations, and a flurry of big-ticket North Sea transactions underlined growing confidence against a backdrop of the most active start to a year for global deal-making in four decades. According to David Beveridge, Glasgow-based managing director of corporate law firm Macdonald Henderson, few dealmakers could have forecast the market would be as buoyant as it currently is. “Obviously some sectors, such as hospitality, have been hit very hard. But others, such as financial services, technology, health research

and pharma, are very strong right now,” says Beveridge. He believes the impact of Covid-19 will also serve as something as a leveller in the advisory community. “For niche firms, in particular, I think not having big shiny offices to invite clients to will now be

management and IFA sectors, the threat of capital gains tax increases before the UK Budget, and private equity liquidity have all accelerated deal activity,” says Toner, whose team has recently been bolstered by a number of new hires. David Kirchin, head of Scotland at Addleshaw Goddard, says the impact of the pandemic is driving heightened levels of M&A activity as firms look to grow and diversify their service offerings. “This is apparent across a number of sectors but particularly so in tech, where there has been a significant shift in M&A activity, with digital David Beveridge, Macdonald Henderson (below) innovation at the top of many boardroom agendas. much less of an issue. With “As the country emerges from a transactions increasingly being sustained period of lockdown, a progressed virtually, it is more about key priority will be M&A activity, being sure you can deliver, on time which will help clients strengthen and on budget.” their balance sheets, aiding the Angela Toner, head of due diligence economic recovery.” in Scotland for RSM, also reports the Paddy Graham, head of BGF’s deals market has recovered well “and Central Scotland and Northern in some ways exceeded expectations Ireland, team which invested more with levels of activity”. than £37m in Scotland last year “Consolidation in the wealth across 12 businesses, says business Above: Forth Ports Dundee Oil rig being towed out to see by tugs

)RU QLFKH ğUPV , WKLQN QRW KDYLQJ ELJ VKLQ\ RIğFHV WR LQYLWH FOLHQWV WR ZLOO QRZ EH PXFK OHVV RI DQ LVVXH LW LV PRUH DERXW EHLQJ VXUH \RX FDQ GHOLYHU

Corporate, commercial, capable. www.macdonaldhenderson.co.uk e: info@macdonaldhenderson.co.uk t: 0141 248 4957 www.insider.co.uk

May 2021 INSIDER 55

Q4 DEALS: ROUND-UP owners’ experience of the pandemic has prompted more M&A activity. “Some are looking to sell up and retire now that it seems we have turned the corner on Covid-19, while others have been forced to look at exit options as they contend with trading in the new normal,” he says. “Over the past few months, some businesses have also been looking to revisit their capital structures and assess the right funding structure to drive their business forward and strengthen their balance sheets after taking on additional debt. As Government initiatives come to an end and businesses turn to alternative forms of finance, including equity funding, we expect this to be an ongoing trend during the next 12 to 18 months.” The stock market debuts of Thurso battery cell firm AMTE Power and Edinburgh ready-meal business Parsley Box made it the most active quarter for Scottish flotations in more than five years. AMTE became the second Scottish firm to list on Aim in six months following telecoms firm Calnex Solutions last autumn. The company, which works with leading motoring industry names such as Cosworth and Williams, secured £13.7m from existing and new investors, nearly twice the £7m it was originally seeking and will use the proceeds to finance working capital requirements. Ready-meal business Parsley Box raised £17m via a share offering ahead of being listed with an initial market cap of £83.8m. The move came after strong growth for the firm, which focuses on delivering meals to “Baby Boomerplus” consumers. A team from RSM, which also worked on the Calnex float, advised on the deal. Although the two floats were welcome news for dealmakers, the quarter brought announcements that are set to see two existing quoted firms leave the public markets. Glasgow-based Aggreko, a stalwart of Scotland’s quoted company list for more than two decades, accepted a £2.3bn takeover by private equity firms I Squared Capital and TDR Capital. Edinburgh-headquartered fintech Nucleus, which floated on Aim three

Swansons Food Wholesalers staﬀ, Inverness

Some businesses have been looking to assess the right funding structure to drive their business forward and strengthen their balance sheets Paddy Graham, BGF

years ago, also agreed a £144.6m deal to sell its business to sector rival James Hay. The quarter also saw another raft of deals by overseas firms to buy Scottish businesses. Significant transactions included Glasgow-based fintech firm HubSolv being sold to Dublin-founded software and data services group Aryza for an undisclosed sum. Neil McInnes, head of corporate finance at Grant Thornton in Scotland which advised HubSolv, says the deal was a significant vote of confidence in what founders Lewis Black and Fraser Hamilton – who will remain with the company – had achieved to date. In another technology deal, Swedish-headquartered IFS struck a deal to purchase Edinburgh’s

Laurna Woods

Axios Systems, a global provider of cloud-based software for an undisclosed sum. In domestic transactions, educational technology specialist Tes Global acquired Glasgow-based SchoolCloud, which has developed software to help schools manage parents’ evenings and school events. SchoolCloud was founded in 2006 by two students, Robbie Beattie and Marcus Fields, who had been given a challenge by their IT teacher to solve a school-wide issue of room double-bookings. The company’s software is now used by more than 6,000 schools. Beattie said being part of Tes Global would give the company’s products have access to a much wider audience around the world. Addleshaw Goddard advised SchoolCloud’s shareholders. In another tech deal, Aberdeen’s C-Sam which provides software for the energy and marine sectors, was acquired by Oxfordshire-based Jonas Software in a deal advised on by AAB. Bruce Stevenson Insurance Brokers, one of the best-known independent players in the sector,

Corporate, commercial, capable. www.macdonaldhenderson.co.uk e: info@macdonaldhenderson.co.uk t: 0141 248 4957

56 INSIDER May 2021

www.insider.co.uk

Q4 DEALS: ROUND-UP was acquired by Aston Lark, a broker backed by Goldman Sachs. A number of Scottish businesses were also active during the period, including Forth Ports which acquired marine services business Targe which owns a fleet of nine vessels including tugs which operate in waters throughout the East of Scotland. Charles Hammond, group chief executive of Forth Ports, described it as an important strategic move, “establishing a commercial marine services business of scale”. Advisors included PwC’s corporate finance team in Scotland and Addleshaw Goddard. Scottish estate agency and lettings group Lomond also completed four acquisitions across Edinburgh, Manchester and Brighton following a merger deal with Linley & Simpson. Sponge, an Edinburgh-based digital learning provider, which is backed by support services investor Aliter Capital, acquired Idox Compliance from its parent company. The acquisition provides Sponge with an operating presence in the EU. DWF’s global corporate team, led by Gemma Gallagher and Paul Pignatelli in Glasgow, advised Sponge with support from teams in the UK, Germany, Belgium and Holland with Idox represented by a team from Pinsent Masons. Although it was a relatively quiet quarter for buyouts, there were a number of high-profile transactions, including an MBO of Beattie Communications led by Laurna Woods after former chairman Gordon Beattie resigned following a controversial social media post. Woods was joined in the buyout by senior colleagues Elspeth Brown, Joanne Spence, Rachel Gladwin and Chris Gilmour. Three long-standing employees of Contract Scotland, the Stirlingbased technical and professional recruitment consultancy, completed an MBO from founder Colin Woodward. Directors John-Paul Toner, Julie Fleming and Alan Shave now lead the business, while Woodward takes up an advisory role. A management buy-in at Scottish shipping container firm RF Brown – led by plant-hire veteran

Contract Scotland JohnPaul Toner

This big push is driven by their institutional investors demanding a pivot that would have been unthinkable only a few years ago Rosalie Chadwick, Pinsent Masons

and incoming managing director Angus Barraclough – was backed by a £2.35m investment from fund manager Foresight. The increasingly popularity of employee buyouts saw several firms also come under the control of their staff, including Inverness-based fresh produce provider Swansons Food Wholesalers. Owner Magnus Swanson had received an offer for the business from a larger wholesaler last year, prompting him to begin considering

Above: Dr David Palmer, Dr Holly Butler, Dr Matthew Baker, Dr Mark Hegarty of ClinSpec

his eventual exit from the business. The move to employee ownership was managed by Carole Leslie’s Ownership Associates, with legal services provided by Harper Macleod and accountancy services by Saffery Champness. The quarter also saw a number of significant investment deals, particularly in the technology and life sciences arenas. University of Dundee biopharmaceutical spin-out Amphista Therapeutics secured £38m in a Series B financing round, one of the largest investments of its kind seen in Scotland. The investment round was co-led by Forbion and Gilde Healthcare, while additional investors include Novartis Venture Fund and Eli Lilly & Company. SujiBFR, a health and fitness startup based in Edinburgh, received a six-figure investment to support the development of a smart fitness device that can dramatically reduce pain and increase muscle strength during exercise. Tennis champion Jamie Murray and his partner Alejandra Murray invested in the round led by BioCity Group. The Murrays joined Scottish Enterprise, Gabriel Investment Syndicate and Creator Fund. SujiBFR was represented by Addleshaw Goddard. Continulus, the Glasgowheadquartered online video-learning platform for health professionals, secured £500,000 of equity investment from a consortium of UK investors. ClinSpec Diagnostics, the Glasgow-based developer of liquid biopsies for early detection of cancer, reached a round-two funding target of £3.5m by securing an additional investment of £1.1m from Norcliffe Capital, the university, Eos Advisory and the founders. Murray Capital, the private investment office of the Murray family, also led funding rounds for two Scottish start-ups. It reinvested in two of its existing portfolio companies – Zumo and Blackford – with the support of the UK Future Fund and other co-investors. Zumo, a Leith-based digital currency wallet and payments platform, raised £1.4m. Blackford, an

Corporate, commercial, capable. www.macdonaldhenderson.co.uk e: info@macdonaldhenderson.co.uk t: 0141 248 4957 www.insider.co.uk

May 2021 INSIDER 57

Q4 DEALS: ROUND-UP insurance brokerage with offices in Aberdeen, Edinburgh, Glasgow and London, secured £800,000. RAB-Microfluidics, a start-up out of the University of Aberdeen that has developed technology to address oil analysis problems, secured a £1.24m investment round led by Eos Advisory and advised on by MHA Henderson Loggie. Aberdeen-headquartered oil and gas technology development company Deep Casing Tools secured fresh investment of £1.6m to develop new technologies from Scottish Enterprise and long-term backer EV Private Equity. Scottish Equity Partners also completed a “significant” investment in Glasgow-based fintech firm AutoRek, which develops financial control and data management software. Signs that investors are returning to the North Sea continued apace in the opening months of 2020 with a series of sizeable deals. NEO Energy, backed by Norwegian private equity player HitecVision, struck an agreement to buy a portfolio of North Sea assets from ExxonMobil for around £700m, as well as a smaller transaction to acquire Zennor Petroleum. Waldorf Production, advised by Addleshaw Goddard, agree to acquire a package of Cairn Energy’s North Sea assets, including Kraken and Catcher. Neivan Boroujerdi, an analyst at WoodMac says the NEO and Waldorf deals continued what has been a “blockbuster start to the year for UK M&A” with buyers and sellers buoyed by the recent recovery in prices. “Despite the UK’s maturity, the deals highlight the attractiveness of the country’s relatively low headline tax rate, which enables assets to generate significant free cash flow at current prices.” WoodMac estimates up to another $5bn worth of assets could change hands this year. “The list of UK sellers is broad. The supermajor sell-off will continue and other private equity-backed vehicles may look to follow Zennor-backer Kerogen’s lead and monetise their

Deep Casing Tools Aberdeen Workshop

Despite the UK’s maturity, the deals highlight the attractiveness of the country’s relatively low headline tax rate which enables assets to generate IUHH FDVK ĠRZ Neivan Boroujerdi, WoodMac investments,” predicts Boroujerdi. With oil majors such as Total and Chevron divesting portfolios of North Sea assets, Rosalie Chadwick, global head of oil and gas for Pinsent Masons, believes M&A activity will remain strong in the months ahead. “This exit from non-core mature assets allows capital to be redeployed in geographies where they can meet their target investment criteria – or into energy transition assets, particularly offshore wind, solar, CCS and hydrogen,” she says. “This big push is driven by their institutional investors demanding a pivot that would have been unthinkable on this scale only a few

years ago.” She argues activity will also benefit from a more realistic approach by sellers who now take the view that valuation gaps can be met because there is greater consensus on the longer-term price of oil. “Deals that may have fallen over because price consensus could not be reached now have a greater chance of success.” The sustainability theme, driving much of the M&A activity as majors look to diversify into lower carbon areas, also has wider implications for the deals landscape ahead, according to Paul Mason, head of corporate finance at accountants Chiene + Tait. He says that sustainability is becoming an increasingly relevant theme on transactions, especially equity raises. “While companies looking to raise money or put themselves up for sale might not be in a position to change to an entirely sustainable business model, they will certainly be more likely to achieve their aims by developing their offering to be more ESG-conscious,” he argues. ■

Corporate, commercial, capable. www.macdonaldhenderson.co.uk e: info@macdonaldhenderson.co.uk t: 0141 248 4957

58 INSIDER May 2021

www.insider.co.uk

MARKET COMMENTARY

COVID AFTERMATH MARKET PROVING TO MORE RESILIENT THAN ANTICIPATED Despite initial reports of a slow recovery of M&A activity in the UK after the immediate aftermath of the first COVID-19 national lockdown, it has become apparent that the market has been more resilient than anticipated. We are seeing a sustained level of deal activity with more to come. While a healthy cash flow for many businesses has been sustained due to the availability of government, bank and shareholder support during the pandemic, it is inevitable that this cash flow will take a hit as we return to ‘business as usual’, particularly those businesses with existing high levels of debt. It is predicted that an increased level of distressed M&A activity can be expected and this creates opportunities for investors and strong trade buyers. Taking an interest in a company that is not subject to the imminent threat of an insolvency process may be the perfect time for a buyer – customers, suppliers and key employees will remain in place, and most importantly supportive, before the business and its reputation is damaged and the only ‘option’ is insolvency. Structuring such a transaction will be key – and there will be advantages and disadvantages of the transaction being either a share sale or an asset sale. A buyer may wish to structure an acquisition as an asset sale because it can “cherry pick” and choose the assets it wants and, exclude any unknown or contingent liabilities, also lessening the burden of a due diligence process.

Sellers, however, will usually prefer a share sale for simplicity and from an advantageous tax perspective. Where an insolvency process is imminent however, the parties may wish to seek the assistance of an insolvency practitioner who can (subject to the legislation) negotiate a ‘pre-pack’ sale. Pre-packs tend to be popular with both a seller and a buyer as the buyer takes assets free of liabilities and the directors take on more of a limited risk in terms of the sale and the valuation of the business. What we can say, with conﬁdence, is that whatever the structure of the transaction chosen, the process will be time pressured and both parties will wish the process to be executed quickly – over to the advisers! When a company is, or is likely to become distressed, directors must have regard to the following key areas:

Laura McKnight is a Director in Macdonald Henderson’s corporate team. For more information contact Laura at laura@macdonaldhenderson.co.uk

Statutory and fiduciary duties – directors have duties to promote the success of the company, to exercise reasonable care, skill and diligence, and to be mindful of any conflicts of interest. Acting in the best interests of the company will be of more importance while a company is in distress. Creditors – directors should bear in mind the interests of creditors and it important to remember that directors could face personal liability where there has been wrongful or fraudulent trading. Directors should consider whether an insolvency practitioner requires to be appointed. Approvals – competition approvals for deal clearance will require to be considered. Further, listed companies must have regard to their disclosure obligations, however the Takeover Code contains some relaxations where a listed company is in financial distress. Employees – ensuring key employees remain ‘on board’ will be vital. Despite troubling times, we are already seeing an increased appetite to incentivise employees by way of EMI option schemes, growth shares, bonus schemes and the like. Timing will be key for both sellers and buyers but if the dynamics of a sale are managed correctly we could see sustained businesses survive, sellers getting some cash for their business, and a buyer getting a good deal. We look forward to working on some of these exciting transactions soon.

PROFILE: JACQUI MCLAUGHLIN, CEO OF REACTEC

ACQUI McLaughlin isn’t afraid of a clean slate. She’s been working in technology for the heavy engineering sector since 2014 as the chief executive of Edinburgh-based Reactec, a company best known for its HAVwear technology, a wearable product designed to help combat risks associated with prolonged exposure to tool vibration; but when McLaughlin arrived at Reactec seven years ago, HAVwear didn’t exist. The company offered a toolmounted product that monitored vibration exposure, but it didn’t offer the ground-breaking, real-time monitoring of an individual’s risk from exposure to vibration that makes HAVwear so unique and valuable. It was McLaughlin that conceptualised the product in the first place, when she posed the almost painfully obvious question: if you’re trying to monitor the effect of vibration on someone’s hand, why aren’t you using a device that can measure what’s happening to their hand in the first place? No-one had an answer that could undermine her premise, and HAVwear went into development in 2015. In her second year on the job, McLaughlin guided the company through the dangerous transition of introducing a product likely to cannibalise its existing offering. As it turned out, the only risk associated with that transition was underestimating just what percentage of Reactec’s sales would be for the new product moving forward: within three months, 100 per cent of Reactec’s sales were for HAVwear. After spearheading such a bold transition, it should come as no surprise that McLaughlin once again successfully navigated Reactec through what will likely be recognised as the greatest threat to workplace health and safety in a generation. When Covid interrupted business as usual in early 2020, Reactec pivoted to address the challenges posed by increased restrictions in the workplace and introduced its SafeDistance technology: sophisticated proximity detection to facilitate social distancing. The technology was a hit: thousands of units of the product were deployed in a variety of workplaces within months of identifying the need. Such a unique, meaningful response to a global workplace challenge wasn’t necessarily obvious: 60 INSIDER May 2021

CEO BATTLING TO CHANGE BUSINESS AND CHANGE MINDS Kathryn Hester on the woman spearheading revolution in safety

hand-arm vibration and social distancing are completely unrelated, but McLaughlin saw the opportunity to apply Reactec’s ground-breaking core technology in a useful, practical

McLaughlin addressed the need for increased employee empowerment but she didn’t choose the subtle route way. In that sense, the response was obvious: Jacqui McLaughlin has a penchant for making bold decisions that make sense. Pushing the boundaries of technology and turning ideas into useful applications has been the northernmost point on McLaughlin’s professional compass throughout her career. Prior to joining Reactec, she spent nearly two decades working

in various business leadership roles within Smiths Group, the multinational engineering firm known for its innovative approach to technologies in the space, aviation and medical industries. At Smiths, McLaughlin addressed the need for increased employee empowerment within a $500m business unit, but she didn’t c hoose the subtle route. McLaughlin radically changed the operational processes within the environment and created platforms to leverage market intelligence across product streams. The result was a seamless expansion and integration effort with a premium focus on innovation and worker-driven solutions. That drive – to meaningfully impact the way that people actually work through the implementation of boundary-pushing technology – is at the heart of what pushes McLaughlin www.insider.co.uk

PROFILE: JACQUI MCLAUGHLIN, CEO OF REACTEC and Reactec to do what they do, and they’ve only just gotten started. With McLaughlin at the helm, Reactec is looking forward and has immediate plans to enhance their existing offerings with the addition of innovative technologies to keep workers connected. The idea driving Reactec’s current innovations is seemingly simple: a connected worker is a protected worker. The reality is that getting workers connected isn’t as straightforward as it sounds. Reactec believes that workers in heavy industry (construction, rail, manufacturing, etc) should be protected from exposure to things like vibration, noise, dust and unsafe proximity to dangerous work areas. Sounds reasonable, right? Not only is this philosophy reasonable, but its renaissance is also long overdue, and that delay persists at the cost of workers’ health and safety, not to mention the company’s bottom line. It’s no secret that many companies within this sector have been slow to digitise: pen and paper methods for tracking things like tool usage remain the norm across an alarming number of worksites, within even blue chip companies, a shocking reality when you consider the accessibility and efficiency of a digital alternative. Reactec generates analytics reports that pinpoint areas where additional attention is needed to improve controls. Following adoption of its technology, Reactec’s customers have successfully implemented initiatives to better train operators, more effectively plan and manage tool rotation, and monitor job/task schedules. These processes reduce exposure to dangerous conditions, improving workers’ health and safety, and save companies time, money and potential exposure to workplace injury-related claims, fines and litigation. So why doesn’t every worker in construction, manufacturing and related industries have Reactec’s products strapped to their wrist? That’s a big conversation, but McLaughlin thinks some of the reticence stems from an industry-wide attitude that keeping workers safe is a by-product of staying compliant, not a legitimate priority in its own right. Currently, firms’ approaches to health risk management are driven by the need to remain in-line with relevant regulations in order to avoid penalties, not by the desire to keep their workforce protected. Chipping away at this outdated, www.insider.co.uk

Above: Reactec’s Safe-Distance technology in operation at Dundee’s Rautomead, a manufacturer of continuous castings. James Franco, Financial Controller, and Jan Barclay, Executive PA, Rautomead, Dundee. Below: Callum Robson, Design Engineer, and Andy Stupart, Inspection / Stores, Rautomead. Photos: Alan Richardson

Stale, outmoded process designed to work well enough don’t work at all when it comes to McLaughlin’s ideas for creating a healthier workplace

outmoded viewpoint would be a massive task for any executive in McLaughlin’s position and, given the businesses with which she works on a daily basis – heavy engineering firms, primarily – you could reasonably wonder whether the task is tougher for her because of her gender. The reality is that the opposite seems to be true; McLaughlin is a deft and confident leader in the male-dominated spaces in which she operates: a woman finding success (again and again) where, historically, males have monopolised the power. Even so, if you ask her, the unique ability she has to navigate a team through this process has less to do with her gender than it does her professional – and personal – experience as a team leader (McLaughlin has clocked 45 caps representing Scotland as a competitive hockey player), but it’s a bare fact that firms with females in executive roles like the one occupied by McLaughlin are not only more profitable and more socially responsible, they’re more adaptable and willing to challenge the status quo than their male counterparts. This adaptability and eagerness to challenge what is in order to make space for what could be is a hallmark of female leadership, and it’s unquestionably been baked into Reactec’s ethos. It calls itself a pioneer in “prevention engineering”, but there’s more going on at Reactec than building products designed to prevent known problems. Reactec isn’t just preventing problems that have plagued work environments for years, it’s more kinetic than that. As its name suggests, Reactec is a responsive, evolving entity in a landscape long-dominated by rigid, oft-outdated systems. In this conventional environment, Reactec stands out as agile, curious and hopeful. Stale, outmoded processes designed to work well enough don’t work at all when it comes to Jacqui McLaughlin’s ideas for creating a healthier workplace. In fact, when it comes to making work environments healthier and safer, the only thing it doesn’t seem safe to do at this point, is underestimate her. ■ Kathryn Hester is an attorney and content strategist who works with innovative technology companies and their leaders. May 2021 INSIDER 61

REPORT: THE PANDEMIC ECONOMY

OR ALL the political argy bargy and the sharp words flying between Holyrood and Westminster, the best research we have to date has concluded that the devolved funding arrangements “largely coped” with the Covid-19 crisis. A major study by academics from the Institute of Fiscal Studies, Fraser of Allander Institute and the University of Stirling said this was achieved as a result of a combination of luck, the huge sums of money provided by the UK Government and an ad hoc bypassing of the normal rules. But, as the study said, there were “some tricky moments”. These were “notably at the beginning of the crisis, when the devolved governments had to wait for confirmation of funding following the announcements of new English spending, and in the autumn as the second wave hit.” However, there was generally good design of policy and the necessary flexibility to cope with what were novel – and huge – challenges. As the study points out, the UK Government eventually bypassed the normal rules by giving up-front guarantees and allowing them the flexibility to carry forward funding between years. The study concludes: “This gave the devolved governments more certainty to plan their Covid-19 responses and helped avoid a wasteful rush to spend money at the end of the year.” But the changes did not stop Kate Forbes MSP, then Finance Secretary, continually criticising the UK Government. The study then points out “such ad-hoc changes are not suitable for the long term and may not be granted by future UK governments if other major crises arise. “It has also been lucky that the crisis did not disproportionately impact one or more of the devolved nations more than England, either economically or health-wise. “If it had done, funding based on how much was spent in England could have been insufficient. And there is no guarantee that future crises – or indeed recovery from the current one – will be similarly symmetric. “It is, therefore, important to consider how the fiscal frameworks can be made more robust to future crises, and better able to support recovery from the current crisis”.

62 INSIDER May 2021

THE GOOD, THE BAD AND UGLY TRUTHS LAID BARE BY CRISIS By KEN SYMON

If a future crisis affected one part of the UK harder than elsewhere, bigger problems could arise down the line David Phillips, Institute of Fiscal Studies

David Eiser, senior knowledge exchange fellow at the Fraser of Allander Institute and an author of the report, said: “The shift away from the usual process of allocating funding by Barnett consequentials to the concept of funding ‘guarantees’ has been critically important in providing the

Above: Kate Forbes, the then Finance Secretary repeatedly attacked the Westminster Government

devolved governments the resources and flexibility they need to meet the evolving demands of the pandemic. “Nonetheless, whilst crises have been avoided, at times this has perhaps only narrowly been the case. Uncertainty around whether the furlough scheme would be available within a devolved nation if a devolved government felt the need to apply tighter restrictions than prevailed in England may have influenced the timing of restrictions in Scotland and Wales at various points. But, in the end, the UK Government’s decision to extend lockdown in England averted major crisis around this issue.”

www.insider.co.uk

REPORT: THE PANDEMIC ECONOMY David Phillips, an associate director at the IFS, and co-author of the report, said: “Luck – or the fact each of the nations was similarly unlucky in terms of the impact of the Covid-19 crisis – and ad hoc temporary changes to the usual rules helped avert major problems. In particular, the fact the path of the pandemic and economy has evolved in similar ways across the UK, and required similar policy interventions, avoided big differences in funding needs from opening up. “And up-front funding guarantees and the ability to shift more funding from one year to the next has given the devolved governments both more financial certainty and flexibility. “But, if a future crisis affected one part of the UK much harder than elsewhere, or indeed if recovery is uneven across the country, bigger problems could arise down the line. It is, therefore, still vital to assess, and potentially change, the frameworks to make them more robust.” Whatever changes need to be made in future, we can conclude that the devolved funding arrangements largely worked as did the furlough scheme in saving many more thousands of jobs and businesses than would otherwise have been the case. But none of this should take away from the severity of the position we still find ourselves in – the economy has a long way to go to get back to health and there are still many thousands of businesses still in a very precarious position. How many of them are effectively “zombie businesses” just being propped up? The latest Red Flag Alert data published towards the end of April by Begbies Traynor, the “rescue and recovery specialist”, shows a 45 per cent year-on-year rise in the early signs of financial distress, with 38,000 businesses in the country now affected. The first quarter of this calendar year saw a 17 per cent rise in companies experiencing “significant distress” in Scotland compared with the last quarter of 2020. However, the research also showed some good news in the fact there was a striking decrease in the numbers of businesses experiencing the more advanced “critical distress” – that is those that have had winding-up petitions or legal decrees totalling more than £5,000 against them. Critical distress among Scottish businesses fell by 48 per cent year on year, and saw a drop of 13 per www.insider.co.uk

Ken Pattullo of Begbies Traynor who is warning that 38,000 Scottish businesses are still in distress

Above: Joanne Dooey of the Scottish Passenger Agents Association which has stated that there is “very little understanding on how the travel business works” among Scotland’s politicians

With courts struggling to catch up, there are likely to be many more actions against indebted companies Ken Puttullo, Begbies Traynor

cent compared with the previous quarter. This means there are fewer companies ‘drinking in the last-chance saloon’ and suggests government insolvency protection measures are having an impact. But, as Ken Pattullo, managing partner for Begbies Traynor in Scotland, puts it: “After more than 12 months of multiple lockdowns and restrictions, the true extent of the financial pressures facing businesses is still largely being masked by the government’s insolvency prevention measures which makes these latest figures even more concerning. “While there has been a striking reduction in advanced distress in

the last quarter, this is almost exactly mirrored by the increase in early distress. Although the government has been successful in delaying liquidations and bankruptcies, there is still an enormous quantity of financial trouble being stored up for when these and other support measures come to an end, which is likely to be later this year.” The other significant question is how much ‘delay’ is there in the transmission of this picture. As Pattullo says: “With the courts still struggling to catch up on the backlog, there are likely to be many more actions against indebted companies in the pipeline.” Amid these continuing difficulties, there is also a strong feeling among many businesses that government is not listening to their concerns nor aware of how very real and acute the problems they are facing are. Joanne Dooey, president of the Scottish Passenger Agents Association, said there was apparently “very little understanding of how the travel business works” as the body issued its manifesto for the Scottish Parliament election. In the second-last week of April, I chaired a hustings for the entrepreneurial business organisation WeDO Scotland. It was a lively meeting of the candidates of the four main parties, with many questions from the business leaders that attended. There were concerns about the continuing severity of the restrictions on different sectors and about whether all the money provided by the UK Government to be spent on business Covid relief was actually being so spent. But the most striking thing that came across time and again was the suggestion MSPs – and, it must be said – the outgoing Scottish Government in particular were not listening to, and heeding, their very real concerns. This chimes with other survey evidence and the summing up by a chief executive of a representative body a few weeks ago that “Scottish ministers have lost the dressing room” with businesses. With a new Scottish Parliament of 129 constituency and list MSPs having now been elected and a new Government being formed we can only hope this will change and that we will see a new attitude resulting in positive decisions and action in the months and years ahead. ■ May 2021 INSIDER 63

ROUND TABLE: GREEN INVESTMENT in association with

COMPANIES EMBRACE THE CLIMATE CHANGE CHALLENGE By KEN SYMON

PANEL MEMBERS Darren Flynn MD, Wealth and Asset Managers & Regional Head for Scotland, Bank of Scotland Commercial Banking Jeavon Lolay Head of Economics & Market Insight, Lloyds Bank Commercial Banking Gordon Farmer CFO, Global Energy Group Paul Stevenson Director, GSS Developments Ltd & Ribnort Ltd Charles Wordie Director, Wordie Properties Ltd Warren Bowden Group Sustainability and Innovation Director, Scottish Leather Group Anne Anderson Head of Sustainability, Scottish Sea Farms Martyn Link Chief Strategy Oﬃcer, Wood Group

64 INSIDER May 2021

would you like to set QJeavon, the scene with the economic

backdrop to today’s discussion? Jeavon Lolay: The one thing we can say with confidence is that there remains an extraordinary degree of uncertainty regarding the economic outlook. A lot of my discussions at client meetings and with other economists are still centred on the risks: what we’re seeing in Europe in relation to the resurgence in infections and in the US about inflation worries. This acutely reflects the nature and scale of this ongoing economic shock and also the unprecedented response from policymakers. There is still a lot to unfold: the path of the virus, the reopening of economies, the phasing out of emergency policy support, changed consumption habits, and the disruption to existing business models – and that’s for starters! Having said all that, I should also emphasise that the overall tone is far more upbeat than earlier in the year; in fact, it’s far more positive than it has been for some time, particularly in the UK. We have to appreciate the scale of the shock last year: we witnessed the biggest annual economic contraction for more than 300 years – GDP down about 10 per cent. On the positive side, we’re now in a position where we have effective vaccines and already more than 67 per cent of the UK adult population have been vaccinated. The economy is also far more resilient to lockdowns and, if government ‘roadmaps’ to re-opening are followed, then expectations are for a really strong rebound in the coming quarters. However, a key point worth highlighting is that this was not a typical recession – and nor will the recovery be typical, either. When we

Darren Flynn

speak to our clients, one of the key themes coming across is that while all firms have been impacted, this recession has been highly divergent at the sector level. If you look at hospitality; in the first lockdown, output was down 90 per cent, and January-to-January it was still down nearly 70 per cent. Whereas in manufacturing, in the initial lockdown, output was down 30 per cent, but only by about 4.5 per cent January-to-January, far less than the overall economy. Overall, the future still holds major uncertainties for the different sectors of the economy and we should also not overlook the important crosslinkages between sectors. The final point I wanted to make is around longer-term growth: after all, this conversation is about sustainability. One of the key areas where the UK economy has really struggled in recent years has been business investment. Since the EU referendum, UK business investment growth has been lower than the G7 average. The measures announced www.insider.co.uk

ROUND TABLE: GREEN INVESTMENT

in the recent UK Budget offer some optimism that firms may bring forward some muchneeded spending. Meanwhile, the Government also appears committed to investing more to achieve its climate and digital infrastructure goals. A strong bounce-back is in prospect if business conditions continue to improve. A key concern, however, is that, when we look to the

nations. The environment, balanced with the social and educational perspectives, are the challenges going forward for each sector and it’s a huge focus within my own. For us, part of that challenge is having infrastructure available for the rural sector. It’s very difficult to go electric when there are no charge points. Martyn Link: In terms of our own company, we’re discussing it at

supply chains and they’re wanting an entirely carbon-neutral supply chain. Up to two or three years ago, this wasn’t on the cards, and it’s now becoming an obligation. This has been on our agenda for a while. But I think it’s notching up a little in urgency in terms of investment and commitment. As I was told some while ago, if we aren’t “sustainable” then we won’t be in business. We do lead the global leather Gordon Farmer

Paul Stevenson

Jeavon Lolay

results of our Lloyds Bank Business Barometer survey, it shows that business confidence has been very variable across the UK. Notably, Scotland has underperformed against the UK average for at least the past two years. It would be useful to hear your views on this and what you believe is required to see confidence and growth really take off in Scotland. you, Jeavon. With QThank the uncertainty of the

external environment, including continuous Brexit challenges and the recovery from Covid-19, how high up on your company’s agenda is climate change? Warren Bowden: Some of our customers refer to sustainability as defining the new luxury. That is quite different to what’s gone before. Due to the disruption taking place in their sector, and the post-Covid world, not to mention the change to electrification, transport in the next 10 years is going to be very different. What they’re looking at is durability, traceability, integrity of www.insider.co.uk

GDP has been growing, even during lockdown, and the prospects are there for a really strong rebound Jeavon Lolay

sector in this regard. Covid has had a massive effect on the ability to produce – obligatory shutdowns, for example. We also now offer an antiviral leather. Brexit is having a short-term effect in disruption, with 85 per cent of our product exported, mostly through the EU. So, all sorts of barriers are in play at the moment. But there’s no doubt, apart from the cost of the product, sustainability is the next most important metric for our customers. Anne Anderson: The expectation is that salmon – where the high-risk, high-reward aspects of agriculture exist – demonstrates a very strong and improving level of sustainability in its production; from sourcing materials to ensuring we’re not transporting our problems away from our producing

board level and the strategy function provides quite a lot of information and analysis to the executive leadership around this subject. I’m looking at it from a strategic perspective: where is the world going? How do we respond? All the markets are changing, what’s going to happen? About 18 months ago I started to see ESG [environmental, social and governance] moving to the centre of the radar of the investor community. I think in an ideal world many companies want to be more sustainable, but the earnings, the returns, how we make money in this new world also needs to be in place. For us, purpose and performance go hand in hand, purpose without performance is a dead end. Paul Stevenson: Our world has changed massively during the last five to 10 years. To do what the regulations say is not enough. We can build buildings to the minimum, but that is not enough. If we want the best buildings in class, if we want to encourage major corporates to come to our buildings, May 2021 INSIDER 65

ROUND TABLE: GREEN INVESTMENT it’s going to require us to be way better than what the minimum asks. We recently completed a 60,000 square foot office building in the middle of Edinburgh. While there are only seven carparking spaces, we made them all electric vehicle compliant. There are changing facilities, shower, cycle facilities, heated lockers. There are bike maintenance facilities and an over-provision of bike racks. It’s all aimed at encouraging occupiers to cycle, to run, to walk to work. Delivering the minimum the regulations ask for is way below what you need to do to encourage the very best occupiers. Ultimately, there’s got to be a culture change and an appetite to do more than we have to. Gordon Farmer: The investment mindset and how you create value has changed, with an increased focus on ESG. The pace of change in the past 12 months has been far greater than anybody anticipated in low-carbon energy and climate change. The change now, in terms of when you tender for work and what customers expect, has significantly changed. At Global Energy Group, we have a lot of work to do but we are committed to deliver on our responsibilities as a group. Understanding your carbon footprint, and the way you operate as a business is critical. This is a challenge but important for developing a sustainable business with the right culture.

What speciﬁc measures have you taken as a business on sustainability and reducing your carbon footprint? Warren Bowden: We started off in 2004 with what we called a zero-waste strategy, which evolved quickly. We built our own energy recovery plants, which is a waste-to-energy operation, producing renewable energy. But, beyond that, this topic requires a much broader commitment towards the social agenda, as per UNGC [United Nations Global Compact], which does change the way you and your supply chains operate. Automotive supply chains have to be carbon-free. So, for us, it means adopting 100 per cent renewable energy. Darren Flynn: We were the first UK bank to announce clear goals aimed at reducing the emissions that we finance by 50 per cent by 2030 on our path to net zero by 2050 or sooner.

66 INSIDER May 2021

Charles Wordie

Warren Bowden

:H ZHUH WKH ğUVW EDQN WR ORRN DW KRZ ZH UHGXFH WKH HPLVVLRQV WKDW ZH ğQDQFH E\ SHU FHQW E\ Darren Flynn

We were also the first UK bank to achieve sourcing 100 per cent of our electricity from renewable sources and have committed to making our own operations net zero by 2030, which is an ambitious target. We are also the only UK bank to be a Carbon Trust Standard Bearer for Carbon and Waste reductions and have reduced our own carbon emissions by nearly 75 per cent since 2009. Another thing we’ve committed to doing is planting more than 10 million trees over the next decade in partnership with the Woodland Trust. More recently, we announced an increase to the expansion of our green

financing initiatives from £3bn to £5bn, given the fact that we have seen more requests coming through from clients in the last 12 months than we have during the last four years. Anne Anderson: It’s about setting targets and driving those targets; one of the key things for us is tackling our energy use – our fuel, our transport. It’s only been six months since we published our targets and there is almost a sense of competition that starts to develop, with suppliers seeking to see how many targets they can tick off a list in terms of what the next farm in Scotland will look like. How much carbon reduction can you get? Can we get to the point where we are sourcing 100 per cent renewable energy for businesses like ours who are at sea? Martyn Link: There are obvious things we can do as a business around real estate such as single-use plastic and renewable power. We are also focusing on the opportunities brought on by smart and sustainable buildings, as well as their cost. We have developed our proprietary SCORE methodology which can help companies develop a roadmap around how to reduce their carbon footprint and ultimately shape a path towards net zero. A lot of companies are wrestling with this challenge and want support. We’ve spoken to many companies across different industries including a big airport in the UK to a beauty product company. We have even trialled a ferry in the Scottish islands using hydrogen as a fuel. We see this as an opportunity to further pivot our portfolio over the next few years. saying to you – QIsthenobody environmental agenda

is all very well, but can we cut the cost? Paul Stevenson: Are companies saying to their landlord, their developer, their investor: We’re happy to pay an extra 10p per kilowatt hour for the power to be from a green source? I haven’t heard that discussion yet. It will take big corporates like the banks and others to say that. There is a cost to that but there is also an upside, so those conversations need to be had. What could be changed is the non-domestic rates legislation, which I think is so out of date. You see buildings that could be refurbished being demolished www.insider.co.uk

ROUND TABLE: GREEN INVESTMENT because of the vacant rates liability. The carbon footprint of demolishing a building is very high. Companies should be incentivised to improve the energy efficiency of buildings and a better non-domestic rates relief system can play its part. Charles Wordie: We operate in the retail industrial sphere, not office, so we’re looking at different dynamics. With respect to clients being prepared to pay more for a “green” building: in industrials, they frankly don’t mind. It’s about location, the ability to shift their products from A to B. In terms of the way some legislation is drafted, particularly Section 63 [to do with energy action plans], it’s a bit carrot and stick. The carrot refers to the tenants not the landlord, so we (as landlords) can spend as much money on the building but will not get the benefits through the rents – it will be tenants who will benefit through reduced utility bills. So that bit of legislation doesn’t work well. When you start linking that to planning, it is a minefield. It’s too time-consuming. Admin and bureaucracy stands in the way of this. But, if you could do something that reduces costs, there’s more of an incentive to do it. We would like to do it but it doesn’t stack up economically. Darren Flynn: Whether companies would be prepared to pay more to occupy a ‘green’ building is a good question. From the bank’s perspective, ‘Landlord managed’ buildings make up a relatively small proportion of the Group’s property footprint, so our main focus has been around developing our strategy and plan for reducing the carbon footprint of the buildings we have full control over. Having said that, we have begun to engage with some of our bigger landlords on the subject of renewable electricity, and plan to do more of this engagement on other areas of environmental sustainability in the future. We also now assess various factors around energy and carbon performance of a building in our acquisitions process. are the main hurdles QWhat to advancing sustainability

within your business and sector? Anne Anderson: From my own sector, there are high investments and high costs to go down this route, particularly for a farming sector that is itself impacted by climate change. Business confidence to invest in www.insider.co.uk

Anne Anderson

Martyn Link

We missed a trick with offshore wind. We can’t do that with these other industries that are emerging Martyn Link

this area is around our ability to grow sustainably, to be able to secure additional tonnage to enable those sorts of investments. Secondly, from the agriculture perspective, it is around our regulatory environment, which is incredibly fragmented. There are multiple regulators in the space. Where there are multiple regulators, there is conflict between them as well as gaps. With the bureaucracy of the administration, our ability to get additional tonnage is challenging. There is a planning system that is land-based for us and yet we work in the sea. So, for the sector, it’s about ensuring government is

supportive and we have a reform of the regulatory landscape. Martyn Link: There are a number of key questions around new markets. If you look at the hydrogen and carbon capture market, the government is going to have to invest significantly to create them from scratch and provide stable, long-term policy direction. There is definitely a businessto-business challenge around the emergence of new industries and I think a big question for the UK is where does it want to be globally competitive. We missed a trick with offshore wind. We can’t do that with these other industries that are emerging. It’s a big question for government: give us market clarity around how companies can make money. The other big area I would put on the table is the need for a clearly defined assessment of what is sustainable. The EU sustainable finance taxonomy is a key bit of guidance that’s been worked through the European level. That will help investors understand their portfolio at a much more granular level around what these companies are doing and what is sustainable. Warren Bowden: There are key areas for me. Language: the definitions of some of these metrics. They’re all over the place. I’ve had to repeatedly explain each of these definitions to my colleagues and it is difficult for me, never mind others less familiar. Clear policy requires clear understanding. Anne mentioned policy and I must add to that: most legislation is geared towards energy use rather than carbon emission. The climate change agreement, for example, doesn’t mention carbon. You can be 100 per cent renewable but still have a carbon liability. I don’t get that; someone in policy somewhere must understand that. I don’t. Policies need to be joined up. Some of the hurdles are around infrastructure. We’ve had to invest, otherwise we wouldn’t be here. We invested in our own waste facility because there wasn’t enough external capacity to treat it, so it became the right thing to do. These costs and green premiums for renewables are unlikely to be recoverable from our customers but we have to secure the business; and some of these premiums are eyewatering, very hard to justify in the boardroom. ■ May 2021 INSIDER 67

The Scottish Business Insider Deals & Dealmakers Awards acknowledge and reward excellence in corporate ﬁnance transactions. The awards celebration recognises the bankers, venture capitalists, lawyers and accountants who initiate, structure and negotiate deals for growing organisations. The awards are based on deals completed by this community in the ﬁscal year 2019/20. Exciting sponsorship opportunities are available, ranging from support partners through to title partner, to discuss in more detail please contact: Aileen Turnbull, Head of Sales 07825 899187 / aileen.turnbull@insider.co.uk Debbie Caldwell, Account Manager 07789 778263 / debbie.caldwell@insider.co.uk

REVIEW: SCIENCE & TECHNOLOGY

SCOTLAND’S SCIENCE AND TECH SECTORS GET A COVID-19 SHOT IN THE ARM By PETER WALKER

F THERE is any silver lining to the coronavirus pandemic, it is surely the speed and skill with which the science and technology sector has responded to the virus. A rapid acceleration in collaboration, investment and focused activity has meant many countries are now well on their way to protecting much of the population using a variety of vaccines. After a marked decline in public trust around experts and the scientific community, the esteem of those behind the Covid-19 response – if not necessarily those in charge – has never been higher. But how has this translated into the financial health of Scotland’s science and technology firms? Successive lockdowns have made traditional teamwork and manufacturing much harder, while Brexit finally happening has dried up EU trade and funding streams, so this review will take

www.insider.co.uk

stock of how the industry is faring in the “new normal”.

Overdue recognition The recognition that research and development within these sectors may be crucial to the nation’s recovery appears to have hit home with those holding the purse strings.

Meeting the needs of manufacturing roles will continue to be high demand, especially in quality and regulatory VNLOOVHWV DV SURFHVVHV DUH UHğQHG Ian Grant, Eden Scot (below)

At the start of March, the UK Government invested more than £117m into 155 Scottish projects, across 24 researchers and 124 businesses. Funding came from the Industrial Strategy Challenge Fund and has gone towards initiatives like the Medicines Manufacturing Innovation

Centre near Glasgow Airport, which received £13m to research small molecule pharmaceuticals and chemical manufacturing. Elsewhere, there was £15m for the European Marine Energy Centre in Orkney to test a self-contained smart energy network, alongside about £2m to create the UK’s first remote low-carbon aviation test centre at Kirkwall Airport. This followed a £213m Westminster investment in January to equip universities with what they need to drive forward research that will help the UK respond to challenges like the pandemic and achieving net-zero carbon emissions. Private money has also been spent on growing companies out of the crisis. In mid-March, life sciences giant LumiraDx made a £78m investment in its current Scottish operations, which could see up to 750 jobs created over the next three years. Supported by a £15m grant from Scottish Enterprise, the posts will be located at sites across May 2021 INSIDER 69

REVIEW: SCIENCE & TECHNOLOGY Stirling, Inverness and a new facility under construction at Eurocentral, near Glasgow. Economy Secretary Fiona Hyslop MSP said at the time the deal makes clear that Scotland is an attractive location for global investors. “The fact that hundreds of high-quality research jobs are being created shows that the company recognises the skills which exist in the country’s workforce.” Alongside LumiraDx’s rapid antigen test for coronavirus, the lateral flow tests produced by Clackmannanshire-based Omega Diagnostics, were recently awarded a £374m UK Government contract – sending the firm’s share price even higher. Another vaccine candidate also began commercial manufacture in Scotland this year, as Valneva committed to doubling its Livingston workforce, following government investment and a 60 million dose order. On the technology side, new data from industry growth platform Tech Nation and job search engine Adzuna showed that Scottish start-ups raised a collective £345m in venture capital funding last year. Scotland has the highest number of verified start-ups (2,442) outside of London and the south-east, while the number of venture capital rounds increased to 96 in 2020 – from 87 in 2019 – despite the challenges of the pandemic. Tech Nation’s annual industry report also revealed that Edinburgh attracted £91m in venture capital investment last year – the fourthhighest UK city total. Meanwhile, Glasgow saw a record increase in venture capital investment, from £11m in 2019 to £35m in 2020.

Funding trends While it’s clear that overall funding for science and tech firms in Scotland is on the rise, drilling down into the data, the picture gets a bit more blurred. The country has more “world-class” universities per head of population than any other country in the world except Luxembourg, with all of them investing in projects that potentially commercialise promising strands of research. But, while the rate of these “spin-out” companies gaining external funding is on the up, problems seem to occur further along the lifecycle, 70 INSIDER May 2021

Andrew McNeill, EOS

Mark Bustard, IBioIC Carina Healy, CMS

Ideas come up over a conversation while making the tea, or in the pub after work, at conferences where you can meet people you wouldn’t so often Andy Porter, Scottish Biologics Facility

when serious scale-up investment is required, often beyond what academic institutions are capable of. Andrew McNeill, managing partner at Scottish science and tech investment firm Eos Advisory, explains that Scotland needs to build a broader base of investment and commercialisation experience to maximise the potential of its innovations. Professor Simon Best, Edinburgh BioQuarter

“We see two key gaps – the first is access to capital, whether that is at seed level or at Series A and beyond – the second is with gaining access to commercial experience.” To help solve the problem, Eos has developed three funding streams for early-stage firms, as well as offering companies access to an international network of commercially-experienced individuals to help them build. In February, the firm entered into a strategic partnership with US-based Kineticos Life Sciences to co-invest £10m over the next five years in oncology-focused life sciences ventures founded in Scotland. Clare Wareing, chief executive and co-founder of drug discovery accelerator Cumulus Oncology, says that, while there is a mature IT sector in Scotland that has witnessed some large exits, by contrast, the life sciences sector is at an earlier point in development. “We have the key elements of a successful life sciences ecosystem in place, and we also benefit from having a productive base in the academic institutes – perhaps what is lacking is access to larger investment funds to support scaling.” Paul Winstanley, chief executive at CENSIS, Scotland’s innovation centre for sensing, imaging and www.insider.co.uk

REVIEW: SCIENCE & TECHNOLOGY IN FOCUS: Forensic science

Internet of Things technologies, says that, while venture capital firms will generally look for a return and exit within a few years, scale-ups depend more on patient forms of capital. On this side of things, the biggest recent development was the launch of the Scottish National Investment Bank in November, with its first investment in M Squared Lasers, a tech company with links to the University of Strathclyde. “There are other positive role models out there, North – formerly Boston Networks – demonstrated that, with the right approach, businesses in Scotland can attract private equity funding,” says Winstanley. “The key is to have confidence, a clear USP and a defined competitive position. With those ingredients, Scottish companies can attract funding from a variety of sources.” Mark Bustard, chief executive of the Industrial Biotechnology Innovation Centre (IBioIC), points out that scaling up requires an entirely different skillset compared to early-stage research and development – and it is also capital intense. “There is only so much you can do with pure science – you also need the capabilities and facilities for manufacturing. www.insider.co.uk

PROFESSOR Niamh Nic Daéid is the director of the Leverhulme Research Centre for Forensic Science at the University of Dundee, which was established in 2016 to improve the scientific rigour of current forensic techniques. For instance, fingerprint and bullet matching is still centred around the comparison of features using imagery, which she says makes it “essentially a spot-the-difference exercise” that opens up issues around susceptibility to bias. DNA analysis is better underpinned by science, but forensic scientists still only look at a “tiny bit of DNA” and the process hasn’t evolved much in the past 30 or so years, while toxicology reporting has problems with its presentation within the courts, due to mixed profiles. “We’re looking at trying to fix all of this,” says Daéid, mentioning the implementation of parallel sequencing of DNA innovation, using nano-bio sensors to detect evidence at crime scenes at a much more detailed level, as well as digitally-enabled investigations using augmented and virtual reality technology. “We’re bringing together the whole ecosystem – forensic academics, detectives, lawyers – to all have a conversation in a safe space about the challenges that are faced. “Communication is key, as the biggest challenge is trying to enable scientists to articulate the work they do, and the uncertainty, clearly to juries.” The research centre is an awardee of Tay Cities Regional Deal, with provision from that creating spin-out Just Tech, which works with the research community to assess their needs, before using partnerships and investment to provide awareness for companies around opportunities for new products and solutions. “We’re identifying quick wins, then working with companies and researchers to make the necessary connections,” Daéid adds.

“IBioIC’s Bioprocessing Scale-Up Centres are a prime example of that,” he adds. “We support companies with access to equipment and expertise that can give them proof of concept and pilot production data to create a business case, and we also provide support with grants and funding – including our Scale-Up Accelerator Fund – which can help them towards commercialisation.” IBioIC’s Innovation Strategy Group, says that Scotland’s established angel investor network has grown into more venture-scale funding capabilities. He points to venture capital firm Epidarex, which is based in both Edinburgh and Bethesda, Maryland, and closed a fund worth more than £100m just ahead of the pandemic. “There are nine University of Edinburgh spin-outs that have located and grown at BioQuarter since the first commercial labs and offices opened in 2011. “Notably of these, RoslinCT has recently expanded its footprint into the new BioCube building and, following a recruitment drive, now has more than 100 staff,” Best adds. In terms of people, Ian Grant, director and head of the life science division at recruitment firm Eden Scott, says that, despite the crisis, the Scottish science and tech sector job market is buoyant. “Meeting the needs of manufacturing roles will continue to be high demand during 2021, especially quality and regulatory skillsets, as processes are refined and streamlined and new products and solutions come into the market. “As we become reliant on data, analysts, statisticians and bioinformaticians will be in increasingly short supply,” he notes, adding that the adoption of “Industry 4.0” processes will also require more embedded software engineers to enter the market.

Government intervention As previously mentioned, both the UK and Scottish governments have responded to the pandemic with investment and job support initiatives, but challenges remain due to travel restrictions and social distancing, as well as the complications of Brexit. Andy Porter, professor of medical biotechnology and director of the Scottish Biologics Facility at the University of Aberdeen, says that, May 2021 INSIDER 71

REVIEW: SCIENCE & TECHNOLOGY while Holyrood’s recent support for the sector should be praised, more could have been done to match Covid-19 vaccine work done in the “golden triangle” of Oxford, Cambridge and London. “There was no Scottish Government support in terms of access to patients,” he explains. “We had phase-three trials, with drugs ready to go, but it was companies down south getting access so, in the end, one Scottish firm had to go to Singapore.” As for the UK’s eleventh-hour transition deal and subsequent exit from its closest trading bloc, Porter says it has significantly slowed things down. “These types of businesses are problem solvers, so we’ve found ways round, but everything just takes longer and is more expensive. The levels of paperwork are much more complex than before, so it’s like a tariff by the back door.” Carina Healy, partner at law firm CMS, agrees that, while financial pressures are always an ongoing issue across the sector, the current challenges have been primarily regulatory-driven – particularly around Covid restrictions and workplace testing – and legislative, with tariffs and other legal changes driven by Brexit. “These are exciting, but also uncertain times for the sector, as the UK changes its focus from the EU to Asia and the US, although it remains to be seen whether this will lead to new investment streams and opportunities,” she says. Winstanley notes that an emerging trend has been companies that previously relied on Europe for part of their operations are now looking at onshoring. “While we expect there will be more, much of this will be shaped by supply chain concerns and dependent on the stage of the specific projects,” he says. Nik Willoughby, the recently-appointed chief technology officer at Scottish biotech firm Horizon Proteins, comments: “As governments wrestle with the current challenges, we believe it is even more important to take a holistic, end-to-end view of the objectives – and therefore the incentives and penalties – governments have to consider when putting funding and grants into emerging technologies and sectors.” 72 INSIDER May 2021

IN FOCUS: Digital Twins In order to lessen the risk of potentially expensive avenues of R&D, business leaders are increasingly turning to “digital twin” technology. This aims to create living models of factories, supply chains or product life-cycles. Recent Accenture research found that 65 per cent of executives expect their organisation’s investment in digital twins to increase over the next three years. In Accenture’s labs in Ireland, the company has begun to use digital twins as a means to analyse treatments, test impacts and understand processes. Barry Heavey, head of life sciences and manufacturing for UK and Ireland at the firm, explained that advances in data storage and computational power have driven what is an old concept into being a global trend. “Essentially it lets you be cynical about things before taking them to the real world. A good example is in aerospace, where planes are designed rigorously on computers before actually flying, making big cost savings on testing.” In Scotland, the oil and gas industry has been using digital twins to test fluid dynamics, trying to avoid drilling and extraction failures and maximise efficiency. “It’s harder to do with biological models,” notes Heavey, who added that understanding the variables earlier in the process promotes efficiency and safety.

Collaboration challenges The dual restrictions of Brexit and Covid-19 have also made the collaboration that drives so much of the innovation in these sectors a lot more difficult. Winstanley says that, during the past year, university teams can more clearly see the importance and impact of their work and have greater appetite for engaging with businesses. “We’re also seeing a greater openness to collaboration and working across different disciplines. “The switch to working remotely has also been a great leveller, with people more inclined to work collaboratively as a matter of course through the constant connection they have with Teams, Zoom and the like.” Porter argues that, despite everything, the sector is in pretty rude health. However, while online tools have been used to overcome many collaboration problems, he notes: “Ideas come up over a conversation while making the tea, or in the pub after work, at conferences where you can meet people you wouldn’t so often – web chats lack that spontaneity. “I think we’re making progress, but I worry we’re getting to a point where the generation of new ideas might be slowing down.” ■ www.insider.co.uk

2021

Upskilling Scotland Scholarship Access to fully funded online courses worth up to £1,400 across business, construction and digital disciplines.

Take your first step towards a Masters degree www.hw.ac.uk/upskilling-scotland

FUTURE

MADE

TOP500 COMPANIES "5 :063 '*/(&35*14 Looking to attract new customers in 2021? Insider Top500 database puts you in touch with the key descision-makers in Scotland’s largest companies with turnover of £20m* and over.

£349 *The Insider ranking is calculated using a computation between annualised turnover and pre-tax proﬁt

+VAT

REGIONAL REVIEW: ABERDEENSHIRE

HOPE OF NORTHERN LIGHT SHINING AFTER DARK DAYS By GRAEME SMITH

ESPITE a considerable amount of depressing economic news in Aberdeen and the northeast in recent times, there is still optimism that better days lie ahead. First there was the oil slump of 2014-15, one of the biggest price declines in modern history and one that cost an estimated 120,000 UK jobs, dependent on the industry. Then Brexit dealt the area a blow with Warwick University researchers calculating last summer that the city was probably the worst hit in the UK. By early-2020 the mood in the city was lifting, better days seemed to lie ahead, but then came Covid. It has not only dealt a devastating blow to the oil and gas industry but also to the city’s retail trade, tourism and hospitality, which could be vital for its future prosperity. John Lewis is one of the latest casualties, leaving the city devoid of any department stores. Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, is one of those whose

www.insider.co.uk

morale is undented by this series of body blows. “Pre-covid we were well on the way to creating a city region fit for the 21st century that Aberdonians can be proud of and that people want to visit. There is still billions being invested across the area, however we must quickly rebuild momentum behind the wider

Pre-covid we were well on the way to creating a city region that Aberdonians can be very proud of Russell Borthwick, Aberdeen & Grampian Chamber of Commerce (below)

regional economic and sector diversification strategies. “Being at the heart of the drive to develop and deliver green energy solutions is, perhaps, a bigger and longer-term economic opportunity for the north-east than when oil was discovered in the North Sea. “The collective expertise, innovation and skills across operators, supply chain, universities and other partners mean we are well

placed to repeat this now, but we also want to ensure we get a larger slice of the research and development pie too, as much of this work in oil and gas took place elsewhere.” Kevin Reynard, PwC’s senior partner in Aberdeen, says he is an optimistic “glass half full” person and agrees there is a great opportunity for a recovery, but adds: “I am not optimistic it will be automatically landed. It’s going to need plenty of time, effort and discipline. “We have only had oil and gas since the 1970s, but it is amazing how it has become synonymous with Aberdeen and Aberdeen has become synonymous with oil and gas. “Aberdeen and the north-east has fought back before from the credit crunch in 2008 and we had our own shock in 2014 when the oil price fell from $140 to $40 – and it felt like overnight – just as we were reaching a better place and there was some emphasis on the diverse economy of the area. “We have to remember we are not just oil and gas and we have to capitalise on our natural assets of great outdoors and fantastic scenery, May 2021 INSIDER 75

MARKET COMMENTARY Lindsay McGranaghan

TECHNOLOGY IS THE KEY TO NAVIGATING WAY THROUGH AN ECONOMIC CROSSROADS Aberdeen and the north-east must focus its future on digital skills and learning, connected communities, and transforming services for all citizens Aberdeen and the north east ﬁnds itself at an economic crossroads. Key sectors have absorbed huge damage due to COVID-19. Now is the opportunity to reassess and build for the future. The Aberdeen Economic Policy Panel has already focused its mind on a “clear route-map for change”. The region, it insists, needs to “reimagine itself as a place to live, work, invest and do business and in doing so, build much greater resilience into the local economy”. The north-east must strengthen its technology ecosystem “to support the establishment of new businesses and improve the digital infrastructure”. Also of vital importance is an updated skills strategy, principally for young people, that “takes account of the existing skills gaps”. If Aberdeen is to embrace a digital future, it must focus on digital skills and learning, connected communities and transforming services for all citizens. These are the threads of a new digital fabric that can change the way communities in the north-east live and interact with local authorities, schools, and each other. Together they can provide a strategy for recovery against a backdrop of ﬁscal challenges caused by the pandemic, and create

a talented digital workforce capable of delivering them. Central to all are universality of access and equality of attainment in education. CGI has created a unique digital solution to transform learning and teaching in schools called Empowered Learning. It oﬀers every student the same access to the same great digital tools for learning, while supporting digital learning and teach strategy. Empowered Learning allows educators, learners and parents to take advantage of digital technology opportunities. In Glasgow, this programme – known as Connected Learning – is one of the largest single city implementations in Europe, and ﬁts with CGI’s core commitment to communities, partnerships and STEM, providing young people with a passion for technology and hunger to learn. A deal with Edinburgh was signed just last month, and will see the deployment of 39,000 IPads to 36,000 pupils and 3,000 teachers in more than 120 Schools. In the Scottish Borders, known as Inspire Learning, all pupils from P4 to S6 in every Borders school has access to their own device, providing an ideal blended learning environment during the COVID-19 pandemic with more than 90% engagement.

Lindsay McGranaghan is CGI Vice President and Scotland Business Unit Lead Find out how CGI can help your business and learn more at cgi.com

Another driver of digital excellence is apprenticeships. CGI has a Graduate Apprenticeships Programme in partnership with Glasgow Caledonian University and Edinburgh Napier University. Currently, there are 13 graduate apprentices in Scotland studying towards a BSC Honours – in Software Development at Glasgow Caledonian and IT Management for Business at Napier – while also developing their career working on real-life projects at CGI, with a paid starting salary of £19,000. These apprentices are not only the key to the future of our business, but also the tech sector in Scotland. With a skilled workforce in place, cities and authorities can then drive forward real digital change for their communities, and fulfil ‘smart city’ ambitions. From schools to social care, health and wellbeing, finance, proactive maintenance, recycling, route optimisation, and smart vehicles, life will be different, better, and technologicallydriven, with citizens at its heart. What is more, this new technology will mean a virtual world that delivers benefits back to authorities in the north-east, and create the right environment for a new, digital economic recovery.

REGIONAL REVIEW: ABERDEENSHIRE so quality tourism is important to us. We have some world-class venues outdoors, including golf courses, and we have built some fantastic facilities including Aberdeen Sports Village and the P&J Live event complex. Our agriculture, food and fish are quality and remunerative and we do quite well in the biotech business and education as well, so we have a broad base to build from. Reynard adds: “Things like the BioHub, the North Sea Transition Deal and the Aberdeen City Region and Deal must be used properly and shouldn’t just be headlines. We need local institutions, local businesses and inbounds to all work together to help leverage each of these areas.” He said he believes energy transition creates a fantastic opportunity for Aberdeen and that the industry is embracing it in terms of its own emissions and sustainability. “But oil and gas isn’t going to disappear for a few decades yet. Three-quarters of UK energy consumption is based in oil and gas, so it has to be about what role oil and gas can play in terms of its own emissions, its own consumption and producing oil and gas in a clean way. “Also, other aspects of energy transition might well only happen with the balance sheets, the innovation and skill of the people that are in oil and gas. Carbon capture and storage and hydrogen, for example – a lot of that is about transferable skills and transferable assets, so I think oil and gas has to be part of the solution. “I feel the sector has a job to do to make itself attractive, but energy transition can only help that. It provides the opportunity to create some impetus around ‘yes we are an attractive industry and you can have a great career here and you c an be at the hub of energy transition’, says Reynard.” Stuart McIntyre, head of research at the Fraser of Allander Institute, has regularly highlighted the gravity of the situation in the north-east. “I can’t say this often enough, or loudly enough: there is a real jobs crisis in the north-east,” he says. “Payroll (PAYE) employment in the north-east of Scotland is down 12,500 on a year ago (-5.5 per cent), and 21,5000 (minus nine per cent) on five years ago. While these data from HMRC are new and at this stage ‘experimental’, it’s pretty clear they reflect the reality on the ground. www.insider.co.uk

peripheral location has made it difficult to diversify its economy and it’s often ‘far-removed’ from policy priorities in the central belt. “Looking to the energy transition and commitments to net zero, what gives the north-east its comparative advantage, if it is capitalised on, is its existing expertise and skilled workforce in the energy sector. Jobs in the oil and gas sector are disproportionately highly skilled and well-paid – and retaining these Lyndsey skilled workers in the region is going McGranaghan, to be key. CGI “It’s great that the UK Government brought forward some new initiatives in the Budget to support the sector, Adrian Watson, and in turn this should act as a boost Aberdeen Inspired for the broader north-east economy but, as always, the devil is in the detail and I have some scepticism about the size of the impact these initiatives will have until I see the detail. “But the economy needs to diversify too. This is where the efforts of bodies such as Opportunity North East and the city council are crucial to helping open up new opportunities for the region in tourism, life sciences and food and drink. “Investment in things like BioHub, Seedpod (food and drink) and the Hydrogen Hub will inevitably create some additional employment in the wider economy, but the ultimate scale of the impact of these initiatives is difficult to gauge at this stage.” Companies like Inoapps demonstrate how a global business can be built from the granite city. It was founded in Aberdeen by Phil Burgess, Inoapps (below) Andy Bird in 2006 when he spotted a gap in the market for high-quality “Often when people think about Oracle IT service provision within the oil and gas sector they think the energy sector. It retains its about jobs offshore – but there is a headquarters in Aberdeen but is huge amount of onshore employment now an international company too, and not just in businesses in the with offices in Asia and the US, supply chain of the oil and gas sector, where Bird is based as global chief but also the employment that those executive officer. working in the sector support in the The company’s EMEA managing wider economy. director, Phil Burgess, says: “Inoapps is “If you have a robust oil and gas a great example of an Aberdeen-based sector you have those supply chain business that has leveraged its initial jobs, and with both of those you get expertise in supporting UK-based the hospitality and retail jobs that oil and gas clients to a wider global come with a robust economy. marketplace. Through organic growth “Geography has a key role and acquisitions, we’ve diversified our in explaining the economic offering across other industry sectors, development of the north-east over building a strong global presence, the past 50 years – positioned as and we’re now preparing for further it was to capture the wider supply significant growth, particularly in the chain benefits of oil and gas US and Asia. developments in the North Sea. “While we now have a strong At the same time, its relatively global focus to our business, we

Through organic growth and DFTXLVLWLRQV ZHłYH GLYHUVLğHG RXU offering across other industry sectors, building a strong global presence

May 2021 INSIDER 77

REGIONAL REVIEW: ABERDEENSHIRE also remain committed to its Aberdeen roots. “Cloud migration and other innovative technological solutions will be an important driver in helping Aberdeen businesses as the city’s economy continues its transition towards new and diverse industry sectors. Our focus on utilising Oracle’s technology and applications to maximise operational excellence has a key role to play in supporting the competitiveness and growth potential of companies here, whether they are targeting Scottish and UK markets or have global aspirations.” Global IT and business consulting services company CGI believes Aberdeen and the north-east must invest in a young, skilled workforce to establish its technological credentials. CGI, which employs more than 500 people throughout Scotland, including Aberdeen, is committed to providing young people with a passion for technology and hunger to learn through STEM. Lindsay McGranaghan, CGI vice-president and Scottish business unit lead, says: “Developing a skilled tech workforce begins in education. CGI has created Empowered Learning, a world-class digital education programme that builds digital schools and classrooms for educators and pupils. “Through it, educators can create and tailor lessons to personalise learning, access new ways of bringing learning to life. This gives pupils access to world-leading digital resources and provides first-hand experience of how the world of digital can impact positively on our lives. “CGI would stand ready to help the north-east establish a new generation of young tech graduates to help build on Scotland’s reputation for digital excellence.” Tourism is an increasingly important sector for the area and, according to Chris Foy, CEO of VisitAberdeenshire, it is in a desperate state. “As we scan the spring skies for silver linings, it is apparent that the tourism sector in the north-east could be well positioned to benefit from pent-up demand to travel,” he says. “Customer insight suggests a desire to explore wide open spaces and majestic landscapes. With that in mind, the offering in Aberdeen and Aberdeenshire is undoubtedly 78 INSIDER May 2021

Aerial view of Aberdeen with the River Dee and Duthie Park

As we scan the spring skies for silver linings, it is apparent that the tourism sector in the north-east could be well SRVLWLRQHG WR EHQHğW IURP SHQW XS demand to travel Chris Foy, VisitAberdeen (above) strong, so long as restrictions allow the market to get to our products. Pre-pandemic, direct tourism expenditure in the north-east contributed more than £730m to the local economy every year, supporting almost 18,500 jobs across nearly 1,400 businesses. “To get heads back on beds in the short term, our promotional campaigns present a viable alternative to well-trodden paths elsewhere on these islands. Looking further ahead, a ‘Team Aberdeen’ approach is being taken to secure a rolling pipeline of high-yield business events for the city, and work with the travel industry should mean more tour operators featuring more north-east experiences in their programmes in the future.

Stuart McIntyre, Fraser of Allander Institute (Below)

Crucial for the success of tourism is a vibrant city centre and for the Aberdeen Inspired Business Improvement District (BID) helping businesses recover from the devastating impact of the Covid-19 restrictions is a top priority. “The businesses and organisations that make up the diversity, vibrancy and appeal of our city centre have faced an unprecedented crisis,” says chief executive Adrian Watson. “We have already seen the loss of our branches of major stores such as John Lewis and Debenhams alongside independent hospitality venues that have been part of our fabric for decades. “One of our core priorities for the next five years, set out in our new business plan, is helping businesses to recover from Covid, including regular business network meetings to provide specific help and advice and a commitment to lobbying for support for the citycentre business recovery. “We are committed to working with Aberdeen City Council and other stakeholders, on behalf of more than 800 levy payers, to help our city centre recover and reinvent itself as a thriving and dynamic destination, fit for the post-Covid world, which attracts visitors and allows businesses to flourish once more.” As businesses move towards a recovery, many will have their eye on evolving their sustainability, according to Fraser Sime, regional director of the Bank of Scotland. “Our latest Sustainability Barometer found that two-thirds (68 per cent) of Scottish SMEs have worked to become more environmentally sustainable in the past year and more than half (56 per cent) of Scottish SMEs believe becoming more environmentally sustainable is important to their business,” he said. “This is an encouraging sign and, at Bank of Scotland, we offer a range of support such as our Clean Growth Financing Initiative (CGFI) to help with sustainable ventures and operations. It allows firms to access discounted lending to invest in green and low-carbon projects such as the installation of solar panels. “Small changes can also make a big impact and SMEs in the region could also consider switching to renewable energy tariffs and reducing waste – small changes that will improve their environmental footprint.” ■ www.insider.co.uk

co uk SCOTLAND: RESET WEBINAR

WEDNESDAY 9th JUNE 2021 AT 11.30am REGISTER NOW AT

scotlandreset.awardsroomcloud.com

INSIDER INTERNATIONAL: INDIA

TUNING INTO THE PROMISE OF GROWING RICHES IN INDIA By PERRY GOURLEY

OR MANY of India’s 1.4 billion residents, one consequence of social distancing measures in particular will have affected their quality of life. In what is a movie-obsessed country, the closure of many of its 8,000 cinemas has had a significant impact on the country’s most popular social pastime. The restrictions have led to a rapid acceleration of what was already a growing trend for India’s wealthier citizens to invest in home cinema systems, a reflection of the dramatic rise in middle-class consumers seen there in recent years. According to Anji Sosa, managing director of Scottish hi-fi firm Fyne Audio, that trend should lead to increased demand for his firm’s speakers in what he sees as a market with significant long-term potential. “India has been something of a slow burner for the audio industry and it has been behind the growth seen in other markets, but it is now starting to catch up quickly,” he says. The rise in consumer spending predicted for India in the years ahead makes it a market where high-end brands such as Fyne Audio are keen to establish a presence. India is on track to soon be the largest country by population and have the third-largest economy, with a four-fold growth in consumer spending predicted by 2030. By then, as many as four out of five households are expected to be “middle-class” with disposable income to spend, up from about 50 per cent today. Although India is currently a relatively small trading partner for Scotland, it is becoming increasingly important.

80 INSIDER May 2021

Scottish exports of goods and services – excluding oil and gas – to the country were estimated to be worth £295m for the latest 12 months that figures are available for, up by more than a quarter from the previous year. The value of exports to India has increased by two-thirds in the past five years – with food and drink accounting for almost half the total – making it Scotland’s 25th-largest export destination. Although Covid has taken an inevitable toll on the Indian economy, the International Monetary Fund recently said it was now on the path to gradual recovery, with GDP growth recently returning to positive territory with forecasters expecting the nation’s growth to hit 11 per cent next year. As the UK looks to build new trading partnerships in the wake

Above: High-end speakers produced by Scottish ﬁrm Fyne Audio

In energy, British experience and technology can be used to help meet India’s growth challenges Chris Horsley, Burness Paull (below)

of Brexit, the long-term growth prospects mean India is seen as a key target market. The UK’s International Trade Secretary Liz Truss MP recently held talks with the Indian government to discuss proposals for an Enhanced Trade Partnership between the two countries, ahead of a more fully-fledged India-UK free trade agreement (FTA). Chris Horsley, the Edinburghbased head of Burness Paull’s India desk, says there is a “huge post-Brexit focus” being put on the UK-India relationship, with both Westminster and Holyrood seeing it as a key

dest destination d estin inati tion to to boost b the future balance of trade. He says there are a number of key sectors where Scottish and UK expertise are in demand. “In energy, for example, there is great scope for collaboration as British experience and technology can be used to help meet India’s growth challenges,” says Horsley. Indian Prime Minister Narendra Modi wants to see the country become a global leader in renewables, recently increasing its target for generation capacity to 220GW by 2022, up from 175GW. A number of Scottish energy firms are already playing an active role in India’s low-carbon transition, including Glasgow’s Smarter Grid Solutions which is working on a contract to help manage renewable resources in the southern state of Tamil Nadu.

IN I FOCUS: India UK-wide trade with India is worth some £23bn a year and supports about half a million jobs in each other’s economies. India is now the UK’s sixth-largest non-EU trading partner after the US, China, Japan, Switzerland and Norway. The UK is also one of the largest investors in India, with £22bn of direct investment into the country over the past two decades. www.insider.co.uk

Although its rising prosperity means India merits a place on the radar of other Scottish exporters, it remains a challenging market to break into. Home to almost a fifth of the world’s population, the scale of the country is daunting. Its eight largest cities each have a population bigger than Scotland, with three – Mumbai, Delhi and Kolkata – having more than 10 million inhabitants. It also has a staggering 380 different languages, although 125 million people class English as their first language. For Fyne Audio, that scale means attempting to build a direct presence there to sell its products was not a viable option. “India is such a vast country and developing your own entity with your own direct sales team on the ground would be a very significant investment for a company like ours,” says Sosa, whose North Lanarkshire firm exports to about 60 countries. The nature of Fyne Audio’s products also means trying to sell online in India is not feasible. “People want to see and hear high-end audio products and you www.insider.co.uk

need physical dealers to be able to do that and to persuade people to buy,” explains Sosa. Instead, Fyne has appointed a Mumbai-based distributor that has a significant presence in the audio market across key parts of the country. Although it remains a small market for Sosa, he believes the work being put in now to build the company’s name there will pay dividends in the years ahead. “The Indian audio market is a bit like the UK was 10 or 15 years ago. We had a huge explosion in home theatre set-ups back then, and India is about to go through that now,” he says. “Obviously, a lot of Indian people don’t get paid much, so budget products are still a very big part of the market and our products don’t really address that end. But the high-end segment is growing and in the next 10 years I think it will really take off there and we are ready for that happening.” Those looking at doing business in India need to be prepared for the practicalities of trading with a country renowned for its high levels of bureaucracy, although significant

Above: BandraWorli Sea Link, connecting island and suburbs of Mumbai

strides have been made in reducing red tape in recent years. The World Bank’s latest Ease of Doing Business rankings saw the country jump 14 places to 63rd out of 190, and the Indian Government has set a goal of reaching the top 50 in the near future with aspirations to hit the top 25 in the longer term. Although progress is being made, Burness Paull’s Horsley, who has been working with Scottish Development International to help firms looking to enter the Indian market, says hurdles still remain. “Bridging the gap between intent and implementation has always been a challenge for Indian governments,” says Horsley, who says firms need to be aware of factors such as disparities between state governments which the federal structure leads to. Businesses also need to be conscious that “politics can still often trump economics” and that India is almost always in election mode, with one or two states going to the polls each month. “This means that political leaders are compelled to navigate challenges of politics and economics on an almost continual basis,” he says. ■ May 2021 INSIDER 81

TECH TALK: RECRUITMENT

PANDEMIC HAS HEIGHTENED COMPETITION FOR TALENT By MICHAEL FEELEY

HEN the pandemic first forced Scotland into lockdown in March 2020, the impact on the IT and digital skills market was immediate and brutal, with practically all recruitment activity abandoned or postponed indefinitely. In the months that followed, however, the mass adoption of flexible working, combined with many organisations accelerating their digital transformation plans, created huge demand once again for already-scarce digital talent. David Mains, head of technology at Tec-Source, a Glasgow-based tech recruitment agency for SMEs, recalls that, immediately prior to the initial lockdown, the Scottish IT recruitment market was healthier than ever. He says: “As we entered 2020, we were exceptionally busy. There was a tremendous demand for technical and digital talent in Scotland, particularly for software

82 INSIDER May 2021

developers. I hired two new staff a fortnight before the first lockdown.” Nick Price, CEO of Edinburghbased tech talent agency Bright Purple, agrees: “The market was buoyant. There was so much going on: transformation programmes, change projects, Artificial Intelligence, Internet of Things, major data projects.

March came and it was like having your legs cut from underneath you. All recruitment halted overnight Nick Price, Bright Purple (below)

Then March came and it was like having your legs cut from underneath you. All recruitment halted pretty much overnight. I’ve lived through three recessions; the difference with this crisis was the unpredictability. No-one knew how long it would last or what the financial hit would be.”

The latest UK Tech Talent Tracker report from Accenture revealed the number of technology job listings in the UK declined by 57 per cent during the past year, with fewer than 55,000 open roles advertised. Despite this, the research found demand for skills in cutting-edge technologies such as AI and Quantum Computing was seeing a resurgence in Edinburgh and Glasgow. Mark Byrne, head of Applied Intelligence for Accenture Scotland, says: “The figures for AI and Quantum Computing indicate that Edinburgh and Glasgow remain hubs for data science and innovation in these fields. The pandemic rapidly accelerated digital transformation and taught us we must all master change.”

The remote revolution According to Chris Lowden, director of digital & technology at Glasgowbased recruiter Nine Twenty, the Scottish IT jobs market began to recover in Q3 of last year and then accelerate rapidly. He says: “By the www.insider.co.uk

TECH TALK: RECRUITMENT autumn, we started to see a rapid uplift in the number of IT vacancies being advertised, with the vast bulk of jobs being related to software development. Whatever the industry, be it retail, financial services, logistics, every business needs software talent to help it adapt to the new reality. “Q4 2020 was broadly on a par with the previous year and now, with Q1 2021, we’ve just had our strongest quarter ever. We were lucky in that several of our clients, such as games developers and pharmacists, grew significantly during the lockdown. “We found that SMEs, including our own business, benefited from being able to make the transition to remote working more swiftly and smoothly than larger organisations. I think the recruitment market will be dealing with the impacts of that shift for years to come.” Mains at Tec-Source points to a number of his SME client companies being able to grow more rapidly during lockdown thanks to remote working: “When you are a growing business, more office space to accommodate more employees generally means more overheads, so we’ve seen the money saved on office expansion diverted towards tech staff salaries. We’ve seen salaries increase by about 20 per cent for developers and by 10 per cent for business support functions like business analysts and account managers. “However, a knock-on effect of the mass shift to remote working is that a whole generation of graduates and re-skillers are being squeezed out of the marketplace. Companies are less willing to take a chance on someone inexperienced because they are probably going to work remotely. As a result, clients are often excluding the least qualified candidates first in the selection process.” Price at Bright Purple believes the broad success of remote working means employers seeking digital talent will have to offer flexible working as a matter of course beyond the pandemic: “We’ve entered a new era of work, with a new set of expectations from candidates,” he says. “Lots of people don’t want to return to a ‘five-days-a-week in the office’ arrangement. “Young people with in-demand digital skills are not going to join a company unless it shows some imagination around flexible working. www.insider.co.uk

A knock-on effect is a whole generation of graduates and reskillers are being squeezed out of the David Mains, Tech-Source (below) marketplace HR people are going to rethink some of their practices to make their organisations attractive to those candidates. “Another point to consider is that the market for IT talent is now truly global in a way that it wasn’t before the crisis. Scottish companies are increasingly comfortable with recruiting digital skills from all over the UK and beyond, but it’s a double-edged sword. Scottish talent is also being recruited by overseas firms in larger numbers, making the competition for skills fiercer than ever.”

The battle for digital skills All of the recruitment specialists

agree that a shortage of digital skills is the biggest threat to the future of Scotland’s tech sector and the industries it serves. Mains says: “Even before the pandemic, we had a welldocumented digital skills shortage in Scotland, with thousands of technology vacancies not being filled every year. We had already started to see a candidate shortage as a result of Brexit. “In recent years, the Scottish tech sector has benefited from a steady flow of skilled migrants arriving from places like Spain, France, Greece and Germany. I’d estimate that, since Brexit, those migrant numbers have fallen by at least 50 per cent.” In addition, recent research from the Learning & Work Institute has revealed that the number of young people taking IT subjects at GCSE has dropped 40 per cent since 2015. Fewer than half of British employers believe young people are leaving full-time education with sufficiently advanced digital skills, while 76 per cent of firms think a lack of digital skills would hit their profitability. Lowden says: “The drop in Scottish students choosing STEM-related subjects at college and university is going to represent a major challenge for the country unless we take action now. We need to be engaging kids, with an emphasis on girls, at primary school level and educating them on the breadth of opportunities available within the digital industry and how digital skills underpin so many aspects of their lives. “Government and the business community need to work together to tackle the digital skills shortage or Scotland is at risk of being left behind.” Price believes it would be a mistake for Scotland to believe its own hype in relation to the digital marketplace. He says: “We hear a lot about Scotland’s strength in fintech, for example, but the reality is that Lithuania, a country of two million people, has a bigger fintech industry than we do. Every country in the world needs digital talent just as much as Scotland. If we underestimate others, and don’t take steps to stay competitive, we’ll be the ones to lose out.” ■ May 2021 INSIDER 83

PROPERTY SPECIAL: COP26

Construction lays foundations to build a far greener future By FRANCIS SHENNAN

HE BUILT environment contributes about 40 per cent of the UK’s total carbon footprint, according to the UK Green Building Council. Almost half of this is from energy used in buildings and infrastructure such as roads and railways. New buildings are more energy efficient, but 80 per cent of the buildings that will still be in use in 2050 have already been built. Yet, in only six months, the 26th UN Climate Change Conference of the Parties in Glasgow will bring together heads of state, climate experts and campaigners to try to agree on co-ordinated action. “In November the spotlight will be on Scotland as we host the COP26 conference and it presents us with a real opportunity to showcase some of the positive steps we are taking,” says Stephen Good, chief executive of Construction Scotland Innovation Centre (CSIC). “It is important we think of COP26 as a launchpad for discussions and action around sustainability rather than an end-point. We already have

some of the foundations in place, including regulations, a strategy for decarbonisation and greater use of renewables across the industry. But there is more to be done in terms of setting targets, tracking progress and measuring outcomes. “One of the major challenges is the fact the construction industry can be

in association with

Above: Rowallan Castle in East Ayrshire, where 79 environmentally friendly homes will be built on the 600-acre estate

the natural materials we already have at our fingertips to produce buildings that are made in Scotland, from Scotland,” says Good. “CSIC is currently supporting industry to explore the greater use of homegrown timber, for instance.” Environmental, social and corporate governance (ESG) and wellness are now the most prevalent themes among occupiers, landlords and developers, according to Toby Withall, office agency partner at Stephen Good, CSIC (below) Knight Frank Edinburgh, and the pace of change has “been incredible to witness”, he says. “Going back to the basics of how a building is put together can help to identify areas that can be improved, such as the way air flows. Air conditioning is a big focus, with new systems beginning to come to the market powered by electricity, rather than gas. Developers are also looking at how systems can maximise the

It is important that we think of COP26 as a launchpad for discussions around sustainability, rather than an end-point. We already have some of the foundations in place quite fragmented. Therefore, strong leadership is essential for driving change through every link in the supply chain.” Transforming the supply chain will be essential to building sustainable property, focusing on the materials used, the digital tools and manufacturing techniques. “There ought to be a focus on

rsmuk.com www.insider.co.uk

May 2021 INSIDER 85

PROPERTY SPECIAL: COP26 benefits of natural airflow. We are also seeing developers move towards renewable energy, with most new buildings coming on to the market as fully electric. Green initiatives are also being included in the design stages, such as photo-voltaic panels and rainwater harvesting to encourage the use of renewables. “In existing buildings, in particular, decarbonisation is yet to be delivered. However, there is an initial investment to consider and occupiers looking for sustainable spaces will be expected to pay a premium to reflect that, until it becomes more mainstream.” The topping out of one building in April shows what can be achieved. The FORE Partnership’s Cadworks in Glasgow City Centre is 95,000 sq ft of speculative office development over 10 storeys, which will complete in time for COP26. It will be one of the first office buildings in the city to be net-zero carbon in operation. It uses no fossil fuel in its operation and is all-electric. It is the first commercial building in Scotland to use Airlite, a 100 per cent natural paint technology to neutralise greenhouse gases and kill viruses. Four months earlier Edinburgh Park’s flagship office building at 1 New Park Square was topped out. The Edinburgh Park Southern Phase masterplan is one of Scotland’s biggest all-electric mixed-use property developments, emphasising reduced waste and carbon footprint with increased energy efficiency. It is designed to maximise the use of clean energy to power more than 845,000 square metres of workspace, including a commercial hub and public square at Edinburgh Park railway station, a 170-bedroom apartment hotel and 1,740 homes. Tony Hordon, managing director of Parabola, says the company pulled the plug on gas across its developments many years ago. “In creating an all-electric development at Edinburgh Park, we have followed best practice in maximising energy efficiency,” he says. “With operational energy requirements minimised, we have then developed designs for a low-carbon, decentralised energy centre and district heating network. “This will supply all homes in

HFD’s 14-storey oﬃce development at 177 Bothwell Street, Glasgow

Going back to the basics of how a building is put together can help to identify areas that can be improved, VXFK DV WKH ZD\ DLU ĠRZV Air conditioning is a big focus Toby Withall, Knight Frank Edinburgh, (below)

Edinburgh Park with heat and hot water from a zero-carbon all-electric system based on the latest air source heat pump technology. The decentralised system increases efficiencies, reduces customer costs and improves resilience.” The pandemic was a watershed for property in relation to ESG concerns, says Stephen Lewis, managing director of HFD Property Group. “Before Covid-19, if a development didn’t embrace sustainability, broadly speaking it had limited impact on its success,” he says. “Now, sustainability will fundamentally determine a

project’s success. If it doesn’t have meaningful sustainability credentials, the building will not even be in the race. “There is, however, an important distinction to make between new and existing buildings. While 39 per cent of global emissions come from the built environment, analysis suggests 80 per cent of the buildings that will exist in 2050 have already been built. That first statistic is heavily skewed towards existing stock, which tend to be the worst-performing assets. “The real challenge will be around the existing estate and how that can be improved from a sustainability point of view.” This adds another level of complication. Can existing buildings be adapted or have their sustainable credentials improved, or would it make more sense to start from scratch? However, if starting from scratch – there is the environmental cost of removing the existing structure.

rsmuk.com 86 INSIDER May 2021

www.insider.co.uk

PROPERTY SPECIAL: COP26

COMMENT Claire Monaghan

“While there is a clamour to look at how these buildings might be refurbished, it is not always the panacea,” says Lewis. “Installing new external fabric and mechanical and electrical systems equates to more or less the full building. And, if you consider the site itself is a finite resource and the existing building may not deliver its full potential – or as much as it could – then a new development may well make sense.” Heating alone accounts for 10 per cent of the UK’s carbon footprint and homes are more significant than all other types of building combined, according to the Green Building Council. In East Ayrshire the first phase of an environmentally friendly housing development has been launched in a £60m joint venture between Cherish Homes and the 600-acre Rowallan Castle Estate, with serviced plots for 79 custom-designed homes costing from £400,000 to more than £1m. Cherish Homes uses innovative off-site modular construction and its homes are typically triple-glazed, highly insulated and use mechanical ventilation and heat-recovery systems, achieving up to a ‘B’ energy rating. “The UK has fallen behind other countries, such as Sweden, Germany and Japan, which have adopted custom-built homes, advanced off-site manufacturing and modular construction techniques much more readily,” says chief executive Stuart Law. “We are seeing long-term changes in consumer behaviour, with more people than ever looking to the countryside for their next home. We are already seeing significant demand for the plots at Rowallan.” Changes in construction technology and methods raise the issue of whether or not the UK, and Scotland in particular, has the skills to cope with new demands placed on it. Just as the pandemic was a watershed in relation to ESG for Lewis at HFD, so it has accelerated the adoption of technology. “Proptech had been discussed for years prior to the pandemic, without any major changes – but the sector is getting better and the pandemic has, again, accelerated that,” says Lewis. “Now, almost everything in property is related to IT. We saw the interplay between property and technology coming and that’s why we set up our IT business 20 years ago – augmented latterly with our DataVita data centre business. Technology is integral to what we do. “But having the most efficient pieces of kit is only half the battle – they need to be used properly. Either you need appropriately trained people to use the technology or have to automate it through the use of sensors, machine learning and artificial intelligence. We are introducing a range of technologies at 177 Bothwell Street (in Glasgow) to minimise people’s need to physically interact with www.insider.co.uk

the building and make it significantly more efficient to operate.” As an indicator of digital maturity and adoption, McKinsey Global Institute’s digital index ranked the construction sector second from bottom and real estate towards the middle of the pack. “Even so, its scores were low,” says Douglas Morrison, director of operations and future skills at CSIC. He adds: “Our industry and education and skills systems have traditionally been focused on specific disciplinary skillsets and have been too slow to respond to the development of digital capabilities. We need a programme of digital upskilling to bring people in the industry to a basic level of digital maturity. “We also need to be more targeted with our integration of technologies and processes within the skills systems to arm people with the competencies to move from being consumers of technology towards being creators. That would mean more individuals and organisations feeling empowered to create content, assets and resources in digital

We are seeing long-term changes in consumer behaviour, with more people than ever looking to the countryside for their next home Stuart Law, Cherish Homes formats that can help address challenges, for instance, around environmental performance or skills development. “Part of that process will be re-thinking how we engage with digital adoption. It has to be developed at as early a stage of life as possible and then recognised as part of lifelong learning.” CSIC has helped more than 1,000 businesses to up-skill with the adoption of building information modelling (BIM). Its Offsite Ready initiative has worked with more than 1,500 individuals to drive low-carbon construction methods and its Passivhaus programme will train 600 workers in methods for ensuring thermal comfort using very little energy for heating and cooling. Morrison pointed to “the new occupations and tasks that will emerge as we develop what a net-zero built environment will look like. This will inevitably see the greater integration of new technologies and systems but, at present, we haven’t optimised the process of mainstreaming emerging practice efficiently and effectively into the education system. This is a challenge that will need to be addressed”. ■

Head of Real Estate and Construction Scotland RSM E: claire.monaghan @rsmuk.com W: www.rsmuk.com

The tumultuous year that shifted the foundation of the property industry RSM’s Real Estate 360 report highlights how the global pandemic and Brexit have presented economic and geopolitical conditions that will fundamentally change the real estate sector. Our 2021 survey of 300 senior industry experts suggests both are disrupting the traditional order of asset classes, as seen with the rise of data centres likely due to an accelerated shift to online trading. The most significant investment growth is expected in industrial property, as businesses acquire more space to store goods centrally, rethink distribution and increase stockpiling due to border concerns. Three fifths of respondents cited Scotland as a key region to achieve greatest residential returns over the next five years, indicating a rebalancing of where in the UK we will see the greatest returns on investment. The challenge will be maintaining the momentum seen over the last year following the end of the LBTT holiday, albeit the residential housing market is seen to be relatively secure and we would expect to see an increasing focus on the build-to-rent sector from institutional investors. Recent statistics shared with RSM highlight the extent of non-domestic investment in the Scottish property sector. It is imperative that Scotland continues to attract this investment, particularly as we expect to see change in our cities with many buildings repurposed from their historic use. Interestingly, 81% of respondents expect to see unused retail property repurposed for residential use, followed by leisure (44%); both of which would further support the expected growth in residential returns. The spotlight is firmly on the future of the office. How businesses occupy their office space and how employees collaborate as teams is an important balance which will be critical for businesses to get right to thrive in the ‘new normal’. Green energy solutions are considered the number one future priority and we are seeing developers and investors putting environmental, social and governance (ESG) considerations at the forefront of investment decisions. Whilst Covid-19 and Brexit are impacting property decisions in the short-term; the Government’s response to combat the conditions will have a marked and longer lasting impression on the property sector. In the future, principal stakeholders, landlords, occupiers and lenders will need to share more evenly in the risk of owning, operating and funding properties. Download a full copy of the Real Estate 360 report at www.rsmuk.com/ideas-and-insights/real-estate-360

May 2021 INSIDER 87

PROPERTY SPECIAL: ON THE HIGH STREET

HE Covid pandemic threw up some surprising heroes – not just the health and care workers but also shop assistants and lorry drivers who kept us in food and essential supplies and the staff of anonymous grey sheds who kept the system working. Yet bricks-and-mortar retailers were pulled out of our high streets like failing teeth, leaving gaps cosmetic surgery seemed unlikely to repair. In spite of that there are optimists who see solutions. Asset manager and developer Scoop has appointed award-winning POD Architects to start reconfiguring and future-proofing The Thistles Shopping Centre in Stirling, which it acquired in December. With more than 500,000 sq ft of retail space in 90 units, its anchor tenants include Next, Boots and Primark. “The high street is expected to take on a very different form postCovid and we now have an exciting opportunity to shape the future of the Thistles,” says Scoop director Mark Hewett. “Future-proofing is vital to ensure primary shopping centres remain relevant and a place where people want to be. They will be about far more than just shopping.” Other challenges include new uses for large iconic buildings. “We’ve already seen some interesting plans for repurposing large high-street spaces, including ex-Debenhams stores, which have been used as community hubs by charities, incubators for start-up businesses, and university campus buildings,” says John Rodger, commercial property partner at accountants Chiene + Tait. “Here in Scotland, we’ve seen the former House of Fraser building in Edinburgh’s Princes Street transformed into the Johnnie Walker visitor centre. These developments can help revitalise city and town centres.” In Dumfries, Community Land Scotland and the Carnegie UK Trust are working with a community company to refurbish eight underused high street properties as “a living, working, socialising, learning and enterprising quarter”. Midsteeple Quarter was founded in 2017 and is owned by its 500 members. Voting members are

Ringing the changes in the high streets By FRANCIS SHENNAN

individuals or businesses from the DG1 and DG2 postcodes and people from outwith the town can join as non-voting members. “In November 2018, we gained ownership of our first building, The Oven, at 135-139 High Street,” says Midsteeple Quarter manager Scott Mackay. “Last year we announced the purchase of 113-115 and 117-119 High Street, renamed The Smithy and The Press. “The Covid pandemic has intensified the pressures on high streets around the country, with stores closing practically every week. This situation just amplifies the need for a fresh approach. “Part of the recovery from Covid must be the re-use of vacant retail spaces for new local businesses and social enterprises to start up.0” One of the keys to essential high-street shops functioning during the pandemic was a resilient logistics sector. At the same time this is one of

Above: Volunteers Katie Anderson and Martin Joseph O’Neill Below: Scott Hogan, Kinight Frank

the factors that has benefited online shopping which, in turn, has posed a threat to high streets. “There has been an increase in demand for logistics and industrial space across Scotland,” says Scott Hogan, Scotland lead on industrials and logistics at Knight Frank. “Largely speaking, it is back to pre-pandemic levels. While that was coming as consumers gradually shifted towards online shopping, the pandemic accelerated that process.” Glasgow has a real supply-demand imbalance, with a lot of existing stock either obsolete or unsuitable for modern purposes. “Occupiers are increasingly looking for brand-new or purpose-built space – and, if that cannot be provided, then at least a major refurbishment. There is every reason to believe the level of demand for logistics and industrial space will continue post-pandemic. Studies suggest many consumers will stick to more frequent online shopping,” adds Hogan. ■

rsmuk.com 88 INSIDER May 2021

www.insider.co.uk

PROPERTY SPECIAL: THE FUTURE OF OFFICES

OME IS where the office is. Where once staff added homely touches to workspaces with photographs and drawings, now they add business organisation to the dining or kitchen table. “Recent surveys suggest a large majority want to continue some form of homeworking beyond Covid-19,” says John Rodger, commercial property partner at accountants Chiene + Tait. “There are, however, limitations on working from home. It doesn’t suit all sectors and it can pose limitations to effective customer engagement, client relationships and social interaction. “We are, therefore, likely to see workplaces adapting to better cater for these requirements, ensuring office spaces with flexible, accessible and attractive amenities will continue to be in high demand while poorly located premises will be harder hit.” John Jackson, project manager at Clyde Gateway, agrees. “The market has an increased appetite for a flexible, hybrid approach for future workplace offerings. An area that has demonstrated unfaltering success pre-pandemic and one that is set to continue to do so after lockdown is our flexible workspace at our Red Tree Business Suites. “They work well for start-ups and SMEs, who started out working from home and wanted to formalise their working arrangements to gain space to collaborate and provide clear boundaries between home and work-life.” A recently completed office development, Two and Three Rutherglen Links, are two 6,000 sq ft office buildings with low-energy and low-carbon specification and an external courtyard for meetings and well-being breaks. “We are also currently building a new office development, Eastworks. This will see the transformation of a former purifier studio into 33,000 sq ft of Grade A office accommodation with shower and changing facilities, locker storage and break-out spaces.” Rather than home-working supplanting office-working it is likely to play a different role in the mix. “Initially a lot of people and

Rutherglen Links

Clyde Gateway’s Eastworks project

Suite success for ﬂexible workplaces By FRANCIS SHENNAN

Initially a lot of people and organisations thought the great working-from-home experiment ZRXOG OHDG WR OHVV QHHG IRU RIğFH Stephen Lewis, HFD Property Group (below)

organisations thought the great working-from-home experiment would lead to less need for office space once the pandemic had passed,” says Stephen Lewis, MD of HFD Property Group. “A KPMG survey published a few weeks into the first lockdown showed 69 per cent of CEOs were planning to cut back on their office space. Fast-

forward a year and the same survey returned a response of just 17 per cent.” Working from home will continue but that might be three days in the office, two from home. “The big challenge for occupiers will be how practically to translate that into their office set-up, how they use their space differently – potentially with more areas for collaboration and less densely packed desks,” says Lewis. Stewart Taylor, senior director at CBRE Scotland, believes it is too early to know for certain what the most common template for new work behaviour will be. Responses to recent CBRE surveys show most companies anticipate a hybrid workforce with many employees in the office a few days a week and remotely a few days. While this will likely mean a reduced real estate footprint for many occupiers, each company will come to a different decision but they are seeing a move up the quality curve as employers look to provide workplaces attractive to staff and that can adapt to new forms of working. “The role of the office is evolving. Many companies are working to provide a more distributed network of workspace in the various locations that employees need to be. Additionally, many are positioning their flagship offices to serve as hubs of transient activity by incorporating more space for collaboration and socialisation.” Toby Withall, office agency partner at Knight Frank Edinburgh, also believes the office is here to stay. “Some occupiers have been forced to make critical lease decisions during the past 12 months. “On the whole, we have seen them decide to stay put and extend agreements rather than breaking away in favour of an entirely remote workforce. On the other hand, many businesses are still considering various changes but not yet taking action.” Businesses may look at smaller facilities spread across the country rather than a large HQ but that will come with additional costs. “Offices are certainly changing but the most effective ways of working are yet to be fully realised.” ■

rsmuk.com www.insider.co.uk

May 2021 INSIDER 89

PROPERTY SPECIAL: ESCAPE THE CITY

State-of-the-art ofﬁces are still hot in the city By FRANCIS SHENNAN

HE Covid pandemic changed our attitudes to numerous aspects of modern life. Whether that change will remain embedded in the “new normal” has still to be seen, especially in relation to property location. “It is clear businesses are seeking an alternative to city centres to cater for new ways of working that have emerged during the pandemic,” says Guy Marsden, director at Highbridge Properties. “The extreme scarcity of Grade A stock has been apparent in city centres for years. However, Covid has accelerated the evolution of today’s office requirements. “Organisations now want buildings that have proven sustainable and renewable heating and cooling technologies and are designed to provide a variety of working environments, centred around inclusivity and employee wellness. We are seeing demand for offices that

are easily reached by public transport, car, bike and walking. “Access to state-of-the-art technology that can support a hybrid model, developed around the head office, local hub office and home working is now also a major factor. Low-rise urban business districts

Above: An artist’s impression of new oﬃces in Glasgow’s Bothwell Street that will feature a rooftop running track and garden

The extreme scarcity of Grade A stock has been apparent in city centres Guy Marsden, Highbridge Properties (below)

are becoming increasingly popular, allowing employees more space, both inside and outside.” He points to the Magenta business park, a 20-acre urban, Grade A office park his company is developing with Clyde Gateway, a mile from Glasgow city centre and with rail, road, cycle and walking routes to the city and outlying commuter towns. CBRE reports occupiers seeking guidance on what to do with their

office space post-pandemic but this has not yet translated into signed leases. “Many companies are proactively reviewing their real estate portfolios on the back of the pandemic, albeit mostly short-term re-gears,” says senior director Andy Cunningham. “However, the extent to which they are considering new locations as part of this process remains to be seen. “The difficult part will be to encourage people out from their homes. Some companies are considering alternatives to relocation, namely adding satellite offices close to the suburbs.” At the same time, city centres remain attractive, especially in places like Glasgow where 1.4 million sq ft of Grade A office space is under construction, of which 81 per cent is pre-let or pre-sold to occupiers such as Barclays, HMRC, Virgin Money and JP Morgan. CBRE recently acted for the vendor of Portcullis House on India Street where the purchaser has applied for planning permission to demolish and build Glasgow’s largest Build to Rent scheme with 750 units. City-centre living is being promoted by Glasgow City Council, which proposes doubling that population to more than 40,000 by 2035, a point also made by Stephen Lewis, MD of HFD Property Group, who says: “I absolutely do not think the pandemic has changed attitudes towards living and working in city centres. “We haven’t seen this much activity in the city from a residential perspective for around a decade. “Offices themselves are adapting too. For instance, at 177 Bothwell Street we will have an 8,000 sq ft roof-top terrace incorporating a 150-metre running track so occupiers can be outside while staying ‘within’ the building.” A similar approach in residential sees Native Land developing the 152 New Eidyn apartments at Edinburgh’s St James Quarter with fifth-floor private gardens. Sales and marketing director Nicholas Gray says: “The stunning Garden Room and sky gardens provide communal spaces for working, meetings and collaborations.” ■

rsmuk.com 90 INSIDER May 2021

www.insider.co.uk

PROPERTY SPECIAL: INVESTMENT & INFRASTRUCTURE

ROPERTY has had more than one type of lockdown to contend with. As well as lockdowns due to the pandemic, all UK open-ended physical property funds were last year forced to suspend dealing as material uncertainty hit independent valuations. Little surprise that this year’s first quarter for Scottish investment was subdued, although the current quarter has brought bright spots. One was the purchase of major assets in Glasgow and Edinburgh, totalling £44m, by a joint venture between the discretionary fund vehicle of Trinova Real Estate, TREOS, and Swedish investor Europi Property Group. They bought the 10-year-old 96,267 sq ft, eight-storey Grade A Cuprum on Argyle Street on the edge of Glasgow’s International Financial Services District (IFSD). Its tenants include AXA Insurance (UK), Teleperformance, SAS Software and Citres. Their other purchase was the 1819 Stamp Office, 52,177 sq ft and seven storeys of Georgian building near Edinburgh’s Waverley station that has been redeveloped behind a retained facade to provide Grade A office space occupied by the Scottish Legal Complaints Commission, The Scottish Ministers, Covance, QueryClick and Senvion. Property advisory firm Lismore Real Estate’s review of the first quarter pointed to subdued trading at £175m, which is 70 per cent down on the five-year average. However, more product is either being prepared for sale or being quietly marketed, suggesting this will be a stronger quarter. Open-ended UK funds are continuing to sell. Other funds focus on matching liabilities and products or following logistics, living and life sciences. Overseas investors have been subdued by travel restrictions but a weight of capital is likely to return this year. “The beginning of restrictions easing and the successful vaccine roll-out is starting to offer light at the end of what has been a very long tunnel,” says Lismore associate Chris Thornton. “The impact across

Glimmer of light for investment after gloom By FRANCIS SHENNAN

property sub-sectors is varied. “The logistics and industrial juggernaut continues to move apace, with the £14.3m acquisition of Titan at Eurocentral being the standout deal of the quarter. Demand continues to outstrip supply and we are beginning to witness speculative logistics development across the central belt. “With such strong market dynamics, those currently on-site with speculative developments are likely to be the early winners. Any talk of the demise of offices is hugely overstated, with the majority of workers keen to reconnect with colleagues.” Life and leisure are attracting attention. “The living sector

Above: The eightstorey Cuprum, on Glasgow’s Argyle Street A Below: Chris Thornton, Lismore

continues to be top of many investors’ buying lists and we anticipate the leisure sector will enjoy a post-Covid bounce.” The pandemic accelerated fundamental changes in retail, negative and positive, with new players entering the retail warehousing market, primarily focused on urban parks and food-led schemes. Shopping centres with limited alternative uses are seeing value reductions in Scotland of 50 to 75 per cent. Ryden’s Scottish Property Review of the outlook for this year saw industrial market demand hitting limited supply. Development land is also sought by the residential sector. While demand stalled in early-2020, the market for well-located sites is back to pre-covid levels. On infrastructure, Doug Smith, chairman of CBRE Scotland, says: “Through early engagement with the private sector, we should make sure the investment in factories, offices or houses which is necessary to deliver economic and employment outcomes will follow that initial investment. “Create serviced sites and plots by all means but think beyond that to the creation of homes for people to live in and new business premises where jobs can be created. Without compromising policy in areas of planning and other necessary statutory consents, how can the process of getting permissions be streamlined so that more projects can start more quickly?” Projects may need support if private-sector capital investment is to be released. “There may be a need for more than ‘light touch’ intervention from the public sector.” John Rodger, partner at Chiene + Tait, warns: “With the proposed increased in Corporation Tax from March 2023, this may mean that some companies may prefer to hold off investment to set it against their profits when there is higher tax rate. “Banks are being supportive at the moment, with most ignoring covenant breaches and taking a generally lenient approach with lenders. I expect this will change as we move out of lockdown.” ■

rsmuk.com www.insider.co.uk

May 2021 INSIDER 91

WEALTH MANAGEMENT: FRANCIS SHENNAN

Take a few careful steps and you can beat the inheritance tax freeze

ENJAMIN Franklin gets the credit for the quotation, even though it was used by Daniel Defoe before him and actually originated in 1716 with the English actor and dramatist Christopher Bullock: “Tis impossible to be sure of any thing but Death and Taxes.” The Covid pandemic sadly led to a huge increase in the former and now looks set to increase the latter, even if the first increases are more covert. Chancellor Rishi Sunak has already frozen the Lifetime Allowance for pensioners, the Capital Gain Tax (CGT) and Inheritance Tax (IHT) thresholds until 2026. “Freezing the lifetime allowance could see a number of people inadvertently exceed their allowance and incur a 55 per cent tax hit which they otherwise would not have to pay,” says Simon Harrington, senior public policy advisor at PIMFA, the trade association for the wealth management and financial advice industry. “Freezing both the Inheritance Tax and Capital Gains Tax also discourages the public from investing in our economy when we need an investment-led recovery.” The IHT freeze alone will net the taxman nearly £1bn. “Freezing the nil-rate band and residence nil-rate band means more and more people will fall into the inheritance tax net over the next five years,” says Sean McCann, chartered financial planner at NFU Mutual. However, the Office of Budget Responsibility predicts house prices will increase 5.7 per cent this year but then fall back 1.7 per cent next year. That could mean many people overpaying IHT on property. There are ways to beat the freeze and reduce the 40 per cent tax on assets above the nil-rate bands. Putting more money into your pension gives you tax relief on the money paid in but also “any

money left in your fund on death will normally be free from inheritance tax,” says McCann. “This could allow you shelter up to an additional £1m-plus from inheritance tax.” Spend your pension last. “Using money held in ISAs and other investments that are subject to inheritance tax first allows you to preserve more of your pension fund, which can normally be left free of inheritance tax. “Any money you give away on a regular basis from your income that doesn’t impact your normal standard of living is immediately exempt from inheritance tax, even if you die within seven years. The rules mean it must be from your income not your capital, it must be regular, such as an annual gift.”

Freezing IHT and CGT discourages the public from investing in our economy when we need an investment-led recovery Ensure your spouse or civil partner is maximising their pension to take advantage of their £1.07m Lifetime allowance. And reclaim overpaid inheritance tax. If the executors sell property at a lower value within four years, they can make a claim. If a property were to fall in value by £10,000 this could mean up to £4,000 being reclaimed. Inheritance tax on qualifying shares and investments can be reclaimed in the 12 months after death. As the shares are aggregated, it can be better for executors to pass shares that have risen in value direct to the family and sell shares that have fallen to maximise the tax reclaimed. ■

IN FOCUS

Don’t forget to include cryptocurrencies in your estate inventory The taxman is not the only way to lose your money. Unclaimed funds from banks, building societies, pensions and investments now total more than £1.25bn. This is now being boosted by the boom is cryptocurrencies such as Bitcoin. Almost 10 million Britons now have some form of cryptocurrency, a rise of 558 per cent on the number who owned one at the beginning of 2018. “Digital assets are becoming a more 92 INSIDER May 2021

proliﬁc part of one’s portfolio,” says Caoilionn Hurley, managing director of Co-op Legal Services, “but if billions of pounds of traditional investments are sitting unclaimed, we have real concerns about how diﬃcult it could be to track ownership of less tangible investments such as Bitcoin and non-fungible tokens like digital art.” In 10 or 20 years, a small amount of cryptocurrency could be worth a considerable

sum of money to any benefactor of your estate, but only if it is properly and legally recorded and easy to access once you’re gone. “You must get your aﬀairs in order and ensure you complete an estate inventory to avoid missing out any assets,” adds Hurley. “Your legal advisors must have a thorough understanding of the estate, including any digital eﬀects, at the time a will is made.” ■ www.insider.co.uk

WEALTH MANAGEMENT: Q&A

STUART PATERSON Julius Baer International

Q&A

The Covid pandemic and resulting lockdown have given many businesses, especially SMEs, a tough time. Yet you’re quite optimistic, aren’t you? Working with business owners and entrepreneurs in Scotland is something we are very passionate about. We set up our regional offices in 2018 and recognised the talent and innovation coming out of Scotland. We wanted to make sure we had people on the ground who could work with those businesses and entrepreneurs to help them achieve their goals. We have seen tremendous growth in this sector and have made a real effort in the business community in Scotland, demonstrated in our recent sponsorship of the EY Entrepreneur of the Year Awards. How can these businesses be helped? In terms of where we can help on a day-to-day basis, we often find that the initial value we can provide to clients – particularly business owners – is the ability to surround them with a top-class team of experts. This is where our relationships with the corporate finance, legal and accounting community is of real benefit. We want to ensure that, from the start, the client has access to the best advice and expertise in their specific sector. On top of this, we also have existing clients who are more than happy to help up-and-coming entrepreneurs by sharing their experiences and potentially take board positions on fast-growing firms, which is something we have had great success in facilitating. Are we talking just about start-ups here? No, it is not just to those starting their entrepreneurial journey. Those who have well-established businesses or are serial entrepreneurs can really take advantage of our expertise, whether that be putting in place complex financing for the next stage in their business venture or helping them with an investment portfolio and wealth-structuring plan ahead of retirement. As the business grows, the founder is not as focused on his own personal affairs as the business can often consume him or her. That is where we step in to help them work out their priorities and how to achieve them. In many cases, owners do not see any line between their business and personal www.insider.co.uk

As the business grows, the founder is not as focused on his own personal affairs as the business can often consume him or her circumstances and it is our role to help them navigate the path between the two. What are the times when this is most crucial for them? This is particularly important when the owner is trying to make a significant change in the firm, be that passing on to a future generation, a partial or a full realisation. This is where we can help in a number of ways, be that with the ability to lend against private company shares, bridge finance to an IPO or

an introduction to another family business who has been in a similar position for a bit of Q&A. We also want to start advising the shareholders of the firm up to a year or two before any event so they can take maximum advantage of any tax planning that can be done. We want to help them meet their long-term personal and family goals, so ensuring they have the right tax-planning structure in place can make a world of difference to them in the future. There is nothing worse than hearing from a prospective client that they wished they had taken our advice sooner. Once any event has occurred our role is to ensure the owner’s risk and objectives all meet to ensure they meet their long-term personal, family and financial goals. ■ Stuart Paterson is executive director in charge of Scotland at Julius Baer International. May 2021 INSIDER 93

COMMENT

INSIDER: APPOINTMENTS Ken Morrice Founding managing partner MM Search W: www.mmsearch.co.uk

Helping your business ﬁnd the best talent Scotland has always been fertile land for unlocking future talent. With some of the best universities in the world and forward-thinking entrepreneurial businesses it is a place many will choose to grow their career from. With spring/summer comes the traditional intake of intern opportunities and it is good to see that so many businesses in Scotland are continuing their commitment to the development of future talent. Following on from a very different and difficult undergraduate year, internships are more important now than ever. The Saltire Scholar internship programme, run by Entrepreneurial Scotland, is one such vital enterprise. The Saltire Scholar programme is a fantastic chance for students to undertake an internship with burgeoning businesses and we are privileged to be one of those. As a current member of the Saltire Leaders Catalyst Programme, it was a great opportunity for us to be part of this initiative and help select interns for the wider programme. Speaking from experience, I know how important an opportunity to get ‘stuck in’ can be at the start of your career and seeking out the best senior talent for an organisation is at the core of what we do, so the synergy with our first internship programme is very poignant. For internships to be successful for both the students and the businesses, it is important they are immersive experiences, focusing on ‘live’ commercial practices – which, in today’s economic climate, has a host of challenges. But it is important for students who want to hit the ground running and see, and be part of, all sides of an entrepreneurial business. The inner mechanics and what make a business tick can only be felt when experienced first-hand. The tangible know-how working as an intern is so very important, particularly as many businesses are still working out how they can operate within the rules and restrictions possible. We feel passionate that we want to give these students an insight into the industry but also a taste for the future. Ultimately, internships are a vital way to unlock future talent and, working in the headhunting industry, this is always front of mind. Harnessing talent early on, we would like to be in a position that we can then offer permanent graduate positions to successful candidates in future. The MM Search Executive Intern Programme launches in summer 2021, with students from St Andrews University and Heriot-Watt University being offered paid internships. MM Search partners with clients to seek the best-in-class senior talent across a wide range of sectors in both the interim and permanent marketplace. For futher information contact www.mmsearch.co.uk

94 INSIDER May 2021

People on the move in Scotland’s business community

in association with

Marchant to chair Logan Energy LOGAN Energy, the hydrogen technology trailblazing company, has appointed former SSE chief executive Ian Marchant as Chair. The move was one of three key appointments as the Musselburgh-based company gears up for international expansion. Marchant is joined by non-executive directors Bob MacDonald, former CEO specialist technical solutions at Wood, and Derek Mathieson, former chief marketing and technology officer at Baker Hughes. Marchant, who is the current chair of Thames Water, has more than 30 years of industry experience driving companies at the forefront of the private

Wakefield to lead CityFibre project Telecommunications company CityFibre has appointed a new manager to lead the £100m fibre rollout in Edinburgh. Paul Wakefield joins as city manager to lead the project in Scotland, replacing Elaine Doherty, who became CityFibre’s head of data insight. The company is engaged in a five-year full-fibre network project aimed at making Edinburgh one of best digitally connected cities in the UK. Wakefield started his career as a police officer with the Met in London, before spending almost six years as head of marketing and partnerships at Marketing Edinburgh. He was previously director of operations and communications at Scottish Land & Estates and was in charge of marketing at property agency Bell Ingram.

utility, power generation and clean energy markets. He said: “It is exciting to get involved in an established business that’s part of a growing industry and I believe that hydrogen can have as big an impact as North Sea oil and gas had in the 1970s or the

wind industry had in the early-2000s.” Bob MacDonald most recently led the consultancy division of multinational engineering business Wood, focusing on the clean energy, automation, nuclear, oil & gas, mining and digital markets.

Higgins takes helm at Edinburgh Fringe FORMER Tesco Bank CEO Benny Higgins has been appointed as the new Chair of the Edinburgh Festival Fringe Society Board of Directors. He succeeded Professor Sir Timothy O’Shea, who served two full terms as Chair. An experienced banker, Higgins was strategic advisor to the First Minister on the development of the Scottish National Investment Bank. He has also worked as chief executive of retail banking at RBS, and chief executive, retail, of HBOS. His current non-executive portfolio includes him being Chairman of the National Galleries of Scotland, a Trustee for the Edinburgh International Culture Summit, Chairman of The Fine Art Society (London and Edinburgh), Chairman of

Sistema Scotland and Trustee of Burrell Renaissance. Tim O’Shea’s tenure was recently extended to March 2021, due to exceptional circumstances brought about by the coronavirus pandemic. Higgins said: “The Edinburgh Fringe is an essential component of Scotland’s cultural heritage. As we rebuild our future after this extraordinarily difficult time, I know the Fringe will have an essential role to play in the country’s economic, social and cultural recovery.”

www.insider.co.uk

INSIDER:PERSONNEL The latest news from HR, recruitment, employment law and staff issues by Ken Symon

COMMENT Gary Foggo Health & Safety Manager Navigator Law E: gary.foggo@ navigatorlaw.co.uk W: www.navigatorlaw.co.uk

Duty to protect the mental health of home workers

Pandemic brings a new era… and thorny issues in the workplace

ITH the full opening of the economy well in sight, many businesses are looking anew at their workplaces and their patterns of work. As employees working from home return to workplaces and, as the vaccination programme continues to roll out, one key issue employers will face will be whether they can insist on employees being vaccinated. Tony Hadden, head of employment law and a partner at Brodies, says: “Some employers may be able to insist an employee is vaccinated in order to perform certain tasks. This is because there is now evidence the vaccine reduces the rate of transmission. “This means employers can say that, even if staff are operating other mitigations, such as PPE, it is ‘safer’ for others if an employee is vaccinated because the risk of transmission is reduced. For roles in which the employee will be interacting with the public, the reduction of risk may justify insisting on employees having had the vaccine.” While most people have jumped at the chance of being vaccinated, some are refusing. This may present thorny issues for employers and the refuseniks colleagues as they return to workplace-based working patterns. But is there action employers can take with regard to an employee who refuses vaccination? Hadden says: “It is unlikely to be lawful to simply dismiss an employee who refuses to take the vaccination. An employer will need to consider the employee’s reasons for refusing. Discrimination issues could be engaged if the employee’s refusal is because of a protected characteristic, such as pregnancy. “It may be possible to allow them to work www.insider.co.uk

in a different way or redeploy them to other duties. If that is not possible and there is no way to mitigate the increased risk the unvaccinated employee poses, the employer may be able to dismiss the employee.” But could employees refuse to work in the same section or area of the workplace with someone who refuses to be vaccinated? “Employees have rights in connection with health and safety,” Hadden says. “One of those is the right to work in an environment where the risk to health and safety is properly controlled. If an employer has established vaccination will reduce the risk of transmission and an employee refuses to be vaccinated, and therefore would increase risk of transmission, it would be possible for a colleague to refuse to work with that employee. “Whether the refusal would be lawful will depend on the evidence of the increased risk.” But what about future employees? Hadden says: “We are aware of employers stating they intend to make vaccination a condition of application. This runs the risk of being discriminatory, given certain categories of employee cannot be vaccinated.” Hadden says employers should be prepared to consider ways to avoid those employees being disadvantaged by the policy, by providing work-arounds, providing greater protection or by them doing different duties. He concludes: “We will see the continued development of different ways of demonstrating individuals have either been vaccinated or pose a low virus risk. I think this will feed into the practical ways in which employers approach the issue of vaccination (or virus risk) and it may be the law is left scrambling to catch up.” ■

Following a survey of more than 5,500 people in 11 countries, Lloyds Resister found that 70% of respondents had experienced higher levels of stress whilst working from home. This is attributed to changes in the working environment, increased workload and lack of support from managers and colleagues. Results showed almost 50 per cent experienced a negative change since working remotely due to longer working hours, feelings of isolation and higher levels of anxiety. Just over 50 per cent had a positive outlook, feeling their work-life balance was improved by no commute. Some 48 per cent believed that disclosing a mental health condition would impact career progression, just 22 per cent would feel confident discussing mental health concerns with HR. For 25 per cent, their employer had provided no additional support addressing mental wellbeing while 50 per cent thought their employer emphasised physical safety over general wellbeing (psychological safety) whereas 26 per cent thought their employment emphasised both equally. Where policies and procedures are in place, they should be proactive, promoting prevention and providing instruction. Managers should be aware of them and have the appropriate support in delivering them. Any policies and procedures should be revisited to reflect change in working arrangements (homeworking or hybrid working) as these move from temporary to permanent. Research carried out by mental health charity, Mind, revealed 56 per cent of employers would like to do more to improve employee wellbeing but felt they did not have the right training or guidance to do so. As ways in which we work have evolved then the ways with which to engage, support and protect workers must evolve also. Established systems for mitigating ‘traditional’ health and safety risks may not be enough and new innovative solutions, delivered on a more collaborative basis (for example, health and safety functions working closely with HR), will be required to ensure both the physical and mental health needs of employees are given equal focus. If you have any questions on the above article, please contact 0333 2400 308 or enquiries@navigatorlaw.co.uk

May 2021 INSIDER 95

Insider’s regular events picture pages

In association with

HIGHLAND SINGLE MALT SCOTCH WHISKY

Above left: Craft beer company Flavourly celebrated its one millionth dispatch in April with co-founder Assean Sheikh marking the event by making a personal delivery – and gifting it for free – to lucky Edinburgh customer Bill Harvey. Above: The National Wallace Monument was lit up in the blue colours of Strathcarron Hospice to celebrate the palliative care charity’s 40th anniversary. Left: Roderick Urquahart, the fourth generation of the founding family, is stepping down from Edinburgh law ﬁrm Urquharts, ending a 145-year connection with the ﬁrm.

WORTH THE WAIT 96 INSIDER May 2021

www.insider.co.uk

Above: Winners and judges of this year’s AcccelerateHER Awards ﬁnals for women-led businesses held in March. The awards are run by Investing Women whose CEO, Jackie Waring, is in the centre. Right: Castle Water, the Perthshire-based independent water retailer, won a Save The Children’s Jessica Award for Oustanding support for children in emergencies. It was presented at a virtual awards ceremony hosted by Natasha Kaplinsky. Below: Edinburgh Chamber of Commerce in March hosted its business awards virtually for the ﬁrst time, with some attendees choosing traditional black-tie fashion despite being in their own homes.

GLENGOYNE.COM

TAKE YOUR TIME, ENJOY YOUR DRAM RESPONSIBLY

www.insider.co.uk

May 2021 INSIDER 97

THE TEN MINUTE INTERVIEW Praveen Kumar Praveen Kumar is an award-winning chef, restraurateur and entrepreneur. He has more than 20 years’ experience working in hospitality, including at five-star establishments Gleneagles and Turnberry. He and his wife, Swarna, opened the award-winning authentic India restaurant Tabla in Perth in 2009 and his own Indian cook school in 2017. All the spices he uses are supplied by his family, who still live in the Southern Indian village where he grew up. His service offering frozen Tabla dishes all over the UK took off hugely in the first lockdown. for people to visit from across the globe, especially people from Asia. I would also work to encourage young people to think more entrepreneurially and think about what life might look like beyond school. I also strongly believe that children should start school later. There should be much more connection for children with the natural world and life skills should be taught as part of the curriculum from day one.

What five words would friends/colleagues use to describe you? Driven, focused, friendly, considerate, decisive. If you could choose anyone, who would be your fantasy board members and why? I would choose Dhirubhai Ambani, who was India’s first self-made billionaire. He started from scratch and had one significant piece of advice that made a big impact on me when I was 10 or 11 years old – “Dare to dream.” I would also include my ex-boss and ex-chairman of Gleneagles, Peter Lederer, who taught me the value of planning well ahead and having focus. I would also include the founders of Brewdog, James Watt and Martin Dickie, who do a brilliant job of innovatively marketing their brand to consumers.

What sport are you interested in/which sporting team do you follow? I love cricket. I used to play as a youngster. I am a big supporter of the Indian cricket team. Top: Brewdog Martin Dickie and James Watt

What was the last film/concert/entertainment event you attended? I went to Celtic Connections in Glasgow.

Above: Rick Stein

If you could choose anyone, who would be your fantasy dinner party guests and why? The Queen would be on my invite list because, in my mind, Praveen Kumar Authentic Indian Cuisine is fit for a Queen! I would also invite Rick Stein, as he is my favourite chef. What is your favourite way to unwind during time off? My wife and I are great foodies and so, together with our daughters, we like to explore Scotland and sample the local cuisine. It is not uncommon for us to travel a couple of hours in the car purely to sample local foods. What is the best advice you’ve ever been given or what advice would you give to the next generation of business leaders? The advice I would give is don’t be shy about reaching out and asking other business leaders who have gone before you for advice and mentoring. Also, to plan ahead, do your homework and then implement your idea before it is too late. Don’t feel wary about raising investment from day one and be willing to ask your customers or clients for feedback. If you were in charge of Scotland, what would you change and why? I would do more to promote Scotland as a destination 98 INSIDER May 2021

Below: Celtic Connections in Glasgow

Describe a perfect day/night/weekend. A perfect night for me would be to finish work, go home and cook with my wife and kids and have some friends over to play cards and enjoy a whisky. I love a nice whisky. A perfect weekend day for me would be to enjoy a late Indian breakfast and then go on an adventure and explore somewhere new in Scotland. What is your most embarrassing moment? I was invited to cook on an STV show and I thought I had taken all the ingredients I needed with me to the studio. However, unfortunately I had left all my spices in the car. The show started and I didn’t have any of the ingredients I needed! I asked one of the show’s runners to pick up my spice kit from the car park as quickly as possible and, in the meantime, I had to fill airtime until the spices turned up. The onions were chopped very thoroughly that day! Who would play you in the film of your life? I would choose Tom Hanks. He acts with full heart and soul and lives and breathes his characters. What is your signature dish to cook? Chicken Biryani. What is your favourite place in Scotland? I love the Cairngorms and Glencoe. I love driving around that area and enjoying the beautiful scenery. ■ www.insider.co.uk

With small class sizes and a state-of-the-art campus, St Aloysius’ College is the ideal environment for learning. Prospective families can now book a personalised tour of our Kindergarten, Junior, or Senior schools. Contact our Admissions Department today.

admissions@staloysius.org | 0141 332 3190 | staloysius.org

The world’s quietest fire engine? Possibly... until the siren’s on. Charlotte. EMERGENCY ONE, CUMNOCK. 19th September 2020.

We provided funding to Emergency One who answered the call to build the very first fully electric fire engine.

By the side of business

SCOTTISH BUSINESS INSIDER Apr/May/Jun 2021

Oil & Gas Review

Football Finance

Deals Quarterly

Accountancy Review

Manufacturing