The Importance of Transport to Business-led Inclusive Growth

Mark Hepworth Wed, August 28th, 2019

Based on Mark Hepworth's presentation to the Conference on Scotland’s National Transport Strategy: Investment, Connectivity and Wellbeing, Glasgow, 28th August 2019

Business-led inclusive job growth is a prerequisite for ensuring personal, community and social well-being throughout Scotland. However, this vital dynamic underlying economic and social well-being is weak in most areas of Scotland, with 22 out of 32 local authority areas and 7 out of 9 regional economic partnership areas lagging behind the Scottish national average (Chart 1). In looking at the future of Scotland’s national transport strategy, and in light of the Government’s inclusive growth objectives, we should ask ourselves this two-part question:

What new directions in Scotland’s transport policies are needed to deliver a more equitable pattern of business-led inclusive job growth? And, what impact management framework for guiding transport investment would be compatible with these new directions?

We have come to this question not through a transport study but rather through an economic development study for the Scottish Government entitled Business-led Inclusive Job Growth in the South of Scotland (June 2019; Our research was based on in-depth interviews with 68 local SMEs spread across Scotland’s newest regional economic partnership area - the new South of Scotland Enterprise Agency starts work in April 2020. We focused attention on SMEs because they generate the lion’s share of business employment throughout Scotland, making them natural partners in place-based inclusive growth. Our ‘conversations’ with SMEs shed light on the links between business practice and inclusive growth policy. We asked SME owners/managers this question: What place-based investments are most needed to help you grow your business and create more and better jobs?

What SMEs in the South of Scotland need most is better transport connectivity (Chart 2). Every business had a clearly defined transport need to share. Diversified farms struggle to attract family visitors due to inadequate bus services. Hawick knitwear brands send chauffeur-driven cars to Manchester and Carlisle to pick up London clients. A food manufacturer is introducing Artificial Intelligence because shift-work staff can’t get to the factory – in a country hotel near Peebles, robots will soon be delivering room-service (like in Singapore). We have evidence that poor transport connectivity is accelerating the AI revolution, because of its impacts on labour mobility. This is relevant to rural and large urban areas, where low-paid workers in routine occupations are most vulnerable.

The SMEs also highlighted poor access to skilled labour and low levels of tourism as binding constraints on business growth and good job creation. Both of these constraints could be eased by better transport connectivity within the South of Scotland region and with the national airports and knowledge economies of the Central Belt. Rural areas that are closely linked with city-regions have better prospects for business-led inclusive job growth. In general, Scotland’s inclusive growth-led transport strategy needs to promote inter-regional economic integration and labour mobility as an overarching goal.

Our interviews with SMEs – which have been extended to the South of Scotland’s diversified farm sector – also showed that inclusive business growth depends on good access to broadband communications. Scotland’s economy runs on ‘wheels and wires’ and most businesses need both infrastructures. Tourists tend to ‘google’ what places have to offer – hotels, restaurants, attractions, etc. – but they still have to physically get there. Modern businesses operate workplaces and interact with suppliers and customers that are ‘part physical, part virtual’– what does this mean for designing Scotland’s transport systems of the future? We envisage a hybrid communications model for moving warm bodies, information and ideas – with electric cars and renewables as part of the ‘mix’. Why not start doing this now?

Our report for the Scottish Government and South of Scotland Economic Partnership did not venture too far into the future. But, on the basis of the SME evidence itself, we recommended building ‘an integrated, multi-modal, sustainable transport system’ that would meet the needs of every business and everyone living and working in the South of Scotland. This model infrastructure would certainly boost the region’s prospects for business-led inclusive job growth, and hence we see it as one of the top region-building priorities for the new South of Scotland Enterprise Agency.

All in all, transport connectivity offers a ‘Route 1’ option for driving and organising the Scottish Government’s place-based inclusive growth policies.

Chart 1: Business-led Inclusive Job Growth in Scotland by Region Economic Partnership Area

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‘Inclusive Growth’ is a composite unweighted measure of how well places – as local economies and local labour markets - perform on both Growth (measured by business output/employment, SME dynamism, median earnings and workforce) and Inclusion (earnings quality/living wage, unemployment and job security, skills and participation of marginal groups).

Chart 2: Place-based Barriers to SME Business Growth in the South of Scotland

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Business-led Inclusive Growth in Scotland opinion 02/07/19 Business-led Inclusive Growth in Scotland A blog by TGE director Mark Hepworth reflecting on The Good Economy's study on business-led inclusive growth for the Scottish Government
Photo by Artur Kraft