Scotland must restore income tax parity with the rest of the UK to become a more competitive environment for scaling-up companies and attracting top executive talent, the Scottish Deals and Dealmaking Business Breakfast, hosted by The Business and The Sunday Times Scotland, heard in Edinburgh in May.

More than 90 dealmakers and corporate advisers learned about the challenging “middle-market” economic conditions in Scotland in the past 18 months, particularly for growth companies looking to raise investment funding or preparing for a sale.

Scotland’s business community is being “discriminated against” because of its current tax regime, the attendees were told.

One senior corporate adviser spoke of his worry about a lack of experienced non-executive corporate advisers in Scotland, while the conference was told about the challenges caused by the dwindling of stock-market listed ‘Corporate Scotland’ in recent years.

When the experts on the panel, chaired by business writer Kenny Kemp, were asked about the pending UK elections and what should be at the top of the wish list to improve the landscape in Scotland, the unanimous voice was Scotland must have the same tax playing field as England and Wales and, if anything, should even consider cutting corporation tax to compete with Ireland.

Ireland is one of Europe’s most successful inward investment nations with lower rates of corporation taxation, which has led to many international companies choosing to base their operations in Ireland because of its ability to serve the European Union market.

“The challenge is that so much of corporate Scotland has drained away in the last 30 years … because of the drain towards London, the quality of competition in all the big Scottish firms has dwindled away over time too,” said Bob Brannan, the chairman of Walker’s Shortbread.

Andrew Noble, a director of Par Equity, one of Scotland’s leading venture capital companies, presented a positive picture and said that the world has changed, and that technology now allows talented people to work remotely and therefore Scotland’s company ambitions had to be “beyond Hadrian’s Wall and with growing teams in London and the United States, in order to get to the customer base”.

As an investor, he was concerned about “distributed management teams” and preferred to see company executives “sitting beside each other and solving some of the problems, and seeing the opportunities, rather than having a fully distributed workforce.”

A straw poll of attendees asked if political changes – of the Conservatives in London and the Scottish National Party in Edinburgh – was required. An overwhelming show of hands agreed that change was needed.

Belinda Roberts, who is the founder of the WeDO entrepreneurial organisation, with business members in Glasgow and Edinburgh, said that her organisation’s attempts to engage with the Scottish Government on behalf of businesses have been extremely difficult.

“Our experience in speaking with government about business issues has been dismal. This really needs to change dramatically after the election.”

Brannan, who sits on the economic advisory board of the Scottish Labour Party as a personal member, said: “My own view is that we need a change in administration. At Westminster and in Holyrood, things have stagnated. It is not clear what direction the Scottish Government is going in its support for business.

“I’ve become very, very frustrated with it. The confusion over the current administration’s support for business is just the latest episode.

“I think Scotland is a really difficult place to do business these days and a difficult place to attract investment to, and it’s a difficult place to attract talent to.”

More must be done to attract key talent to Scotland, the conference heard, and the higher tax bands for senior executives was leading to talk of a ‘Scottish weighting’ on salaries to deal with the discrepancy between income tax in Scotland and the rest of the UK.

Earlier Andrew Noble assessed the investment picture. “Hankies out for the venture capital players. A lot of VCs are closing out funds across the UK and Europe at 30 per cent of their target fund sizes.

“What that means is that they have had to reduce the number of companies that they invest into, and reduce their follow-on reserve, and they have to reduce the size of the team operating as well. That’s not a Scottish phenomenon, but UK wide.”

He added: “This has an impact on the trickle-down effect to start-ups. This liquidity squeeze is impacting angel investment groups.”

This is a concern because Scotland has enjoyed great success with its vibrant angel investment ecosystem in Scotland – and also with the tax benefits of Enterprise Investment Scheme funds.

“Access to capital is harder than it has been in the past. The time to get fundraising away is between three to six months, and in the past that has been two to three months. Moreover, the deal structures are more complex,” said Noble.

He added that with the absence of capital, many VCs are moving into earlier funding rounds, and they want to be first ticket into deals.

But the clarion call from the four business leaders was that Scotland must work together in a more constructive way and that factional interests need to be comprehensively tackled and ended.

Panel member James Varga, a serial entrepreneur now with First Carbon Investment, who has lived in Scotland for more than 20 years, said Scotland had to stop looking inwardly and realise that it has to grab international opportunities.

While Scotland’s start-up business scene and the emerging talent was encouraging, there has been a drain of much-needed corporate level experience in building and growing sustainable businesses in Scotland. The gathering heard that Scotland must do more to get companies to ‘think globally, and act locally’.

Varga, an adviser to the Scottish ministerial trade board, spoke about the imperative of Scottish business leaders getting on a plane and going around the world to engage more effectively.

He said that Scotland’s business community needed to stop bickering with itself, work more closely together and look for advisers with more global or external Scottish experience.

“We are a small place. There are only around six million people. You are not going to set a start-up in Scotland, retire off the proceeds, and buy an island. There just isn’t the market.

“Companies must think more globally from the start. We spend more time arguing with ourselves in Scotland: East versus West, North versus South, Glasgow versus Edinburgh, this industry versus that industry, than in com- peting with the rest of the world,” he said.

Varga cited the business ecosystems in Finland and in Estonia, where he has recent experience, which are already building modern business communities with a “pure, collective approach” to global connections.

“This starts with accountability in the public sector where people go into post, and there is a strong crossover in Estonia between the public sector and commercial sector. Where the public sector looks to the commercial sector for some of these ideas to solve problems, without going through big tenders.

“When they have that ‘global first’ perspective, they are much more successful because they are all pushing in the same direction,” he added.

A major aspect of national economic change is that Scotland must work harder at pulling everyone together, including our international networks, as a fundamental way of increasing our national success rate.

“Even networks such as Global Scot are completely untapped in this regard. I’ve worked with a number of Global Scots for years, and not one has said they have been approached about a non- executive role,” he said.

Roberts pointed out that Scotland already has some outstanding non-executive directors, but she said that many start-ups did not know where to look for the right executives. She said it was important for relevant non-execs to have the right skillsets. She also revealed that Edinburgh, Glasgow and Dundee councils had been given around £230 million of the UK Levelling-Up funds specifically to help businesses, but she asked if this was well enough known – and if anyone had yet heard about its dispersal.

Findlay Anderson, head of corporate for Gilson Gray, in a comment from the floor, said that the oil and gas industry in the North- East of Scotland is still one of the most important sectors in the country, yet Scottish politicians have continually pilloried the sector when it has been a leader in ESG (environmental, social and governance) issues, and in moving towards a ‘just transition’ with jobs and skills.

There was also concern from the panel about proposed cuts in funding by the Scottish Government to the Scottish National Investment Bank, which was set up with a mission to fill a gap in the market to help Scottish companies scale up.

“It should be said that the bank has backed funds like ourselves,” said Andrew Noble of Par Equity. “So they are an enabler into this ecosystem. Let’s not forget they are one of the leading players in our scale-up fund, they helped to crowd in an additional £47 million into our fund and we hope to raise further capital.”


Panel member Bob Brannan offered up nuggets of his wisdom from more than 25 years as a corporate adviser and company chairman who has been instrumental in helping build businesses for a lucrative sale.

He stressed Walker’s Shortbread, where currently he is chairman, is not a company looking for a sale and would remain a family company, and that the views he expressed were historic and personal and not company related.

Brannan, who was previously the chief executive of William Grant & Sons, one of Scotland’s leading family businesses, remains a major player in the global drinks business. “I suspect it is one of Scotland’s most successful companies.” He was also CEO of Whyte & Mackay when it had a valuation of £150 million, and was sold to Vijay Mallya for $1.2 billion in 2006.

“I’ve been involved in several amazing deals, and a whole bunch of average ones, and quite a few absolute disasters,” he said with a wry smile.

Brannan shared a few business lessons learned. On the sell side, he said: “No matter how good the adviser, the owner can always get a better deal when negotiating. With one caveat: that they are prepared to listen to good sense.

Bob Brannan: “The reluctant vendor typically gets the best deal”

“The second, on the sell side, is the reluctant vendor typi- cally gets the best deal. It’s an obvious statement but those who are prepared to walk away right to the end. Who, if there is no other buyer, treat themselves as the other buyer, and if there is anything they don’t like in the deal structure, they either negotiate it or walk away.”

But he said that timing was everything. “I’ve been involved in some amazing businesses, and we got the timing wrong and didn’t get a great deal, trying to sell on a rising tide. So don’t dress a business up for sale because there are a lot of clever people out there on the other side, who are at least as smart as you are and will spot it.”

On the buying side, he advised not to want the deal too badly and be prepared to walk away, and don’t overpay. “There is always something else that will come along. Being the under-bidder is a great position to be in. It is surprising how often it comes back to you.”

His second piece of buying advice is that buying is the easy part.

“Making money out of it, integrating it into your own business is by far the most difficult thing to do.”

His final point was that when using private equity, pick a backer that you like. “Effectively, when you pick a private equity backer, you are picking your next boss. That boss might be the guy who sacks you, so make sure you pick the right backer.”