Meeting of the Parliament (Hybrid)

Meeting date: Tuesday, April 19, 2022

Official Report 941KB pdf

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Technology Sector

The next item of business is a statement by Kate Forbes on transforming Scotland’s tech sector. The cabinet secretary will take questions at the end of her statement.

14:16  

In August 2020, the Government published the “Scottish Technology Ecosystem Review”, which is a blueprint to establish Scotland as a leading hub for tech start-ups. As members will know, the report was written by Mark Logan, the former chief operating officer of Skyscanner, which was one of Scotland’s first tech companies to achieve a valuation of more than £1 billion.

Professor Logan’s report was greeted with acclaim on publication. It was described as an

“exciting route map for how the government and the private sector can work together to build Scotland into a global leader.”

Today, I will provide an update on progress against the route map, which is backed up with £45 million-worth of Scottish Government investment, and on how it is building a sense of momentum and excitement in Scottish tech.

That sense of momentum is being felt in London, where tomorrow the First Minister will open the EIE London innovation and investment showcase, which is an event that is aimed at strengthening the gateway to global investment and finance for Scotland’s most innovative companies. It is being felt in silicon valley, where a Government-funded cohort of 20 Scottish start-ups arrived last week on a curated visit that has been arranged by Startup Grind, which is the world’s largest community for start-ups, founders and innovators. It is also being felt at home, in Glasgow, where next week we are co-funding the first Glasgow tech fest at the University of Strathclyde, bringing together founders, businesses and the Scottish tech ecosystem in the city to help the sector grow and flourish.

Those are not isolated examples. They are all connected because they are happening thanks to our Scottish technology ecosystem fund, which the Logan review recommended in order to make strategic investments in what ecosystem builders call “social infrastructure”, creating the best possible network and environment for founders and start-ups to succeed.

Thirty-four awards totalling more than £1 million have been given through the fund, which will deliver an exciting and diverse range of meet-ups, events and projects such as the three that I have just mentioned. That work has engendered a distinct buzz around Scottish tech, but there is an even bigger buzz about what is still to come.

Last October, we invited suppliers to tender for a contract to establish a national network of five tech-scaler hubs in Glasgow, Aberdeen, Dundee, Edinburgh and Inverness. The hubs will provide Scottish companies with commercial education sourced from the best providers in the world. That education will be complemented with physical co-location, first-rate mentoring and vibrant peer communities. Through state-of-the-art remote technologies, all of that will be available virtually in every community in Scotland.

Those tech scalers are a game changer. They will deliver for Scotland one of the most sophisticated and comprehensive state-funded environments for the creation and scaling of start-ups available anywhere in Europe. They will put Scotland on the global start-up map, and we will promote their services relentlessly to attract the world’s most talented founders to establish their businesses in Scotland. The tender exercise is almost complete, and I expect to announce the winning bid in early summer.

Building momentum is one thing, but sustaining it over a period of generational change requires deeper, longer-term investment. Professor Logan’s route map recognises that, and calls for far-reaching changes to the teaching of computing science in Scotland, raising it to a level where it is considered just as important as physics or maths. We have made significant strides towards delivery here, too.

In partnership with the University of Glasgow, we have established a new organisation, Scottish Teachers Advancing Computing Science, or STACS for short. STACS is led by two teachers: an inspiring young woman named Toni Scullion, founder of the coding club charity dressCode, and a deeply experienced former head of department named Brendan McCart. They are supported by the University of Glasgow’s Professor Quintin Cutts, one of the United Kingdom’s leading experts in computing science pedagogy. Together, they will act as critical friends, driving improvements in equipment, teacher training and the curation of best practice. Working with Toni and Brendan, we have invested more than £1 million pounds to add to schools’ existing stocks of computing hardware, putting more kit into classrooms and into the hands of teachers and pupils.

We are designing a new plan for professional skills development in computing science, to build teachers’ confidence and help them keep pace with rapid change. Later this year we will pilot the plan in partnership with one of our local authorities, before a national roll-out.

Our ambitions for tech do not end in schools. Last year we invested £1 million in the digital start fund, a programme that supports people on benefits or low income to undertake courses with providers such as CodeClan, which give people the skills that they need for a well-paid career in tech. We invested a further £500,000 in the digital skills pipeline, a bespoke set of modular courses running from beginner level all the way through to advanced coding. We provided grant funding of £150,000 to CodeYourFuture, a truly exceptional organisation that supports refugees with the skills and networks necessary to progress in education and employment. Together, those programmes have supported around 600 people to reskill and re-energise their career.

The Government is delivering on its promise to transform tech in Scotland. In doing so, we are dismantling long-standing barriers to entry and opportunity in the sector. Here, we will benefit from the whole-system review of female-led enterprise in Scotland, which I have asked Ana Stewart, the founder of i-design, to carry out. Ana has invited Mark Logan to contribute to the development of that report.

It is clear that there is much to be done. Today, female founders get less than a penny out of every pound of venture capital invested. That position is clearly intolerable, and that is why the Scottish National Investment Bank has agreed to support the all-female investor group, Investing Women Angels, to establish a new investment fund focused exclusively on women and minority founders based in Scotland. That makes Scotland one of very few European nations with a bespoke seed investment fund focused on stimulating the growth of female-led companies, delivering yet another of Mark Logan’s recommendations.

This year we will pursue delivery of another exciting suite of recommendations. We will build a national network of coding clubs, ensuring that young people and children enjoy equity of access to extra-curricular learning, irrespective of where they come from, and we will create an investor discoverability platform, increasing the visibility of Scottish companies to global investors.

Just last month we published the national strategy for economic transformation, which extends Mark Logan’s thinking from the tech domain to all forms of high-growth entrepreneurship.

On education and talent, there is strong evidence that the creative, commercial and leadership skills that are necessary to start and scale a business are teachable, so we will embed project-based entrepreneurial learning into school and post-16 education curricula, in partnership with industry. We will create a new start-up apprenticeship, which is an inventive way of exposing new talent to the start-up community and creating a potentially rich source of future founders. We will embed entrepreneurship in the young persons guarantee, cultivating the business leaders of tomorrow by exposing them to first-rate start-up techniques and experiences.

On entrepreneurial infrastructure, the tech scalers are just the beginning. Over time, we will shift their focus from tech to all high-growth companies, irrespective of sector. We will complement them with a network of what we are calling “pre-scalers”, which are smaller community-based hubs that will stimulate the very earliest stages of high-growth entrepreneurship by prospective founders to conceive new ideas, start companies, design and develop products and support early tests of market traction. As our ecosystem matures and more consistently generates success, we will seek to partner with prestigious commercial accelerator programmes, ensuring that the ambitions of our very best companies can be realised in Scotland.

Together, the reports commit the Government to the most radical reforms of the Scottish entrepreneurial ecosystem since devolution. Our ambition is nothing less than to establish Scotland as one of the leading start-up economies in Europe. It is worth remembering that it was a Scottish start-up that led the world to the previous economic revolution that transformed global living standards and lifted millions of people out of poverty.

In the current context of Brexit, the climate emergency and an uncertain post-pandemic world, the challenges that we face today are just as grave. However, there have never been limits to the problems that our people can solve. It is time for Scottish start-ups to get to work, and the Scottish Government stands full square behind them.

The cabinet secretary will now take questions on the issues that were raised in her statement. I intend to allow around 20 minutes for questions, after which we will move to the next item of business.

I thank the cabinet secretary for prior sight of her statement. The Parliament will be pleased to have some more information about the STACS initiative.

First, I draw the cabinet secretary’s attention to the following. In 2008, there were 766 teachers of computing science, but, 18 months ago, that number had fallen to 595. In 2001, 28,000 pupils in Scotland were studying computing science, but, by 2020, that number was 9,800. As a result of the subject choice issue, the number of schools that offer the subject has fallen from 2,500 to 425. If the Scottish National Party wants the initiative to take place and be successful, what is it doing to address the subject choice issue?

Liz Smith identifies—in part, although unpacking the numbers is really important—the critical importance of the pipeline of talent coming through our schools to serve the start-up community and to become the next generation of start-ups.

The recommendations on which we have arguably made the greatest progress are those around STACS and ensuring that there is greater choice for young people in their formal subject choices and informal extracurricular activities. That clearly starts with teachers, and Liz Smith will know that we have offered a bursary of up to £20,000 for career changers, to attract more teachers to teach science, technology, engineering and mathematics subjects. The highest demand for teachers needs to be in computing.

Liz Smith asked for a bit more detail on STACS. It is a teacher-led organisation, so it starts with teachers. It aims to provide support and expertise to and promote skills among computing science teachers across Scotland, so that they can teach as effectively as possible and meet the needs of young people. As I said, it is led by teachers, who understand the challenge.

Part of that challenge—I will close with this—is about promoting computing science as a subject choice and a career option for pupils. Although we need to ensure that there are enough teachers to meet the demand, we also need to do more work to create that demand in the first place. That is something else that STACS is already doing. That includes exploratory career sessions with teachers, parents and students to support more students to pick computing as a subject. We have seen too many students choosing not to pursue it, not only because of a lack of choice, as Liz Smith said, but because there just is not the demand.

I welcome the initiatives that the cabinet secretary set out in her statement. It is important that we take tech start-ups and turn them into growth organisations. The statement is a positive step forward.

To go further with Liz Smith’s line of questioning, not only did the number of teachers fall by about a quarter between 2008 and 2020, but the number of people studying for highers dropped by a quarter, from just over 4,200 to 3,200, in the same period. The cabinet secretary is right to identify the need for a pipeline of talent, but if young people are not studying for highers and we do not have teachers to teach them, what progress can we make? Would she concede that we must make progress on those fundamentals?

I also ask about tech uptake among small and medium-sized enterprises. While tech start-ups are important, the recent paper by the Productivity Institute on the Scottish productivity challenge identified the poor uptake of technology by SMEs as a core reason for Scotland’s lagging productivity growth. What steps is the Scottish Government taking to address that vital issue?

Those are two important questions. I will start with the point about education. I am not disagreeing with the importance of getting the pipeline of talent right. The statement was designed to demonstrate the progress that has been made since the recommendation was published in 2020.

One of the first things that we did was to establish a steering group, which is led by Mark Logan and Shirley-Anne Somerville, who is now the Cabinet Secretary for Education and Skills. Prior to that, Mr Logan was engaging with the Deputy First Minister, who then had responsibility for education. The steering group includes the most senior leaders from education and skills agencies across Scotland and is working to progress changes in computing science in schools.

That has resulted in STACS—about which I can go into more detail—and in some critical changes elsewhere. We have provided more than £1 million for additional computing science hardware and software to improve provision in schools. We have also provided funding to Digital Xtra, whose grant award programme aims to inspire young people to acquire digital technology skills through high-quality, exciting extracurricular activities.

There is a risk that we might think that someone can pursue a career in a tech start-up only if they have done computing science. This is absolutely and vitally important: there will be young people who have never considered doing computing science and who need access to those digital skills. We are trying to encourage them to want to study technology and technology-related disciplines and ultimately to pursue a career. That is hugely important.

Daniel Johnson picked up on another important point, which is about the sectors that are not specifically deemed as technological. We are in a time when every sector is ultimately a tech sector. That is one of the changes that have emerged from Covid. Prior to Covid, it was perhaps harder to make the case for SMEs to invest in digital capabilities, either in the skills of their workforce or in the facilities that they used. Covid has changed that significantly.

We have seen significant uptake of, for example, the digital boost scheme, which is why the commitment to invest £100 million in giving small and medium-sized enterprises access to digital technology really matters. We reopened the £25 million digital boost fund in the Government’s first 100 days, recognising its importance, which Daniel Johnson referred to. It is more popular than ever, not because the programme has changed, but because the uptake is significantly higher. The appetite is there, and we will build on that to provide not just the funding, but the expertise. Ultimately, it is probably one of the biggest game changers when it comes to productivity.

I refer members to my registered interest as a member of the British Computer Society. I thank the cabinet secretary for her statement, and particularly for the emphasis on women and entrepreneurial endeavours in this area. We know from the Royal Society of Edinburgh’s “Tapping all our Talents” report that many women have left the tech sector and other science, technology, engineering and mathematics areas. What opportunities will there be for women in particular to retrain in the tech sector?

That is another excellent question. Retraining was a key theme in elements of my statement. We want to ensure that, when we try to bring more women into the sector, we provide routes for them to either return to work or change their careers. CodeClan does important work when it comes to retraining and reskilling, but a key thing in all of this is the digital fund that I mentioned in my statement, which specifically targets those who are furthest from the job market. The digital start fund targets those people to encourage them to undertake intensive courses with providers such as CodeClan, which will give them the skills that they need to have well-paid careers in tech.

CodeClan is absolutely brilliant at helping people where they are. Having visited it a few times—I am sure that Clare Adamson is familiar with it, and she may want to visit it, too—I know that it is excellent at providing wraparound support for individuals who are returning to the job market or changing careers.

Ultimately, in a sector where accessing talent is a real challenge and the number of women is still disproportionately low, we can meet two challenges by expanding the number of talented individuals and ensuring that we increase the number of women. That is one of the primary commitments in implementing the STER recommendations.

Scotland has spent many years lagging behind on STEM and entrepreneurship education, and it is vital that that is addressed, albeit belatedly. On the technology side, we saw during the pandemic that the issuing of laptops to schoolchildren across Scotland was plagued with delays and obfuscations, as has been the promise to provide internet-ready devices for young people in Scotland since the election. Our education and apprenticeship system has been bruised by two years of Covid and it will take time to recover. The cabinet secretary spoke about new start-ups, apprenticeships and entrepreneurial learning in schools. When precisely will those things be delivered?

They are already being delivered. We are obviously keen to expand and grow them, but the apprenticeship model has already been adapted. We have far more young people choosing to do cyber apprenticeships than we had before. Many young people are choosing to work and study simultaneously, and a number of tech businesses are already taking advantage of that apprenticeship model.

Work has also started on expanding the young persons guarantee. We are pleased to be working with Young Enterprise Scotland to look at how we can work as effectively as possible through the young persons guarantee to ensure that there are a number of routes into the tech sector for young people.

A lot of work has started. We are building on that progress and expanding it. The key thing about the national strategy for economic transformation is that it takes a lot of the most successful interventions in the tech sector and tech entrepreneurship and expands them across the entrepreneurship domain so that they are not unique to the tech sector.

I thank the cabinet secretary for her statement and celebrate the ambition that is contained in it, particularly the actions regarding women.

My question is specific to my constituency of Falkirk East. It concerns data flows as a critical enabling technology. Only recently, US President Joe Biden and European Commission President Ursula von der Leyen made a joint declaration on co-operation regarding the value of data flows. Germany is leading within Europe, and the German Government has mandated the method of Obashi Technology Limited, a pioneering firm, to map and model its data flows. Will the minister meet me and Obashi senior management at its site in Stenhousemuir to learn about how Scotland and the Scottish Government could utilise, and lead the world with, that critical new technology?

I thank Michelle Thomson for bringing that to my attention. It is great to see what is being done in her constituency. I am particularly keen to look at how we use data more effectively and at how we support businesses working in that field. I would be very happy to get further information from her and to consider how we can support that work, including by meeting the relevant business.

Mark Logan’s company, Skyscanner, was sold to Ctrip of China for £1.4 billion in 2016. That is not necessarily a success story for the Scottish economy; it reveals a major strategic weakness in companies of high-scale potential being lost to overseas ownership. What measures might the Scottish Government consider to protect Scottish start-ups through the critical growth phase? Would it consider direct measures such as the Government taking golden shares in companies to shield them from predatory overseas takeovers, or perhaps tackle a strategic weakness that Mark Logan identified by coaching a critical mass of senior executive leaders to have the confidence to keep their headquarters in Scotland through making an initial public offering of shares, rather than selling to an overseas multinational?

We are progressing a number of recommendations specifically around investment and investment funding, to avoid the situation whereby, for a Scottish start-up to expand, grow and develop, it needs to access funding elsewhere.

Although no one would dispute that Skyscanner has been a success, some of the recommendations looked at, for example, establishing a series A funding partnership between the Scottish Government, Scottish venture capitalists and external investors; investment vehicles specifically for certain groups, such as female founders; the need to identify where grant support is effective and where it is ineffective; and the partnering of Scottish VCs with the Scottish Government on a number of joint initiatives, including maintaining and publicising a live database of all angels and all start-ups in Scotland.

Obviously, a bigger issue is at stake: ultimately, keeping businesses in Scotland is about delivering an environment in which they want to continue doing business. We can put in place a number of interventions. I have just rattled through a few of the recommendations very quickly; not all of them will necessarily be relevant to the example that the member cites. However, ultimately, it is about building up the wider ecosystem, infrastructure and environment so that, at every stage of a start-up, and at scale-ups in growth, there is access to investment funding, talent or whatever else it might be that will either stop a company from growing in Scotland or enable it to continue to be headquartered in Scotland.

Thank you. I appreciate the cabinet secretary’s desire to provide comprehensive responses, but many members would like to put a question, so I would be grateful if her responses could be made more concise.

How will the cabinet secretary ensure equal opportunities in access for children in our more deprived communities to benefit from technology education? Can we provide additional resources, where those may be required?

The point that Willie Coffey makes is one of the key themes that comes through in the national strategy for economic transformation. It specifically talked about apprenticeships for underrepresented groups. Those might be underrepresented along the lines of gender, income inequality or ethnicity. There is a focus on expanding the pool and creating equity of access. Our priority is to roll out apprenticeships specifically among those underrepresented groups.

I warmly welcome the cabinet secretary’s announcement of new investment in building Scotland’s tech sector. The measure of success will not be the number of start-ups but the number of companies that kick on for the longer term.

Fundamental to supporting the sector and future start-ups is ensuring that we have the necessary digital infrastructure. However, many parts of Scotland are being left behind badly through delayed superfast broadband roll-out, particularly in island and rural areas. What confidence can the cabinet secretary give members that the ambition that she has reasonably set out will be met with delivery on the ground over the next decade?

That is a fair question if we care about equity of access. We still have much to do with the 95 per cent of access to broadband that already exists. Clearly, the reaching 100—R100—programme needs to ensure that every property has access to broadband. We will progress that and ensure that it is delivered despite the fact that it is a reserved area and we are stepping into the breach to do that.

Liam McArthur is right to say that there are two sides of the same coin but, ultimately, the work is progressing. I know that many communities, not least the ones that he represents, would like us to go faster, further and deeper into their communities. We will do what we can and the R100 programme is continuing to try to meet the shortfall where it exists.

I thank the cabinet secretary for her statement. It is important to be clear that developing the tech sector is not just about information technology and apps but that tech is the foundation of sectors such as the space and aerospace industries, which the export plan identifies as growth areas in Scotland. Prestwick airport is integral to thousands of jobs in the aerospace industry in my constituency. What role will Prestwick airport and spaceport play in meeting our ambitious goals?

Siobhian Brown rightly points out that every community, business and key national asset, such as Prestwick airport, is part of our ambition to be a world-leading tech nation. Many communities, particularly under the Ayrshire growth deal, are already taking significant steps. I have been in contact with a number of individuals from those communities, particularly in relation to the HALO project, to see how we might integrate our plan for tech scalers with work that is already on-going.

It would be dangerous to suggest that the work that I have just outlined is the first of its kind. It is about bringing together much of the great work that is already going on in the Scottish ecosystem and providing support, including to businesses in Siobhian Brown’s constituency.

I thank the cabinet secretary for her statement, which I welcome. There is much to commend in it.

I will ask about support for digital solutions to social and environmental problems. The sharing economy for good can play a key role in designing new solutions for certain challenges that we face, not all of which have commercial or commodifiable elements. Therefore, such solutions will need continuing investment or support, especially if they have rapid growth trajectories predicted. What support will be available for the mission and challenge approach to designing new solutions and for the sharing economy for good more generally?

That is an important question because tech for good has grown significantly in recent years and we want to provide support to social enterprises and other companies.

It is not just about the private sector working to create wealth; it is about resolving many of the biggest issues that we face. The tech for good sector is critical in that regard, and working with social enterprises, charities and others to embrace the opportunities that technology presents is important, too.

Can the cabinet secretary set out what steps are being taken to ensure that women’s tech businesses play a full and leading part in transforming Scotland’s tech sector? What will that success look like?

The tech ecosystem fund has supported multiple events for and by women, with more than £160,000 of funding given to Women’s Enterprise Scotland, Female Founder Squad, Mint Ventures and other organisations providing learning and peer networking opportunities and helping to overcome some of the challenges faced by women in tech.

There is a clear gender gap in business participation in Scotland. Closing that gap and unlocking the full economic potential of women in enterprise will have a transformative impact on Scotland’s economic performance. As part of our commitment to fund £50 million of support for women in enterprise, we will consider how we better close that gap. Ana Stewart’s work as an experienced entrepreneur will be critical when it comes to the independent short-life review of the support landscape for women.

Success looks like 50 per cent of businesses being female led, with equal participation and equal sharing of the opportunities in technology among women and men.

The Logan review highlights that on average in any given year, 84 per cent of students studying higher computing science are male. What action is the Scottish Government taking to address the chronic gender imbalance in computing science at school level, which has resulted in a huge loss of talent in the workforce pipeline for tech start-ups?

There are clear recommendations to contend with that. I have referred to some of those recommendations in previous answers. Some of that is about overcoming gender stereotyping in the early years. That is where the work of young women, such as Toni Scullion, is critical. Being able to provide extracurricular activity that creates equity of access to opportunities to learn is so important. Those young women are being role models as female founders and in celebrating female computer science teachers, which is critical to all of this.

Right now, Education Scotland has a dedicated team that is working with schools and early learning centres specifically to deal with early gender stereotyping and to ensure that that engagement carries on throughout primary school and high school and ultimately into the university years.

I can refer to specific interventions in the work that Education Scotland and Toni Scullion are doing, as well as the extracurricular activity, but there is a bigger issue around the visibility of successful women in technology and successful female entrepreneurs to inspire young women to see themselves in those roles in the future.

The issue of poor cybersecurity has been raised recently as a result of several high-profile breaches. Does the Scottish Government have any plans to promote that side of the tech industry? Many young people who have no official qualifications have great ability with computers and might be the ideal recruits to that developing sector.

That is another good question, to which the short answer is yes. We are keen to avoid having to retrofit cybersecurity to digital solutions. We are keen to see more small and medium-sized enterprises embracing the opportunities of technology, and that needs to go hand in hand with cybersecurity. In the past, we have provided financial support, such as vouchers, to help SMEs to do that.

The second part, though, is around introducing the fundamentals of cyber skills, from the earliest years onwards. There is a pipeline of talent in that area, too, and examples of where that has been done successfully.

My last point is about inspiring young people through extracurricular clubs and so on—for example the cyber discovery and cyberfirst programmes—so that cyber is not seen as an afterthought. I have referred to some of the cyber apprenticeships. That all goes hand in hand with promoting best practice across the public, private and third sectors.

That concludes the ministerial statement on transforming Scotland’s tech sector. There will be a brief pause before the next item of business.