Enterprise and Culture Committee, 14 Jun 2005

Meeting date: Tuesday, June 14, 2005

Official Report 292KB pdf

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Business Growth Inquiry

For agenda item 2, I welcome Alec Mackie from Barwell plc, Peter Shakeshaft from Archangel Informal Investment Ltd and Geoffrey Thomson from Braveheart Ventures Ltd.

Thank you for coming along. The stage is yours if you would like to say a few words about venture capital in Scotland, its contribution to business growth and where we go from here.

We are interested in the creation in Scotland of sustainable businesses that have global potential, and there are four main ingredients in achieving that goal. The first is the creation and maintenance of an innovative culture. We have such a culture to some degree, but more can be done.

Secondly, we need to work closely with our science base. Most of our global businesses have come, and most of our potential global businesses will come, from our science base—that is, the Scottish universities. We need to work particularly closely with them to ensure that we have good ideas.

The next ingredient that we need in order to create sustainable businesses is money. That is where we come in. We provide venture capital money to young businesses. There is public sector intervention in the form of the Scottish co-investment fund and the enterprise capital funds that are being discussed at Westminster. There is also support from the private sector through initiatives such as the enterprise investment scheme, so there are tax-efficient means for the private sector to put money into young businesses.

The fourth aspect is the need to mentor businesses. That is another area in which business angels are important. The money that we put into young companies goes very quickly; in six months' time, there will be another round of funding. The academics and others whom we put into companies to help entrepreneurs to grow their businesses are fundamental.

I do not have a rehearsed speech for members, but I will pick up on one or two points and make a couple of additional ones, particularly on the quality, depth and training of management.

We are asked to consider young businesses and to assess their prospects for survival as well as growth, but that survival and growth will not happen unless the management has a driving ambition and, preferably, some experience. One of the problems is that there has not been a cultural background that encourages people to go out and have a go, which is what we are there to support. The result is that successes have been sporadic. As investors, we have seen a huge number of propositions that have had to be turned away, not necessarily because the widget is at fault but because in our view—it is only a personal opinion—the people do not have the capability to run the business and make a success of it. Those personal qualities are more important than anything else.

I am aware that the University of Edinburgh has started a course in entrepreneurship with the backing of a link with Stanford University. By way of anecdotal evidence, I can say that my meeting with the students on that course was the first time that I did not have to do the running to talk to people. As I discovered afterwards, part of the syllabus teaches the students how to press themselves on willing or unwilling victims and make their point. That push and willingness to get up and go are critical. I am sorry to say that people from academic backgrounds often have an idea and love the product, but do not have the love of business because they have not had the chance to gain experience. That is a major issue, which relates to education and the creation of a smarter Scotland.

You will hear much the same story from each of us. Scotland has a rich history of invention but, unfortunately, it has been unable to commercialise that and get the benefit out of it. We invented penicillin, anaesthetics, antibiotics, television, the telephone and pneumatic tyres but, right up to Dolly the sheep, little benefit has been retained in Scotland for Scottish economic wealth creation. We continue to have a world-class academic base and an inventive nature, but the challenge is for us to capture those inventions, to commercialise them into global businesses and to grow businesses of scale that will stay in Scotland.

We have a number of positive features in Scotland. We have a strong business angel community—only a part of which the committee is seeing today—that in many ways is the envy of Europe. It offers smart, patient, first-stage risk investment, which helps companies on their way. We have the positive attitude of the Scottish Executive and Scottish Enterprise, which created the Scottish co-investment fund, the business growth fund and the investor-ready programmes. Most of those initiatives are working extremely well and they give Scotland a slight edge. They are good things to have. There is recognition that we need to grow the small companies that we have into companies of scale. We are still waiting to see how the new Scottish investment fund turns out, but it could well be an important initiative that will help the process.

Company formation is not about the number of small companies that are formed or how many VAT registrations there are every year; it is about forming companies that have global application and that can achieve real growth and bring economic benefit to Scotland. It is not a game of statistics; it is about growing major companies.

Of course, we need a good infrastructure in Scotland, and we need to be able to provide long-term, adequate funding that is both smart and patient. We need the ability to attract key, senior and good people into our industries and to retain and motivate them. We need to work on Scotland's business profile abroad, to ensure that we have an edge in Scotland and that the world acknowledges Scotland's importance.

Finally, a small matter that we come across constantly is the need to encourage the Scottish public sector to start buying from our small, growing companies and to try out their innovations and risk products. The business is more important to us than are grants; we want reference points for where the business works.

The witnesses' opening statements might have been unrehearsed, but they were interesting. I found it instructive that none of them mentioned the intermediary technology institutes. The ITIs are only 20 months down the line, but what is the witnesses' perception of their activity? Are they valuable?

We have had some involvement with the ITIs, particularly with ITI Life Sciences, which has been helpful to two or three of our companies in providing funding for applied research alongside other units, in Scotland and elsewhere. The ITIs have a big budget and I suspect that the jury is still out on how that is being used, because it is early days, as you say. However, the initial backing that we received from ITI Life Sciences was very positive for two or three of our companies.

Peter Shakeshaft's group is strong in the life sciences, so I am not surprised that a link with ITI Life Sciences has been made. Our only opportunity for a link was through a couple of investments in the oil industry in Aberdeen. We spoke to people at ITI Energy but by the end of my conversations, I was struggling to reconcile the creation through public sector funding of publicly-owned intellectual property, which I understand can be accessed by a number of companies so that the technologies can be brought into use sooner rather than later, with the needs of the small company that I was backing, which was trying to come up with clever ideas and steal a march on the rest of the marketplace. I question whether some of the work that the ITIs do will help small businesses in their early stages, unless those businesses are in the research business.

So far, so good.

Alec Mackie's comments raise the question of whether the sort of activity in which his business wants to invest is much further down the road than the activity that the ITIs consider.

That is an issue. Are the ITIs looking too far ahead in relation to the development of technology? In theory at least, we invest over a five or seven-year period, so if it will be four years before a technology can have a practical application, it is not much use—our company will have thrived or died by then.

Perhaps we could have some e-mail correspondence on the matter. The committee can be made aware of that.

Peter Shakeshaft talked about public procurement, which I think all members have considered individually and in the committee. There are quite a lot of opportunities in public-private partnerships. Do opportunities for local and Scotland-based businesses arise when PPP contracts are scoped, rather than further down the line?

That is an interesting point because, by definition, some of the companies are very young. If someone enters the public procurement process, they tend to be asked for three years accounts, their trading history and everything else. Frankly, many of the companies are not at that stage, so they find it difficult—indeed, almost impossible—to get on to European tender lists and so on.

I understand the situation; there are rules that govern public procurement. However, just occasionally, it would be super for us to say, "Let us have a trot at that. It looks like a really good innovation." For example, although a couple of our medical companies are doing extremely well at selling in the United States of America, they cannot sell to the national health service because the system is backed up against them.

We have had many conversations and done much lobbying on the subject, which is difficult. We have our own power in Scotland: why cannot we use it a little bit more widely?

Thank you and welcome, gentlemen. I will pick up on a couple of points that have emerged so far. The first is a general question about company start-ups in this country. I think that Alec Mackie said that because we do not have a culture of encouraging people to go out and have a go, we have a relatively low level of start-ups and a relatively poor level of sustainability.

Why is the start-up rate in Scotland lower than in England? The difference between Scotland and the US or Japan might be understandable, but what is the difference between Scotland and England? Are we loth to take a risk or do we have a fear of failure? What do you put our lower start-up rate down to, if it can be put down to anything?

Again, the answer is anecdotal, but I guess that any evidence that you get from us will be anecdotal to some extent. I have four children, all of whom I encouraged to move south or to Europe to expand their horizons and opportunities. Perhaps we are losing some of our best talent to larger marketplaces, but I am not sure that an awful lot can be done about that. After all, we are only 5 million people, so even England is a magnet. A large marketplace and opportunities exist, particularly in the south-east of England. We need to be specialist and find niche markets to create market leaders on our own patch. That is not the whole answer, but the young need to be encouraged to stay and the infrastructure that lets them get experience somewhere before they go off on their own needs to be in place. There is not that much experience to be had.

Please tell me if I am wrong, but you seem to be saying that the issue is not a lack of will, drive or ambition but, where those exist, a tendency for them to be developed outwith Scotland rather than locally.

In many cases, it is.

Interestingly, the idea of the global Scot initiative that Scottish Enterprise has been talking about is to bring some of those people back to Scotland. I am sure that quite a lot of them want to come back in one form or another once they have the experience. Such initiatives could be expanded and made more accessible. If I want to find a global Scot to come and help a company, it is difficult to get my hands on one through the current system. I am not pointing the finger at anyone; I am simply saying that, although the global Scot idea is a good one, it is not easy to plug into that sort of network.

That is interesting. Colleagues might want to take something more from the point. I will move on to a comment that Peter Shakeshaft made. You said that the business angel community in Scotland is the envy of Europe because it is so strong. There seems to be a contrast between that comment and the level of business development. Is a lot of your business done for people or companies outwith Scotland?

Quite the opposite. We invest only in Scotland and in Scottish companies. Our syndicate is probably more active and makes more investments than any other angel syndicate in Europe. I say that we are the envy of Europe because both Geoffrey Thomson and I have been in Europe and talked to our European counterparts, so we know that they are jealous of what we have got—they are jealous of the tax incentives and so on that help private investment in the UK as a whole.

Your point perhaps links in with your previous slightly negative comment about how Scotland's business start-up rates compare with England's. I believe that the position is changing. We are catching up and we may, in a sense, be overtaking England. This is not a statistics game, as I am talking about not all new businesses but real businesses that are created. Given the growing strength of Scotland's business angel community by comparison with that of Europe, I think that business angels are now beginning to help the whole entrepreneurial status in Scotland. I believe that statistics of real company growth are improving quite a lot.

Twenty years ago, starting one's own business and taking the risks that today's entrepreneurs take was not the thing to do. If we contrast the situation twenty years ago with that of today, we can see a sea change. I believe that the line on that graph is going up. The whole thing is beginning to come together and to improve and the angel community is helping in that.

You seem quite positive about the trend.

I am.

I agree entirely with Peter Shakeshaft that there are many positives. Many foreign students now come to study in Scotland. An interesting fact is that, of the 12 university spin-outs that we have backed in the past 12 months, five have been fronted by foreign nationals who came to Scotland to do post-doctoral work and stayed to form their own business. That is one difference today, which I think is fantastic. It is not necessarily always easy to get work visas for those people, but we have some very clever guys who are coming to Scotland for higher education.

Ultimately, creating that kind of base is about having companies with headquarters in Scotland.

Absolutely. We do not allow them to go back. They have to stay in Scotland.

You chain them to their desks.

In the business pages of The Herald last week, David Sibbald—who built Atlantech, which he sold recently—was quoted as saying that public sector investment in research and development, and investment in development generally, puts too much emphasis on innovation and not enough emphasis on developing existing products. Do you have a view on that? How does that equate with your experience with start-up companies?

We are extremely focused on getting products to market and on revenue. There is no question about that. A company might have a whole IP platform, but it needs to get its first products out there and to build a proper business before it can start developing the rest. From our perspective, when we put money into a business, our focus is very much on developing the first product and on getting a revenue stream. We can then develop the rest of the IP portfolio.

Absolutely. I have a lot of respect for David Sibbald, but he has his own views. Elements of the public sector spend, such as the small firms merit award for research and technology and the proof of concept fund, are aimed at innovation and at the invention bit. That is fine. However, by the time something comes to being a proper spin-out—when it is a real business in which people will like us will invest—I agree with Geoffrey Thomson that the need is to get the product out into the commercial market as much as possible. We do not back pure invention. Sometimes, we might stop the inventor and say, "That is fine. It will do. It will go to market. It has enough bells and whistles on it."

I have a couple of questions about the availability of venture capital, which all members of the panel should feel free to answer. When we took evidence from Scottish Enterprise two weeks ago, we heard that the overall level of venture capital in Scotland is decreasing. Is that your perception? If so, can you explain why that is happening?

I am not sure whether Geoffrey Thomson is a venture capitalist or a business angel these days.

I am both.

I will answer for the angels, so that Geoffrey does not get into a conflict.

Without doubt, the position both in Scotland and globally is that venture capitalists have moved up the chain. They have tended to forget what the word "venture" means and, indeed, what the word "equity" means. They have moved up into companies that are at a further stage, such as post-revenue companies that have already proven their ability to achieve sales and to make profits. Very rarely are they interested in financings of less than £5 million, so they miss the whole stage of growing companies.

That is not just a Scottish problem. I referred to the proposed new Scottish investment fund, which is to be aimed particularly at the £2 million to £5 million investment gap. The venture capitalists used to fill that gap but they have now left and the angels find it a little difficult to get that high. I do not want to name names, but some big venture capitalists have left Scotland. Part of our job is to attract some of them and some overseas funds back. If we create a good enough seed base, we will attract them back.

Do you believe that those venture capitalists are moving up the value chain—as you said—to reduce risk?

Yes.

They do that also to reduce transaction costs. Given that it is as much effort to make a £100,000 investment as it is to make a £2 million investment, it is inevitable that companies will move up the scale, although risk comes into it, too. There is a lot of money about that is looking for a home, but because it is safer for a venture capitalist to back a large management buy-in or buy-out of an established company, that is now seen firmly as a venture capital activity, which is not really what we are about as angels. The big venture capitalists do not deal with start-ups or with the bolstering of management teams, which is part of our function.

I agree completely with Peter Shakeshaft that the important point is to have a pipeline of money from a company's early stage right through to listing. There is no question but that the big VCs have gone up to investments of £5 million plus, which means that there is a gap in the £2 million to £5 million bracket. Investments of below £2 million are covered, but those of £2 million to £5 million are difficult, because one cannot get the big VCs to provide them. We recently did a deal with an Italian VC in which we partnered 50:50, but that was difficult because there is a different mentality there.

Another factor is that, if venture capital money is not available in the £2 million to £5 million bracket, some young companies will list too early on the alternative investment market. One company with which we have dealt has just listed before it has revenue and before it is ready mentally to become a public company. That gets companies into reporting issues, profit warnings and all sorts of problems. Unless there is enough venture capital at the level of investment above what we provide—whether it is from the Scottish investment fund or whatever—companies will list too early, which will cause problems. It will not help anybody if companies in Scotland list, but then go backwards and retreat quickly.

That is helpful and leads neatly on to my second question, which is whose job it is, given that we have identified the problem, to fill the hole and to encourage venture capitalists. Is it for Government to provide incentives, or how else can we do that? Some committee members were in Dundee last week and heard from people who are in the equity and venture capital field. We heard a degree of criticism of what they saw as the conservatism—with a small c, I should say—of Scottish financial institutions when it comes to lending. Is that your perception, too?

We are in a cyclical market. If we go back to the days of the internet company boom, so much money was available that it was just everywhere. A lot of the big VCs got burned, as a result of which their appetite for risk has changed a lot. Because of market forces, we are struggling now because more money is not coming back in. We need the £100 million Scottish investment fund—that is the target—to plug the gap. However, apart from putting in public money to try to lever in private money, I do not know what else can be done. A healthy listing market—the initial public offering market—is crucial, because it gives us the exits through which we can recycle capital and so drives demand at the lower end.

If I can be so brave, I will suggest that the matter is largely the responsibility of the private sector, but we need public sector support. A good model is the Scottish co-investment fund, which is a superbly crafted idea and a brave and good initiative that has given Scotland a bit of an edge. The fund relies on the private sector to do the work and to make decisions, but it is backed up by financial and other support from the public sector. Investment financing is a capitalist element and it should be largely left to the private sector, but supported by the public sector.

Getting money out of the big pension funds is extremely difficult. First of all, they say, "We don't like investing only in Scotland." Their attitude to risk has changed enormously over the past five years.

Even the ones with "Scottish" in their names?

Yes, particularly those.

That is fair enough, because although those companies may have "Scottish" in their names, they are global players. They are taking global finance from all over the place and they are expected to invest it globally. To put into Scotland what one might call the Boston model—to say that one wants X per cent out of the finance sector—does not work as a rule of thumb. However, there are a number of specific opportunities in the Scottish financial sector that I think could be promoted, although that cannot simply be done across the board. We cannot say, "Because we have umpteen billion under management, some of that should find its way into private equity in Scotland." That is not a workable formula.

There is evidence that most start-ups—or many of them, at least—do not fail because of lack of finance. You spoke mainly about investment, funding and financing, but I would like to know how you see the role of coaching. Do you feel that you, as a business angel, should be involved? If you should not be involved, who else should be involved? Lack of coaching might be one of the main reasons for failure.

That is our job. We may start off talking to the company about its investment needs, but that is not the package that we offer. The package that we offer is proper angeling; we are hugely involved with the businesses in which we invest. That is why I said that the provision of money is not just about patient money but about smart money. We support all our companies through our network; we have about 80 or so of Scotland's business great and good helping us and helping those small companies in a quite remarkable way.

If you take a basket of 10 of our investments at any one time, you will find that they are all super when we make the investment to begin with, but that three or four of those investments will fail. They will fail not because of lack of money or lack of management support or advice, but because the science does not work, because the market has moved on or because of other commercial reasons. That is because we are right at the front end of risk in applying money. I often say that to potential investors.

Out of that same basket of 10 investments, three or four will get a bit muddy. They will never fulfil the promise of the early business plan and will never quite do what they said that they would do. They need a lot of guidance, help and redirection to make them into proper companies that will eventually make money effectively. Only a couple of investments will be the shooting stars that make multiples of money and have fantastic global results.

We take a whole-basket approach to investment. It is very high risk, but we are very hands on. We are all businessmen. We have all been around the block a few times—we have bought a few tee-shirts—and we have the bruises and scars to show for it. We bring that experience back into the companies.

Wolfgang Michalski used the word "coaching". Peter Shakeshaft has the advantage of being able to draw on a large group of people who have a number of skills. We do not have that, so I find myself looking for an address book, if you like, where I can find people who can mentor or come in as non-executive directors and contribute significantly to the development of the company, if it is particularly weak in sales and marketing or in some other area.

Coaching is not very common in the Scottish marketplace. I am aware of one coaching company, which is probably quite good, although I have still to find a suitable victim for it. I believe that that area should be encouraged. We obviously try to do it ourselves but, as an investor, we face the dilemma that, if we thrust a non-executive director or coach into the operation, there is often a chemistry issue. In a young start-up company, the guy who has had the idea often sees that as an affront to his abilities, so a bit of diplomacy is involved, as well as a fundamental need. Some things can go wrong before that works. We have had that experience. Consultants have been thrown back out at us when we have got the chemistry wrong. The issue is not simple, but the need exists.

We run internal training days for non-executive directors. Like Peter Shakeshaft, we have guys who have been out in business and have usually done very well, but being a non-executive director of a FTSE 100 company is different from being a non-executive director of a little spin-out company that is just getting going. We sit them down and explain to them what we expect from them and what their fiscal responsibilities are. That is important, because they become very involved in the companies. Sometimes, they become too involved and cease to be non-executive directors.

Peter, you said that you did much lobbying for Government procurement. Do you lobby for linking start-ups to bigger companies?

We have done a bit of that. I had a pop at public procurement just because I am sitting in this forum, but that is not the only concern. To be honest, it is difficult for small companies to sell to big companies, for some—but not all—of the same reasons. Often, we try to tie up our smaller companies with bigger companies for distribution in some marketplaces, because it is much easier and more relevant to undertake distribution through a larger company. I return to life sciences. Our involvement with big pharmaceutical companies globally is good. We call on all those to help when we can.

I thank you for your interesting opening statements. You have all talked about backing not widgets—to use Alec Mackie's word—but people. You see that as your primary role. Do you widen that to backing people rather than focusing on sectors? Is it important for an enterprise network to work with individuals and to identify key people rather than to focus on key sectors?

I would always rather have a class A management team and a class B product than a class A product and a class B management team. The management team and the people who develop it are extremely important. My response to your question is that concentrating on developing people is an important element, but it cannot be achieved without ideas, so both are needed.

I will comment more on ideas. I have talked about management, but I give some credit to the idea that expertise can be developed in a local enterprise area in life sciences, computer software or whatever. The fairly clear evidence from places such as Cambridge, where a core of expertise has been developed, is that if enough of a climate and a grouping are created to allow people to move about and to spin off and do their own thing, people learn from one another and a pool of labour exists. In that sense, an area can do something to make itself specialist. However, management is ultimately needed on top.

Clustering is a good idea. It worked well in Cambridge and is working particularly well in Dundee. To a lesser extent, it is working in the Livingston area, where we have some good semiconductor-type companies. It is hard spending much time and effort on finding the entrepreneur. The entrepreneur will emerge; the trick is recognising one when we see one.

Alec Mackie's point is valid. A cluster of life science companies will attract to that area people who work in such an environment. Clustering is a good way forward. A cluster of businesses will bring specialist funds into an area.

How do you identify the ideas that will be attractive to you and your members? What are your key criteria? I realise that I am asking you to give away all your secrets.

I am not a technologist. My job is to spot a market opportunity and say whether we can make a success of it, build a business out of it and make money out of it. I will send a technologist in to tell me whether the science works. I need to be able to look at the market and determine whether a product fits in the market at the right cycle and whether the people behind the business are good enough to deliver the business plan. That is the judgment call.

Barwell probably works on a slightly smaller scale, so we do not have such a nice list of consultants. The simple rule that I have always applied is that, if the management cannot explain in simple terms to an accountant—which is what I am—what their business is about, what the product is and what it is going to do out there in the marketplace, they probably have not got a hope anyway and I will not spend too much time in looking at them. That is a crude but effective test.

I agree with both of the above.

We got on to a rather despondent note at one point, with talk of venture capital and the future generation of best talent leaving Scotland. You three have all decided to live, work and invest in Scotland. Why? What brings you in? What are the positives?

I happen to be chief executive and gatekeeper of Archangel Informal Investment; I am not one of the big investors, although we have 80-odd people who are. We are there to make money, which is why we invest. That is our prime motivation. However, virtually to a man and a girl, we all want to put something back into Scotland plc. We have all been successful and have had lives of moderate success—to a greater or lesser degree—from Scotland and have benefited. There is a real desire to put something back into Scotland plc, to help companies to develop and to see something emerge. There is a pride in the whole thing as well but, for God's sake, do not call us altruistic.

I would not dream of it.

Again, Barwell is in a slightly different position, as we are not restricted to investing in Scotland. We are backed by one man who sees his home as being in the Highlands and who is interested in ensuring that there is a return to the Scottish economy, which he regards as being a function of wealth. I am the hired hand, if you like. Having worked as an accountant in Glasgow, I have a network of contacts and, almost inevitably, the companies that are introduced to me are more often than not Scottish. However, two of our directors are resident in England and they are producing investment opportunities there, too. We do not have the same restriction. However, I want to live in Scotland. I trained in Scotland and have enjoyed living here, so I am not rushing to get away.

We, too, invest in English companies, although we invest principally in Scottish companies. About 25 per cent of our investors come from south of the border and are, effectively, bringing money into Scotland. I am an investor. I am the chief executive but I also invest my own money in the companies. We expect a decent return on our cash, as it is high-risk capital. There is a desire to put something back—there is no question about that. Most high-net-worth individuals who have been born and raised in Scotland and have made money here would like to put something back. What we do is also much more interesting than investing in listed companies—most of our people put only a small proportion of their money into unquoted stock, as that is a high-risk venture, but it is much more fun.

I have a couple of questions to wind up with. We often hear from venture capitalists that there is loads of money swimming around looking for projects but that there just are not enough projects. Is that the case?

Absolutely not. That is usually the rationalisation of a venture capitalist who is leaving the country because his overheads have got too high to support his offices—not that I can think of anybody who has done that. The reality is that a whole host of opportunities is emerging in Scotland. I look at 250 business opportunities in a year, most of which are in the central belt of Scotland. Most of them are good opportunities that are well worth looking at. In our portfolio of 30 or so companies are four or five that are considering listing on the stock market and becoming major companies. There are a huge number of opportunities in Scotland. I have heard the argument that you have put forward and I absolutely reject it.

I have an automatic follow-up to that answer. Are we losing a lot of good projects because there are not enough companies like yours or is there not enough money chasing the good projects?

As has been mentioned, the gap between investments of £2 million and £5 million is quite difficult, although that changes a bit during economic cycles. As Geoffrey Thomson said, the sub-£2 million investment level is probably catered for, given our strong base of business angels, the Scottish co-investment fund and several other factors. The £5 million-plus level is catered for by venture capitalists who are resident in Scotland or who will come in from outside to consider good opportunities. However, the gap in the middle, which used to be the preserve of the venture capitalist, is now the difficult area. We have to watch that we get that bit right, otherwise we will not see the saplings through to maturity.

So the new fund that Jim Wallace is proposing is the right thing for the Executive to do.

It is the right thing if it is properly organised, as I am sure it will be.

I was going to ask whether you were hinting at something.

As you are probably well aware, the Executive has been through a consultation process and we are waiting for the results. I suspect that most of us have had our say. Again, I will use the parallel of the co-investment fund. That was a clever and brave initiative and if the new fund takes a similar approach to innovation—although it should perhaps not be similar in structure—we could get a good answer.

To be successful and fill that gap, what should the main features of the new fund be?

Smart and patient money, and the ability to leverage in a significant amount of private money with it.

I take it that our other two panellists agree with that.

The venture capital trusts will be the guys who say that there are tons of money swilling around and they cannot find anywhere to invest it. They are looking for a mix of debt and equity and are not in the early-stage technology sector at all. They want to invest in nursing homes and the port authority, which is not where we are at all, although they have extra cash and the market is very competitive. It is important to distinguish between global opportunity companies and a nursing home. They are different types of business and have a different type of risk profile.

On the Scottish co-investment fund, I agree completely with Peter Shakeshaft. The question is about getting the money into the hands of the right people, not about giving the money to big fund managers who have no real interest in investing in such businesses and are doing so for a straight fee. That is important.

You said that investments of less than £2 million would already be taken care of. However, having been a business consultant before I came into my current job, I know that many people who want to set up reasonably sized businesses—I am not talking about window cleaners or taxi drivers—and who might need £50,000 or £75,000 find it difficult to raise that kind of money. My impression is that, if someone is trying to raise between £250,000 and £2 million, that is okay in Scotland, but it is still pretty difficult to raise £50,000 or £75,000. Is that fair to say?

That depends on the business opportunities. We are professional investors and will put money in with people who are looking for a return. We know that there is a high risk and we might lose all our money, but we want a company eventually to be built up into a size that can give a return that reflects the risks that we took in the first instance.

The company that is looking for an investment of the order of £25,000 to £75,000 is more likely to be a lifestyle kind of company than a company that will make a world-beating widget, because making a world-beating widget needs more than a £50,000 investment. We have to consider the type of business and investor. I do not think that companies such as ours would be involved at that level; the investment would more likely come from a bank, friends and family or the business growth fund.

But if I am making a new super-duper widget and I need £75,000—

Fine—you should come to me immediately. That would be good. Geoffrey Thomson and I have made investments of £25,000 and £2 million. We will invest as long as the business's style and potential are good.

So there is not really a gap at that level.

I do not think so.

I would say that we are selective at that level. I return to transaction costs. Lawyers keep telling me that they will charge me the same fee, whether the figure is £75,000 or £225,000, which obviously has an influence. People are made to be more selective when they are looking at a smaller sum of money.

Peter Shakeshaft is absolutely right about lifestyle businesses. A huge number of propositions that I have seen at the request level of £50,000 to £75,000 concern what are in effect lifestyle businesses, which we do not invest in. We would leave that much more to the clearing banks. The small firms loan guarantee scheme and other more conventional ways exist to raise such money. It is also worth mentioning that people who are looking to attract such a sum may not be at all willing to give away a reasonable slice of their business's equity, which is the trade-off that we will obviously always look for. The business may still be highly proprietorial and a clash of cultures can come into play at that level.

In recent years, banks in Scotland have looked for belts, braces, straps and everything else. Is their role wide open to fair criticism?

No. By definition, banks are not necessarily risk takers. The DTI has the small firms loan guarantee scheme, which caters for propositions for which the risk element or the asset base is inadequate to secure the bank's help. It is not terribly fair to say to banks, "You're not doing a job because you're not taking risks." That is not the banks' job.

It could be said, as people have done, that the small firms loan guarantee scheme is not being used enough, but it is there.

That is not equity, however. Banks lend money against security—they are not equity players and they never have been. Investment banks are a different kettle of fish. The small firms loan guarantee scheme is being used in a sort of quasi-equity way, which is wrong. Banks should lend only against revenue or for working capital purposes rather than for development capital purposes.

Peter Shakeshaft is absolutely right. We will not finance a person who is looking to set up a window-cleaning business. If it is an expensive window-cleaning business, it will struggle. However, we usually get technology companies funded. We have a set-up through which we will put £50,000 into young technology companies. We have done so for eight of those, but it must be accepted that that is not cost effective.

Before Christine May comes in for a final question, I want to ask you about your experience of the business gateway. Do you deal with it much? Have you found it to be a professional organisation? Is it very bureaucratic? Have you found that it has improved a lot in recent years? Have you found it at all?

I think that I have dealt with it once, when I gave a presentation to a load of people who came to a meeting. Apart from then, I have never dealt with it.

I do not deal with it either.

Neither do I. I have experience on the other side, as my daughter asked it for advice and was well catered for. If a company should really come to us, the business gateway tends to pass it on to a local enterprise company. We get very little from the business gateway.

What is your experience of dealing with the LECs?

Some of them are very good.

Out of the 13 LECs, how many come into that category?

I am not sure. As with everything, quality varies.

I will hedge my bets as much as Peter Shakeshaft has done by saying that we have not dealt with many LECs and our experience has been mixed.

Ditto.

I want to return to something that Alec Mackie said back at the beginning about encouraging his children to leave Scotland. Will you encourage them to come back once their rounded edges have been sharpened up a bit?

Yes, if they can find a position.

Would others similarly encourage people to get out and see the world and then come back?

My son is in Canada and I hope that he will come back. I think that that experience will have done him good. I had nothing to say on that—it was his decision.

Finally, what is your view of something purely practical that the public sector and universities tend to do, which is to offer small incubator business units, with a space, a phone and some management training? How valuable have they been to any of the companies that you have helped?

They have their place, although some of them can be a bit precious about what they offer and how much they charge. You have just come back from Dundee, where a small business incubator has been set up. However, those running it are finding it difficult to attract companies, because they are asking them to pay a rent that is twice what they might have to pay commercially. It is horses for courses. Incubators are valuable in principle.

There are only two incubators in Scotland that are working: one is out at Hillington and the other is the Alba Centre. Those are well run and we have financed a number of companies that have come out of them. However, the rest of them are pretty expensive. It is a bit of a struggle.

The idea of incubators has a long history and—with one or two notable exceptions—has not really achieved much. We have never invested in a company that is in an incubator, although we have spoken to one or two. Peter Shakeshaft used the word "precious", which was quite right in some ways. Incubators are a bit inexperienced.

That was excellent. Thank you. I have just checked with the clerk whether you have all been issued with an invitation to the business in the Parliament conference on 8 and 9 September; if you have not been invited, you will be. There is a special section on access to finance, which is one of the key issues to be addressed in the business growth agenda. The input from the three of you would be extremely useful at that session.

While we change over witnesses I intimate to committee members that the commission for economic and social policy of the Committee of the Regions intends to hold a conference and seminar on 28 November in the Scottish Parliament on restructuring and employment, which would be relevant to our next planned inquiry on employment and employability. More details will come to the committee, and it will be an agenda item next week, by which time we should know whether the Scottish Parliamentary Corporate Body has given its approval.

I hope that everybody will take the opportunity to read the material that has been circulated by the clerk on the content of the conference. If anyone has any influence with the corporate body and they think that the conference is a good idea, they might wish to pass that message along to their representative.

I welcome James Sugden from the Scottish Textile Manufacturers Association. Our inquiry is into business growth, but we do not want to give the impression that we are interested only in electronics or high-tech industries; we are also concerned about the future of long-standing industries in Scotland such as textiles and the issues that such an industry faces. It is important that we address those issues, as well as issues relating to the newer industries.

The Scottish Textile Manufacturers Association covers the broad spectrum of textile manufacturing in Scotland. It was interesting to come in on the end of the previous discussions about finance and business growth, because it could be said that our industry is and always will be a bit of a Cinderella, in that we have been around for a long time. My company is 200 years old although, as I regularly say to people, 200 years is impressive but it guarantees nothing.

The textiles sector in Scotland breaks down into four sectors that are represented by my association. The sectors have had different fortunes in recent years. Some of the reasons are historical. We are in a changing world; the watchword in the industry is change and there is a need to adapt to the new circumstances. My company is involved in three of the four sectors.

The first of the four sectors is clothing and apparel. The sector has probably had the worst experience over the past five or ten years. There has been a lot of pain and a great many jobs have been lost as bulk manufacturing of clothing in Scotland has moved offshore to China, India or even eastern Europe.

One of the other sectors that is still around is the knitwear industry; I have just come from Hawick, where we have a factory. The Borders knitwear industry and knitting companies elsewhere in Scotland—some are on the west coast—have reached a plateau in activity. The decline has been halted and—dare I say it—there is some growth now as the industry has moved towards higher added value products, particularly cashmere. A number of significant new initiatives in the industry promote the products overseas. There has been great support from the Scottish textiles team in that endeavour. I am sure that the committee knows about some of the activities of the Scottish Cashmere Club over the past three or four years.

Another sector, which is largely based on the east coast, is technical textiles. The sector is high-tech precision synthetic textile manufacturing and it is doing very well. It is very much smaller than it was; the old jute industry has declined and the products have changed.

The final sector is weaving and apparel fabrics, which traditionally might have been known as tweed, cashmere tweed and fabrics for outerwear. Again, although that sector of the industry has got smaller, it has now reached a size that is sustainable and the companies that are left in it are still profitable.

In each sector the endeavour has been to go for smaller niche markets and to distance ourselves from the price competition that abounds in the world. That has not been an easy task for many people, but the industry has never run cap in hand to Government for support.

Some of the problems in the industry have emanated from ownership. Our peer group within Europe is in Italy. Most Italian companies are privately owned. There was a period in the 1960s and 1970s when rationalisation took place in Scotland and large public limited companies took over. That sort of ownership was perhaps relevant to a period of growth when the industries were bigger and there was a bigger critical mass, but now the most successful companies are largely those that are owner driven.

I listened to the three business angels talk about risk. Profit is the reward of risk and textiles are at the cutting edge of risk. In fashion, if someone gets it right, they can do very well, but if they get it wrong, it is very sad. The secret is to get it right. Scotland has always had a pre-eminent place in design and has been able to go out into the world with its products. We are the envy of some other European countries. The industry still employs more than 23,000 people in Scotland. We have a turnover of £1.4 billion and export almost £500 million-worth.

We meet regularly to discuss the state of business across the sectors. Business is okay, but there is more pain to come, as there is always pain in change. The industry faces many dangers. I have talked about overseas competition. The industry is now much smaller than it was, so the critical mass within the industry is dangerously low. That does not apply only in Scotland; it applies also in England. In some cases we are finding it extremely difficult to justify doing things independently.

Clusters were mentioned. In the past, clusters have worked by allowing groups of people to share common facilities and by justifying investments in machinery and new technology that single firms operating on their own would not have been able to make, because they did not have the necessary throughput. Throughout the sectors, there is constant investment. I go to China a great deal to buy raw materials and I have watched that country develop very fast over the past 20 years. It has now come up alongside us and is buying the same sort of tackle that we use.

We are at the coalface of manufacturing. As I have said, we tend to perceive ourselves as being a Cinderella industry as far as the Government is concerned, but we are still here and we provide good employment. Although the return on capital that the industry provides is not as high as some of the investment gurus would like it to be, it is not bad if one takes it over the piece, and it justifies further investment in the industry.

Another pitfall of the present size of the industry is that it makes it difficult to recruit people. The difficulty that my company experiences is not because we are in Scotland, although we find that up in Elgin, where my head office is, we are the last of the Mohicans, as the firm in Peterhead recently went into receivership. It is extremely hard to attract the right calibre of managers and technicians up to that neck of the woods. I spend a great deal of my time attempting to do that.

We are constantly looking to recruit younger people into the industry, which has had a pretty bad press over the years. I have been in the industry for 35 years and I have not seen too much short-time working. That said, the industry must come to terms with the need to give long-term commitments to employees and to provide careers that are worth while and are rewarded accordingly. The industry is working hard on recruitment and training and the many initiatives are beginning to pay dividends.

To return to the theme of ownership, many of the investment decisions that are taken in the industry are acts of faith. Good business plans can be produced, but it is necessary to have a vision for where the company and the products will be. Making investment decisions on new machinery is a big part of what we do, but those decisions are often based on an instinctive belief in what we do. It is probably best that such decisions are taken by owners of companies rather than business angels, who must be approached cap in hand and who, in light of what they perceive as excessive risk, might want to take a bigger slice of the action than we or any individual company would want to give them.

Finance is always a problem in the industry because, at times, the rate of return can be much lower. There are definite cycles in the industry, such as the fashion cycle and the economic cycle. In spite of all that and the pain that has been suffered over the past five to 10 years, during which there has been decline and an exodus of companies and some products from the industry, I genuinely believe that we are now in a better position. We are leaner and much more focused on what the industry is doing. Although there are many problems, the people in the industry who belong to our association are reasonably upbeat at the moment.

Although there are many problems in the overseas markets—we export a great deal—our home market has been strong for most of the companies that are involved in it. The UK economy has been quite good, but we are suffering a bit because of the weakness of the dollar. Although the European market is flat, the industry is still doing good business in France. The market has also been flat in the far east—I am talking about Japan—with which Scotland has done a huge amount of business. In Japan, changes are taking place in the buying of textiles and the country's proximity to China is such that it has been almost swamped with Chinese products at much lower prices.

China represents both a huge threat and a possible opportunity. We are considering selling back into China at the top end of our industry. China has its problems; I assure the committee that the situation there is not all beer and skittles. Even buying raw materials in China is difficult. There is little rule of law and contractual law is non-existent. That said, the Chinese are making progress at a great pace.

This year alone, the cost of clothing coming into the UK has fallen by 30 per cent, which is great if you want to buy a pair of Y-fronts in Marks and Spencer. However, as far as the perception of textiles is concerned, such a situation does nothing for the increased price of higher added value products. Our industry does not compete with China, but the premium that our customers will pay us for the privilege of buying products marked "Made in Scotland", which is nevertheless still important, has a ceiling. The whole industry is aware that, in the present deflationary world conditions, with other costs going up, we can achieve stable prices only by increasing productivity.

That is a summary of the current position.

That was very helpful.

It appears that with the ending of the multifibre agreement, the World Trade Organisation's reduction of tariffs and the price threat from China and other countries in the far east, most of the industry is trying to move up the value chain and create niche markets. Although I accept that, as an industry, you cannot go cap in hand to Government, how can Government assist the industry in facing its current challenges, particularly with regard to international competition?

When someone asked me that question recently, I replied, "By having less government." However, that might be a glib answer. Notwithstanding the sincerity of your question, I believe that individual companies have to make their own salvation in the market. The withdrawal of the multifibre agreement has been flagged up for many years; we all knew that it would happen. However, it is always a shock when reality hits. Whatever preparations you might make, it is a bit like preparing for a flood: when it happens, it is worse than you thought it was going to be. The issue still causes a lot of pain.

On the question of what Government can do for the industry, we want a level playing field in Europe. Indeed, we have worked on that very matter. I find it interesting that, within weeks of the expected and allowable flood of imports, the Italians, who are our real competitors in Europe, went cap in hand to their Government to seek limits on growth in quota allowances. I do not know what Peter Mandelson has said about that, but the Italians have negotiated a slightly reduced increase in quotas. However, it is meaningless in effect, because this is reality. As private individuals who believe in competition, we accept that this is simply the market at work.

As for asking Government to give us less regulation, there has been much talk about the working time directive. However, we do not subscribe to that. Most of my staff want to work as many hours as they can and are very happy for the overtime. I should also point out that, up to now, the minimum wage requirement has not been a big problem. We have accepted the increases, because we realise that we need to attract people back into the industry. We do not want to be a low-pay industry; indeed, we want to pay as much as we can, but there is a limit to the speed at which we can implement such measures without devastating our profit and loss balance sheet. These things take time.

We need time. The matters that I have outlined cannot be addressed quickly.

You highlighted four areas, including technical textiles, which you said were doing very well. I do not know anything about such products. Can you describe some of them?

I was talking about filter cloths, heart valves, airline seat covers and so on. Technical textiles are not my particular field; however, I can tell you that they are high-tech, high added value products and are not conventional textiles in any sense of the word.

Can the Government encourage that side of the textiles industry to sustain its current market position and perhaps to access growth where it might be available?

Are you talking about Government procurement?

Not necessarily. I am talking about a range of activities. After all, in an industry in which, at best, we are keeping our heads above water, we should perhaps focus effort on its successful aspects.

I regularly hear colleagues at meetings comment on the cost of research and development. That applies to all of us; we all put a huge amount of time, money and resource into product development, whether we are involved in the fashion end or the technical end of the textiles industry. In the technical textiles field, the cost of developing a product is much higher and there is a much longer lead time between an idea and a product. If the product is aimed at the medical or precision engineering fields, development takes a long, long time. There has been lengthy discussion about whether co-operation between universities and business could be developed. Universities have resources that could be made over to help the flow and the timing needed to get technical textiles on to the market.

Perhaps one of your colleagues in the technical textiles field could write to the committee. That might help us.

Certainly.

That would be helpful.

My question neatly ties in with James Sugden's final comment. Given the importance of being at the cutting edge of the fashion and design market, which you stressed, what links do you have with Scottish textile and design colleges, such as the Glasgow School of Art?

There are huge links. I am not talking about companies in the technical textiles field, because product development in that field is different and requires qualified scientists and technicians. However, all companies in Scotland that are involved in fashion, clothing and apparel take on graduates from Gray's school of art, the school of textiles and design at Heriot-Watt University, and the Duncan of Jordanstone College of Art and Design in Dundee. My company takes on one graduate per year and we have eight full-time designers in two factories. Scottish designers have a reputation and more are coming on to the market than the industry can absorb, so there is a threat that some might go offshore to China. The direct connections between senior lecturers and individual companies are strong and we use that resource well.

The colleges are a useful resource.

Absolutely. We fought hard to keep the school at Heriot-Watt University going, because there was a big question mark over it. It would have been madness to have lost the school, which is the last centre of excellence for design. There is virtually no technical training in Scotland now. I know a young girl of 21 who is a dyer, who will have to do part-time courses in Bolton to complete her course in colour chemistry. Those are the problems that we face; we are geographically isolated and the situation is tricky. However, we have great confidence in what the colleges are producing on the design front and we fight hard to keep that work going.

It is difficult to find courses, not just for the textiles industry but for the paper industry. As the industry contracts, there are fewer suppliers in the machinery supply end of the business, fewer services for machines and fewer courses. What can Government and the industry do to expand and innovate in areas in which there is potential for growth?

That is a vexed question, because the much smaller numbers affect the economics of running lots of different courses. I speak to people in Leicester, Manchester, Leeds and Belfast who face the same problems. The owners of a well-known French company sent their son to Heriot-Watt University to study, so the problem of where we send people is Europe-wide. We will have to concentrate courses in areas where there is a critical mass—a course might have to be in Toulouse rather than Bolton. We can help to fund the costs and the local enterprise companies are, on the whole, prepared to help us with that, but other than that it is a matter for individual companies.

Your opening statement was interesting and I appreciated the fact that you did not ask for Government aid or further protection for the Scottish textiles industry, which means that you are willing to adapt in the future—you have had to adapt in the past. You said that the industry employs 23,000 people. How are those employees shared across the four sectors that you mentioned?

It is something like 20 per cent in apparel, 30 per cent in knitwear, 20 per cent in technical textiles and 20 per cent—does that come to 100 per cent?—in the other sector.

My next questions are related. What is the prospect for converting traditional textiles companies into new fields such as technical textiles? Are the technical textiles producers companies that have come into the business, rather than companies that have been converted or adapted to the new business environment?

My second question is on the internal conversion of the sector. I read about the Danish textiles industry, which has not asked the European Commission for protection. It has diversified in that companies take care of design and marketing in Europe and production is done in China. Have you developed that kind of international division of labour in your activities?

Your first question was what transfer of resources there can be between the fashion—in its broad sense—and technical textiles fields. They are different fields requiring different skills; the type of technician that is needed in one is different from the type of technician that is needed in the other. There is commonality of business problems, but the three areas of clothing are separate from the other area. A lot of the textiles have completely different uses and use completely different fibres. The majority of fibres used in the three clothing sectors are natural fibres. That is a difficult question.

Your question on sourcing is a good one. Do we focus on job retention here, being realistic about the cost of sourcing and knowing that the cost of bringing some goods in is much lower? We have considered that. A number of companies are retaining design and development functions in Scotland and outsourcing volume production. That is a way for a company to stay viable. My company has not done that. We are tempted on occasion but we have tended to try to make a virtue out of necessity. That is becoming more difficult, because the gap in cost is widening. The cost of running the business is going up. As the Chinese increase production and are reducing prices—bizarrely—our costs are going up and it is difficult to command the premium in the market.

A number of companies in my association have done exactly what you have said. There are job losses, but the companies retain product development, design and distribution back here and employ people in sourcing. We have formed a group that helps people source and use the Chinese facilities. The picture is not black and white. My company recently had a visit from Chanel—a well-known French couturier—which was going round the industry looking at suppliers, not just in Scotland but in Italy and France. Its concern was whether it could get a source of luxury goods from Scotland or leather from Italy and whether there was enough critical mass left. The chairman of the company, which has a huge investment in luxury goods, was concerned about the decimation of the luxury industry and its ability to remain viable. One of the reasons why such companies are worried is that the culture in China is of a command economy. It is a Communist country and there is not a rule of law. There is no protection on IP, so although someone might have invested a huge amount of money in their brand, they have only to go to the street markets of China to see the counterfeiting that is going on, not just in textiles but in every other product from compact discs to electronics. It is not all beer and skittles. Some companies, including mine at the moment, do not want to get involved in that situation. However, things are changing and we will see what happens. China is in the WTO now and we must expect that it will abide by the club rules, but that could be a long time in coming.

That completes our questioning. I thank you for your evidence, which was helpful indeed. It would also be extremely helpful if you could provide us with the follow-on information that was mentioned. We will make sure that you get an invitation to the business in the Parliament conference, because we want to ensure that manufacturing is properly represented.

We now move on to agenda item 3, which is an oral report from committee members on the recent visit to Dundee that was undertaken as part of the business growth inquiry.

Before we get on to that, I will make a request. We are taking evidence from quite a few witnesses who have not submitted written evidence in advance, and I think that we could get much more benefit out of them if we had a curriculum vitae for each witness. For example, knowing that a witness is Alec Mackie of Barwell plc tells us nothing about who he is, why he is coming or what we are getting from him for the inquiry.

We have asked each witness not only for a CV but for a written submission, although we cannot, of course, force witnesses to give us written submissions. The witnesses are selected because they are particularly high up in their fields.

Indeed, but I presume that someone knows why we selected them and it would be useful to see that information.

In general, your point is correct and we will try to emphasise it even more.

It would be helpful if the clerk or whoever selects the witnesses could give us a little background material before we take evidence from them.

Item 3 is an oral report on the visit to Dundee. The clerks are preparing a full minute of the visit, which will be circulated, so it is probably not necessary to give a full report.

We had four separate sessions. The first one was at the University of Dundee, where first-class work is being done. Then we visited Cyclacel and saw the work that it is doing. That emphasised the benefit of the cluster: academia is on one side and the private sector—in this case, a spin-off—is on the other, working together with public agencies. In the afternoon, we visited the ITI Life Sciences, where we were given a full presentation on the role of the ITIs and the work that they are already doing. We wound up with a round-table discussion on how to improve business spend on research and development in Scotland. Quite a number of people—from venture capitalists to scientists and university staff—were involved in the discussion.

I will bring in other members to add to my comments. There are two Mikes: Michael Matheson and Mike Watson. I ask them and Murdo Fraser to give us their brief impressions of the day. I found it extremely helpful and productive but the turnout of committee members was disappointing, as only four of the committee's nine members were on the visit. I understand that all members have busy diaries, but we went on to a fortnightly schedule of committee meetings to provide time for committee members to make such visits. I appeal to committee members—

Convener—

I am not asking for reasons or excuses, because I know that it is not possible for all committee members to attend every meeting. However, in general and given that we have more or less moved to a fortnightly cycle of formal committee meetings, we need to consider our attendance at such visits.

There is a material point in that I have another committee meeting on a Tuesday, so a whole-day visit is difficult for me. If it had been a half-day visit, I would certainly have attended.

We will bear that in mind in future. I do not want to get into a debate about why committee members were not able to turn up, but I make the general point that attendance at such visits is important, as is attendance at formal committee meetings.

I echo the comment that the day was useful. I pay tribute to the clerks for organising the meetings, which did not just happen or fall into place; they had to be organised.

The introductory session at the life sciences department of Dundee university was valuable. We heard about the history of the development of the department and were able to benefit from the experience of the senior people who were there. It was also interesting to visit the spin-out company. Again, the detail will come out in the report, but it is interesting to note that the company has been going for six years and has not yet made a profit.

It is not expected to do so for another couple of years.

Yes, yet it is being supported because it will develop what are important products—presumably drugs.

Although the afternoon session was helpful, it was a little bit heavy, given that we had six presentations.

Actually, we had seven presentations.

I did not count the introductory one from the overall head.

Nonetheless, the afternoon session was thorough and, as none of us had any experience of ITIs before, it was useful. I do not know whether there will be a written version of the information that we were given. We did not get anything in writing apart from the packs, but other members might be able to get something. The discussion in the afternoon involved a broad range of people who are involved in research and development, financing innovation and so on.

The day was useful and is a good example of what the committee can do by visiting places that are within striking distance of the Parliament. The day was reminiscent of the sort of day that we have when we go abroad and showed that we can do such things in this country and get a great deal out of them.

I agree with most of what has been said. The visit was valuable. I could not attend the first session, as I had a meeting elsewhere, but the three sessions that I attended were useful. Interestingly, one issue that came out of both the morning meeting and the ITI meeting was the apparent consensus on the major need for an animal research facility in Scotland. It will be interesting to see whose manifesto for the 2007 elections contains that.

The best session of all was the final one, which was a round-table discussion with a collection of people who are involved in funding companies. At one stage, the conversation got fairly heated, which shows that there is not necessarily a consensus in that regard.

We should say that we were spectators.

Yes, I should say that it was not we who were getting heated; we were trying to keep the peace. In any case, the session was valuable, even if there was no agreement about what needs to be done.

When we asked a question about tax incentives, we found that there was no universal agreement about the best way to provide them. I do not know whether your party's policy beat ours, Murdo, but there was certainly a diversion of opinion.

I found the day useful and interesting. I was particularly interested in the dependency between the various sectors, such as higher education, spin-out companies and venture capitalists, and in the role that ITIs play in developing sectors, particularly the life sciences sector.

I was reassured that Scotland has the skills, knowledge and ability to develop further within the sector. The challenge is to ensure that we have in place the right components to allow the sector to continue to develop.

A full minute of the day's sessions will be circulated to all members, with back-up material. The day was certainly worth while.

I take Richard Baker's point about how we organise such visits. It just so happened that, this way, we were able to squeeze a lot into one day.

I might have missed this information as I missed a committee meeting two weeks ago, but has the visit to Lancashire been cancelled or postponed?

I was the only member who was going to go.

Has the meeting been rescheduled?

No, because we have discovered that Scottish Enterprise runs a similar scheme that none of us knew about. It will supply us with material on that. Basically, because what is being done in Lancashire is being done in a slightly different way in Scotland, we did not think that visiting Lancashire would be the best use of our time.