1. Rural Development Council 8 th December 2008

2. Contents Scottish Enterprise Focus Economic Downturn Implications & Actions Core Rural Objectives HIE Economic downturn Implications Actions Challenges

3. Framework - Scottish Government’s economic strategy To create a more successful country, with opportunities for all of Scotland to flourish, through sustainable economic growth. Productivity and competitiveness Participation in the economy Increasing the population Shared and sustainable

4. Review of the Enterprise Networks Scottish Enterprise’s infrastructure activities to focus on projects of regional or national importance Careers Scotland and lead responsibility for skills programme delivery to transfer to Skills Development Scotland Business Gateway Contract Management and local regeneration activities to transfer to local authorities Focus on building the competitive advantage of Scotland’s key industries and businesses to sustainable economic growth The reforms to the Enterprise Networks, announced by Cabinet Secretary, Finance & Sustainable Growth, September 2007:

5. Focus of Industry Demand Generate critical mass More company growth Maximise existing assets Increase access to risk capital Exploit knowledge base Broaden company innovation EnterpriseInvestmentInnovation Increase the scale and speed to market of high growth start- ups. More intensive, strategic engagement with firms that have growth potential. Support growth firms in key business areas: Innovation Internationalisation Investment Efficiency Attract added value FDI. Create world class business infrastructure for growth companies and priority industries. Increase leverage from public funds by attracting more private risk capital to invest in Scotland. Attract specialist investment in priority industries. Enable wider innovation across the business base. Improve industry demand for new licences / collaborative ventures with the academic base. Utilise demand from priority industries to bundle IP into larger scale successes. Create a culture of continuous innovation. Innovation, Investment & Enterprise Focus, Driven by Industry Demand

6. Economic Downturn Uncertainty Confusion Dominating headlines Survey evidence pointing to dramatic weakening in levels of business activity and confidence Personal review with all account managed companies

7. Economic Downturn – Issues facing our customers Access to finance – cash flow, overdraft facilities, payment periods, finance costs, equity Cost pressures Contracts being delayed/cancelled Customers downgrading

8. Impact Fall in revenues Delaying investment Staff redundancies Reviewing costs Diversification and new market development

9. Feedback from key industries Tentative evidence that service sector worse than manufacturing Food & Drink Tourism Energy Forestry

10. Scottish Enterprise Increased demand for efficiency programmes Investment programmes Innovation Face the Challenge

11. Scottish Enterprise and Rural Operations Enterprise, Innovation and Investment agenda Rural Growth and economically important businesses Rural economic diversification with focus on Scotland’s priority industries Enabling investment in rural areas Implementing operational agreements with partners

12. Rural Operations - some key projects Planning to Succeed Rural Leadership Rural Petrol Stations LEADER

13. 12 Current Economic Situation House prices falling Fluctuating oil and food prices Changing pattern of household expenditure International economic climate Inflation high (but now falling)

14. 13 Highlands and Islands Economic Climate Review Wide-ranging review of changing economic conditions Likely implications for the Highlands and Islands HIE response to new situation

15. 14 Implications: Highlands and Islands A slow down in the housing market - substantial reduction in new private house building Reductions in businesses and households obtaining credit from banks Major industrial or commercial developments depending on a private housing element being delayed Evidence of businesses holding back and reporting reductions in domestic spending on their goods and services Increase cost of money having detrimental impact on the viability of profitable businesses

16. 15 Creative Industries

17. 16 Energy a world-class resource

18. 17 Financial and Business Services

19. 18 Food and Drink

20. 19 Life Sciences

21. 20 Tourism

22. 21 Construction

23. 22 HIE Response Support implementation of Economic Recovery Plan: –One-to-one advice sessions –Dedicated business helpline –Local business clinics –Enhanced on-line information, advice and toolkits –Business masterclass programme –Targeted interest relief grants –Acceleration of capital projects

24. Challenges/Opportunities? Response to Economic downturn Global outlook More value from renewables, tourism, local Getting more economic output from public funding review fit/use of existing programmes – e.g. LEADER, Priority 4 ERDF Widen out use of proven projects e.g. Planning to Succeed