Scottish Economy

New Deal for Business must extend to research

This article was originally published in the Herald on the 14th July 2023.

The recent report from the Scottish Government’s New Deal for Business Group highlighted the need for business to be given more of a voice into the early stages of policy development.

But what about those of us that spend our days pulling together evidence to support, and sometimes influence, policy making? Whilst over the years, more attention has been placed on ensuring the voice of ‘lived experience’ is included in research to ensure those most excluded from decision making are part of designing the solutions, the voice of businesses are rarely part of study designs.

Perhaps this is because it is assumed that economists speak on behalf of businesses. Indeed, often it’s people of our ilk that will warn of harm to the economy and economic growth due to the latest rule or regulation.

But is this an accurate reflection of what businesses actually think or want?

The New Deal for Business Group report noted a lot of room for improvement around engagement and understanding the impact of new policies on businesses. But the report also made clear that business does understand that sometimes there will be costs to bear for the sake of wider societal benefit.

For any policy maker or politician interested in improving working lives, businesses hold the solution, and will know more about what works in practice than any government official or university professor.

With the Scottish Government promising to do better when it comes to their own work, we need to think about how researchers outside of government, like ourselves, go about developing recommendations and insights.

The Fraser of Allander Institute already has a lot of links with businesses, and through work like our quarterly Business Monitor, we try and stay on top of how firms are navigating many issues, from price rises to climate change.

But we’d like to do more to understand how decisions are made on a day-to-day basis and the enablers and barriers to making changes within different environments.

That has been the focus of a programme of work with a group of hospitality employers. We’ve spent a lot of time talking and listening to people inside businesses to harness their expertise and to understand if and how changes can be made to improve the financial circumstances of their employees who may be facing hardship. This isn’t just about pay, but about a whole host of issues that workers in low paid industries face, including lack of access to affordable flexible childcare and out of hours transport – both very important factors when you are working shifts often finishing late at night.

This is a long term programme of work, and we are learning how to make sure that the businesses who are engaging with us find the process worthwhile – otherwise they will disengage (and indeed some already have). But already, we are finding new insights and new ideas.

It will be of no surprise to any hospitality employers reading this that the wellbeing of the workforce was of high concern among the businesses we have worked with, and finding workable solutions to deal with the hardships that their employees faced was high on their priority list.

Whilst we are working with a self-selecting sample, and there will be no doubt always be ‘bad’ employers out there, we know that the vast majority of employers care about and respect their employees. However, the businesses we talked highlighted how they often feel constrained by the uncertainty they are facing and the sustainability of actions they take – will a pay rise this year still be affordable next year? Alongside the extent of the cost pressures facing businesses at the moment, another key risk that was highlighted was the uncertainty around government intervention in the sector, and a lack of trust that government (both UK and Scottish) were able to deliver effective policy for the sector.

We worked through some of the possible scenarios resulting from different levels of impact that these risk factors could throw up.

In the more optimistic future scenarios, if prices came down and stabilised, employers felt that they would have the headroom to improve pay and provide other benefits that had a permanent cost. But if the current cost pressures continue, and government continues to put forward interventions that put uncertainty and additional costs onto the sector (the Deposit Return Scheme, which at the time of doing the research was still imminent, was mentioned) employers felt that increasing pay would be less likely to be an option. Other more creative solutions were forthcoming – for example, coordinating with other local businesses to find low cost training opportunities or transport and childcare provision. Even in the worst possible scenarios, the group knew they needed to find ways to support their workforce.

There were asks for government, beyond better engagement with the sector. A lot of these suggestions came from the recognition that employers and managers were time-poor and needed to be able to find support quickly and efficiently.  There was an ask for a ‘one-stop shop’ for employers to find out what support is available, both for them and their workforce. Longer term, there was hope that there would be an improvement in the skills pathway to ensure those coming into the industry were better equipped, plus simpler and streamlined provision to further education and training for existing employees, especially in rural areas.

With labour market shortages so prevalent at the present time, it could be said that now, more than ever, businesses need to do more to retain their staff. But, in reality, good hospitality employers will always have this at the forefront of their mind. Implementing change in practice depends on the range of other issues that are being navigated at the same time, but even in this post-covid cost of living storm, we’ve seen first hand how hospitality employers are keen to learn how they can do better. And in turn, we need to learn from them.







Emma Congreve is a Principal Knowledge Exchange Fellow and Deputy Director at the Fraser of Allander Institute. Emma's work at the Institute is focussed on policy analysis, covering a wide range of areas of social and economic policy.  Emma is an experienced economist and has previously held roles as a senior economist at the Joseph Rowntree Foundation and as an economic adviser within the Scottish Government.