The independence referendum: the importance of SMEs

The referendum debate is picking up speed, with heavy guns being deployed on both sides.

Would Scottish independence be a good thing? The airlines and some parts of the manufacturing sector say yes. The oil industry and financial services take an opposite view.

The debate so far has largely been confined to the biggest issues, voiced by business leaders representing the biggest companies in Scotland. But as the date for the referendum comes closer, it’s worth reminding ourselves that Scotland’s economy is heavily dependent on the small business sector, and they are as much affected by tax or fiscal uncertainties as anyone else.

The country may need oil and financial services for its tax revenues, but employment and business growth is largely being fuelled at the other end of the economic spectrum.

The statistics are compelling. Levels of unemployment in Scotland are falling, employment rising, and there are now some 340,000 small businesses in Scotland. That’s the highest number since records began.

To put that in perspective, over 30,000 Scottish businesses registered with Companies House in 2013. In 2012, it was 25,500; in 2011, 24,000; in 2010, 20,700. It’s a trend we should all welcome.

This is borne out in a recent report, the UK Startup Ecosystems Report, which ranks Britain’s entrepreneurial ecosystems. Scotland comes out extremely well – ranked fourth, reflecting its high business birth rate and low business death rate.

The report, essentially, is a guide to the best places in the UK to start a business, and is based on a number of criteria – for example, business birth rates, unemployment rates and the number of businesses per 10,000 adults. Scotland came after the south east, London and the east.

The Federation of Small Businesses (FSB) quotes Scottish government statistics to show that small and medium-sized enterprises now account for 99% of all Scottish businesses and for over half of all private sector employment.

The FSB also recently said that Scotland’s SMEs need support from banks, the government and utility firms if the sector’s recovery is to gain momentum this year. Tellingly, the FSB also said that both sides of the Yes/No debate needed to make a more compelling case to SMEs on the benefits of unity or separation.

It’s a point noted by the Yes campaign which is promising simplification of the tax system and a slashing of red tape for small enterprises – as well, of course, the benefits of having control of VAT: targeting tax breaks for the likes of the tourism and hospitality sectors.

However, many of those proposals don’t need independence. For example, the Regulatory Reform (Scotland) Bill which was voted into law earlier this year, is intended to improve the way that regulation affects Scottish businesses while encouraging sustainable growth. It’s a good bit of legislation, overwhelmingly supported by the Scottish parliament, and a good example of the “if it ain’t broke, don’t fix it” school of thought in the constitutional debate.

However, for most voters, the referendum debate has become bogged down in what BA or BP says; whether Scotland can (or should) retain the £; and whether we will be granted early membership of the EU. 

These are, of course, huge and important issues. But we have to remember that Scotland is a patchwork of many thousands of companies, working across the business spectrum – many of them dependent on UK or export trade; others on international collaboration.

Scotland’s economy, in a digital age, has been transformed: from medical research to renewables; from gaming to computer software: again underlining Scotland’s proud history of innovation. Would independence be a benefit or a hindrance for those high-growth sectors?

Rather, then, than have the independence debate shaped by RBS or Standard Life, it is the SME sector that politicians and the media should be listening to. Should be, but aren’t.

The trouble, of course, is that it’s not easy for a small business to speak up, let alone make its voice heard. That’s where the likes of the FSB, Chambers of Commerce and other representative bodies are so important.

The small business sector is the Scottish business sector. What happens to it will have a much greater impact on Scottish employment and economic health than many big Scottish employers put together.

We are specialists in national and international PR strategy and delivery. You can contact us at +44 (0) 1620 844024 or michael@laidlawwestmacott.com

Crisis communications and the search for MH370

The search for MH370 continues, with possible debris spotted in the water, but with factual information either patchy or non-existent.

It has become the Marie Celeste of the 21^st century – a modern mystery of horrific proportions, with 239 passengers and crew onboard, and played out in real-time across the world’s media.

In the absence of absolute proof that the flight did crash, relatives continue to cling to the tenuous hope that the plane might somehow have landed safely, in an echo of the TV series Lost.

It has created a poisonous brew of distrust and grief, with police ejecting relatives from press conferences and a protest march in Beijing – something almost unheard of.

But how well, or otherwise, has Malaysian Airlines coped with the aftermath, in a febrile atmosphere where nothing is quite as it seems?

Certainly, the immediate aftermath was handled badly, with media briefings providing only sketchy information, sometimes contradictory, and spokespeople not answering questions.  That allowed speculation to run riot: from dodgy passengers on stolen passports, to the pilots’ political affiliations.

The Daily Telegraph in an early editorial described the PR response as a “masterclass in how not to deal with the aftermath of an incident.”  That reached its nadir when a civil aviation chief described two suspect passengers as resembling Italian footballer Mario Balotelli.

But much of that criticism should be directed at the Malaysian government, and not the airline which, in my view, has done rather well, from issuing a relatively prompt first press release to “darkening” its website and social media channels – removing all content that could be considered frivolous or insensitive, and announcing that the flight codes MH370 and MH371 would be retired.

Its social media response has also shown empathy.  Two Tweets sum up the approach.  “For the families involved, every minute is like an hour.  Please keep them in your thoughts as we continue to search for MH370…”  Or, “We would like to humbly ask all Malaysians and people around the world to pray for flight MH370…”

The airline has tried to follow the Triple R of crisis communications – regret, reason and remedy – but has been hampered by contradictory “facts” entering the public arena, fuelled by innuendo and false rumours.  Also, while it has expressed regret, it hasn’t been able to offer reason and remedy – and nor can it until the plane is found, and likely causes of the crash ascertained.

The first rule of any crisis is to get ahead of the story.  But, in the unprecedented circumstances surrounding the airliner’s disappearance, how do you get ahead of this particular story?

The airline has also been criticised for announcing by late night text message on Monday 24^th March that it believed that the flight had crashed into the Indian Ocean, without survivors.

It looked insensitive.  But the airline, in the middle of a worldwide media frenzy, was trying to be open and transparent – something about which it had been criticised.

The airline’s PR team had already been facing an uphill battle, even before MH370 went missing – an uphill struggle that has just become mountainous.

The airline has racked up losses for the past three years, unable to deal effectively with high costs, unprofitable routes and the emergence of low-cost rivals.  In 2013, it returned a negative 4% margin, worse than almost any airline in the world.

And, while China accounts for only 7% of the airline’s capacity, China is a growth market; if Chinese passengers choose to fly on other airlines, that spells more trouble.

The airline’s share price has been falling for some time, and has fallen a further 10% since MH370 went missing.  It now languishes at about a tenth of its value in 2004.

The disappearance of MH370 is both a human tragedy and a disaster for an airline in real financial trouble.  If nothing else, it underlines the need for robust crisis PR planning.

Many companies pay lip-service to crisis communications.  MH370 is a reminder that paying lip-service isn’t enough.

Our sympathies are with everyone who has been affected by the loss of this airliner.  On a much smaller scale, my sympathies are also with the Malaysian Airline’s PR team which has done an adequate job in the most difficult of circumstances.

We are specialists in national and international PR strategy and delivery.  You can contact us at +44 (0) 1620 844736 or Charlie@davidgraypr.com

PR and the internet of things

Charlie Laidlaw is a director of David Gray PR and a partner in Laidlaw Westmacott.

The advent of big data is allowing companies to deploy smart marketing campaigns aimed at smaller and smaller segments, profiling all of us against analytical technologies that are driving messaging from the macro to the micro.

By tapping into large sources of data, smart companies are beginning to understand how the demographics and buying habits of an ill-defined crowd can be distilled into valuable marketing information to drive bottom lines.

A research report from McKinsey, published in 2011, said that big data will become a key basis of competition, underpinning new waves of productivity growth, innovation, and consumer surplus.

The report said that 15 out of 17 sectors in the US have more data stored per company than the US Library of Congress, and that the value of all that big data could translate into a $300 billion saving for US healthcare, a €250 billion value for Europe’s public sector – and a 60% increase in retailers’ operating margins.

Understanding and making use of big data isn’t just a challenge for marketers; it’s a challenge also for PR, with content management becoming of increasing importance – with compelling messages for smaller and smaller groups, even down to individual consumers.

It’s something that, conceptually, is well understood.  Content marketing topped the digital priority list in 2013, according to a Econsultancy report, although only a minority of companies had a defined content marketing strategy in place or dedicated people to carry one out.

Sophisticated Customer Relationship Management (CRM) systems and data mining capabilities now allow marketers to focus messages onto comparatively small target groups and, as big data gets bigger, those groups become smaller – the ultimate content management opportunity.

Being able to talk to consumers on a one-to-one basis remains the ultimate dream.  However, understanding consumer behaviour and market dynamics is one thing; big data, in particular using social media channels, will soon allow companies to talk to you and me – with a different sales or PR message for each of us.

But big data is set to become a whole lot bigger as “the internet of things” picks up pace, and the virtual and real worlds become a little more blurred.

The internet of things is all about making more intelligent use of information, by building in communications functionality in more and more stuff – from cars to farm animals – including the stuff we carry around: everything from store and credit cards to mobile devices.

Nor is it entirely science fiction, and there are think tanks and a consortium dedicated to its development.  It has come about through wireless and computer technology – and has implications for virtually everything.  (It’s sometimes also called the “internet of everything.”)

Imagine then a world in which every human being, animal or thing has an IP address and the means to wirelessly transmit information.  On the upside, it could be a heart patient with a monitor implanted, and who can be alerted when an irregularity occurs.

But as more and more things become smart, capable of monitoring and transmitting our every click or purchase, and GPS always knowing precisely where we are – the implications become staggering. 

The security implications are obvious; indeed, Cisco has just launched a competition to find new ways to handle security in the internet of things.  (If you have a good idea, they’re offering prizes of up to $75,000).

How the internet of things develops in the years ahead shouldn’t be down to technologists alone, because it has implications for all of us, because we’ll all have to think and behave in new ways.

It’s therefore something we should, at least, be aware of, and a McKinsey report from 2010 is a good place to start.  It’s the future of communications, but it’s already here.

We are specialists in national and international PR strategy and delivery.  You can contact us at +44 (0) 1620 844736 or Charlie@davidgraypr.com or connect with us on LinkedIn or Facebook.

Scotland the Brand, from Scott to Isaac Newton

Charlie Laidlaw is a director of David Gray PR and a partner in Laidlaw Westmacott.

Companies stand or fall on the authenticity of their brands, with brand value an integral element in corporate and marketing strategy.

The same is true of countries, particularly in a global economy: a pertinent observation ahead of Scotland’s independence referendum later this year.

If Scotland does vote to go it alone, it is the value of the country’s brand that will sustain it – driving everything from inward tourism to international investment.

Of course, defining a national brand and its value to the economy is virtually impossible, as perceptions vary enormously.  The Anholt-GfK Nation Brands Index, which ranks countries against a number of criteria, offers some insight.

 We are, of course, hotwired to think in shorthand.  For example, think of Italy, and what do you associate it with?  Pizza?  Ferrari?  Do you have a positive view on Italian manufacturing quality?  Would you buy an Italian product against a competitor product from, say, France?

In some instances, the national brand guessing game is easy.  Germany, for example, despite being on the losing end of two world wars, has achieved an international reputation for engineering excellence that has made it the economic powerhouse of Europe.

In that sense, Germany has reinvented itself.  So too, Japan.  “Made in Japan” once meant cheap and second-rate.  Now, the Japanese automobile and electronic industries straddle the world, and stand for excellence and reliability.

Scotland too has reinvented itself, most obviously by Sir Walter Scott who organised King George IV’s visit to Edinburgh in 1822.  It represented nothing less than a national brand makeover, making all things tartan chic and fashionable.  Later, Queen Victoria put the heroic back into the Highlands.

In some ways, for such a small country, Scotland is overburdened by iconography: from tartan to whisky, from lochs to glens, shortbread to haggis, bagpipes to the Loch Ness Monster, golf to kilts…the list goes on.

National symbols are important because they sustain economic activity.  For example, Scotland’s tourism industry employs some 200,000 people and visitors spend almost £11 billion a year – with many of those visitors coming from other parts of the UK.  Will they still come if Scotland becomes independent?

The tourism and hospitality industry seems split on that one, despite the Scottish government promising to cut VAT for the sector and reduce airport tax.

Whisky is another icon, an industry that employs 10,000 people and, according to the Scotch Whisky Association, exports in excess of £4 billion.  But food and drink extends well beyond the water of life. 

Scotland is also home to about 25% of the UK’s beef cattle, and we catch over 50% of the nation’s fish.  Our salmon rivers are world-famous, supporting rural and remote communities.

Or financial services, another national icon, with Scotland also credited with “inventing” retail banking.   Yet if Scotland achieves independence, banks would have over 1,000% of Scotland’s GDP.  When Iceland’s banks went bust, their assets were some 880% of GDP.  Is that brand strength, or brand risk?

Westminster politicians obviously think so, having blocked Scotland from entering into a UK Poundland after independence.  Does Scotland therefore revert to its own currency?  Or, longer term, think about the Euro?

(Incidentally, it was Sir Isaac Newton, then Master of the Mint at the Tower of London, who brought Scots coinage into line with the rest of Britain following the Act of Union).

The financial case for independence is based, at least initially, on two iconic industries – North Sea oil and the financial sector.  The SNP hopes to secure some 90% of tax from oil and gas, albeit a diminishing source of revenue, and a healthy slice of income from the country’s financial sector.  (That’s leaving to one side the issue of Scotland’s share of national debt).

That means that Scotland the Brand will be dependent on a diminishing asset under its waters, and a sector that (post-crash) the country can’t necessarily rely on to deliver a safe return.   Let’s not forget that, against Scottish tax revenues of some £60 billion annually, the cost of the bank bailouts was some £500 billion in loans and guarantees.

It’s why the SNP government is keen to develop renewables as a new icon of Scottish industry, despite some ambivalent figures – for example, that offshore wind investment halved to £29 million last year.  Biggest blow was a decision by Scottish Power to drop plans for the £5.4 billion Argyll Array windfarm.

Scotland has other strengths, particularly its track record of invention: from penicillin to the postage stamp, from TV to the telephone, the steam engine to logarithms…that list also goes on and on, to modern advances in gaming to Dolly the Sheep.  If Scotland the Brand stands for anything, it must also be about education, innovation and invention.  Medical and scientific research may become brand icons of the new Scotland.

However, in this year of decision, Scotland the Brand will also step onto an international sporting stage, helping the country to redefine itself (again) as a country of beautiful cityscapes and wilderness.  The Commonwealth Games and Ryder Cup couldn’t have come at a better time for the pro-independence lobby.

But it’s the future that will better define Scotland the Brand: how the country’s universities engage internationally; how Scotland diversifies from oil and financial services; how Scotland can find niche industries to build worldwide reputation; how it attracts inward investment; and how it promotes its festivals, cities and landscapes.

Scotland may or may not vote for independence.  But the debate has done one great thing for Scotland: it has raised awareness internationally in Scotland the Brand, a marketing opportunity that the country should grasp with both hands.

We are specialists in national and international PR strategy and delivery.  You can contact us at +44 (0) 1620 844736 or Charlie@davidgraypr.com or connect with us on LinkedIn, Facebook or Google+.