The opportunity that change presents

The oil and gas sector has seen a a shift in emphasis toward focusing on entreprepreneurial activity in maximising return from ageing fields and infrastructure.
The oil and gas sector has seen a a shift in emphasis toward focusing on entrepreneurial activity in maximising return from ageing fields and infrastructure.

Uncertainty has been rife – but for corporate Scotland there remain very positive prospects

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By Will McIntosh

Following June’s EU referendum result, businesses across the UK are dealing with uncertainty, particularly in Scotland where there is an extra level of constitutional complexity to consider in terms of the recurring question of Scottish independence.

However, think back to 2014; Scotland’s Independence Referendum debate was in full swing with polls latterly suggesting a close call, and there was uncertainty not only over whether Scotland would remain part of the UK, but also whether it would remain in the EU and what its currency would be, should it become independent. And yet 2014 was Scotland’s most successful year in attracting foreign direct investment (FDI) from the US and its third best ever for FDI as a whole, according to EY’s 2015 Scotland Attractiveness Survey.

One reason for this is that Scottish business has become accustomed to change (not least as a result of the devolution process), responding and adapting to the changing market, overcoming challenges and seizing the many opportunities that have presented themselves.

Will McIntosh emphasises the ability of Scottish business to adapt to change.
Will McIntosh emphasises the ability of Scottish business to adapt to change.

Turning to the present, many of Scotland’s businesses are starting to benefit from sterling’s 10% depreciation. The food and drink sector is going from strength to strength and is now worth some £14.3m a year. Whisky exports alone are worth £3.86bn a year – equivalent to 34 bottles of Scotch being exported from Scotland every second. At Brodies, we receive regular requests from investors/trade buyers seeking to invest or acquire capacity in the Scotch whisky industry, and recent purchases were made before the depreciation of sterling.

Market conditions have also brought opportunities for Scottish real estate investment. The fall in the value of the pound and the requirements for liquidity, or at least a buffer, from the likes of open-ended real estate funds is bringing assets to the market, thus facilitating the flow of transactional activity, especially as finance is readily available, unlike during the recession.

In the oil and gas sector we have seen a shift in emphasis from major capital developments by the largest E&P corporations to a focus on entrepreneurial activity in maximising return from ageing fields and infrastructure. The rapidly-changing market has opened the door for new players with strong balance sheets – such as, for example, INEOS Upstream, which Brodies advised on its purchase of DEA UK (including interests in 12 North Sea gas fields) and two Fairfield companies – the biggest investment in the UKCS since the oil price slump.

Scotland also has world-leading businesses in the technology, life sciences, energy and financial services sectors, and boasts a well-educated and skilled workforce – cultivated by Scotland’s impressive universities, which are renowned for world-leading research and innovation.

That traditionally strong talent pool has been boosted by the Scottish Council for Development and Industry’s work on productivity and innovation as well as Scottish Government initiatives such as the Digital Champions Development Programme and its review of the enterprise and skills support provided by Scotland’s development and skills agencies.

Corporate Scotland has its sleeves rolled up and is ready for business. With change has come opportunity for overseas investors, and those opportunities have just become 10% cheaper.