Brodies’ Bill Drummond argues that lack of infrastructure investment is damaging the UK’s major business and legal hubs
Writing this in early May, I’m conscious that many managing partners across the UK are, for once, doing much the same thing at the same time; mulling over the numbers for the past financial year. As I do so, my mind turns to one of the conundrums taxing economists – the UK’s stubbornly low level of productivity, despite our climb out of recession.
As a managing partner you wonder why, on the back of economic growth, we do not see this particular measurement improving faster.
To my mind, in analysing productivity challenges most commentators on the legal sector start from the wrong place. For any economy to be productive, including its legal sector, it must be made as easy as possible for its enterprises to do business. This means having modern infrastructure that allows the rapid and reliable flow of goods, people, information and ideas.
We feel this keenly in Scotland, a country and an economy that must trade and export goods and services or forever lag behind. Consider this: there are more than 2,200 foreign-owned companies based in and around Aberdeen, Edinburgh and Glasgow and there are many hundreds of companies across Scotland doing business overseas. Last year, Aberdeen, Europe’s oil and gas hub, saw one of the largest annual take-ups of commercial property anywhere in the UK outside London – some one million sq ft – with the majority of that space being booked by businesses trading across the globe. Despite the recent slump in the price of oil, the sector remains robust and year-in year-out makes a valuable contribution to the Exchequer (£4.7bn in 2013/14 – 11% of the corporation tax take) as well as keeping the economy powered. London’s and New York’s capital markets are vital to energy companies’ investment capabilities and oil and gas sector supply-chain businesses are spread across the UK, with the east coast ports being crucial for access to North Sea assets.
And yet, the number of daily connections between Scotland’s airports and Heathrow has actually fallen from 50 to 35 over the past decade. The UK government is committed to establishing a high-speed rail link between London and Birmingham – a distance of 126 miles already served by a motorway network. But with Aberdeen and Edinburgh the same distance apart, we continue to rely on a rail service with a journey time of around two hours 20 minutes and an A-road link which takes the same time to drive. Edinburgh to London – 413 miles – takes around four-and-a-half hours by train.
Leaving the north-east, Glasgow and Edinburgh airports together serve some 5.25 million business travellers each year. Under dynamic management, both airports have done great work in opening up new international routes to long-haul destinations such as Doha and Chicago, with new services to Abu Dhabi and New York JFK in the pipeline. However, with Heathrow running at full capacity and Gatwick heading in that direction over the next five to six years, where are the slots for the business and leisure passengers critical to the Scottish economy who want – or need – to travel to London?
The risk is that we slide further behind our global competitors and starve our home nation and northern economies of the arteries they need to thrive.
Contrast the position in the UK with France’s TGV, or the latest generation of the Maglev train in Japan, which is capable of speeds of up to 370 mph – Aberdeen to London by train in under four hours? Both countries, despite high levels of government debt (some estimates have it at more than 240% as a percentage of GDP in the case of Japan), have continued to invest in their transport infrastructure, thus securing competitiveness for their economies for the future. The construction costs for the Maglev train network are estimated at $100bn, and the French government is pressing ahead with a new TGV to link the south-western cities of Bordeaux and Toulouse. It would take a lot of claret to generate £4.7bn for the Trésor public.
The UK and Scottish governments’ existing commitments to major road and rail network improvement projects are welcome. However, I have been dismayed by politicians who have told me that it’s terribly difficult to push through some major infrastructure projects because particular constituencies with clout could be affected. We have already lost five years due to no policy support for new runway capacity in the south-east. The stark risk is that we slide further behind our European and global competitors – and we starve our home nation and northern economies of the arteries they need to thrive.
At the Scottish Council for Development and Industry Forum in Edinburgh at the end of March, I enjoyed hearing Sir Richard Leese talk about the city deal that has been secured by Manchester and the excitement and accountability felt at being entrusted to deliver the vision of a northern powerhouse. To us, in Scotland, connectivity for our businesses and our people is even more vital than it is for cities 200 miles from London. We need commitment and vision from the new UK government to economic infrastructure right across the country.
We will do our bit. The UK legal sector has the finance and other technical skills to support these projects stage by stage, and there will be a short-to-medium-term revenue boost for firms. But the real pay-off will be the long-term benefits for the commercial enterprises of the future and the law firms supporting them that will be able to spread across the UK yet trade internationally with a sensible cost base and the advantage of a globally competitive infrastructure. They will deliver the productivity boost that is so badly needed – and so will we. It is a vision the UK legal sector should be getting behind.
Bill Drummond is managing partner of Brodies