The problem of Scotland’s foreign-owned economy

Common Weal was mentioned in the Scottish Parliament yesterday. Labour MSP Mercedes Villalba used an opportunity at Topical Questions to raise with Deputy First Minister Kate Forbes the issue that Scotland’s economy is one of the most foreign owned in Europe, based on the research in our 2024 policy paper Profit Extraction. You can watch the exchange in Parliament here.

The impact of the extent of foreign ownership means that, on balance, more than £1 in every £20 created by the Scottish economy each year – more than £10 billion pounds – is extracted by the foreign owners of Scottish businesses. This is money that is not reinvested into the Scottish economy or paid to workers and spread throughout the economy in other ways. The result of that loss means that Scotland ends up even more reliant on courting foreign companies to attract inwards investment rather than bootstrapping up Scotland’s own domestic economy.

Forbes’ answer was that she was talking about exports which she characterised as “the direct polar opposite” of the question of inwards investment but this is plainly not the case. Just taking the examples of Scotland’s three iconic and keystone export products – energy, whisky and salmon – we see that in all three cases, these sectors are all highly foreign owned. The result of this is that whenever Scotland exports a crate of whisky, we also effectively export a portion of the profits from that whisky as well as the owners take their cut from the sale.

Villalba also raised the important point that high reliance on inwards investment risks Scotland becoming beholden to these companies. Companies capable of delivering inwards investment are, by dint of that ability, highly mobile with their capital. If they can invest in Scotland, they can just as easily invest elsewhere instead. One does not need to dig far into the business news sections of any newspaper to find stories of companies threatening to leave Scotland if they don’t get a tax break or a cut to regulations or something similar or even just for a story of a bright, new Scottish innovation being bought up by foreign capital.

Foreign companies aren’t nearly so accountable to the Scottish democratic processes as domestic companies and are far harder to regulate or to tax fairly than domestic companies – this often means that attracting them not only exports profits and opens us to high pressure lobbying, it also puts Scottish companies who can’t shift their profits into tax havens at an economic disadvantage.

More worryingly, in an increasingly chaotic geopolitical world, the reliance on foreign companies for critical functions like the running of our government means that our very democracy could be threatened if a hostile nation orders companies to deliberately shut Scotland out from those services.

Taking actions to protect Scotland from influences that seek to undermine our democracy or take advantage of pliant politicians isn’t merely a defensive move. It would create jobs in Scotland, allow money generated in Scotland to be reinvested in Scotland and would lead to better laws and regulations as they would be made for Scottish companies, by politicians who would face the workers at those companies in elections to justify their actions.

We’re happy to have had these issues raised in Parliament this week. That we were shows that our work is not just about creating a headline for the day but about producing work that changes the political landscape in Scotland such that more than a year after publication, our papers remain even more relevant than when they were first published.

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