If we had any hopes that the uncertainty that freighted 2015 with so much worry might abate, 2016 took us into a different league altogether. The Herald’s business pages on January 1 bore the encouraging headline ‘Whisky-makers cheered by long-term prospects’, and this optimism at least was borne out, as premium malts continued to boost Scotland’s exports throughout the year.

Below that, however, Ian McCon-nell pointed to the downward revisions to UK growth published just before last Christmas and to what 2016 might bring as a result of Chancellor George Osborne’s continued commitment to austerity.

What few people were likely to imagine at that stage, however, were the momentous events later in the year when, as a result of Prime Minister David Cameron calling a referendum on UK membership of the EU, both he and Osborne had been replaced by Theresa May in Number 10 Downing Street and Philip Hammond next door.

This presented the immense conundrum as how we were going to exit the EU with the least damage – both to the economy in particular and the fabric of British society in general. As the value of sterling plummeted and arguments were ventilated as to the various possible permutations regarding the free movement of labour and the single market, Scottish business, which had already weathered the vicissitudes of an Independence referendum plus Scottish and UK elections knuckled down and got on with the job as usual.

Prime Minister May and Chancellor Hammond have been dismissive of the Scottish First Minister Nicola Sturgeon’s proposed separate Brexit deal for Scotland.

Then came the second bombshell as the US chose billionaire property tycoon Donald Trump as its next president, with his promises to deliver the biggest economic boom in the country since the New Deal of the 1930s. Many disagree: a recent client survey by forecasting firm Oxford Economics said that Trump’s future policy stance represents the "single largest risk to the global economy."

One might question the value of forecasting at all and take comfort in some of the more encouraging highlights of these pages: in innovative engineering, food and drink, professional services and a host of small family firms for example, there are many still building business with remarkable ingenuity and resolve.

Banking and finance

Scotland is the most important UK financial centre outside London, employing 84,000 and contributing £7 billion to the UK economy, according to the Scottish Government, so the consequences of the Brexit vote are set to have conspicuous consequences for the sector. In its Financial Stability report the Bank of England said

the outlook for financial stability in the UK in general "remains challenging" and is dependent on an orderly exit from the European Union – and that the likelihood of risks to stability "remains elevated."

Of course, some institutions will not relish the prospect of a fresh tranche of challenges. There was more despondency for the Royal Bank of Scotland, with the news that it will have to raise some £2bn to boost its financial strength after failing the Bank of England’s annual stress test. The bank, which is 73 per cent owned by the taxpayer was the worst performer in the test, which was also failed by Barclays.

In October Clydesdale submitted a bid to buy Williams and Glyn, which has 307 branches in England and Wales and NatWest branches in Scotland, from the Royal Bank of Scotland just weeks before the sales deadline. RBS is divesting the business under EU rules for receiving a bailout of £46bn during the financial crisis. Earlier in the year Clydesdale regained its independence from National Australia Bank, which exited the UK market, in a flotation which gave the business, employing about 4,200 in Scotland, a stock market value of some £1.6 billion.

In August last year David Nish, chief executive of Standard Life stepped down and handed over to Keith Skeoch, head of the company’s investment division and this year another departure was that of Fiona McBain as chief executive of Scottish Friendly, Scotland’s only remaining mutual after 10 years in the top job. During her tenure funds have grown to £2.5bn and the mutual’s membership to 480,000.She will be succeeded by current deputy chief executive Jim Galbraith on January 1.

Aberdeen Asset Management, which has about £300bn of funds under management said that "challenging and volatile market conditions" had affected the company into this year, causing further outflows from the business. Chief executive Martin Gilbert warned that following Donald Trump’s election victory that political risk will remain a "firm part of the investment landscape."

Manufacturing and Engineering

After a stake was driven into the heart of Scottish steel making last year with the closure of the Tata mills in Motherwell and Cambuslang there was a resurgence of hope in the sector. The Dalzell plant in Motherwell reopened in September and Liberty House, which took over both plants in a deal brokered by the Scottish Government’s steel task force, also plans to re-open Clydebridge.

Further good news for a traditional industry was confirmation by the Ministry of Defence that work to build eight Type 26 frigates on the Clyde will begin in the summer of next year, hopefully securing hundreds of jobs in the west of Scotland for 20 years and a boost for BAE Systems in Glasgow.

The tenacious Jim McColl continued to steer Ferguson Marine, the company he rescued from closure two years ago, with a firm hand. Last year the yard had around £110m of orders and early this year it underpinned its commitment to the Inverclyde area by announcing that it was taking on 150 new apprentices.


Jim McColl continued to steer Ferguson Marine and promised to take on 150 new apprentices

In April Weir Group saw chief executive Keith Cochrane’s remuneration fall sharply as the engineering company’s underlying pre-tax profits tumbled by 46 per cent. Cochrane stepped down in September after 10 years on the board of the company to be replaced by Jon Stanton, who in his first interim management statement last month issued a profit warning after revealing its oil and gas businesses would make a full year loss but said performance in its core markets was beginning to improve.

The sector faces a challenging year, however. The Manufacturing Purchasing Manager’s Index fell last month and growth has eased from the highs seen in September as the fall in the value of the pound pushed manufacturers’ prices up and new orders for machinery and orders for factory parts eased in the fourth quarter of the year. And a Fraser of Allender Institute survey, carried out in July and covering 320 firms in Scotland, reported that 33 per cent of firms thought Brexit would have a "very negative impact".


Depressed oil prices continued to dog Scotland’s oil and gas industry as it adjusted to the new reality. Oil & Gas UK reported that the cost of extracting a barrel of oil or gas from the UK Continental Shelf (UKCS) had nearly halved in scarcely two years while production had risen 10 per cent. The cost has been an average 30 per cent decline in supply chain revenues since 2014, and an estimated 120,000 job losses across the UK. There is no expectation that 2017 will bring a significant pick-up in already weak investment levels in the North Sea.

Exploration remains at record lows but, more encouragingly, the 29th Offshore Licensing Round for the UKCS offers licensees greater freedom in phasing, funding and staging activity. Its inclusion of the Rockall Trough and the Mid-North Sea High frontier areas points to the future. First oil flowed this year from Premier Oil’s Solan field west of Shetland.

OPEC’s intention to cut oil production from January 1, 2017 has some analysts suggesting a floor of $50 per barrel for oil in 2017 if the agreement sticks. However, leading oil services companies said it will be 2018 at least before the North Sea activity sees any boost from the OPEC deal.

By mid-year, 8.1 gigawatts of renewable electricity capacity was installed in Scotland, an annual increase of 7.4 per cent, with wind power playing the biggest role in generation from renewable sources. Provisional figures showed nearly 57 per cent of gross electricity consumption in Scotland in 2015 was met from renewable sources, almost per cent more than in 2014.

In headline events, Atlantis Resources’ MeyGen subsidiary connected the first phase of its tidal power project in the Pentland Firth to the distribution network, delivering first power in November. 2017 will see final commissioning of Norwegian energy company Statoil’s Hywind pilot project off Peterhead as the company seeks to show that the floating wind turbine technology could be commercially viable.

Swedish utility Vattenfall is meanwhile progressing construction of its European Offshore Wind Deployment Centre in Aberdeen Bay to create a facility for testing and demonstrating new technologies.

Food and drink

Already a global success story, Scotland’s food and drink sector is an example of Theresa May’s wish for accelerated export activity.

Employing 360,000 people, it is – as a manufacturing/producer cluster – Scotland’s fastest growing export segment. The industry is set to meet its annual revenue target of £16.5bn by next year.

Whisky and seafood lead the way, followed by our beef and lamb, craft beers and dairy producers. International consumers, particularly quality seekers, are pleasingly receptive. The US and France are the top two destinations.

But Brexit could upset the apple cart, unless the Scottish and
UK Governments develop tailored

support packages, according to professional services firm Grant Thornton. It remains to be seen what fresh measures Mrs May’s and Ms Sturgeon’s ministers will consider.

On home turf, 2016 has been a good year. For example, Perthshire butcher Simon Howie chose St Andrew’s Day to announce that the big four UK supermarket chains will stock the world’s first widely-available gluten free haggis ahead of Burns Night.

It is estimated that this addition will equate to more than £300,000 of business in the year ahead, out of its more than £3 million total haggis sales for 2017.

The ‘free from’ food and drink product niche signals one innovative growth opportunity. As well as coeliac customers, healthy eaters are impressed.

To slake the thirst, Bellfield Brewery, a dedicated gluten-free microbrewery in Edinburgh, is the first in the UK to run brewing trails with a new gluten-free barley from Australia, Kebari, which may simplify its processes. Meanwhile, craft brewer Innis & Gunn raised £2.5 million through its equity crowdfunding drive, exceeding its initial target by £1.5m.

Professional services

As with virtually ever other part of the Scottish economy, the professional services sector is trying to feel its way forward following the Brexit vote in June. Although legal and accountancy firms continue to prosper, there is a great deal of uncertainty about changes to come.

Interest in a career in the law is healthy and growing, with the number of solicitors north of the border now rising above 11,000 for the first time. Perhaps even more significantly, there are now more female solicitors than male, though there are still the challenges of a gender pay gap and getting women into senior positions to address.

The landscape in the profession may currently be positive and there is a general sense of optimism, but there are some worries going forward. Many believe that the Scottish market has become saturated – nearly seven out of 10 solicitors think that there are simply too many firms and practitioners.

This situation have driven more than half of Scottish companies to hold merger talks in the last year, though most have not reached a conclusion. There have been rumours that two of the biggest and best known firms, MacRoberts and Morton Fraser, are in discussions. If they did combine, it would create the sixth largest firm north of the border.

Accountancy, too, is flourishing, with the big four firms continuing to dominate the market and capitalising on business optimism – though, again, there is some nervousness about what the UK’s future relationship with the EU will be.

Though both profitability and investment are increasing, consolidation is taking place, with Scott-Moncrieff acquiring Edinburgh practice Ogilvie and Company and Inverness firm Callandar Colgan.

Advisory services, too, are seen as an area of opportunity and may emerge as a silver lining in the overall cloud that – in business terms, at least – is Brexit. As to what it will really mean, the sector can only wait and see.

Commercial property

Even if construction started today it would probably be 2019 before the Glasgow skyline would see a new Grade A office tower, and that lack of any development pipeline is the big worry for the city’s property sector. Lack of new Grade A buildings hampers our ability to compete for new jobs and mobile projects at a time when rivals Manchester and Birmingham are benefiting from overheating in London. Whoever has the confidence to start on site would almost certainly do well, but funding for speculative development remains a desperate struggle.

Leaving aside the largest office deal, HFD Group’s 150,000 sq ft pre-let to Morgan Stanley at Waterloo Street, which has distorted annual take-up figures, this year’s focus has therefore fallen on no fewer than ten smaller refurbishment projects. With Brexit and the possibility of indyref2 on the horizon, it is ironically the UK Government’s property unit’s search for 200,000 sq ft of new HMRC and DWP space which is currently the biggest market requirement.

Edinburgh is not much better off in supply terms, though has 100,000 sq ft under construction at M&G’s £35m Quartermile 3 and GSS’ £24m Semple Street office schemes. Finance and technology firms, like FanDuel, Skyscanner and Cirrus Logic have replaced traditional professional ones and dominate an occupational market also shortly to benefit from tax and pensions demand similar to Glasgow’s. Three properties have been shortlisted in each city. Oil hit Aberdeen has new supply but few takers.

The players may have changed in Scotland’s commercial property investment world, with UK funds largely steering clear post Brexit and being replaced by overseas investors from the US, Europe, sovereign wealth funds and high net worth individuals from the Far East.

Foreign capital sees opportunity in the weak pound and will help year-end figures hold up surprisingly well, though price chipping is afoot and the additional independence questions add to uncertainty and leave us trading at a discount.

Industrial development in Scotland suffered a body blow in April with the Scottish Government – despite protests – ending 100 per cent rates relief on empty buildings, apparently in the belief this would drive landlords to fill them. Instead, it has led not only to a virtual halt in speculative new development but even demolitions of older stock.

Home delivery of internet purchases and expansion by discount supermarkets continues to drive the warehouse market, with Amazon (380,000 sq ft at J4M8) and Lidl (120k at Eurocentral) among those growing their network. Our lifestyle changes are reflected in cinemas and an accompanying cabal of restaurants appearing on every out of town retail park, without serious damage to city centres.



Despite rising personal debt, pay that has barely increased since the crash of 2008 and a recent forecast that economic growth could fall by half next year as the country’s negative jobs growth continues, shoppers have been energetically wielding their credit cards, online and in-store.

Black Friday, now extended by many retailers over the full weekend, was a stampede to the stores (though thankfully without the riots of 2014 when police had to intervene at several sales), with UK shoppers spending a record £2bn on the day alone, though analysts had predicted more. With grim intimations of rising prices in the New Year following the slump in the value of sterling, many us were keen to invest in high-value items while there was a window of opportunity.

Department store John Lewis was probably the most prominent beneficiary of shoppers’ enthusiasm, ringing up its best ever weekly revenues of £199.8m, up 6.5 per cent on the same week last year.

According to Scottish Government figures, retail sales volumes in Scotland grew by 4.9 per cent in Quarter 3 of 2016 compared to the same period in 2015, and the value grew by 2.1 per cent.

October saw Marmite-gate, when Tesco, in a 24-hour standoff with manufacturing giant Unilever, made the much-debated yeast extract temporarily unavailable on its website along with Hellmann’s mayonnaise, PG Tips and other brands. Unilever claimed it was forced to put up its prices because of the weak pound. An official spokesman for the Prime Minister fielded questions on the dispute, saying: "It is a decision for the companies how they market and sell their products".

The shadow that loomed large over the retail sector this year, though, was that of Sir Philip Green when BHS closed its doors (which had opened in Scotland in 1964) joining C&A and Woolworths in previous years and leading to large-scale unemployment and pension concerns. Sir Philip had suggested he had severed his connection with the store after selling it for £1 last year but was called to account over a £571 million hole in its pension scheme. The Pensions Regulator began enforcement measures against Sir Philip and bankrupt Dominic Chappell, who bought BHS, "to seek redress on behalf of the BHS pension schemes".


Destabilising threats to Scottish labour market dynamics over the past 12 months give executive search professionals challenges to ponder. Yet growth remains a target.

"We’ve enjoyed incremental overall growth in our core markets, despite continuing uncertainty caused by Brexit and the US election," says Aspen People director Donogh O’Brien.

"Recruitment companies must spell out their focus on service and partnership. This applies equally to voluntary board posts as well as (to) typical leadership executive director/ CEO campaigns. Next year is set to be another rollercoaster. We’re anticipating growth."

Scott Miller, Director for Scotland at Badenoch & Clark Executive, is bullish but cautions employers against complacency.

"In Scotland, our Executive Search and Interim business has grown 30 per cent in 2016. We expect similar growth in 2017," he reports.

"We see agility, with short-term growth in the professional interim market most likely in Scotland. Longer term, the Brexit decision should be a wake-up call for those employers who don’t take strategic talent and workforce planning seriously. Employers need to invest in their people and collaborate with education providers to develop the UK’s domestic talent pipeline now."

Managing Director for Hays in Scotland, Akash Marwaha, echoes the sentiment. "In 2016, we predicted 70 per cent of organisations in Scotland planned to recruit additional staff. Our research following the EU referendum increased this to 92 per cent. The employment market this year has remained robust, in spite of uncertainty.

"There are more jobs now than in previous years," he warns employers. "In 2017 skilled candidates will be spoilt for choice, especially in the construction and property, IT and financial services sectors."

Travel and tourism

The summer of 2016 was a good one for tourism in Scotland, as terrorist incidents in traditional destinations led some to holiday at home and the currency effect of the Brexit vote brought overseas visitors enjoying improved flight connections.

Glasgow Airport celebrated its 50th anniversary this year, one in which it launched another series of new routes and is on course to achieving record passenger levels after achieving its biggest ever percentage increase in annual passenger numbers during 2015. The airport is expecting to benefit from a £25m investment which was made to extend the main terminal and create more retail and lounge space, plus resurfacing the runway.


Managing director Amanda McMillan noted that passenger numbers on Emirates’ services were higher than before the recession and welcomed the return of Air France.

The airport will not, however, have welcomed the Brexit referendum vote and the subsequent threats by airline companies to take their operations elsewhere as since the European single market came into force, the number of intra-European flights has doubled.

Edinburgh airport continued its growth, predicting last month that passenger numbers would rise by a further 18 per cent, from 11.1 million last year to 13.1 million in 2020. Despite local residents’ disquet the airport said it would "safeguard" land for a second runway, though this will not come into regular use until 2050.

Unsurprisingly, in an area dominated by the offshore industry, Aberdeen airport has been negatively affected by the downturn in the sector but is looking to the future and forging ahead with a £20m project which will see a 50 per cent increase in the size of the existing terminal.

In October nearly 14,000 people subscribed to an online petition calling for ScotRail operator Abellio to have its contract terminated early over punctuality issues and the company’s woes were compounded last month when trains between Edinburgh and Glasgow were cancelled after it said that engineering works had overrun.

On the plus side, there was progress toward establishing the proposed £144m rail link, backed by City deal funding, between Glasgow airport and the city centre and the city last month launched a new tourism and visitor plan focused on increasing overnight leisure tourism visits to three million per year by 2023.


Gareth Williams, chief executive of Skyscanner, which was sold to China’s Ctrip for £1.4 billion

Technology and R&D

The £1.4 billion sale of Edinburgh-based online travel comparison company Skyscanner to Ctrip, China’s largest online travel firm, brought 2016 to a spectacular end in Scotland’s technology, research and development scene.

Glasgow-based venture capital firm Scottish Equity Partners reaps nearly £500m on its investment in Skyscanner, and has also raised a new £260m fund focused on high-growth technology and technology-enabled companies.

There were of signs of ambition further down the corporate scale. Edinburgh-based accounting software company FreeAgent debuted on the Alternative Investment Market at an initial valuation of £34.1m, raising £8m for expansion in what was thought to be the first example of an IPO by an equity crowdfunded start-up.

Rapidly growing Clyde Space, a world-leading innovator and supplier of CubeSats and small satellite systems, signalled its ambitions by recruiting the former president of Virgin Galactic as non-executive chairman as the company pursues a significant share of a £1.8 bn global market. Stream Technologies, a leader in design and provision of specialised mobile networks expanded on to larger premises at Skypark, Glasgow, creating new jobs as it targets a near quadrupling of turnover to £20m by 2018.

The £180m Oil and Gas Technology Centre in Aberdeen filled key posts to start work on helping companies to develop and deploy new products and processes that can reduce costs in the North Sea industry. It will ramp up activity in 2017.

The University of Strathclyde Business School is to launch an MSc in Financial Technology next September as this aspect of financial services continues to expand in Glasgow and Edinburgh.

In life sciences, drugs giant GlaxoSmithKline announced new jobs at its expanded penicillin manufacturing plant in Irvine. At the other end of the spectrum, Selkirk-based Ryboquin raised new funding to progress its cancer gene therapy product ECP-102 towards clinical trials.


Clyde Space CEO Craig Clark

US company Dexcom, a global leader in continuous glucose monitoring for diabetics, opened a European, Middle East and Africa headquarters in Edinburgh, while the University of Edinburgh’s Centre for Dementia Prevention launched at Edinburgh BioQuarter with backing from Janssen Pharmaceuticals.

Global markets

Unsurprisingly, the mood of markets throughout the world was dominated by two extraordinary events: the Brexit vote and the election of Donald Trump as the next US president. The world was affected by a seismic shift as Britons voted in favour of quitting the EU. The Organisation for Economic Co-operation and Development, which predicted early in June that such an event would send shockwaves, said that even a small reaction could "tip the word into another deep downturn" and downgraded its UK growth forecast by more than any other developed country.

In the US, Donald Trump signalled his intention to immediately withdraw from the Trans Pacific Partnership trade deal, which led Japanese prime minister Shinzo Abe to warn that the TPP would be "meaningless" without US participation.

The morsel of comfort from the tumble in the value of sterling, of course, was that British companies could take advantage of the exchange rate to boost exports; the accompanying problem remained that for manufacturers, plant and machinery generally comes from Europe and beyond and is priced in euros and dollars.

Scottish Manufactured Exports had grown in 2015 and while it’s too early to tell what the totality of 2016 will hold, there were good news stories this year as gin and whisky distillers lifted the spirits. Whisky enjoyed even greater success in premium single malts and the producers’ geographical diversification has benefited them.


Salmon was Scotland’s top food export

In September William Grant & Sons posted record annual profits with demand booming for premium spirits overseas and Diageo did well, including in India – while the number one food export from Scotland was a healthy salmon industry. In August the Scottish Salmon Company highlighted very strong global prices

Glasgow-based Think Analytics showed itself to be a continuing success with its search and recommendations software licensed to major TV media companies in more than 30 countries and in 36 different languages. Its management team expects to turn it into a US$100m company over the coming years.

Edinburgh-based Cheeky Chompers was a quirky example of export success. The firm, set up by Julie Wilson and Amy Livingstone, and maker of the chewable teething Neckerchew bib is set to double turnover again, to about £2.5m, as it expands distribution and its product range. It has presence in 33 countries.

And earlier this week, when we thought we had seen all the drama that was possible, another Prime Minister, Matteo Renzi of Italy, stepped down after calling a referendum over changes in the constitution that signally failed to go to (his) plan.

The euro, though it subsequently recovered, fell to a 20-year low against the dollar and shares in Banca Monte dei Paschi di Siena, the world’s oldest bank, fell sharply. It again illustrated the public’s rejection of establishment politics and threatened to trigger a new round of economic and political uncertainty in Europe.