Blog – Investing in Scotland’s Greatest Asset
Scotland is fortunate to have a workforce where talent, tenacity and innovation are so commonplace. Time and again, they prove that, when you invest in them and their skills, you will always get strong returns on your investment.
Yet, as we look toward the decades ahead, Scotland’s business community is facing a stark demographic and economic reality. Scotland has an ageing population, with the proportion of working-age adults at 63% and projected to fall further. At the exact moment we need to be expanding our talent pool, recent UK visa restrictions are reducing the number of skilled workers entering our labour market. Simultaneously, we are watching skilled Scottish talent leave for international markets that offer more competitive salaries – in 2024, more than half of young Scots said they were considering leaving Scotland for better wages elsewhere.
Scotland cannot afford to let these skills gaps go unaddressed. Businesses are already reporting that current migration policies are increasing hiring costs and resulting in missed opportunities for growth. SCC’s internal data found that 44% of employers reported increased recruitment costs, with nearly 40% turning down contracts or reducing services due to labour shortages.
If persistent skills shortages continue, they will fundamentally weaken Scotland’s growth potential, limit our capacity to innovate, and increase fiscal pressures well into the second quarter of the 21st century. We must build an environment where people actively want to live, learn and work.
With this ambition in mind, our Plan for Growth outlines clear, actionable steps. One of the most innovative and urgently needed policies is the introduction of targeted tax or income incentives to attract and retain young and skilled workers.
We don’t need to look far for inspiration: Portugal has shown what’s possible when the government acts decisively to attract talent. When faced with challenges retaining young professionals of young professionals, the Portuguese government introduced a targeted tax incentive offering a 100% income tax exemption in the first year, which gradually tapers down over the following years. This boosts take-home pay during the most financially vulnerable stage of a worker’s career.
Piloting a similar early-career tax incentive here could help Scotland retain its graduates, attract skilled migrants, and support regional growth. This is particularly relevant for remote and rural communities, where new visa restrictions, combined with a growing depopulation challenge, leave a substantial gap in the workforce. By exploring how devolved tax powers can support early-career talent, the next Scottish Government can directly strengthen long-term workforce resilience.
Retaining talent through tax incentives is just one piece of the puzzle. Scotland also needs a single, joined-up workforce system with measurable readiness targets set in consultation with employers this broader strategy must be supported by a thriving college and university ecosystem that helps us attract and retain talent which will build a new economy.
We must switch to a more sustainable funding model for education. The challenges of recent years show that we must reform our universities and colleges to protect the pipeline of graduate-level skills – that’s an ambition that reaches beyond any one organisation. Gavin Donoghue, CEO of Colleges Scotland, welcomed the ambition to “deliver a resilient and skilled workforce that underpins sustainable growth across the country.”
We need to refocus our economy on the future, securing both public and private investment in regional skills hubs focused on STEM, AI, and green technologies to support workforce resilience. These hubs should work in partnership with employers to deliver vital training – as Ryanair is doing at Prestwick Airport, with great success.
And we must seek greater flexibility in migration policy, such as regional visa pilots, to address long-term skills shortages and expand relocation schemes for key sectors. Scotland has unique economic requirements that simply cannot be met with a ‘one size fits all’ approach.
Much is made of Scotland’s long and proud history of innovation, and even a cursory glance at our dynamic labour market, full of high-achieving apprentices, in-demand graduates, and ambitious entrepreneurs, there can be no doubt: Scotland is a nation full of potential. But we need the policy framework to foster it, and start turning potential into value. Scotland’s people are its future: the next SG should give them the investment they deserve.
– Charandeep Singh BEM, SCC Chief Executive
