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Investment levels in Scottish oil and gas are strong

These are hard times to attract investment into Europe, let alone Scotland, so it's a notable achievement for Scotland to be told it's improving its performance at that within the UK nations and regions.

It's all the more significant when you recall George Osborne warning that the prospect of independence was already putting businesses off investing in Scotland.

He couldn't cite any that had said as much. Either he was making it up, or this was because businesses don't criticise the losing bidder for their investments. We only occasionally find out the ones that got away.

But for now, the Scottish government has strong evidence showing, even if some have inevitably gone elsewhere, that a healthy number are continuing to come to Scotland despite (or because of?) constitutional uncertainty.

Nice Highlanders

Why? Well, I was given an interesting insight into the thinking and the process last month when I interviewed Prof Edward Roberts, professor of entrepreneurship at the Massachusetts Institute of Technology, and a non-executive director.

From his office overlooking the Charles River and across to Boston, he explained that he used to be on the board of a local medical diagnostics firm, Superior Sensors, looking at the right place to manufacture.

Highlands and Islands Enterprise, working with Scottish Development International (SDI, the trade and investment wing of the Scottish government) already had links into the medical sector around MIT.

The company was looking for easy access to the European market. Inverness had that, but so did other bidders. It was looking for an educated workforce. Inverness had that, but so did others. It wanted to work with people who would co-operate and collaborate "in a nice way". Highlanders can be nice, but so are others.

Understanding customers

When the investment decision was about to go to Ireland, Roberts recalls the Scottish team asked to make one last bid to the company's directors, over dinner in Dublin. And despite Ireland's lower corporation tax, the Scots clinched it.

Says Roberts: "When you started to add up all the things a company is looking for, starting from a blank sheet of paper, Scotland at that time came out number one."

The firm became Inverness Medical, and a big Highland employer, now owned by Johnson & Johnson.

That's why, when another company of which he is director, Daktari Diagnostics, started looking to scale up manufacture of its medical devices, it put Inverness into a long list of 14 options, and the Highlands came out on top again.

By international benchmarks, SDI punches above its weight. "My experience is that these are fine people," Prof Roberts told me. "They understand their customer. They understand us very well".

One of the tricks they can pull is that Scotland operates at a small enough scale that SDI can easily bring ministers on board to make the pitch with them. A call from the First Minister of Scotland can make a difference in a tight contest. Top people like to know they've got access to top people.

Northern exposure

And that brings us to one of the factors behind those Ernst & Young findings about Scotland doing well on inward investment last year. There may be an impact from the abolition of SDI's and Scottish Enterprise's rivals in England, the Regional Development Agencies.

Westminster's coalition government got rid of them when it won office in 2010, and they're replacing them with business partnerships. That appears to put Scotland at a bigger advantage. Indeed, Wales and Northern Ireland may have gained as well, as they came out quite well from the accountancy firm's survey.

However, if you listen to BBC Radio 4's Analysis programme this week, asking 'Is regional policy a waste of time?', you would find an argument that such intervention in regional/industrial policy in north-east England has worked only poorly.

Magnet London

It's worth a drill down into some of the other Ernst & Young findings. There's a glaring clue in the title: "No room for complacency".

One is that it is London that stands out as the big draw for inward investors. It get the most inward investment projects and most jobs. And when asked which nation or region of the UK is the most attractive location, 45% said London. Scotland did well relative to the other options, but with only 4%.

So while it will cheer fans of independence to find that inward investment is not being discouraged, London's strength raises questions of whether Scotland would want to put up barriers (in regulation, employment law or tax differences, for instance) with such a powerful economic dynamo.

The figures show that inward investment is much less about manufacturing than we used to assume in the glory days of attracting electronics firms into Silicon Glen. Across the UK, Ernst & Young found only 17% of the projects were for manufacturing, while 57% were about sales and marketing. In Scotland, the balance is much closer, at 31% manufacturing to 32% sales and marketing.

The survey found Scotland doing well out of US outward investment, as well as France, Norway and Sweden. That may have a lot to do with the current strong investment levels in oil and gas.

But investments from India and China don't put Scotland in such a positive light. Already important international investors, notably in Britain's steel and car manufacturing, these big Asian players are going to become much more so.

Moreover, there's a trend afoot known as re-shoring, which isn't included in the Ernst & Young work, but which is worth a mention. It's reversal of offshoring, which is becoming more evident in the USA, with companies bringing manufacturing back from Asia to be near the home base.

The cost advantages of being in China have diminished as wages and other costs have risen. Managers in the US have learned the advantages of having shorter lines of control.

And in sectors where quick product turnaround is an advantage - the fickle business of clothing retail, for instance - they don't want to have to wait for shipping. So if that is shifting at least some manufacturing from Asia to Europe, as much as to the US, there will be opportunities there for the investment team at SDI.

"Poor analysis"

A final note of caution for Finance Secretary John Swinney and others warmly welcoming the news form Ernst & Young.

Yesterday at a conference in Edinburgh, Rupert Soames, chief executive of temporary power firm Aggreko, took on Jim McColl of Clyde Blowers, one of those who argues the opportunity to cut corporation tax in Scotland could unlock investment and growth, and that a "no" vote on independence holds risks for business.

McColl's aligned with the business grouping getting on board with the Yes Scotland campaign, arguing that there's latent investment waiting to be unlocked if fiscal and regulatory controls shift to Edinburgh.

Soames, English-based while running a company headquartered in Glasgow and assembling generators in Dumbarton, is willing to put his head above the parapet, but he reaches a conclusion that's both different and trenchant:

"The persuasion so far has not been good; the facts presented seem partial and in some cases misleading; the analysis poor," he argued.

Having just invested in a new plant in Dumbarton, he doubts that he would have done so in an independent Scotland.

"I am certain that it will place barriers to the free movement of goods, services and people where none exist today. I am certain that the two-thirds of Scottish exports that go to other parts of the United Kingdom, every pound of the £45bn will have attached to it cost that does not exist today.

"I am certain that the cost of government borne by the Scottish people and businesses will increase substantially".

What Rupert Soames had also said in a separate newspaper article, earlier in the week, is that a far greater concern is the other referendum we may be facing soon, and which will certainly exercise business minds - on whether the United Kingdom pulls out of Europe.