Scotland can be an innovation nation again - here's how

Mission accomplished, you might think. Wait a while, and the jobs, industries, and incomes will follow. That’s how growth has happened before. As the economist David Autor has shown, the jobs most of us do today didn’t even exist in 1940. Out with the miners, in with the solar engineers and wedding planners.

But there’s nothing automatic about translating headline innovation into broad-based prosperity. Too many Scottish firms, once they reach a certain scale, find they must either sell or relocate elsewhere in the UK or to the US to grow. Dundee University spin-out Exscientia—a global leader in AI drug discovery—moved to Oxford to become Scotland’s first biotech ‘unicorn’.

The bigger problem is structural. Scotland has one of the most lopsided innovation economies in the world. It ranks second globally for university R&D as a share of GDP, yet sits mid-table on private sector R&D. For every pound of public research spending in Scotland, just £1.46 is matched by private investment—half the UK average, and a third of the OECD rate.

It doesn’t have to be this way. In a new report, Innovation Nation, published last week by Our Scottish Future, I set out a five-point plan to raise private innovation and ensure Scotland’s ideas scale at home. I begin with a call for a single plan, shared between the Scottish Government, UK Government and local leadership. There is no “silver bullet” for policymakers; success will require the careful coordination of reserved and devolved policy levers, as well as local consent and support. That shared set of priorities is far from Scotland’s current reality: a spaghetti junction of competing Scottish and UK institutions, impossible for business to navigate and – taken together – less than the sum of its parts.

But a plan for what? Scotland’s most pressing problem is not an absence of talent, infrastructure and access to capital. It’s that – with a few notable exceptions – it lacks what economists call ‘clusters’ of similar businesses, all of whom become more productive because they can draw on a shared pool of expertise, workers, supply chains and specialist infrastructure such as lab space or testing facilities. As well as being good for individual firms, these clusters are good for communities: they give firms a strong reason to stay put and invest, rather than relocate elsewhere.

My second recommendation is for tax and planning reform, capital spending, and political leadership to create five “Growth Zones”. These would be small campuses, putting major research facilities, indigenous start-ups, and multinational enterprises side-by-side. Scotland already has the first two; the Scottish and UK governments will have to negotiate the third, while local leaders do the hard work of assembling the land, finding the funders, builders and tenants, and creating new economic hubs.

To do that, local leaders will need more power, status and – correspondingly – accountability. Following earlier Our Scottish Future work, I call for Scottish Combined Authorities, based on the successful model of Manchester, to cover Scotland’s major urban areas.

As well as being responsible for the Growth Zones, these Scottish Combined Authorities should play a lead role in connecting the engines of the innovation economy into wider social and economic life on their patch. If we don’t make an intentional effort, overreliance on innovation-led growth can make inequalities worse.

And that’s not just inequitable: it’s inefficient. Researchers at Harvard and MIT have shown that we could raise patenting levels fourfold if we could bring talented youths from communities typically left behind by innovation into the labs and research centres.

And last but not least, any shift in efforts towards building up Scotland’s clusters can’t come at the cost of stopping – or worse, reversing – support for the universities and early stage investors that currently speaks so much to Scotland’s credit. The risk, in Holyrood and Westminster, is that we cut back on innovation funding and cut ourselves off to global talent. Scotland cannot afford to kill its golden goose.

The work we do shapes how we see ourselves and the places we live. Scotland’s identity is still deeply tied to its industrial heyday—shipbuilding on the Clyde, coal and oil from Fife and Aberdeenshire, medical breakthroughs from Edinburgh. But there is no reason the 21st century can’t belong to Scotland too.

Indeed, we can see its outline already. Glasgow’s former workshops now house Europe’s largest satellite cluster and cutting-edge life sciences. Edinburgh’s fintech firms are reimagining payment and exchange. Dundee has shifted from jute to gaming and advanced therapeutics. Aberdeen is preparing for its second great energy transition, leading on hydrogen and offshore renewables.

This is a chance to write a new chapter—not by erasing the past, but by building on it. Scotland’s future industries can honour its industrial legacy: drawing on the same places, the same skills, the same deep pride in work. But to get there, we need to do something new: create jobs in the innovation economy, at every skill level, across the country.

That is the challenge and the opportunity. To remake Scotland’s innovative legacy —not as a monument to past glory, but as a home for modern, inclusive, enduring industry. That’s what it means to become an innovation nation.

Dan Turner, Innovation Nation report author and an economist at the University of Sheffield