Written evidence submitted by Universities Scotland (ITS0009)

Universities Scotland is the representative body of Scotland’s 19 higher education institutions. We have a policy and advocacy role on behalf of our member institutions.

We have made a submission to one of the three areas of interest in this call for evidence; the strand which focuses on the challenge and opportunities for Scotland in the Industrial Strategy.

Q: To what extent is the UK Government’s forthcoming industrial strategy, Invest 2035, geared towards the challenges and opportunities facing Scotland today?

Universities are hugely enthusiastic about the opportunities that exist within the Industrial Strategy and the contribution that we can make to realising its ambitions. The 8 growth-driving sectors identified in the draft Strategy align strongly with Scottish HE strengths in research, innovation and skills development. To cite some examples, which convey only a fraction of the HE sector’s role in only four of the 8 growth sectors for reasons of brevity:

• In advanced manufacturing, Scotland has developed a super cluster of critical technologies (including quantum, AI, photonics and semiconductors), across research, design, development and manufacturing, which is unrivalled in the UK outside the South-East of England. These technologies underpin and power impact across multiple sectors, including advanced manufacturing.
• In clean energy, universities are well-placed to support the UK Government’s mission to make the UK a clean energy superpower, particularly through research into renewable energies, exporting electricity, and carbon capture utilisation and storage. Scotland Beyond Net Zero brings together 10 HEIs to mobilise their strengths in research, data and innovation to support Scotland in its net zero transition and beyond.
• In life sciences, the sector is already crucial to Scotland’s economy but represents significant potential for continuing high growth. Scottish universities’ excellence and well-established partnerships across the health and life sciences sector position Scotland to take advantage of growth opportunities in critical areas such as digital health, precision medicine, and advanced pharmaceutical manufacturing.
• In the creative industries, which contribute more than £5 billion to the Scottish economy every year, Glasgow is an important and dynamic creative and cultural cluster in Scotland and the UK. Scotland’s art school and Conservatoire are core to growing and attracting a population of creatives, practitioners and some of Scotland’s most important cultural and creative organisations. 

Q: What are the barriers to and enablers of industrial growth in Scotland, both now and in the future?

Enablers:

Scotland’s universities are a huge asset as an enabler of industrial growth. Our universities actively engage with and enable business-led research and innovation, as well as producing highly skilled graduates, across all 8 growth-driving sectors.

• The importance of world class and sustainably funded fundamental ('blue skies') research cannot be over-stated. We support the drive to commercialise the products of research. However, blue skies research, in which UK universities excel, is often viewed as too high risk and too long-term for commercial investors (at technology readiness levels 1-3). As an example, the origins of quantum science are over a century old, but it has only been in recent years that practical applications for quantum have become possible, with the quantum industry worth a potential £1 billion in Scotland by 2030. Public investment to support universities to continue their world leading research will ensure the UK maintains its strengths, not only in the growth-driving sectors, but in emerging industries beyond the timescales of the Strategy.

• Development of high level skills and attraction of talent to the UK. Universities are well-placed to be the lifelong high skills learning partners of industry. All 8 growth-driving sectors are dependent on high-level skills. For example, 76% of the workforce in the creative sector are graduates, 74% in professional and business services, and 73% in life sciences. The National Energy Skills Accelerator in Aberdeenshire is a good example of a responsive regional model that involves two universities, a college, industry partners and Scottish Government support via SDS. There can and should be coordination between governments to maximise the impact of this type of initiative, for Scotland and the wider UK’s benefit, within a UK Industrial Strategy.

Barriers.

• A low appetite for risk amongst investors, particularly at early stages of technological readiness, is a barrier to more commercialisation success. It’s been shown that where public funding is invested into university spin-outs, it reduces risk for private investors and improves survival rates. Government could support co-investment with other spin-out venture capital funds providing only cornerstone investment, thereby increasing the funding available.

• We see an over-concentration of investment in London and southeast England as a barrier to growth in other regions. The UK Government should prioritise investment in R&D ecosystems outside of the south-east of England and London, to drive more even distribution of economic growth. This pattern also applies to the concentration of private investment in innovation infrastructure in southeast England, including in sectors like manufacturing, finance and insurance, and business services. This risks further concentration of enterprise and can be a factor in Scotland (and other regions) losing home-grown commercial enterprises to other parts of the UK

• Low absorptive capacity of Scotland’s SME business base. Strategies to improve absorptive capacity need to be tailored to the sector, the size of industry and an understanding of the barriers faced. The average size of businesses has been a problem in Scotland, with 99% classed as SME, given the smallest businesses (0-49 employees) are least likely to be “innovation active”. Universities have extensive experience in customising policy solutions to engage small companies in innovation, including: innovation vouchers and the “match-making” services of Interface; Knowledge Transfer Partnerships; regional innovation networks; and industry-university innovation hubs like the Edinburgh BioQuarter. The cluster approach also offers significant potential in this space.

Q: To what extent does the Industrial Strategy Advisory Council reflect the make-up and priorities of Scottish industries? How can the Council ensure the needs and interests of Scottish industries are represented within the UK Government’s policy-making processes?

In broad terms:

We would like to see holistic representation of Scotland as a nation within the UK within the membership of the Industrial Strategy Council, given its cross-UK remit. In the absence of that, there should be a transparent framework or formal mechanism to ensure the Council connects to the Devolved Administrations and other stakeholders in the devolved nations on a regular basis.

We note and understand the inclusion of Skills England on the Council. Whilst it makes sense to have a strong connection into strategic skills policy, this is another body in which Scotland is not directly represented, nor is it yet clear whether Skills England will set strategy for England only or cover cross-UK agendas. This gives us cause for further concern that the UK scope of the Council will inadvertently but inevitably be steered in the direction of the needs of England and its regions.

Reflecting the priorities of Scottish industries:

We’re delighted that the membership includes those working in or closely connected to higher education (albeit in England only). More broadly, industry expertise related to the financial services sector, renewables, the creative industries and advanced manufacturing are well reflected in the membership of the Council, which aligns closely with some of Scotland’s key sectors.

Q: How can the UK Government achieve its objective of an industrial strategy with a ‘place-based approach’? What should such an approach look like, and how could it deliver for Scottish industries?

As we have noted above, effective and respectful collaboration between the UK Government, the Scottish Government and Scotland’s regions is a prerequisite of successful Industrial Strategy implementation in a way that supports places. We welcome the UK Government’s approach to regions and nations within the Strategy but would want to ensure that there is sufficient granularity and focus given to the diverse needs of Scotland’s regions. The modern Industrial Strategy puts a lot of emphasis on local growth plans, but these apply to English regions only. There is a positive model to build on for Scotland’s regions in the City and Region Growth Deals programme, and UKRI’s Strength in Places fund. Regional Economic Partnerships emerged from the Deals, and whilst they lack the formal power or structures of Mayoral Combined Authorities in England, they have a solid track record of collaboration and will be important in informing UK Government thinking on what the regions can contribute.

We support a focus on clusters as one route to growth, which can also deliver on strategic place-based objectives. Clusters are an area where Scottish and UK Government strategies for growth strongly align. Universities are core to both established and emerging clusters in Scotland. A programme like Research England’s development fund, if expanded UK-wide, could help catalyse greater collaboration to foster industry clusters. Within the Industrial Strategy’s UK focus, there’s also potential to develop clusters on a cross-border basis, with considerable potential for an east coast energy corridor extending from northeast Scotland - where GB Energy is of course now headquartered - to England’s northeast.

Cross-cluster and cross-sector collaboration is important to maximising value. As an example, Scotland’s strengths in digital and technologies (underpinned by our world-leading research in AI and data science) is a key driver of Scotland’s role as a major financial hub. Financial services are supported within the Glasgow Innovation Accelerator and fintech is a key component of the Edinburgh City Region Data-Driven Innovation programme, demonstrating the strong synergies between these two clusters, as well as the strengths across Scotland’s central belt in both fields.

We would like to see more UK Government direction of innovation infrastructure in regions which are especially poorly-served by private investors. Combining considerations of place and excellence would be helpful when considering the location of major UK research and innovation infrastructure. City Region and Regional Growth Deals are an example of where place and excellence have been effectively combined to support infrastructure development. Additional measures could include mandating organisations like British Business Bank to dedicate a percentage of funding for this purpose, or creating new sub-funds and operating models.

In Scotland, the public sector is the most frequent investor, and Scottish universities are the providers or key partners in most of Scotland’s company incubation capacity (in the form of incubators, innovation hubs and technology parks) as well as leading in the hosting of Tech Scalers. Universities themselves are anchored in their regions and proud to drive local/regional economic growth. This makes universities an ideal partner for pursuing place based economic growth.

Some proven Scottish initiatives could be scaled-up (UKRI’s place-based strategy, Innovate UK’s Catapult Network, Knowledge Transfer Partnerships, Innovation Vouchers) and there are some England-only ideas in the innovation space that could be extended to Scotland, such as the Connecting Capability Fund (which is England only at present).

Q: How will the UK Government’s approach cohere with the Scottish Government’s economic plans, including its Green Industrial Strategy and National Strategy for Economic Transformation?

Helpfully, there is some complementarity between Scottish and UK Government approaches to economic growth, both in terms of clusters and key sectors .

That said, the Scottish Government’s Innovation Strategy (2023) identified 5 (rather than 8) priority sectors. The goal must be to ensure that Scotland’s potential in all sectors is fully realised, not only where the priorities of the Scottish and UK governments overlap.

Scottish HE operates in both a devolved and reserved context for research and innovation. As such, the Innovation Strategy and its successful delivery in Scotland is highly relevant to our institutions and to maximising growth within Scotland and the rest of the UK.

We need the shared focus both governments have on innovation-driven growth to work to the  benefit of Scotland’s economy.

It is less clear to us how alignment will be achieved on skills policy between both Government and the respective public bodies in Scotland and England. As noted elsewhere, as a new body it is not yet clear how Skills England intends to operate and to what extent it will shape some aspects of UK-wide policy (including informing the skills dimension of the Industrial Strategy, and inputting into the Migration Advisory Committee on the reserved matter of migration).

ENDS

March 2025