10

Written evidence submitted by The Scotland Office – (ITS0026)

 

 

 

 

 

 


Introduction

  1. The Scotland Office welcomes this inquiry. This response reflects the UK Government’s focus on providing long-term stability for businesses and investments, in Scotland as across the whole UK, in a rapidly changing global economy.
  2. Throughout its history, Scotland has undergone significant industrial transitions that shaped the nation’s economic landscape. Some of the most notable industrial changes include the decline of heavy industries such as shipbuilding, steel production, coal mining, and traditional textiles, as well as the rise of sectors like oil and gas, advanced manufacturing and technology.
  3. Scotland’s industrial transitions have been varied in their causes, impacts, and results. These transitions were driven by several factors, mainly changes in technology, global markets, and policy choices.
  4. There exists a large body of academic and wider expert literature that discusses at great depth in what way some transitions were more effectively managed than others, and how the legacy of these changes continues to influence the Scottish economy today.
  5. In this context it is important to acknowledge that any open market economy, such as the UK and Scotland, is open to external events, such as technological progress, and will experience changes in the structure and economic activities throughout its history.  However, government policy - such as industrial strategy, international trade, energy policy, taxation and regulation - remains a pivotal factor.
  6. The population Census data between 1901 and 2021 highlights this fact. It shows that the total working population increased from 1,982,812 to 2,500.000. Over the same period the mining workforce declined from 132,183 to 33,980 and manufacturing fell from 923,800 to 202,396. In 1901, around 47% of the total workforce worked in the manufacturing sector and this reduced to 7% by 2021.[1]
  7. These structural economic changes over time have socio-economic and societal impacts. For these reasons it is important to engage widely and understand what the UK Government can do now and going forward to effectively manage these inevitable economic changes.
  8. The difficult economic and industrial landscape inherited by this government meant that it has had to take targeted immediate interventions since it came into power last summer. Harland and Wolff - with sites in Arnish and Methil - was saved thanks to a deal brokered by the UK Government and £200 million from the National Wealth Fund will be allocated to drive investment in a viable long-term industrial future for Grangemouth.
  9. Currently the government is consulting on plans on the phased transition to clean energy of the North Sea sector helping to support investment and protect businesses and jobs now and for the future.
  10. The government has also set out a vision for a modern industrial strategy for the whole of the UK in a credible, 10-year plan to deliver the certainty and stability businesses need to invest in the high growth sectors that will drive the government’s growth mission.

 

Industrial Strategy

  1. Invest 2035 is the UK Government’s Industrial Strategy to deliver the certainty and stability businesses need to invest in the high growth sectors that will drive growth right across the UK. The strategy’s goal is to capture a greater share of internationally mobile investment in strategic sectors and spur domestic businesses to boost their investment and scale up their growth – an essential step in achieving sustainable, inclusive, and resilient growth.
  2. Scotland has major strengths to celebrate and build on, such as high-quality research institutions and innovative firms, its place within the UK’s globally integrated regulatory and competition institutions, a pro-entrepreneurial environment, and a highly skilled workforce. But there is room for improvement in the adoption and diffusion of technology and ideas, as well as improving market dynamism.
  3. The industrial strategy will be ambitious and targeted. Its primary objective is to drive growth, by taking advantage of the UK’s unique strengths and untapped potential, enabling the UK’s world-leading sectors to adapt and grow, and seizing opportunities to lead in new sectors, with high-quality, well-paid jobs. It will shape the type of growth being pursued. The government will also seek to support net zero, regional growth, and economic security and resilience. It will be grounded in long-term stability, a renewed commitment to free and fair trade, and a pro-business approach focused on reducing barriers to investment in the UK.

 

Growth-driving sectors

  1. The industrial strategy will focus on the sectors which offer the highest growth opportunity for the economy and business. Eight growth-driving sectors have been identified:

●       advanced manufacturing

●       clean energy industries

●       creative industries

●       defence

●       digital and technologies

●       financial services

●       life sciences

●       professional and business services

  1. Scotland's strengths in these sectors are well-known and the contributions industries can make, such as the financial services sector with its global centres in Edinburgh and Glasgow, and the energy sector with its world-leading expertise in the North-East of Scotland, to name a few.
  2. In the next stage of development of the industrial strategy, the government will prioritise subsectors within these broad sectors that meet our objectives and where there is evidence that policy can address barriers to growth.
  3. Ambitious and targeted sector plans will be designed in partnership with business, devolved governments, regions, experts, and other stakeholders, through bespoke arrangements tailored to each sector. 
  4. In summary, Scotland will be key to delivering growth across many of the Strategy’s priority sectors - such as defence, energy, advanced manufacturing and life sciences.  It will also be crucial that the process supports Scotland’s key city-regions to drive this growth in a similar way to in England.

 

Pro-business environment

  1. Our industrial strategy will bring forward coordinated sector-specific and cross-cutting policies that support businesses to overcome barriers and invest. By considering and listening to businesses and experts, the government can identify the most effective levers for our sectors and geographical clusters across the country.
  2. These policy areas include the following (some of which, such as skills, are devolved to the Scottish Government):

●       people and skills

●       innovation

●       energy and infrastructure

●       the regulatory environment

●       crowding in investment

●       international partnerships and trade

 

 

  1. Where policy responsibilities and levers are devolved, the UK Government will engage with the Scottish Government in addressing barriers raised.

Place

  1. A core objective of the industrial strategy is unleashing the full potential of our cities and regions. The industrial strategy will concentrate efforts on places with the greatest potential for our growth sectors: city regions, high-potential clusters, and strategic industrial sites.
  2. The Chair of the Industrial Strategy Advisory Council and the Secretary of State for Scotland discussed the council and its role in ensuring the strategy is successful in Scotland. This includes making it work in all the cities and regions across Scotland.
  3. Partnership with devolved governments will make this a UK-wide effort and support the considerable sectoral strengths of Scotland, Wales, and Northern Ireland.

 

Partnership

  1. The ambitions set out in this document can only be realised in partnership.
  2. The government will engage widely through the development of this strategy, engaging:

●       businesses

●       trade unions

●       local and devolved leaders

●       experts

●       international partners

  1. A statutory, permanent, and independent Industrial Strategy Council will be established so that the strategy is informed by a broad and high-quality evidence base.
  2. The industrial strategy and growth-driving sector are aligned for publication with the Spending Review in spring 2025.
  3. The government continues to collaborate on the development of this modern, ambitious 10-year industrial strategy.

 


Evidence

Q3. To what extent is the UK Government’s forthcoming industrial strategy, Invest 2035, geared towards the challenges and opportunities facing Scotland today?

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

  1. Scotland has industrial strengths across our identified growth-driving sectors. From clean energy expertise and capabilities in the Highlands, to financial services specialisms in Edinburgh, to cutting edge advanced manufacturing technologies in Glasgow and globally competing life sciences.
  2. However, key barriers such as those relating to energy, skills, infrastructure, access to finance, and the regulatory environment have repeatedly been raised in our engagement with stakeholders and through the initial findings from the Industrial Strategy Invest:2035 Green Paper consultation.
  3. Working in partnership with the Scottish Government and utilising the insights from the independent Industrial Strategy Council, the Industrial Strategy will focus on tackling these barriers in the eight identified growth-driving sectors and places to create the right conditions for increased investment, high-quality jobs and a tangible impact in communities.

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?

  1. To underline the UK Government's commitment to certainty, stability, and long-termism in implementing the Industrial Strategy, a statutory, independent, and evidence-led Industrial Strategy Council will be established when parliamentary time allows. In the meantime, to ensure that the Industrial Strategy is developed with independent expert advice from the start, we have established the Industrial Strategy Advisory Council (ISAC), with members drawn from across business, academia and trade unions to provide a broad range of skills and expertise. 
  2. Diversity of background, experience, and viewpoints has been a key focus in the decisions on membership to ensure we reflect the broadest range of perspectives this country has to offer.
  3. To ensure stakeholders who are not members can feed into the development of the Industrial Strategy, including in Scotland, the Industrial Strategy Advisory is engaging widely to consider views from businesses, trade unions, devolved governments, regional leaders and other stakeholders from across the UK.
  4. As part of this, the Chair of the Advisory Council, Clare Barclay, has met the Secretary of State for Scotland and the Deputy First Minister for Scotland.  The Industrial Strategy Unit and Industrial Strategy Advisory Council Secretariat have also met with the Scottish Business Chambers, City Regions, FSB, IOD, CBI, Prosper and its wide membership. The government is grateful for their support in ensuring that the voices of Scottish business are represented in the development of the Industrial Strategy. Prosper’s membership organisations are overarching and  include SMEs, larger businesses, social enterprises, trade unions, and voluntary and public sector organisations.
  5. Beyond this, the government is engaging widely on the development of the Industrial Strategy: working with businesses, trade unions, devolved governments, local leaders, academia, and international partners, including on barriers to growth and investment in Scotland.

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?

  1. Regional growth is one of the objectives of the Industrial Strategy. The Strategy will unleash the full potential of our cities and regions by attracting investment and creating the best environment for businesses to thrive.
  2. The Industrial Strategy will concentrate efforts on places with the greatest potential for the growth-driving sectors: city regions, high-potential clusters, and strategic industrial sites.
    1. For example, it will:
      1. harness research and development (R&D) investment to build strong regional innovation ecosystems;
      2. use financial mechanisms like the National Wealth Fund to support investible propositions across the UK.
    2. The government is exploring how to build on existing place-based initiatives such as Investment Zones and Freeports, and how to identify, select, and intervene in industrial sites to make them magnets for globally mobile investment.
    3. We are working in partnership with the Scottish Government and businesses to make this strategy a UK-wide effort and to ensure the Industrial Strategy supports city regions, clusters, and strategic industrial sites in Scotland.

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?

  1. UK Government officials are working with the Scottish Government on how we can drive growth in Scotland and the wider UK within the context of our Industrial Strategy. This includes a shared understanding of our respective industrial policy strategies and plans.
  2. This partnership will help make the Industrial Strategy a UK-wide effort and support the considerable sectoral strengths of Scotland.

 

 

APRIL 2025

[1] https://www.economicsobservatory.com/how-has-deindustrialisation-shaped-debates-about-scottish-independence#:~:text=Economic%20historians%20are%20increasingly%20emphasising,key%20explanation%20of%20political%20turbulence.