Scotland’s 358-strong ‘untapped innovation cohort’ presents a real opportunity

Publishing research into the UK’s innovation economy and access to public funding for high-growth companies, Royal Bank of Scotland (RBS) - part of NatWest Group - said Scotland was home to 1,737 “innovative” businesses, 59 per cent (1,027) of whom are recipients of public funding and 367 classed as university spinouts. Only London had a higher number of university spinouts than Scotland of the UK’s regions and nations.

Scottish firms were found to perform above the UK average on commercialisation. Some 31 per cent of Scottish grant-backed firms have secured follow-on equity investment, compared with 26 per cent across the UK as a whole. Scotland’s grant-backed firms also secured one of the highest levels of follow-on investment outside London and the south east of England, according to the report, which has been produced by RBS using data from Beauhurst.

In total, Scotland’s innovative firms have attracted some £6.4 billion in equity investment since 2011. The report highlighted energy transition, life sciences, advanced manufacturing and digital technologies as areas of particular success in commercialising innovation.

At 34.9 per cent, Scotland’s “untapped innovation cohort” - defined as those businesses that continue to trade but have failed to secure follow-on investment, achieve an exit or demonstrate a scale-up signal - is lower than the 38.1 per cent rate across the UK. However, this still represents 358 businesses, suggesting that there remains significant potential to generate additional growth from existing innovative businesses, RBS noted.

Within Scotland, the west of the country had the highest number of innovative businesses overall, at 558, with the east being narrowly behind with 511. Aberdeenshire had 280 innovative businesses and Tayside had 254. The Highland and Islands had 98 innovative businesses, despite its smaller population.

Innovative businesses in the east of Scotland were found to be more successful at attracting public grant funding than those in the west, with 366 grant recipients against 328. Tayside businesses were also more successful than those in Aberdeenshire, with 129 and 120 respectively.

Despite having the lowest number of grant recipients, innovative businesses in the Highlands and Islands were only behind those in the east of Scotland, in attracting grant funding as a share of total innovative businesses.

The report identifies a challenge of ensuring that more businesses can access the finance, networks, talent and commercial opportunities needed to grow, suggesting that successful commercialisation and innovation adoption are just as important as new discoveries. It recommends strengthening access to growth capital, supporting commercialisation pathways and helping innovative firms build the capabilities needed to scale would help more businesses to move beyond the research stage and achieve sustainable growth.

The report was produced by the bank’s public policy unit using data from Beauhurst, drawing on analysis of more than 12,000 recipients of public innovation grants since 2011.

Darren Pirie, head of accelerator and partnerships at Royal Bank of Scotland, said: “Our new report highlights that not only is Scotland’s tradition for invention and innovation alive and well but that our scaling businesses support ecosystem is also very strong.

“Yet we cannot be complacent. We need to have a laser focus on delivering new opportunities and platforms for high growth Scottish businesses, so they can access public funding and attain the exposure necessary to attract the private investment they need to expand and create growth.

“As a Glasgow citizen, it is great to see Scotland's largest city and the West being a key hub for innovative businesses. However, as our report shows, high potential firms and scaling success can be found in every part of Scotland.”

Michelle Ferguson, director of Scotland at the CBI, said: “Scotland has never had a shortage of good ideas, and the numbers here confirm it, with 1,737 innovative businesses across the country and £6.4bn of equity raised since 2011. The harder question is the 358 firms still trading that have not secured follow-on investment, and that is where Scotland’s unrealised growth sits.

“Our members point consistently to two constraints, later stage growth capital and competition for skilled people, and if government, industry and the financial sector move on both we can turn more of Scotland’s inventiveness into jobs and economic opportunity for every part of the country.”

Evelyn McDonald, chief executive of business funding competition Scottish Edge, said: “Royal Bank of Scotland’s report provides a valuable picture of both the strength of Scotland’s innovation economy and the opportunity that still exists to help more businesses scale.

“The fact that 358 innovative Scottish businesses have been identified as having untapped growth potential should be seen as a real opportunity. We know from our own experience at Scottish Edge that access to the right funding, networks and support at the right time can make a significant difference to a company’s trajectory.

“Our collective challenge now is to ensure that strong bases of innovation have an equally strong infrastructure for converting innovation into commercial opportunities, clearer pathways to investment, and the support needed to build sustainable, high-growth companies here in Scotland,” she added.

Recent figures suggest that Scotland’s scale-up business population may have declined for three consecutive years.

The Scaleup Report by tech platform Vestd is based on data from the Office for National Statistics and assesses year-on-year changes in the scale-up ecosystem. The study’s latest findings indicate that the number of scale-ups in Scotland dipped by almost 1 per cent in the last year to 8,720 - a continuous downward trend since a previous peak in 2023, according to Vestd.

‘Particularly concerning’ figures show fall in Scotland’s scale-up business population