The proportion of Scottish businesses classed as innovation-active has fallen to 29.4%, extending a longer-term decline and leaving the country below the equivalent UK-wide rate of 34%.
New Scottish Government analysis of the UK Innovation Survey covers businesses with at least ten employees and examines activity during the three years from 2022 to 2024. The previous survey put Scotland’s innovation-active share at 32.4%.
The UK rate also declined, from 36.3% to 34%, meaning the deterioration is not confined to Scotland. Scotland has nevertheless generally recorded a lower innovation-activity rate than the UK average since the 2010–12 survey period.
A business is classed as innovation-active if it introduced a new or improved product, had innovation projects under way or abandoned during the period, or implemented new or improved business processes covering production, delivery, organisation or marketing.
Business-process innovation showed a particularly marked decline in Scotland, falling from 25.8% of businesses in 2020–22 to 21.2% during 2022–24.
Sector differences are substantial. Scientific research and development recorded the highest innovation-active share at 73.9%, followed by computer-related and ICT activity at 71.1%. Accommodation and food services was at the opposite end of the range.
Industrial composition consequently affects national performance. Economies with larger concentrations of life sciences, research and software businesses will typically record more formal innovation than economies weighted towards sectors where improvements are incremental or less likely to fit survey definitions.
The decline still raises questions about investment conditions. Innovation decisions are sensitive to financing costs, demand expectations and management capacity. Companies dealing with elevated energy, wage or borrowing costs may prioritise near-term resilience over projects whose commercial returns take several years to appear.
Skills are another constraint. Buying advanced machinery or software does not automatically raise productivity if a company lacks employees able to redesign operations around it. Smaller businesses can find that problem particularly difficult because technical specialists are expensive and management teams have limited capacity to run transformation programmes.
The findings arrive as both UK and Scottish policymakers put greater emphasis on innovation as a route to productivity growth. Scotland has substantial university research, life-sciences capability, energy technology and financial services, but broader economic gains depend on adoption well beyond the most research-intensive organisations.
Diffusion is therefore as important as invention. A small group of frontier businesses can invest heavily in AI, automation or advanced materials without materially lifting economy-wide productivity if thousands of established companies continue using older processes.
Regional policy has to address that gap. Grants and research programmes can help produce new technologies, while adoption may depend more heavily on finance, digital skills, management capability and confidence about future demand.
The survey does not measure the commercial value of every innovation. A lower participation rate does not mean that the companies continuing to invest are generating weaker technology or fewer valuable products.
It does, however, provide a consistent measure showing that fewer Scottish businesses meet recognised definitions of innovation activity than in the previous survey. With the rate now below 30%, reversing the trend will require attention to the everyday barriers that stop established companies investing, not solely to the research pipeline producing new ideas.
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