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The report, published jointly by the UCL Institute for Innovation and Public Purpose (IIPP) and , identifies three systemic challenges facing Scotland鈥檚 economy: the need to raise productivity growth, decarbonise the economy and tackle inequalities. However, a 鈥渃hronic problem of low investment鈥� continues to undermine living standards, stifle innovation, and hold back Scotland鈥檚 net zero transition, the report finds.

The Scottish Government is expected to publish proposals for a new green industrial strategy later this year. However, the new research warns that the government鈥檚 new strategy must 鈥渁void reheating old orthodoxies鈥�. As other countries across the world implement ambitious industrial strategies, Scotland risks being left behind.

The report calls on the Scottish Government to embrace a 鈥榤ission-oriented鈥� approach to its new industrial strategy 鈥� replacing traditional, sector-focused strategies with cross-sectoral 鈥榤issions鈥� that address major societal challenges. The focus of Scotland鈥檚 new industrial strategy should be on 鈥渟ystem-wide transformation鈥� rather than supporting a small number of sectors, Mazzucato and Macfarlane argue.

To support this, Scotland should learn from successful 鈥渆ntrepreneurial states'' across the world, where governments 鈥渁ctively shape and create markets, not just fix them鈥�. To achieve this, the report recommends that the Scottish Government:

• Moves away from acting simply as 鈥榣ender of last resort鈥� bailing out struggling firms, and instead embraces an 鈥榠nvestor of first resort鈥� role 鈥� investing proactively to nurture new technological and industrial landscapes
• Promotes greater coordination between policies such as procurement, subsidies and innovation funding, as well as institutions such as Scottish
• Enterprise and the Scottish National Investment Bank
• Creates a new 鈥榮ocial contract鈥� between government and business by attaching conditions on private sector access to state funding, and taking equity stakes in major projects
• Strengthens capabilities within Scotland鈥檚 public sector to reduce reliance on private consultancy firms听
• Creates new governance models to break government silos and drive a mission-oriented industrial strategy across the Scottish Government

The authors also warn against the risk of relying on ambitious rhetoric without concrete policy action. Instead, a mission-oriented approach requires 鈥渕ajor changes to the way that policies are delivered, the way that resources are allocated, and the way that government and public institutions operate鈥�. Future research from IIPP and Future Economy Scotland will assess how the Scottish Government can most effectively harness all its available tools, institutions and capabilities to embed missions across the public sector.

Commenting on the report, Professor Mariana Mazzucato, who served on the Scottish Government鈥檚 Council of Economic Advisors between 2015 and 2022, said:

鈥淥ld approaches to industrial strategy are not well equipped to address 21st century challenges. To succeed, Scotland鈥檚 new industrial strategy needs to do more than just hand out support to certain sectors. Our report offers a clear roadmap for a new type of industrial strategy that catalyses cross-sectoral investment oriented around bold goals, and maximises the public value of these investments. By embracing a mission-oriented approach, the Scottish Government can drive investment and innovation-led growth, and align social and environmental priorities with economic goals.鈥�听

, Co-Director at Future Economy Scotland and IIPP Policy Fellow, said:

鈥淎s other countries embrace ambitious industrial strategies, it is critical that Scotland does not get left behind. Although the Scottish Government does not have control over all aspects of economic policy, this makes it ever more critical that the powers it does have are harnessed most effectively. The mission-oriented approach we outline aims to fully harness the Scottish Government鈥檚 tools, institutions and resources to drive the structural change that Scotland鈥檚 economy so desperately needs. In doing so, it can help deliver the First Minister鈥檚 three stated priorities of growing the economy, eradicating child poverty and tackling the climate emergency.鈥�

This report is being released as part of IIPP鈥檚 Mission-Oriented Policy Hub, which builds on IIPP鈥檚 global work with governments to shape what mission-oriented statecraft looks like in practice. 听