Scotland has lower skills shortages than other parts of the UK, but there are signs that business is failing to capitalise on the knowledge economy, according to a new report.

Economic think-tank Local Futures, found that skill levels in Scotland are higher than most other areas of the UK, and are similar to those of the south-east of England.

Edinburgh is singled out in the report as the area that attracts skilled migrants, while both the capital and Glasgow are in the top ten in the UK in terms of graduate retention.

The report for Scottish Enterprise identifies pockets of success in capitalising on skills, particularly in Edinburgh and Aberdeen, but says a dependence on the public sector and a narrow band of industries, such as tourism, is holding back the economy.

Scotland, as a whole, also has a lower employment rate than the UK average, with a strong dependence on the public sector and a narrow band of industries such as tourism and retail. This in turn translates into wages, with an average take-home pay in Scotland of £326 a week – 6% below the UK average.

The report recommends Scottish Enterprise take a strategic approach to developing a knowledge economy in the country, with benchmarks to measure progress. It also suggests setting up a "smart observatory" – an interactive, web-enabled, database-driven knowledge management system to support and guide knowledge-economy policy making.

* Learners in Scotland are to receive up to £200 a year to pay for courses that will help them get back into work and improve their career opportunities. The new Individual Learning Account (ILA) Scotland scheme has been funded until at least 2008.

Initially, ILA Scotland is to be available to people whose income is £15,000 or less, but later this year 2005 income restrictions will be removed. Learners will be asked to make a minimum contribution of £10 for each course they undertake.