Memorandum submitted by Scottish Enterprise
Forth Valley
CONTENTS
EXECUTIVE SUMMARY
Scottish Chemicals Sector
Issues Facing the Industry
Scottish Enterprise's Role
NEWCO
Employment Impact of BP Grangemouth
Employment Impact of Newco Grangemouth
Scottish Enterprise Forth Valley Support for BP
and NEWCO
Economic Strategy and Overview of Falkirk Economy
Forth Valley's Regional Economic Development
Strategy
Annex 1—Global Chemicals Sector
Annex 2—My Future's in Falkirk—List and
Description of Projects
EXECUTIVE SUMMARY
Background
This memorandum is submitted to provide economic
background on the potential impact and opportunities on the local,
regional and national economy resulting from BP's proposals to
establish a new global company from its olefins and derivatives
division.
The paper provides Members with an indication
of the current contribution of the chemicals sector to Scotland
and the Falkirk economy.
SCOTTISH CHEMICALS
INDUSTRY
The Chemicals Sector has long been a significant
contributor to the wealth of the Scottish Economy (over £2.2
billion in 2002) and is recognised by Scottish Enterprise (SE)
as a key industry sector. Workforce productivity is high (GVA
per employees approx. 40% higher) relative to other manufacturing
sectors and to the UK Chemicals sector as a whole. The sector
directly employs approximately 16,200 people in Scotland.
In addition, the Scottish Science base has the
capacity in numbers and quality to produce the world class research
which can form the basis for the developments required to address
the challenges and opportunities of the 21st Century. On average
approximately 15% of total spin outs have been chemistry-based
eg Strathclyde University had five from 17. Innovation amongst
chemical companies is high and chemicals are extremely relevant
in new and convergent technologies such as opto and micro-electronics,
biotech and smart materials.
SE Forth Valley is leading the development of
the Chemicals Industry action plan, and as part of this process
has engaged widely with industry, academia, and the largest trade
body operating in Scotland the CIA (Chemicals Industry association).
This has resulted in an industry which is re-invigorated, and
sees the opportunities for growth. A strategic statement of intent
has been developed by the industry facilitated by SE, however,
the industry feels vulnerable and is seeking greater understanding
and partnership from the public sector to remain competitive.
Falkirk is the pre-eminent location in Scotland
for the chemicals sector and there is a high inter-dependency
amongst the chemical companies and in particular with BP.
BP—NEWCO
The BP Grangemouth site houses the three main
operating groups, namely BP Refining, BP Chemicals and BP Exploration
(Kinneil Separation Plant). BP Grangemouth currently employs 1,544
staff and approximately 400 contractors. Taking into account both
this direct and the indirect impact of this employment there are
2,415 jobs in Forth Valley and 4,243 jobs in Scotland dependent
on BP Grangemouth.
Newco Petrochemicals Grangemouth is the petrochemical
portion of the BP Grangemouth site. The site is completely integrated
from a feedstock, intermediate product transfer and infrastructure
basis. Newco will employ around 730 staff and approximately 70
contractors. Both the direct and indirect employment impact of
Newco will be 1,070 jobs at a Forth Valley level and 2,043 at
a Scottish level.
All of Grangemouth Petrochemicals are "Olefins
and Derivatives". The Olefins business (crackers) have performed
very well but the Derivatives (Ethanol and Polymers) business
has had a very tough time over the past few years. One of the
options for Newco is to seek to decouple those businesses by investing
in further Ethylene export capacity at Grangemouth.
The past seven years have seen a poor Petrochemicals
environment at Grangemouth although there are indications of an
improvement in that business—this year Grangemouth petrochemicals
will be profitable. Similarly in refining there have been several
years of poor margins but this year there have been high refining
margins despite the high Oil price.
The Refinery mainly serves Scotland, Northern
England and Northern Ireland. Petrochemicals products are exported
worldwide. Polymers have markets locally within Scotland, within
the UK and Europe and also as far a field as China, South America
and South Africa.
The strategic rationale for the sale of the
Olefins and Derivatives business has been clearly articulated
by BP previously. When the return on capital employed is examined
for Grangemouth it can be seen that it is difficult for that part
of the business to compete for capital against other more profitable
parts of the business. Indications are that Newco Grangemouth
will be able to attract greater investment from the new parent
company.
On formation Newco is likely to be the fifth
largest chemical company in the world. Strategically Grangemouth
will become a significant component of that Newco. Grangemouth
will be the second largest of Newco's thirteen European sites
behind Cologne in Germany; representing over 19% of total capital
employed ($1.5 billion) and having 9% of all employees. Newco
Grangemouth will be the sole producer of Ethanol for the whole
company. Newco Grangemouth is likely to operate as a profit centre
rather than a cost centre.
SCOTTISH ENTERPRISE
SUPPORT
SE has had initial discussions with senior representatives
of Newco and is discussing areas of future potential investment
and joint working. Some key strategic issues are emerging such
as the potential for a new ethylene export jetty on the Forth.
This will allow Newco to sell to wider markets and thereby enable
the plant to operate a greater utilisation rates and efficiencies
enabling it to be more competitive.
SE Forth Valley will build upon the current
Account Development plan which exists with BP and undertake a
new plan with Newco when appropriate. A full account team will
be developed, having Scottish Development International field
staff in all appropriate locations involved to assist in promoting
the location for further inward investment. Likely actions will
include:
— Work with the organisations
to develop internationally as appropriate.
— Work to attract new in-house
business to Grangemouth.
— Work to attract new organisations
to Grangemouth to co-locate with BP/NewCo.
— Ensure that BP/NewCo is fully
integrated into the Scottish Chemicals Community, to embed the
organisation to Scotland.
— Work on local supply chain development
and procurement.
— Develop R&D opportunities
whereby BP/Newco can collaborate with other business/academia.
— Work to develop/employ new diversification
opportunities, company spin out/in.
— Work to ensure lean management
principles applied.
— Skilled workforce, and future
skilled workforce.
We believe that by adopting this approach it
will ensure that both BP and NewCo consider themselves to be an
integral part of the Scottish Chemicals community, with opportunities
to win new business to site, and develop opportunities to contribute
to the economic development agenda in Scotland and feel a valued
part of the Scottish Industry base.
BP remains very committed to the Falkirk area
as demonstrated through the regeneration initiative "My Future's
in Falkirk" (MFiF). This project seeks to create 4,250 new
jobs in the Falkirk area over the next 10 years. It will diversify
the industrial and business base of the area to make it less dependent
on any single sector or major employer and attract new competitive
knowledge economy businesses.
ECONOMIC STRATEGY
FOR FORTH
VALLEY AND
FALKIRK
In addition to supporting BP and Newco, SE Forth
Valley and partners are supporting the wider Falkirk and Forth
Valley economies. Forth Valley's Economic Development Strategy
aims to diversify and strengthen the local economy and increase
Forth Valley's productivity, participation and prosperity. Falkirk's
local strategy is a partnership between SE Forth Valley, Falkirk
Council, BP and the Falkirk community. The strategy aims to develop
£20 million of pump-priming that will leverage £170-£200
million of commercial investment, from which 4,250 jobs will be
created over a period of 10 years.
Since 2001 the Falkirk economy has experienced
a number of shocks, just as the national economy has. However,
there is evidence that the Falkirk economy has weathered the economic
situation well with increased participation in the work-force
and unemployment reducing to just above the Scottish average.
In addition there has been a higher than average number of business
start-ups combined with population growth over the past five years
and the expectation of continuing population growth, the Falkirk
economy has a positive outlook.
There are areas for improvement such as aiming
to drive up productivity as well as improving prosperity further.
These remain the aims of both the Forth Valley Regional Economic
Development Strategy as well as MFiF which is now starting to
implement large scale projects and get results.
SCOTTISH CHEMICALS
SECTOR
Scottish Chemicals Industry is approx 10% of
the UK industry in terms of number of organisations, employees
and turnover. In 2002 Scotland's Chemicals Industry had a turnover
in excess of $2.2 billion, which constitutes some 1.7% of Scottish
GDP—comparable to food, drink, transport engineering, mechanical
engineering, or paper, printing and publishing. See Annex 1.
In November 2003, employment in the Scottish
Chemicals Industry was in the region of 16,100 persons. This represents
a decline of 15.9% on November 2001. The largest contributing
factor in this decline was staff reductions in large enterprises
between November 2002 and 2003, such as BP, DSM (based in the
Netherlands) and Glaxo Smith Kline.
In November 2003, there were approximately 210
enterprises operating in this sector in Scotland. Of these, 51%
were micro-businesses (with less than 10 employees), while 21%
were small (10-49 employees), 14% were medium (50-249 employees)
and 14% were large (250 employees or more).
This percentage split is somewhat different
from the EU picture as a whole, particularly in the areas of small
and large organisations. The Scottish Economy has a higher percentage
of large organisations, and this makes Scotland vulnerable as
most of these organisations do not have HQ function in Scotland.
The graph for UK and Europe is representative in relation to the
value add and the employment numbers, as the value add and the
employment numbers are located in large organisations.
In terms of exporting position, in year 2000,
the Chemicals sector represented 12% of Scottish manufactured
exports, making it the second largest exporting sector after Engineering
and Allied Industries (mainly electronics). Between 2002 and 2003,
exports declined by 7.5%, while manufacturing exports as a whole
declined by 12.3%. Despite this, the Chemicals Industry remains
very significant to the Scottish, UK and EU economies, as Scotland
is a net exporter of product.
In terms of contribution to the Scottish Economy,
the Chemicals Industry contributes significantly. In 2001, the
Scottish Industry's GVA per worker was approximately £53,900
in 2000-01 prices—significantly higher than that of manufacturing
as a whole (£37,400 per head in real terms).
Between 1998 and 2001, productivity in the industry
declined at an average annual rate of 0.8%, compared to an average
annual decline of 2.4% in manufacturing.
Productivity may have declined slowly, however,
incomes in the Chemicals sector remain buoyant. In 2001, the average
annual wage in the Chemicals industry was around £26,800
in 2000-01 prices—markedly higher than the average in manufacturing
(£20,200 in real terms). Wages in the industry grew at an
average annual rate of 5.9% between 1998 and 2001, faster than
the average for manufacturing as a whole (2.6%).
Chemical Sector Geographical split: Top
6 local authorities in 2001 in terms of turnover per employee
| Local Authority |
No of units | Total Turnover £m
| Gross Value Added £m |
Total Employees
|
No of units % |
| Falkirk | 15 | 1,000
| 100 | 2,700 | 6
|
| Fife | 20 | 380
| 90 | 1,050 | 8
|
| North Ayrshire | 15 | 470
| * | 1,970 | 6
|
| Dumfries & Galloway | 9
| 20 | 10 |
100 | 3 |
| Aberdeen | 17 | 60
| 20 | 340 | 7
|
| Renfrewshire | 10 | 280
| 90 | 1,660 | 4
|
| | |
| | |
ACADEMIA IN
SCOTLAND
Scotland has a history of innovation and product and process
development. Not only is the country known for initial innovation,
but for continual product and process evolution.
The academic base in Scotland for Chemistry is excellent,
as shown on the following Research Ratings table:
| University | Subject Area
| Rating |
| Aberdeen | Chemistry | 3a
|
| Edinburgh | Chemistry | 5
|
| Chemicals Engineering |
4 |
| Glasgow | Chemistry | 5
|
| Heriot Watt | Chemistry |
4 |
| Chemical Engineering |
4 |
| Strathclyde | Chemistry |
4 |
| Chemicals Engineering |
5 |
| St Andrews | Chemistry |
5 |
| Glasgow Caledonian | Chemical Engineering
| 3b |
| | |
In addition to the Scottish Universities, Scottish Colleges
play an important role in the Chemicals Industry. One of the foremost
colleges in Scotland is Falkirk College, who specialises in Chemical
related courses with industry practical aspects in particular.
Falkirk College has just been awarded the highest rating possible
for a further education college, in the recent HMI inspection.
One of the positive developments happening with SHEFC, and
SFEFC is the move to a joint funding council and also the Eastchem/Westchem
initiative, which seeks to pool expertise and funding to Universities
in geographic locations which will enable research institutions
to specialise and collaborate, rather than compete with each other.
THE CHEMICALS
INDUSTRY ACTION
PLAN
SE Forth Valley is leading the development of the Chemicals
Industry action plan and as part of this process has engaged widely
with industry, academia and the largest trade body operating in
Scotland the CIA (Chemicals Industry Association).
This has resulted in an industry which is re-invigorated,
and sees the opportunities for growth, with the help and guidance
of the Economic Development Agency. There are challenges ahead
for the industry, but it does see a future in Scotland of high
value add manufacturing and product and process development, one
which can compete on a world scale and global environment due
to the level of skills and expertise currently available in the
country and which will continue to grow and develop.
It is the intention of SE to work with the industry to help
it achieve the aims which it feels it can attain, as a valued
contributor to the Scottish Economy.
As part of the consultation with industry, a SWOT analysis
was undertaken, the highlights of which are shown below:
| Strengths | Weaknesses
|
Compliance standards
Reputation
Management and systems
Skilled workforce
Competitive position of companies
Exit costs very high
IP/knowledge—history of innovation
| Inability of public/private sector to work together
Raw material supply
Brain drain
Old infrastructure
Bad press/media—leading to bad perception
Local companies by-passing Scotland as a possible supplier and location
Lack of interest from schools
|
| Opportunities | Threats
|
Move into niche markets (Less price sensitive)
"Pilot plant" manufacturing opportunities
IP/knowledge base
High value add/high know-how in branch plants and small niche players
Collaboration with overseas—EU, Asia, USA and Japan
Synergies with other areas eg bio-manufacturing, wider life sciences, energy
Continued efficiency across value chain
Consortia bid to help slow down rising cost of utilities
CLC-research/ innovation priorities identified
Link to UK sales pitch, not just Scotland
| EU legislation and cost of compliance
Cost of over compliance—gold plating
Fast growth/development of China, India, EU, Japan
Rising cost of utilities/transport/waste removal
Price sensitivity/tightening across value chain
Brain drain
Inability to win new projects "in-house"
Company consolidation leading to Scottish Plants being "non-core"
|
| |
STATEMENT OF
INTENT
In addition, the industry, in conjunction with the Universities
and SE, has developed a statement of intent, which it sees the
action plan assisting them to work towards, some of the aspects
identified by industry include:
— The industry would be valued and supported
(in ways not seen today).
— Letting go of traditional industries/acceptance
of likely future decline in industry areas such as commodities
where Scotland cannot compete.
— Development of products fit for Scotland's
strengths and capability.
— Encouragement of niche/specialists/synergies
links with academia with particular emphasis on less price sensitive/more
technologically difficult areas which are less prone to duplication
and price competition.
— Increased innovation of processes and products.
— Improved "local partnership"—private,
academic, public.
— Stronger links with EU, Asia, USA, and Japan.
— Organisations working collaboratively.
— Looking towards new markets—working
together and collaborating nationally.
— Clear encouragement/interventions to assist
organisations win "in-house" business and R&D projects.
— Chemical industry providing more industrial
support for stage two and three clinical trials, developing on
their understanding of moving from bench to business.
— Continue re-investment and commitment to
manufacturing—to have this base for the future.
— Research companies and academia working closely
with manufacturing industry to build on Scotland's product/process
innovative capability—to tap into home grown—produce
an "industrialisation pipeline".
— Ensure that pharma companies continue to
manufacture in UK/Scotland as they move towards marketing/service
based focus in the future.
— More knowledge sharing/collaboration across
Scotland—building on strengths—both academia and industry
ie chemistry is more secure in Scottish HEIs than rest of UK.
— Increased chemical spin-out activity more
established/increasing in size.
— Scottish chemicals industry having international
recognition—possibly part of UK—towards winning more
business in a global market.
— Lead role in manufacturing process innovation—first
five years of product life cycle.
ISSUES AFFECTING
THE CHEMICALS
INDUSTRY
The industry identified aspects of operating in Scotland
that would either help or hinder the Chemicals Industry and the
aspirations it has for the future. The main issues which they
have raised are:
— Regulatory framework—EU risk aversion,
perceived UK gold plating (and the comment that Scotland is worse
that UK as a whole).
— Lack of spin-out activities—linked
to Schedule 22.
— Perceived lack of political will, to encourage
the industry to remain and develop.
— Lack of poor/joined up approach—Planning,
Utilities, HSE, and SEPA.
SCOTTISH ENTERPRISE'S
ROLE TO
PROMOTE THE
CHEMICALS INDUSTRY
IN SCOTLAND
— Increased promotion of chemistry in schools.
— Improve growth and innovation of whole company
base—providing support to enable companies to grow, and
tap industry into existing programmes eg KTP, PofC, enterprise
fellowships.
— Work with non HQ/branch plants to win new
business and extend current contracts.
— Work to embed organisations in Scotland increasing
links with universities and across the supply chain.
— Increase retention of graduates in Scotland—eg
through the use of initiatives such as Talentscotland.
— Run events/support development of initiatives
that look at cross industry synergies, (Energy, MOCT, Life Sciences).
— Encouraging Scottish companies, especially
spin-outs to utilise Scottish supply chain—need to ensure
that they know who can do what for this to happen.
— Help organisations attract more R&D and
manufacturing projects to Scotland.
— International Marketing to increase exports.
— Tie industry into the workings of Chemistry
Leadership Council.
— Reputation—work with SDI and UKTI to
promote Scotland as location in which to do business and invest.
— Promote Scotland's capabilities and strengths,
including Scottish Pavilion at major trade shows.
— Attract events to Scotland, which industry
can participate in.
— Develop an industry sourcebook.
— Invite "globalscots" from international
companies to an information event on Scottish chemicals capacity.
— Develop industrial/marketing skills from
Scottish educational establishment, companies to raise profile
of this as an issue for the industry:
— with Scottish Executive.
— Introduce industry to collaboration forums.
— Create industry/ university working group.
— Organise regular technology briefing events.
— Assist the CIA to operate as a Trade body.
BP—NEWCO
Structure
NewCo's Global HQ will be based in Chicago. Three operating
units will be established to oversee operations in Europe, America
and Asia. The HQ for European operations will potentially be Cologne.
NewCo will be trading as a separate company from 1 January
2005 but still 100% owned by BP until legal separation takes place;
this is anticipated to be 1 April 2005.
Staff will then transfer from BP to NewCo, as we understand,
on the same terms and conditions of employment. There may be potentially
10-20 new jobs created in corporate admin functions such as finance,
commercial management and HR. NewCo will be required to provide
these services as a separate company.
It is anticipated that the business will float on the stock
market around July 2005.
NewCo will be the fifth largest chemicals company in the
world.
NEWCO
GRANGEMOUTH
The BP Grangemouth site houses the three main operating groups,
namely BP Refining, BP Chemicals and BP Exploration (Kinneil Separation
Plant). NewCo Petrochemicals Grangemouth is the petrochemical
portion of the BP Grangemouth site. The site is completely integrated
from a feedstock, intermediate product transfer and infrastructure
basis.
The main NewCo units are two major ethylene crackers. Other
facilities include downstream polymer production including Polypropolene
(PP), High Density Polypropolene (HDPE) and Linear Low Density
Polypropolene (LDPE) along with two ethanol units. There is also
a benzene production unit, a butadiene unit and a gasoline treatment
unit utilised to process raw gasoline produced in the ethylene
units. Power and steam generation utilities are provided from
the BP Grangemouth Utility centre. There is some small amount
of offsite storage tanks, a marine jetty product export facility
and road car and pipeline product dispatch facilities. Administration
buildings, maintenance facilities and warehouses provide support
infrastructure.
Adjacent to the site there are a number of other petrochemical
companies owned by Rohm and Hass (polystyrene), and ENI Chem/Polimeri
(SBR). There is some integration of product streams with these
companies, for example butadiene is transferred by pipeline to
Polimeri.
Grangemouth is the second largest of NewCo's 13 European
sites behind Cologne in Germany. It represents 19% of total capital
employed and 9% of NewCo's workforce. NewCo Grangemouth will be
the sole producer of Ethanol for the whole company.
Industry Trends
All of Grangemouth Petrochemicals are "Olefins and Derivatives".
The Olefins business (crackers) have performed very well but the
Derivatives (Ethanol and Polymers) business has had a very tough
time over the past few years. One of the options for NewCo is
to seek to decouple those businesses by investing in further Ethylene
export capacity at Grangemouth.
The past seven years have seen a poor Petrochemicals environment
worldwide, although there are indications of an improvement in
that business—this year Grangemouth petrochemicals will
be profitable. Similarly in refining there have been several years
of poor margins but this year there have been high refining margins
despite the high Oil price. The Forties Pipeline System (FPS)
business is somewhat insulated from oil price variations because
much of its business is based on tariffs however, in general,
higher oil prices are good for the FPS business.
EMPLOYMENT
There are currently a total of 1,544 people employed at BP's
Grangemouth site as well as an additional approximately 400 contractors.
BP will transfer 530 direct site jobs to Newco as well as around
200 shared service jobs (corporate admin). Of the contractors
less than 70 work in the petrochemicals division.
This represents just about half of the total BP Grangemouth
workforce (47%) and just under a fifth (18%) of contractors.
This will represent around 9% of total Newco jobs.
BP will continue to recruit between 20 and 30 apprentices
each year.
BP Grangemouth Headcount (1st January each year)
Since 2000, BP Grangemouth has reduced their workforce by
around 900 people. It is anticipated that their eventual headcount
will stabilise around 1,460.
Employment impact for BP Grangemouth (refinery and petrochemicals)
The employment impact across Forth Valley and Scotland was
calculated using SE's Employment Impact model (designed by Experian
BSL). This model takes the total direct employment within an organisation
and calculates the level of indirect employment related to that
particular organisation. As can be seen from the tables below,
for BP Grangemouth as a whole there are 1,944 direct jobs (including
contractors). At the Forth Valley level there is approximately
470 additional indirect jobs dependant upon BP Grangemouth. At
the Scottish level there is a higher impact of 2,298 jobs indirectly
dependant on BP Grangemouth. This gives a total figure of 2,415
jobs in Forth Valley and 4,243 jobs dependent on BP Grangemouth
at Scottish level.
| Employment Impact of Fuel Refining and Chemicals
|
| Forth Valley | Scotland
|
| Direct Jobs | 1,944 | 1,944
|
| Indirect Jobs | 470 |
2,298 |
| Total Jobs | 2,415
| 4,243 |
| | |
Employment impact for NewCo (petrochemicals)
Looking at the employment impact of NewCo there are 800 direct
jobs (including contractors). This has an indirect impact of 273
jobs at Forth Valley level and 1,243 jobs at Scottish level. The
total number of direct and indirect jobs dependent on NewCo is
therefore 1,073 in Forth valley and 2,043 in Scotland.
| Emloyment Impact of Chemicals only
|
| Forth Valley | Scotland
|
| Direct Jobs | 800 |
800 |
| Indirect Jobs | 273 |
1,243 |
| Total | 1,073
| 2,043 |
| | |
MARKETS SERVED
Refinery—The Refinery mainly serves Scotland, Northern
England and Northern Ireland.
Petrochemicals—Petrochemicals products are exported
worldwide. Polymers have markets locally within Scotland, within
the UK and Europe and also as far afield as China, South America
and South Africa.
SUPPLY CHAIN
IMPACTS
Last year BP Grangemouth purchased goods and services from
1,680 companies (1,200 of these were for Newco Grangemouth), 640
were Scottish (approximately 500 of these Scottish companies were
trading with Newco Grangemouth).
The spend with the Scottish suppliers over the last 12 months
was approximately £85 million (and £50 million of this
was for Newco).
| Number of Scottish Suppliers
| | Value of Contracts to Scottish Suppliers (£ million)
|
| Total BP (including Newco) | Newco
| Newco as % of total BP | Total BP (including Newco)
| Newco | Value of Newco as % of BP
|
| 640 | 500 | 78%
| 85 | 50 | 59%
|
| | |
| | |
TURNOVER
In 2002, the end market value of goods generated from BP
Grangemouth site (both refining and petrochemical) was approximately
$8 billion.
ANNUAL CAPITAL
INVESTED FROM
2000-04
Capital invested during the last five years is shown below:
| Year | Capital Invested ($ million)
|
| 2000 | 270 |
| 2001 | 140 |
| 2002 | 140 |
| 2003 | 190 |
| 2004 | 155 |
| |
CAPITAL EMPLOYED
Newco Grangemouth represents a significant level of Capital
employed—19% of Newco's total Capital Employed.
| Capital Employed ($billion)
|
| Newco | 8 |
| Grangemouth | 1.5 |
| Grangemouth as % of Newco | 19%
|
| |
SCOTTISH ENTERPRISE
FORTH VALLEY'S
SUPPORT FOR
BP AND NEWCO
SE Forth Valley will build upon the current Account Development
plan which exists with BP and undertake a new plan with Newco
when appropriate.
A full account team will be developed, having SDI field staff
in all appropriate locations involved. Likely actions will include:
— Work with the organisations to develop internationally
as appropriate.
— Work to attract new in-house business to
Grangemouth.
— Work to attract new organisations to Grangemouth
to co-locate with BP/NewCo.
— Ensure that BP/NewCo is fully integrated
into the Scottish Chemicals Community, to embed the organisation
to Scotland.
— Develop R&D opportunities whereby BP/Newco
can collaborate with other business/ academia.
— Work to develop/employ new diversification
opportunities, company spin out/in.
— Work to ensure lean management principles
applied.
— Skilled workforce, and future skilled workforce.
We believe that by adopting this approach it will ensure
that both BP and NewCo consider themselves to be an integral part
of the Scottish Chemicals community, with opportunities to win
new business to site and develop opportunities to contribute to
the economic development agenda in Scotland, and feel valued part
of the Scottish Industry base.
ECONOMIC STRATEGY
AND OVERVIEW
OF FALKIRK
ECONOMY
Forth Valley's Regional Economic Development Strategy
The overarching vision for the future of the Forth Valley
economy is:
"a thriving and diverse economy, well connected nationally
and internationally where prosperity is growing throughout the
population."
How we will achieve our vision
The vision for Forth Valley is focussed on increasing prosperity
and economic growth while ensuring that this growth is distributed
as widely as possible throughout the region. The success of the
strategy will be measured by three related strategic measures
which are consistent with the core strategic measures behind Smart
Successful Scotland—productivity growth and higher participation
leading to increased prosperity.
We require progress in all three to meet our aspirations.
The main strategic objective is to increase prosperity for Forth
Valley businesses and residents. This will be achieved by increasing
productivity and participation and in turn will help generate
more prosperity.
— increasing prosperity: economic development
is about providing greater prosperity and generating a better
quality of life for people and allowing business to reinvest in
new products, processes and skills. Creating the conditions in
which the people of Forth Valley can access higher skill, higher
paid employment is critical to this vision. Shifting more of the
region's economic base into higher value, higher income activity
is key to future success.
— increasing productivity: productivity
(the level of economic output per worker) is the key driver of
economic growth and lies at the heart of the Framework for Economic
Development and Smart Successful Scotland. Increasing productivity
levels in the Forth Valley economy will lead to greater competitiveness,
higher output, increased employment opportunities and greater
market share.
— increasing participation: economies
cannot sustain growth if insufficient numbers of people are not
engaged in some form of economic activity. Increasing the number
of people participating in the economy will show that more employment
and economic opportunities are available to the people of Forth
Valley.
My Future's in Falkirk
The local strategy designed to delivery this vision in Falkirk
is the MFiF regeneration strategy. MFiF (previously the Falkirk
Action Plan) is a strategy whereby £20 million of pump-priming
will leverage £170-£200 million of commercial investment,
from which 4,250 jobs will be created over a 10 year period. MFiF
is a partnership between SE Forth Valley, Falkirk Council and
BP as well as Falkirk's business and local communities and was
established in response to the redundancy announcement by BP in
2001.
Projects included under MFiF are included in the Annex 2.
Falkirk Economy
The tables below shows the Falkirk economy benchmarked against
Forth Valley and Scottish economies in relation to the three strategic
economic indicators of productivity, participation and prosperity
as well as the unemployment figures since 2001.
Productivity—(GVA / per FullTime Worker)
In 2001 Falkirk's productivity (£33,695) was above that
of both Scotland's (£32,842) and Forth Valley's (£32,842).
Since then productivity has declined to £32,444 below the
Scottish average of £34,415, albeit is still just above the
Forth Valley average of £32,068.
Participation—(% of working age population in
employment).
In 2001, the participation rate in Falkirk was 75% this was
above the Forth valley level of 71% and equalled the Scottish
average. Now in 2004 the participation rate has actually increased
to 77%, still in line with the Scottish average and above Forth
Valley.
Prosperity—(household income per head of population).
Household income per head of population is used as a proxy
for prosperity. Prosperity has increased in Falkirk over the last
three years, although it is still below the national average as
well as Forth valley average.
| Productivity GVA per head of FT worker (£)
| Participation % of working age population in employment
| Prosperity household income per head of population (£)
|
| | |
| | | |
| 2001 | 2004
| 2001 | 2004 | 2001
| 2004 |
| Falkirk | 33,695 | 32,444
| 75 | 77 | 9,398
| 9,849 |
| Forth Valley | 32,053 | 32,068
| 71 | 72 | 9,478
| 9,925 |
| Scotland | 32,842 | 34,415
| 75 | 77 | 11,054
| 11,779 |
| | |
| | | |
Unemployment
Unemployment across Scotland has fallen over the last three
years, by 0.4%. In Falkirk unemployment has fallen by a larger
amount than the Scottish average, from 3.4% to 2.9%, a drop of
0.5%. Despite this achievement the claimant count unemployment
rate is still slightly above the Scottish average.
| Claimant Count Unemployment (%)
|
| 2001 (September) | 2004 (September)
|
| Falkirk | 3.4 | 2.9
|
| Forth Valley | 3.1 | 2.7
|
| Scotland | 3.2 | 2.8
|
| | |
Overview
Since 2001 the Falkirk economy has experienced a number of
shocks, just as the national economy has. However, there is evidence
that the Falkirk economy has weathered the economic situation
well with increased participation in the work-force and unemployment
reducing to just above the Scottish average. There are areas for
improvement such as aiming to drive up productivity as well as
improving prosperity further. These remain the aims of both the
Forth valley regional economic strategy as well as My Future's
in Falkirk which is now starting to implement large scale projects
and get results.
| 
