APPENDIX 5: THE SCOTTISH ECONOMY IN
CONTEXT
Scotland's prosperity is very similar to the UK average.
Output per head is only a whisker below the UK's as shown in the
chart below.[176] Outside
London and the South East, Scotland is the most prosperous part
of the UK. North Sea oil and gas are excluded from the chart belowand
other figures in this appendix unless otherwise statedas
ONS treat North Sea oil and gas output as arising in a separate
region and there is no clear way to divide it among the regions
of the UK. The impact of different allocations of North Sea oil
and gas to Scotland and the rest of the UK are considered throughout
this report.
FIGURE 4
Output per head* excluding North Sea oil
and gas 2011 (£)
*Output per head measured by Gross Value Added
(GVA) per head
Source: ONS, Regional Gross Value Added (Income
Approach), 12 December 2012
Scotland has just over 8% of the UK's population
and output as shown in the table below. Its average price level
is also very close to the UK average as are its unemployment rate
and level of average earnings. Productivity in Scotland is also
closest of all the UK regions to the UK average. Professor Charlie
Jeffery of Edinburgh University said: "Scotland is more or
less bang on the UK average on most economic indicators."[177]
TABLE 3
Key figures on Scotland and UK economies.
North Sea oil and gas excluded from output figures except for
the UK marked *
| Scotland
| UK |
Population-2011 (million)[178]
| 5.3m (8.4% of UK) |
63.2m |
Output-2011 (£ billion)[179]
| £108bn (8.1% of UK)
| £1,341bn |
Output per head-2011 (£)[180]
| £20,571 | £20,873
|
Price level index-2010[181]
| 99.7 | 100
|
Unemployment-October to December 2012 (%)[182]
| 7.7% | 7.8%
|
Average weekly earnings-2012[183]
| £498 | £506
|
Productivity-output per hour worked index for 2011[184]
| 96.9 | 100
|
Trade-2011 (% of output)[185]
| 37% (excluding trade with the rest of the UK)
105% (including trade with the rest of the UK)
| 67%* |
Public sector spending-2011-12 (% of GDP)[186]
| 52% | 46%*
|
Scotland is a very open economy when trade with the
rest of the UK is added to that with the rest of the world. While
the trade and GDP data for Scotland should be treated with cautionthe
data for Scotland is "experimental" and excludes North
Sea oil and gas output whereas the data for the UK includes North
Sea oil and gasthe overall picture is clear. For Scotland
trade with the rest of the UK is a huge part of its economy representing
almost two-thirds of its total trade and worth an estimated 68%
of output. But for the rest of the UK trade with Scotland is a
much smaller share of its economyaround 6% of its output.[187]
Trade linkages between Scotland and the rest of the UK are particularly
strong in financial services. Scottish insurers sell 6% of their
products there and 94% to the rest of the UK. About 16% of mortgages
sold by Scottish firms are to Scottish postcodes and 84% to the
rest of the UK.[188]
Public sector spending, however, is a considerably
higher share of Scotland's output. Again there is a note of caution
in using this data as the ratio for Scotland excludes any North
Sea oil and gas output while the ratio for the UK includes North
Sea oil and gas output. Public spending in Scotland is underpinned
by the Barnett formula which was introduced in 1978 and allocates
substantial parts of government spending between the four nations
of the UK.
Manufacturing and construction make up more of Scotland's
economy than the whole UK, with the reverse true for financial
services, real estate and wholesale and retail trading. But the
differences are relatively small as the chart below shows. North
Sea oil and gas would likely make a significant contribution to
an independent Scotland's economy but this is not included in
the chart below. These similar economic structures and strong
trade linkages lead Scotland and the rest of the UK to share similar
business cycles.[189]
FIGURE 5
Key sectors in Scotland and the UK economies
(% of output*)
*Output measured by Gross Value Added (GVA).
Source: ONS, Regional Gross Value Added (Income
Approach), Regional GVA NUTS1, Table 1.3, 12 December 2012
Demography
Scotland has 8.4% of the UK population with 5.3 million
peoplethe highest ever figure for Scotland.[190]
In the last decade population growth has been driven by a surge
in migration from overseas. But despite this surge in migration
from outside the UK, the migration flows between Scotland and
the rest of the UK are still bigger than between Scotland and
the rest of the world. This is another sign of the close linkages
between Scotland and the rest of the UK.
A slightly greater share of Scotland's population
is of working age compared to the UK as a whole67% vs 66%.
But a smaller share of Scotland's population is under 1516.1%
vs 17.6%with a slightly larger proportion over 65. The
demographic challenge facing many countries of a rising number
of pensioners per person of working age is projected to be worse
in Scotland than the UK as a whole.[191]
Countries similar in size to Scotland
Below is a list of European countries of comparable
size to Scotland. Denmark, Finland, Ireland and Sweden are in
the European Union. Norway is in the European Economic Area which
allows it access to the EU's single market. Switzerland is in
neither body but, like Norway, has access to the EU's single market.
All of these countries are better off on a GDP per
head basis than Scotland. But the figure for Scotland does not
include any North Sea oil and gas which, if a large share (geographic
share) was allocated to Scotland could raise GDP around 20%.[192]
The table shows several European economies are of similar size
and prosperity to Scotland. However, most have their own currency,
a much lower debt to output ratio and higher labour taxes than
Scotland. Those countries with their own currencies have been
less affected or recovered more readily from the global financial
crisis.
TABLE 4
Countries similar in size to Scotland
| Scotland
| Denmark
| Finland
| Ireland
| Norway
| Sweden
| Switzerland
|
Population | 5.3m
| 5.5m | 5.4m
| 4.5m | 4.9m
| 9.4m | 7.8m
|
GDP (PPP) | $181.5bn
| $219.3bn | $196.6bn
| $178bn | $277bn
| $365.9bn | $361.9bn
|
GDP per heard (PPP)
| $34,754 | $39,545
| $36,664 | $39,778
| $56,648 | $39,013
| $46,480 |
Public sector debt
| 82.4%
(UK figure)
| 55.5% | 57.4%
| 102.4% | 49.5%
| 49.1% | 40.2%
|
Tax on average worker (% of labour cost)
| 32.7%
(UK figure)
| 38.3% | 42%
| 29.3% | 36.8%
| 42.7% | 20.8%
|
Currency | Sterling
| Danish Krone | Euro
| Euro | Norwegian Krone
| Swedish Krona | Swiss franc
|
Note: GDP figures are based on Purchasing Power
Parity (PPP) exchange rates to give the sum value of all goods
and services produced in the country valued at prices prevailing
in the United States.
Source: Except for Scotland all data taken from
OECD, Country Statistical Profiles: Key Tables from OECD for the
year 2010; for Scotland population is from ONS 2011 Census; 2010
GDP figure taken from The Scottish National Accounts Project and
divided by the UK's PPP rate taken from OECD (2010 population
used for GDP per head).
176 Output in regional accounts is measured by Gross
Value Added (GVA) which is similar to Gross Domestic Product (GDP).
GVA is similar to GDP except that it includes subsidies on products
and excludes taxes on products. Back
177
Q 533 Back
178
ONS, 2011 Census: Population estimates for the UK, 17 December
2012 Back
179
Output measured by GVA. ONS, Regional Gross Value Added (Income
Approach), 12 December 2012 Back
180
Output measured by GVA. ONS, Regional Gross Value Added (Income
Approach), 12 December 2012 Back
181
ONS, UK Relative Regional Consumer Price Levels for Goods and
Services for 2010, 12 July 2011 Back
182
ONS, Labour Market Statistics, 20 February 2013 Back
183
ONS, Annual Survey of Hours and Earnings, 2012 Provisional
Results, 22 November 2012 Back
184
Output measure used in GVA. ONS, Labour Productivity, Q 3 2012,
3 January 2012 Back
185
Expressed as the sum of exports and imports as a percentage of
GDP. Scotland data is from Scottish National Accounts Project,
Scottish National Accounts Tables, Table 8, 2012 Q2; UK
data is from ONS, Quarterly Accounts, C1, Q3 2012 Back
186
Scottish Government, Government Expenditure & Revenue Scotland
2011-12, Box 2.3, March 2013 Back
187
Figures calculated from The Scottish National Accounts Project,
Scottish National Accounts Tables, Table 8, 2012 Q2; UK data taken
from ONS, Quarterly National Accounts, Q 3 2012, Table C1, 21
December 2012 Back
188
Q 515 Back
189
For an assessment of the similarity of business cycles see National
Institute Economic Review, January 2012, Scotland's Currency and
Fiscal Choices by Angus Armstrong. Back
190
The Scottish Government, Fiscal Commission Working Group, First
Report-Macroeconomic Framework, page 53, February 2013 Back
191
Q 503 Danny Alexander MP Back
192
Government Expenditure and Revenue Scotland estimates, Box 2.2
page 20. Back
|