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| Scotland: Towards the Knowledge Economy |
| ANNEX A: THE SCOTTISH ECONOMY |
| A.1 In some respects, Scotland is already in a strong position to exploit the opportunities offered by the emergence of the knowledge driven economy. However, at the overall level, the conclusions that have been reached about the productivity gap between the UK and its main competitors also apply to Scotland12. |
A.2 A number
of meas-ures are available which illustrate the pattern
of Scotland's productivity performance and provide a
broad indication of the extent of Scotland's
com-petitiveness relative to the UK as a whole. These
include:
|
| PRODUCTIVITY AT THE AGGREGATE LEVEL |
| A.3 Regional Accounts data show that GDP per head in Scotland in 1997 was 95.5 per cent of the UK average. In other words, overall productivity appears to be lower in Scotland than in the UK as a whole. |
| SECTORAL VARIATIONS IN PRODUCTIVITY |
| A.4 The aggregate data conceals some signif-icant variations by sector, as Table 1 illustrates. The table presents two sets of index numbers for each Scottish industry: output per head relative to the Scottish average for all production industries; and output per head relative to the UK level in the same industry. |
| A.5 1996 data for the production industries as a whole indicates that gross value added per head in Scotland was 12 per cent higher than in the UK. There were significant variations by industrial sector, largely reflecting the sectoral differences in the ratios of capital to labour. GVA per head was highest in coke, oil & nuclear processing, energy and drink & tobacco. A similar pattern of industries with relatively high and low GVA per head emerged from the UK figures. |
| A.6 Scotland's relative productivity levels (compared with the UK) were highest in office machinery, other electrical and instrument engineering, chemicals and man-made fibres and wood and wood products. Compared with the UK, Scotland had a relatively low GVA per head in food, energy and mining. Provisional data for 1997 suggests that gross value added per head in manufacturing in Scotland in 1997 was £32,500, slightly below the UK average of £32,800. |
| A.7 For the non-production sectors, data on the levels of GVA per head in Scotland and the UK are available from the respective Input-Output Tables for 1995. The results are summarised in Table 213 . |
| Table 1: Gross Value Added per Head by Industry: Scotland and the UK, 1996 |
| Industry | Gross Value Added per head (£) |
Indices relative to: |
||
Scotland |
UK |
Scottish average for all production |
UK level in same industry |
|
| Mining | 36,848 |
47,118 |
92 |
78 |
| Food | 23,876 |
32,250 |
60 |
74 |
| Drink and Tobacco | 82,390 |
86,938 |
206 |
95 |
| Clothing and footwear | 21,445 |
19,410 |
54 |
110 |
| Wood and wood products | 25,812 |
20,689 |
64 |
125 |
| Paper and printing | 34,404 |
35,644 |
86 |
97 |
| Coke, oil, nuclear processing | 111,560 |
91,703 |
278 |
122 |
| Chemicals and man-made fibres | 72,380 |
57,807 |
181 |
125 |
| Plastic and rubber | 28,256 |
28,491 |
71 |
99 |
| Other non-metallic goods | 32,904 |
31,738 |
82 |
104 |
| Metals | 45,125 |
36,751 |
113 |
123 |
| Metal goods | 29,579 |
24,772 |
74 |
119 |
| Mechanical engineering | 31,602 |
31,180 |
79 |
101 |
| Office machinery | 68,684 |
50,830 |
171 |
135 |
| Other electrical and instrument engineering | 39,657 |
30,554 |
99 |
130 |
| Transport equipment | 30,948 |
36,508 |
77 |
85 |
| Miscellaneous manufacturing | 22,338 |
24,071 |
56 |
93 |
| Energy | 87,488 |
113,450 |
218 |
77 |
| Total production industries | 40,062 |
35,858 |
100 |
112 |
| Source: Scottish Production Database, ONS sample survey of production (formerly ACOP) |
| Notes: 1. Gross value added is at basic prices. |
| 2. Per head figures are based on employment figures adjusted for part-time employees. |
| Table 2: Gross value added per head in the non-production industries: Scotland and the UK, 1995 |
Gross value added per head (£) |
Index for Scotland relative to UK level in same industry |
||
Scotland |
UK |
||
| Agriculture, forestry, fishing | 41,900 |
41,900 |
100 |
| Distribution | 23,800 |
21,100 |
112 |
| Transport and communication | 37,300 |
39,300 |
95 |
| Financial services | 29,000 |
43,800 |
66 |
| Business services | 29,900 |
26,300 |
113 |
| Public and other services | 23,200 |
24,900 |
93 |
| Source: Input-Output Tables and Multipliers for Scotland, 1995; UK Input-Output Balances, 1995. |
| A.8 The differences between Scottish and UK GVA per head levels were relatively small in agriculture, forestry and fishing, transport and communication, and public services. GVA per head was higher in Scotland than in the UK in distribution and business services. By contrast, GVA per head in financial services was considerably higher in the UK than in Scotland, reflecting the structure of output in the City of London. |
| MANUFACTURING INVESTMENT BY FOREIGN COMPANIES |
| A.9 Investment by foreign companies allows the sharing of knowledge about industrial processes and management. The share of investment by foreign-owned companies is a measure of attractiveness to foreign investors and the importance of foreign investment to the manufacturing base. Over the period between 1994 and 1997, foreign companies accounted for almost 40 per cent of manufacturing investment in Scotland. The equivalent ratio for the UK as a whole was 32 per cent14. |
| EDUCATIONAL QUALIFICATION LEVELS |
| A.10 Education and skill levels can be important in explaining the growth of national income. A greater proportion of the workforce in Scotland is qualified at Higher level than in the UK. As at Summer 1998, 50 per cent of the workforce had 3 Highers or equivalent, compared to 44 per cent in the UK as a whole. 74 per cent of 19 year olds in Scotland had 5 Standard grades or equivalent, slightly above the proportion in the UK (73 per cent). |
| INVESTORS IN PEOPLE RECOGNITION RATES |
| A.11 Investors in People (IIP) requires em-ployers to ensure that everyone working for them understands how their job contributes to what the organisation wants to achieve, receives the training and development required to help them perform even better, takes time to plan for the training and development of their staff, and measures the return on the investment in training and development. IIP recognition rates are lower in Scotland than in the UK as a whole. 13 per cent of firms with 50 or more employees in Scotland had IIP recognition as at November 1998, compared to 18 per cent in the UK as a whole. 24 per cent of firms with 200 or more employees had IIP recognition compared to 33 per cent in the UK. |
| EXPENDITURE ON R&D |
| A.12 R&D expenditure is one way in which firms build distinctive capabilities to maintain competitiveness. The share of expenditure on R&D can be viewed as a proxy measure for the ability of an economy to generate new ideas. In Scotland, R&D as a percentage of value added in manufacturing was less than half that in the UK in 1997 (3.2 per cent compared to 6.7 per cent)15. |
| PERCENTAGE OF EMPLOYEE JOBS IN HIGH TECH SECTORS |
| A.13 The share of employee jobs in high tech sectors is one measure of the importance of such sectors to the economy. 3.4 per cent of employee jobs in Scotland in 1997 were in high tech sectors, compared to 2.9 per cent in Great Britain16. |
| CONCLUSIONS |
| A.14 Although there are aspects in which Scotland has been outperforming the UK, in overall terms, Scottish GDP per head was slightly below the UK average in 1997. Hence, in addressing the productivity gap between the UK and its international competitors, it is reasonable to assume that the central themes will also apply to Scotland. |
| A.15 The manufacturing sector in Scotland is more open to foreign direct investment than the UK as a whole, while the Scottish workforce is generally more highly qualified, and a greater proportion of employee jobs are in high tech sectors (than in GB). On the downside, levels of expenditure on R&D are lower and fewer Scottish firms have received Investors in People recognition. |
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