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The Economic Impact of Algal Toxin Closures on Shellfish Dependent Communities on the Scottish Coast and Implications for the Sector's Future Structure

2 MAPPING THE SCALLOP INDUSTRY

2.1 INTRODUCTION

This chapter maps the scallop sector, providing the background ( ¹see notes at end of chapter) and an analysis of the sector's current position in terms of the relative importance and performance of vessels, divers and farmers in supplying scallops within each geographical area. Unless otherwise stated, scallops refers to both king and queen scallops.

2.2 CONTRIBUTION OF THE SCALLOP FISHING SECTOR

2.2.1 Value of Landings

Scallops have become an increasingly important fishery in the UK over the past ten years. There are extensive scallop grounds right around the coast of Scotland and the industry is important for the Highlands and Islands, in particular on the West and South-West coasts and the Islands. Vessels fish with anything from four to twenty dredges a side, the larger numbers being hauled by vessels in the region of 30m overall length. They fish over coarse sand and gravel beds which are the scallops' habitat.

Table 2.1 shows the recent history (between 1990 and 2001) of the scallops' fleet for Scottish vessels landing more than one tonne of scallops (the upper limit for which a licence would not be required) ². It show a substantial increase in the fleet during the mid-1990s throughout all size classes of vessel, but most notably in the smaller vessels. For example, the number of vessels of less than 10m grew by over 840% from 7 vessels in 1994 to 66 in 2001.

These significant increases are consistent with two features of fishing in the North Sea and West of Scotland but are clouded by the introduction of licensing for vessels of under 10m. First, the profitability of around 40%, nett before depreciation, reported by the Sea Fish Industry Authority's Costs and Earnings survey in the Fishermen's Handbook ³ would be expected to attract increased activity. Secondly, falling North Sea quotas and a lack of quotas for nephrops have acted as an incentive to switch fisheries.

The increase in total numbers of vessels appears to have peaked in 1995 and there has been a slight fall during the period of the closures. The numbers are shown diagrammatically in Figure 2.1.

Source: Scottish Fisheries Statistics

Between 1991 and 1998 there appears to have reasonably steady growth in the volume of landings into Scotland by UK vessels (see Table 2.2).

Source: Scottish Fisheries Statistics

Landings grew from a low of 8,866 tonnes in 1991 to 16,630 tonnes in 1998 an increase of almost 88% or an annual average growth rate of 9.5%. Over the same period the value of these landings grew from 8.8m to 18m, an increase of almost 105% or an annual average growth rate of around 11%. However, these figures include both king and queen scallops. The price fetched differs between the two, with queen scallops having an implied price of only 25% of that for king scallops. Therefore in understanding the value and volume of landings of scallops over time requires an awareness of the relative balance between the two types. Since 1991 the volume of king scallops being landed has been increasing, by 14% per annum between 1991 and 1998. This compares with an annual average growth rate of only 5% for queen scallops over the same period. Over the same period the implied price has fallen by around 1.5% per annum for king scallops and 1% per annum for queen scallops. Thus the growth in the value of scallop landings into Scotland over this period has largely been accounted for by the increase in the volume of scallops landed.

Figure 2.1: Length groups of vessels catching more than 1 ton of scallops in the year

There is clear evidence in the data of the impact of the scallop bans on the volume and value of landings in 1999 with reductions in the volume of landings by UK vessels into Scotland of 19%. However, because of some increase in the price of scallops in 1999 the reduction in the value of landings was only in the region of 8%. In contrast in 2000, while there was an increase in the volume of landings for king scallops the price fell relatively more resulting in a reduction in the value of king scallops landed, while both the volume and value of queen scallops declined. In 2001 landings recovered to over 15,300 tonnes (up 18%) valued at 19.5m (an increase of almost 24%). A more detailed analysis of landings by Scottish vessels into Scotland and the rest of the UK is reported in Chapter 3 as part of the assessment of the sector's response to the fishing bans.

Although there is no one 'typical' year, data from 1998 provides as good an approximation to the performance of the sector prior to the harvesting bans. Table 2.3 reports the share of total value of scallops landed for each District in Scotland by UK vessels in 1998, 1999 and 2000. In 1998, when the fishing bans were still only being imposed to the East of Orkney, almost 62% of landings were within the Highlands and Islands. Although Ayr accounted for over 21% of all scallop landings these landings include a large volume of queen scallops. In most of the other districts the majority of landings are of king scallops. Mallaig, Campbeltown and Oban accounted for over 35% of the scallops landed and are the three most important districts for landing scallops after Ayr ⁴. Shetland, Orkney, Stornoway and Wick districts between them account for a further 25% of landings. On the East coast the most significant District is Aberdeen ⁵ with over 6.5% of landings.

In 1999, extensive harvesting bans were applied around the Scottish coast, in particular the West coast was severely affected in terms of both the area covered by the bans and the length of the bans. Although there were closures off the East coast including parts of the Moray Firth area, these closures were less extensive and in force for a much shorter duration than occurred on the West coast. As a result the total value of scallops landed declined by 9% with the share landed in the Highlands and Islands falling by 39% and representing only 41% of the total. Reductions in landings in Orkney (-27%), Shetland (-27%), Stornoway (-64%), Mallaig (-61%), Oban (-59%) and Campbeltown (-21%) Districts were valued at 4.5m of which Oban accounted for 25%. These reductions were compensated to some degree by landings in the rest of Scotland growing by 40% and representing 59% of total landings. In particular there was growth in landings on the East coast in Aberdeen, Peterhead and Fraserburgh Districts as well as at Wick, the only District in the Highlands and Islands to post an increase in landings.

In 2000, although much of the West coast and areas around Orkney were affected by bans these were not as extensive or long lasting as in 1999. Although the total value of landed scallops declined by a further 5% (a combination of both lower volumes and lower prices, the latter partly the result of Scottish product now having to compete with cheaper imports), the balance of activity moved back towards the Highlands and Islands with a 48% increase in the value of landings in the area, compared to a 41% decline in the rest of Scotland. As a result the Highlands and Islands accounted for almost 64% of landings in Scotland. In both Oban and Campbeltown the value of scallops' landings grew significantly by 267% and 41% respectively, reaching levels well above those of 1998. At 18.4% of total Scottish landings, Oban reported the highest value of landings by a District in Scotland, the position usually reserved for Ayr. Ayr was in second place with 17.7%, down from its 1999 share and some 3.7 percentage points below its 1998 share. However, landings in both Orkney and Shetland continued to decline.

It is obvious that the value of landings of scallops has been significantly affected by the bans and pattern of change reflects the geographic distribution of the bans.

Source: Scottish Fisheries Statistics

Source: Scottish Fisheries Statistics

The potential impact of the scallop bans will depend on the relative importance of scallops to total landings in each District. Table 2.4 shows the share of scallops in total landings for each District in 1998, 1999 and 2000. In 1998 the value of scallops landings were particularly important for, in descending order of importance, Ayr, Oban, Campbeltown, Orkney, Mallaig, Buckie and Stornoway. Whereas the East coast ports seemed to be positively affected in terms of increasing their share of scallop landings as a share of their total fish landings, the ban had significant negative impacts on Highlands and Islands Districts with the share of scallops in total landings declining by 50% in Oban, 70% in Mallaig and 27% in Orkney and we would expect the more significant impacts to be focussed on these areas.

With the semi-recovery of the West coast fishery in 2000, the relative importance of scallops in the most seriously affected districts returned to or improved on the shares in 1998, although Orkney and Shetland did not appear to have recovered as well as the other Districts in the Highlands and Islands.

It is clear from this analysis that the areas most dependent on and, at least to date, the areas most severely hit by the bans are those on the West coast and Orkney. These communities tend to be more dependent on the scallop fishery and thus are more likely to suffer negative impacts from the fishing bans.

Tables 2.5 - 2.7⁶ report the value of scallop landings and total fish landings for each District in 1998, 1999 and 2000. These reveal the absolute importance of the scallop fishery to communities in the Highlands and Islands accounting for, in 1998, a value of just over 11m and representing some 8-9% of the value of fish landings in the region compared to just over 4% of the value of landings in the non-HIE area. However, as discussed below, it is often the case that the scallop fishery is a significant contributor to the viability of the smaller West coast communities.

Source: Scottish Fisheries Statistics

Source: Scottish Fisheries Statistics

Source: Scottish Fisheries Statistics

2.2.2 Employment

Tables 2.8 and 2.9 presents our estimates of employment by District which is attributable to scallop catching activity. This has been calculated by assuming that the share of total direct employment attributable to scallops within a District is identical to the species' share of total landings by value. While this gives us a rough indication of the number of jobs supported by the scallop fishery, changes in these numbers will directly mirror the changes in value of scallop landings by District. ⁷ As such, these estimates are based on 'heroic' assumptions and thus must be treated with caution. At best they are only indicative at the broadest geographic level.

These estimates are notional, based on changes in the value of landings by District and aggregated to the HIE/non-HIE and Scottish levels. As such they provide, at best, an indication of potential employment impacts at the Scottish level. However these data can provide a fuller picture of the impact of the bans, if and when the sector regains the levels and fishing patterns of the pre-ban era. The data for 2001, once it is released, should provide some indication of the aggregate longer term impacts of the closures.

These estimates show that in 1998, in the region of 925 jobs were attributable to scallop activity or some 12% of fishing related jobs. These numbers were roughly evenly split between the Highlands and Islands and the rest of Scotland (47% versus 53%). Ayr accounts for 73% of those jobs outside of the Highlands and Islands. Within the Highlands and Islands the jobs are spread more evenly with Stornoway, Oban, Campbeltown, Mallaig and Orkney accounting for almost 89% of these jobs.

In terms of the importance of scallop fishing within particular Districts, the highest concentration, outside of Ayr, is within Oban where over one in four direct jobs can be attributed to scallops, followed by Campbeltown where the ratio is over one in five. As noted above, the potential impacts on employment of the ban is quite geographically concentrated.

Using the same method, in 1999 the total number of jobs attributable to scallops had fallen by almost 9% to 843. However, the notional distribution of these jobs reflects the pattern of landings. Thus jobs associated with scallops in the non-HIE area of Scotland appears to have grown by almost 18% while jobs in the Highlands and Islands had fallen by almost 39%. Effectively, these data could reflect nomadic vessels moving from the West coast to fish and land on the East coast during the ban periods rather than actual reductions in employment on the West coast.

Source: Scottish Fisheries Statistics

Finally, in 2000, the jobs associated with scallops increased by 6.5% with a reduction of 9% in non-HIE areas (although the numbers were still some 7% above the levels in 1998) and an increase of almost 40% in the Highlands and Islands (although this is some 15% below 1998 levels). The largest percentage increases were associated with Oban and Stornoway with implied jobs increases of over 100%. However, no District in the Highlands and Islands regained their 1998 jobs levels. In two Districts, Wick and Shetland, there were implied reductions of over 50%.

The revival, in 2000, on the West Coast of the Highlands and Islands reflects the smaller geographic area covered by bans and the shorter duration of the bans in the traditional scallop areas on the West Coast and Islands.

Source: Scottish Fisheries Statistics

Note: The employment estimates are notional reflecting the relative value of scallop landings compared to other landings in each district. For example, the implied reduction in employment at Mallaig between 1998 and 1999 reflects the reduction in the value of landings and not the actual reduction in fishermen employed.

The trend over the period suggests that the estimated employment associated with scallop catching is returning towards the levels of 1998 and the pre-ban era. This should be confirmed, or otherwise, once data for 2001 is released. This assessment is made on the assumption that vessel/fisherman efficiency is relatively unchanged, and any significant improvements could manifest themselves as lower scallop fishermen associated employment.

2.2.3 Scallop Farming

The employment estimates presented above do not encompass the full range of employment affected by the ban. First, there is employment supported in scallop farming and diving activity, not all of which is reported by the official statistics and assessment will rely on survey work and consultations undertaken previously and by the consultants.

1. This figure is based on SFIA Report estimate.

Farmed shellfish production in Scotland is dominated by mussels and pacific oysters. Small volumes of queens and scallops are also produced. In 2000, 96% of Queen scallops were farmed in Strathclyde region. Of the 39 tonnes of king scallops, just over 60% were from Strathclyde with the remainder from Highland Region. Total scallop and queen scallop farmed production in Scotland in 2000 was only three quarters of one percent of total landings in Scotland.

The scallop farms are patches of seabed protected by Several Orders. Several Orders restrict the right to fish to specified enterprises. Harvesting often takes place by diving. Eight Several Orders were granted by 2000 for scallop fisheries, six for commercial companies and two for companies involved in research and development. According to the Scottish Shellfish Farms Annual Production Survey 2000, the growth in scallop production is likely to continue over the next few years and markets were maintained and demand remained high. Between 1997 and 1998 production of farmed scallops grew by 54%, between 1998 and 1999 production fell by 63%, growing again between 1999 and 2000 by 154%, albeit only to 1998 levels. This pattern is consistent with the intensity of fishing bans affecting farmed production in the same way as non-farmed harvesting.

2.2.4 Scallop Diving

Currently there are estimated to be in the region of 150-200 scallop divers in Scotland compared to in the region of 300 or so only a few years ago. In Orkney the numbers have dropped from 60 to around 20.

Divers tend to work from smaller boats and so are dependent on specific fishing areas and on weather conditions. Divers focus on larger scallops that, given the means of harvesting tend to command a premium price. In general, divers also work on shellfish farms at least part-time as well as having other occupations

2.2.5 Seasonality of Activity

In the past, the last quarter of the year was considered the most important season for scallop fishing. Demand and prices both increase at this time, reflecting in particular the importance of the Christmas market. The seasonality of the scallop landings is reported in Table 2.11.

Source: Scottish Fisheries Statistics

First, it shows that over the period July to November, which approximates to the core period of the fishing bans, that the share of landings by value, at least up to around 1998, are no more important than at other times of the year. If these five months had a share of scallop landings equal to its share of the calendar year, then the period between July and November would usually account for 41-42% of total annual landings. The simple average across the period 1993-1998 is 40.5%. However, over the next two years the share of landings for July-November falls to 35% in 1999 and 37% in 2000. While these percentages may not be significant in the long term, 1999 and 2000 were both characterised by severe fishing bans that probably account for the lower percentage shares.

The data in the table do point to the importance of the final quarter of the year. If the landings were equal in value throughout the year then this period would see 25% of total activity by value. In fact between 1993 and 1998 this figure was exceeded in every year bar one when it equalled 25%. However, in 1999, when the ban was at it most severe, the percentage fell to 19% reflecting the impact of the ban on the harvesters ability to obtain scallops at the time of the year when demand and prices are at their highest. With the easing of the restrictions in 2000, the percentage once again regained its earlier levels.

Table 2.12 presents the seasonality of landings by quarter for 1998-2000. In particular, comparing 1998 (pre-ban) with 1999 (extensive bans) there is evidence of the impact on landings of the progressive incidence of the bans around Scotland. Specifically, it can be seen that the earlier part of the year ended up contributing a higher share of total landings in 1999 compared to 1998.

Source: Scottish Fisheries Statistics

Finally, Table 2.13 reports the share of total annual Scottish landings by month for 1998-2000. In particular, the reduced share of landings over the period September 1999 - February 2000 is especially noticeable - a time period that would usually account for over half of annual landings accounted for only around 37%.

2.2.6 Seasonality of Prices

Table 2.14 analyses price per tonne by month of the year for king scallops. These are calculated using the weight and value of scallop landings by month. As such these estimates will not necessarily equate to prices in specific markets but rather give an average indication of prices.

Source: Scottish Fisheries Statistics

1. Figures in bold are equal to or above the annual average

The general finding is that prices in July, August and September are below the annual average and that prices in the last quarter are generally higher the closer to Christmas you get. For December, this was the case for every year between 1996 and 2000 (and in fact was similarly the case as far back as 1993 at least) with prices at over 20% above the annual average, other than in 1997. The prices in December 1998 and 1999 are particularly high compared to the annual average. In 1998 this was partly a function of the lower prices earlier in the year which pulled down the annual average. However, the greater variation in 1999 reflects the higher prices in the run up to Christmas in conjunction with the supply constraints caused by the scale of the ban. A similar pattern is seen in 2000 although not as pronounced as in 1999.

Table 2.15, below, provides estimates of the prices attained per tonne of scallops landed for each month during 1998, 1999 and 2000. These monthly averages are compared to the annual average price in each year.

Source: Scottish Fisheries Statistics

1. Figures in bold are equal to or above the annual average price.

In many ways 1998 represents a typical pre-ban year, although there were severe restrictions off the East coast of Orkney, in terms of the pattern in the value of prices with above average prices from October into January, and below average prices basically from Easter, during the summer months until the end of September.

With the application of much wider bans, around the West coast in particular, this pattern changed. First, the average annual price increased by over 13% between 1998 and 1999 and this higher average price was largely maintained during 2000. Second, the number of months with above average prices increased from four in 1998 to six in 1999 and seven in 2000. Specifically, there was a seven month run of above average prices from November 1999 to May 2000. This is the period when, traditionally, demand for Christmas and Easter would push prices up. In this case the impact of the fishing restrictions has further added pressure to the price of those scallops landed.

Thus the potential impact of the ban in terms of earnings for vessels and processors will be more significant in the last quarter of the year in comparison to the core summer period (July-September).

Table 2.16 compares the value of monthly landings for 1998, 1999 and 2000 and reports the total percentage change in the value of landings between 1998 and 2000. The sector faced a decline in the value of total landings of 15% between 1998 and 2000. There was however a significant variation in the monthly value of landings from a reduction of (-) 45% in September to a growth of 15% in May.

Source: Scottish Fisheries Statistics

This analysis suggests that, although during certain times of the year the value of landings fell significantly, values throughout the year reflected various combinations of reduced/increased weight of landings and increased/reduced price per tonne. These figures also hide the geographic variation in impact with the West Coast suffering disproportionately in 1999 but making a relative recovery in 2000.

Finally Table 2.17 reports the estimated price per tonne of scallops landed by size of vessel.

Source: Scottish Fisheries Statistics

Not surprisingly it appears that the smaller vessels (under 10m) achieve a significant premium over scallops landed by the larger vessels. These premiums ranged from 76% in 1998 to 31% in 2000. This will in part reflect the likely higher quality of scallops harvested by smaller vessels including divers. However, this premium has declined quite substantially over the three years to 2000 and it is not clear why this should be the case.

The smaller vessels appear to have experienced a reduction of over 50% in the total annual value of landings in 1999 and 2000 compared to 1998 while the larger vessels experienced reductions of only 4% and 7% respectively. In 1998, vessels <10m accounted for 5.6% of the weight of scallops landed into Scotland by UK vessels. In 1999 this had fallen to 3.6% indicating a greater relative impact on smaller compared to larger vessels. This may reflect the wider alternatives available to the larger vessels in fishing further afield whereas the smaller vessels and divers are much less mobile and thus have less opportunity to fish elsewhere.

The relative inability of the smaller vessels and divers to provide product to the market when the bans are being enforced could have implications for the potential premium and hence partly explain the reduction in the premium over the past two years.

2.3 CONCLUSIONS

Scallops have become an increasingly important fishery in the UK over the past ten years and there are extensive scallop grounds right around the coast of Scotland. Between 1991 and 1998 there has been reasonably steady growth in the volume of landings into Scotland by UK vessels. Landings grew from 8,900 tonnes in 1991 to over 16,600 by 1998, an annual average growth rate of 9.5%. Over the same period the value of these landings grew from 8.8m to 18m.

There is clear evidence of the impact of the scallop bans on the volume and value of landings in 1999 with reductions in the volume of landings of 19% and a reduction in the value of the landings of 8%. In contrast in 2000, while there was an increase in the volume of landings for king scallops the price fell relatively more resulting in a reduction in the value of king scallops landed, while both the volume and value of queen scallops declined. In 2001, landings recovered to over 15,300 tonnes (up 18%) valued at 19.5m.

Farmed shellfish production in Scotland is dominated by mussels and oysters with only small volumes of queen and king scallops being farmed. Total scallop and queen scallop farmed production in Scotland in 2000 was only three-quarters of one percent of total landings in Scotland.

Currently there are estimated to be in the region of 150-200 scallop divers in Scotland compared to in the region of 300 or so only a few years ago. Divers tend to work from smaller boats and so are dependent on specific fishing areas and on weather conditions.

Historically, the last quarter of the year was considered the most important season for scallop fishing. Between 1993 and 1998 the value of landings between October and December accounted for over 28% on average of the annual value of landings. In 1999, when the ban was at its most severe the percentage fell to 19%, reflecting the impact of the ban on ability to obtain scallops. With the easing of restrictions in 2000, the percentage once again regained its earlier levels.

2. Any UK registered vessel wishing to land more that one tonne of scallops a year requires a licence in order to fish for them. There are three classes of Licence: known as Category A, B, and C. These categories are sub-divided to allow a vessel to fish on different stocks of fish. The species of fish are themselves categorised into pressure stocks, non-pressure stocks, and miscellaneous other species.

Pressure stocks are those stocks for which a Total Allowable Catch (TAC) was set as part of the CFP in 1984. They are called pressure stocks because they are thought to be depleted by over-fishing or at risk of depletion and the TAC was set below a level that would allow unrestricted fishing.

Non-pressure stocks were also set a Precautionary TAC in 1984 but at a level that would allow unrestricted fishing as they were not thought at the time to be at immediate risk.

Miscellaneous species includes all the other species for which the UK fleet is permitted to fish. Some, such as North Sea nephrops and monkfish, have been allocated Precautionary TACs and quotas since 1984.

In order to fish for scallops a vessel needs a licence within either of the Categories A and B, or a Category C Licence which explicitly names scallops among its fishing entitlements. The category of licence determines the alternative fishing opportunities available to the vessel should it choose not to or be unable to fish scallops.

Because no TAC and quota are set for scallops whether a vessel is part of the Sector - of 10 metres and over and owned by a member of a Producer Organisation (PO) - part of the non-Sector - of 10 metres and over but whose owner is not a member of a PO, or under 10 metres is immaterial to the management of catches. As such PO members have no Fixed Quota Allocation to allocate to a PO pool and POs have no direct role in management of the scallop fishery.

3. Fishermen's Handbook 1997/1998, Sea Fish Industry Authority, Edinburgh, 1999

4. Ayr district vessels account for a significant proportion of landings in Mallaig and Oban. (Source: Industry Representative).

5. Kirkcudbright and Buckie based vessels are important in terms of landings in Aberdeen district. (Source: Industry Representative).

6. It should be noted that a significant proportion of landings into HIE/non-HIE areas are made by visiting vessels. (Source: Industry Representative).

7. These calculations assume a direct correlation between the proportion of landings attributable to scallops in a specific district and the percentage share of employment associated with the scallop fishery. However, they also imply that, for example, the value landed per fisherman into Aberdeen in 1998 was 108,000 per annum compared to 66,866 at Wick and 6,800 at Oban. This difference could in part reflect the likelihood that vessels landing at large East Coast ports will be larger and more efficient thus implying a higher value landed per fisherman compared to the greater proportion of smaller vessels and divers on the West Coast. However, industry representatives argue that vessels landing into Oban are as efficient (or more so) than those operating out of Wick and these implied landings per vessel are therefore suspect. As a consequence, the individual District employment estimates will be less accurate than those at a higher spatial level. Finally, there is an issue of whether the number of fishermen catching scallops could vary to such a degree from one year to the next. In part this variation is attributable to vessels moving from the West to the East Coast although it could be theoretically argued that at the margin fishermen will switch from one fishery to another to maximise marginal revenues and for a fishermen from Aberdeen to switch to scallop perhaps requires significantly higher revenue levels compared to a fisherman on the West Coast.

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