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Scottish Economic Statistics 2004

B1 chapter one: Economic Accounts

GDP growth

In the year to 2004 quarter 1, Scottish GDP grew by 1.6 per cent. The service sector grew by 2.0 per cent over the year, compared with a 1.5 per cent drop in the production sector and an 8.0 per cent rise in Construction. Agriculture, Forestry & Fishing grew by 1.2 per cent over the year.

Between 2000 and 2003 Scottish GDP has grown by 5.3 per cent. This equates to an annual average growth rate of 1.7 per cent - just above the long term growth rate of 1.6 per cent. During this period the service sector experienced the highest increase, with an average annual growth rate of 3.9 per cent, while the Production sector declined by an average of 4.4 per cent each year.

However, these figures mask some of the changes which have been happening over the recent period. Chart 1.2 tracks the year-on year growth of GDP since 1996 and provides a more informative picture of recent trends. Since 1999, year-on-year growth of the economy as a whole has remained fairly stable at around 1.5 per cent to 2.0 per cent. However, growth trends in its two largest sectors, services and production, have been very different.

The service sector has remained in positive growth throughout the period and, from 2001, it has been the main driver of growth reaching a peak of 5.5 per cent annual growth in the year to 2002 Q2. Since then its rate of growth has slowed - although remaining positive throughout - to reach a level of 2.0 per cent in the year to 2004 Q1.

Conversely, the production sector has been in decline since the first quarter of 2001 and at its lowest point in 2002 Q2 annual growth was -7.2 per cent. Since that point the downturn appears to have bottomed out and there are signs that the effects of global uncertainty and restructuring are beginning to weaken as the rate of decline is beginning to lessen.

The service sector is the largest sector in the Scottish economy, accounting for 68.8 per cent per cent of GDP, while production accounts for 23.5 per cent. Construction and Agriculture, Forestry & Fishing contributing the least to the overall GDP (5.8% and 1.8% respectively). The relative importance of industries to the economy as a whole has changed over time, with the service sector growing in importance and production, construction and agriculture, forestry & fishing reducing - see chart 1.3.

Chart 1.1: Scottish GDP index 1995 Q1 - 2004 Q1

Chart 1.2: Year on year GDP growth, 1996 Q4 to 2004 Q1

Chart 1.3: GDP weights of main industries, 1995 and 2000

Value of GDP

The above section describes the quarterly index of Scottish GDP at basic prices (known as Gross Value Added (GVA) under ESA 95). This is produced by the Scottish Executive 17 weeks after the end of the relevant quarter, and provides an indicator of economic growth. It does not, however, provide a monetary value for GDP. An estimate of this in current prices is provided by the Office for National Statistics Regional Accounts. The Regional Accounts take UK totals from the National Accounts, and apportion these to the regions of the UK. Scottish GVA was estimated as 73 billion in 2002. Estimates for 1989 to 2002 are shown in table 1.2. Table 1.3 gives a breakdown by geographical (NUTS 3) area. These are the latest sub-Scotland figures available, but as they were published prior to the figures in table 1.2 they are not compatible with the figures in that table. The next release of Regional Accounts GVA data by ONS is expected in December 2004.

Supply and Demand

The supply of goods and services in an economy is equal to the overall demand for those products. The Scottish input-output tables provide a detailed account of the structure of the Scottish economy, where supply and demand data have been reconciled. Total demand for Scottish products is broken down in Table 1.4. Total Scottish output at purchasers' prices for 2000 is 142 billion, of which 49 billion (35%) is exported from Scotland and the rest is consumed domestically; 44 billion is used by Scottish industries, 23 billion (16%) by consumers' expenditure and 19 billion (13%) by government. For individual products the picture is different, with over 70 per cent of mining & quarrying and manufacturing products being exported, while 85 per cent of energy supply and distribution & catering products are consumed within Scotland.

Chart 1.4: Principal products as percentage of industry output

Key to industries shown in chart 1.4

The primary purpose of the Supply table (Table 1.5) is to show the goods and services (commodities) produced by each industry in Scotland in 2000 along with the supply of commodities through imports. The distinction between industries and commodities is important; individual firms and organisations are classified according to the products they make. The supply of commodities is presented in the rows while the columns show the industries responsible for the output of these commodities. If they produce more than one product, they are classified according to whichever product accounts for the largest component part of their output (). Each industry produces what is termed to be its principal product (shown in the diagonal elements in Table 1.5) and many industries also produce a range of other commodities referred to as secondary products (shown in the off-diagonal cells). Chart 1.4 illustrates the different levels of each industry's principal product. Some industries such as Health (N) and Public Admin (L) are almost exclusively producing their principal product whereas industries such as Hotels & Restaurants (H), Forestry (A02) and Chemicals (DG) are more diversified.

The supply table also demonstrates the transition from total domestic output of products at basic prices to total output at purchasers' prices through the addition of distribution margins and taxes less subsidies on products. The transition from domestic output to total supply is made by the addition of imports and their related taxes and margins.

The Domestic Use matrix (Table 1.6) shows that each industry purchases a certain mix of commodities in order to produce its output, and that each commodity is sold to a variety of domestic industries and final markets. For the analysis of industry linkages and economic impacts, it is more meaningful to represent the Use matrix in Industry by Industry (IxI) (Table 1.7) form.

The columns of the IxI matrix show purchases made by industries and final demand from each Scottish industry's output arising from both principal and secondary production. Column 4 of the IxI matrix shows that the Energy & Water industry purchases the majority of its domestic inputs from other firms in the same industry, and from Finance & Business. If the output of the Energy & Water industry rose then more inputs would be required from these supplier industries.

The demand for the Energy & Water industry's outputs could in turn be influenced by the industries it supplies. Looking at row 4 of the IxI matrix, if demand for Manufacturing rose we could expect to see an increase in the demand for Energy & Water industry outputs, as a supplier to Manufacturing etc.

These industry linkages can be summarised as industry Multipliers and can be used to look at the knock-on effects throughout the Scottish economy of a change in final demand. In addition, the Scottish input-output impact model can be used to provide evidence and analysis relating to specific impacts on the Scottish economy. These have included assessing the impacts of Foot and Mouth disease, World Trade Centre attacks and as part of the evidence to support the Euro 2008 bid. Further details on the uses of the Scottish impact model can be obtained from Maria Melling ( Maria.Melling@scotland.gsi.gov.uk) or Claire Boag ( Claire.Boag@scotland.gsi.gov.uk).

Scottish Exports

Introduction

Scottish Executive statisticians publish two main sources of data on Scottish exports. Annual estimates of the value of Scottish exports for 2002 were first published in February 2004, with results for 2003 provisionally planned for publication in December 2004. These estimates, which cover all sectors of the economy, are based on the results of Scotland's Global Connections Survey (SGCS). Tables 1.8 and 1.9 show results from the 2002 survey by sector and destination.

The quarterly index of Scottish manufactured exports provides estimates of changes in the level of exports over time, adjusted for inflation. Table 1.10 gives data on this by industry. A full range of export statistics from both sources can be found on the Scottish Executive web-site at www.scotland.gov.uk/exports, along with background on estimation methodology.

All exports

• In 2002, total Scottish exports were estimated to be 18.8 billion, of which 76 per cent (14.3 billion) were attributable to the production and construction sector, including manufacturing. It was estimated that the service sector accounted for 4.3 billion exports (23%) with an additional 0.2 billion (1%) being generated by primary sector industries.
• The top five exporting sectors were office machinery (3.4 billion), food & beverages (2.5 billion - of which alcoholic beverages accounted for 85%), radio/television and communication equipment (2.3 billion), business services (1.4 billion) and chemicals (1.3 billion). Overall these sectors accounted for 58 per cent of total exports.
• Manufactured exports were estimated at 14.3 billion (76% of total exports) and account for almost all exports in the production and construction sector. Within the manufacturing sector, the electronics industry as whole (defined as SIC divisions 30 - 33) had estimated exports of 6.8 billion, accounting for 48 per cent of manufactured exports and 36 per cent of total exports.
• The top five exporting service sectors were business services (1.4 billion - 32% of total service exports), wholesale/retail & repairs (0.8 billion - 20% of total services exports), transport (0.6 billion - 14% of total service exports), financial intermediation (0.5 billion - 13% of total service exports) and hotels & restaurants (0.5 billion - 11% of total service exports).

Chart 1.5: Scottish exports by grouped industry sector, 2002r

The value of exports to the European Union was estimated at 10.8 billion (58%) with a further 8.0 billion (42%) going to the rest of the world. The top destination for Scottish exports was Germany, which accounted for an estimated 2.4 billion exports (13% of total exports). This was followed by the USA which accounted for an estimated 2.0 billion exports (11% of total exports) and France which accounted for an estimated 1.8 billion exports (10% of total exports).

Manufactured exports growth

Chart 1.6: Index of manufactured exports 1995 Q1 - 2004 Q2

Manufactured export sales grew by 2.9 per cent in real terms in 2004 Q2 but decreased by 8.2 per cent over the year to 2004 Q2. Over the year, the industries with the greatest increases in export sales in real terms were drink (+2.0%), transport equipment (+3.6%) and other manufacturing (3.4%). Electrical & instrument engineering experienced the greatest decline in export sales (-17.2%) over the year, followed by chemicals (-7.2%) and metals (-6.0%). (Table 1.10)

Since 2001 the level of manufactured export sales has fallen by 24 per cent in real terms. Chart 1.6 displays the scale of the decline since this point and indicates that in recent quarters the decline may be slowing. Most industries increased their export sales over the latest quarter - most notably metals (11.5%) and transport equipment (13.2%). Electrical & instrument engineering, the largest export industry in volume terms (representing 53% of the manufactured exports market) increased by 2.1 per cent over the quarter.

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