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Chapter Three: Industry Sectors
Introduction
This chapter describes information on various industrial sectors of the economy - agriculture, fisheries, manufacturing, construction, services and tourism.
Scottish Annual Business Statistics
This chapter includes information on the sectors of the economy covered by the Annual Business Inquiry ( ABI). The service sector is referred to for simplicity, but the figures quoted do not cover the financial sector and some of the public sector. For more detailed information, please visit the following web site: http://www.scotland.gov.uk/Topics/Statistics/16170/4363
Trends and Comparisons
In 2004, turnover in the industries covered by the Annual Business Inquiry in Scotland amounted to £170 billion. Of this, £95 billion related to services, £34 billion to manufacturing, £21 billion to oil & gas and £12 billion to construction. The two industries making the largest contributions to these totals were both within services; retail at £19 billion and wholesale at £18 billion. (Tables 3.1 and 3.3).
Gross value added ( GVA) is a measure of the income generated by businesses after the subtraction of input costs, but before costs such as wages and capital investment are paid prior to arriving at a figure for profit. Chart 3.1 shows that GVA (at 2004 prices) accounted for by manufacturing fell between 2000 and 2004 from £12.6 billion to £12.4 billion (down 1%). Services' share rose in the same period from £26.8 billion to £34.2 billion (up 27%). Gross value added per employee is a measure of productivity. Chart 3.2 shows that gross value added per employee (at 2004 prices) in the manufacturing sector increased from £42,200 in 2000 to £53,000 in 2004 (up 25%). In the same period, services' gross value added per employee rose from £24,200 to £28,800 (up 19%). The lower productivity levels found in services partly reflects the higher level of part time working in this sector.
Chart 3.1: Gross value added by sector in 2000 and 2004 (at 2004 prices)
Source: Office for National Statistics, Annual Business Inquiry (compiled by Scottish Executive).
Note: 1. Service Sector coverage excludes certain areas such as the financial sector and some of the public sector.
2. GDP deflator from HM Treasury applied to 2000 figures.
Box 3.1: Focus on the Other Business Activities sector |
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The Other Business Activities sector, as defined by Standard Industrial Classification ( SIC) category 74, encompasses a diverse range of services ranging from legal activities and business consultancies to security and industrial cleaning. In total the sector's Gross Value Added ( GVA), a measure of its contribution to the economy, stood at almost £6.9 billion in 2004. GVA in the sector has grown strongly, with Scotland's share of the UK wide sector increasing from 5.3 per cent in 1999 to 6.4 per cent in 2004. As the diagram below illustrates, Legal, accounting etc. is the largest single area in the sector accounting for around 31 per cent of GVA in 2004. Architectural & Engineering Activities and Labour Recruitment also make a major contribution to the sector accounting for a further 25 per cent and 15 per cent of GVA respectively. Chart 3A: Other Business Activities - 2004 shares of Gross Value Added 
Source: Office for National Statistics, Annual Business Inquiry (compiled by Scottish Executive). Between 1999 and 2005 the sector has seen average annual GDP growth of 2.9 per cent a year. This is faster than the Scottish economy as a whole where GDP growth averaged 1.9 per cent a year over this period. The sector's long term GDP performance is summarised in the chart below. Whilst it did not perform quite as strongly as the wider service sector in the second half of the 1990s its performance has improved since then. Chart 3B: GDP Index 1995-2006Q1 (2002=100) 
Source: Scottish Executive Quarterly GDP Index Employment growth has been strong in the sector. Between 1999 and 2004 employment grew by 19 per cent. In the Scottish economy as a whole, employment grew by 8 per cent over this period. Over 224,000 workers were employed in the sector during 2004, making it twice as large as Financial Services and only slightly smaller than the manufacturing sector. Owing to the wider range of services encompassed by Other Business Activities, there is likely to be significant variation in terms of both qualifications and earnings within the sector. For example, architectural and engineering activities would be expected to have higher levels of both qualifications and earnings compared to cleaning or security services. Overall average qualifications amongst employees in the sector are significantly better than the Scottish average. Over 36 per cent of employees are educated to at least degree level (above SVQ 4) compared to around 20 per cent of all people in employment. However, despite high levels of qualifications median weekly earnings in the sector were slightly below the Scottish average in 2005 at £395. The source of this gap appears to be the low levels of earnings amongst females in the sector. Whilst average male earnings in the sector were slightly above the Scottish average, female earnings were 10 per cent below the Scottish average in 2005. In line with the wider Scottish economy over 95 per cent of enterprises in the Other Business Activities sector employ less than 50 employees. This trend is not surprising, companies with fifty or more employees are generally found in the manufacturing sector where the greatest economies of scale can be generated. Workers in the sector are, however, twice as likely to be self employed than the Scottish average with over 21 per cent of workers registered as such. The high level of self employment probably reflects the fact that many of the services encompassed in the sector require little initial investment, thus making it easier for individuals to enter the market. The Global Connections Survey reports that, in 2004, the sector exported £975 million of goods and services to destinations outside the UK. This makes it the largest exporting sector, in absolute terms, outside of manufacturing. However relative to its total turnover exports are comparatively low with just 9 per cent of the industry's turnover being exported. This is a lower proportion than other areas of the economy especially in the manufacturing sector. This low level of export intensity may be due to the fact that many of the services contained in the sector require interpersonal contact and are thus much less globally mobile than the products produced in areas of the economy such as manufacturing. Table 3A: Main Industries with Employment Related to the Other Business Services Sector in 2002 | Output (£m) | Employment ( FTE) | Gross Value Added (£m) |
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Total | 1,782 | 25,803 | 966 |
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Other Land Transport | 467 | 6,584 | 239 |
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Recreational Services | 415 | 5,846 | 222 |
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Education | 212 | 5,175 | 164 |
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Banking | 542 | 4,916 | 229 |
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Other Service Activities | 146 | 3,281 | 113 |
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Source: Scottish Input-Output Tables and Multipliers 2002 Analysis of the 2002 input-output tables and multipliers provides information on the economic impact the purchases of goods and services by the Other Business Services sector has on the wider economy. They show that in 2002 there were 65,173 jobs in other industries that were related to other business activities purchases. There were also 68,177 jobs directly supported by the demand for the sector's services and products. The table above illustrates the sectors with the largest dependencies on the activities of the Other Business Services sector. |
Chart 3.2: Gross value added per employee by sector in 2000 and 2004 (at 2004 prices)
Source: Office for National Statistics, Annual Business Inquiry (compiled by Scottish Executive).
Note: 1. Service Sector coverage excludes certain areas such as the financial sector and some of the public sector.
2. GDP deflator from HM Treasury applied to 2000 figures.
The industry with the largest GVA in manufacturing is in the food & drink industry (£2.7 billion). In services, 'other business activities' (which includes legal activities, accounting, architectural & engineering, labour recruitment etc.) has the largest GVA total at £6.9 billion. (Table 3.1).
Chart 3.3: Shares of gross value added by sector and ownership, 2004
Source: Office for National Statistics, Annual Business Inquiry (compiled by Scottish Executive).
Note: 1 Service Sector coverage excludes certain areas such as the financial sector and some of the public sector.
Chart 3.3 looks at GVA by broad sector split by ownership. It shows that within manufacturing, foreign owned firms accounted for 35 per cent of gross value added in 2004. Whereas, in services, foreign ownership accounted for only 14 per cent of GVA (and just 3% in the construction sector). (See also Table 3.7).
Renfrewshire, Glasgow City and Fife were the local authority areas with the highest gross value added in the manufacturing sector in 2004. In the services sector, the highest gross value added figures were found in Glasgow City, Edinburgh City and Aberdeen City. (See Tables 3.4 & 3.5).
Within manufacturing, 'manufacture of office machinery and computers' accounted for the largest Scottish share of total UKGVA at 56 per cent in 2004 (£1.2 billion out of £2.2 billion). Within services, 'recreational, cultural and sporting activities' accounted for the largest share at 14 per cent (£3.1 billion out of £22.8 billion). (See Table 3.6).
Tourism
Two national surveys provide the main data on tourism: the ONS International Passenger Survey ( IPS), which surveys visitors to the UK at the point of exit from the UK, and the United Kingdom Tourism Survey ( UKTS) which asks UK residents about trips they have made. The Office for National Statistics ( ONS) publishes information on international tourism. For domestic tourism, the UKTS data are collected on behalf of the National Tourism Boards.
Due to changes in the ONSIPS and the UKTS, statistics for 2005 are not directly comparable with previous years. Prestwick airport was introduced into the IPS sample in January 2005 and there was also a subsequent modification to the IPS system of calculating weights for contacts at UK regional airports. The new methodology prevents overestimates of traffic volumes to any particular UK region and additionally it prevents changes in traffic at remote locations in, for example, the south of England from affecting results in Scotland, and vice versa. Further details are available via the following link: http://www.statistics.gov.uk/about/methodology_by_theme/gini/Int_passenger_survey.asp
Chart 3.4: Tourism GVA Index, 1995 - 2006Q2
Source: Scottish Executive
Following an extensive review of tourism data, the UKTS underwent a methodology change in May 2005, with the survey moving from a telephone survey methodology to a face-to-face survey methodology. The change was brought about as a result of doubts in the validity of the survey data produced by the telephone survey methodology. Further details on the new methodology and the reasons for this change are available via the following link: http://www.scotexchange.net/research_and_statistics/new_methodology.htm.
Table 3.8 shows the estimates for the volume and value of tourism in Scotland in 2005. It can be seen from this that half of overnight expenditure in Scotland was from other parts of the UK.
Further information on tourist trends and attitudes for Scotland is available from Tourism in Scotland 2005, which can be accessed via the following link: http://www.scotexchange.net/tis_summary2005updated.pdf.
Scottish Economic Statistics 2004 contained an article introducing an experimental Tourism Satellite Account for Scotland. From this, it was estimated that 5 per cent of employment in Scotland was related to tourist expenditure - equating to around 130,000 jobs. This covers all industries and is based on the ratio of tourist expenditure (including day visitors) to output in each industry. Around 99,000 of these jobs are due to overnight tourism. The figure of around 200,000 jobs that is often quoted relates to employment in tourism-related industries, that is all employment in selected industry types such as hotels, bars, restaurants, travel agencies, museums, libraries and sporting venues.
Tourism ratios as described above can be applied at an industry level to the weights that make up the Scottish quarterly GVA index to derive a tourism index. The index derived in this way is shown in chart 3.4 - this covers overnight tourism only, so uses different ratios to the employment figures. It can be seen from this that tourism GVA has in general been increasing in recent years - the average annual growth rate of the index between 1995 and 2005 is 2.3 per cent, compared to 2.1 per cent in GVA overall (based on the 2006 Q2 release of GDP). There was modest growth from 1995 to 2000, before the growth of budget airlines from 2001 onwards resulted in Scotland being more accessible from London and the Southeast, and a change in marketing focus again increased its popularity - particularly as a weekend break destination. Since the beginning of 2005, a slight fall in GVA related to tourist expenditure has been evident.
Further information on the profile of the Scottish Tourism-Related Sector, from the most recent Scottish Annual Business Statistics ( SABS) 2004 publication, can be accessed via the following link: http://www.scotland.gov.uk/Topics/Statistics/16170/Tourism2004.
The Scottish E-Business Survey ( SEBS) (as discussed in Chapter 2), carried out by Scottish Enterprise and Highland and Islands Enterprise, collates information on adoption of e-business applications and also attitudes to e-business and its perceived relevance to businesses. Analysis of this has been done for tourism related businesses and the results are published at http://www.scottish-enterprise.com/publications/sebs2005-tourism.pdf. This shows that the perceived importance of e-business continues to increase and this is reinforced by 85% of e-business adopters stating that they have found some benefit, particularly increased efficiency. The main barrier to e-business adoption is that organisations do not believe it to be relevant.
Access to the internet (71%) has continued to rise amongst tourism organisations. Within the last 12 months, broadband adoption has also seen substantial increases as companies upgrade their existing dial up connections. Fifty eight per cent of connected tourism companies now have broadband and 84 per cent of dial-up or ISDN users plan to upgrade to broadband within the next 18 months. Although this level and rise in broadband adoption is in line with the Scottish average, tourism organisations lag behind most other priority industries in their uptake of broadband.
Adoption of e-business technologies such as websites and Local Area Networks ( LANs) has shown a significant increase in 2005. Website adoption in particular is above average for businesses across Scotland. e-Business practices such as trading online have shown significant increases, again above the Scottish average.
Agriculture and fisheries
Agriculture accounted for 1.3 per cent of Scottish Gross Value Added in 2004, which was higher than the UK average of 0.8 per cent. Comparisons for the countries of the UK can be seen in chart 3.5 below. This also shows that agriculture accounted for just under 3 per cent of employment. More details on agriculture employment based on the annual agricultural census can be found in table 4.7.
The Scottish Executive Environment and Rural Affairs Department ( SEERAD) collect detailed information on farms' incomes and outputs. Table 3.9 summarises this data, details by type of farm can be found in the Economic Report on Scottish Agriculture ( http://www.scotland.gov.uk/Publications/2006/05/12103110/0). Total Income from Farming is calculated as net value added plus other subsidies minus the sum of hired labour, interest and rent. This was £536m for Scotland in 2005. It can be seen from chart 3.6 that this is a slight decrease on the previous 2 years after a period of growth from 1998 onwards.
Chart 3.5: Agriculture in the economy
Source: June Agriculture Census & Labour Force Survey, Summer quarter 2005. Not seasonally adjusted.
Chart 3.6: Total Income from Farming and Direct Subsidies , 1996 - 2005
Source: Scottish Executive, Environment and Rural Affairs Department
The number of Scottish-based sea-fishing vessels has fallen from almost 3,000 in the early 1990s to around 2,400 in 2004. This is largely as a result of decommissioning due to reduced fishing quotas. The corresponding number of fishermen employed has fallen from 9,420 in 1993 to 5,067 in 2004, which underlines the fact that it is the larger vessels employing several people that have been decommissioned. Chart 3.7 illustrates these trends, and shows the corresponding total landings of fish. Detailed information on Scottish fisheries can be found in Scottish Fisheries Statistics ( http://www.scotland.gov.uk/Publications/2006/09/19141352/0).
Chart 3.7: The Scottish sea-fishing industry, 1996 - 2005
Source: Scottish Executive, Environment and Rural Affairs Department
Map 3.1: Manufacturing sector - total labour costs per employee by local authority, 2004
Source: Office for National Statistics, Annual Business Inquiry (compiled by Scottish Executive).
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