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3 Benchmarking Scotland against other EU Countries
This section seeks to provide some international context, benchmarking Scotland across a range of other European countries in order to determine levels of processing of primary produce. The following countries have been selected for the reasons stated.
- Italy - a Mediterranean country with a strong, traditional, food heritage and international reputation for quality produce
- Austria - a mid-European country with strong connections to Germany similar to Scottish connections to the UK
- Denmark - a north-European, intensive, food producing country e.g. pig meat products with an export focus and international reputation
- Poland - a developing country in agricultural terms with scope to significantly raise productivity and exports
- Wales - is part of the UK and shares a border with England. It is also a similar size in terms of population and has a similar economic structure to Scotland.
The analysis is presented below with a comparison to Scotland for each country.
Again, the main purchasing groups are domestic processors (where primary produce is being processed); domestic households (where primary produce is consumed without any processing, these purchases can be made directly from farms or via the wholesale or retail sector); domestic primary producers (where primary produce is being used as an input to agricultural production); the domestic hotels and catering sector (where produce is being used as an input to catering/hospitality); and non-domestic purchasers across all sectors including non-domestic processors, households, primary producers, and hotels/caterers.
3.1 Italy
3.1.1 Characteristics
Italy was chosen as a benchmark as an example of a southern European state with a strong processing sector. Italy is a net food importer, because much of its land is not suited to farming, and therefore domestic production is insufficient to meet Italian food needs. In the north of the country, cereals, meat and dairy are the most important products while in the south mostly fruit and vegetables (including olives, for processing into oil) are produced. Italy is the second largest producer of wine in the world (after France). Germany is the main trading partner of Italy, in terms of both exports and imports, followed by France.
Food and beverages is not Italy's main export, despite the fame of Italian food. Leading exports are machinery, textiles and transport equipment, and even chemicals prevail over the export of food and drink.
Tourism is the main driving force of the Italian economy. Italy is the fourth most visited country in the world, benefiting from its Mediterranean climate, the Adriatic coast, the Alps and a number of sites of historical importance. Nonetheless, the food-processing sector is important to the Italian economy, supporting a large SME base.
3.1.2 Sales and Purchases of Primary Produce
An overview of sales and purchases of Italian primary produce is shown in Figure 3.1 with key points summarised below.
The food and drink-processing sector
A result of an important food-processing sector in Italy is that Italian food processors purchase a comparatively large proportion (43%) of domestic primary produce. Processors purchase 89% of their inputs from Italy, which is around the average for the benchmark countries, but much higher than in Scotland.
Households
17% of primary produce sales in the country are to Italian households compared to 24% in Scotland. Households buy 17% of their total purchases from outside Italy, which is a relatively low figure compared to other European countries, and much lower than in Scotland (33%).
The primary production sector
Italian primary producers purchase only 10% of total Italian primary produce, which is the second lowest figure among the benchmark countries, while Scotland has an average figure (18%). Italian primary producers buy only 7% of their total primary produce purchases from other countries, while Scottish primary producers import five times as much.
Hotels and catering
The importance of tourism to the Italian economy is reflected in the 4% of Italian primary produce purchased by the hotels and catering sector. While this seems a small figure, it is the largest proportion among the benchmark countries. In contrast, hotels, caterers and pubs purchase only 1% of Scottish primary produce. The catering industry in Italy buys 7% of its primary produce from abroad, compared to 31% in Scotland.
Exports
7% of total Italian primary produce sold is exported. This is an average level among European countries. Scotland sells 26% of its primary produce abroad, mainly to other parts of the UK.
3.1.3 Key Findings
The domestic food and drink processing sector is a key purchaser of Italian primary produce, buying more than 40% of output and importing relatively little. Italian households, however buy proportionately less unprocessed domestic produce than Scottish households. The hospitality sector is not a significant purchaser of primary produce relative to the processing sector, households or the primary sector, however, the proportion of primary produce purchased by hotels, catering and pubs is three times greater than Scotland.
Figure 3.1. Primary Produce Sales in Italy and Scotland
Source: Eurostat Input-Output Tables for Italy, 2000 and Scottish Executive Input-Output Tables 2003
3.2 Austria
3.2.1 Characteristics
Austria was chosen as a benchmark due to its central location within Europe and its strong economic connections and dependence on the large neighbouring Germany, which resembles the interdependence between Scotland and the rest of the UK.
Austria is a developed social market economy; with an economic structure similar to Germany. Austria is closely integrated with other members of the European Union, especially Germany. The Austrian agricultural sector is fragmented and characterised by small farms - agricultural production is often expensive. Austrian farmers provide 80% of domestic food requirements, but agricultural contribution to GDP is less than 3%.
Both winter and summer tourism are very important to the Austrian economy; Austria is the 10th most visited country in the world. Austrian tourism is strongly dependent on German visitors; therefore the tourism sector is strongly linked to the German economy. The most important international trade partners of Austria are Germany and Central & Eastern European countries.
3.2.2 Sales and Purchases of Primary Produce
An overview of sales and purchases of Austrian primary produce is shown in Figure 3.2. with key points summarised below.
The food and drink-processing sector
A third of Austrian primary produce sales are to domestic processors, which is a relatively low figure, although higher than the Scottish figure (26%). Processors buy 14% of their inputs outside Austria, which is a high rate, the highest among the benchmark countries. It however remains below the Scottish rate, which is 32%.
Households
Austrian households buy 19% of Austrian primary produce (an average proportion in Europe). At the same time, households buy 29% of their total primary produce purchases from abroad, which is a very high rate compared to other European countries, and close to the Scottish rate (33%).
The primary production sector
Domestic primary producers purchase 18% of total sales of Austrian primary produce - the same rate as in Scotland. Austrian primary producers buy 11% of their total primary produce purchases from abroad, while the rate is 35% for Scottish primary producers.
Hotels and catering
Tourism is more important to the Austrian economy than to the Scottish economy. This is reflected by the fact that 3% of primary produce sales are purchased by hotels, caterers and pubs in Austria, compared to only 1% in Scotland. Surprisingly, the Austrian hotels, catering and pubs sector imports only 5% of its total primary produce purchases. The equivalent figure in Scotland is 31%.
Exports
6% of Austrian primary produce sales are made outside Austria, which is a relatively low rate in Western Europe. Scotland exports 26% of its primary produce.
3.2.3 Key Findings
Austrian purchases of domestic primary produce are split among key purchasing groups as might be expected of a developed European country, with no single group significantly over-represented. Whilst Austria was selected as a benchmark because of its open economy, exports of primary produce are still markedly lower than Scotland.
Figure 3.2. Primary Produce Sales in Austria and Scotland
Source: Eurostat Input-Output Tables for Austria, 2000 and Scottish Executive Input-Output Tables 2003
3.3 Denmark
3.3.1 Characteristics
Denmark was chosen as an example of a northern European state similar to Scotland in its dependence on foreign trade. Denmark has a very strong food-processing sector, which is intensive and specialised.
Denmark is a welfare state with a large public sector, heavy taxes and extensive social transfers. The economy of Denmark depends strongly on foreign trade, especially on the import of raw materials. Food processing is one of the most important sectors of the Danish economy. One of Denmark's major exports is canned meat.
3.3.2 Sales and Purchases of Primary Produce
An overview of sales and purchases of Danish primary produce is shown in Figure 3.3. with key points summarised below.
The food and drink-processing sector
Since the food-processing sector is crucial to the Danish economy it is not surprising that Danish processors buy half of all Danish primary produce. This proportion is higher than in the other benchmark countries. 91% of all purchases of primary produce by Danish processors are from Danish sources and only 9% are from abroad, reflecting the specialised nature of Danish farming and processing activity.
Households
The picture is significantly different for Danish households, who buy 35% of their total primary produce purchases from outside Denmark. This figure is the second highest among the benchmark countries, and close to the Scottish rate (33%). Overall, Danish households buy 15% of outputs from the Danish primary produce sector, which is the second lowest proportion among the benchmark countries, after Wales.
The primary production sector
A further 15% of Danish primary produce is purchased by Danish primary producers, which is also a small proportion compared to other European countries. However, primary producers in Denmark buy 92% of their primary produce purchases from Danish sources; this rate is only 65% in Scotland.
Hotels and catering
The Danish hotels and catering sector purchases only 1% of Danish primary produce, the same proportion as this sector in Scotland purchases from Scottish producers.
Exports
A comparatively large proportion (18%) of Danish primary produce is exported, similar to Scotland, although the Scottish proportion is even higher (26%).
3.3.3 Key Findings
The food processing sector in Denmark is the most significant purchaser group of Danish primary produce. Conversely, households buy a smaller proportion of domestic primary produce and are much more likely to purchase imported produce than Europe generally and even Scotland specifically, despite the high proportion of imports from the rest of the UK. This reflects the specialised nature of primary production and food-processing in Denmark, which produces large quantities of a limited range of products.
Figure 3.3. Primary Produce Sales in Denmark and Scotland
Source: Eurostat Input-Output Tables for Denmark, 2000 and Scottish Executive Input-Output Tables 2003
3.4 Poland
3.4.1 Characteristics
Poland was chosen to benchmark as an example of a recent EU accession country, as well as being a country with a much less open economy than the other benchmark countries, although dependent on imports.
Fast economic liberalisation in the Polish economy since the fall of the communist regime in 1989 has led to rapid private sector growth. However, Polish agriculture still has serious structural problems as it struggles with labour surplus, lack of investment, and inefficient, small and fragmented farms. 16% of Poland's workforce is employed in agriculture, but the productivity of agriculture is comparatively low: it accounts for less than 4% of the country's GDP. More than half of farm households in Poland produce only to satisfy their own needs.
Poland is a net exporter of processed fruit and vegetables, meat and dairy. Polish food processors are dependent on the import of wheat, feed grains, vegetable oil and protein sources to supplement domestic production, which is not enough to satisfy domestic demand. Domestic feed grain production cannot be increased because of the short growing season, soil conditions and the small size of farms. At the same time, Poland is Europe's largest producer of potatoes and rye and one of the world's largest producers of sugar beet. Other significant products are rapeseed, grain, pigs and cattle. Poland's main trading partner is Germany.
3.4.2 Sales and Purchases of Primary Produce
An overview of sales and purchases of Polish primary produce is shown in Figure 3.4 with key points summarised below.
The food and drink-processing sector
Polish processors purchase 36% of all Polish primary produce, which is a low proportion relative to most other European countries, although it is slightly higher than the Austrian figure (33%) and significantly higher than the Scottish figure (26%). Polish processors buy 92% of their primary produce purchases from Polish sources and only 8% from abroad.
Households
Similarly, only 10% of primary produce purchases of Polish households are imported. This is the lowest figure among the benchmark countries. Overall, Polish households purchase 28% of Polish primary produce, which is a larger proportion than in Scotland or any of the benchmark countries.
The primary produce sector
Primary producers in Poland buy almost a quarter (24%) of domestic primary produce, which is also a lot more than other European countries. Only 4% of their purchases are imported, which is the lowest proportion among the benchmark countries.
Hotels and catering
Primary produce purchases of the Polish hotels and catering sector account for less than 0.5% of total Polish primary produce sales.
Exports
Only 3% of Polish primary produce is exported, compared to 26% in Scotland.
3.4.3 Key Findings
The Polish primary produce sector has a strong domestic focus, with much being purchased in an unprocessed state by households (28%) and other primary producers (24%). Whilst the food and drink processing sector is the single largest group purchasing domestic primary produce, the proportion is lower than most benchmark countries, but still around 10% higher than Scotland. Exports are limited, with only 3% of Polish primary produce leaving Poland. However, this is a situation that is likely to change rapidly as Poland has joined the EU and will see agricultural productivity improve.
Figure 3.4. Primary Produce Sales in Poland and Scotland
Source: Eurostat Input-Output Tables for Poland, 2000 and Scottish Executive Input-Output Tables 2003
3.5 Wales
3.5.1 Characteristics
Wales was chosen because, like Scotland, it is part of the UK shares a land border with England, and has a closely linked economy. The difference between the two countries is that the Welsh economy is much smaller than the Scottish economy, and therefore even more open.
80% of the land in Wales is used for agriculture, but agriculture, forestry and fishing in total contribute only 1.5% to the Welsh economy. Agriculture is dominated by livestock farming due to the grassy and hilly terrain of Welsh land. Sheep and cattle farming are the most common. 13% of Welsh land is covered by forestry and woodland. Fishing in Wales is concentrated along the Bristol Channel.
Wales is an attractive location for tourism, with more than 90% of visitors from other parts of the UK. The service sector in general is growing faster than that of the UK as a whole, concentrating in Cardiff, Swansea and Newport. On the other hand, the employment structure is short of high value-added service sector employment, compared to the UK as a whole. The small population and the lack of a large city hold back the Welsh economy.
3.5.2 Sales and Purchases of Primary Produce
An overview of sales and purchases of Welsh primary produce is shown in Figure 3.5 with key points summarised below. An import matrix is not publicly available for Wales, so while the domestic use of primary produce (the proportions within the circle) is precise, the import ratios are estimates based on the actual import figures.
The food and drink-processing sector
Welsh food and drink processors purchase 26% of total Welsh primary produce sales, which is exactly the same proportion as Scotland, significantly lower than all of the other benchmark countries. Only 54% of Welsh processors' total primary produce purchases are from Welsh sources, which is considerably lower than the proportion in Scotland and in the other benchmark countries. Both of these statistics point to significant cross-border trade.
Households
Only 8% of Welsh primary produce is purchased by Welsh households, which is less than in all of the benchmark countries, including Denmark, which has the second lowest figure. 43% of households' total primary produce purchases are imported, which is a higher proportion than all of the benchmark countries and Scotland.
The primary produce sector
7% of Welsh primary produce is purchased by domestic primary producers, which is also the lowest figure among the benchmark countries, although similar to the Italian figure. Welsh primary producers import 42% of their total primary produce purchases, similar to Welsh households, this is higher than Scotland and all of the other benchmark countries.
Hotels and catering
The hotel and catering sector accounts for 2% of total Welsh primary produce sales, which is higher than the Scottish, Danish and Polish proportion. Hotels, pubs and restaurants in Wales are estimated to import 47% of their total primary produce purchases, which is the highest among all of the countries investigated.
Exports
49% of Welsh primary produce is exported, mainly to the UK. This is more than Scotland and Denmark, and much more than in the other benchmark countries.
3.5.3 Key Findings
It is clear that the Welsh primary produce sector as well as the whole Welsh economy depends strongly on cross-border trade (mostly with England). The results presented above suggest that this dependence is even stronger than in Scotland, partly due to the smaller size of the Welsh economy, but also due to the length of the border and the location of processors. Almost twice as much primary produce is exported as Scotland, and import ratios are also estimated to be much higher.
Figure 3.5. Primary Produce Sales in Wales and Scotland
Source: WERU Input-Output Tables for Wales, 2000 and Scottish Executive Input-Output Tables 2003
3.6 Benchmarking summary
Table 3.1. provides a summary of the data presented in Figures 3.1. to 3.5. It also provides UK data (not shown above).
Table 3.1. Summary of benchmark data
All of the data in Table 3.1 is accurate as domestic use tables were available for all countries.
The proportion of primary produce sold to non-domestic purchasers is much higher in Scotland and in Wales than in any of the benchmark countries. This is partly due to the fact that both are part of the United Kingdom and partly due to their geographic location. The proportion of primary produce sold to the Rest of the UK and abroad by Wales is almost twice of the proportion sold to non-domestic purchasers by Scotland. This reflects the fact that the smaller Welsh economy is more dependent on the English economy than the Scottish economy is. The proportion sold to processors is the same in the two countries; the difference lies in the proportion sold to domestic households and primary producers.
The benchmark countries located in mainland Europe sell a significantly smaller proportion of their primary produce abroad, with the exception of Denmark, which has a different structure of primary produce sales altogether, concentrating on domestic processors and non-domestic purchasers and selling smaller proportions to domestic households and other domestic sectors, than most other countries.
Sales to other domestic sectors (outside of the domestic processing, primary produce and hotels and catering sector and domestic households) are most significant in Austria and Italy. In the case of Austria this proportion reflects large sales by forestry to wood and paper producing sectors. In case of Italy it includes significant sales by agriculture to textile production, as well as higher margins received by wholesalers and retailers, as the Italian market is not as dominated by large supermarkets as some other European countries.
In terms of processing activity, of all the primary produce processed in Scotland more than two-thirds (68%) is of domestic origin. This is higher than Wales and Austria (where the equivalent figures are 54% 6 and 66%) but lower than the UK (85%), Italy (89%), Denmark (91%) and Poland (92%).
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