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3. Benchmarking Scotland against other European 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.

In discussion with RERAD, five benchmark countries were selected, four of which are part of the "arc of prosperity" - a group of small, successful countries surrounding Scotland. In addition, Sweden was selected to complete the circle of small and affluent northern European countries. The five countries are:

• Denmark
• Finland
• Norway
• Ireland
• Sweden

While Iceland is the fifth member of the original 'arc of prosperity' it could not be benchmarked as the Icelandic government does not publish Input-Output tables.

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 Denmark

3.1.1 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.

3.1.2 Sales and purchases of primary produce

Processors

Almost 60% of Danish primary produce is bought by Danish processors, up from 50% since last year's analysis, which was based on Input-Output data from 2000. This reflects the fact that the food processing sector is very important to the Danish economy and a lot of processed Danish food is exported. 90% of all purchases of primary produce by Danish processors are from Danish sources and only 10% are from abroad, reflecting the specialised nature of Danish farming and processing activity. This rate has not changed significantly since 2000.

Households

Overall, Danish households buy only 7% of outputs from the Danish primary produce sector, which is the lowest proportion among the benchmark countries, and significantly lower than the proportion bought in 2000 (15%). Therefore it is not surprising that Danish households buy 40% of their primary produce purchases from abroad, up from 33% in 2000. This proportion is now higher than the Scottish rate (34%).

Primary producers

A further 10% of Danish primary produce is purchased by Danish primary producers, which is lower than the average (13%) and considerably lower than the Scottish rate (16%) and the 2000 Danish rate (15%). However, primary producers in Denmark still buy 91% of their primary produce purchases from Danish sources, which is not significantly lower than the 2000 rate (92%).

Hotels and restaurants

Danish hotels and restaurants purchase only 1% of Danish primary produce, the same proportion as this sector in Scotland purchases from Scottish producers, though a much larger absolute value.

Exports

A fairly large proportion (17%) of Danish primary produce is exported, though this is considerably lower than the Scottish proportion (30%). The figure reflects the levels of processing taking place within Denmark.

3.1.3 Key findings

The food processing sector in Denmark is the most significant purchaser group of Danish primary produce. In comparison with the previous report, we can conclude that this sector has increased in importance since 2000. Conversely, households buy a smaller proportion of domestic primary produce and are much more likely to purchase imported produce than the rest of Europe and Scotland specifically, despite its 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 3.1 Sales and purchases of primary produce, Denmark

Source: Scottish Government, 2004 Scottish Input-Output Tables, Eurostat, 2003 Danish Input-Output Tables, adapted by DTZ

3.2 Finland

3.2.1 Characteristics

Primary production accounts for 2.9% of the Finnish GDP, but 4.4% of the labour force works in agriculture and forestry.

In terms of foreign trade, the key sector is manufacturing, though forestry, paper and agriculture are important industries due to the large number of people living in rural areas. Rural regions get substantial funding from the government.

3.2.2 Sales and purchases of primary produce

The destinations of Finnish primary produce sales are outlined in Figure 3.2. The investigated destination groups (primary producers, processors, households, hotels and restaurants and exports) account for 98% of the total sales of Finnish primary produce.

Processors

Finnish processors buy almost half of total Finnish primary produce, which is twice the proportion of domestic food produce bought by processors in Scotland. The food and drink processing sector in Finland buys 93% of primary produce inputs from Finnish sources.

Households

18% of total Finnish primary produce sold is taken up by Finnish households without processing. Households source 74% of their primary produce purchases in Finland - an average figure for the benchmark countries.

Primary producers

At 21%, a relatively large proportion of Finnish primary produce is used as inputs for the Finnish primary production sector, which sources almost all (95%) of its primary produce purchases from Finland.

Hotels and restaurants

Finnish hotels and restaurants buy 2% of total Finnish primary produce, while for most benchmark countries this proportion is just 1%. This sector buys 65% of its primary produce from Finnish sources, and imports the rest, which is the usual case for the hotels and catering sector across Europe.

Exports

Only 8% of Finnish primary produce is exported, this is a considerably lower rate than the average for the benchmark countries (15%).

3.2.3 Key findings

The Finnish food and drink processing sector is the main purchaser of Finnish primary produce, followed by Finnish primary producers. Both of these groups buy their primary produce inputs almost exclusively from Finnish sources, unlike in Scotland. At the same time, households buy a smaller proportion of total primary produce in Finland than in Scotland, but even so, they import a smaller share.

Figure 3.2 Sales and purchases of primary produce, Finland

Source: Scottish Government, 2004 Scottish Input-Output Tables, Eurostat, 2004 Finnish Input-Output Tables, adapted by DTZ

3.3 Norway

3.3.1 Characteristics

Norway is a primarily industrial country that has experienced fast economic growth fuelled by petroleum production and a booming fishing industry. Norway is a welfare state with a large public sector, and as such it is one of the most heavily taxed economies in the world.

3.3.2 Sales and purchases of primary produce

Processors

Similar to Denmark, more than half of Norwegian primary produce is bought by the Norwegian food processing industry, which buys 90% of its primary produce purchases from Norwegian sources. This finding reflects the importance of the fish processing sector (catching and aquaculture) to Norway.

Households

15% of Norwegian primary produce is bought by domestic households, which is a low figure in comparison with other benchmark countries.

Primary producers

Only 5% of total Norwegian primary produce is bought by the Norwegian primary produce sector, which is the lowest rate among all the benchmark countries and similar to the Swedish rate (6%).

Hotels and restaurants

Norwegian hotels and restaurants buy 1% of total domestic primary produce.

Exports

14% of Norwegian primary produce is exported, which is near the average across the investigated European benchmark countries.

Figure 3.3 Sales and purchases of primary produce, Norway

Source: Scottish Government, 2004 Scottish Input-Output Tables, Eurostat, 2002 Norwegian Input-Output Tables, adapted by DTZ

3.4 Ireland

3.4.1 Characteristics

Ireland is a highly trade-dependent country that experienced a strong economic growth in the past twenty years, especially during the second half of the 1990s. Agriculture was once the most important sector in Ireland, but it has gone through a sharp decline and now accounts for 5% of the Irish GDP. This is still a high rate in comparison with most European countries and farmers still account for 7% of the workforce. Agricultural and food products account for 8.5% of total exports; live animals and processed meat are among the most important Irish export products.

3.4.2 Sales and purchases of primary produce

Processors

60% of Irish primary produce is bought by Irish processors, reflecting the importance of the Irish meat processing sector. 93% of this sector's primary produce inputs is bought from Irish sources.

Households

Irish households buy only 13% of total Irish primary produce, which is a much lower proportion than in Scotland and it is lower than the rate in most other benchmark countries. Households in Ireland import 28% of their primary produce purchases.

Primary producers

15% of total primary food produced in Ireland is used as inputs for the Irish primary production sector. This is very similar to the Scottish rate (16%), and both are higher than average in Europe. However, Irish primary producers buy 92% of their primary produce purchases from Irish sources, while for Scottish primary production this rate is just 65%.

Hotels and restaurants

1% of Irish primary produce is bought by domestic hotels and restaurants, who import only 11% of their primary produce purchases - a low rate for this sector in Europe.

Exports

Although the main driver of the Irish economic growth is exports, only 10% of total Irish primary produce is exported. Again, this reflects the importance of the Irish meat processing sector and shows that most Irish primary produce is exported after going through domestic processing.

3.4.3 Key findings

The food processing sector is a more important buyer of domestic primary produce in Ireland than in any other European country across those investigated by this study. The primary production sector also buys a large proportion of Irish primary produce, similar to Scotland. Consequently, households buy a smaller proportion and are more likely to import primary produce than the above two sectors.

Figure 3.4 Sales and purchases of primary produce, Ireland

Source: Scottish Government, 2004 Scottish Input-Output Tables, Eurostat, 2000 Irish Input-Output Tables, adapted by DTZ

3.5 Sweden

3.5.1 Characteristics

Sweden is a highly industrialised, modern welfare state with a high standard of living. Primary production is less important to the Swedish economy than other sectors, agriculture accounts for only 1.4% of the GDP and the country imports a significant amount of food.

3.5.2 Sales and purchases of primary produce

Processors

Almost half of Swedish primary produce is processed domestically, and processors source 87% of their primary produce from Sweden.

Households

In terms of primary produce purchases, Swedish households operate very similar to those in Scotland. Swedish households buy a large proportion (21%) of unprocessed Swedish primary food and drink, similar to Scotland (23%) and the UK (25%). In addition, households buy a large proportion of their primary produce purchases from outside Sweden (35%), which is almost exactly the same as in Scotland (34%).

Primary producers

Only 6% of Swedish primary produce is bought by the Swedish primary production sector, this is the lowest proportion among the benchmark countries after Norway (5%). Swedish primary producers buy 88% of their primary produce inputs from Swedish sources.

Hotels and restaurants

About 1% of Swedish primary produce is purchased by domestic hotels and restaurants. This sector buys only 64% of their primary produce purchases from Sweden, a much lower proportion than the Scottish rate (74%).

Exports

13% of Swedish primary produce is exported, which is lower than the average. This reflects the low importance of agriculture to the Swedish economy.

3.5.3 Key findings

The largest purchaser group of Swedish primary produce is the domestic processing sector. Primary produce purchases of households in Sweden are similar to those in Scotland as they buy a similar proportion of total domestic primary produce and they also source a similarly large proportion of primary produce purchases from outside the country.

Figure 3.5 Sales and purchases of primary produce, Sweden

Source: Scottish Government, 2004 Scottish Input-Output Tables, Eurostat, 2000 Swedish Input-Output Tables, adapted by DTZ

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) and data on four additional countries investigated by last year's report. In the case of both Scotland and Denmark the most recent data is shown rather than that presented in last year's summary. The other four countries examined last year have not updated their Input-Output information since last year's report.

All of the data in Table 3.1 is accurate as domestic use tables were available for all countries.

On average, 43% of domestic primary produce is processed domestically. Scotland and Wales have a significantly lower rate (around a quarter), while Denmark and Ireland are higher.

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; in Scotland it is twice the average.

These findings reflects the concentration of indigenous processing in Denmark and Ireland which is contrasted with the interdependence of the countries that form the United Kingdom. In addition, the ability of UK companies to switch Scottish produce to different sites within the UK is a factor. They also reflect the fact that the bulk of the UK population is in the south east of England and the natural flow of primary and processed produce throughout the UK is southwards.

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 exports and selling smaller proportions to domestic households and other domestic sectors, than most other countries.

For sales to primary producers, Scotland is above average, reflecting the interdependence of Scottish agriculture. Scotland is also above average (at 23%) in sales to domestic households, with only with only the UK (25%) and Poland having a higher level of 28%.

Whilst the UK has one of the highest levels of sales to the hotel and restaurant sector at 3% of £30 Bn, Scotland's level is only 1% of £3 Bn. It is possible that Scottish produce is sold to English suppliers but clearly there is more potential to sell to the Scottish catering sector. Italy has the highest level at 4% of £41 Bn.

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