Daily question: How big is Scotland’s economy and what's important to it?
As the people of Scotland weigh up how to vote in the independence referendum, they are asking questions on a range of topics from the economy to welfare.
In this series, we are looking at those major questions and by using statistics, analysis and expert views shining a light on some of the possible answers.
Here, we look at Scotland's economy and its size. But the question of size isn't as straightforward as you might think.
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How do we measure the size of the economy?
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|£ millions||£ per capita|
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The problem we have here is that there are a number of ways to measure the size of a country's economy.
When we talk about Scotland's economy, we're normally referring to Gross Domestic Product (GDP) at market price. That's a measure of all the things made within Scotland - the total produced by each industry or sector of the economy.
The reason there are three different figures for Scotland is because of the age old problem of oil. The figures show how big the economy is without oil, and then with the oil industry, measured first by population and then by geography. If a geographical share of oil is included, the Scottish economy was £2,500 bigger per person in 2013. Without oil and gas, the GDP figure in Scotland is slightly below the UK average, but sill bigger than lots of UK regions, as the London figure drives up the UK average.
…OK, well that's sorted then
Not quite. Just to add to the headache some economists say that this figure doesn't really reflect the true size of a country's economy because it measures everything that's produced within the country's borders, no matter who owns the firm.
In Scotland, a number of its most significant oil and gas, petrochemical, financial services and whisky companies are foreign owned. Although the products are made in Scotland, the money doesn't necessarily stay in Scotland.
If we use the Gross National Income (GNI) measure, we can find the total of the economic activity of the citizens of that country. It includes money made elsewhere and brought back into Scotland, and excludes money made by foreign companies within Scotland.
The Centre for Public Policy Research says UK GNP per person was £21,267 in 2010, and they say that although there is no official breakdown for Scotland, because of a higher proportion of foreign owned companies in significant Scottish industries, it's likely that Scotland's GNI per person would be lower than the UK average.
However, the Scottish government disagree. They have put together experimental statistics of GNI for Scotland. In 2010 [including a geographical share of the North Sea] Scotland's GNI was estimated to be £26,000 per head, which is higher than the UK GNI per head which is estimated to have been £24,000.
So who's right?
The Scottish government have much higher estimates for the profits from oil and gas production. Their figures show £16bn flowing into Scottish coffers and £5bn flows out of Scotland, so they think three quarters of profits stay in Scotland. This seems surprisingly high as Scottish ownership of oil and gas assets is through smallish companies, and although there will be Scottish shareholders in the big oil companies like BP and Shell, a growing number of North sea oil and gas companies are owned by foreign governments with no Scottish component.
What are the most important parts of Scotland's economy?
This is a much more straightforward question to answer. In 2011, the services sector [which includes retails and financial services] represented about 72% of all economic activity, up from 66% in 1998. Over the same period the manufacturing sector shrank from 19% to 12% of the economy. Like lots of developed economies across the world, manufacturing has been getting less significant, and services have become more important.
In terms of exports the two largest exporting industries in 2012 were....
- manufacture of food and drink - £4.7bn
- and manufacture of coke, refined petroleum and chemical products - £4.1bn.
Basically, oil and whisky really are crucial to Scotland's export economy.
Where does all this stuff go?
Scottish international exports in 2012 [excluding oil and gas] are provisionally estimated at £26bn. The top export destination is the USA, which is good news as that's an economy that's growing rapidly at the moment. The value of Scottish exports to the rest of UK in 2012 [excluding oil and gas] are provisionally estimated at £47bn, nearly twice as much as the global export level.
Keeping that level of trade with the rest of the UK is one of the main reasons that the Scottish government is keen to keep the pound if Scotland does vote yes.