Re-industrialisation and the Scottish economy
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Transcript of Re-industrialisation and the Scottish economy
Re-industrialisation & the
Scottish Economy
Dr Graeme Roy
Senior Economic Adviser
15 October 2014
Recent Economic PerformanceChart: GDP levels in Scotland, and Pre-2007 Trend
80
85
90
95
100
105
110
115
120
125
2000 2002 2004 2006 2008 2010 2012 2014
Year
Pre-2007 trend GDP
Actual GDP Potential on pre-2007 trend
Labour Market TrendsChart: Difference from 2000-2007 mean across Labour Market Indicators
95
96
97
98
99
100
101
102
103
2008 2009 2010 2011 2012 2013 2014
Unemployment rate Employment rate Average hours worked Full time %
Long-term Ambitions
• Narrowing regional variations in performance
• Tackling barriers to fulfilling economic opportunity
• Creating more sustainable and well-paid employment opportunities
Regional Variations in Scotland
Source: ONS
Chart: GVA per head, UK =100, 2011
Trade BalanceChart: Trade Balance as Percentage of GDP, 1995-2013
-10%
-5%
0%
5%
10%
15%
20%
Austria Denmark Finland Germany
Norway Sweden United Kingdom United States
Source: OECD
Manufacturing and Key Indicators
Manufacturing
output as % of
GVA
Investment
as % of
GDP
Trade
Balance
(% of
GDP)
Business
Expenditure on
Research and
Development
(BERD) as % of
GDP
% Change in
manufacturing
GVA 1990-2012
(2005 prices)
Austria 18.2 22.7 3.2 2.0 75.4
Denmark 10.7 17.4 5.1 2.0 14.6
Finland 15.4 19.8 -1.0 2.4 87.3
Germany 23.8 17.3 5.9 2.0 31.7
Sweden 15.7 18.9 5.8 2.3 140.9
United
Kingdom10.0 14.7 -2.1 1.1 -0.7
Table: International Comparisons across a range of indicators (2012)
Manufacturing
• Traditional definition: combining inputs to produce physical products
• But increasingly more complex - e.g. complementary services
• Scotland’s strengths well-documented. For example:– Life Sciences, Food & Drink; Energy etc– University research– Engineering
Structure of Scottish Economy
3%
8%
29%
9%
11%
7%
15%
18%
1%
7%
12%
8%
13%
8%
25%26%
Agriculture,Forestry and
Fishing
Other production Manufacturing Construction Distribution, Hotelsand Catering
Transport, Storageand
Communication
Business Servicesand Finance
Government andOther Services
% of Total Onshore Output
1973 2009
Source: Scottish Government Input-Output Tables, onshore output
Source of Inputs by Sector
- 5,000 10,000 15,000 20,000 25,000
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Energy supply
Water and waste
Construction
Distribution, hotels and catering
Transport, storage and communication
Financial, insurance and real estate
Professional and support activities
Government, health and education
Other services
£ million (basic prices)
Source of Inputs by Sector (Intermediate Consumption), 2011
Total Domestic Consumption Imports from RUK Imports from ROW
Source: Scottish Input-Output Tables
International Comparisons
5
10
15
20
25
30
35
% o
f G
DP
Year
Austria Denmark Finland Germany Sweden United Kingdom
Source: UNCTAD
Chart: Contribution of Manufacturing to GDP, 1970 to 2012
Manufacturing employment…..Chart: Employees in Scottish Manufacturing Sector (‘000s)
……but rising productivity
Chart: Real (volume) GVA and Labour Productivity (2008 Q2 = 100)
Sources: Scottish Government GDP statistics, ONS workforce jobs
The role of Re-industrialisation
• Growing consensus of benefits of focussing on –
– A more sustainable form of growth;
– One that focusses on greater resilience;
– Is less consumption led;
– Has a greater role for exports and investment;
– And is more geographically dispersed.
• A stronger manufacturing sector can potentially play a key role
Stronger Manufacturing Sector
• Innovation – manufacturing firms account for 65% of business R&D in Scotland;
• Trade – nearly 60% of Scottish exports are in manufacturing;
• Geography – spatial balances;
• Investment – physical and human capital & supply chain;
• Employment – earnings tend to be above national average;
• Resilience – value added & less reliance on consumption led growth
• Supports service sector
Policy1. Fundamentals:
– Leadership
– Economic model (e.g. value of long-term investment vs. short-term profit);
– Strengthening Collaborative Approaches
– Ownership
2. Policy priorities
– Access to finance
– Regulation
– Skills & Workforce Development
– Innovation, Internationalisation & Infrastructure
Policy
3. Specific policies (such as use of tax & gov. spending)
– Capital allowances to encourage investment;
– Incentives to encourage R&D activity – either through payroll taxes or corporation tax;
– Supporting remanufacturing and move towards the circular economy;
– Scottish Manufacturing Advisory Service, and focus on strengthening supply chains.
Conclusions
• Move towards services witnessed across most developed economies – not unique to Scotland/UK
• However, there remains a vibrant and diverse manufacturing sector in Scotland – which has evolved over the years.
• Key is how we harness that in the future – and capture emerging opportunities.
• Prize is potentially more robust growth, greater resilience, high quality employment opportunities and stronger presence in international markets