Economy of Scotland facts for kids
Edinburgh: Scotland's capital city
|Currency||Pound Sterling (GBP£)|
|1 September – 31 August|
|EU, WTO, OECD|
|GDP||$233.332 billion (Nominal; 2015 est.)
(including revenues from
North Sea oil and gas)
|0.7% (Q3 FY2016 – Q3 FY2015)|
GDP per capita
|$43,410 (including revenues from North Sea oil and gas)|
GDP by sector
|▲ 1.6% (YTD January 2017)|
Population below poverty line
|15% (UK, 2014 est.)|
|▼ 0.332 (UK, 2015)|
|2,610,000 (2017 est.)|
Average gross salary
|£2,480 / €3,373 / $3,814 monthly (2014)|
Average net salary
|£1,730 / €2,064 / $2,793 monthly (2011)|
|Agriculture, Banking & Finance, Computing, Construction, Defence, Electronics, Emergency Services, Fishing, Food & Drink, Forestry, Life Sciences, Oil & Gas, Renewable Energy, Shipbuilding, Textiles, Tourism, Transport|
|Exports||£78.6bn (2015 figures.)|
|Aerospace & Naval Systems, Barley, Automobiles, Business & Financial Services, Chemical Products, Computers, Computer Software, Electricity, Electronics, Fish, Confectionery, Oil & Gas, Pharmaceuticals, Renewable Energy, Scotch Whisky, Ships, Textiles, Timber, Water|
Main export partners
|Rest of United Kingdom
Rest of European Union
Main import partners
|Rest of United Kingdom
Rest of European Union
All values, unless otherwise stated, are in US dollars.
The economy of Scotland is the 43rd largest in the world with an estimated nominal gross domestic product (GDP) of up to £152 billion in 2015. As of 2016, Scotland, if it were a separate country, would be the twelfth-largest economy in the 28-member European Union (EU). Since the Acts of Union 1707, Scotland's economy has been closely aligned with the economy of the rest of the UK. England has historically been the main trading partner of Scotland. However, since the United Kingdom became part of the European Union, Scotland has developed closer links with other European Union economies. However, Scotland still conducts the vast majority of its trade within the UK. In 2014, Scotland's exports totalled £76 billion, of which £48.5 billion (64%) was with constituent nations of the United Kingdom, £11.6 billion with the rest of the EU, and £15.2 billion with other parts of the world.
Scotland was one of the industrial powerhouses of Europe from the time of the Industrial Revolution onwards, being a world leader in manufacturing. This left a legacy in the diversity of goods and services which Scotland produces, from textiles, whisky and shortbread to jet engines, buses, computer software, ships, avionics and microelectronics, as well as banking, insurance, investment management and other related financial services. In common with most other advanced industrialised economies, Scotland has seen a decline in the importance of both manufacturing industries and primary-based extractive industries. This has, however, been combined with a rise in the service sector of the economy, which has grown to be the largest sector in Scotland.
Government involvement in Scotland's economy is on the whole exercised by the UK Government and the Scottish Government via HM Treasury, respectively headed by the Chancellor of the Exchequer, and the Cabinet Secretary for Finance, Constitution and Economy, representing those two administrations which are responsible for reserved and devolved matters respectively. Since 1979, management of the UK economy (including Scotland) has followed a broadly laissez-faire approach. The Bank of England is Scotland's central bank and its Monetary Policy Committee is responsible for setting interest rates. The Bank of Scotland, Royal Bank of Scotland and Clydesdale Bank can print their own notes to be issued around Scotland; they are not legal tender (neither are Bank of England notes in Scotland), but are generally accepted. The currency of Scotland is the Pound Sterling, which is also the world's third-largest reserve currency after the US dollar and the euro, and also the fourth-most-valued currency in the world, behind the Kuwaiti Dinar, Bahraini Dinar, and Omani Rial, and the most valued currency outside the Middle East. Scotland (as a constituent nation of the UK) is a member of the Commonwealth of Nations, the European Union, the G7, the G8, the G20, the International Monetary Fund, the Organisation for Economic Co-operation and Development, the World Bank, the World Trade Organisation, Asian Infrastructure Investment Bank and the United Nations.
- Agriculture and forestry
- Natural resources
- Public sector
- Economic performance
- Relationship with the rest of the United Kingdom
- Images for kids
- See also: Economy of the United Kingdom
After the Industrial Revolution in Scotland, the Scottish economy concentrated on heavy industry, dominated by the shipbuilding, coal mining and steel industries. Scottish participation in the British Empire also allowed Scotland to export its output throughout much of the world. However heavy industry declined in the late 20th century, leading to a shift in the economy of Scotland towards technology and the service sector. The 1980s saw an economic boom in the Silicon Glen corridor between Glasgow and Edinburgh, with many large technology firms relocating to Scotland.
In 2007 the industry employed over 41,000 people. Scottish-based companies have strengths in information systems, defence, electronics, instrumentation and semiconductors. There is also a dynamic and fast growing electronics design and development industry, based around links between the universities and indigenous companies. There is also a significant presence of global players like National Semiconductor and Motorola. Other major industries include banking and financial services, construction, education, entertainment, biotechnology, transport equipment, oil and gas, whisky, and tourism. The Gross Domestic Product (GDP) of Scotland in 2013 was $248.5 billion including revenue generated from North Sea oil and gas. Edinburgh is the financial services centre of Scotland, with many large financial firms based there. Glasgow is the fourth largest manufacturing centre in the UK, accounting for well over 60% of Scotland's manufactured exports. Shipbuilding, although significantly diminished from its heights in the early 20th century, is still a large part of the Glasgow economy. Aberdeen is the centre of North Sea offshore oil and gas production, with giants such as Shell and BP housing their European exploration and production HQs in the city. Other important industries include textile production, chemicals, distilling, agriculture, brewing and fishing.
When Scotland ratified the 1707 Act of Union, despite Scotland's national debt, taxes were low due to war avoidance and trade thrived from the Baltic to the Caribbean. German sociologist Max Weber credited the Calvinist "Protestant Ethic", involving hard work and a sense of divine predestination and duty, for the entrepreneurial spirit of the Scots. Growth was rapid after 1700, as Scottish ports, especially those on the Clyde, began to import tobacco from the American colonies. Scottish industries, especially linen manufacturing, were developed. Scotland embraced the Industrial Revolution, becoming a small commercial and industrial powerhouse of the British Empire. Many young men built careers as imperial administrators. Many Scots became soldiers, returning home after 20 years with their pension and skills.
From 1790 the chief industry in the west of Scotland became textiles, especially the spinning and weaving of cotton. This flourished until the American Civil War in 1861 cut off the supplies of raw cotton; the industry never recovered. However, by that time Scotland had developed heavy industries based on its coal and iron resources. The invention of the hot blast for smelting iron (1828) had revolutionised the iron industry, and Scotland became a centre for engineering, shipbuilding, and locomotive construction. Toward the end of the 19th century steel production largely replaced iron production. Emigrant Andrew Carnegie (1835–1919) built the American steel industry, and spent much of his time and philanthropy in Scotland. Agriculture gained after the union, and standards remained high. However the adoption of free trade in mid-19th century brought cheap American corn which undersold local farmers. The industrial developments, while they brought work and wealth, were so rapid that housing, town planning, and provision for public health did not keep pace with them, and for a time living conditions in some of the towns were notoriously bad.
Shipbuilding reached a peak in the early 20th century, especially during the Great War, but quickly went into a long downward slide when the war ended. The disadvantage of concentration on heavy industry became apparent: other countries were themselves industrialising and were no longer markets for Scottish products. Within Britain itself there was also more centralisation, and industry tended to drift to the south, leaving Scotland as a neglected fringe. The entire period between the world wars was one of economic depression, of which the worldwide Great Depression of 1929–1939 was the most acute phase. The economy revived with munitions production during World War II. After 1945, however, the older heavy industries continued to decline and the government provided financial encouragement to many new industries, ranging from atomic power and petrochemical production to light engineering. The economy has thus become more diversified and therefore stabler.
Agriculture and forestry
- See also: Agriculture in Scotland and Forestry in the United Kingdom
Only about one quarter of the land is under cultivation – mainly in cereals. Barley, wheat and potatoes are grown in eastern parts of Scotland such as Aberdeenshire, Moray, Highland, Fife and the Scottish Borders. The Tayside and Angus area is a centre of production of soft fruits such as strawberries, raspberries and loganberries, owing to the mild climate. Sheep raising is important in the less arable mountainous regions, such as the northwest of Scotland which are used for rough grazing, due to its geographical isolation, poor climate and acidic soils. Parts of the east of Scotland (areas such as Aberdeenshire, Fife and Angus) are major centres of cereal production and general cropping. In such areas, the land is generally flatter, coastal, and the climate less harsh, and more suited to cultivation. The south-west of Scotland – principally Ayrshire and Dumfries and Galloway – is a centre of dairying. Agriculture, especially cropping in Scotland, is highly mechanised and generally efficient. Farms tend to cover larger areas than their European counterparts. Hill farming is also prominent in the Southern Uplands in the south of Scotland, resulting in the production of wool, lamb and mutton. Cattle-Rearing particularly in the east and south of Scotland results in the production of large amounts of beef. Farming in Scotland was affected by BSE and the European ban on the importation of British beef from 1996. Dairy and Cattle farmers in south-west Scotland were affected by the 2001 UK Foot and Mouth outbreak, which resulted in the destruction of much of their livestock as part of the biosecurity effort to control the spread of the disease.
Because of the persistence of feudalism and the land enclosures of the 19th century the ownership of most land is concentrated in relatively few hands (some 350 people own about half the land). In 2003, as a result, the Scottish Parliament passed a Land Reform Act that empowered tenant farmers and communities to purchase land even if the landlord did not want to sell.
About 13,340 km² of land in Scotland is forested – this represents around 15% of the total land area of Scotland. The majority of forests are in public ownership, with forestry policy being controlled by the Forestry Commission. The biggest plantations and timber resources are to be found in Dumfries and Galloway, Tayside, Argyll and the Scottish Highlands. The economic activities generated by forestry in Scotland include planting and harvesting as well as sawmilling, the production of pulp and paper and the manufacture of higher value goods. Forests, especially those surrounding populated areas in Central Scotland also provide a recreation resource.
The waters surrounding Scotland are some of the richest in Europe. Fishing is an economic mainstay in parts of the North East of Scotland and along the west coast, with important fish markets in places such as Aberdeen and Mallaig. Fish and shellfish such as herring, crab, lobster, haddock and cod are landed at ports such as Peterhead, the biggest white fish port in Europe, Fraserburgh, the biggest shellfish port in Europe, Stornoway, Lerwick and Oban. There has been a large scale decrease in employment in the fishing industry within Scotland, due initially to the sacrifice of national fishing rights to the EEC on the UK's accession to the Common Market in the 1970s, and latterly to the historically low abundances of commercially valuable fish in the North Sea and parts of the North Atlantic.
In tandem with the decline of sea-fishing, commercial fish farms – especially in salmon, have increased in prominence in the rivers and lochs of the north and west of Scotland. Inland waters are rich in fresh water fish such as salmon and trout although here too there has been an inexorable and so far unexplained decline in abundance over the past decades.
Scotland has a large abundance of natural resources from fertile land suitable for agriculture, to oil and gas. In terms of mineral resources, Scotland produces coal, zinc, iron and oil shale. The coal seams beneath central Scotland, in particular in Ayrshire and Fife contributed significantly to the industrialisation of Scotland during the 19th and 20th centuries. The mining of coal – once a major employer in Scotland has declined in importance since the later half of the 20th century, due to cheaper foreign coal and the exhaustion of many seams. The last deep-coal mine was at Longannet on the Firth of Forth. It closed in 2016. A modest amount of opencast coal mining continues.
The Scottish Government states that it is taking a cautious, considered and evidenced-based approach to fracking. In January 2015 the Scottish Government placed a moratorium on granting consents for unconventional oil and gas extraction. This will allow health and environmental impact tests to be carried out as well as a full public consultation to allow every interested organisation and any member of the public to input their views. The Scottish Government has stated that no fracking can or will take place in Scotland while the moratorium remains in place.
Silicon Glen is the phrase that is used to describe the growth and development of Scotland's hi-tech and electronics industries in the Central Belt through the 1980s and 1990s, analogous to the larger concentration of hi-tech industries in Silicon Valley, California. Companies such as IBM and Hewlett-Packard have been in Scotland since the 1950s being joined in the 1980s by others such as Sun Microsystems (now owned by Oracle). 45,000 people are employed by electronics and electronics-related firms, accounting for 12% of manufacturing output. In 2006, Scotland produced 28% of Europe's PCs; more than seven per cent of the world's PCs; and 29% of Europe's notebooks.
The software sector in Scotland developed rapidly and in 2016 there were an estimated 40,226 people working in the digital economy across Edinburgh, Glasgow and Dundee. Scotland's history in manufacturing is being transferred into the software sector and this is attracting companies from around the world. Several universities are playing an important role by producing research in Computing Science, including the University of Edinburgh's School of Informatics. According to the REF 2014 assessment for computer science and informatics the School of Informatics has produced more world-leading and internationally excellent research (4* and 3*) than any other university in the UK.
It is estimated that tourism accounts for 5% of Scotland's GDP. Scotland is a well-developed tourist destination with attractions ranging from unspoilt countryside, mountains and abundant history. The tourism economy and tourism related industries in Scotland support c. 196,000 in 2014 mainly in the service sector accounting for around 7.7% of employment in Scotland. In 2014, over 15.5 million overnight tourism trips were taken in Scotland, for which visitor expenditure totalled £4.8 billion. Domestic tourists (those from the United Kingdom) make up the bulk of visitors to Scotland. In 2014, for example, UK visitors made 12.5 million visits to Scotland, staying 41.6 million nights and spending £2.9 billion. In terms of overseas visitors, those from the United States made up 15% of visits to Scotland, with the United States being the largest source of overseas visitors, and Germany (13%), France (7%), Australia (6%) and Canada (5%) following behind.
Excluding intra UK trade, the European Union and the United States constitute the largest markets for Scotland's exports. As part of the United Kingdom and the European Union, Scotland fully participates in the single market and free trade area which exists across all EU member states and regions. In the 21st century, with the high rates of growth in many emerging economies of southeast Asia such as China, Thailand and Singapore, there was a drive towards marketing Scottish products and manufactured goods in these countries.
Note: Revenues from North Sea oil and gas are not included in these figures.
|United States||£3,985 million|
|Republic of Ireland||£1,125 million|
|United Arab Emirates||£670 million|
|Template:Country data African Union||£420 million|
|Source: Export Statistics Scotland|
The total value of international exports from Scotland in 2014 (excluding oil and gas) was estimated at £27.5 billion. The top five exporting industries in 2014 were food and drink (£4.8 billion), legal, accounting, management, architecture, engineering, technical testing and analysis activities (£2.3 billion), manufacture of refined petroleum and chemical products (£2.1 billion), mining and quarrying (£1.9 billion) and wholesale and retail trade (£1.8 billion). The total value of exports from Scotland to the rest of the UK in 2014 (excluding oil and gas) was estimated at £48.5 billion.
The public sector, in Scotland, has a significant impact upon the economy and comprises central government departments, local government, and public corporations. As of 2016, there were approximately 545,000 people employed in the public sector, which accounts for 20.9% of employment in Scotland – this includes all medical professionals employed within the National Health Service in Scotland, those employed in the emergency services and those employed in the state education and higher education sector. This is in addition to employees of the government in the civil service and in local government as well as public bodies and corporations.
Since the Devolution Referendum of 1997, in which the Scottish electorate voted for devolution, a Scottish Parliament was reconvened under the Scotland Act 1998 and is considered to be a devolved national, unicameral legislature of Scotland. The Act delineates the legislative competence of the Parliament – the areas in which it can make laws – by explicitly specifying powers that are "reserved" to the Parliament of the United Kingdom. The Scottish Parliament has the power to legislate in all areas that are not explicitly reserved to Westminster. There is a clear separation of responsibility of the powers of both the UK government and the devolved Scottish Government in relation to the formulation and execution of national economic policy as it affects Scotland – this is set out under Section 5 of the Scotland Act 1998.
- See also: United Kingdom budget and United Kingdom national debt
The UK Government along with the Parliament of the United Kingdom retains some control over Scotland's fiscal environment, in relation to taxation (including tax rates and tax collection) and the overall share of central government expenditure apportioned to Scotland, in the form of an annual block grant. It also retains complete responsibility for the operation of the Welfare State, in terms of pensions, unemployment insurance and child benefit – as part of the UK-wide Welfare State exercised by the UK Department for Work and Pensions and HM Treasury. Whilst the UK Government retains most control over social security schemes, the Scottish Government has introduced a "Scottish Welfare Fund" to lessen the impact of cuts on welfare.
- See also: Scottish budget
The Scottish Government has the power to raise or lower the rate of income tax in Scotland by up to 3p in the pound. It is also able to vary business rates and can regulate the application of local taxes such as the council tax levied by local authorities in Scotland. The Scottish Government has full control over how Scotland's annual block grant is divided between government departments, such as healthcare and education and on state-owned enterprises, e.g. Scottish Water and Caledonian MacBrayne. The Scottish Government does however have control over Economic Development policy, and controls, funds and regulates the national Economic development Agency – Scottish Enterprise. In 2016, for example, the budget of the Scottish Government was around £37bn, which the Scottish Government can spend on the areas under its jurisdiction such as education, healthcare, transport, the environment and justice.
The 32 unitary authorities in Scotland have the power to levy a local tax, called the Council Tax, which is used to pay for local services such as refuse collection, street lighting, roads, pavements, public parks and museums. The value of residential property is the base for the tax, with each dwelling allocated to one of eight bands coded by letters A to H (H being the highest) on the basis of its assumed capital value. Each local authority sets a tax rate expressed as the annual levy on a Band D property inhabited by two liable adults. The budget of local authorities is supplemented by direct grants from the Scottish Government.
Historians agree that widespread high quality education was one key to Scotland's economic success, providing human capital that helped make up for the deficit in natural resources. The history of education in Scotland in its modern sense of organised and institutional learning, began in the Middle Ages, with the education of boys based around Church choir schools and grammar schools. By the end of the 15th century schools were also being organised for girls and universities were founded at St Andrews, Glasgow and Aberdeen. Their academic reputation was higher than Oxford or Cambridge. Education was encouraged by the Education Act 1496, which made it compulsory for the sons of barons and freeholders of substance to attend the grammar schools, which in turn helped increase literacy among the upper classes.
The Scottish Reformation resulted in major changes to the organisation and nature of education, with the loss of choir schools and the expansion of parish schools, along with the reform and expansion of the Universities. In the seventeenth century, legislation enforced the creation and funding of schools in every parish, often overseen by presbyteries of the local kirk. The existence of this network of schools later led to the growth of the "democratic myth" that poor boys had been able to use this system of education to rise to the top of Scottish society. However, Scotland's university system did help to make it one of the major contributors to the Enlightenment in the 18th century, producing major figures such as David Hume and Adam Smith. Most universities are linked with a research and development sector; the University of Dundee is at the heart of a biotechnology and medical research cluster; the University of Edinburgh is a centre of excellence in the field of Artificial Intelligence and the University of Aberdeen is a world-leader in the study of offshore technology in the oil and gas industry.
Another major component of central government expenditure in Scotland is on healthcare and healthcare related services. The National Health Service (NHS) is the publicly controlled provider of the majority of healthcare in Scotland, with the NHS being a major employer not only in terms of; doctors, nurses, and other key healthcare workers, but also in terms of administration. The service is administered differently from the rest of the United Kingdom and is largely free at the point of use to residents in Scotland, except for dental and optical services where those over 18 must pay. In the short term spending on healthcare in Scotland remains high in response to the population's poor diet and high instance of heart disease. In the medium to long term, the challenges of an ageing population are likely to increase demand for health services and put increasing pressure on the health service in Scotland.
Another component of devolved central government expenditure in Scotland is on justice. The Cabinet Secretary for Justice is responsible for the entire justice system; incl. security, access to justice, criminal law and procedure, civil law, Police Scotland, the legal profession, courts, sentencing, Scottish Prison Service, victims and witnesses, reducing reoffending, youth justice, criminal justice social work, community safety, Scottish Fire and Rescue, anti-social behaviour, drugs policy, violence reduction, anti-sectarianism & liquor licensing. Police Scotland is the territorial force responsible for law enforcement in Scotland. Since 2007, the SNP-led Scottish Government has remained committed to the 1,000 extra police officers pledge, with the force now having consistent funding for officer numbers to remain over the 17,200 mark and not to fall below that number. The Scottish Prison Service (SPS) manages the prisons in Scotland, which collectively house over 8,500 prisoners.
In Scotland, GDP per capita varies from €16,200 in North & East Ayrshire to €50,400 in Edinburgh city. 1.1 million (20% of Scots) live in these five deprived [GDP per person is under €20,000] Scottish districts: Clackmannshire & Fife, East & Mid Lothian, West Dumbartonshire, East & North Ayrshire, Caithness Sutherland & Ross.
According to Eurostat figures (2013) there are huge regional disparities in the UK with GDP per capita ranging from €15,000 in West Wales to €179,800 in Inner-London West. The average GDP per capita in the South East England region (excludes London) is €34,200 with no local government area showing a GDP per capita of less than €20,000. Equally, there are 21 areas in the rest of the UK where the GDP per person is under €20,000: 4.5 million (8.5% of English) live in these deprived English districts.
The figures below come from Eurostat (2013) and are denoted in Euros, it notes the economic position of Scottish regions in terms of GDP and GDP per capita. It should also be noted that the Scottish figures exclude offshore oil revenue. There are 26 areas in the UK where the GDP per person is under €20,000.
|Scottish Area||GDP €||GDP per capita €|
|Angus & Dundee||€6.5 bn||€24,500|
|Perth & Kinross & Stirling||€6.5 bn||€27,400|
|Dumfries & Galloway||€3 bn||€20,500|
|Scottish Borders||€2.3 bn||€20,300|
|Clackmann. & Fife||€8.3 bn||€19,900|
|Edinburgh & Lothian||€32.7 bn||€31,766|
|West Lothian||€4.6 bn||€26,200|
|East & Mid Lothian||€3.5 bn||€18,700|
|Glasgow & Strathclyde||€57.6 bn||€23,671|
|Glasgow City||€25.5 bn||€42,700|
|Inverclyde & East Renfrew & Renfrew||€7.3 bn||€21,000|
|North Lanarkshire||€7.1 bn||€21,200|
|South Ayrshire||€2.9 bn||€25,200|
|South Lanarkshire||€6.7 bn||€21,500|
|East & West Dumbarton||€4 bn||€17,900|
|East & North Ayrshire||€4.1 bn||€16,200|
|Aberdeen & Aberdeensire||€23.2 bn||€47,900|
|Highlands & Islands||€11.2 bn||€24,000|
|Caithness & Sutherland & Ross & Cromarty||€1.7 bn||€18,400|
|Lochaber & Skye||€2.3 bn||€23,300|
|Eilean Siar||€0.5 bn||€20,200|
|TOTAL||€154.9 bn||€29,100 (excl oil revenue)|
Relationship with the rest of the United Kingdom
By convention, if the UK Parliament wants to pass legislation in areas lying within Holyrood's powers, MPs should seek consent from MSPs. If Westminster legislation would expand or contract the powers of Scottish Parliament or its ministers, this too requires consent from Edinburgh. The Smith Commission report concluded that "The Scottish Parliament will be made permanent in UK legislation" and the Sewel Convention must be "put on a statutory footing".
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