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The Washington Independent
The Washington Independent

Scotland's Plan: National Framework

Scotland's Plan: National Framework

Like much of the developed world, Scotland is experiencing a long-term decline of traditional industries and a growth in service-based activity. Services are now the dominant sector of the economy.

Thomas Dixon
Last updated: Mar 18, 2021 | Apr 19, 2004

Table of Contents

The Economy

Like much of the developed world, Scotland is experiencing a long-term decline of traditional industries and a growth in service-based activity. Services are now the dominant sector of the economy. Manufacturing output, although contributing about 20% of GDP, is falling.

Annual growth in GDP averaged 1.6% between 1974 and 2002 compared with 2.1% for the UK as a whole. GDP per head is 99.75% of the average for the existing 15 European Union member states. Performance lags well behind that of the more successful small European economies. Slower growth over the last 2 years reflects the global economic downturn and a decline in the output of the electronics sector.

Scotland has extensive trade links. In 2002, the gross value of exports was 27.5 billion. Exports to the rest of the UK account for over 50% of Scotland's total exports, while imports from the rest of the UK account for 65% of total imports. Scottish exports to the rest of the world are 16% of gross output, a slightly higher proportion than UK exports as a percentage of UK output (13%). Some sectors are particularly export-oriented _ 28% of the output of agriculture, forestry and fisheries and 36% of production and construction output, is exported to the rest of the world. More than 60% of manufactured exports go to the European Union.

Nearly 300,000 private enterprises employ around 2 million people, with clear strengths in tourism, financial services, electronics, whisky, and oil and gas. 95% of enterprises employ fewer than 50 people. Fewer than 2,200 companies employ more than 250 people, though these account for 43% of total employment. The public sector currently employs 531,000 people in Scotland, accounting for just over 20% of all employees.

Foreign investment has made an important contribution to the Scottish economy over the last 30 years. For example, North Lanarkshire, which was badly affected by the decline of the steel industry in the 1980s, recovered strongly in the 1990s as a result of inward investment, primarily in the electronics sector. The boost to the economy provided by mobile international capital is now less than it was in the 1980s. Currently, there are more than 1,000 inward investors in Scotland, employing some 80,000 people. While American and Far Eastern companies were the dominant players in the past, Europe is an important source of new investment.

Trends in the locational preferences of business and industry include:

  • Clustering of activity around transport nodes and arteries (e.g. Glasgow, Edinburgh and Aberdeen airports, the M8/M9/M74 motorway network, Dundee's Kingsway and the New Town road networks);
  • Gravitation of office-based business and services towards urban centres; and
  • Growth of specialist, knowledge-dependent activities around universities, research institutes and existing industry clusters (e.g. Pentland Science Park and Dundee Technology Park).

Employment Level

The number of people in employment increased by nearly 8% in the period 1995 to 2002. The biggest increases were in Midlothian (28%), West Lothian (25%) and Perth and Kinross (22%) (see Map 5). Glasgow and Edinburgh experienced increases of 16% and 14% respectively. There were increases of 10% in the Highlands and 8% in the Borders. The decline occurred in Aberdeen, Dundee, Renfrewshire, Ayrshire and the three islands council areas.

employment change

Unemployment Level

Unemployment is at its lowest levels for decades and lower than in many of the advanced European countries which are our main competitors. However, there are significant regional disparities. In the Lowlands, the highest levels of unemployment are in parts of West Central Scotland particularly North Ayrshire, Inverclyde and West Dunbartonshire and in Dundee. The Western Isles has the highest levels in rural Scotland. The lowest levels of unemployment are in Aberdeen, East Lothian, East Renfrewshire and East Dunbartonshire. Many of the more buoyant areas have skills shortages.

Significant parts of the country are eligible for assistance under Objectives 1 and 2 of the current EU Structural Funds Programmes (see Map 6). The Highlands and Islands have transitional Objective 1 status, which provides support for the development and structural adjustment in regions whose economic performance is lagging behind the EU average. The South of Scotland and parts of the West and East receive funding under Objective 2 Programmes, which provide assistance to areas facing industrial, urban or rural decline. The Lowlands and the South of Scotland are eligible for funding under the Objective 3 Programme, which provides European Social Fund support to tackle long-term unemployment and social exclusion. Scotland also benefits from the Leader+, Equal, Urban II and INTERREG III Community Initiatives and the LIFE programme. Lower levels of EU support can be expected after the current programming period ends in 2006.

European Structure Funds


Tourism provides employment for some 216,000 people (about 10% of the total workforce) and tourists spend around 4.2 billion a year. Over 93% of visitors to Scotland originate in other parts of the UK or Ireland. Of the 1.85 million overseas visitors per annum, the largest proportion (27%) come from the USA. While overseas visitor numbers were depressed by global tensions in 2002, new markets are emerging in Scandinavia and Central and Eastern Europe. The Highlands, Edinburgh and Glasgow are Scotland's most popular destinations. Many visitors are attracted by Scotland's strong cultural heritage and historic environment. 81% of overseas visitors who come to Scotland arrive in the UK by air and 65% of UK visitors to Scotland come by car.

Financial Services

Scottish financial services have a European and world profile. The sector employs 97,000 people directly, and a further 99,000 indirectly, representing almost 10% of the total workforce. The financial services industry is primarily focused on Edinburgh but is of growing importance in Glasgow and has a presence in Perth and Aberdeen. The industry has expanded steadily since 1995 and is still growing. Cost of living and quality of life considerations combined with relatively good international links have led to some transfer of jobs from London and the south-east of England.

Sea Oil

Since the 1970s, the development of North Sea oil and gas fields has made an important contribution to the Scottish economy and underpinned prosperity in the North-East. The oil and gas industry currently provides 100,000 jobs directly or indirectly, around 41,000 of these in the North-East. North Sea oil production is expected to peak between 2005 and 2010. As the North Sea fields have matured many of the companies established in Aberdeen have retained the city as a base for headquarters functions and international operations.


Retailing makes a major contribution to the economy. Turnover in 2001 was estimated at 18.4 billion. The sector employs around 230,000 people. Glasgow is ranked second in the UK (behind London's West End) in Experian's 2003 Retail Centre Ranking. Edinburgh is the next highest rated Scottish retail destination, lying in 14th place. There has been a "feel-good factor" in retailing which, while now weakening, remains relatively strong. There are, however, continuing concerns about the loss of local shops, particularly in rural areas.

Thomas Dixon | He creates the ideal marketing experience by connecting online brands with their target audiences. He recently completed a research paper on consumer conversion and took part in a community project on SEO optimization. Thomas is working on his Bachelor of Arts in Communications and plans to intern in an online marketing department soon.


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