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Economy of Scotland

2007 Schools Wikipedia Selection. Related subjects: Economics

   The headquarters of the Bank of Scotland, located on the Mound in
   Edinburgh.
   Enlarge
   The headquarters of the Bank of Scotland, located on the Mound in
   Edinburgh.

   The economy of Scotland is closely linked with the rest of Europe, and
   is essentially a mixed economy. Scotland has the third largest GDP per
   capita of any part of the United Kingdom after London and the South
   East of England.

   Scotland was one of the industrial powerhouses of Europe from the time
   of the Industrial Revolution onwards, being a world leader in
   manufacturing and shipbuilding related industries, at the time, which
   today has left a legacy in the diversity of goods and services which
   the Scottish economy produces from textiles, whisky and shortbread to
   aeroengines, buses, computer software, ships, avionics and
   microprosssors to banking, insurance and other related financial
   services.

   In common with most other advanced industrialised economies, Scotland
   has seen a decline in the importance of the manufacturing industries
   and primary-based extractive industries. This has, however, been
   combined with a rise in the service sector of the economy which is now
   the largest sector in Scotland, with significant rates of growth over
   the last decade.

   The British Pound Sterling is the official currency of Scotland, and
   the central bank of the UK is the Bank of England which retains
   responsibility for the monetary policy of the whole of the United
   Kingdom.

Overview

   After the Industrial Revolution, the Scottish economy concentrated on
   heavy industry, dominated by the shipbuilding, coal mining and steel
   industries. Scottish participation in the British Empire also allowed
   the Scottish economy to export its output throughout the world. However
   heavy industry declined in the latter part of the 20th century leading
   to a remarkable shift in the economy of Scotland towards a technology
   and service sector based economy. The 1980s saw an economic boom in the
   Silicon Glen corridor between Glasgow and Edinburgh, with many large
   technology firms relocating to Scotland. Today the industry employs
   over 41,000 people. Scottish-based companies have strengths in
   information systems, defence, electronics, instrumentation and
   semi-conductors. There is also a dynamic and fast growing electronics
   design and development industry, based around links between the
   universities and indigenous companies like Wolfson, Linn, Nallatech and
   Axeon. There is also a significant presence of global players like
   National Semiconductor and Motorola. Other major industries include
   banking and financial services, education, entertainment,
   biotechnology, transport equipment, oil and gas, whisky, and tourism.
   The Gross Domestic Product (GDP) of Scotland is just over £74 billion
   ($130 billion) (2002) , giving a per capita GDP of £14,651 ($25,546)
   (2002).

   Edinburgh is the financial services centre of Scotland and the sixth
   largest centre in Europe, with many large financial firms based there,
   including the Royal Bank of Scotland (the second largest bank in
   Europe), HBOS (owners of the Bank of Scotland) and Standard Life
   Insurance. Glasgow is Scotland's leading seaport and 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. The city has the UK's largest and most
   economically important commerce and retail district after London's West
   End. Glasgow is also one of Europe's top 20 financial centres and is
   home to many of the UK's leading companies. Other important industries
   include textile production, chemicals, distilling, brewing and fishing.

Manufacturing

   Whisky stills at Glenfiddich Distillery in Moray.
   Enlarge
   Whisky stills at Glenfiddich Distillery in Moray.

   Manufacturing in Scotland has shifted its focus in recent years with
   heavy industries such as shipbuilding and iron and steel declining in
   their importance and contribution to the economy. It is generally
   argued that this has been in response to increasing globalisation and
   competition from low cost producers across the world, which has eroded
   Scotland's comparative advantage in such industries over the latter
   half of the 20th century. However, the decline in heavy industry in
   Scotland has been supplanted with the rise in the manufacture of
   lighter, less labour intensive products such as optoelectronics,
   software, chemical products and derivatives as well as life sciences.
   Not only has the decline of heavy industry, in the last 20 to 30 years,
   resulted in a sectoral shift of labour, it has led to smaller firms,
   strengthening links with the academic community and substantial,
   industry-specific retraining programmes for the workforce.

Whisky

   Scotch Whisky is probably the best known of Scotland's manufactured
   exports contributing around £800 million to the Scottish economy,
   supporting 41,000 jobs as well as adding £2 billion to the balance of
   trade making it one of the UK’s top five manufacturing export earners.
   The Whisky industry also generates a substantial income for the
   government with around £1.6bn raised in duty each year. The principal
   whisky producing areas include Speyside and the island of Islay where
   there are 8 distilleries providing a major source of employment for the
   island. In many areas the whisky industry is closely related with
   tourism, with many distilleries also functioning as tourist
   attractions.

Electronics

   The electronics industry in Scotland 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 (which maintains a plant at
   Greenock near Glasgow) have been in Scotland since the 1950's being
   joined in the 1980's by others such as Sun Microsystems at Linlithgow.
   45,000 people are employed by electronics and electronics-related
   firms, accounting for 12% of manufacturing output. Today, Scotland
   produces 28% of Europe’s PCs; more than seven per cent of the world’s
   PCs; and 29% of Europe’s notebooks.

Textiles

   Historically textiles were a large employer in Scotland in places such
   as the Scottish Borders, Shetland and the Outer Hebrides - areas where
   there is much production of wool. Knitwear and tweed are traditionally
   seen as cottage industries but names like Pringle have given Scottish
   knitwear and apparel a presence on the international market. Despite
   increasing competition from low-cost textile producers in SE Asia and
   the Indian Subcontinent, textiles in Scotland is still a major employer
   with a workforce of around 22,000. Furthermore the textiles industry is
   the 7th largest exporter in Scotland accounting for over 3% of all
   Scottish manufactured products

Exports

   In 2004, total Scottish exports (excluding intra-UK trade) was
   provisionally estimated to be £17.5 billion, of which 70% (£12.2
   billion) were attributable to manufacturing. The largest export
   products for Scotland are whisky, electronics, and financial services.

Major Trading Partners

   Excluding intra UK trade, the United States and the EU 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. Recently with the high rates of growth in many emerging
   economies of SE Asia such as China, Thailand and Singapore, there has
   been a drive towards marketing Scottish products and manufactures in
   these countries, with Singapore entering the top ten markets for
   Scottish exports in 2004.

   CAPTION: Top 10 export destinations, 2004

   Export destination  Value (£million)
           USA         2,610
       Netherlands     1,645
         Germany       1,600
         France        1,165
          Spain        775
   Republic of Ireland 700
       Switzerland     585
         Belgium       555
          Italy        525
        Singapore      465
   Source: Scottish Executive Global Connections Survey 2005

Services

Banking

   Standard Life Bank, in the Financial District of Edinburgh
   Enlarge
   Standard Life Bank, in the Financial District of Edinburgh

   Edinburgh is Europe's fifth largest financial centre, with influential
   financial players such as the Royal Bank of Scotland , the Bank of
   Scotland, Scottish Widows and Standard Life all having a presence in
   the city.

   Banking in Scotland has a long history, beginning with the creation of
   the Bank of Scotland, in Edinburgh, in 1695. Today Scotland is home to
   4 clearing banks - the Bank of Scotland, the Royal Bank of Scotland,
   the Clydesdale Bank and Lloyds TSB Scotland. The Royal Bank of Scotland
   which is the second largest bank in Europe, fifth largest in the world
   by market capitalisation and has significant international operations
   recently opened its new global headquarters in Edinburgh augmenting the
   city's position as a major financial centre. Many other international
   banks are beginning to operate bases in Scotland, as the sector
   expands. In 2005 Scotland ranked second only to London in the European
   league of headquarters locations of the 30 largest banks in Europe as
   measured by market value .

   Finance in Scotland also features unique characteristics. Although the
   Bank of England remains the central bank for the UK Government, three
   Scottish clearing banks still issue their own banknotes: (the Bank of
   Scotland, the Royal Bank of Scotland and the Clydesdale Bank). These
   notes have no status as legal tender in England, Wales or Northern
   Ireland; but in practice they are universally accepted throughout the
   UK , as well as in the Isle of Man and the Channel Islands. The full
   range of Scottish bank notes commonly accepted are £5, £10, £20, £50
   and £100. (See British banknotes for further discussion).

   Centred primarily on the cities of Edinburgh and Glasgow, the
   development of financial services industry in the Scottish Economy, has
   taken place over the last 10 to 20 years. The sector makes a
   significant contribution to the economy employing 5% of the Scottish
   workforce or 113,160 people and generating £5bn or 6% of Scotland's GDP
   . The financial services industry in Scotland is also one of its
   fastest growing areas with a growth rate of over 35% over the period
   2000 to 2005 .

Investment, Insurance and Asset Servicing

   Scotland is one of the world's biggest fund management centres with
   over £300bn worth of assets directly serviced or managed in the
   country. . Scottish fund management centres have a major presence in
   areas such as pensions, property funds, investment trusts as well as in
   retail and private client markets. Similarly asset servicing on behalf
   of fund managers has become an increasingly important component of the
   financial services industry in Scotland with Scottish based companies
   providing expertise in securities servicing, investment accounting,
   performance measurement, trustee and depositary services and treasury
   services.

Tourism

   Gleneagles Hotel, Perthshire. Tourism is one of Scotland's fastest
   growing economic sectors.
   Enlarge
   Gleneagles Hotel, Perthshire. Tourism is one of Scotland's fastest
   growing economic sectors.

   It is estimated that tourism accounts for 3% of Scotland's economic
   output. Scotland is a well-developed tourist destination with
   attractions ranging from unspoilt countryside, mountains and abundant
   history. Tourism is responsible for sustaining 200,000 jobs mainly in
   the service sector, with tourist spending averaging at £4bn per year .
   Domestic tourists (those from the United Kingdom) make up the bulk of
   visitors to Scotland. In 2002, for example, UK visitors made 18.5
   million visits to Scotland, staying 64.5 million nights and spending
   £3.7 billion. In contrast, overseas residents made 1.58 million visits
   to Scotland, staying 15 million nights and spending £806 million. In
   terms of overseas visitors, those from the United States made up 24% of
   visits to Scotland, with the United States being the largest source of
   overseas visitors, and Germany (9%), France (8%), Canada (7%) and
   Australia (6%), following behind.

Infrastructure

   Glasgow International Airport, the largest passenger airport in
   Scotland.
   Enlarge
   Glasgow International Airport, the largest passenger airport in
   Scotland.

   Infrastructure in Scotland is varied in its provision and its quality.
   The densest network of roads, railways and motorways is concentrated in
   the Central Lowlands of the country where around 70% of the population
   live. The motorway and trunk road network is principally centred on the
   cities of Edinburgh and Glasgow and connecting them to other major
   concentrations of population, and is vitally important to the economy
   of Scotland. Key routes include the M8 motorway, which is one of the
   busiest and most important major routes in Scotland, with other primary
   routes such as the A9 connecting the Highlands to the Central Belt, and
   the A90/ M90 connecting Edinburgh and Aberdeen in the east. The M74 and
   A1, in the west and east of the country, respectively, provide the main
   road corridors from Scotland to England. The Scottish Executive has
   stated that it intends to spend £3bn on a capital investment scheme to
   improve Scotland's road and rail system, over the next decade , with
   the setting up of a national agency in January 2006 - Transport
   Scotland to oversee this. Many roads in the Highlands are single track,
   with passing places.

   The rail network is primarily centred on the central belt and is used
   principally as a means of public transport, with some freight movements
   - for example from the port at Grangemouth. After a large
   rationalisation of routes in the 1960s, which led to station and line
   closures, the rail network is currently being expanded, to cope with
   ever increasing levels of passenger demand. The rail-operator First
   ScotRail operates most routes within Scotland, with long-distance
   connections to London operated by GNER or Virgin Trains. Proposals
   which have been mooted include the construction of a high-speed MAGLEV
   rail system connecting Edinburgh and Glasgow which, it estimated, will
   cut journey times between the two cities by around 30 minutes . Other
   measures suggested include the electrification of the rail system in
   order to cut journey times.

   In 2004, 22.6 million passengers used Scotland's airports, with their
   being 514,000 aircraft movements with Scottish airports being amongst
   the fastest growing in the United Kingdom in terms of passenger
   numbers. Plans have been published by the major airport operator BAA
   plc to facilitate the expansion of capacity at the major international
   airports of Glasgow, Edinburgh and Aberdeen, including new terminals
   and runways to cope with a large forecasted rise in passenger use.
   Prestwick Airport also has large air freight operations and cargo
   handling facilties. Scotland is well-served by many airlines and has an
   expanding international route network, with recent long-haul services
   to Dubai, New York and Pakistan.

   Major deep-water Port facilities exist at Aberdeen, Grangemouth,
   Greenock, Peterhead, Scapa Flow and Sullom Voe. Scotland is connected
   to mainland Europe by a dedicated ferry service between Rosyth (near
   Edinburgh) and Zeebrugge in Belgium. In addition to this many remote
   island communities on Scotland's western seaboard are served by
   lifeline ferry services operated by the state-owned company Caledonian
   MacBrayne, which carry tourists as well as freight and are vital to the
   economies of these islands.

The Role of the Public Sector

   The public sector, in Scotland, has a significant impact upon the
   economy and comprises central government departments, local government,
   and public corporations. In quarter 3 of 2005, there were 577,300
   people employed in the public sector, which accounts for 23.4% of
   employment in Scotland - this includes all medical professionals
   employed within the National Health Service in Scotland, those employed
   in the fire, police and 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.

   There is a clear separation of responsibility of the powers of both the
   UK government and the devolved Scottish Executive 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.

UK Government

   The UK Government along with the Parliament of the United Kingdom
   retains full 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.

Scottish Executive

   The Scottish Executive has very limited power to raise or lower the
   rate of income tax in Scotland by up to 3p in the pound, but has the
   power to vary business rates and can regulate the application of local
   taxes such as the council tax levied by local authorities in Scotland.
   Nevertheless the Scottish Executive 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, such as Scottish Water and Caledonian MacBrayne. The
   Scottish Executive does however have control over Economic Development
   policy, and controls, funds and regulates the national Economic
   development Agency - Scottish Enterprise. In 2006, for example, the
   budget of the Scottish Executive was around £25bn, which the Scottish
   Executive can spend on the areas under its jurisdiction such as
   education, healthcare, transport, the environment and justice.

Local Government

   The 32 unitary authorities in Scotland have the ability 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 through 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 Executive.

Education

   Education in Scotland is well-funded with very high levels of
   participation in all sectors of education. Participation in further and
   higher education is especially high, with Scottish universities
   generally being recognised as amongst the best in the teaching of
   medicine, law, engineering, science and technology. Increasingly
   Scotland is being seen as an exporter of education, with the number of
   overseas students applying to studying at universities throughout
   Scotland, rising substantially in recent years . Most universities are
   linked with a flourishing 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 . Scotland generally has a well-educated
   population - adult Literacy rates are at over 99%.

Health

   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 services (where those over
   19 must pay) and prescriptions (free to the elderly and subsidised for
   others). In the short term spending on healthcare in Scotland remains
   high in response to the nations' 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.

Other Economic Indicators

   Total Population: 5,094,800 (2005 est)

   Working Age Population: 3,175,386 (2005 est.)

   GDP (£million): 74,058 (2002)

   Manufacturing GVA (£million): 11,110 (2003)

   Number of VAT registered companies: 126,025 (2003 est.)

   Number of Large Companies (250+ employees) in Scotland: 2,240 (2004)

   Employment Rate (% of adults of working age): 74.7 (2004)

   Median Gross Weekly Earnings of full-time workers on adult rates (£):
   392.70

   Claimant Unemployment Rate (%): 3.5 (2004)

   People of working age claiming key Social Security benefits (%): 16.7
   (Feb. 2005)
   Retrieved from " http://en.wikipedia.org/wiki/Economy_of_Scotland"
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