Scotland has a mixed economy closely interlinked with the rest of the United Kingdom (UK) and with the European Union more widely. Its Gross Domestic Product (GDP) per capita, which stood at ?16,944 in 2005, is the 4th highest of the regions and countries of the UK, after London, South East England and Eastern England. Its annual economic growth in 2006 was 2. 2%. The main factors contributing to the Scottish economy are Energy, Whiskey and financial services. The unemployment in Scotland is harming the economy in ways which and not remedied easily.
The Scottish unemployment rate is now 8. 5%, which is higher than the UK average of 8. %. Total UK unemployment rose by 128,000 to 2. 64 million. Meanwhile, separate figures showed private sector employment rose year-on-year by 30,300 in Scotland in the third quarter, outweighing a fall of 23,500 in public sector jobs over the same period. The private sector, including all financial institutions, now accounts for 77. 7% of Scottish employment – the highest share since devolution. The rise in unemployment figures prompted First Minister Alex Salmond to call for an urgent UK-wide summit involving finance ministers from the UK government and three devolved administrations, to agree an immediate programme of jobs creation.
He said: “The UK government’s economic policy is in a state of collapse, and the prime minister’s policy of isolation in Europe can only makes things worse. Whisky. 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 worth ?30 million Gross Value Added to the industry each year. Energy. Scotland is endowed with some of the best energy resources in Europe, and is a net exporter of electricity, with a generating capacity of 10. 1GW primarily from coal, oil, gas and nuclear generation.
The principal companies operating in the sector are Scottish Power, Scottish and Southern Energy and British Energy. With prevailing international concern over the use of fossil fuels in power generation, Scotland has been identified as having significant potential for the development of renewable energy sources, with abundant wave, tidal and wind power. The Scottish Government has set ambitious targets that 18% of Scotland’s electricity generation be derived from renewable sources by 2010, rising to 40% by 2020.
Currently renewable energy sources provide Scotland with 35% of its electricity production, with onshore wind generation making the largest contribution, and supporting several thousand jobs. There are many windfarms along the coast and hills, with plans to create one of the world’s largest onshore windfarms at Barvas Moor on the Hebridean island of Lewis. Financial Services. The first half of the 19th century brought the creation of many life assurance companies in Scotland, predominantly on the mutual model.
By the 1980s there were 9 members of the Association of Scottish Life Offices but these have demutualised and most were taken over. Standard Life, based in Edinburgh, demutualised and has remained independent. Starting in 1873 with Robert Fleming’s Scottish American Investment Trust, a relatively broad stratum of Scots invested in international investment trust ventures. Around 80,000 Scots held foreign investment assets in the early 20th century. Nowadays 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.