The Centre for Public Policy for Regions (CPPR) yesterday produced an important comparison of UK and Scottish GDP growth in 2011. The analysis uses the latest Scottish Government GVA data for the 4th quarter of 2011, which were published on 18 April.
A key finding of the CPPR analysis is that a comparison of overall GVA between Scotland and the UK in 2011 provides a distorted comparison of the relative performance. This is because overall GVA includes all of North Sea Oil and Gas production in the UK figure but only includes on-shore activities in the Scottish figure. A more correct comparison is to compare GVA for the two excluding the extraction of oil and gas.
Normally this matters little if the performance of oil and gas is not much out of line with overall performance. But during the past year oil and gas production fell by 18% and 22% respectively, which has affected UK GDP and export performance as I noted here and here.
The effect of this fall is to dampen UK growth relative to Scotland.
In 2011, overall GVA grew by 0.5% in Scotland and 0.6% in the UK. But when oil and gas extraction is excluded the unfavourable gap between Scotland and the UK widens, with Scottish growth of 0.5% and UK growth of 1%.
I have taken CPPR's analysis further and extend the comparison back to the start of the recession and subsequent recovery. The performance of overall GVA is given in this chart:
And GVA performance, with oil and gas extraction excluded, is given in the next chart:
The charts reveal the dampening of UK growth relative to Scotland when overall GVA is considered. When oil and gas extraction is excluded the Scottish position is broadly unchanged but the UK recovery is stronger.
The main conclusion from this analysis is that the Scottish recovery from recession is quite a bit weaker relative to the UK than many might have believed.