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.
Disappointing reading, but I appreciate the analysis Brian. It would be interesting if a survey was carried out on the effect of negative economic articles in the press (or as I refer to as the ‘Recessionary Slumber’ in my blog) on growth and business confidence in Scotland – if you think this has a significant impact or not?
Posted by: Brian C Pope | 30 April 2012 at 08:51 PM
Brian, the trend lines are so close together in both cases, it's hardly worth discussing the difference. I'm not really clear what point you are trying to make, except that clearly being part of the UK has done Scotland no good whatsoever over the last few years.
Posted by: Thegreenplace | 30 April 2012 at 09:17 PM
It appears that you only see what you want to see. The graphs are not 'trend lines' but plots of Scottish and UK GVA/GDP relative to where the econonomies were at before the recession started. Because the overall GVA series does not compare like with like when comparing Scotland and the UK, a more appropriate comparison is with oil and gas extraction removed. When this is done the Scottish recovery from the trough of the recession is weaker relative to the UK because the weakness of oil production dampens the UK recovery. If you want numbers: when overall GVA is compared, the Scottish recovery is 85% of the UK recovery. When oil and gas are excluded the Scottish recovery is weaker at 80%. Not a dramatic difference but a difference nonetheless. I don't think this has anything to do with the independence question. Although, CPPR make the point that if you assign a geographical share of oil to Scotland then Scottish GDP would have fallen by 3% last year whereas rest of UK GDP would have risen by 1%. The counter to that is that the level of Scottish GDP would be higher with a geographic share of oil, although GDP would be more volatile.
Posted by: Brian Ashcroft | 30 April 2012 at 11:11 PM