Scotish economy

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SCOTLAND : a New Player in a Global Economy? |
01/09/2008 |
[Scottish economy, Scottish strengths and key industries, relationships with the world, the Scottish independence project ] |

* Table of content

Introduction 2

I. Economic situation of Scotland 3

A. Growth 3
B. Inflation 4
C. Employment/Unemployment 5
D. Further information 8II. PEST analysis of the key industries 9

A. Agriculture and fisheries 9
B. Petroleum and gas 14
C. Electronic 16
D. Tourism: 18
E. Others 19

III. The Scottish independence 20

A. Scotland’s relationships with the world 20
B. Scotland: a possible Celtic Tiger? 22

Conclusion 24

References 25

* Introduction

Scotland takes part of United Kingdom, fifthlargest economy of the world. However, some characteristics make it different from England, Northern Ireland or Wales: a production focused on exportation, important government supports and foreign investments more and more present. Though, Scotland is more exposed to currency fluctuation, the governmental policies and the evolution of world economy.

Since the World War II, in a context ofdifficult economic health for the country, autonomist claims have been raised among the Scottish population. At the same time, UK government has given more power to the Scottish Office, reinstated since 1885. In 1947, the Scottish National Party (founded in 1934) tried to create an autonomist assembly, and failed. Despite the discovery of petroleum in Northern Sea in 1969, Scottish waited until theelection of Tony Blair in 1997 to establish once again the discussion about a devolution project. In 1999, the Scotland Act was approved and allowed Scottish Parliament to come back after 292 years of absence. The Scottish Parliament only has the legislative power to vote laws in specific fields such as health, education, tourism, law, environment… Today, the question of a total independence is stilldiscussed.

What are the viability of Scottish economy and its key industries? Even if Scotland detains strong industries, would it be able to play a strategic role in Europe or in World trade?

The report will be built on an analysis of Scottish economy and industries in order to identify the Scottish strengths, and establish what can be the issue of its independence and the feasibilityof such project in long term.

I. Economic situation of Scotland
Since few years, the downturn in foreign direct investments (FDI) from many countries and the withdrawal of some foreign-owned companies have contributed to enhance the creation and success of domestic firms. The rate of start-up is assimilated to an indicator of growth, often correlated to increasingperformance (competitiveness and productivity) of local companies.

Chart 1 shows the number of businesses start ups in 2004. With 29 new firms registered per 10,000 residents, Scotland has a lower rate of start-ups than UK with 38. But, without taken into account the results of London and South East, Scotland should be just behind UK.

Considering that Scotland’s results have positively changedover the last few years, these data are optimistic for its economic future.

Chart 1: VAT Registrations per 10,000 Resident Adults, 2004


In a global recession context, inflation has reached and harmed UK’s economy, like many other countries.
UK inflation rate has increased by 2.7 points in the last 5 years (See table1: from 1.6% in 2002 to 4.3% in 2007).

Table 1: UKinflation rate figures

“A surge in the cost of oil, a leap in household electricity and gas bills, rising food prices, and more expensive imports are putting severe upward pressure on UK inflation”, wrote Ian McConnell, Business Editor (The Herald news paper, 13th of June 2008).

Consequently, the Central Bank of England is constantly raising UK interest rates in an effort to curb inflation,...