On the 29 January 2020 the Scottish Government published Export Statistics 2018, showing an increase in exports to the rest of the UK, the EU and other international markets – with the growth in exports to the EU being the most significant increase in percentage terms. In total, exports grew by 2.9% in cash terms, or 0.9% in real terms between 2017 and 2018. These statistics do not include oil and gas.
Since 2009, total exports have grown by £19.2bn, (29.2%) in nominal terms, or £7.2bn (10.9%) in real terms. Since 2009, the real terms growth in exports to the rest of the UK (rUK) has increased by just 2.4% – most of the growth in Scottish exports over this period has been driven by exports to the EU and other international markets which account for £6.1bn of the real terms growth.
Scottish Government targets
Export Statistics 2018 is the first full year publication of export data since the Scottish Government launched its new export strategy (Scotland: A Trading Nation) in May 2019. This strategy set four high level aims which the Scottish Government aims to achieve by 2029:
- add £3.5bn to GDP
- grow exports to 25% of GDP
- create 17,500 jobs
- almost double the value of exports.
The data in the recent publication relates to 2018, which is the year before the strategy was launched. But, do the most recent figures tell us anything about progress towards the headline goals of the strategy?
Export Statistics 2018 does not detail how the increased exports have fed through to GDP or job creation, so we cannot yet assess targets 1 or 3. The Scottish Government should consider including this analysis in future publications. However, while we can’t examine how growth in exports have affected GDP, we can look at how the real terms value compares to Scotland’s GDP.
In real terms, total international exports grew by 1.5% between 2017 and 2018, however over the same period Scotland’s onshore GDP grew by 2.1% meaning that international exports as a percentage of GDP remained broadly flat at around 20%.
Turning to the final target, if the aim to almost double international exports by 2029 is to be achieved then they would need to grow from £32.7bn in 2017 to around £65bn by 2029. This equates to a nominal compound annual growth rate of 5.9% for the period (this is the rate of growth required each year to reach the target by 2029). The actual nominal growth rate of international exports between 2017 and 2018 was 3.4%.
This target could be achieved through only moderate growth in international exports if for example GDP growth in Scotland was weak, or through rebalancing existing exports from the UK towards international markets. It’s also a target that the Scottish Government could miss if GDP growth in Scotland is robust between now and 2029 – even if international exports grow significantly.
Geographic spread of exports
As exports to rUK have grown by 2.4% in real terms since 2009, but exports to the EU and other international markets have grown by more than 25%, as a proportion of total exports rUK exports have fallen by 5 percentage points. The rUK still remains the most significant market for Scottish exports though, accounting for 60.2% of all exports in 2018. EU and other international exports have both grown as a proportion by 2.5 percentage points to 19.0% and 20.8% respectively.
Scotland: A Trading Nation identifies 15 “priority one” markets – markets where Scottish exports have a presence, but where analysis suggests there is an ‘export value gap’ – i.e. comparable countries have had more success in exporting to these markets. Looking across these markets, Scottish exports rose by £244m over the year, a real terms increase of 1.3%. Priority one markets in the EU drove this increase, up £342m in real terms, while exports to other international priority one markets fell by £98m.
Alongside the geographical figures, the Scottish Government published data showing the breakdown of exports by sector. Over the past decade there were some striking increases.
For example, exports of information and communication services increased by £1.5bn (83.8%) in real terms between 2009 and 2018, food and drink exports by £1.5bn (20.5%) and education services by £413m (52.9%). On the other hand, the most dramatic decreases were electrical equipment (-£360m, -56.8%) and wood, paper and printing products (-£285m, -21.7%).
Overall, the balance between manufactured goods and services remained relatively stable over the period, with around 35% of exports being manufactured goods and 49% services. The remaining exports not classified as either goods or services increased slightly as a proportion over this period, from an aggregate £9.3bn (14.2% of total exports) to £11.bn (15.6% of exports). These other exports include utilities, construction, agriculture, forestry and fishing and mining and quarrying. Within this utilities were the main driver of the increase (up £1.2bn in real terms, 32.6%).
As noted earlier, the data in this update is for the year before the Scottish Government announced its new export strategy, and so any actions taken as part of the strategy will only impact future years. HMRC regional trade statistics have been published up to Q3 2019, and suggest that Scottish exports also performed strongly in the twelve months ending September 2019, up 11.3%, with much of this increase being attributed to the strong performance of food and drink exporters.
It is worth noting that HMRC regional trade statistics are not directly comparable with Scotland’s Exports 2018: HMRC exports cover only goods, and are unable to fully allocate exports to the nations of the UK.
2019 ended on a more cautious note as October saw the US announce it would impose a 25% tariff on certain goods from EU member states in response to a ruling by the WTO related to state aid. These tariffs will apply to several Scottish exports including whisky. The USA has been the biggest international destination for Scottish exports in every year since 2002, and is a key market targeted in Scotland: A Trading Nation. These trade barriers, and the continued uncertainty around the UK’s trading arrangements with the EU once the transition period ends, represent potential challenges to the growth of exports needed to meet the Scottish Government’s targets.
Andrew Feeney-Seale, Senior Researcher, Financial Scrutiny Unit