Scotland possesses 96% of the UK’s crude oil and 63% of natural gas production and this leads to claims that Scotland is over-reliant on the sector. The breadth of economic activity undertaken in a nation’s economy is important. So, let us take a look at the diversity of Scotland’s economic output and examine how that compares to other nations.
As it turns out, Scotland’s economy is diverse and broad-based. Far from being over-dependent on oil and gas, Scotland is actually less dependent on oil and gas than the UK economy is on the finance sector, which caused the 2007/8 financial crises. By comparison, in the year of the oil price crash (2015/16), Scotland avoided recession — that year the onshore economy actually grew 1.6%. 343
In 2016, oil and gas made up about 6% of Scotland’s overall economic output 74 and 11% of Scotland’s economy by Gross Value Added (GVA).75 This compares to the UK as a whole, where business and financial services made up 33% of the economy by GVA. 76
Norway’s oil and gas sector represents 19% of its economy over a ten-year average 77 (8% more than Scotland’s 78) and it is the seventh richest nation in the world by GDP per capita 79. Their pension fund, generated from oil and gas sector revenues, is worth almost £826bn, meaning their national savings massively outweigh their national debt. 80
Since the oil price fall in 2015, Norway has generated more than £82.2bn in oil and gas sector revenues compared to £3.3bn by the UK. 81 This means that Norway’s revenues from oil and gas, in this time period, were 25 times higher than the UK’s. All that whilst Norway’s economy is just under one and a half times more dependent on oil than an independent Scotland would be.
In fact, when you look at the top three largest sectors of Scotland’s economy and compare those to other nations, you find that Scotland’s economy is more diverse than that of the UK. The UK economy is actually less diverse than six Northern European economies we benchmarked against.
The most economically diverse nation was Norway, with the top three sectors contributing only 50.72% of GVA, followed by Denmark at 51.23%, Scotland at 52.56%, Finland at 52.98%, Sweden at 53.37% and in last place the UK at 57.77%. 84
The UK has the least diverse economy.
Scotland’s economy is significantly less reliant on oil and gas than Norway’s, a country which has managed to thrive and has simultaneously the largest single sector and the most diverse economy overall in our benchmark group.
The UK is more reliant on business and financial services centred around the City of London than Scotland is on oil and gas.
Norway a smaller, independent northern European country has recently generated 25 times more oil revenue than the UK Government (which controls oil and gas taxation policy) has in the exact same market conditions.
Over-reliance is a phrase that suggests economic risk, but that any risk can clearly be adequately managed by a competent government. This suggests that over-reliance is more of a political attack line that than an economic issue.
Please like our Facebook page to keep up to date with news and posts.