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David Porter » Articles at Suite 101 » High Road or Low Road: Where is the Scottish Economy Going?

High Road or Low Road: Where is the Scottish Economy Going?

As a think-tank economist warns Scotland will be ‘third-world’ by 2030, it’s timely to ponder financial assets with independence remaining contentious.

As visitors leave Edinburgh after another International Festival, Douglas McWilliams, chief executive of the Centre for Economics and Business Research, said in less than 20 years ‘low living standards and slow economy’ would reduce Scotland to ‘merely a third-world tourist destination’.

Scot McWilliams founded the Centre (Cebr) in 1993 to provide independent forecasts and analysis to private, public and third sector organisations. It specialises in ‘making business sense of economic data’ so clients understand their markets.

For 2011 they predicted yet another Euro crisis, slower growth, retirement at 75 in Japan and banks lending again. McWilliams’ August 2011 comments arose from data suggesting Scotland ‘lacks entrepreneurship, mis-spends money and suffers too much government intervention’, according to The Daily Telegraph (30 August 2011).

Can Scotland Pay Her Way?

Will Scotland ride out the world economic slump, Euro and banking problems, changing demographics and technological advances? In May 2011 when the Scottish National Party (SNP) swept to power in the Scottish Parliament elections, it put independence centre of the debating arena.

Could Scotland prosper outside the UK? Oil is a contentious issue, with some feeling that too much has been given away already. If nationalist parties have traditionally cashed in on past grievances and wrongs, that theory was turned upside down when the SNP won controlling power in the summer of 2011.

Aditya Chakrabortty wrote in The Guardian in May 2011 that their winning 53% of all seats in the Scottish legislature ‘under an electoral system designed to prevent such majorities’ made independence lurch from ‘counterfactual fantasy to outside possibility’. SNP leader Alex Salmond promised to ‘re-industrialise Scotland’, starting with turning the North Sea oil industry into a giant renewable energy industry.

For Chakrabortty, the political debate north of the border wasn’t about whether spending cuts were ‘too far, too fast’, but about an economic strategy that served as job creation policy. In short, it was a ‘metaphor for industrial renewal’. Opponents, who included former Labour energy minister Brian Wilson, argued making the North Sea ‘the Saudi Arabia of wind’ would bring barely 5000 jobs to north-east Scotland.

While debate continues, taxing energy, the follow-up to the collapse of much Scottish-based banking (Royal Bank of Scotland and Halifax Bank of Scotland) and the future of energy renewables are in the spotlight. Chakrabortty quoted Graeme Bell, boss of Green Ocean Energy, who felt an event was needed to get people and economy moving. Severing the union could be that event.

But cost-benefit analyses are not ready, business model not available. Divorce terms are undrafted, division of assets barely considered. Would England’s and Scotland’s respective economics look much the same as now?

Is Tourism the Economic Key?

In July 2010 STV News reported a visit to Heartland Project by Enterprise, Energy and Tourism Minister, Jim Mather. The scheme, supported by VisitScotland, offered vouchers to local attractions when short breaks were purchased.

Mather said that boosting tourism was vital; it contributed over £4bn a year to Scotland’s economy, from 12.5 million UK visitors. It’s an industry that cannot be outsourced, can only stay in Scotland, and will outlive oil and gas.

In May 2004, the Journal of Vacation Marketing published Scottish Tourism: Scenarios and Vision. It said: ‘We have the essential physical ingredients of a successful tourism destination, but to compete in the 21st century we need ambition, strong leadership, commitment and passion’. Has it been forthcoming?

Using 2005 figures as the base, the Scottish Parliament’s Economy, Energy and Tourism Committee (SP Paper 141, 2008) aimed to increase tourism revenue by 50% by 2015. They anticipated the leisure market from all over the world, business tourism and increased expenditure as much as greater numbers would achieve the target. They didn’t anticipate the global economic slowdown, although the trend for ‘stay-cation’ holidays in the UK has mitigated a little.

Is the Movie Industry Economic Salvation?

In August 2011, Magnus Bennett reported on BBC Scotland news how hundreds of people working on a film set gives Scotland’s economy ‘a shot in the arm’. The shooting in Glasgow of part of Brad Pitt’s zombie movie, World War Z, gives temporary work in accommodation, food, transport, extras, designers, crew and scene makers, worth around £2m as estimated by Glasgow City Council

In bigger terms, it makes people want to visit, as ‘ movie-tourism ’ or ‘set-jetting’ is a growth industry. Wicker Man (1973) left a legacy of the Wickerman Festival in Kirkcudbright. Chariots of Fire (1981), Local Hero (1983), Braveheart (1995), Trainspotting (1996) and The Da Vinci Code (2006) are among those which put Scotland on the map and raised revenue, from the films themselves and advertising.

Location income is worth about £20m a year, but supporters of film funding believe the potential is far greater. Hollywood blockbusters have large budgets, and big name stars spend more and attract crowds. Creative Scotland is the agency charged with maximising economic benefit from films. Location manager Belle Doyle told the BBC they were hopeful of further big films.

One neither produced nor filmed in Scotland – Brave, a 3D computer animated fantasy adventure of myths, magic, legends from the Disney/Pixar studios is set in the Highlands with the voices of Billy Connolly, Kelly Macdonald, Emma Thompson, Robbie Coltrane and Julie Walters. It’s slated for release in 2012 and VisitScotland hope it will generate huge worldwide interest in Scotland.

Forthcoming releases starring Ewan McGregor (Perfect Sense) and Tom Hanks and Halle Berry (Cloud Atlas, 2012) have been shot in Scotland. Under the Skin, starring Scarlett Johansson as an alien seductress harvesting body parts in the Scottish Highlands, is expected to bring in tourist business!

Clearly, no one sector is the answer. Just as the Edinburgh Festivals work together, so collectively, each part of the economy buttresses others. There is no question that Scotland is well placed, well-provisioned and well motivated to take every advantage of world economic growth in the future. The only question is whether that is within or without the United Kingdom.

First published on Suite 101, 30 August 2011

Image: Scottish Tourism Could Increase 50% – Christian Bickel


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