As in the UK as a whole, there are significant inequalities between regions in Scotland. The success of levelling-up policies, designed to offer economic support to areas in need, will depend in part on how well policy-makers understand Scotland’s industrial history.
Newsletter from 11 February 2022
Last Saturday, the Scottish men’s rugby team beat England in the Six Nations for the second year in a row. This week at the Economics Observatory, we’ve been continuing our exploration of how Scotland matches up against the rest of the UK in terms of its economic performance. As part of our series on the economic issues at the heart of the Scottish independence debate, two new pieces encourage readers to take a longer-term view and consider how the nation’s past will shape future policy decisions.
Scotland’s economy was changed fundamentally by deindustrialisation in the second half of the 20th century. Between 1951 and 2021, over 70,000 mining and quarrying jobs disappeared, and more than half a million people stopped working in factories and workshops (see Figure 1).
Figure 1: Scottish manufacturing employment
Source: Population Census 1901; Digest of Scottish Statistics 1953; Population Census 2001; Scottish Government, Scotland’s Labour Market: People, Places and Regions – background tables and charts (2021)
Ewan Gibbs (University of Glasgow) looks at how the experience of deindustrialisation has shaped political debates in Scotland. His article emphasises how economic disorientation contributed to the 1962 breakthrough of the Scottish Nationalist Party (SNP) in West Lothian – a county that was suffering acutely from mine closures.
Attempts by the UK government to maintain manufacturing employment in Scotland – such as supporting the Linwood car factory in Paisley – initially managed to secure some cleaner, safer and better-paid jobs. But even tax breaks and grants from Westminster couldn’t prevent eventual closure of the factory in 1981.
These changes were railed against at the time and the SNP cited the steel industry as an archetypal example of the UK government’s failure to realise Scotland’s industrial potential. Declining industry was at the core of the 2014 independence campaign in Scotland and remains a contentious issue today.
When the discovery of North Sea oil made people in Aberdeen some of the richest in the UK, it was easier for campaigners to accuse central government of stifling Scotland’s bright economic future. Now though, drill activity is declining and this characterisation is less clear (see Figure 2).
Figure 2: PAYE employment (2014 = 100)
Institutions and countries often struggle to adapt to economic change. This ‘path dependency’ may help to explain some of the economic questions around Scottish independence. It may affect the current state of inequality in Scotland – a topic explored by Stuart McIntyre (University of Strathclyde), Graeme Roy (University of Glasgow) and David Waite (University of Glasgow) in an article on what levelling up might mean for Scotland.
They highlight how Scotland as a whole performs reasonably well compared with the rest of the UK. It is the fourth most productive region in terms of gross value added per head (a measure of output) (see Figure 3). But within Scotland, there are some significant gaps – just as there are between the North and South of England. Jobs and income vary widely between areas like Edinburgh and East Ayrshire, with many rural areas falling well behind the bustling cities.
Figure 4: Gross Value Added (GVA) per head
The impact of deindustrialisation is still evident in the high correlation between the locations of industry in the 20th century and the more deprived parts of Scotland today. In Glasgow, employment in manufacturing fell from over 400,000 jobs in the early 1950s to under 150,000 by the mid-1980s. This is thought to contribute to ‘the Glasgow effect’, where life expectancy in parts of the city is significantly lower than comparable areas of the country, even after controlling for deprivation.
Scotland’s distinctive rural regions also face their own challenges, including poor access to infrastructure and public services. The country has a third of the UK’s landmass but only a tenth of the population.
The UK government’s 2021 budget has committed £170 million to levelling up in Scotland, but power-sharing makes its distribution difficult. While Westminster controls most broad macroeconomic and taxation powers, it is the Scottish government that actually controls many of the policy tools (such as education and training) which economists think will make a difference to addressing regional inequalities.
In the past, it has been the devolved governments that have handled spending similar to the levelling-up funds, such as the European Union’s structural funds. But this time, the UK government will work directly with Scottish local authorities to decide where to spend the money. There are concerns that Westminster operating the new UK Shared Prosperity Fund could cause competitive (rather than cooperative) economic policy.
Scotland’s industrial history casts a long shadow over its economic future. The success of levelling up in the Scottish regions most in need of targeted policy support depends on understanding this history. And the debate as to whether Scotland is best placed to meet these challenges inside or out of the Union will continue.