Orkney Economic Review No. 23 — 2008

© Published by:
Department of Development Services
Orkney Islands Council, School Place, Kirkwall, KW15 1NY
www.orkney.gov.uk

IMAGE: Map of the Orkney Islands, labelling Mainland, Hoy, Flotta, South Ronaldsay, Burray, Graemsay, Shapinsay, Stronsay, Eday, Wyre, Egilsay, Rousay, Sanday, Westray, Papa Westray and North Ronaldsay.

This booklet aims to bring together and review the latest data available on the Orkney economy. The majority of the statistics come from published sources, which are credited below each table/graph.

Whilst it is the purpose of the review to present up-to-date information, in a few cases, where entirely current data was not available at the time of going to print, more dated figures are shown.

In many cases historical data provided differs from that previously published. Updated statistics have been used where they have been provided.

Every care is taken in the production of this publication, however, neither the publisher nor the printer can accept responsibility for any errors or omissions.

Contents

1. General Review
2. Population
3. Weather
4. Agriculture
5. Fishing
6. Fish Farming
7. Energy Production
8. Energy Consumption
9. Transport
10. Tourism
11. Housing
12. Retail Study

Cover photograph: EMEC - Tidal Turbine test rig at Falls of Warness, Eday
Photo: Open Hydro, Mike Roper

IMAGE: The new travel centre on Junction Road, Kirkwall, a modern public transport building with a covered bus shelter and road markings. Completed late summer 2007.

1 General Review

Unemployment Rate % in Orkney 2002–2007

Source: Office for National Statistics

Note: Unemployment rates are all people claiming unemployment related benefits, divided by the number of economically active people (the proportion of the population which is involved in employment, self-employment or is seeking work, ONS).

Orkney’s unemployment rate, the most regularly published indicator of the condition of the local economy, rose at the start of 2007 at its highest rate since April 2006. The rate dropped during the summer months reaching a low of 0.9%, possibly due to seasonal tourism related work, rising slightly again at the end of the year to 1%. Orkney continues to have one of the lowest unemployment percentages in Scotland.

IMAGE: Chart showing monthly unemployment rates in Orkney from 2002 to 2007, with the lowest 2007 rates of 0.9% occurring from June to September.

Unemployment Rate in Orkney Relative to Scotland 2002–2007

IMAGE: Bar chart comparing unemployment as a percentage of all economically active people in Scotland and Orkney at June and December from 2002 to 2007. Scotland is consistently higher, while Orkney falls to about 1% by December 2007.

Source: Office for National Statistics

When compared to Scotland as a whole, Orkney has maintained a favourable position with regard to unemployment, although the national percentage has continued to reduce over the past several years. At the end of 2007, Orkney’s unemployment rate was just over 45% of the National figure.

% Economic Active

Source: Scottish Economic Statistics, Scottish Executive

In 2007 Orkney’s economic activity rate (the proportion of the working age population involved in employment, self employment or seeking work) was just under 4 percentage points above the national average. However, Orkney’s trend appears to be one of decline in contrast to that of the Highlands and Islands and nationally which have remained relatively constant.

Gross Value Added for main industries: Total £million

Source: Office for National Statistics

NOTE: Components may not sum to totals due to rounding.

Broad sector breakdown of Orkney’s GVA figures highlights that Orkney, like the rest of the UK, is continuing to experience growth in the service sector. More interestingly perhaps, figures show that between 2002 and 2004 the decline of primary and manufacturing sectors halted and indeed showed signs of growth, hinting at a recovery for these parts of Orkney’s economy.

IMAGE: Table showing the growth of service activities from £110 million in 1997 to £158 million in 2004, while total GVA rose from £210 million to £243 million.

VAT Registered Enterprises in Orkney

Source: Office for National Statistics

NOTE: Each individual cell is rounded to the nearest 5 enterprises, so totals may not equal the sum of their constituent parts.

Although the combined primary sectors saw the largest proportion of new VAT registrations in 2007, the trend of decline in business stock continued during the year. VAT registration figures for most other sectors remained static during the year, although the total number for construction businesses continued to increase. The total number of all VAT registered businesses at the start of 2007 is now approximately 20 lower than it was four years ago.

New Business Start-ups in Orkney

Not all businesses are VAT registered, however, and the following table perhaps offers a clearer indication of all entrepreneurial activity in Orkney.

Source: The Committee of Scottish Clearing Bankers

The figures, published by the Committee of Scottish Clearing Banks, an alliance of the four major Scottish banks, indicate that a total of 434 new businesses were set up in Orkney during the past 5 years. The table represents business start ups only and takes no account of the inevitable failures or closures during the same period, since this data is not available.

Weekly Earnings Comparison

IMAGE: Bar chart comparing average weekly earnings in the Western Isles, Orkney Islands, Shetland Islands and Scotland from 2001 to 2006. Orkney data is shown only from 2004.

Source: Scottish Neighbourhood Statistics

NOTE: No data available for Orkney until 2004.

Over the past three years, with the exception of 2005, Orkney’s average weekly earnings have remained under £400. The National data indicates a rise in average wages, as do the figures for the Western Isles. However only three years statistics are available for Orkney, and it is therefore difficult to see a trend.

2 Population

Population Change

Source: General Register Office for Scotland

NOTE: Population and migration figures post 2001 are estimates.

The natural growth rate of the population (the difference between births and deaths) turned negative around 1997 and has remained so ever since. Interestingly, though the birth rate has increased over the past two years, and the death rate has decreased. The significant decline of Orkney’s population predicted at the end of the nineties has also been avoided due to the rise in migration to the County.

Population Projections for Orkney

Source: GROS Projected population of Scotland (2006–based)

Population Predictions

IMAGE: Bar chart showing predicted population from 2006 to 2012 for all ages, males of all ages and females of all ages. Total population rises steadily, with females slightly more numerous than males.

The General Register Office has revised its predictions and is now expecting almost a 15% increase in the County’s population up to 2031. This is possibly due to the estimated population in recent years exceeding the previously predicted figures. The trend of more females than males is expected to continue.

IMAGE: Population pyramid for Orkney in 2006, showing the percentage of males and females in age groups from 0–4 to 90+. The distribution is broadly balanced between the sexes, with a notably low proportion aged 20–35, described as the “waistband effect”.

The distribution of Orkney’s population by age and gender shows that there is a fairly even gender split across each age category. The graph also clearly displays one of the County’s more worrying statistics, a relatively low population percentage in the age range 20-35 known as ‘the waistband effect’.

Population by Age and Sex, 2006 (%)

Source: GROS Mid-Year Population Estimates

This table clearly shows that in relation to Scotland, Orkney’s population has a higher percentage of people over the age of 45. Predictions for an ageing population are highlighted further in the following two tables.

Table 1: Predicted population changes (per cent) 2006 to 2021

• Pensionable age is 65 for men, 60 for women until 2010; between 2010 and 2020 pensionable age for women increases to 65.

Table 2: Predicted Orkney population 2021

• Pensionable age is 65 for men, 60 for women for 2006 figures and 65 for the 2021 predictions.

Source: GROS Projected population of Scotland (2006–based)

Population Change, 1991–2001

IMAGE: Bar chart showing population change between 1991 and 2001. Mainland increased by 95 people, or approximately 0.58%; all listed islands declined. Wyre and Flotta experienced the largest percentage losses, both exceeding 35%.

Source: Census of Population 1991 and 2001

Although the predicted decline of Orkney’s population has not yet materialised, there is still a worrying trend of depopulation in all of the inner and outer isles. Whilst the Mainland of Orkney experienced population growth of around 0.58% (95 people) between the 1991 and 2001 census, the isles experienced the opposite effect, with Flotta and Wyre suffering the most extreme population losses, both dropping over 35% during the period.

IMAGE: Photograph of a pedestrianised town street in Orkney, with shops, pedestrians and historic stone buildings.

3 Weather

Meteorological data for Orkney, 2006/07

Mean MAX Temp (°C)

Mean MIN Temp (°C)

Rain (mm)

Sun (hrs)

Source: Loch of Hundland climate station

NOTE: 50 yr average is from Grimsetter Airport 1950–2000.

Orkney Temperature 2007

IMAGE: Line graph showing 2007 mean maximum and minimum temperatures compared with the 50-year average. Maximum temperatures peak around July and August; minimum temperatures peak in July and August at approximately 9–10°C.

Source: Loch of Hundland climate station

Note: 50 yr average is from Grimsetter Airport 1950–2000.

As data from the Meteorological Office (taken at Kirkwall Airport) is now less readily available, weather statistics for 2006 and 2007 are taken from the Loch of Hundland climate station operated by K. Johnston. Comparison of these figures with the 50 year average shows an increase in the mean maximum temperature, particularly over the winter months. The average minimum temperature has stayed in line with the 50 year average. The overall rise is in line with the well documented concept of global warming although it should be noted that this data is not entirely conclusive and may just be the result of milder years.

4 Agriculture

Orkney Auction Mart Prices

Source: Orkney Auction Mart

Livestock prices at Orkney Auction Mart are one of the main determinants of the value of agricultural output in Orkney. Following an initial increase in value during the first half of 2007, prices declined again during the second half of the year. In comparison to 2006, the lamb price reduced significantly during 2007.

Livestock Shipments from Orkney (OIC Ports)

Source: OIC Harbours Dept.

Shipments of cattle have remained largely static since 2003. However since 2002, the figure for sheep movements from Orkney through OIC ports has declined substantially. It should be noted however that these figures represent only movements through Council owned ports and do not include shipments, for example on the St Margaret’s Hope to Gills Bay route, since this data is not available.

Agricultural Land Use in Orkney (hectares)

Source: SEERAD Agricultural Census

Figures for agricultural land use, released annually by The Scottish Executive Rural Directorate, show comparatively little change over the years. Grass land and rough grazing continue to dominate agricultural land usage in Orkney.

IMAGE: Photograph of agricultural machinery, including a tractor and mower, working in a field near farm buildings in Orkney.

Herd/Flock Size in Orkney

Source: SEERAD Agricultural Census

Almost all breeding herd sizes decreased between 2006 and 2007. Both breeding ewes and lamb flocks declined by the largest percentage.

Orkney Milk Production (000’s of Litres)

IMAGE: Bar chart showing milk production rising from approximately 14,900 thousand litres in 2001–02 to approximately 15,500 thousand litres in 2005–06, before falling to 15,334 thousand litres in 2006–07.

Source: Orkney Cheese Company Ltd.

Despite a steady increase in milk production up till 2006 (with the exception of 2004/05), the output figure dropped during the 2006/07 period to 15,334,000 litres, perhaps reflecting the decreasing number of dairy cows as indicated on the previous table.

Agricultural Employment in Orkney

Source: SEERAD Agricultural Census

The figures for agricultural employment show that not only is part-time employment within agriculture more common than full-time employment, but that there is an overall trend of decline of employment within the industry. Nevertheless, the economic importance of this primary industry to the county is highlighted by a 2007 total workforce figure of 2,020.

Agricultural Holdings in Orkney

Source: SEERAD Agricultural Census

The total number of holdings in Orkney has continued to rise gradually in recent years, although the total land use has remained reasonably constant.

Total claims, claimants and payments by Scottish sub region for all CAP schemes administered by SEERAD

IMAGE: Photograph of cattle and calves grazing in a field behind a traditional stone wall.

5 Fishing

IMAGE: Photograph of a small fishing boat at sea, equipped with pots, ropes and other fishing gear.

Landings of White Fish by Orkney Vessels

Source: SEERAD

Despite a small decrease in the live weight of white fish landed by Orkney vessels, the value of landings rose by over £550,000. The rise in value represents an 8% price increase overall.

Landings of Shellfish by Orkney Vessels

Source: SEERAD

With the exception of 2006, shellfish landings have continued to rise since 2002. The landing values have also continued to improve, giving a higher average price per kg each year.

Shellfish Landings by Orkney Vessels 2007, Liveweight

IMAGE: Chart listing the liveweight shellfish landings categories: Scallops - Queen, Whelks, Surf Clams, Razor fish, Squid, Crabs - Other, Nephrops (Norway Lobsters), Cockles, Lobsters - Squat, Lobsters, Crawfish, Clams, Scallops, Periwinkles, Crabs - Brown (Edible), Crabs - Velvet (Swim), and Crabs - Green.

Source: SEERAD

Shellfish Landings in Orkney 2007, Value

IMAGE: Chart listing the value categories for shellfish landings: Scallops - Queen, Squid, Whelks, Surf Clams, Clams, Crabs - Brown (Edible), Cockles, Scallops, Razor fish, Periwinkles, Nephrops (Norway Lobsters), Lobsters - Squat, Lobsters, Crawfish, Crabs - Velvet (Swim), Crabs - Other, and Crabs - Green.

Source: SEERAD

Orkney Fishing Fleet

Source: SEERAD

Two new trawlers were introduced to the Orkney fleet during 2007, increasing the total number of vessels to 10. This increase is in direct contrast to the national trend which is seeing a decline in the white fish fleet.

Orkney Fishermen Employed

Source: SEERAD

Despite not growing at the same rate as production, both full time and part time employment in this sector increased in 2006, having declined slightly the previous year.

IMAGE: Photograph of fishing boats moored in Kirkwall Harbour.

6 Fish Farming

Salmon & Smolt Production in Orkney

Source: Scottish Fish Farms Annual Production Survey

Orkney’s fish farming sector has seen a significant increase since 2006 both in terms of output and employment. Despite signs of a decline in the industry over the past few years, these increases perhaps indicate an upturn for the sector.

Fish Farming Employment in Orkney

Source: Scottish Fish Farms Annual Production Survey

7 Energy Production

Annual Tonnages of Cargoes Loaded from the Flotta Oil Terminal

Source: OIC Harbours Dept.

Crude oil shipments through the Flotta terminal from North Sea oil fields have generally continued to decline in recent years, although there was a slight increase during 2007. The volume of oil handled by shuttle tanker from the Foinaven field in the Atlantic Frontier continued to decrease, and will now cease with the conclusion of their contract at the end of 2007.

Similarly, ship to ship oil transfers, which have represented significant activity for the harbour of Scapa Flow, have continued to decline with the tonnage dropping to 930,136 during 2007.

Ship to Ship Transfers

Source: OIC Harbours Dept.

IMAGE: Photograph of the EMEC tidal turbine test rig at Falls of Warness, near Eday, silhouetted against the sea and sky. Photo: Open Hydro, Mike Roper.

Grid Connected Wind Turbines in Orkney

Source: Orkney Renewable Energy Forum

There were no newly constructed grid connected wind turbines in Orkney during 2007. This is primarily due to grid capacity issues and difficulties surrounding the planning process.

8 Energy Consumption

Primary Energy Consumption in Orkney, 2003 (Gigajoules - GJ)

IMAGE: Pie chart showing primary energy consumption in Orkney in 2003: 1,453,618 GJ from petroleum products, 5,632 GJ from LPG, 205,356 GJ from solid fuel and 566,784 GJ from electricity.

Source: Orkney Energy Audit 2003-04

Orkney’s Carbon Footprint

Source: Orkney Energy Audit 2003-04

The European Marine Energy Centre (EMEC), the world’s first grid connected, independently accredited marine energy test centre, opened its tidal site at the Falls of Warness, Eday in late September 2007. EMEC’s wave site at Billia Croo, Stromness, was formally opened in August 2004.

9 Transport

Traffic on Stromness – Scrabster Route (St. Ola & Hamnavoe)

Source: OIC Harbours Dept.

Whilst the unavailability of data for the St Margaret’s Hope to Gills Bay ro-ro ferry service introduced in 2001 limits the value of conclusions regarding sea traffic to the Scottish mainland, some insights can be taken from figures provided by the OIC harbours department. For example, figures for the Stromness – Scrabster route, now operated by Northlink Ferries, show significant growth in 2007 in terms of both passengers and accompanied vehicles. Nevertheless, numbers of commercial vehicles and trailers using the service have continued to decline.

Traffic on Shetland – Kirkwall – Aberdeen Route

Source: OIC Harbours Dept.

Despite a decline in numbers for the Shetland – Kirkwall – Aberdeen route in 2007, the service continues to show signs of growth over the long term. Annual figures for cargo for example have risen by 135% since 2004.

Kirkwall Airport Traffic

Source: Highlands and Islands Airports Limited

Following the installation of the Instrument Landing System in 2003, activity at Kirkwall airport has risen steadily. Passenger numbers have risen substantially in the last year, almost certainly due to the continuing and increasing influence of the Air Discount Scheme (ADS) and increased services.

Updated figures for the Inter Island ferry links operated by Orkney Ferries Ltd show that, following strong increases since 2000-01, ferry traffic growth has begun to slow, considered a result of reaching capacity on many peak time sailings. It should be noted however, that higher figures reported for 2004-05 are largely attributed to extra summer sailings of the MV Thorsvoe to the South Isles.

Inter Island Ferries (Cars)

Source: Orkney Ferries Ltd.

Inter Island Ferries (Commercial Vehicles)

Source: Orkney Ferries Ltd.

Inter Island Ferries (Passengers)

Source: Orkney Ferries Ltd.

IMAGE: Map of Orkney’s internal ferry routes, showing dashed routes between Mainland, Hoy, Flotta, Graemsay, South Ronaldsay, Burray, Shapinsay, Wyre, Egilsay, Rousay, Eday, Stronsay, Sanday, Westray, Papa Westray and North Ronaldsay. An inset photograph shows the MV Varagen returning to Kirkwall.

10 Tourism

During the period 2004-05 a study into Orkney’s growing tourism sector was conducted by TNS consultants commissioned by Orkney Islands Council, in conjunction with Visit Orkney and HIE Orkney. The key aim of the study was to supply information about visitors to Orkney and their visit in order to guide future tourism policy. The key findings of the TNS study, along with other tourism statistics of interest are therefore included in this section of the review.

TNS note the total number of visitors to Orkney during 2004-05 to be in the region of 127,000. It should be stressed however that although this figure is based on passenger figures provided by sea and air carriers, data for the privately operated Burwick and St Margaret’s Hope harbour was restricted to an estimate.

Average Length of Stay of Visitors to Orkney

Source: TNS Visitor Survey 2004-2005

Average Visitor Spend in Orkney (per person)

Source: TNS Visitor Survey 2004-2005

IMAGE: Photograph of the Italian Chapel at Lamb Holm, a small decorated chapel standing in an open rural landscape.

The TNS Visitor Survey 2004-2005 indicates that visitors to Orkney now input around £26.5M to Orkney’s economy, a significant increase from the estimated £18M in 2001. Unfortunately however, data is not available to provide a breakdown of the current figure to illustrate the respective values of leisure tourism, business tourism, and visiting friends and relations.

Cruise Liner Visits to Orkney

Source: OIC Harbours Dept.

Despite a decrease in 2006, the number of liners visiting Orkney rose to 67 during 2007. The number of passengers almost equalled that of 2005 when 75 liners called into the County.

IMAGE: Photograph of the Hebridean Spirit passing Balfour Castle, Shapinsay.

Estimated total number of bedspaces in Orkney in 2004

Source: Brian Burns Associates

Accommodation Provision in Orkney, 2004

Tourist Board Members Only

Source: Orkney Tourist Board

Based on the 2004 details of Orkney Tourist Board Members and an estimate of those tourist accommodation providers not registered, a total of 3,750 visitor bedspaces is estimated to be provided by the county’s tourism sector. With regard to Orkney Tourist Board members the majority of these bedspaces are provided via self-catering (33%) followed by hotels and guest houses (27%).

11 Housing

Housing Tenure in Orkney and Scotland

Percentage of households in each housing tenure

Source: Scottish Household Survey 2001-2002, 2003, 2004

Although significantly higher than the average Scottish figure, the percentage of housing owned outright in Orkney dropped during 2003-04 to 44.11%. Conversely, figures for Shetland and the Western Isles rose slightly over the same period perhaps as a result of lower average house prices in these areas.

Average House Prices, Last Quarter 2007

Source: Registers of Scotland Executive Agency.

NOTE: All figures are simple averages based on all residential properties between £20,000 and £1,000,000 recorded in the four quarters of each year. Figures for Scotland are for the period October to December 2007.

Figures released by the Registers of Scotland Executive Agency show that, based on all residential properties between £20,000 and £1,000,000, Orkney’s average house prices continued to remain higher than that of Shetland and the Western Isles. Orkney’s annual increase percentage has dropped from 17.6% in 2006 to 8.5% at the end of 2007, which is lower than the national average. Out of 32 areas in Scotland, Orkney has dropped in the ranking from number 27 in 2006 to 30th place in the fourth quarter of 2007.

Housing Completions in Orkney

Source: The Scottish Government

IMAGE: Photograph of Sutherland Park, Kirkwall, showing newly completed low-rise housing by Orkney Housing Association in 2007.

12 Retail Study

In 2007, in order to develop a strategic retail model, the Council commissioned the first in depth study of Orkney’s retail sector.

The study reports that Orkney’s potential market for retail goods is almost £100 million, comprising:

Calculation of market value is informed by national statistics and a survey of 750 Orkney households conducted by market research specialists, NEMS.

The following figure illustrates where Orkney’s retail goods expenditure originates from, and how it is dispersed. Percentages have been established from existing data and market research conducted during the retail study.

Origin & Destination of Expenditure: All Goods

IMAGE: Flow diagram showing that residents account for 93% of all goods expenditure, tourists for 6% and day trippers for 1%. The total market is £99.2 million, distributed as 18% through special forms of trading, 14% through leakage to shops outside Orkney and 69% through Orkney shops.

It is estimated that Orkney households spend approximately £18m annually on retail goods (primarily general comparison) via special forms of trading (SFT) and £14m in UK mainland shops (leakage). SFT includes internet and mail order shopping etc.

A total of 281 retail and retail service units were identified in Orkney, comprising 176 retail goods, 88 retail service, and 17 vacant units. Retail Services includes restaurants, hairdressers, travel agents, financial services, estate agents, etc.

Total employment in the sector is somewhere within the range 1650 -1800, or 1320 -1425 full time equivalent jobs. This is approximately 17.5% of the economically active population in Orkney and represents annual wages and salaries in the region of £15m.

The physical make-up of the sector is illustrated in the table below (the floor areas are rounded and turnover is based on 2004 prices).

The distribution of retail businesses throughout Orkney is indicated below:

Retail Goods - provision and distribution