Orkney Economic Review No. 21

2006

Department of Development Services
Orkney Islands Council
School Place
Kirkwall
KW15 1NY

IMAGE: Cover showing the title “Orkney Economic Review No. 21”, the year “2006”, the Orkney Islands Council logo, and a photograph of the Golden Princess liner anchored in Kirkwall Bay with ferries and the shoreline visible.

© Published by:

Department of Development Services
Orkney Islands Council
School Place
Kirkwall
KW15 1NY

IMAGE: Title page showing “Orkney Economic Review No. 21”, “2006”, and the publication details for the Department of Development Services, Orkney Islands Council.

IMAGE: Map of the Orkney Islands labelled Mainland, Hoy, South Ronaldsay, Burray, Shapinsay, Rousay, Egilsay, Wyre, Eday, Stronsay, 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.

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 — 1
2. Population — 6
3. Weather — 8
4. Agriculture — 10
5. Fishing — 15
6. Fish Farming — 17
7. Energy Production — 18
8. Energy Consumption — 20
9. Transport — 21
10. Tourism — 26
11. Housing — 29

The cover photograph shows the Golden Princess liner anchored in Kirkwall Bay along with Northlink’s Hrossey and Hjaltland ferries, taken from Wideford Hill.

IMAGE: The new herring production factory in Stromness, completed June 2005.

1 General Review

Unemployment Rate in Orkney 2000-2005

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, continued to fall in 2004-05 reaching a low of just 1.2% through August and September before a seasonal rise to 1.5% in December 2005. Orkney’s unemployment figure therefore is now consistently below 2% and has halved since the beginning of 2000. Furthermore during February 2004, Orkney’s Working Age Claimants of Key Benefits (Dept. for Work and Pensions) was just 8%, the lowest in Scotland a total of 9 percentage points under the national average.

Unemployment Rate in Orkney Relative to Scotland 2000-2005

The chart compares unemployment rates in Scotland and Orkney at June and December from 2000 to 2005. Scotland’s rates range from 4.5% in June 2000 to 3.2% in December 2005, while Orkney’s rates range from 2.3% in June 2000 to 1.5% in December 2005. Orkney remains below Scotland throughout the period.

Source: Office for National Statistics

When compared to Scotland as a whole, Orkney has maintained a favourable position with regard to unemployment. Indeed, at the end of 2004, Orkney’s unemployment fell to only 48.5% of the Scottish figure. In recent years however Orkney has suffered larger seasonal fluctuations in employment compared to Scotland although trends suggests the degree of seasonality in unemployment is reducing.

IMAGE: Electricity cable laying at Falls of Warness, Eday, for the European Marine Energy Centre Tidal Device test facility due to open summer 2006.

Total Employee Jobs in Orkney 2000-2003

Source: Annual Business Inquiry Employee Analysis

*Confidential data

Note: Totals may not sum due to rounding

Due to the relatively small size of Orkney’s workforce, the insights provided by nationally published employment figures for the county are limited. Figures from the Annual Business Inquiry are rounded to nearest hundred and considering Orkney’s industry workforce totals are rarely more than a few hundred such rounding has the potential to significantly obscure these figures. Having said this however, interesting trends are reflected in the data. 2003 shows a significant rise in employment in the construction sector which forms part of a trend of growth for the industry. The public sector maintains its position as the county’s main employer showing a steady growth between 2000 and 2003. Agriculture and fishing shows a slight drop in employment which is verified by the figures released by SEERAD presented later in this review.

Orkney Economic Activity Rates

(As % of population aged 16 – 59/64)

Source: Labour Force Survey

For 2004, Orkney had the third highest economic activity rate amongst the Scottish local authorities (the proportion of the population which is involved in employment or self-employment or is seeking work). However despite being 6 percentage points above the average, Orkney’s trend is one of decline whereas the Scottish average is steadily increasing.

Gross Value Added comparison Orkney & Scotland

The chart shows GVA per head at basic prices for Scotland, Orkney, and the Highlands & Islands from 1995 to 2003. In 2003, the figures were £15,523 for Scotland, £11,950 for Orkney, and £11,400 for the Highlands & Islands.

Source: Office for National Statistics

According to the Office of National Statistics, GVA figures (the difference between output and intermediate consumption) for Orkney show a static trend when compared to the steady growth experienced between 1995 and 2001 by the Scottish average. However between 2001 and 2003 Orkney experienced a level of growth similar to both the Scottish and Highlands and Islands averages. More recent estimates of local economic output released by Mackay Consultants suggest that Orkney’s total GVA increased by 3.1% to £266m in 2004- the highest growth rate in the country and 1.1% over the Scottish Average.

Gross Value Added for main industries: Total £million

Source: Office for National Statistics

Industry breakdown of GVA figures highlights that Orkney is experiencing the same trends as much of the UK with a reduction in primary and manufacturing industries and more reliance on growing service activities.

VAT Registered Enterprises in Orkney

Source: Office for National Statistics

Note: companies should register for VAT if the value of their taxable supplies in the past 12 months or less has exceeded the current VAT registration threshold of £60,000

Agriculture and fishing saw the largest proportion of new VAT registrations in 2004 yet these sectors have been experiencing a decline in total stocks since 2000. Having said this, increases in the threshold figure (increasing by around £1,000 each tax year) may be the cause of some enterprises de-registering. Most other sectors show rather static figures with construction, real estate, and hotels and restaurants recording the only significant increases in stocks.

New Business Start-ups in Orkney

Source: The Committee of Scottish Clearing Bankers

Figures published by The Committee of Scottish Clearing Bankers, a collaboration between the four major Scottish banks, shows that a total of 264 new businesses have been set up in Orkney over the last three years.

2 Population

Population Change

Source: General Register Office for Scotland

The natural growth rate of the population (the difference between births and deaths) turned negative around 1997 and has remained so ever since. However the significant decline of Orkney’s population predicted at the end of the nineties has been avoided due the rapid rise in migration to the county.

Population Estimates for Orkney

Source: Office for National Statistics

Population estimates for the county have in turn been revised to predict a steady growth until 2007 before, again beginning a slow decline.

Population Change, 1991-2001

The chart shows population change for Orkney’s islands between the 1991 and 2001 censuses. Mainland increased by 95 people, approximately 0.58%. The largest percentage declines were in Flotta and Wyre, both exceeding 35%.

Source: Census of Population 1991 and 2001

Although the predicted decline of Orkney’s population has not materialised there is still a worrying trend of decline in many of the county’s isles. Although the Mainland experienced population growth of around 0.58% (95 people) between the 1991 and 2001 census’, many of the county’s isles revealed an opposite trend with Flotta and Wyre both suffering the loss of over 35% of their respective populations during the period.

3 Weather

Meteorological data for Orkney, 2004

Mean maximum and minimum temperature (°C)

Rainfall and sunshine

Source: Loch of Hundland climate station

Note: 50 yr average is from Grimsetter Airport 1950-2000

IMAGE: Line chart comparing 2004 mean maximum and minimum temperatures with the 50-year average for each month. The 2004 maximum temperature peaks at 17.4°C in August; the 2004 minimum peaks at 11.1°C in August.

Source: Loch of Hundland climate station

Note: 50 yr average is from Grimsetter Airport 1950-2000

As data from the Meteorological Office (recorded at Kirkwall Airport) is now less readily available, weather statistics for 2004 are taken from the Loch of Hundland climate station operated by K. Johnson. Comparison of these figures with the 50 year average shows a slight increase in sunshine hours and slight reduction in rainfall. When compared to the 50 year average, maximum and minimum temperatures for 2004 reflect an overall rise in the average temperature of the county. This trend is in line with the concept of global warming which has been well documented in recent years although it should be noted that this data is not entirely conclusive and may simply be the result of a milder year.

4 Agriculture

Orkney Auction Mart Prices

Average price per Kg

Source: Orkney Auction Mart

Orkney Auction Mart prices are one of the main determinants of the value of agricultural output in Orkney, and although higher than figures from the end of the nineties, they have, after increases in 2004, declined slightly during 2005.

Livestock Shipments from Orkney (OIC Ports)

Source: OIC Harbours Dept.

Given the fairly constant levels of herd sizes and local slaughtering, the decline in shipments of cattle and sheep since 2000 is most likely to be the result of alternative methods of transport out of the county, not recorded by the OIC Harbours Dept. such as transportation via the St. Margaret’s Hope – Gills Bay route.

IMAGE: Photograph of cattle standing in a field.

Agricultural Land Use in Orkney (hectares)

Source: SEERAD Agricultural Census

Note: To prevent disclosure of information about individual holdings, entries relating to less than 5 holdings, or those where two or less account for 85% or more of the information, have been replaced with an asterisk.

Figures for agricultural land use, produced on an annual basis, show little change between 2000 and 2004. The area under barley rose slightly in 2004 to its highest level since 2000 whilst figures for set aside in the county have continued their steady growth over the last 5 years.

Agricultural Land Use in Orkney, 2004

The chart shows the relative areas of barley, oats, ware potatoes, turnips and swedes and beet for fodder, other crops for stock feed, vegetables for human consumption, set aside, grass for mowing, and grass for grazing. Grass for grazing is the largest category, followed by grass for mowing and other crops for stock feed.

Source: SEERAD Agricultural Census

Breeding Herd in Orkney

Source: SEERAD Agricultural Census

With the exception of ewes which fell by just over 1%, breeding herd sizes increased slightly between 2003 and 2004.

Orkney Milk Production (000’s of Litres)

Source: Orkney Cheese Company Ltd.

Milk production in Orkney has been relatively static since 2001 declining only slightly to 15,160,000 litres in 2004-05.

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 the industry to the county is highlighted by the total workforce figure of 2,111.

Agricultural Holdings in Orkney

Source: SEERAD Agricultural Census

The total Number of holdings in Orkney has remained fairly constant over the last 5 years incurring only a slight increase in 2004 to a total of 1,933.

5 Fishing

As with much of the agricultural data included in this review, fishing statistics have, in the majority, been sourced from The Scottish Executive Environment and Rural Affairs Department (SEERAD). However, due to the timeframe in which this data is collected some tables are not entirely up to date.

IMAGE: Photograph of a fishing vessel at sea near a rocky coastline.

Landings of Fish by Orkney Vessels

Source: SEERAD

Note: Includes demersal, pelagic and shellfish landings

Following a recent decline of the live weight and value of landings, 2004 shows a slight increase in both, to 8,788 tonnes and £10,048 respectively.

Shellfish Landings by Orkney Vessels 2004 (tonnes)

Source: SEERAD

Number of Fishermen in Orkney

Source: SEERAD

Unlike agricultural employment, the fishing industry has had a significant increase in the number of full-time workers to 305 in 2004. It is likely that much of this increase was brought about by part-time workers moving into full-time work as the figure for irregular workers more than halved between 2003 and 2004.

Orkney Fishing Fleet

Source: SEERAD

Similar to elsewhere in Scotland, Orkney’s whitefish fishing fleet has continued to decline, losing 3 vessels in the last round of decommissioning. Fortunately however, shellfish vessel numbers have proven more robust.

6 Fish Farming

Salmon & Smolt Production

Source: Scottish Fish Farms Annual Production Survey

The rate of growth in Orkney’s fish farming industry has been steadily increasing in recent years. In 2002, 7,585 tonnes of salmon was produced, 690 tonnes above the year’s projected figure. Estimates for 2003-04 show this growth is expected to continue.

Employment

Source: Scottish Fish Farms Annual Production Survey

Employment in the industry, despite not growing at the same rate as production, increased in 2002, having declined slightly the previous year. Furthermore, a significant proportion of this employment is located in the outer isles, providing a valuable source of employment.

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 continued to decline in 2004 as did the volume of oil handled by shuttle tanker from the Foinaven field in the Atlantic Frontier.

Ship to Ship Transfers

Source: OIC Harbours Dept.

Ship to ship oil transfers in Scapa Flow have, since the late nineties, represented significant activity for the harbour. Despite large fluctuations, 2005 saw a total of 17 transfers, the highest figure since 2001.

IMAGE: Photograph showing a ship-to-ship oil transfer in Scapa Flow, with two large tankers and a smaller support vessel.

Grid Connected Wind Turbines in Orkney

Source: OREF

There are currently ten operational grid connected wind turbines in Orkney producing a total capacity of 16.3MW. Construction of two more turbines at Burgar Hill, Evie is set to begin this year adding another 4MW to Orkney’s wind turbine output capacity. Suitability of Orkney as a site for renewable energy production has also led to the development of the European Marine Energy Centre (EMEC), including a test site for wave power devices which became operational in 2003, and a tidal power device test site due to be completed this year.

8 Energy Consumption

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

Source: Orkney Energy Audit 2003-04

Orkney’s Carbon Footprint

Source: Orkney Energy Audit 2003-04

Although energy consumption in Orkney has increased by 16% over the period 1990 to 2003, the increase in CO2 emissions resulting from the combustion of this fuel has risen by only 8%. This improvement in CO2 emission is primarily due to the use of grid electricity and oil products in preference to solid fuel.

9 Transport

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

Source: OIC Harbours Dept.

Following the initial impact of the 2001 introduction of a privately operated roll on-roll off ferry service between St Margaret’s Hope and Gills Bay in Caithness, passenger traffic on the Stromness – Scrabster route has continued to rise. This trend is also reflected in car traffic on the service. The number of commercial vehicles and trailers using the service dropped in 2004 by around 17.5%.

Traffic on Shetland – Kirkwall – Aberdeen Route

Source: OIC Harbours Dept.

Figures for the revised Shetland/Kirkwall, Kirkwall/Aberdeen route show an increase between 2003 and 2004, of just over 9,000 passengers.

Imports by Coastal Carrier to OIC Mainland Ports Only (tonnes)

Source: OIC Harbours Dept.

Coastal shipping remains an important method for bringing bulk cargoes into the county, particularly specialist cargoes such as liquid fuels. However, since many cargoes such as salmon feed are capable of carriage by a variety of methods, figures for such may show erratic variation from year to year.

Kirkwall Airport Traffic

Source: HIAL

Following the installation of an Instrument Landing System in 2003, activity at Kirkwall Airport has risen steadily. Whilst the number of passengers terminating their travel at Kirkwall Airport dropped slightly during the last year, passengers in transit at the Airport has continued to rise - largely due to a significant increase in the number of North Sea oil rig helicopters using the Airport to refuel in adverse weather conditions.

IMAGE: Photograph of Kirkwall Airport’s Instrument Landing System, completed in 2003.

Inter Island Ferries (Passengers)

Source: Orkney Ferries Ltd. (Year runs April – March)

Total passenger carryings on the inter-isles ferries has continued its 5 year growth rising by over 3.8% in the last 12 months. This increase has been shared by the majority of isles, with Flotta, Stronsay, Eday and Papa Westray the only isles to experience a reduction in passenger carryings. North Ronaldsay (41.5%) and North Hoy (14.1%) experienced the strongest increases.

Inter Island Ferries (Cars)

Source: Orkney Ferries Ltd. (Year runs April – March)

The growth in the number of cars carried on the inter-isles services has slowed over the last 12 months, yet still shows modest overall increase.

Inter Island Ferries (Commercial Vehicles)

Source: Orkney Ferries Ltd. (Year runs April – March)

The total number of commercial vehicles carried increased by 12.2% between 2003/04 and 2004/05, with Westray showing the strongest rate of growth.

IMAGE: Map titled “Orkney’s internal Ferry Routes”, showing ferry routes between Mainland, Hoy, South Ronaldsay, Burray, Shapinsay, Rousay, Egilsay, Wyre, Eday, Stronsay, Sanday, Westray, Papa Westray, and North Ronaldsay. An inset photograph is captioned “MV Thorsvoe returning to Kirkwall”.

10 Tourism

During the period 2004-05 a study into Orkney’s growing tourism sector, commissioned by Orkney Islands Council in conjunction with Visit Orkney and Orkney Enterprise, was conducted by TNS consultants. 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 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 route was restricted to an estimate.

Average Visitor Spend in Orkney (per person)

Source: TNS Visitor Survey 2004-2005

Average Length of Stay of Visitors to Orkney

Source: TNS Visitor Survey 2004-2005

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. However, data does not provide a breakdown of the current figure to illustrate the respective values of Leisure Tourism, Business Tourism, and visiting friends and relations.

In addition, independent studies estimated spending by Cruise Liner passengers and crew in the county to contribute between £600k and £900k to Orkney’s economy during the 2004 season.

IMAGE: Photograph of the Golden Princess cruise liner taken from Kirkwall Bay.

Cruise Liner Visits to Orkney

Source: OIC Harbours Dept.

Total Visitor Bedspace in Orkney, 2004

Source: Brian Burns Associates

Accommodation Provision in Orkney, 2004

Tourist Board Members Only

Source: Orkney Tourist Board

Based on the 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

Dwellings in Orkney and Scotland

Source: General Register Office for Scotland

Occupation of houses in Orkney has increased in 2004 to 91.1% of the total 9,548 houses. This figure, although Orkneys highest since 2001, is still 4 percentage points lower than the equivalent Scottish figure.

Housing Tenure in Orkney and Scotland

The chart compares housing tenure in Orkney and Scotland in 2001. Owner occupation accounts for 72% in Orkney and 63% in Scotland. The categories shown are owned, rented from council, other social rented, private rented unfurnished, private rented furnished, and living rent free.

Source: 2001 Census Data

The percentage of owner occupied housing in Orkney, at 72%, is significantly higher than the Scottish average (63%) which is perhaps a result of the relatively low cost of housing in the county compared to the Scottish average.

Average House Price, December 2005

Source: Registers of Scotland Executive Agency

Housing Completions in Orkney

Source: Scottish Housing Statistical Bulletin

The chart compares houses started and houses completed from 2000 to 2004. Houses started were 28, 38, 128, 108, and 155 respectively. Houses completed were 29, 52, 120, 86, and 81 respectively.

Source: Scottish Housing Statistical Bulletin

The number of house builds started in Orkney more than trebled during 2002 to a figure well over 100, a level which has been maintained over the last couple of years.

IMAGE: Photograph captioned “Wellington Street, Kirkwall: new housing under construction for the Orkney Housing Association”.