Orkney Economic Review No. 22

2007

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

IMAGE: Cover of the Orkney Economic Review No. 22, 2007, showing two red-and-white ships involved in a liquefied natural gas ship-to-ship transfer in Scapa Flow, with the Orkney Islands Council crest and the publisher’s address.

IMAGE: Map of the Orkney Islands showing Mainland, Hoy, Burray, South Ronaldsay, Flotta, 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

• General Review — 1
• Population — 6
• Weather — 8
• Agriculture — 10
• Fishing — 15
• Fish Farming — 18
• Energy Production — 19
• Energy Consumption — 21
• Transport — 22
• Tourism — 26
• Housing — 29

Cover photograph: Liquified natural gas ship to ship transfer in Scapa Flow

IMAGE: The new travel centre on Junction Road, Kirkwall, under construction and due to be completed in late summer 2007.

General Review

Unemployment Rate in Orkney 2001–2006

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 end of 2006 to levels higher than the previous two years over the same period. Consequently, Orkney’s average unemployment rate rose in 2006 to 1.6%, halting a four year decline in the figure.

IMAGE: Table showing Orkney’s monthly unemployment rates from 2001 to 2006, with the annual average rising from 1.5% in 2005 to 1.6% in 2006.

Unemployment Rate in Orkney Relative to Scotland 2001–2006

The chart compares unemployment in Scotland and Orkney at June and December points from 2001 to 2006. Scotland’s rate ranges from approximately 3.1% to 4.0%, while Orkney’s rate ranges from approximately 1.4% to 2.6%.

Source: Office for National Statistics

Despite the slight rise in Orkney’s rate of unemployment the county still maintains a favourable position when compared to national figures. Indeed, at the end of 2006, Orkney’s unemployment settled to a level just over 56% of the National figure.

% Economic Active 16–59/64

Source: Scottish Economic Statistics, Scottish Executive

Despite remaining static between 2004 and 2005, Orkney’s economic activity rate (the proportion of the working age population involved in employment, self employment or seeking work) maintains a level above both the Highlands & Islands and Scottish averages. Indeed, at 86.5%, Orkneys rate is more than 7 percentage points above the national average and is second only to Shetland (88.2%), as the highest of any local authority area in Scotland.

IMAGE: Bar chart comparing unemployment rates in Scotland and Orkney at June and December from 2001 to 2006, followed by a table showing economic activity rates for Orkney, the Highlands & Islands and Scotland in 2004 and 2005.

Gross Value Added for main industries: Total £million

Source: Office for National Statistics

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 released by the Office for National Statistics show that between 2002 and 2003 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 increase in service activities’ gross value added from £105 million in 1995 to £150 million in 2003, while total GVA increased from £204 million to £231 million.

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 £61,000. The VAT registration threshold increases by around £1,000 each tax year. Figures are rounded to the nearest 5.

The trend of decline in business stock in the combined primary sectors of agriculture and fishing continued during 2005. VAT registration figures for most other sectors remained fairly static during the year, although the total number of construction businesses did increase. The total of all VAT registered businesses, at the start of 2006, is now approximately 30 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 358 new businesses were set up in Orkney during the last four years. However, the table represents business start ups only and takes no account of the inevitable failures or closures during the corresponding period. That data is not available and consequently, it is not suggested that Orkney’s total business stock increased to the same degree, or even at all, over the above period.

Population

Population Change

Source: General Register Office for Scotland

Orkney’s natural growth rate (the difference between births and deaths), negative every year since 1998, improved in 2005 from an annual average of -33, to just -13. This improvement, combined with still substantial, but now decreasing, levels of inward migration resulted in continued population growth in 2005 to 19,590.

Population Estimates for Orkney

Source: General Register Office

Despite indications of population growth during the past 4 years, the General Register Office maintains its prediction of an accelerating decline in the county’s population during the period 2010 – 2024.

Estimated population by age and gender, Orkney 2005

The population pyramid shows the percentage of males and females by age group. Females slightly outnumber males overall. The chart shows a relatively low population in the 20–35 age range, known as ‘the waistband effect’.

The chart displays the following age groups: 0–4, 15–19, 30–34, 45–49, 60–64, 75–79 and 90+, with the horizontal scale ranging from 6% male to 6% female.

The distribution of Orkney’s population by age and gender shows that, whilst the total figure for females is slightly higher than that of males, there is a fairly even split across each age category. The graph also clearly displays one of the County’s more worrying statistics, a relatively low population in the age range 20-35 know as ‘the waistband effect’.

Population Change, 1991–2001

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: Population pyramid for Orkney in 2005, showing the percentage distribution of males and females by age and the low population between ages 20 and 35.

IMAGE: Bar chart of population change from 1991 to 2001. Mainland increased by 95 people; all listed islands declined, with Westray losing 141 people and Wyre and Flotta each losing more than 35% of their populations.

Weather

Meteorological data for Orkney, 2005

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

IMAGE: Four-panel weather table comparing 2005 and 50-year-average maximum temperature, minimum temperature, rainfall and sunshine in Orkney.

Orkney Temperature 2005

The chart compares 2005 mean maximum and minimum temperatures with the 50-year average for each month from January to December.

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 2005 are taken from the Loch of Hundland climate station operated by K. Johnson. Comparison of these figures with the 50 year average shows an increase in rainfall and a slight reduction in sunshine hours. When compared to the 50 year average, maximum and minimum temperatures for 2005 reflect an overall rise in the average temperature of the county. This trend 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 simply be the result of a milder year.

IMAGE: Line graph comparing monthly 2005 maximum and minimum temperatures with the 50-year average. The 2005 maximum temperature peaks at 15.9°C in July, and the 2005 minimum temperature peaks at 10.1°C in July.

Agriculture

Orkney Auction Mart Prices

Average price per kg

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 drop in value during the first half of 2006, prices rose during the second half of the year to levels considerably higher than those realised at the corresponding period in 2005.

Livestock Shipments from Orkney (OIC Ports)

Source: OIC Harbours Dept.

Whilst figures for cattle have remained largely static since 2003, shipments of sheep from Orkney through OIC ports declined in 2006 by over 4,000. It should be noted however that these figures represent only movements through Council owned ports and do not included shipments on the St. Margaret’s Hope – Gills Bay route, for example. Data for that service, operating since 2001, has unfortunately not been made available.

Agricultural Land Use in Orkney (hectares)

Source: SEERAD Agricultural Census

Figures for agricultural land use, released annually by The Scottish Executive Environment and Rural Affairs Department (SEERAD), show little change between 2001 and 2006. Grass land and rough grazing continue to dominate agricultural land usage in Orkney reaching a figure of over 92% of total land use in 2006.

IMAGE: Black-and-white photograph of several tractors in an agricultural field, with farm buildings in the background.

Herd Size in Orkney

Source: SEERAD Agricultural Census

Herd sizes of cattle and sheep fell during 2006 to figures of 89,411 and 133,635 respectively. Breeding ewes perhaps took the most significant hit with a drop of more than 9% between 2005 and 2006.

Orkney Milk Production (000’s of Litres)

Source: Orkney Cheese Company Ltd.

Despite relatively unchanged figures since 2001, milk production in Orkney rose by 330,000 litres in 2005-06 compared to output for the previous 12 months reaching a total of 15,490,000 litres.

IMAGE: Horizontal bar chart of Orkney milk production, showing 15,490 thousand litres in 2005–06, the highest value shown.

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 a 2006 total workforce figure of 2,097.

Agricultural Holdings in Orkney

Source: SEERAD Agricultural Census

The total Number of holdings in Orkney has remained fairly constant in recent years incurring only a slight increase in 2006 to a total of 1,967.

The method of calculating the levels of support provided to the industry via the Common Agricultural Policy (CAP) has recently been reformed and it remains to be seen what effect, if any, that will have on the industry in Orkney. The Scottish Executive Environmental and Rural Affairs Department (SEERAD) which administers the CAP schemes in Scotland, made subsidy payments totalling £16.11m to 795 Orkney recipients during 2005. (SEERAD Annual Report, 2005).

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

Fishing

Landings of White Fish by Orkney Vessels

Source: SEERAD

Recent growth of the live weight of white fish landings by Orkney vessels continued in 2006 reaching its highest level since 2002 at just over 6,400 tonnes. Similarly, the value of landings rose by more than 44% during 2006 to a total of £8,303,000.

Landings of Shellfish by Orkney Vessels

Source: SEERAD

IMAGE: Black-and-white photograph of a fishing boat in the sea beneath steep layered cliffs.

Unlike the positive growth of white fish landings in 2006, shellfish landings for the same period were slightly lower than the previous year at 3,799 tonnes. The value of shellfish landings by Orkney vessels continued to grow during 2006 to a figure of £6,809,000.

Shellfish Landings by Orkney Vessels 2006, Liveweight

The chart identifies the following shellfish categories: Scallops – Queen, Squid, Surf Clams, Whelks, Crabs – Brown (Edible), Cockles, Scallops, Razor fish, Periwinkles, Nephrops (Norway Lobsters), Lobsters, Crawfish, Crabs – Velvet (Swim), Crabs – Other and Crabs – Green.

Source: SEERAD

Shellfish Landings in Orkney 2006, Value

The chart identifies the following shellfish categories: Scallops – Queen, Squid, Surf Clams, Whelks, Crabs – Brown (Edible), Cockles, Scallops, Razor fish, Periwinkles, Nephrops (Norway Lobsters), Lobsters, Crawfish, Crabs – Velvet (Swim), Crabs – Other and Crabs – Green.

Source: SEERAD

IMAGE: Two pie charts showing the composition of Orkney’s 2006 shellfish landings by liveweight and by value. Brown edible crabs form the largest share by liveweight and value; the remaining categories include velvet crabs, lobsters, nephrops, scallops, cockles, whelks, squid, surf clams, razor fish, periwinkles, crawfish and other and green crabs.

Orkney Fishing Fleet

Source: SEERAD

With the exception of larger shellfish vessels which increased by 9, Orkney’s fishing fleet continued to decline in 2006, in line with national trends, ending the year with a total of 154 vessels.

Number of Fishermen in Orkney

Source: SEERAD

Following positive growth in full time fishing employment during 2005, 2006 represented a slight decline in both full time and total employment levels. However, it is likely that some of these full time jobs have been replaced by part time jobs which rose by 13 during the year.

Fish Farming

Salmon & Smolt Production in Orkney

Source: Scottish Fish Farms Annual Production Survey

In line with a recent nationwide trend of decline, Orkney’s fish farming sector has reduced dramatically since 2003 both in terms of output and employment. More positively however, estimates released by Fisheries Research Services display signs of a halting of this decline and indeed a recovery for the industry over the next few years.

Fish Farming Employment in Orkney

Source: Scottish Fish Farms Annual Production Survey

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 continued to decline in recent years, as has the volume of oil handled by shuttle tanker from the Foinaven field in the Atlantic Frontier.

Ship to Ship Transfers Oil Tonnage

Source: OIC Harbours Dept.

Ship to ship oil transfers in Scapa Flow have, since the late nineties, represented significant activity for the sector. However following two years of increased activity in 2004 and 2005, the tonnage of oil transferred dropped in 2006 to 993,759 tonnes.

Grid Connected Wind Turbines in Orkney

Source: OREF

Following the construction of two more turbines at Burgar Hill during 2006, Orkney now has a total of 12 operational grid connected wind turbines with a combined production capacity of 21.35MW.

IMAGE: Photograph showing a small boat and a drilling rig being transported at sea to the EMEC tidal site at Eday.

Energy Consumption

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

• 1,453,618 — Petroleum Products
• 5,632 — LPG
• 205,356 — Solid Fuel
• 566,784 — Electricity

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.

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

IMAGE: Photograph of wind turbines on a grassy hill in Orkney.

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, operated by Northlink Ferries, showed further growth in 2006 in terms of both passengers and accompanied vehicles. Commercial vehicles and trailers on the other hand continued their 4 year decline ending 2006 with a total of 5,956.

Traffic on Shetland – Kirkwall – Aberdeen Route

Source: OIC Harbours Dept.

Despite a slight decline in passenger numbers for the Shetland – Kirkwall – Aberdeen route in 2006, the service continues to show signs of growth over the long term. Annual figures for commercial vehicles and trailers for example, have risen by over 1,000 since 2003.

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 period 2004/05, passengers in transit at the Airport had seen growth of just under 4,000. Furthermore, it is expected that this increase will be accelerated by the introduction of the Air Discount Scheme (ADS), reduced cost air travel for residents of the Northern and Western Isles, expected to increase the number of passengers travelling to/from Shetland and Edinburgh/Inverness via Kirkwall.

Kirkwall Airport Traffic

Source: HIAL

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 that higher figures reported for 2004-05 are largely attributed to extra summer sailings of the MV Thorsvoe to the South Isles brought about by a greater availability of crew during the 12 month period.

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

Tourism

During the period 2004-05 a study into Orkney’s growing tourism sector was conducted by TNS consultants commissioned by The 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.

IMAGE: The Polar Star, Black Prince and Ocean Majesty cruise liners docked at Hatston Pier.

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

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.

Following a particularly busy year in 2005, cruise liner visits to Orkney dropped during 2006 to a total of 47 carrying a little over 20,000 visitors to the county.

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%).

Housing

Housing Tenure in Orkney and Scotland

(% 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, 2006

Source: Registers of Scotland Executive Agency

Note: Averages based on all residentail properties between £20,000 and £1,000,000 recorded during July-December 2006

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 price remained higher than that of Shetland and the Western Isles in 2006 at £111,421. More significantly however Orkney’s annual increase in average house price was recorded at 17.6% in 2006, 0.9% and 5.8% below the Highland and Shetland averages respectively.

Housing Completions in Orkney

Source: Scottish Executive Development Department

Following a particularly active year of housing in 2004, figures for 2005 show slight reductions in house completions to 123 for the year.

IMAGE: Photograph of Sutherland Court, Kirkwall, showing new housing completed by the Orkney Housing Association in November 2006.