Orkney Economic Review

2012-13

IMAGE: Hatston Pier extends into a blue sea beside the Orkney coastline, with a vessel moored at the pier and a wind turbine onshore. The cover caption reads: “At 385 metres - almost a quarter of a mile - the newly extended Hatston Pier is now Scotland’s longest commercial deep-water berth.”

Development and Infrastructure Services
Orkney Islands Council
School Place, Kirkwall KW15 1NY
www.orkney.gov.uk

No. 26

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

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

Every care has been taken in the completion of this Review. However, the publisher cannot accept responsibility for any errors or omissions. It should be noted that small local sample sizes can lead to some rounding of figures, and that some figures previously published in this Review have been revised in light of the availability of updated statistics and research. If you have any suggestions for subject areas which could be included in future Orkney Economic Reviews, please forward them to: economic.development@orkney.gov.uk.

[Please note: the Western Isles are referred to throughout as ‘Eilean Siar’.]

Contents

1. Population
2. Labour Market
3. Economic Activity
4. Agriculture
5. Fishing
6. Shellfish
7. Fish Farming
8. Energy Production
9. Transport
10. Housing
11. Weather

1 Population

Although Orkney’s population natural growth rate (births minus deaths) remains negative, the gap has closed significantly and, if the recent overall trend continues, could soon contribute to population growth. Estimated net in-migration might be influenced by the difficult conditions prevailing in the UK economy and the availability in Orkney of relatively accessible and affordable housing.

Orkney Population Change 2000-2012

Source: General Register Office for Scotland (GROS)

NOTE: population and migration figures post 2001 Census are estimates: figures for 2000 to 2008 are ‘as at’ 30 June; figures for 2010 and 2012 are based on the calendar year. Only biennial figures are shown, so the trends do not tally with the changes in population.

Population information for Scotland’s islands from the 2011 Census was released during August 2013.

The 2011 Census has identified changes to the Orkney demographic, as shown below.

These trends can be compared with those for Scotland as a whole.

On 11 July 2013, a report in The Scotsman newspaper identified Orkney as ‘best place for those looking for a job in Scotland’, which may partly explain the increase in population aged 40-64.

The trend is towards an increasingly ageing population, a trend which is projected to continue. Predictions are highlighted in the following table.

Predicted population changes (%) 2008 to 2023

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

Source: GROS

An Orkney Population and Migration study was completed in April 2009 and the comprehensive report can be viewed at: http://www.orkney.gov.uk/Files/Council/Publications/2009/Orkney_Population_Change_Study_April_09.pdf

2 Labour Market

Unemployment Rate (% Job-seekers) in Orkney 2004-2012

Source: Office for National Statistics (ONS)

Note: These unemployment rates represent the proportion (%) of the resident population who are of working age and who are seeking employment.

Orkney’s average unemployment rate rose in 2011 but fell slightly in 2012 and remains significantly lower than the Scotland and UK December 2012 levels of 3.8% and 3.7% respectively. However, as the following table illustrates, the trend over recent years was, until 2012, towards increasing numbers of job seekers. Whilst the figures for 2012 are, overall, more encouraging than those for 2011, that year saw a notable increase in those out of work for more than 12 months.

Claimant count, Job Seeker Allowance (JSA)

Source: ONS

Notes: Totals may not always tally due to rounding and, owing to rounding, the apparent movements by age group and duration may therefore be distorted.

The age bracket displaying the largest increase in Orkney unemployment during the last six years is the 18-24 age-group, although there are indications that the situation is improving: in December 2011, the figure was 80 but by October 2013 this had reduced to 45.

However, the overall rate of increase in all job-seekers over the last five years, in percentage terms, is approximately half that of Scotland and much lower than in Great Britain (GB) as a whole.

JSA Claimants

Source: ONS

Note: Claimant % is a proportion of resident working age people (estimated).

In October 2013, the figures for Orkney and other Highlands and Islands local authority areas, Scotland and Great Britain were as follows.

JSA Claimants

Source: ONS

Note: Claimant % is a proportion of resident working age people (estimated).

3 Economic Activity

The percentage of the Orkney population who are economically active, i.e. either in employment or actively seeking employment, tends to be consistently higher than both the Scotland and Great Britain averages.

Economically Active as % of (estimated) working age population (16-64)

Source: ONS

Orkney’s active percentage is much more variable than the national statistics owing to the lower numbers involved but at its lowest is significantly above average.

Self-employment is also more prevalent in Orkney than in the rest of Great Britain.

Self-employment – regional comparison

Source: ONS

The following information from the 2011 Census was published in November 2013.

Economically Active People aged 16 to 74 by Council area, Scotland, 2011 (%)

Source: 2011 Census

Although the Census data is older than the most recent information provided by the Office for National Statistics, it is likely to be more reliable owing to the larger scale of survey involved, with the Census covering every household in the UK. For example, the 2011 Census (conducted on 27 March 2011) identified a higher proportion of people in Orkney who were self-employed (15.2%) than the Office of National Statistics did in December that year (12.5%).

However, changes in type of employment during 2011, coupled with Orkney’s comparatively small working population, could easily account for this difference in the statistics. It should also be noted that the Office for National Statistics’ data covers an age range of 16 to 64 years, whereas the 2011 Census covers from 16 to 74 years.

Workforce Qualifications

In terms of accredited skills and education at a higher level, figures suggest that the Orkney working-age population lags behind that of Scotland and that of the aggregated Great Britain labour pool.

Qualifications – People aged 16 to 64, January to December 2012

Source: ONS

Notes: NVQ is known as SVQ in Scotland.

In vocational terms NVQ 4 indicates management skills; and in academic terms, NVQ 4 or above indicates HND, etc. or above (Scottish Credit and Qualifications Framework level 8 and above).

The following information from the 2011 Census was published in November 2013.

Highest Level of Qualification of People aged 16 and over by Council area, Scotland, 2011 (%)

Source: 2011 Census

Notes: Census Level 1 qualifications are at a Standard Grade/SVQ 1 or 2 equivalency; Census Level 2 qualifications are at a Higher Grade/SVQ 3 equivalency; Census Level 3 qualifications are at a HNC/HND/SVQ 4 equivalency; and Census Level 4 qualifications are at Degree/SVQ 5 and above.

It is unfortunate that the data sets used by the Office for National Statistics and the 2011 Census are not directly comparable, but the Census information indicates that Orkney is slightly above the Scottish average attainment in terms of the highest level qualifications (Degree/SVQ 5 and above). Again, the 2011 Census figures include information about those aged 65 and over, whereas those from the Office for National Statistics do not.

Working Hours

The following information from the 2011 Census was published in November 2013.

Hours worked per week by employed people aged 16 to 74 by Council area, Scotland, 2011 (%)

Source: 2011 Census

The proportion of working people in Orkney who work for 60 hours or more per week is the highest in Scotland, and is indicative of an economy which is so dependent on farming (Moray has the next highest rate at 9.7%, followed by Aberdeenshire at 9.4%).

Enterprises

Reliable and inclusive data on business churn is not available. However an enterprise birth and death rate is available in respect of what is termed ‘Active Registered Enterprises’, i.e. those which had either turnover or employment at any time during the reference period and were registered with Her Majesty’s Revenue and Customs (HMRC) for VAT and/or PAYE.

Active Registered Enterprises – Orkney

Source: ONS

At the date of publication, data in respect of 2012 was not still available, but in March 2013 the Committee of Scottish Bankers (CSB) reported 77 new business starts in Orkney during 2012 and CSB data is usually fairly indicative of HMRC numbers. The availability of new business start-up grant funding via Orkney Islands Council’s Business Gateway service, which commenced in April 2011, has contributed to the higher business birth rates in 2011 and 2012, with 34 new businesses supported in the two year period to end March 2013.

The Scottish Government’s ‘Businesses in Scotland 2013’ report provides a data set which offers a broader snapshot of Orkney’s business base. This shows the estimated total enterprises, registered for VAT and/or PAYE, operating in Orkney at March 2013.

The estimated 1,505 enterprises operate in the following sectors (Standard Industrial Classification, 2007).

Active Orkney Enterprises, March 2013

• rounded to nearest 5

Source: Businesses In Scotland 2013

However, there is a substantial number of enterprises in Orkney which have no employees and are therefore not included.

Owing to the irregularity of reporting and the very small number of Orkney businesses sampled, the reporting of productivity (or Gross Value Added (GVA)) by government statistics agencies has traditionally been unreliable. Nevertheless, an indication of trends and comparisons with other areas is provided by the Office for National Statistics, with the most recent data being in respect of 2011.

Regional Gross Value Added (GVA^1,2) £ per head (at current basic prices)

¹ Caithness, Sutherland, Ross & Cromarty
² Inverness, Nairn & Moray, Badenoch & Strathspey
³ Lochaber, Skye & Lochalsh, Arran, Cumbrae, Argyll & Bute

Source: ONS

The drop in GVA in Orkney between 2009 and 2011 is most noticeable when considered in view of the 22.4% increase in productivity in Shetland over the same period, which is likely to be attributable, at least in part, to recent developments in the North Sea oil industry.

In terms of household income, the following table can provide an indication of changing household wealth between 1997 and 2011. Gross Disposable Household Income (GDHI) is money left after expenditure associated with income, for example: taxes and social contributions; property ownership; and provision for future pension income. It is calculated gross of any deductions for capital consumption.

Regional Gross Disposable Household Income (GDHI¹) £ per head (at current basic prices)

¹ Caithness, Sutherland, Ross & Cromarty
² Inverness, Nairn & Moray, Badenoch & Strathspey
³ Lochaber, Skye & Lochalsh, Arran, Cumbrae, Argyll & Bute

Source: ONS

Orkney is noticeable in having the highest GDHI figures in 2011 of those areas surveyed, slightly higher than Shetland, which had the highest figure in 2009.

There are fairly wide variations in the extent of increase in the various areas over the years with, it appears, Orkney’s GDHI displaying increases well above the regional and national averages.

¹ Caithness, Sutherland, Ross & Cromarty
² Inverness, Nairn & Moray, Badenoch & Strathspey
³ Lochaber, Skye & Lochalsh, Arran, Cumbrae, Argyll & Bute

Source: ONS

It is not possible to establish the reasons for this but Orkney and the wider Inverness/Moray area demonstrate the greatest increases and both have strong agricultural economies. Over the period 2007-2012, whilst livestock market prices were, overall, increasing, borrowing costs were reducing and stabilising.

During the same period, the construction sector in Orkney was, overall, also healthy, partly as a result of the Council’s Schools Investment Programme. Nevertheless, the possible explanations are purely speculative and the income statistics also come with the usual health warning with regard to risk of error due to small sample sizes.

4 Agriculture

Livestock values returned at Orkney Auction Mart rose significantly during 2009 and cattle prices have since further increased.

Orkney Auction Mart Prices - Average price, pence per kg

Source: Orkney Auction Mart

Livestock Numbers

Following recovery in 2009 the dairy herd declined again in 2010 and 2011, although it increased again by over 100 (or 2.8%) in 2012.

Herd/Flock Size in Orkney

Source: Scottish Government’s Rural and Environment Research and Analysis Directorate (RERAD), agricultural census annually at June

Livestock Shipments

The following table shows that livestock shipments through Orkney Islands Council (OIC) ports have increased significantly since 2007, with cattle shipments up by 45% over the period to 2012 and sheep movements up by 207% over the same period. However, as data for the privately-run St Margaret’s Hope to Gills Bay ferry service is not published, total livestock shipments from Orkney cannot be accurately ascertained.

Livestock Shipments from Orkney (OIC Ports)

Source: OIC Marine Services

Land Use

Following a slight increase in 2008, the total land area utilised by agriculture decreased significantly in 2009: the statistics agency believed that this may have been an anomaly caused by changes to data collection and reporting processes, and the subsequent recovery of the reported land use statistics to just above their 2007 levels would appear to bear this out.

Agricultural Land Use in Orkney (hectares)

Source: RERAD

Note: Totals may not always tally due to changes in reporting methods. * - Not previously reported.

Milk Production

Milk production has fallen since 2009-10: two dairy farms withdrew from the market during 2010-11 resulting in the loss of almost 1 million litres of production. To date, the unused quota has not been taken up by the remaining producers.

90% of all Orkney milk production goes towards the manufacture of Orkney Cheddar, produced by the Orkney Cheese Company Ltd.

Orkney Milk Production (000's litres)

Employment in Agriculture

Total employment in agriculture in 2012 decreased by 8.3% on 2011 figures but was higher than in 2010 and, with a total of 1,821 people having a direct economic interest in farming, the agriculture industry remains the most significant employer in Orkney outwith the public sector.

Agricultural Employment in Orkney

Source: RERAD

The total number of agricultural holdings has continued its upward trend and this, when considered alongside other evident trends, reinforces the belief that the apparent drop in agricultural land is due to changes in statistical procedures, and that the land area associated with agriculture in Orkney remains relatively constant.

CAP Subsidies

The total of all subsidy payments received by Orkney farmers during recent years under the EU Common Agricultural Policy (CAP) support schemes is set out in the following table. Fluctuations may be due, in part, to currency exchange rate movements and changes in eligibility for dedicated schemes, although the significant reduction in the number of recipients in 2012 is notable.

CAP subsidy payments

(excludes payments made in respect of Rural Priorities Contracts)

Note: * figures for calendar rather than financial year as previously reported.

Source: Scottish Government Rural Payments and Inspections Directorate

At just under £19.5 million in 2012, subsidies are critical to the viability of Orkney farming and the future success of Orkney agriculture may be dependent upon the continued entitlement to these payments at the current levels. However, a new CAP structure will shortly be introduced across the European Union and it would appear likely that direct support to Orkney farming via several of the major CAP schemes will decrease thereafter.

5 Fishing

The size and make-up of the fleet remained relatively unchanged between 2006 and 2011, although 2012 saw a reduction of 10 vessels.

Orkney Fishing Fleet

Source: Marine Scotland Science

Comparisons with the fishing fleets in Shetland and Eilean Siar are made below.

Source: Marine Scotland Science

Employment

Regular employment in the Orkney fishing industry in 2012 was down by 9.6% on the previous year whilst partial employment rose by 3.5%.

Orkney Fishermen Employed

Source: Marine Scotland Science

Note: Figures relate to those employed on vessels which submit landing declarations to Marine Scotland.

Alongwith reduction in fleet size, the volume and value of landings of demersal and pelagic fish fell considerably in 2012.

Pelagic/Demersal landings by Orkney Vessels

Source: Scottish Sea Fisheries Statistics

6 Shellfish

Shellfish species landed in Orkney since 2006, their live weight and values are as follows.

Quantity (tonnes)

Value (£’000)

Source: Scottish Sea Fisheries Statistics

7 Fish Farming

Salmon production soared in 2010, up by 51% on the previous year, but returned to just above 2009 levels in 2011. However, the 2012 salmon output soared again and was the highest over the period reviewed.

Salmon & Smolt Production in Orkney

Source: Marine Scotland Science

Employment levels in the industry fluctuate from year to year and no explanation is offered for this. The following table shows fish farming employment in Orkney as presented by the Scottish Government (Marine Scotland Science).

Fish Farming Employment in Orkney

Source: Marine Scotland Science

The above statistics are not however supported by figures reported by the trade body, the Scottish Salmon Producers Organisation (SSPO) who reported that direct employment by their members in Orkney increased from 56 in 2008 to 91 in 2011. It is not known why the two figures differ.

Shellfish Production

Marine Scotland reports show that there were 6 registered producers in Orkney in 2012 with total employment in the sector of 2 full-time plus 3 part-time/casual. However, only 2 sites were reported to be producing shellfish directly for the consumers’ table, with the remainder described as ‘no production or active on-growing, or fallow’.

8 Energy Production

Oil & Gas

The volume of crude oil leaving the Flotta Oil Terminal in 2012 was almost half of that shipped in 2010 and there were no shipments of propane gas. Foinaven oil has not been shipped via the Flotta terminal since 2008.

Annual Tonnages of Cargoes Loaded from the Flotta Oil Terminal

Source: OIC Marine Services

Following the high of 2009, there was a steady reduction in the number of ship-to-ship (STS) transfers in Scapa Flow, culminating in there being no such activity in 2012.

Ship to ship operations

Source: OIC Marine Services

Note: LNG – Liquefied Natural Gas.

Wind Energy

The number of operational commercial-scale wind turbines in Orkney continues to grow with 29 turbines generating up to 40.3 megawatts (MW) by the end of 2012. At that time a further 21 commercial-scale wind turbines had obtained planning permission but had not been constructed.

Operational Grid Connected Wind Turbines in Orkney, December 2012 (0.5MW and above)

Source: OIC

Marine Energy

In March 2010 The Crown Estate announced the names of the successful bidders for the lease of commercial wave and tidal generation sites in the Pentland Firth and Orkney waters. Seabed leases were awarded to developers to install 1050MW of marine generated power at eight sites in Orkney waters with a further 150MW at two sites on the northern coastline of the Scottish mainland.

Occupancy levels have increased at the European Marine Energy Centre (EMEC) test sites at Billia Croo and Fall of Warness and nursery sites for testing prototype technologies during the earlier stages of development have been introduced in the more benign wave and tidal areas of Scapa Flow and Shapinsay Sound respectively.

Since 2009, there has been investment of more than £20M in marine renewable energy infrastructure projects in Orkney by the Council and its funding partners, the European Regional Development Fund and the Scottish Government. The Council’s Three Ports Strategy comprises:-

1. a major redevelopment of the quayside and hinterland at Lyness;
2. construction of a new pier and shoreside facilities at Copland’s Dock, Stromness; and
3. a 160-metre extension to Hatston Pier in Kirkwall, creating - at 385 metres - Scotland’s longest commercial deep-water berth (as shown on the cover of this Review).

9 Transport

Traffic on Stromness - Scrabster Route (NorthLink Ferries)

Source: OIC Marine Services

The upward trend in passenger and accompanied car numbers on the Stromness-Scrabster route since 2002 came to a halt in 2008 and the recovery in 2009 has not been sustained.

Pentland Ferries does not publish the traffic statistics for its St Margaret’s Hope to Gills Bay service.

Although there was a slight reduction in passenger and accompanied cars on the Shetland-Kirkwall-Aberdeen route in 2012, commercial vehicles and cargo significantly increased by 31.8% and 46.4% respectively on the 2011 figures.

Traffic on Shetland - Kirkwall - Aberdeen Route (NorthLink Ferries)

Source: OIC Marine Services

Visiting Liners

Source: OIC Marine Services

The increase in passengers of 11,688 in 2012 represents a 39% increase.

Kirkwall Airport Traffic

Source: Highlands and Islands Airports Limited (HIAL), Annual Reports

The increase in passengers of 5,612 in 2012/13 represents a 3.5% increase.

Orkney’s Internal Ferry Routes

The total levels of passenger numbers on the internal ferry routes increased again in 2012, by 1.8%, and have reached their highest level over the period reviewed in the table below.

Vehicle movements in 2012, although slightly down on the number carried in both 2010 and 2011, remain higher than the average for the eight years covered (84,113).

Single journeys – year ended March: Passengers

Single journeys – year ended March: Vehicles

10 Housing

During the third quarter of 2013, house prices in Orkney were 10.1% lower than during the corresponding period twelve months earlier. This decrease was in contrast to rises elsewhere, particularly in Shetland.

Average Residential Property Prices

Source: Registers of Scotland

In terms of the total numbers of sales completed over the same period, as shown below, the property market in Orkney has been more vibrant than it was in 2012: the comparatively small numbers involved in Orkney can however lead to significant percentage changes.

Number of Residential Sales

Source: Registers of Scotland

A more reliable indicator of trends might be had by comparing only sales of detached residential property (the most popular type in Orkney), but the annual and quarterly changes detailed below for Orkney are much the same as those for average residential property sales shown above. The 2013 Orkney figure is still well below that of the corresponding period in 2009 when the average reached £170,450.

Detached Residential Property - Average Sale Price

Source: Registers of Scotland

New Housing

A total of 1,485 new houses, or approximately 13.5% of the total Orkney housing stock, have been completed during the past nine years, with the total number of completed private developments approximately double that of the social housing agencies.

Housing Starts and Completions in Orkney

OHAL: Orkney Housing Association Limited
OHAL ‘Starts’ = Approvals

Source: Scottish Government

11 Weather

As an archipelago so dependent on economic activity related to agriculture, fishing and tourism, the weather in Orkney can be very influential both in terms of productivity and reputation.

Temperature

Sources: 2012 data: Loch of Hundland climate station
12 year average, period 2000 – 2012: Loch of Hundland climate station
50 year average includes Kirkwall Airport data for 1952-1999

As data from the Meteorological Office (taken at Kirkwall Airport) is no longer available, 2012 data and the 12-year averages are provided from the Loch of Hundland climate station, privately operated by Mr Keith Johnson.

Rainfall and sunshine hours

Sources: 2012 data: Loch of Hundland climate station
12 year average, period 2000 – 2012: Loch of Hundland climate station
50 year average includes Kirkwall Airport data for 1952-1999