EnergyFromTheEdge
A conference about sustainable energy, large-scale resource development in remote communities, and more ...
12-14 SEPTEMBER 2007 Shetland Islands
The Shetland Economy
The economic outlook of Shetlanders today is quite different to that of previous generations, who had to hone their skills of survival to extract a meagre living from the land and the sea.
Now, after 40 years of economic prosperity, driven first by the resurgent fisheries and textile sectors in the late 1960s and followed by the presence of the oil industry for over 30 years, modern Shetland is a sophisticated place populated by people who are eager for, and capable of, more commercial success.
Shetland is a wealthy society by any standard. The Gross Regional Domestic Product (GRDP) per capita was £15,245 in 2003. Since then the aquaculture sector has experienced substantial growth so the GRDP per capita figure for 2006 will be closer to £16,000. This is very near to the UK average (and the UK is one of the wealthiest countries in the world).
The five most important sectors in terms of output are: aquaculture (£88M in 2003); fish processing (£65M); construction (£60M); oil terminal (£57M); and public administration (£47M). These sectors are closely followed in value by finance, retail and fish catching. With such an important contribution from the aquaculture and fish catching sectors, Shetland still has almost 10% of its workforce in primary sector employment, similar in scale to public administration and to the construction sector. Around 600 people are employed in oil related activities either in production or in related services. The combined impact of all 3 fisheries sectors (catching, processing and aquaculture) and the oil industry means that around 60% of all private sector jobs in Shetland depend, to some extent on these industries, either directly or indirectly.
Economic Performance
An economic survey conducted by Fraser of Allander Institute in 1998 calculated the overall value of the Shetland economy to be £761,261,000. A subsequent economic survey conducted by University of Aberdeen Business School and AB Associates Ltd. in 2005 calculated the overall value of the Shetland economy – based on the combined total output of all economic sectors – to be £705,705,000. The same survey calculated Shetland’s Gross Regional Domestic Product to be £333,403,150. This equates to a GRDP per capita of £15,245. The table below illustrates the contribution made by some sectors in recent years.
Value of Key Sectors of the Shetland Economy (£ m)
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| Oil Production Operations | 50.4 | 53.0 | 116.1 | 65.0 | 57.7 | ||||||
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| Combined Fisheries Output | 97.8 | 202.8 | 223.9 | 208.2 | 243.1 | ||||||
| Agriculture | 14.3 | 11.7 | 12.4 | 13.1 | 13.1 | ||||||
| Knitwear | 4.0 | 5.0 | 2.5 | 3.0 | 2.5 | ||||||
| Tourism | 11.3 | 12.0 | 12.75 | 12.6 | 12.6 | ||||||
| Shetland Islands Council | 111.1 | 124.7 | 150.5 | 133.4 | 127.0 | ||||||
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As the role of the oil industry declines in Shetland, it is important that its value in economic terms is replaced. The approach taken has been to identify and encourage potential development opportunities in the traditional industries. At present this approach would seem to be succeeding and although the relative value of the oil industry has declined since its peak in the early 1980s, it still provides a significant input to the local economy which it is hoped will continue well into the future. Operations significantly increased during 2001 due to the Gas Plant Overhaul and Oil Recovery programme which took place at the Sullom Voe Oil Terminal.
Traditional Industry Output Values (£ m)
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| Fish Catching | 11.2 | 17.0 | 20.0 | 97.8 | 223.9 | 208.2 | 243.1 | ||||||||
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| Fish Processing | 12.7 | 15.0 | 25.0 | ||||||||||||
| Salmon Farming | 0.0 | 3.3 | 33.0 | ||||||||||||
| Agriculture | 5.8 | 7.8 | 11.0 | 14.3 | 12.4 | 13.1 | 13.1 | ||||||||
| Knitwear | 4.2 | 6.4 | 4.0 | 4.0 | 2.5 | 3.0 | 2.5 | ||||||||
| Tourism | 3.5 | 5.9 | 10.0 | 11.3 | 12.75 | 12.6 | 12.6 | ||||||||
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Source: Economic Development Unit, SIC; Review of the Shetland Economy, AB Associates Ltd.; Shetland Regional Accounts 2003, University of Aberdeen Business School & AB Associates Ltd.
Being all too well aware of its remote location and dependency upon relatively few economic sectors, Shetland is always seeking to strengthen its economy. For the past 30 years this has meant finding new opportunities to develop in parallel to the oil industry with the full understanding that oil is a relatively short-term bonus, based on dwindling finite resources. In the 1980s the new opportunity was aquaculture. By 2000 Shetland produced one third of the total Scottish salmon output and by 2005 over half of the Scottish farmed mussel production was from the isles. More recently, farmed cod has emerged on the market from Shetland and appears to be a successful new product. Sea trout, halibut, scallops and oysters are also farmed in increasing volumes.
While the aquaculture sector was being set up in the 1980s and 90s, Shetland was also concentrating on building up its pelagic catching and processing capability. Shetland Catch, one of Europe’s largest pelagic processors, is now well established in Lerwick and the islands' fleet of pelagic trawlers is the envy of ports throughout the UK. Following a period of poor results it now looks as though the white fish fleet has turned an economic corner and, after 2 good years, more people are returning to this fishing. Shetland lies in the middle of some of the richest fishing grounds in European waters and, with a fishing heritage going back for thousands of years, there is considerable local interest in making sure that we derive economic benefit from our own fish. After such lean recent times for the white fish sector, largely due to poor EU management of the stocks, it is heartening to see investment in new vessels again. By 2010 we should have 25 Shetland registered vessels back on the white fish grounds.
Shetland’s economic strategy is also about adding value to its resources and about seeking more diverse ways to make a living. Many businesses are moving on from the primary processing methods of food production, largely associated with fisheries, to develop high quality products that are sold directly to food suppliers. It is now possible to buy Shetland products in top retailers throughout the UK and Europe and a growing number of Shetland people work in ventures engaged in this activity. Like many other places Shetland is looking at creative ways to derive income from culture, heritage and the arts. The cottage skills associated with fine Shetland knitwear are now much more widely applied to a range of activities, from furniture making to jewellery. Knitwear still remains an important part of the Shetland way of life, with traditional skills now used in combination with modern design and production techniques. Garments are sold in top quality markets throughout the world but, even today, it is still possible to purchase a hand knitted garment in Shetland made of wool that is grown and spun in the islands. Music is the very soul of Shetland tradition. Once only a pleasurable pastime, the ring of the fiddle and a variety of other instruments is part of a growing commercial activity that involves scores of talented musicians, often plying their trade across the globe.
Tourism is recognised as a valuable part of the Shetland economy. There is no better way to understand the culture, traditions and products of a place than to visit it. In recent years the increase in visitor numbers has encouraged the start up and expansion of numerous tourism related businesses. Just over 104,000 tourists (43,000 as cruise liner passengers) visited in 2006, a 57% rise on 2000. The value of tourism is calculated at £16.5 M, up £4.5 M since 2000, making tourism one of the fastest growing sectors in Shetland.
To remain in a successful position as a crossroads of the North Atlantic, better communications need to be developed. Shetland strives to improve transport links with the heart of the UK and with other European countries. If our future is to be truly cosmopolitan we also need to offer high standards of telecommunication services so that distance working can be promoted. The introduction of direct flights to London and the prospect of fibre optic digital links together with all our other enterprises means that a prosperous modern economy in Shetland is a probable rather than possible outcome.