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Export Statistics Scotland – 2021

Craig Dalzell

Introduction

It used to be that the second busiest day of my year as a data wonk after our annual GERmas Feast would come in January with the publication of Export Statistics Scotland – the annual measure of how much of various goods and services Scotland exported to the rest of the UK, to the EU and to the rest of the world. Like GERS, it was always a publication that garnered a huge amount of interest from journalists and political wonks – especially those who could grab a story out of the headline figures without going too deep into it to find the data that was actually interesting and informative.

Sadly, “due to Covid”, the publication was disrupted and then suspended. The January 2021 report was only published in October of that year and then we heard very little from the Government at all until this summer when they added a note to their publications calendar saying that the next release would be out in November. Last week (while I was on holiday!), Export Statistics Scotland 2021 was published, covering data for 2019, 2020 and 2021 – the first time we’ve been able to get a hint about the impact of both Brexit and Covid on Scotland’s exports.

The Limits of Trade Data

We’ve talked extensively about what this report is and what it is not. There are many limits to what it can tell us about Scotland’s trade relations but there are some advantages to the way that it is put together too. Please read my article about the October 2021 report for more details but one major advantage of the way ESS is gathered is that it avoids the so-called “English Ports” problem where some folk suspect that Scottish goods that are transported to, say, Felixstowe before leaving the UK are counted as exports from England to their destination rather than from Scotland to their destination – this would act to make Scotland look more dependent on England for trade than it is. In fact, ESS is “route agnostic” and merely asks companies where their sales are going rather than how they get there.

The largest problems with ESS lie in what it doesn’t count at all. Oil and gas exports are excluded entirely (despite Scottish oil and gas now being largely included as Scottish rather than “Unknown Region” when considering UK trade) and, perhaps even more critically, the report only deals with exports and not imports. This report alone cannot be used to calculate Scotland’s “Balance of Trade”. This is important when we do have that discussion about how “dependent” Scotland may or may not be on the Union for our wellbeing as it might be a bit harder to cut ties with a neighbour if you’re a net importer of critical goods like food and energy than if you’re a net exporter of them.

Another major problem with ESS though is in how the data is gathered. The UK as a whole does a very poor job of measuring goods entering and leaving the country (especially since Brexit – which has led to high profile issues like rotten and contaminated food entering the supply chain) and it would, of course, be even more difficult to check movements across the not-yet-a-border between England and Scotland. Services are even harder to track in this way as they are often intangible and sometimes not even seen as an export (a French tourist sleeping in a Scottish hotel should be counted as a “tourist service export” but hotels don’t always track where their guests are coming from in a systematic way and this goes double for the Tesco down the road that provides the “retail services export” to that tourist when they buy breakfast in the morning). Instead of systematic data gathering, ESS relies on sending out surveys to companies “likely to be involved in exporting” and ask them where their goods and services end up, they then combine that survey with other economic data to try to calculate the value of those exports. However recent years have seen a decline in the number of companies that respond to the survey. When I started looking at this data in 2016, the response rate was typically around 25%. In the latest report, it has dropped to just 13% with some (like accommodation and food services) falling below 10%. This is becoming a critical problem that I hope the Scottish Government will try to address soon as we’re simply, through attrition, apathy and lack of support, losing the ability to measure an important part of the Scottish economy.

Scotland’s Exports

One thing to note in this analysis of the data is that, unlike previous years, ESS 2021 only included data for 2019, 2020 and 2021 but did not include data for previous years back to the start of the survey in 2002. Usually we’d expect to see this data along with corrections for any adjustments to numbers or methodology in the intervening time (it’s not unusual for statistics like this to be adjusted even five after first publication – see the annexes to GERS for a good example of this practice). This means that we have only one year of overlap between the older reports and the latest one and there are signs in there that there could be some significant revisions on the way.

Overall, Scotland exported just under £80 billion worth of goods and services. This is down 2.6% from the 2019 peak of £82 billion however the ESS 2019 report recorded the value of Scottish exports in 2019 as £87 billion. Looking a little deeper, it appears that almost all of the revision to this figure is due to a downgrading of the value of Scottish exports to the rest of the UK – exports to the EU and rest of the world are almost unchanged (actually, international exports in 2019 have been revised slightly upwards). This means that it is quite likely that Scotland was somewhat less dependent on the UK for our exports than we had assumed in 2019, to the tune of just over £5 billion. We’ll have to see if we get any information on why these exports have “vanished” but I suspect that they never existed in the first place. My hunch, purely speculative at this point, is that it is an artefact of the low survey response that put a little too much weight on some category of goods or services that it shouldn’t have.

A common measure of Scotland’s dependence on the Union is the ratio of Scottish exports to the rest of the UK compared to the EU (almost as if independence couldn’t open up new possibilities for exports to, say, the USA). It’s an overly simplistic measure but it’s one held up by especially the pro-Union campaign. It used to be that they’d tell us that Scotland couldn’t be independent because we exported four times as many goods and services to the rest of the UK than we did to the EU. That number has been declining steadily (despite overall export value rising) and hit a low of 2.75 in 2019 (post-revision). This is the lowest UK:EU ratio since 2002. It has since increased again to 3.24 in 2021 for reasons that I’ll talk about shortly.

On the slightly better “export ratio” that includes all international exports rather than merely exports to the EU, Scotland exported around 1.55 times as much to the rest of UK as we did to the rest of the world in 2021 and this number too is among the lowest since the ESS records began. Scotland’s exports are increasing and are becoming increasingly diversified. That’s not a story that those who demand our dependency on the Union want to tell.

Covid and Brexit

In my last report on ESS I expressed some hope that we’d see the full effect of Brexit feed through over the next few years. Unfortunately this singularity moment in our trade data managed to coincide with another equally devastating event – the Covid pandemic and the lockdowns and disruptions that played havoc with global trade networks. It’ll take much larger datasets and much more time to tease out all of the details of which impacts were more significant on Scotland’s trade. There are some hints though that the impacts have been substantially affected by both and in different ways. Covid was, of course, an acute shock that has mostly subsided (though the longer term impacts of chronic illness in the workforce are only slowly becoming apparent). The sharp drop in trade as a result of the lockdowns in 2020 mostly rebounded back over the course of 2021 as can be seen in the exports between Scotland and rUK and between Scotland and non-EU countries. However, exports to the EU appear to have flatlined in that same time. Around £2 billion worth of Scottish exports to the EU stopped in 2020 and have not come back. We shall have to see in future years if those exporters will eventually adapt their goods to cope with the additional borders or whether their EU customers have simply decided to buy from elsewhere.

Goods and Services

If most of the headline focus is on how much Scotland exports to various places somewhat less emphasis is place in terms of what Scotland exports to various places. Scotland exports substantially fewer goods to the rest of the UK than it does to the rest of the world though the situation is reversed for services. This, in general, makes sense. Services are more affected by “trade gravity” than goods are (it’s easier to ship a crate around the world than it is to provide a mortgage to a country that has a different currency, housing market and working language – this is something that limits service trade even within the EU where someone in Germany rarely goes to a Dutch bank to get a mortgage for a house in France). However this is far from the “disaster for independence” that the pro-Union campaign might have us believe as the goods that Scotland exports to the rest of the UK are not services that the UK is going to find easy to give up or are services that would actually be fairly easy to adjust to the new state of affairs. If we take “financial services” for instance. We don’t know how much of that is not also reflected in service imports and so would just simply provide identical services within Scotland instead. We also don’t know how much is “ghost trade”. Someone in London getting a mortgage for a flat in London from a bank HQ’d in Scotland (not that there are many these days) would be in receipt of a Scottish financial service export but that kind of trade isn’t likely to be a huge loss to the Scottish economy post independence.

A similar story emerges from the Wholesale retail service sector. This is largely the result of a highly monopolistic logistics sector that has crowded out local businesses to feed a few (often tax-dodging) conglomerates. Even without independence, this is a sector that could do with being broken up a bit. And it’s not like that would be the end of especially food trade from Scotland to rUK given that we’re net a food exporter and they are a net importer. A special note goes here on the “utilities” export sector. With oil and gas excluded from ESS and cross-border trade in water utilities effectively zero (with the exception of a couple of local cross-border water grids) this is almost entirely electricity. In 2021 Scotland exported £5.3 billion in utilities to the rest of the UK. If the UK really, really want to threaten Scotland a trade war for the temerity of demanding independence then I suggest that our negotiating team turn out the lights in the room and reconvene the meeting after lunch.

Conclusion

I’m a little surprised that this report got so little traction this year given that it used to be viewed with almost as much sensation as GERS. I wonder if folk simply forgot about it in its absence. Given the massive impacts that UK policies around Covid and Brexit had on Scotland’s trade, it really should have been pushed up the agenda somewhat. That said, it’s worrying that the weaknesses of this report are becoming more severe. It’s not the first time I’ve talked about Scotland’s growing Data Desert (and not even the first time in relation to our export data!) but the issues are not getting any better on their own. We urgently need some Scottish Government intervention to review our statistical output and to improve what data we collect, how we do it and how it is presented to the public. The SNP already has a policy on its books to create a Scottish Statistics Agency charged with this very task but the Government has yet to pick the policy up and implement it. We cannot keep creating policies without knowing if they’re needed or what impact they are having. Otherwise we’ll never get beyond the headlines in anything we do.

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