Ambitious for Scotland

January 2011

Area profile for Highl ands and Islands

Highlights
In 2009, the population of the Highlands and Islands was 447,043. This represents an increase of 3.14% since 2001 and compares to a 2.48% increase overall in Scotland. Unemployment in the Highlands and Islands has 1 been consistently below the Scottish rate . To date the region has suffered less than either Scotland or the UK as a whole from the recession which began in the latter part of 2008. The female dominated sector of public administration, education and health is the largest employment sector, accounting for 32.8% of jobs in 2008. Distribution, hotels and restaurants, manufacturing, construction, transport and communications and agriculture and fishing also account for a higher proportion of employees in the Highlands and Islands than in Scotland. In 2008, the majority of workers (over 50%) were employed by companies with fewer than 50 employees, which demonstrates the dominance of employment within small businesses in the Highlands and Islands. Business start-ups in the Highlands and Islands have been slightly higher than in Scotland. In 2008, there were 4.0 new start-ups per 1,000 of the population compared to 3.9 per 1,000 in Scotland. House prices have risen rapidly in recent years. The median house price in the Highlands and Islands area in 2008 was 117,750 compared to 114,500 in Scotland. _______________________________________
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Please refer to the Unemployment Digest prepared by the Planning and Economics team on a monthly basis for the latest unemployment data at: http://www.hie.co.uk/highlands-and-islands/economicreports-and-research/

Highlands and Islands

Population: 447,043 Area: 4,050,000 hectares Main sectors of employment: public, tourism, primary industries, manufacturing, construction

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Introduction
This Area Profile for the Highlands and Islands provides recently available data from the most reliable sources on: Population structure Population change Migration Unemployment Economic activity Incomes Gross Value Added (GVA) Employment by sector Company size Business starts Educational attainment Destinations of school leavers House prices Quality of life indicators Comparisons are made with Scotland as a whole, and figures for Highlands and Islands Enterprise (HIE) Area Offices are provided for key indicators.

Population
Tables 1(a) and 1(b) show the change in the resident population of the Highlands and Islands compared to Scotland from 2001 to 2009. Table 1(a): Resident Population: 2001 2009 2001 Highlands & Islands 433,448 2009 447,043 5,190,000 Change (2001-2009) 13,595 125,800 % Change (2001-2009) 3.14 2.48

5,064,200 Scotland Source: GROS Mid-Year Estimates

The population of the Highlands and Islands grew by 3.1% between 2001 and 2009, faster than the growth of 2.5% in Scotland. The Highlands and Islands experienced population growth of 0.7% between 1991 and 2001, with job opportunities and economic diversification the main drivers of growth in the region. Table 1(b): Resident Population by HIE Area Office: 2001 2009 2001 Argyll and the Islands Caithness and Sutherland Inner Moray Firth Innse Gall Moray Orkney Shetland Lochaber, Skye & Wester Ross HIE area Scotland Source: GROS Mid-Year Estimates 69,898 38,426 133,561 26,450 87,000 19,220 21,960 36,933 433,448 5,064,200 2009 70,543 38,113 144,375 26,180 87,660 19,960 22,210 38,002 447,043 5,190,000 Change (2001-09) 645 -313 10,814 -270 660 740 250 1,069 13,595 125,800 % change (2001-09) 0.92 -0.81 8.1 -1.02 0.76 3.85 1.14 2.89 3.14 2.48

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The regions growth has been particularly strong in the Inner Moray Firth (+8.1% between 2001 and 2009) and in Orkney (+3.9%). The population of Caithness and Sutherland and Innse Gall experienced a modest decline between 2001 and 2009 (-0.8% and -1% respectively). Some small islands and remote areas, however, have experienced a continuation of more significant historical decline due, in particular, to a decline in primary industries and crofting. Figure 1 illustrates the population of the Highlands and Islands by HIE Area Office in 2009. Figure 1: Population by HIE Area Office: 2009

Source: GROS Mid-Year Estimates

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Age Structure Table 2 shows the changing age structure of the Highlands and Islands (H&I) and Scotland from 2001 to 2008. Table 2: Distribution of Population by Age: 2001-2008 (% of total population) Age Group 0-4 5-19 20-44 45-64 65-84 H&I Mid 2001 5.4 18.6 32.0 26.8 15.3 H&I Mid 2008 5.1 17.3 29.2 29.4 16.8 2.2 Scotland Mid 2008 5.5 17.3 33.9 26.7 14.6 1.9

85+ 2.0 Source: GROS Mid-Year Estimates

The Highlands and Islands has an older age structure than Scotland, with a higher proportion of its residents than Scotland in each of the 45 years and older age bands. The main differential is in the 20-44 age group, which represented 29.2% of the Highlands and Islands population compared with 33.9% of Scotlands population in 2008. Figures show a tendency towards an ageing population and a resulting challenge for the area. This may prove particularly challenging in more rural areas because dispersed settlement patterns and low population densities make the delivery of services more difficult. Parts of the area are attractive for retirement, but many young people leave to seek out Higher Education and employment opportunities elsewhere.

Migrant Workers Table 3 shows the number of applications for National Insurance (NI) numbers that were made by migrants in the Highlands and Islands and Scotland from the financial year 2002/03 to 2008/09. The figures for the Highlands and Islands are for the areas six main local authorities. Table 3: Applications for NI numbers Total NI registrations Highlands & Islands Scotland Source: Department for Work and Pensions 20,870 246,110 Registrations per 10,000 economically active 901.5 962.1

Migrant workers have been almost as important to the Highlands and Islands economy as to Scotlands since 2002/03 in easing tight labour markets as evidenced by the low unemployment rates that most parts of the region still have despite this supplementary labour supply. NI registrations have been particularly high in Highland some 22% above the Scottish average over the period as a proportion of the economically active population. As shown below in Table 4, some 62% of migrant workers have come from the EU Accession States compared with 44% for Scotland.

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Table 4: Applications for NI numbers by World region (January 2002-March 2009) World Area of Origin Asia and Africa Middle (%) East (%) 4 7 7 18

EU (%)

EU Accession States (%)

Other Europea n (%)

The America s (%) 5 5

Australasia and Oceania (%) 6 6

Highlands and 14 62 2 Islands Scotland 17 44 2 Source: Department for Work and Pensions

Unemployment
Figure 2 shows the unemployment rate for the Highlands and Islands compared to Scotland from December 2006 to December 2009. The rates are based on the Claimant Count, which is a measure of people who are claiming Jobseekers Allowance. Figure 2: Unemployment Rates: 2006-2009
4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

Highlands and Islands Scotland

Source: NOMIS Unemployment in the Highlands and Islands has remained significantly below the Scottish average over the past three years, with a widening differential since the recession began in the second half of 2008. It can be explained by the fact that the region is more reliant that the rest of Scotland on public sector employment and less on financial and business services sector. Therefore it experienced less of the recessionary impacts in comparison to other areas of Scotland. In addition, a strong tourism sector has ensured employment levels have remained high over the past two years. The areas December 2009 unemployment rate of 2.9% compared with average rates of 4.1% for both Scotland and Great Britain.

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There is significant seasonality of unemployment in most parts of the Highlands and Islands, due mainly to the importance of tourism to the area, although related also to the agricultural cycle and the difficulties of outdoor construction work in the winter.

Unemployment by Gender Figure 3 illustrates the male and female unemployment trends for the Highlands and Islands from December 2006 to December 2009. Figure 3: Male and Female Unemployment Rates: 2006-2009

4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

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Source: NOMIS The trend in female unemployment in the Highlands and Islands has broadly followed the male trend over the past three years with a rate of less than half the male rate (as elsewhere in the UK). Over the past ten years, many of the new jobs that have been created have been part-time or otherwise relatively well suited to the female labour force.

Economic Activity Rate

Table 5 shows the economic activity rates for the Highlands and Islands and Scotland between January and December 2008. These figures are based on the Annual Population Survey a residence based labour market survey. The percentages are of all people of working age, except the unemployment rate, which is a percentage of those economically active. This measure of unemployment is more comprehensive than the Claimant count, however not available regularly for local areas.

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Table 5: Economic Activity: January 2008-December 2008 (working age population) Highlands & Islands Number % Persons Economic activity rate Employment rate % who are employees % who are self employed Unemployment rate Males Economic activity rate Employment rate % who are employees % who are self employed Unemployment rate Females Economic activity rate Employment rate % who are employees % who are self employed Unemployment rate Source: Annual Population Survey 220,200 213,300 183,800 27,500 7,000 122,800 119,400 99,800 19,000 3,400 97,300 93,800 84,000 8,500 3,500 84.3 81.6 70.4 10.5 3.2 88.2 85.7 71.6 13.7 2.8 79.9 77.0 69.0 7.0 3.6 Scotland % 79.6 75.6 67.5 7.7 5.0 83.1 78.7 67.6 10.7 5.3 75.9 72.3 67.4 4.5 4.8

The economic activity rate in the Highlands and Islands in 2008 was over 84% (almost five percentage points higher than in Scotland), with a similar differential for both male and female activity rates. This illustrates positively the growing economic activity in the region. Self employment was considerably higher than in Scotland, with again a similar differential for both males and females. This high rate of self employment reflects the importance of activities such as agriculture / crofting, fishing, building trades and small scale tourism provision to the Highlands and Islands economy that are characterised by high levels of self employment. The female unemployment rate of 3.6% was higher than the male rate of 2.8%, contrasting with the Claimant Count female to male differential and suggesting a relatively high proportion of females interested in working who were not eligible for unemployment benefit.

Income
Table 6 shows the median gross weekly earnings in the Highlands and Islands and Scotland in 2009. Table 6: Median Gross Weekly Earnings (): 2009 H&I as a proportion of Scotland 90.8%

H&I

Scotland

Median gross weekly pay 350.0 385.4 for all employee jobs Source: Annual Survey of Hours and Earnings (work place based)

In 2009 the average weekly pay for all employee jobs in the Highlands and Islands was around 9% lower than the equivalent for Scotland. The data is based on the Annual Survey of

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Hours and Earnings and should be used with a degree of caution due to the low sample sizes for smaller geographies. These relatively low earnings in H&I reflect (i) industrial structure, including a high dependence on tourism and low share of Scotlands financial and business services; (ii) occupational structure, including a relatively low proportion of managers and professionals; and (iii) a high dependence on small businesses (see Figure 5 below) with relatively low productivity.

Gross Value Added (GVA)

Gross Value Added (GVA) is a measure of the income generated by a sector from the production of goods and services after the deduction of costs incurred in the production process (excluding wages and capital investment costs). Table 7 shows the GVA per full-time employee (FTE) for the Highlands and Islands local authorities, H&I and Scotland in 2007. The figures for the regions should be treated as indicative as there is likely to be quite a high margin for error in GVA statistics as suggested by large year-to-year fluctuations. Table 7: GVA per FTE (): 2007 Manufacturing Construction Services 27,731 24,047 22,169 45,221 17,312 21,901 26,685 35,582

Argyll and Bute 43,804 41,930 Innse Gall 28,865 46,513 Highland 61,512 29,819 Moray 77,987 51,385 Orkney 67,454 48,063 Shetland 47,349 48,932 Highlands & Islands 63,173 38,000 Scotland 62,030 47,762 Source: Scottish Executive, Scottish Annual Business Statistics, 2007 (adjusted from all employees to FTE employees)

There are significant differences in GVA per full-time equivalent employee between the Highlands and Islands local authority areas, especially for manufacturing and construction, which will be due largely to the composition of those sectors in each area and, for construction, the types of contract (i.e. their labour intensity). GVA per FTE employee is particularly high in Moray (77,987) and Orkney (67,454) for manufacturing; in Moray (51,385), Shetland (48,932) and Orkney (48,063) for construction; and in Moray (45,221) for services. The GVA per FTE employee for the Highlands and Islands is slightly higher than Scotland in manufacturing but lower than Scotland in construction and services.

Employment by Sector Figure 4 illustrates the distribution of employment by sector in the Highlands and Islands and Scotland in 2008. The figures are based on the SIC 2003 and provide a broad picture of industry categories in the area.

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Figure 4: Employment by Sector: 2008

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Source: Annual Business Inquiry (NOMIS) Note: These figures exclude the self-employed. Actual employment will be higher, particularly in primary industries and tourism. In seven of the nine sectors, the Highlands and Islands has a higher proportion of employment than Scotland - public administration, education and health (32.8% compared with 30.0% in Scotland), distribution, hotels and restaurants (24.9% to 22.2%), construction (6.9% to 5.9%), transport and communications (6.1% to 5.1%), agriculture and fishing (2.3% to 1.7%), manufacturing (8.9% to 8.7%) and other services (5.5% to 5.4%). The Highlands and Islands has a lower proportion of its employment than Scotland in banking, finance and insurance (11.8% to 19.1%), and in energy and water (0.9% to 1.8%). The region has a high dependence on public sector employment, particularly in the island areas, and on tourism, which is highly seasonal in most areas.

Employment by Gender Figure 5 shows the percentage of male and female employees by sector in the Highlands and Islands in 2008.

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Figure 5: Employment by Gender and Sector: 2008

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% of employees

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Male Female

Source: Annual Business Inquiry (NOMIS) Note: These figures exclude the self-employed. Actual employment will be higher, particularly in primary industries and tourism. The public administration, education and health sector employs almost half (47.0%) of the Highlands and Islands female workforce. The other main sector for female employment is distribution, hotels and restaurants (25.8% of the regions female workforce). The sectors of most importance to the male workforce are again distribution, hotels and restaurants (23.8% of male employees), public administration, education and health (17.1%), banking, finance and insurance (13.2%), manufacturing (13.1%) and construction (12.7%). The regions male workforce has a wider employment base than its female workforce, of whom 92.1% work in services.

Employment by Company Size Figure 6 shows employment by company size in the Highlands and Islands compared to Scotland in 2008 (excluding the self-employed).

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Figure 6: Employment by Sizeband: 2008

60 50 Highlands and Islands Scotland

% of employees

40 30 20 10 0 1-4 5-10 11-24 25-49 50+ employees employees employees employees employees Business Sizeband

Source: Annual Business Inquiry (NOMIS) The average company size in the Highlands and Islands is significantly smaller than in Scotland, with 41.7% of employees working in businesses that employed 50 or more people in 2008 compared with 57.0% of Scotlands employees. This is due largely to the generally small size of most sub-regional economies (i.e. local markets are limited), the small proportion of head office employment, and the limited number of major employers. Very few private businesses employ more than 500 staff.

Business Starts
Table 8 shows the number and rate of new business start-ups per 1,000 population in the Highlands and Islands and Scotland in 2008. Table 8: New Business Start-ups by Area in 2008 Area Start-ups Start-ups per 1,000 population 4.0 3.9

Highlands & Islands 1,795 Scotland 20,028 Source: Committee of Scottish Clearing Bankers Note: population base is taken from the 2007 Mid-Year Estimates (GROS)

In 2008, the Highlands and Islands had a slightly higher business start-up rate than Scotland at 4.0 per 1,000 population. In the first quarter of 2009 there were 20.5% fewer new business starts in the Highlands and Islands than in the average 2008 quarter, although in the second quarter there were 1.1% more. In the third quarter, the number of new business starts dropped by 24.9%. Scotland also experienced a drop (17.4%) in new business starts in the first three quarters of 2009 compared to the 2008 quarterly average.

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Educational Attainment
Tables 9 and 10 show SQA attainment in secondary schools at the end of S4 and S6 in 2007/08. Table 9: % S4 roll gaining 5+ awards at Standard Grade 1-2 by the end of S4 2007/08 Argyll and Bute Innse Gall Highland Moray Orkney Shetland Highlands and Islands Scotland Source: Scottish Government 36 39 38 37 37 49 38 34

Table 10: % S4 roll gaining 3+ awards at Higher Grade A-C by the end of S6 2007/08 Argyll and Bute Innse Gall Highland Moray Orkney Shetland Highlands and Islands Scotland Source: Scottish Government 33 40 34 31 38 38 33 30

All six local authority areas had higher attainment rates at Standard Grade than the Scottish average. Exceptionally high attainment rates were achieved in Innse Gall, Orkney and Shetland.

School Leavers
Table 11 shows the destinations of school leavers from the Highlands and Islands and Scotland in 2007/08.

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Table 11: School Leaver Destinations (%): 2007/08 Highlands & Islands Total Number of Leavers Higher Education Further Education Training Employment or Voluntary Work Unemployed Seeking Work Unemployed Not Seeking Work Unknown Source: Scottish Government 5,762 30% 21% 2% 36% 8% 2% 1% Scotland 58,791 31% 25% 5% 25% 11% 2% 1%

In 2007/08, the Highlands and Islands had 9.8% of Scotlands school leavers. The main differences between the Highlands and Islands and Scotlands school leavers destinations were that 36% went into employment compared with 25% in Scotland (reflecting the strength of demand for labour in the region and the lack of FE/HE opportunities). 21% compared with 25% went into Further Education, and 8% compared with 11% were unemployed and seeking work. A similar proportion went into Higher Education, although this proportion tended to be relatively high in areas with high levels of attainment at Higher Grade. Although the UHI is growing as a provider of Higher Education, the vast majority of school leavers take up degree courses at universities elsewhere in Scotland, often staying away to start their subsequent careers.

House Prices
Table 12 shows the median price of house sales and the percentage change between 2005 and 2008 for HIE Area Offices, the Highlands and Islands and Scotland. Table 12: Median House Prices (): 2005-2008 Change (2005-08) 2005 2006 2007 2008 Number Argyll and the 78,000 77,050 112,000 100,000 Islands Caithness and 69,250 75,000 86,000 81,500 Sutherland Inner Moray Firth 103,000 125,000 140,000 140,000 Innse Gall 65,150 39,375 80,000 82,000 Lochaber, Skye & 91,380 105,000 125,000 123,250 Wester Ross Moray 82,500 93,000 116,226 115,015 Orkney 80,200 86,125 95,500 95,500 Shetland 58,000 73,089 89,000 91,250 Highlands and 87,250 96,888 120,000 117,750 Islands Scotland 87,000 100,000 118,000 114,500 Source: Scottish Government Communities Analytical Services Division 22,000 12,250 37,000 16,850 31,870 32,515 15,300 33,250 30,500 27,500 % 28.2 17.7 35.9 25.9 34.9 39.4 19.1 57.3 35.0 31.6

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In both 2007 and 2008, the median house price in the Highlands and Islands was higher than the median price in Scotland (+1.7% and +2.8% respectively). In 2008, the median price was significantly higher than the Scottish median of 114,500 in Inner Moray Firth (140,000: 22.3% higher) and in Lochaber, Skye and Wester Ross (123,250: 7.6% higher). Increases between 2005 and 2008 exceeded the Scottish average of 31.6% in Shetland (+57.3%), Moray (+39.4%), Inner Moray Firth (+35.9%) and Lochaber, Skye and Wester Ross (+34.9%). In Caithness and Sutherland the median price increased by only 17.7% and in Orkney by 19.1%. Affordable housing is in short supply throughout the Highlands and Islands, and addressing the shortfall is a high priority in all parts of the region.

Quality of Life
Table 13 compares the Highlands and Islands to Scotland on selected quality of life indicators. Table 13: Quality of Life Source % of population rating local authority area as a very good place to live % of population perceiving vandalism/graffiti/damage to property as a problem Crime rate per 10,000 population % of population living in most deprived 20% of data zones in Scotland Pupils per primary class Scottish Household Survey (2005/06) Scottish Household Survey (2005/06) Scottish Government (2007/08) Scottish Index of Multiple Deprivation (2006) Scottish Government (2008) H&I 69 Scotland 52

9 575 4.3 19.4

16 749 19.7 23.2

On all of the above indicators, Highlands and Islands residents have a significantly better quality of life than the average Scottish resident, with indicators particularly favourable in island economies. Indeed, a 2008 Bank of Scotland analysis ranked residents of Shetland as having the highest quality of life of any Scottish local authority area.

Summary
Positive trends in the Highlands and Islands over recent years include population growth that has outpaced population growth overall in Scotland and a higher employment rate than in Scotland and Great Britain. The regions main employment sector is public administration, education and health, in which female employees outnumber males. The agriculture and fishing, construction and distribution, hotels and restaurant sectors are also proportionately more important in the Highlands and Islands than in Scotland, which is reflected in unemployment rates that are more highly seasonal. Furthermore, the dominance of tourism in many areas, low paying industries and higher winter unemployment rates give rise to income levels in the Highlands and Islands that are below the Scottish average. Employment in small businesses is more

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prevalent than in Scotland, and business start-up rates are slightly higher. House prices have been increasing at a faster rate than the Scottish average.

Contact Information
If you have any queries about the information contained in this document, or any other economic issues, please contact HIE: Heather Smith Research Assistant Kateryna McKinnon Economist Claire McDonald Senior Economist heather.smith@hient.co.uk kateryna.mckinnon@hient.uk claire.mcdonald@hient.co.uk Tel: (01463) 244320 Tel: (01463) 244258 Tel: (01463) 244228

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