Summary

Measuring economic growth in Scotland provides insight into the performance and health of the Scottish economy. The Scottish Government publishes quarterly and monthly GDP estimates. The quarterly GDP is the main measure used for reporting on economic growth in Scotland. While monthly GDP reporting provides a more up to date picture, there can be some volatility and therefore the three-month growth rate is reported, with month on month change also reported for completeness.

The Office for National Statistics (ONS) published annual estimates for regional Gross Domestic Product (GDP) and Gross Value Added (GVA) including Wales, although there is a delay in the publication of the data. The most recent data is for 2023.

Things to consider

Gross Domestic Product (GDP) is a measure of economic output based on the total monetary value of goods and services produced by a country or region in a specified time period (usually a year or a quarter, but monthly estimates have also become common in recent years).

GDP is measured at the market prices of goods and services, which includes the value of tax (or subsidies) on products, such as Value Added Tax (VAT). There are other related measures which are frequently used alongside or instead of total GDP, including:

• GDP per head is a measure of a country’s GDP divided by its population. It is used to measure the economic prosperity of a country and can indicate the average purchasing power of citizens.
• Gross Value Added (GVA) is a measure of economic contribution calculated by taking the value of goods and services produced and subtracting the costs of inputs and materials. It is equal to GDP minus the value of product taxes such as Value Added Tax (VAT). In practice, growth rates for GVA and GDP are very similar.

GDP/GVA statistics are the standard measure of reporting on economic growth but there are some limitations on using this measure alone as a measure of success. For example, GDP does not consider the environmental impact of economic activities, nor do they reflect the wellbeing and quality of life of the population, or the income distribution within the country.

Another economic indicator for Scotland is Regional Disposable Household Income per head. This is often regarded as the best measure of material living standards and represents the amount of money that individuals can spend or save, after income re-distribution through the tax and benefits system.

For Scotland, Disposable Household Income is only published in nominal, not real terms. To enable comparisons of living standards, ONS also publishes Regional Gross Disposable Household Income as an index, with UK = 100.

When assessing data for Scotland specifically, it is important to note whether analyses include or exclude North Sea oil and gas activity. As explained on the Scottish government website, the quarterly first estimate figures for GDP are in real terms only, and exclude oil and gas extraction in the North Sea (although they do include the activities of sub-contractors and the wider oil and gas supply chain in Scotland which supports the activity of operators in the North Sea). This follows longstanding conventions that all offshore oil and gas extraction is treated as separate extra-regio (or extra regional) activity.

However, some parts of the Quarterly National Accounts GDP estimates include oil and gas extraction in Scottish adjacent waters. This is commonly referred to as the ‘total’ value of GDP, as opposed to the ‘onshore’ value. There are also some statistics including on; exports and public sector finances, which include the offshore sector in Scottish adjacent waters. The inclusion of extra-regio (or extra regional) activity affects levels and trends and should be considered in any interpretation.

What to look out for

Comparisons of GDP and GVA data must use either real or nominal data. Real GDP/GVA removes the effect of inflation whereas nominal figures include price changes. Real measures are generally preferred for judging economic performance over time, as using nominal values without removing inflationary effects can be misleading. Note that, as sub-national price indices are not available, real GDP and GVA reflect changes only in the overall UK price level.

When comparing statistics about economic growth in Scotland with other parts of the UK, it should be noted that many sources presented regionally – such as trade, prices and parts of GDP – are UK level surveys, which are apportioned to provide an accurate representation of the economy in Scotland.

When comparing Scotland with the UK specifically it should be noted that   Scotland’s economic composition differs from the UK average due to many factors including:

• proportionately larger energy sector, including oil and gas supply chain which is reflected on onshore GDP
• proportionately higher levels of public sector employment
• strong financial and professional services in the Central Belt
• Variation between city/region performance (Edinburgh/Glasgow) and rural areas are prevalent

International comparisons should be like-for-like as far as possible and should take into consideration the limitations to the comparability of data between countries.  Where possible, statements should use a consistent choice of countries to compare against, such as the G7, the largest economies in Europe etc.

Wider support

We have published a rapid review of Revisions of estimates of UK Gross Domestic Product (GDP), providing guidance on improving the communication of uncertainty and revisions of economic growth statistics.  

ONS has also published several blogs to aid understanding of economic growth and its statistics:

• ‘GDP – Bringing the big picture up-to-date’
• ‘Measuring GDP: Revisions are fact of statistical life’
• ‘What is GDP and how do we measure it?’

Information on a variety of Scottish economic statistics can be found in the Scottish government economy statistics collection. The Scottish Chief Economist regularly produces an economic bulletin which summarises the Scottish economic outlook and draws on a number of sources.

The Scottish Fiscal Commission has recently produced a five year forecast of the Scottish Economy and an overview of the Scottish fiscal position.

The Scottish Parliament Information Centre SPICe also produces progress updates on Scotland’s economic performance using Scottish Government metrics.

The Institute for Fiscal Studies (IFS) is an independent economics research institute. The IFS publishes its own analysis and forecasts on a range of economic and fiscal topics.

The National Institute of Economic and Social Research (NIESR) is an independent research institute that carries out research into the economic and social forces that affect people’s live in the UK.