Factfile - Economy
Introduction
Specific local research (link to 2003 Regional Accounts) indicates that the economy of the Western Isles has grown since previous detailed assessment in 1988/89 and 1997, however, it still lags behind neighbouring areas such as Shetland, Orkney and the wider Highlands and Islands, in addition to other regions within the UK. The lack of indigenous resources and a reliance on importing is confirmed by an estimated trade deficit of some £163.4 million.
Private sector investment in the Western Isles is limited and there is continuing need for public sector intervention either from the UK government or the wider European Commission to help assist economic development and social improvement on the islands.
Due to it’s economic situation, the whole of the Western Isles, including Stornoway, is recognised in policy terms by Highland and Islands Enterprise (the agency charged with ‘economic development’ in the Highlands and Islands) as an economically ‘Fragile Area’. This means that the need for sustainable development opportunities, which combine economic, social, cultural and environmental concerns, is paramount. The Highlands and Island as a whole is recognised as a fragile area within Europe requiring economic assistance in the form of Transitional Status for Objective 1 funding.
Click here for a current Economic Profile of the Western Isles or here for other Highland and Islands Area Economic Profiles.
Sectors
Since the last 1980s, the relative importance of sectors within the economy has changed in the Western Isles. The economy has become slightly more evenly distributed between sectors although there is still a high dependency on five key sectors for employment: other services (private), construction, distribution (i.e. retailing and most wholesaling), health and education.
The reliance on a few sectors for the creation of wealth is more specialised within the Western Isles than for other regions in Scotland. The five key sectors for generating economic wealth (value added, i.e. earnings in terms of wages, profits etc) in 2003, were: distribution; other public services; education; health and other private services. In aggregate these five sectors contributed 47.3% to total Western Isles value added. The Western Isles is heavily reliant on primary industries and the public sector in terms of income. Dependence on a few sectors makes the economy vulnerable to market fluctuations. Primary industries such as fishing and fish farming in particular are susceptible to environmental impacts and international pressures such as chancing European legislation.
Diversification is therefore key to the economic development strategies of Comhairle nan Eilean Siar (the Comhairle / Western Isles Council) and Western Isles Enterprise. The main areas of potential economic growth for the Islands are anticipated to be around six key drivers identified in the joint Comhairle / Western Isles Enterprise / Highland and Island Enterprise “Creating Communities of the Future” strategy. These drivers are renewable energy, broadband, heritage and cultural development, business infrastructure, the University of the Highlands and Islands Millennium Institute, and jobs dispersal.
There has been a substantial estimated drop in ‘agriculture, fishing and fish farming’ employment from 1997-2003; due in part to the downturn which has occurred in the aquaculture sector during this period. Employment in construction, transport and private services saw the biggest proportional increase (as % of all employment) in 2003 but the public service sector remains the largest at 30% of all employment.
The 2001 census found that the proportion of employment in the fishing (6%), construction (11%), transport (8%) and the public sector, including education and healthcare (32%) was of greater importance to the Western Isles compared to Scotland in 2003. This difference is particularly marked in the fishing industry, construction and the public sector where the national proportions are considerably lower at 0.3%, 7% and 27% respectively.
Industry of Employment |
No. of Residents |
Western Isles % |
Scotland % |
|---|---|---|---|
Public sector* |
3,658 |
31.8 |
26.8 |
Retail, trade and repairs |
1,344 |
11.7 |
14.4 |
Construction |
1,216 |
10.5 |
7.5 |
Manufacturing |
1,039 |
9.0 |
13.2 |
Finance and business |
1,027 |
8.9 |
15.8 |
Transport and communications |
931 |
8.1 |
6.7 |
Fishing |
666 |
5.8 |
0.3 |
Hotels and restaurants |
666 |
5.8 |
5.7 |
Other |
555 |
4.8 |
5.3 |
Agriculture and Forestry |
175 |
1.5 |
2.1 |
Mining and quarrying |
125 |
1.1 |
1.2 |
Electricity, gas and water |
104 |
1.0 |
1.0 |
|
11,511 |
100.0 |
100.0 |
* Public sector includes health, social work, education and defence
The value of trade to and from the Islands has however increased in recent years. One sector that has been playing a growing part in this increase is Tourism. Visitors and visitor spend on the islands has been growing and the tourist season is expanding from primarily the summer months to run between March and October. (Western Isles Tourism 2002 Update)
The continuing trend of population decline and the move towards an ageing population is a key issue that will have a fundamental impact on the future of the islands economy.
