Primary Income Account and Gross National Income (GNI) for Scotland, 1998

Overview

This publication contains estimates of primary income flows and Gross National Income (GNI) for Scotland for the years 1998-2021. This is the first release of these statistics since December 2018, and includes revisions to the previously published figures for 1998 to 2017. The next release, including results up to 2022, is planned for publication in the first half of 2024.

The estimates in this release are consistent with data sourced from Scotland’s Quarterly National Accounts for 2022 Quarter 4, the UK Pink Book 2022 and the UK Economic Accounts for 2022 Quarter 4.

All results in this paper are designated as experimental statistics. These are defined as new official statistics undergoing development and testing. All users should be aware that the results in this paper are provisional and will be revised and updated when further developments are made. They should therefore be used with appropriate caution at this time.

Key Points

In all years between 1998 to 2021, Scotland’s primary income debits have been higher than credits, resulting in a negative net balance or primary income deficit.
In 2021, Scotland’s balance of primary income is provisionally estimated at a deficit of £10.1bn, or 5.6% of GDP.
In 2021 Scotland’s Gross National Income (GNI), including a geographical share of UK extra-regio activity, is estimated at £170.9bn, or 94.4% of Scotland’s GDP of £181.0bn.
Scotland’s GNI has remained below GDP throughout the period from 1998 to 2021, reflecting the primary income deficit over this period. This net outflow of primary incomes is driven by a range of factors including relatively high levels of foreign ownership among Scottish industries including North Sea oil and gas operators, a relatively low proportion of UK companies having headquarters in Scotland, and a large insurance and pension sector with policy holders outside Scotland.
Since 2008 the gap between GNI and GDP has narrowed slightly. On average, between 1998 and 2007 GNI was 90.6% of GDP, between 2008 and 2021 GNI was 92.5% of GDP. GNI reached a high of 97.6% GDP in 2020 before dropping to 94.4% in 2021.
In 2021 the majority of the income flows made a negative contributions to Scottish GNI. The largest negative income flow in 2021 was direct investment (-3.2% of GDP) followed by portfolio investment (-1.4%).

Introduction

Gross National Income (GNI) can be viewed as an adjustment to the more widely used Gross Domestic Product (GDP) measure of economic activity to take account of financial flows into and out of the country due to ownership. For example, where profits made by Scottish companies outside Scotland are repatriated, this would be included in an estimate of Scottish GNI but is not included in Scottish GDP. Likewise, when non-Scottish companies repatriate profits made in Scotland, these profits would be included in Scottish GDP but would be omitted from estimates of Scottish GNI.

Methodology Overview

The original aim behind these statistics was to develop the statistical framework and methods for extending Scotland’s national accounts to include estimates of Gross National Income (GNI) in addition to Gross Domestic Product (GDP), and for these statistics to cover activities across the wider economic territory of Scotland (i.e. including a geographical share of UK extra-regio economic activities, namely oil and gas production in Scottish adjacent waters). Specific objectives were:

To apportion the UK Primary Income Account to Scotland – estimating the financial flows between Scotland and the (non-UK) Rest of the World (ROW), including intra-company flows within the UK which underly the international flows in the UK accounts.
To estimate Scottish flows to and from the Rest of the UK (RUK).

Building on Previous Work

The methodology used for this release has largely remained the same as previous versions. More information on the methodology can be found in the separate methodology paper, which can be downloaded using the buttons at the top of this page.

The methods, data sources and results in this paper are open for ongoing consultation with users, and we welcome feedback on all aspects of the release. Please contact us at economic.statistics@gov.scot

Users should note that development of these statistics has focused on results from 2010 onwards for which data sources, such as the Foreign Direct Investment Survey, have been identified. Estimates for earlier years have largely been derived using extrapolation and back-casting of apportionments, and as such are subject to much higher levels of uncertainty and should be used with an appropriate level of caution. Care should therefore be taken when analysing longer term trends. Most of the commentary in this paper will focus on post-2010 trends.

This work complements other experimental statistics which have been developed to better understand the whole economy. In particular, the latest release of the Supply and Use Satellite Accounts for extra-regio economic activities for 1998-2021 published in June 2023. All the GNI estimates in this paper relate to the same economic territory for Scotland i.e. including Scottish adjacent waters and the underlying continental shelf, plus an illustrative population share of UK overseas public administration and defense activities.

Detailed Results

How to use the charts:
Hover over the line or bar to see data label
Hover over any income flow legend label to see them in isolation in the chart
Click on any income flow legend label to add/remove them from the chart

Overall

Credits, debits and net income flows for Scotland, 1998 to 2021

Scotland’s primary income credits (inflows from RUK and ROW) and debits (outflows to RUK and ROW) are both estimated to have peaked in 2008, prior to the impacts of the financial crisis. Between 1998 and 2008, the value of debits increased by more than credits, resulting in the net balance of primary incomes increasing from -£5.2bn to -£17.8bn. After 2008, the values of credits and debits have both fallen, and the net balance has improved slightly.

In 2020, there were sharp falls in the value of both debits and credits due to the impacts of the COVID-19 pandemic across the economy. This resulted in the lowest value for the primary income deficit since 1998 (-3.9bn). In 2021, primary income flows returned closed to levels seen before the pandemic, and Scotland’s net balance was -£10.1bn, mostly due to a increase in debits after GDP began to recover from the low of 2020.

Rest of the UK (RUK)

Net income flows for key primary income components between Scotland and rest of the UK, 1998 to 2021.

Between 1998 and 2021, Scotland has had a primary income deficit with the rest of the UK in all years, with the value of debits to RUK being higher than credits from RUK.

Since 2010, the net balance with RUK has remained relatively stable and at a lower level than estimated for before the financial crisis in 2008. In 2020 there were sharps falls in both debit and credit flows due to the impacts of the COVID-19 pandemic on GDP, but these returned to higher values in 2021. In the latest year, the net balance of primary income with RUK is estimated to be -£3.9bn.

Rest of the world (ROW)

Net income flows for key primary income components between Scotland and UK rest of the world, 1998 to 2021

Flows between Scotland the rest of the world are smaller than flows between Scotland and the rest of the UK. Between 2016 and 2019, there was an increase in flows in both directions between Scotland and ROW. Between 2019 and 2020 there was a sharp decrease in flows between Scotland and ROW due to the impacts of the COVID-19 pandemic on GDP in Scotland and around the world, resulting in a reduction of the net position to -£1.2bn in 2020. In 2021 this dropped to -£6.2bn.

Credits

Overall

Credit income flows for key primary income components, 1998 to 2021

Earnings on other investment (interest received from deposits or loans) have formed the single largest flow of income into Scotland. This is largely due to flows coming from the RUK as shown by the chart in the ‘RUK’ tab. Income flows into Scotland from other investment peaked between 2007 and 2008. This is due to income flow from the ROW into Scotland, when UK earnings on overseas deposits peaked.

In 2008 income flows from other investment accounted for 56% of Scotland’s income credits, portfolio investment debt securities accounted for 16% and direct investment and compensation of employment accounted for 10%. In 2021, other investment accounted has decreased to 36%, while portfolio investment debt securities (18%), direct investment (16%) and compensation of employment (18%) have increased.

RUK

Credit income flows for key primary income components between Scotland and UK rest of the UK, 1998 to 2021

There has been a steady decrease on earnings on other investment income to Scotland from RUK since 2008. The largest contribution to these other investment flows from RUK comes from pension entitlements paid by insurance corporations and pension funds in the rest of the UK to Scottish households.

ROW

Credit income flows for key primary income components between Scotland and UK rest of the world, 1998 to 2021

Income flows into Scotland from other investment (mainly earnings on foreign currency deposits by Scottish Banks) peaked between 2007 and 2008, this is due to income flow from ROW into Scotland, when UK earnings on overseas deposits peaked. Since then, earnings to Scotland from ROW have usually been made up of a more even split between direct investment, earnings on equity securities, earnings on debt securities and other investment. In 2021, direct investment accounted for 30% of income flows from ROW to Scotland, earnings on equity securities accounted for 32%, earnings on debt securities accounted for 20% and other investment accounted for 17%.

The volatility seen in direct investment flows from ROW to Scotland is due to flunctuation in profits in large companies (mostly financial and oil companies) which have a headquarter based in Scotland.

Debits

Overall

Debit income flows for key primary income components, 1998 to 2021

Debits flow from Scotland peaked in 2008, largely due to other investment to both RUK and ROW. Direct investment flows out of Scotland peaked between 2017 and 2018 due to an increase in flows to ROW. Scotland saw a drop in debits for nearly all flows in 2021, however most are back to around pre-pandemic levels.

In 2021, direct investment and other investment both accounted for 27% of income flows from Scotland, earnings on debt securities accounted for 20%, compensation of employment accounted for 14% and earnings on equity securities accounted for 12%.

RUK

Debit income flows for key primary income components between Scotland and UK rest of the UK, 1998 to 2021

Flows out of Scotland to the rest of the UK were larger than flows in the other direction. Historically they were again dominated by earnings on other investment and this remains the biggest single component. This mainly consists of pension entitlements paid from Scottish insurance corporations and pension funds to residents in the rest of the UK. The size of these other investment outflows has reduced since around 2008 and this has led to a corresponding reduction in flows from Scotland to the rest of the UK.

ROW

Debit income flows for key primary income components between Scotland and UK rest of the world, 1998 to 2021

Flows from Scotland to ROW is largely made up of other investment, direct investment, earnings on equity securities and debt securities.

Since 2009 earnings on direct investment has mainly been the largest component, again the volatility seen in direct investment in these years is due to using company revenue information from the Foreign Direct Investment survey which have a presence in Scotland.

GDP

GNI as percentage of GDP

Gross National Income as a percentage of Gross Domestic Product, 1998 to 2021

Scottish GNI has remained below GDP throughout the period from 1998 to 2021. Since 2008 the gap between GNI and GDP has been narrowing. GNI reached a high of 97.6% GDP in 2020 before dropping to 94.4% in 2021.

Primary Income components as percentage of GDP

Primary Income component as a percentage contributions of Gross Domestic Product, 1998 to 2021

In 2021 the majority of the income flows made a negative contributions to Scottish GNI. The largest negative income flow in 2021 was direct investment (-3.2% of GDP) followed by portfolio investment (-1.4%), debt securities (-1.4%), equity securities (-0.7%) and compensation of employment (-0.3%).

Since 1998 the gap between GDP and GNI has been largely driven by direct investment. Net contributions of other investment flows had also made a large negative contribution to net Primary Income, however this has reduced in more recent years.

GNI per capita

Gross National Income per capita of Scotland, 1998 to 2021

The chart above shows Scotland’s GNI divided by its population. It shows economic events have had an impact on the GNI per capita rate for Scotland. There has been a drop in 2009, due to the financial crisis and in 2020 due to the pandemic. Scotland is still slightly below pre-pandemic levels.