BF114 Introduction to economics and
business analysis
Tutorial group 16
Tutor – Iswat Oladele
Economic growth within Scotland
Group 16A
Sania Waseem - 202212541
Ethan Stutzman - 202242974
Ramsay Wilson - 202232076
Jacob Alexander Barrett - 202230231
Alasdair McGowan - 202222877
Yik Cheuk - 202239280
Daniel Mott - 202225834
Rihana Akhtar - 202212671
Word count - 1392
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Table of Contents
Title
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Table of Contents
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Summary
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Question 1A - Ways to measure unemployment
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Question 1B - Unemployment rate in scotland and compared to UK
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Question 2A - The determinants of Scottish real GDP and the difference between real GDP and
real GDP per capita
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Question 2B - The effect of the pandemic on Scottish GDP
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Question 2C - The limitations of using GDP as a measure of well-being for a country and other
measures which may help in measuring a nation's well being
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References
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Appendix
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Summary
The two foremost methods of calculating unemployment are via labour force survey and
claimant count. Each with its respective strengths, such as the ability to capture a large
sample size or relatively low cost. In terms of weaknesses, data may be too generalised
or too reliant on factors such as benefit claims.
Overall, Scotland has seen an overall decrease in unemployment within the last
decade. Within this period, however, we have seen several fluctuations which we can
attribute to factors such as Brexit, the Covid-19 pandemic, and the financial crash of
2008/2009. Despite all these adverse factors, Scotland has had the greatest success in
recovering from the crisis, as seen within figure 1.
Within the Scottish economy, the 'real' outputs displaying the highest increase are crop
and livestock production. Agriculture has overall seen an increase of over 60% within
the last 16-year period.
When viewing the GDP per capita, the Great British Pound (GBP) has seen a real lack
of growth. Generally, meaning countries using the GBP have fallen behind those using
the US Dollar.
As previously stated, the Covid-19 Pandemic had a drastic effect on the Scottish
economy. Plummeting from over £200 billion to near £150 billion in a matter of months.
However, we can see great resilience in the GDP returning to pre-pandemic numbers
due to foreign investment as well as growth within the construction and service sectors.
Despite GDP giving us an overall outlook for Scotland's economic health; it is not a
guaranteed measure of success. A higher GDP more accurately shows a productive
workforce, rather than a high quality of life. GDP cannot measure income inequality, and
often "hides'' inequalities. An indicator that may overcome this is the 'Genuine Progress
Indicator' (GPI). This scale includes factors such as crime and pollution.
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Question 1A - Ways to measure unemployment
One way of measuring unemployment is a labour force survey, this survey is sent to
several households within the country, asking them if they’re currently employed or
unemployed. The strengths of using the labour force survey are that out of household
surveys it has the largest sample size and that then allows the statistics to be generated
at a regional level. A weakness of the labour force survey is that the samples provide no
guarantee of sufficient coverage of the industry, as the survey is not distinguished by
the type of industry.
Another way to measure unemployment is by using a claimant count, this is calculated
by tracking those who claim job seekers benefits within the country. A strength to using
claimant counts is that it’s a cheap and relatively easy way to collect data. A downside
of using a claimant count is that it may not be accurate, the amount of unemployed is
underestimated as not every unemployed person claims unemployed benefits.
Question 1B - Unemployment rate in scotland and compared to UK
Overall, Scotland's unemployment rate decreased ten years ago, but it fluctuated widely
within that period. In October 2012, unemployment peaked at 7.8%, but it has since
dropped to 3.3% as of October 2022 (Ons.gov.uk, 2015). Many factors have played into
this change due to the impact of the financial crash in 2008/2009 which sprung a
recession, Brexit and also the COVID-19 pandemic.
Scotland has a large labour market, and it is not performing as well as it should in terms
of employability for the size of the labour market. From the crash of 2008/2009
employment levels rose to allow for the country to regain much of the lost capital within
the country. As the country began to become more stable, the level evened out and a
decrease in employment began. Men were majorly impacted by the decrease in jobs, as
many of them did not work in contractually stable jobs and labour pay per job. In the
current climate due to the Bank of England having to step in to stop the pension and the
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house markets crashing, a recession is inbound and in a few years’ time, we could see
a decrease in unemployment, due to inflation soaring.
Scotland’s pandemic recovery has been superior to that of the rest of the UK. During
the financial crisis, Scotland experienced similar trends to the rest of the UK, including a
decrease in unemployment rates. However, since the pandemic, the UK, has been
monitoring an increase in levels and may continue to do so. Scotland has a lower
unemployment rate than the rest of the UK and a higher employment rate. This
demonstrates that Scotland has a large number of employed individuals whose rehiring
by the Scottish Government would help balance the books.
Figure 1: UK’s Annual Unemployment Rate and Annual Change (MacroTrends, 2020)
Question 2A - The determinants of Scottish real GDP and the difference between
real GDP and real GDP per capita
Real GDP is GDP measured at constant prices held from year to year, reflecting the
number of goods and services produced by an economy in a given year and changes in
the price level (inflation and deflation) from the trend in output over time (OECD, 2019).
The Scottish economy has changed significantly over the past 20 years. The main
determinants of real GDP are agriculture, forestry and mining, construction, production
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and services. Overall, all determinants have rapid growth in different outputs. For
instance, in agriculture, forestry and mining, Scotland has a significant increase in
different outputs including crop and livestock production. In 2003, the total income from
agriculture was 477.4 million and it gradually increased to 791.2 million, which has risen
by more than 60 per cent in sixteen years (see figure 2).
Figure 2: Output, input and income, 2003 to 2019 (www.gov.scot, 2022b)
As previously stated, some of the determinants of real GDP in 2022 include agriculture,
forestry and mining. However, real GDP per capita takes into account the average GDP
per person in the economy (Nasrudin, 2020). In terms of how the determinants have
changed over time for real GDP versus real GDP per capita, GDP per capita is
calculated as the sum of gross value added by resident producers in the economy and
product taxes not included in the valuation of output divided by mid-year population. As
for how the determinants of real GDP per capita have changed over the last 70 years,
the story is very similar to real GDP due to the calculation being the same just divided
by the population which is the only determinant that is counted in real GDP per capita
that isn't used in the calculation of real GDP, so the real GDP determinants directly
affect real GDP per capita.
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Question 2B - The effect of the pandemic on Scottish GDP
The COVID-19 pandemic placed a heavy toll on Scotland’s economy. As of February
2020, Scotland’s GDP was approximately £205 billion (www.gov.scot, 2020a). As
shown in Figure 2, Scotland’s GDP plummeted shortly thereafter, reaching levels as low
as £157.3 billion only two months later. By June 2020, GDP was approximately £167.1
billion (Graham, 2022), representing an 18.5% decrease from only four months prior.
However, as of July 2022, Scotland’s GDP has returned to pre-pandemic levels, as
seen in Figure 3.
Figure 3: Scotland’s GDP, Feb. 2020 – July 2022 (Graham, 2022)
The return to pre-pandemic GDP in 2022 has been largely driven by the growth of the
Construction and Services sectors at 2.5% and 1.0%, respectively (www.gov.scot,
2022a). Additionally, Scotland attracted foreign direct investments at a higher rate than
the UK as a whole, which is another key driver of economic growth (Scott and Arnold,
2022).
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Question 2C - The limitations of using GDP as a measure of well-being for a
country and other measures which may help in measuring a nation's well being
GDP is the total value of products produced in an economy over a certain time period
and it is used as a measure of well being for a nation as if it has high GDP it is likely to
mean that the economy is growing, which may allow its citizens to have a greater living
standard. However, GDP does not necessarily reflect the well-being of a nation but
rather reveals the productivity of their workforce, as it shows how productive the country
must be in order to produce this output level. Furthermore, GDP doesn’t show the level
of income inequality across the country. Researchers have stated that “Because GDP
does not address but often hides social and economic inequities, it does not properly
provide societal insights into economic welfare” (Bernasek 2006, quoted in Giannetti et
al., 2015). This is a problem as a nation may seem rich based on their GDP level, whilst
a large amount of the nation may be poor and don’t benefit from this. This doesn’t
reveal a nation's well-being as there may be income inequality as the poorer people in
society aren’t benefiting from the wealth generated in the economy.
A more suitable measure of well-being for a country would be the ‘Genuine Progress
Indicator’ (GPI). This is calculated by adding the negative effects of activity in an
economy to the total value of output produced over a certain time period. The GPI is a
more useful measurement of well-being as it includes things such as crime, volunteering
work and pollution. This means that it is a more well rounded measurement as it takes
into account more and valuable aspects of activity which GDP excludes.
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Figure 4: Global GPI per capita and GDP per capita (Kubiszewski et al., 2013)
The above chart supports the idea that GPI is a more accurate indicator of well-being
than GDP as it demonstrates that the global GPI is lower. This is because the GDP
level is inflated as it excludes negative economic effects of output making it less
accurate meaning GPI is better used as a measure of well-being. Overall, despite GDP
being used to measure wellbeing today, there are limitations of using it such as the
exclusion of crime and other activity that isn’t recorded and so GPI would help measure
well being in a nation as these things are accounted for.
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References
Giannetti, B.F., Agostinho, F., Almeida, C.M.V.B. and Huisingh, D. (2015). A review of
limitations of GDP and alternative indices to monitor human wellbeing and to manage
eco-system functionality. Journal of Cleaner Production, [online] 87, pp.11–25.
doi:10.1016/j.jclepro.2014.10.051.
Graham, C. (2022). Supporting documents. [online] www.gov.scot. Available at:
https://www.gov.scot/publications/monthly-gdp-july-2022/documents/.
Institute, F. of A. (2018). Scotland’s economy: ten years on from the financial crisis….
[online] Fraser of Allander Institute. Available at: https://fraserofallander.org/scotlandseconomy-ten-years-on-from-the-financial-crisis/.
Kubiszewski, I., Costanza, R., Franco, C., Lawn, P., Talberth, J., Jackson, T. and
Aylmer, C. (2013). Beyond GDP: Measuring and achieving global genuine progress.
Ecological Economics, 93, pp.57–68. doi:10.1016/j.ecolecon.2013.04.019.
Leaker, D. (2020). LFS: ILO unemployment rate: Scotland: All: %: SA - Office for
National Statistics. [online] Ons.gov.uk. Available at:
https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/ti
meseries/ycnn/lms.
MacroTrends (2020). U.K. Unemployment Rate 1991-2020. [online]
www.macrotrends.net. Available at: https://www.macrotrends.net/countries/GBR/unitedkingdom/unemployment-rate.
Nasrudin, A. (2020). Real GDP: Formula, How to Calculate, Determinants. [online]
Penpoin. Available at: https://penpoin.com/real-gdp/.
nationalperformance.gov.scot. (2021). National Indicator Performance | National
Performance Framework. [online] Available at:
https://nationalperformance.gov.scot/measuring-progress/national-indicatorperformance.
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Ons.gov.uk. (2015). Labour Force Survey (LFS) QMI - Office for National Statistics.
[online] Available at:
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandem
ployeetypes/methodologies/labourforcesurveylfsqmi.
Pettinger, T. (2018). Real GDP Per Capita - Economics Help. [online]
Economicshelp.org. Available at: https://www.economicshelp.org/blog/glossary/realgdp-capita/.
Scott, A. and Arnold, P. (2022). How Scotland has become a strong and established
investment choice. [online] www.ey.com. Available at:
https://www.ey.com/en_uk/attractiveness/22/scotland-leads-the-way-for-fdi-investment.
Slight fall in Scotland’s unemployment rate. (2021). BBC News. [online] 15 Jul.
Available at: https://www.bbc.co.uk/news/uk-scotland-scotland-business-57821399.
OECD. (2019). GDP and spending - Real GDP forecast - OECD Data. [online] Available
at: https://data.oecd.org/gdp/real-gdp-forecast.htm.
www.gov.scot. (2020a). State of the economy: February 2020 - gov.scot. [online]
Available at: https://www.gov.scot/publications/state-economy-february-2020/pages/6/.
www.gov.scot. (2020b). State of the economy: September 2020 - gov.scot. [online]
Available at: https://www.gov.scot/publications/state-economy/.
www.gov.scot. (2021). Scotland’s Labour Market: People, Places and Regions Statistics from the Annual Population Survey 2020/21. [online] Available at:
https://www.gov.scot/publications/scotlands-labour-market-people-places-regionsstatistics-annual-population-survey-2020-21/pages/7/.
www.gov.scot. (2022a). GDP increases by 1% in first quarter of 2022. [online] Available
at: https://www.gov.scot/news/gdp-increases-by-1-percent-in-first-quarter-of-2022/.
www.gov.scot. (2022b). Growth sector statistics - gov.scot. [online] Available at:
https://www.gov.scot/publications/growth-sector-statistics/.
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Appendix
Contributions
Rihana Akhtar: Researched and contributed to Part 1 of the questions, with a particular focus on
question 1B. In addition, helped develop the structure and flow of the report as a whole.
Jacob Barrett: Contributed to some of the auxiliary components of the report, such as the
executive summary and the table of contents. In addition, helped develop the structure and flow
of the report as a whole.
Yik Cheuk: Researched and contributed to Part 2 of the questions, with a particular focus on
question 2A. In addition, helped develop the structure and flow of the report as a whole.
Alasdair McGowan: Researched and contributed to Part 1 of the questions, with a particular
focus on question 1B. In addition, helped develop the structure and flow of the report as a
whole.
Daniel Mott: Researched and contributed to Part 2 of the questions, with a particular focus on
question 2A. In addition, helped develop the structure and flow of the report as a whole.
Ethan Stutzman: Researched and contributed to Part 2 of the questions, with a particular focus
on question 2B. Also helped with auxiliary components of the report, such as the references list.
In addition, helped develop the structure and flow of the report as a whole.
Sania Waseem: Researched and contributed to Part 1 of the questions, with a particular focus
on question 1A. Also helped with auxiliary components of the report, such as the cover page. In
addition, helped develop the structure and flow of the report as a whole.
Ramsay Wilson: Researched and contributed to Part 2 of the questions, with a particular focus
on question 2C. In addition, helped develop the structure and flow of the report as a whole.
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