SUMMARY OF KEY FINDINGS

·  The total Gross Regional Domestic Product (GRDP) of the Western Isles in 2003 is estimated as £263.02m or £10,078 per capita. 

·  Estimated per capita GRDP is 66% of the UK equivalent.

·  The overall Western Isles economy has experienced 2.5% growth in real terms since the 1997 study; a rate significantly lower than that experienced in the UK economy as a whole.  The higher growth rate in per capita GRDP experienced by the Western Isles can be attributed in part to a decline in population over the period. If population had remained at 1997 levels, per capita GRDP would hardly have changed at all in real terms.

·  Total Gross Regional Domestic Expenditure (GRDE) is estimated at £385.3m or £14,764 per capita which compares more favourably with other regions.  Differences between the two measures of economic performance reflect the receipt by Western Isles households of both public sector and private transfer payments.

·  There have been a number of changes in the relative importance of many sectors within the economy between 1997 and 2003, both in terms of employment and value added earnings.  Overall the economy has become slightly less specialised.

·  The five most significant sectors in 2003 in terms of their contributions to employment were (in descending order) Other (private) Services, Construction, Distribution (i.e. retailing and most wholesaling), Health, and Education. Together, these five sectors accounted for 50.5% of total Western Isles employment in terms of FTE jobs.

·  On aggregate, the public sector accounts for 29% of employment and 30% of the total value of output in the Western Isles. 

·  In 2001, the Western Isles had an external trade deficit of £163.4m. 

·  As in 1997, the fish farming sector provided the greatest value of exports and, by importing relatively few inputs, contributed more than any other sector to the trade balance. 

·  Sea fishing saw the largest percentage drop in real terms in the value of exports between 1997 and 2003. 

·  Western Isles households derive a higher proportion of their total income from self employment than in Scotland as a whole; however the dependence on self employment income has declined since 1997.

·  Western Isles households spend a total £100.1m on imported goods, either through direct purchases (through mail order etc or while on trips away from the region) or on goods imported into the regions and then sold on by Western Isles wholesalers and retailers.

·  Western Isles households spend more on necessities, in particular food and drink, fuel and light than their Scottish or UK counterparts.

·  In 2003 tourism contributed an estimated £41.1m towards Western Isles GRDP, a real increase of 12% from 1997 levels.

·  The sector with the highest output multiplier is food and drink processing (1.742).  This suggests a £1000 increase in demand for output from the food and drink processing sector would generate an additional £742 in the value of output produced across all local sectors as a result of linkages within the region.  Generally, output multipliers were found to have declined in magnitude from their 1997 level.

·  The lowest output multiplier value belongs to Banking and Insurance at 1.123. However subsequent analysis shows that, although Banking and Insurance activity itself does not itself give rise to large knock-on benefits in the economy, it plays a vital role in facilitating growth in other areas of the economy.

·  The magnitude of SAM household multipliers were lower than those found in the 1997 study reflecting, in part, a greater dependence of local households on imported goods and services.  Retired households were found to generate the largest multiplier effects (1.205).

·  Other public services (2.467), fish processing (2.242) and air transport (2.122) were found to have the largest employment multipliers of all sectors.

·  Taking into account the various inter-sectoral and household linkages in the economy, the export market is responsible for generating 38% of the value of output produced in the economy, and 40% of total factor income and employment in the economy. The second most important stimuli in terms of income and employment is central government expenditure.  Dependence of the economy on central government transfers has increased since 1997. 

·  Government transfers direct to households in the region support 9% of jobs and account for almost 15% of incomes in the region.

·  A number of different “scenarios” were investigated based on the information from the 2003 accounts.  These included a decline in the Western Isles aquaculture sector, growth in the population due to net in-migration, a switch in household consumption patterns and an investigation into the role of the construction sector in facilitating economic growth.

·  At the firm-level, around two-thirds of respondents to the business survey said that there had been a key development or a significant change in the operation of their business over the past six years.  Changes at the business level varied enormously confirming that in many cases, sectoral trends within the region are determined by the performance of a relatively few large businesses. 

·  An overwhelming majority of respondents to the business survey felt there were problems with the local labour market, in particular skill shortages, which were inhibiting economic development.

·  It is argued that the Western Isles faces similar problems to that that of the Scottish economy as a whole (population decline, remoteness, key sectors in long term decline) but at a more extreme level. Moreover, due to its size, it is far more vulnerable to changes in the economic environment.  The report provides a strong basis for more sophisticated and narrowly focussed investigations into a number of areas.