Publication - Research and analysis

Supporting the economic, social and environmental sustainability of the UK's marine sectors

This research considers barriers to sustainable marine economy growth in Scotland and the rest of the UK with particular regard to cross sectoral barriers and market failures.

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Contents
Supporting the economic, social and environmental sustainability of the UK's marine sectors
3 Overview of marine sectors in the UK

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3 Overview of marine sectors in the UK

Introduction

3.1 This chapter provides an overview of the economic performance of each of the seven sectors of the marine economy within scope for this research study. It draws on the detailed analysis presented in Appendix 1, available in the Supporting Documents, the structure of which was agreed with the project’s Steering Group.

3.2 For each sector, consideration is given to the sector’s economic performance in recent years, before an examination of the outlook for the sector in line with strategic growth aspirations.

Commercial capture fishing

3.3 The commercial capture fishing sector comprised almost 6,150 vessels in 2017. As illustrated in Figure 2.1 it is dominated by the fleets in England and Scotland, which account for over 80% of vessels. Whilst England has the highest number of vessels overall, Scotland has the greatest number of vessels over 10m in its fleet (accounting for 28% of the total fleet).

3.4 The industry is relatively geographically concentrated. In England, the sector is largely located in the South West (Devon and Cornwall), and in the North East (Humberside, Tyneside). In Scotland, the sector (by both number of vessels and tonnage) is predominantly located in NE Scotland and Shetland, with the majority of the remainder of operations on Scotland’s west coast. In Wales, fishing operations are largely in the South West, around Pembrokeshire, or in the North West and specifically Holyhead; in Northern Ireland, the industry is concentrated in the ports of Belfast, Kilkeel, Portavogie and Ardglass.

Figure 2.1: Size of the UK fishing fleet, by country of administration [2]
Graph of number of fishing vessels across UK administrations by under 10 metre and over 10 metre vessels.

MMO (2018) UK Sea Fisheries Statistics, 2017

3.5 As Figure 2.2 illustrates, the commercial capture fishing industry in the UK has seen reasonable growth in recent years, in terms of business base, turnover and GVA. However, there has been a decrease in employment[3] at the UK level, with only England showing any significant employment growth. Impact distribution is also constrained because of the geographic concentration of the industry across the UK.

Figure 2.2: At-a-glance sector assessment for commercial capture fishing
Business base Employment Turnover/ landing GVA Trade Impact distribution
UK ++ - ++ ++ - +
England ++ ++ ++ ++ N/A +
Northern Ireland + +- + ++ N/A -
Scotland ++ - ++ ++ N/A +
Wales ++ -- ++ ++ N/A +

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

Sector performance

3.6 There has been modest turnover growth in the UK’s commercial capture fishing sector in recent years. Total business turnover has increased by just over 3% to £1bn between 2013 and 2017.[4]

3.7 The value of landed fish has seen strong growth. The total value of fish landed between 2013 and 2017 by UK vessels has grown by around 32%. At the same time, the Landed Price Index[5] has increased from 153.9 to 182.9 (versus 2000 prices) over the same period. This increased value of catch means that in 2017, fish worth around £980m was landed by UK vessels.

3.8 The total tonnage of landed fish has also seen strong growth between 2013 and 2017. 2017 landings stood at 724,330 tonnes, and increase of 16% on 2013 figures. Landings by species type vary by each country of the UK. Landings by vessels administered in Scotland in 2017 were broadly evenly split between demersal, pelagic and shellfish, with pelagic accounting for a slightly higher proportion by weight, (35%; this rises to 44% when considering value of landings at Scottish ports). In contrast, demersal species account for the largest proportion of English vessel landings at 50% (though only 30% by value at English ports). Landings for both Northern Ireland and Wales are dominated by Shellfish – for Wales in particular, this is largely made up by Whelks; in Northern Ireland, nephrops are the highest represented species in terms of landings.[6]

3.9 In terms of GVA, there has been strong growth: the sector’s added contribution was estimated at £566m in 2017 – growth of around 49% since 2013.[7] GVA per worker at the UK level stood at almost £168,000 in 2017.[8] Whilst no historic figures are available for Northern Ireland to allow for a UK-wide comparison, evidence from elsewhere in the UK indicates that GVA per worker has grown strongly – by 25% in England, 38% in Scotland, and 67% in Wales in the period 2012-17.

3.10 The trade deficit in fishing persists. During the period 2013-17, this fluctuated but with very little substantial change: exports have grown by around 30%, but this is insufficient to offset at 16% growth in imports. As a result, net imports stood at just over £1.29bn in 2017.[9] Anecdotal as well as balance sheet evidence[10] suggest that this is in part due to patterns of consumption in the UK – there is dissonance between what is caught by UK vessels, and what is consumed by the UK population.

3.11 The commercial capture fishing business has seen modest growth in recent years. The fishing business base has increased by 4% between 2012 and 2017, with the largest absolute and proportional growth in Scotland. Northern Ireland’s fishing base contracted by around 3% over the period, with Wales’s business base remaining largely stable.

3.12 However, the commercial capture fishing workforce has contracted. In contrast to the business base, the UK workforce has decreased by 8% over the same period, from around 7,000 to just under 6,500. The largest proportional decrease was in Wales, with the employment base contracting by almost 47%. In contrast, England’s fishing workforce increased by 7% (+125).[11] At the UK level this suggests a trend towards smaller companies or self-employment, with some degree of workers exiting the sector.

3.13 The UK’s fishing fleet has contracted. There has been a degree of renewal and replacement in the fleet, with fishing businesses seeking to drive efficiency gains and more selective, sustainable catching methods. Indeed, anecdotal and industry evidence suggests that there has been an increase in vessel-building activity in recent years. However, over the period 2014 to 2017, there has been a decrease of around 4% in the UK’s fleet size. Only Scotland has seen an increase, of just over 1% since 2014.[12]

Sector outlook

3.14 Evidence suggests that the commercial capture fishing sector is reasonably healthy, and it is growing sufficiently to meet (or contribute to meeting) a number of broad strategic targets set across the countries of the UK. For example:

  • Seafood 2040 (England): There is ambition to increase seafood consumption in England by 75% – and thus increase employment in fisheries to 5,300, and fisheries sales to £504m by 2040. Evidence from the value of landings indicates that the rate of landings growth is sufficient to reach this target well before 2040. However, the employment target may not be met. There is an average annual growth rate in employment of around 5%, which would be sufficient to meet the employment target by 2037; but this masks a decrease of 42% between 2016 and 2017. Assuming a similar growth pattern to 2040, this would be insufficient to meet the employment target.
  • Wales Seafood Strategy: The strategy aims to grow fisheries production and turnover by 30%, and employment in fisheries by 10% by 2025. As demonstrated above, employment targets are unlikely to be met if current growth patterns persist. Further, the fisheries production target would not be met; however, the increase in the value of landed catch in Wales indicates that, if current trends are maintained, the 30% increase target could be met as early as 2020.
  • Ambition 2030 (Scotland): There is a wider ambition to double the value of Scottish Food & Drink to £30bn, of which fisheries is a key part. For fisheries, this would assume a doubling of the value of landed catch to £1.12 billion by 2030. Assuming that the current pattern of growth persists, this target would be met four years early, by 2026.

3.15 Whilst production, sales or turnover targets appear achievable, recent decreases in employment raise questions regarding the achievability of employment targets in England. However, the main focus for all strategies and plans regarding fisheries is the sustainability of stocks and fishing operations.

Commercial capture fishing in Iceland and Norway

3.16 Commercial capture fishing is a key component of Iceland’s economy. It is regarded as the second largest fisheries nation in the North East Atlantic, behind Norway. It employs around 2% of Iceland’s total workforce, though in recent years, the workforce has declined. Between 2013 and 2017, the workforce declined by around 18%. In terms of catch, the tonnage and value of landed fish has declined. In 2017, a total of 1.18 million tonnes of fish was landed by the Icelandic fleet, a decrease of around 14% since 2013. In value terms, this amounted to around Kr 11bn (£1.03bn), a decrease of over 17%.[13] It is worth noting that catch in 2017 was influenced by a fisherman’s strike over pay and conditions.

3.17 Fishing is a major industry in Norway. However, Norway’s fishing workforce has also decreased somewhat in recent times, though this decrease is smaller than in Iceland or the UK. In 2017, the workforce totalled 11,320, a decrease of around 2.5%. Norway’s fleet has remained broadly the same over the period 2013-17, though this masks a small decrease in 2014 and 2015. However, in contrast to Iceland, the total tonnage landed increased 15% to 2.4 million tonnes between 2013 and 2017, with a corresponding increase in value of almost 43%. This is in excess of the growth in tonnage and value of the UK. This indicates that Norway’s commercial capture fishing sector is increasing in productivity and efficiency, helping to consolidate its market share in the North East Atlantic.

3.18 Whilst the downward trend in employment in commercial capture fishing appears to be the norm across major fisheries in the North East Atlantic, there are some clear differences in catch between countries. The evidence demonstrates that whilst the UK’s commercial capture fishing sector has grown in recent years, its ability to grow further and secure a greater market share is arguably dependent on its ability to increase its productivity. The growth challenge here is one of competitiveness to increase the UK’s market share in the North East Atlantic.

Aquaculture

3.19 The aquaculture industry has seen significant growth in recent years. Aquaculture is of particular significance to the economic growth in rural, coastal and island areas where it can act as an anchor industry providing year-round, well-paid jobs in remote areas and contributing to the viability of many communities. It also supports a wider, and more geographically dispersed supply chain including, processing, distribution, feed supply, and exporting. The majority of UK aquaculture activity is located in Scotland where finfish production dominates, although it is increasing in areas of Wales and England, with shellfish aquaculture being spread more evenly throughout the countries of the UK although it is less well developed. In Scotland, aquaculture is relatively mature and vertically integrated, finfish in particular.

3.20 As Figure 2.3 demonstrates, available data shows that there has been reasonably strong growth across some aspects of the aquaculture sector, certainly with regard to turnover and GVA. However, there has been a decrease in employment at the UK level, and weak growth in the business base – though this is in part due to consolidation in the sector. As aquaculture is relatively confined to rural and remote coastal areas, the distribution of impacts is relatively narrow.

Figure 2.3: At-a-glance sector assessment for aquaculture
Business base Employment Turnover GVA Trade[14] Impact distribution
UK + - ++ ++ ++ -
England + -- ++ ++ N/A -
Northern Ireland + N/A + + N/A +
Scotland ++ ++ ++ ++ ++* +
Wales + - + + N/A -

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

3.21 This is discussed in more detail in the following sections. Further analysis is presented in Appendix 1, available as a Supporting Document.

Sector performance

3.22 Turnover in the UK aquaculture sector has grown strongly in recent years. In 2017, the turnover of the UK aquaculture sector was £1.3bn, an increase of 47% since 2013, with growth particularly concentrated between 2016 and 2017 where turnover rose by £343m or 36%.[15] Scotland accounts for a disproportionate amount of aquaculture turnover, reflecting its strength in the industry. In 2016, Scottish aquaculture turnover accounted for 84% of total UK turnover despite Scotland only accounting for 8% of the UK population.[16] Turnover of Scottish aquaculture more than doubled between 2012 and 2016, reaching £797m. Scotland therefore plays a particularly prominent role to play in the aquaculture industry across the UK.

3.23 Evidence indicates that aquaculture trade has also increased. While there is no trade data available for aquaculture on its own, fishing and aquaculture exports has grown over the period 2013-17. Following a fall in exports from 2014 to 2015, total export value rose to £738m in 2017, an overall growth of £295m or 67% since 2013.[17] Import values to 2017 are incomplete, with data being withheld by ONS for disclosure control. However, previous datasets to 2016 indicate that import values around the £40m mark.[18]

3.24 Given the predominance and maturity of Scottish finfish aquaculture and salmon in particular, data are available for salmon exports. Across a similar time period, the UK has seen significant growth in salmon exports since 2013 (£579m), increasing by 20% to £726m in 2017.[19] Whilst imports have also increased over the same period, a 2017 import value of £490m means that the UK had a trade surplus in salmon of £236m in 2017.

3.25 The UK aquaculture business base is characterised by a small number of finfish producers (mainly salmon, with some trout production) typically located in Scotland, and a larger base of shellfish producers. Consequently, the vast majority of aquaculture businesses in the UK are micro and small-sized (98%), with only five medium and five large-sized companies operating.[20] This is reflected in 2018 turnover figures for the sector, where 43% turned over less than £100,000 and 83% less than £500,000. All ten high turnover businesses (£10m or more) were based in Scotland. England had the largest number of businesses in 2018 at 235 (54% of all UK aquaculture businesses), with businesses in Scotland accounting for 34% of the UK total – this is somewhat surprising given Scotland’s dominance in the sector, however Scotland is highly consolidated. There were 35 and 20 aquaculture businesses in Northern Ireland and Wales, respectively, in 2018. [21]

3.26 The overall business base in the UK has seen weak growth, with a decrease in the two years to 2018. Though the UK business increased by 4% between 2014 and 2018 (from 420 businesses to 435), the total number of aquaculture businesses dropped from 450 in 2016 (c.3% decrease). Evidence suggests that the decrease has largely been driven by a decrease in businesses in England.[22]

3.27 Aquaculture employment in the UK has seen a moderate decrease in the last couple of years. Total employment dropped by 7% between 2015 and 2017, falling to 3,249 employees. However, there is a varied picture below the UK level. There was a steep drop-off in employment numbers in England across the same time period, falling from 1,375 to 950, a decrease of 31%. Employment in Wales also fell substantially between 2016 and 2017, dropping to 80 from 150.[23] Conversely, employment in Scotland increased by 6% between 2015 and 2017 to 2,125 people, with Scotland consequently accounting for almost two-thirds of total aquaculture employment in the UK. This is followed by England (29%), Northern Ireland (3%) and Wales (2%).[24]

3.28 GVA for aquaculture has grown strongly between 2013 and 2017. There has been a 26% increase to £432m of GVA.[25] Regionally, Scotland has consistently accounted for the highest proportion of GVA, accounting for 59% in 2017, whilst also seeing significant growth in absolute terms between 2013 and 2017, rising 61% from £289m to £466m.[26] England accounted for 31% of UK GVA in 2017, having grown by 68% from 2013 to £246m. Northern Ireland accounted for 7% and Wales 3% of GVA, with growth across both since 2013. GVA per worker was highest for England (£89,500) and lowest for Scotland (£77,700) in 2017.[27] GVA per worker in Wales increased substantially from 2013 to 2017, where it more than doubled from £40,000 to £83,600. GVA per worker is proportionally higher across England and Wales in 2017 than in previous years due to reduced employment numbers.

Sector outlook

3.29 Evidence suggests the aquaculture sector in the UK is fairly healthy currently, with growth in both turnover and GVA. Scotland is particularly strong, accounting for the majority of UK turnover and almost two-thirds of all aquaculture employment – both indicators have been on the rise in Scotland over the last five years. Growth is sufficient to contribute to meeting some targets set out in a number of national strategies, but in some instances this will not achieve industry ambitions:

  • Aquaculture Growth to 2030 (Scotland): The ambition is to raise aquaculture’s economic value to £1.1bn across Scotland by 2030, with an increase in tonnage potentially increasing jobs in the sector to 6,000 (with wider UK economy value of £3.6 billion and 18,000 jobs). This would require a year-on-year growth of 5%. Based on Marine Scotland figures, there has been year-on-year growth in turnover of around 4.8%, which would be sufficient to meet the value target by 2031, one year later; considering the growth over a longer historic period of 8.2% from 2008-16, the target would be met by 2024. However, the employment growth rate is insufficient to meet growth targets for aquaculture in Scotland by 2030. Further, industry ambition is to double output to somewhere in the range of 300,000 to 400,000 tonnes per annum for finfish production, with a median production figure of 350,000 tonnes. Recent research has indicated that dependent factors that would facilitate this 100% increase in production by 2030, along with challenges that would need to be overcome, suggest that a 50% increase in production might be more likely.[28]
  • Seafood 2040 (England): There is potential for growth in aquaculture production value from £35m to £60m accounting for seafood consumption levels of two portions per week. To achieve this by 2040, annual growth of under 2.5% is needed. There is no available production value or turnover data for aquaculture only in England, but Aquaculture and Fisheries has an average annual growth rate of +8%, and GVA for aquaculture in England has seen substantial growth as noted above. Assuming this rate of growth for aquaculture only, the target could be achieved by 2023. However, there is a degree of volatility in turnover figures, with negative growth in some years. This may impact on the realisation of targets.
  • Brexit and our Seas (Wales): The emerging policy position is prioritising the development of new and existing shellfish activities, supporting new and existing operations to increase finfish production, and promoting diversification of commercially viable species in the marine and inland areas. However, the decrease in aquaculture employment coupled with a stagnation in business growth suggests that this is an ongoing challenge.

3.30 At the UK level, whilst there is a degree of growth – largely in England and Scotland – for Northern Ireland and Wales, growth appears to be a challenge. Further, this growth is not sufficient to be competitive globally: a significant challenge facing the UK aquaculture sector is that of market share. Evidence indicates that in spite of increasing output, the UK’s global market share is decreasing. For example, the rate of production growth for salmon in Scotland has been lower than competitor countries, and has resulted in a reduction in global market share from 10% in 2005 to between 7% and 8% in 2017.[29],[30] This is considered in more detail with regard to Norway’s aquaculture sector in the following section.

Aquaculture in Norway

3.31 Aquaculture is an important industry for Norway. Norway accounts for over half the Atlantic salmon produced globally[31], and exports approximately 95% of its total production (1.16m tonnes).[32],[33] Many of Norway’s top aquaculture companies such as Marine Harvest (now Mowi) and AKVA Group either operate in the UK, or own UK companies.

3.32 The Norwegian aquaculture sector has realised significant growth in recent years. Its business base has decreased by over 25% in the period 2009-18, but the evidence indicates that there has been consolidation in the industry, similar to the consolidation that has taken place in the Scottish finfish aquaculture sector. Over the same period, employment in Norwegian aquaculture has grown by 68% to over 8,500, and total sales have grown from around £2.29bn (Kr 22.4bn) in 2009 to £6.25bn (Kr 67.8bn) in 2018, an increase of over 272%.[34]

3.33 For comparison with Aquaculture in the UK, over the period 2013-17, employment in Norwegian aquaculture grew by 37%, and sales by 39%. This is significantly stronger performance, which has allowed Norway to grow its global market share to around 54%.[35]

3.34 Whilst the UK’s aquaculture sector has grown modestly, its relative growth compared to key competitor markets is considerably weaker. Therefore there is a growth challenge: the UK’s ability to grow further is constrained by its lack of competitiveness on a global level.

Seafood processing

3.35 Seafood processing serves both the commercial capture fishing and aquaculture sectors, and so the sector performance is driven largely by performance in those two sectors, as well as by the scale of fish imports. Seafood processing in the UK is largely dominated by operations in England and Scotland. Within Scotland, there are seafood processing clusters in Aberdeen City and Aberdeenshire – particularly at Peterhead – and in the Central Belt. In England, there are strong concentrations of activity in Grimsby, North East Lincolnshire – with Grimsby Fish Market, the largest of its kind in the UK – and Heathrow in London.

Figure 2.4: At-a-glance sector assessment for seafood processing
Business base Employment Turnover* GVA Trade* Impact distribution
UK -- ++ + ++ -- -
England - ++ + ++ N/A -
Northern Ireland -- ++ -- ++ N/A -
Scotland -- + ++ ++ N/A -
Wales + + + ++ N/A --

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

* Wider food manufacturing sector below UK level

Sector performance

3.36 Turnover in the UK’s seafood processing sector has remained broadly constant in recent years. The turnover of the seafood processing industry in the UK was almost £3bn in 2017. This had fallen slightly from a high of £3.1bn in 2014. The sector is particularly prevalent in Scotland, where it accounted for £1.6bn turnover in 2016, and over one quarter of the wider food manufacturing sector.[36]

3.37 Salmon exports have increased in value, but there is an overall trade deficit. Data from Seafish indicates that there was a trade deficit by volume in Seafood of around 250,000 tonnes in the year ending August 2017.[37] In the food products trade deficit is estimated at £4.6bn in 2017, although this includes the processing of meat, fruit and vegetables etc., as well as seafood. In Scotland, latest figures from the Scottish Salmon Producers Organisation show that Scottish salmon exports reached a peak of £600m in 2017[38], making salmon Scotland’s number one food export. This high value has been stimulated by an increase in the price of salmon and an increase in export tonnage. It is worth noting that the value of Scottish salmon is also influenced by its marketing and branding as a premium product.

3.38 The seafood business base in the UK has decreased. There were just over 300 seafood processing businesses in the UK in 2017, with the majority based in England and Scotland, and very small numbers based in Wales and Northern Ireland (<10% of overall UK business base). This number has fallen in recent years, with a 10% decrease since 2012; this has been driven by a strong decline in Scotland (-19%).[39]

3.39 However, employment growth is strong in the seafood sector. In contrast to the business base, employment in seafood processing has grown in recent years, by 12% from 2012. This suggests consolidation with a smaller number of larger employing companies, or could be evidence of vertical integration with seafood producers acquiring processing operations, since businesses are identified by their main operations. There were over 16,000 people employed in the sector in the UK in 2017, and, again, these are primarily based in England and Scotland. The rise in seafood processing employment has been driven by strong growth in England in particular, whilst job numbers in Northern Ireland, albeit low, have doubled over this period.[40]

3.40 The sector is dominated by non-domiciled workers. A report by Seafish in 2018 estimated that there were 18,000 FTEs working in seafood processing in the UK, and that up to half of these are from the European Economic Area (EEA).[41] This reflects anecdotal evidence from seafood processors that there are challenges in finding locally available labour at current wage levels.

3.41 GVA growth for the UK’s seafood processing industry has grown in recent years. The UK seafood processing sector accounts for around £580m GVA, which has increased by around 9% over the last five years.[42] Evidence from Seafish indicates that England accounts for over half of the sector’s GVA, with Scotland accounting for around a further 45%.[43] GVA per head, or productivity, in the wider food product manufacturing sector is estimated at circa £56,000, and is slightly greater in England than in Scotland.

Sector outlook

3.42 Evidence indicates that the seafood processing sector in the UK is moderately healthy. There has been growth in terms of employment and GVA, and salmon exports in particular have increased in value. However, whilst there has been growth in terms of productivity and efficiency, there has not been growth in absolute terms, with turnover stagnating.

3.43 The outlook of the sector is unclear: there are signs of growth in parts, such as the increase in value and export tonnage of Scottish salmon. Employment and GVA levels have been growing fairly strongly in recent years also. However, the lack of growth in absolute terms, and the trade deficit in seafood are causes for concern. Also, the vast majority of the impact of seafood processing is based in England and Scotland, with very little activity occurring in Wales and Northern Ireland. This constrains the distribution of impacts across the UK. This leads to a mixed picture in terms of meeting strategic targets:

  • Seafish UK Corporate Plan: Seafish, the non-departmental public body set up to support the UK seafood industry, has set out broad targets to 2021 to: increase seafood’s contribution to the UK’s GDP, improve the balance of trade of value-added seafood products, increase consumption in the UK to 1.35 portions per person per week, and an annual increase in sales attributable to marketing.[44] However, the stagnating turnover of the sector, and the ongoing trade deficit indicate that this is will not be achieved.
  • Seafood 2040 (England): A 75% increase in consumption (from 1.15 portions to 2 portions of seafood per person per week) and an additional £4.6bn in sales.[45] Despite the decrease in turnover in recent years, there is evidence to suggest that the value of UK consumption is increasing, though this includes imported seafood products. The value of consumed seafood increased 4.7% to £6.61bn in the UK in year ending June 2017[46]. Even assuming a more modest year-on-year increase of 3%, this target could be reached by 2030.
  • Changing Tides: A strategy for Scotland’s seafood industry: The Scottish food and drink strategy aims to double the value of the sector to £30bn by 2030. The Scottish seafood sector aims to make an important contribution to this, with Changing Tides focusing on four key themes: market development and brand; investment and innovation; people and skills; and supply chain.[47] However, the rate of recent growth in turnover in the Scottish seafood processing sector (based on ONS data) of around 2.2% indicates that doubling the turnover value of seafood processing in Scotland from 2016 would not be achieved by 2030.
  • Wales Seafood Strategy: Targets 30% sustainable growth of the industry by 2025, with a 10% increase in employment over the same period.[48] At present, the 2% decrease in turnover in the Welsh seafood processing sector (based on ONS data), and static employment levels indicate that this is unlikely to be achieved – though because of the relatively small base in Wales, a small absolute growth in future years could still positively impact on achieving these targets.

3.44 The evidence therefore indicates that there is a growth problem for the Seafood industry in the UK. This is not unique to the UK; other countries where there is a large seafood processing industry, such as Iceland, are also facing growth challenges. However, in countries such as Norway, there is considerable growth. The following sections explore this further.

Seafood processing in Iceland and Norway

3.45 Seafood processing, and particularly processing for export, is a major part of Iceland’s economy. However, the volume seafood produced for export in recent years has decreased somewhat. Between 2013 and 2017, there was a 25% decrease in tonnage processed for export, from around 786,000 tonnes to just over 590,000 tonnes.[49] Over the same period, the value of processed seafood for export has decreased by a similar proportion, from Kr 265,000bn to Kr 197,000bn.

Figure 2.5: Seafood processing for export in Iceland, indexed, 2013-17
Indexed graph of volume and value of Iceland seafood processed for export, 2013-2017.

Statistics Iceland, 2019

3.46 In contrast, the value of processed seafood exported by Norway has increased year-on-year between 2013 and 2017. Overall, there was a 54% increase in the value of exported seafood to Kr 94.5bn; much of this was salmon (68% of total exports by value), with cod accounting for 10%.[50] The latest data indicate that this has increased further to Kr 99bn in 2018.[51]

Figure 2.6: Seafood processing in Norway, value, 2013-17
Value of seafood processing in Norway, 2013-17.

Source: Norwegian Seafood Council, 2019

3.47 Consequently the growth challenge in the UK is one of increasing growth overall. This will help to improve the UK’s competitiveness versus Norway and other high-growth seafood processing countries. Not addressing this issue will further negatively impact the UK’s market share and trade balance. Constraints and challenges to growth are explored further in Chapter 4.

Commercial seaweed harvesting

3.48 Seaweed harvesting has long been a feature of coastal communities in the UK, but this has been, and still is, in the main done by hand for small-scale commercial use or domestic consumption. There are a small number of established areas of commercial production across the UK, but in recent years, there has been growing interest and attention paid to larger-scale commercialisation operations. This acknowledges that seaweed has great potential value, particularly in down-stream uses such as pharmaceuticals and bio-energy applications.

Figure 2.7: At-a-glance sector assessment for commercial seaweed harvesting
Business base Employment Turnover GVA Trade Impact distribution
UK + N/A N/A N/A N/A +
England N/A N/A N/A N/A N/A +
Northern Ireland N/A N/A N/A N/A N/A +
Scotland N/A N/A N/A N/A N/A +
Wales N/A N/A N/A N/A N/A +

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

Sector performance

3.49 Seaweed harvesting is very much a nascent sector in the UK, and therefore estimates around the scale and economic value of the sector are limited at this stage. Viking Fishing Farms in 2012 estimated that the UK microalgae industry had an economic value of between £1m and £1.3m.[52] Despite relative under-development in the UK, harvesting bases have been established in areas of Scotland, Northern Ireland and South Wales, with harvesting historically concentrated in the Scottish Outer Hebrides, estimated to account for 5,500 of 6,000 wet tonnes of total UK harvest.[53]

3.50 More recent estimates of the sector have put total UK harvest at between 20,000 and 30,000 wet tonnes, an increase driven in part by an expansion in harvesting in South West England[54]. Whilst there are development proposals for new kelp harvesting[55], under the current regulatory environment, such projects are unlikely to happen. Research commissioned by HIE has highlighted that despite Scottish seaweed harvesting being of relatively low value in itself, it has the potential to enable very high value manufacturing and pharmaceutical industries (in the range of £100m to £500m after 10 years)[56].

3.51 It was estimated by Viking Fish Farms in 2012 that the UK macroalgae industry constituted 15 SMEs, increasing to 27 following a report conducted by Cefas in 2016. Of the 27 seaweed related businesses identified in the UK in 2016, 16 were using UK harvested seaweed while 11 were using seaweed harvested elsewhere in the world.[57] Eight of the 16 produce seaweeds for food or condiments with the next most common uses being cosmetics and nutraceuticals, followed by animal feed production and fertilisers. There was limited information on staff numbers, however data available indicates most of the 27 businesses were micro (0-9 employees) or small (10-49 employees) in size.

3.52 Regionally, Scotland hosts the majority of UK seaweed businesses (including harvest), with businesses especially concentrated around the islands. There are a further two businesses in Wales, two on the south-west coast of England, one in Essex and one in Northern Ireland. Wild harvest supply issues mean that, as of 2019, those businesses on the south-west coast of England are focused on cultivation.

3.53 The value and productivity associated with seaweed production varies considerably depending on the type of products being produced. For instance, as shown in Figure 2.8, the economic return for biomass is estimated at less than £1 per kg, compared to more than £5,000 per kg for ‘special applications’. The UK is currently at the stage of producing added value commodities and speciality products, with values between £1 and £1,000 per kg.

Figure 2.8: Pricing of products from macroalgae and current capacity for macroalgae production in the UK
Seaweed sector value added with processing level.

Source: Cefas, (2016) Seaweed in the UK and abroad – status, products, limitations, gaps and Cefas role

3.54 Estimated timescales also vary extensively depending on product type.[58] Some applications, such as cosmetics, fertiliser, sea vegetables and hydrocolloids are already well established with further future growth anticipated. In the longer term, the application of seaweed in industrial biotechnologies, thermal conversion, ethanol and terponoids are still at the research stage, with deployment 10 to 15 years away.

Sector outlook

3.55 Seaweed harvesting is well established in the UK on a small-scale level (for food, feed and fertilisers). However there has been increased awareness of the potential uses of seaweed in recent years, for instance in algal biofuel technologies. This has led to increased interest in seaweed harvesting the UK, albeit based on farming as wild harvesting is close to capacity at locations with existing activity.[59]

3.56 Seaweed farming in the UK is currently at a pre-commercial stage with a number of pilot farms established in Northern Ireland (Queen’s University Belfast), Scotland (SAMS) and formerly Wales (Swansea University).[60] These have been developed as a response to wild harvest over-capacity, and if successful could contribute to the UK and regional seaweed sectors. Indeed, current areas of research can also be expected to lead to future seaweed uses with higher value and productivity.

3.57 Whilst there is insufficient evidence to provide a clear indication of whether there is a growth challenge, evidence from elsewhere indicates that other countries, such as the Faroe Islands and Norway are in a more advanced position in terms of development, growth and value of the Seaweed harvesting sector. This is explored in more detail with regard to Norway below.[61]

Norway’s seaweed industry

3.58 Seaweed harvesting is an emerging industry in Norway, but is showing signs of relatively rapid growth. In contrast to the UK, seaweed harvesting in Norway is largely of farmed algae, i.e. seaweed cultivation. The Norwegian Directorate of Fisheries identifies seaweed harvesting as an important, new priority in aquaculture (Seaweed harvesting is considered a subsector of aquaculture in Norway). Kelp species produced and harvested include sea belt (Saccharina latissima), babberlocks (Alaria esculenta), dulse and nori nei. The first licences for seaweed harvesting were awarded in 2014. The Norwegian seaweed harvesting sector has undergone significant growth in recent years. Its business base has grown from 10 companies in 2015 to 23 in 2018 (Figure 2.9), an increase of 130% over the period, albeit within the context of small business numbers.

Figure 2.9: Norwegian seaweed harvesting business base, 2015-2018
Number of seaweed harvesting businesses in Norway, 2015 to 2018

Directorate of Fisheries, Norway, 2019

3.59 Employment in Norwegian seaweed harvesting has grown overall over the same period, by 32%, as shown in Figure 2.10. However, following a peak of 69 total employees in 2017, seaweed harvesting employment fell to 58 in 2018, a decrease of 19%.

Figure 2.10: Norwegian seaweed harvesting employment, 2015-2018
Employment in seaweed harvesting in Norway, 2015 to 2018

Directorate of Fisheries, Norway, 2019

3.60 Overall tonnage and value of seaweed harvested has increased over the period 2015 to 2018, as shown in Figures 2.11 and 2.12. Harvesting tonnage increased by 248%, rising from 51 tonnes to 178 tonnes. This has been largely a result of an increase in Sea Belt algae, with tonnage growing from 33 tonnes in 2016 to 140 tonnes in 2017.

Figure 2.11: Norwegian seaweed harvesting quantity (tonnes), 2015-2018
Volume of seaweed harvested in Norway, 2015 to 2018

Directorate of Fisheries, Norway, 2019

3.61 The value of seaweed harvested grew at a significantly higher rate between 2015 and 2018, increasing 722% from around £14,000 to almost £119,000.

Figure 2.12: Norwegian seaweed harvesting value (1000 £), 2015-2018
Value of seaweed harvested in Norway, 2015 to 2018

Directorate of Fisheries, Norway, 2019

3.62 Whilst evidence indicates that the UK’s production of harvested seaweed is greater than that of Norway, the growth challenge facing the UK’s seaweed industry is one of competitiveness. The lack of consistent and robust data on the UK’s seaweed harvesting sector is an added factor in determining its competitiveness.

Offshore renewables

3.63 The UK offshore renewables sector is a dynamic and rapidly expanding field and is expected to play a significant role in providing energy for the UK and globally. Renewable energy presents the best opportunity for cheaper, cleaner and faster decarbonisation. The sector comprises offshore wind, wave, and tidal energy, all of which have the potential to produce vast amounts of power that can be harnessed by modern technology. It is anticipated that offshore wind alone will provide a third of the UK’s electricity by 2030.[62]

Figure 2.13: At-a-glance sector assessment for offshore renewables
Business base* Employment* Turnover GVA Trade Impact distribution
UK ++ ++ ++ ++ - +
England ++ + ++ N/A -- +
Northern Ireland + + ++ N/A + +
Scotland + ++ ++ N/A ++ +
Wales + - - N/A -- +

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

* For offshore wind only

Sector performance

3.64 In 2015 it was estimated that the UK offshore renewables sector has a total (including indirect and induced) turnover impact of £4.7bn.[63] Whilst the UK leads the world in wave and tidal development, the technologies in these two are less developed than offshore wind in terms of maturity and they are currently more expensive. The offshore wind sector is estimated to have directly turned over more than £3.5bn in 2017[64], representing 29% of the total £12.3bn directly generated by the UK’s low carbon electricity sector. As Table 2.1 illustrates, the majority of turnover within the UK offshore wind sector was generated in England (91%), with the other significant share of turnover, albeit it much less, accrued in Scotland (9%).

Table 2.1: Turnover, £000s – Offshore wind by country
Date UK England Scotland Wales Northern Ireland
2014 2,938,000 2,496,000 95,000 341,500 6,000
2015 2,388,000 2,208,000 n/a 117,000 n/a
2016 2,628,500 2,224,500 300,500 67,000 36,000
2017 3,573,000 3,235,000 304,000 26,000 8,000

Source: ONS, Low carbon and renewable energy economy, UK: 2017

3.65 Marine renewable energy had an estimated direct GVA impact in the UK of £730m in 2015.[65] In addition to these direct impacts the sector was estimated to have annual indirect GVA benefits of £511m stimulated in supply chains and induce a further £256m in the wider economy when direct and indirect employees spend their earnings.

3.66 The regional distribution of the wave and tidal energy sectors’ is different to offshore wind, with wave and tidal clusters and key assets in Cornwall, the Solent, Wales and the Highlands and Islands.[66] In Scotland, the European Marine Energy Centre (EMEC) in Orkney has generated £194m of GVA for the UK economy and created 3,801 job years on the islands. The Beatrice Offshore Windfarm Ltd, which opened in July 2019, is Scotland’s largest offshore wind farm, and is expected to create around 90 full-time jobs over the course of its 25 year lifespan, while powering 450,000 homes with an installed capacity of 588MW and 84 turbines. In the South West, cutting edge facilities have generated over £170m of investment in the last decade and created more than 400 marine energy jobs in the region.[67]

3.67 In 2017, the UK offshore wind sector accounted for 7,200 jobs (of the estimated 32,200 full-time equivalent (FTE) jobs in the wider sector), and these were concentrated in NW England, SE England, Yorkshire and Humber. Recent estimates put the employment supported by wave and tidal energy at 1,700.[68]

3.68 The past decade has seen a significant step-change in the scale of marine renewable infrastructure. As Figure 2.14 indicates, 2017 was the first year that the offshore renewables sector generated over 6% of UK electricity.

Figure 2.14: Electricity generated by offshore renewables
Volume of electricity generated by offshore renewables 2009 to 2017 in UK

Source: BEIS, Renewable electricity capacity and generation

3.69 The offshore wind sector constitutes roughly 10% (2,500) of the approximately 23,000 UK low carbon electricity production businesses. The majority of these businesses are operating in England (2,000) and Scotland is the only other nation with a significant number of active companies (500).

Sector outlook

3.70 The UK’s natural assets and success to date in deployment and generation, particularly in offshore wind but more recently in tidal energy, mean offshore renewables are set to grow strongly and the economic opportunity in offshore renewables energy is robust and growing. Analysis suggests that the regions of the UK which currently have the highest direct employment from the offshore wind sub-sector are the North West and South East of England with between 2,000 and 4,000 direct FTE jobs. However forecast projections suggest that by 2032, employment will be highest in the North East, and Yorkshire and Humber (>4,000 FTEs).[69]

3.71 The North East’s offshore wind sector has been named as one of four regions set to become part of a new £250m Offshore Wind Growth Partnership (OWGP). The Partnership is expected to drive investment in areas such as advanced manufacturing, floating wind and larger turbines as well as create new, high-skilled jobs in the region.[70] The world’s biggest offshore windfarm, Hornsea, is located off the Yorkshire coast and is forecast to be fully operational by 2020 with additional Hornsea projects either in the construction or development phases.[71] However, whilst these developments are positive, meeting the 2050 UK emissions target may require a large-scale rollout of low-carbon generation over the next decade, with strain put on existing renewable technologies.

3.72 Challenges to future development include marine technologies competing with alternative technology options that are more cost-effective, such as wind. There are also challenges around integrating low-carbon technologies into the existing UK generation system (given decentralisation and intermittency of generation), and commitment from UK government to provide ongoing, sustained support for the development of the marine energy sector for the foreseeable future.

Competitor comparison: offshore renewables in Denmark

3.73 Denmark is a global leader in offshore renewables energy and an interesting comparator for the UK. In Denmark there are more than 500 companies, working in all areas of the wind industry.[72] Two Danish manufacturers, Siemens Wind Power and MHI Vestas Offshore Wind, dominate the global market for offshore wind turbines and together, they have produced almost 90% of all the offshore wind turbines installed in Denmark. Siemens is also involved in the Beatrice Offshore Wind Development, through Siemens Gamesa.

3.74 Figure 2.15 shows the total number of people employed by Wind Denmark between 2013 and 2017 in Denmark. The number of employees in offshore and onshore wind has risen steadily over the five year period, increasing from around 27,490 in 2013 to over 33,660 in 2017 – an overall increase in employment of 22%. The UK offshore wind sector accounted for 7,200 jobs in the UK in 2017, with the wider offshore renewables sector accounting for around 32,200, putting Denmark slightly ahead of the UK in terms of overall employment in wind energy.

Figure 2.15: Number of people employed by Wind Denmark, offshore and onshore, 2013-2017
total number of people employed by Wind Denmark between 2013 and 2017 in Denmark

Source: Industry Statistics, Wind Denmark 2014-2018

3.75 Total revenue of the offshore and onshore wind turbine industry in Denmark was £16.94bn in 2017, increasing from £12.96bn the year prior (an increase of 31%). Over the five year period between 2013 and 2017, revenue in offshore and onshore wind turbines rose significantly by 85%, up from £9.15bn. The UK offshore wind sector generated an estimated £3.5bn in turnover in 2017. The reasons for the difference in turnover between the UK and Danish sectors is unclear, though it may be related to the maturity of the Danish wind energy sector.

Figure 2.16: Total revenue in Denmark’s offshore and onshore wind turbine industry, 2013-2017
total revenue of Wind Denmark between 2013 and 2017 in Denmark

Source: Industry Statistics, Wind Denmark 2014-2018

3.76 The number of wind turbines (on and off-shore) in 2017 was 6,161, an increase in volume of over 20% since 2010. Around 8% of these were offshore turbines (519). Capacity of wind turbines has also increased, from around 3,700 MW in the early 2010s to 5,522 MW in 2017.[73] Capacity of offshore wind in 2017 was 1,297 MW, around 23% of the overall wind turbine capacity in Denmark.

3.77 Table 2.2 shows the number of offshore wind turbines connected in Denmark between 2013 and 2018, as well as the total wind power generated the number of offshore wind farms developed across the same period. The total number of connected offshore wind turbines in Denmark was 514 in 2018, eight more than the previous year and over 400 more than in 2013. This marks an overall increase in connected turbines of 430%.

3.78 Total power in Megawatts increased from 350 MW to 1,329 MW over the same period, rising 280%. The number of offshore wind farms also increased from one in 2013 to 14 in 2018.

Table 2.2: Number of offshore wind turbines connected, Denmark, 2013-2018 [74]
2013 2014 2015 2016 2017 2018
Farms 1 12 13 13 16 14
Turbines connected 97 513 513 517 506 514
MW connected to grid 350 1,271 1,271 1,271 1,266 1,329

Source: WindEurope, 2013-2018

3.79 Figure 2.3 shows the total primary renewable energy production in Denmark first, from 1990 to 2010 over ten and five year periods, and then from 2015 to 2018 annually. Primary renewable energy production was 45.46 Petajoules[75] in 1990, increasing to 131.31 PJ in 2010, a rise of around 189%. Despite a minor decline between 2015 and 2016, production increased to 174.64 PJ in 2018, and overall increase of 281%.

3.80 Offshore renewables in the UK generated 23,000 Gigawatt hours[76] of electricity in 2017, the equivalent of 82.8 PJ. This was around half the total primary renewable energy production in Denmark in 2017.

Table 2.3: Primary [77] renewable [78] energy production in Denmark, 1990-2018
Year (1990-2010) 1990 2000 2005 2010
Renewable Energy (PJ) 45.46 76.02 105.58 131.31
Years (2015-2018) 2015 2016 2017 2018*
Renewable Energy (PJ) 159.16 158.59 170.57 174.64

Source: Danish Energy Agency, 2018

3.81 Observed renewable energy consumption in Denmark is shown in Table 2.4, covering the same 1990 to 2018 time period. Consumption has increased at a greater rate than production since 1990, rising by 269% between 1990 and 2010, and 439% across the 18 year period to 2018.

Table 2.4: Observed renewable energy consumption in Denmark, 1990-2018
Year (1990-2010) 1990 2000 2005 2010
Renewable Energy (PJ) 45.46 78.51 121.88 167.94
Years (2015-2018) 2015 2016 2017 2018*
Renewable Energy (PJ) 210.04 217.51 244.16 244.82

Source: Danish Energy Agency, 2018

Oil and Gas decommissioning

3.82 Decommissioning is part of the natural lifecycle of oil and gas assets. It is the obligation of all oil and gas operators to decommission offshore assets once they have ceased production. The oil and gas sector has experienced significant challenges in recent years since the downturn of oil prices from late 2014, as shown in the sector overview table above, however decommissioning is one area which is performing well and has a strong outlook with significant opportunities in the UK.

3.83 Given that many assets in the UK Continental Shelf (UKCS) are beginning to come to the end of their lifecycle, UK expenditure on oil and gas decommissioning is rising and was estimated to be £1.8bn in 2017. This is an increase of more than 60% from 2014 expenditure levels.[79] This strong growth is also set during the period when the overall expenditure on the UKCS fell by almost 50%, reflecting a challenging period of market conditions. However, decommissioning still accounts for a very small proportion of overall industry expenditure on oil and gas in the UKCS, at 8% in 2017. This is due to the drop in oil prices since 2014 meaning that industry is looking to increase efficiencies and reduce decommissioning expenditure.

Figure 2.17: At-a-glance sector assessment for oil & gas decommissioning
Business base+ Employment+ Turnover* GVA Trade# Impact distribution
UK -- - ++ -- -- -
England -- -- N/A N/A N/A +
Northern Ireland - N/A N/A N/A N/A --
Scotland -- - N/A N/A N/A +
Wales - -- N/A N/A N/A --

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

+ For Support activities for petroleum and natural gas extraction
* Based on decommissioning expenditure as part of wider oil & gas activity
# For wider ‘Mining support service activities sector’

Sector performance

3.84 Overall oil and gas support activity turnover has decreased in the last few years. In the UK, the total turnover of businesses providing support activities for oil and gas extraction (of which decommissioning is part) was almost £5.4bn in 2017, although this had fallen significantly from a peak of £7.9bn in 2014 before the oil prices decline.

3.85 The business and employment base for oil and gas support activity has also decreased, though largely as a result of the oil & gas industry downturn. There were 210 businesses in the UK involved in support activities for oil and gas extraction in 2018, and they were broadly split between England and Scotland.[80] This total number of businesses has fallen substantially since 2013, particularly so in Scotland (-85; -45%). The sector employed c.20,000 people in 2017, with the vast majority of these being based in Scotland and particularly in Aberdeen City and Aberdeenshire. Again, over the period of falling oil prices (i.e. since 2014), employment numbers have been declining in Scotland (-18%) and England (-63%). Very little oil and gas decommissioning economic activity is based in Northern Ireland and Wales.

3.86 GVA for the oil & gas decommissioning sector has increased recently, in contrast to the business base and employment. GVA for the wider oil and gas extraction sector has fluctuated widely over the last decade, from a high of £3.18bn in 2008 to a low of £1.46bn in 2016. Most recent figures place it at £2.38bn for 2017. GVA per worker in the sector, an indicator of productivity, is very high at £121,000, over double the UK average. This reflects the high value nature of the sector. GVA per worker has grown since 2014 suggesting forced increasing efficiencies by oil and gas companies as a result of the oil price crash.

Sector outlook

3.87 It is forecast that £15.2bn will be spent on oil and gas decommissioning projects in the UKCS over the next decade, from 2019 to 2028.[81] Geographically, almost half of this expenditure is forecast for the Central North Sea, and, by activity, almost half of expenditure is expected to be on well plugging and abandonment activities. Cumulative expenditure over the next decade has been revised downward somewhat, influenced by: the aim of maximising economic recovery (MER), intended to drive down costs and improve efficiencies in oil and gas activity; better understanding of operating late-life assets, which in turn influences the timing of decommissioning, and continuing investment in new production assets in the UKCS. However, the overall trend is one of increasing oil & gas decommissioning activity, and therefore expenditure.

3.88 Wood Mackenzie forecasts that, over the period, the UK will have the highest decommissioning spend in the world, accounting for 33% of the forecast expenditure by the top 12 global markets.[82] Forecast spends by the USA and Norway is second and third. Regulations in other countries differ to that of the UK. For example, the disposal of platforms at sea and being converted into artificial reefs is allowed in the USA.

3.89 After a sustained period of rising oil prices followed by a rapid fall from 2014, the sector is now committed to operational improvements and cutting expenditure. This will be key to the UK positioning itself as a global leader in decommissioning.

3.90 There is also increasing interest in the application of circular economy principles to oil and gas decommissioning in the UK. Zero Waste Scotland has identified ways in which oil and gas assets could be reused and reconditioned for economic gain.[83] Two approaches in particular include the re-use of components (e.g. steel, pipelines, and cables) and the reconditioning of equipment (e.g. vessels, tank, and accommodation blocks) in other industries.

3.91 When decommissioning, operators are required to assess the environmental and societal impacts of different activities, in particular the impact on commercial fisheries which can lead to negative consequences such as damaged equipment and spoilt catches.[84] The number of incidents reported has fallen significantly over time, and this is likely due to improved technology and communication. Going forward, oil and gas operators will need to continue to take cognisance of the impact of their decommissioning activities on other marine sectors and the marine environment.

Oil and gas decommissioning in Norway

3.92 On the Norwegian shelf, there are currently 12 concrete facilities, 23 steel floating facilities and 59 steel facilities resting on the seabed. In addition, there are nearly 400 subsea installations. The concrete facilities account for around 70% of the total weight of facilities on the shelf. Thus far, the Frigg field is the largest field on the shelf where facility decommissioning has been completed following production ceasing in 2004. Offshore disposal work began in 2005 and the extensive work was completed in 2010.[85]

3.93 At present, authorities in Norway have processed around 20 decommissioning plans, making disposal decisions where a final deadline has been set for the completion of removal projects. Between 2016 and 2021, up to 25% of the fields currently on stream will be able to be closed. It is difficult to predict when producing fields will be shut down, as shown in Table 2.5 below.

Table 2.5: Change in estimate lifetime for selected Norwegian oil and gas fields, 1980-2050
Field Latest year of reported production in:
1992-1995 2002 2018
Veslefrikk 2007 2014 2025
Varg 2003 2006 2016
Statfjord 2007 2020 2025
Gullfaks 2004 2016 2042
Ekofisk 2025 2028 2050
Draugen 2007 2016 2035
Brage 2005 2008 2030

Source: Norwegian Petroleum Directorate, 2018

3.94 Costs related to the shut-down and disposal of facilities are fairly small compared to the costs related to exploration, development and operations and the revenue from the field. Decommissioning costs are also uncertain, and vary from field to field, with the largest cost elements in disposal and decommissioning related to the permanent plugging of wells and removal of the offshore facilities.

Figure 2.18: Field shut-down costs, 2011-2021[86]
Decommissioning shut-down costs of Norwegian fields, 2011 to 2021

Source: Norwegian Petroleum Directorate, 2016

3.95 Shut-down and disposal costs decreased from £3.3bn in 2010 to £858m in 2015.[87] It was forecast that the decommissioning costs in 2016 would total approximately £2.1bn, and by 2021 this figure would be £1.1bn[88], based on predicted lifespan for existing oilfields on the Norwegian shelf. From 2011 to 2021, decommissioning costs will account for 3% of the £263bn used or intended to be spent on petroleum activities, broken down into: 58% investment, 24% operating costs, 12% exploration costs, 3% cessation costs, and 3% other costs. This is a considerably lower proportion than for the UK oil & gas decommissioning sector.

Figure 2.19: Field disposal costs, 2011-2021
Decommissioning field disposal of Norwegian fields, 2011 to 2021

Source: Norwegian Petroleum Directorate, 2016

3.96 Longer term estimates put Norwegian decommission expenditure among the third highest globally after the UK and the United States. From 2018 to 2027, Wood Mackenzie forecasts Norwegian expenditure to be around £9bn, one-third of the UK total expenditure (£27bn).[89] During this time, Norway expects to decommission 363 wells (subsea and platform), initially at a pace of 22 per year until 2024 and thereafter at an average of 70 per year from 2025 to 2027 following the beginning phases of some large decommissioning projects.

3.97 Another competitor/comparator sectors is the Netherlands, who anticipate decommissioning 419 wells (suspended subsea exploration and appraisal, subsea development and platform) between 2018 and 2027. It is expected the majority of these wells will be fully decommissioned by the end of 2025.

3.98 Based on the available evidence, and taking the global downturn in the oil & gas industry into consideration, it can be argued that there is no growth challenge in the industry, but rather that any changes in the sector are subject to global trends and influences. The UK is positioned well globally in terms of the scale of its activity, and this is forecast to continue growing over the next decade. There nevertheless are industry-specific constraints that impact on the productivity and efficiency of the sector, and these are explored in more detail in Chapter 4.

Marine tourism

3.99 Marine tourism forms a major part of the broader tourism industry, and encompasses a diverse range of activity that takes place both in the water (such as scuba diving, sailing/ leisure marine and jet skiing), and includes coastal tourism (usually referring to the type of tourism which takes place at the seaside), and other maritime activities. There are also a number of related sectors that are directly impacted by marine tourism, such as food and drink, transport and energy. It is likely that the diverse nature of the sector accounts for the lack of consistent data for marine tourism at the UK level. At a global level, there are varying definitions of marine tourism, which results in a lack of comparable data – where this is available.

3.100 As Figure 2.20 illustrates, marine tourism in the UK has grown in recent years, but the extent to which this growth has been seen across the UK is not clear. The following sections examine this in more detail.

Figure 2.20: At-a-glance sector assessment for marine tourism
Business base Employment Turnover GVA Trade Impact distribution
UK N/A + ++ ++ ++ +
England N/A + N/A N/A N/A +
Northern Ireland N/A + N/A N/A N/A +
Scotland N/A ++ ++ ++ ++ +
Wales N/A + N/A N/A N/A +

Key

++ Strong growth; widespread distribution of impacts

+ Weak or no growth; weak distribution of impacts

- Weak negative growth; poor distribution of impacts

-- Substantial negative growth; very poor impact distribution

N/A No data available

Sector overview

3.101 The marine tourism sector in the UK was valued at an estimated £4-5bn in 2016.[90] As Table 2.6 indicates, marine tourism in Scotland had a turnover of £1.0bn in 2016 (increasing by over a third from £746m in 2009), leading to a GVA contribution to the economy of £554m, whilst the total spend generated by domestic coastal tourism in England and Wales is approximately £8bn, and the sector contributes £3.6bn in GVA a year. UK marine leisure exports were estimated to be £882m in 2015.

Table 2.6: Summary of GVA and Turnover Estimates
Geography Turnover GVA Sector
England and Wales £8.0bn £3.6bn Domestic Coastal Tourism
Scotland £1.0bn £554m Marine Tourism
Northern Ireland £926m - Total Tourism
UK1 - £4-5bn Marine Tourism

Source: National Coastal Tourism Academy; Scottish Government; North Ireland Statistics and Research Agency; Big Lottery Fund

Sector performance

3.102 Coastal tourism in England and Wales directly supported 212,000 jobs in 2010-2012 (up from 207,000 in 2006-08), and that the number indirectly supported could be as high as 600,000.[91] There is a more recent figure for marine tourism employment in Scotland, in 2016 an estimated 27,900 jobs were in the sector, up 15% from 2008.[92] In Northern Ireland, the visitor economy as a whole supported more than 61,000 jobs in 2017,[93] and coastal tourism represents a significant proportion of the wider tourism turnover in the region (£926m in 2017, up from £641m in 2011[94]).

3.103 Tourism is a key employer in many coastal areas in the UK, with boating related tourism alone having created 62,200 new jobs (between 2013 and 2018). Indeed, direct boating tourism contributes more GVA to the UK economy than other sectors individually including the agriculture, forestry and fishing industry, and motion picture and television programme production. Table 2.7 illustrates that at a local level in England and Wales, coastal tourism has the largest employment impact in the South West, where nearly a third of the England and Wales total are employed. The South West and South East are the locations for growth in employment with the employment numbers and in the North West and Wales falling since 2006/08.

Table 2.7: Average year-round employment directly supported by seaside tourism
Region 2006/08 2010/12
South West 61,000 68,000
South East 46,000 49,000
North West 29,000 25,000
East of England 23,000 23,000
Wales 20,000 19,000
Yorkshire and Humber 14,000 14,000
North East 7,000 7,000
East Midlands 6,000 7,000
England and Wales 207,000 212,000

Source: Beatty, Fothergill and Gore (2014)

3.104 However, like the wider tourism sector, marine tourism faces challenges in attracting talent; this is a significant challenge for the tourism sector not just across the UK, but more widely.[95] This is related to real and/or perceived low pay, high turnover of staff, competition from other sectors, long shifts and the seasonality of work.

3.105 Within the boating tourism sub-sector, boat hire, charter and training contributed the most GVA (£132m) to the UK economy. This can be attributed to increased spending on leisure activities as wealth and disposable incomes rose following the UK’s recovery from the financial crisis.

Sector outlook

3.106 The marine tourism sector demonstrates the potential for further industry growth, and there are several examples of strong performance within sub-sectors of marine tourism. Sailing tourism in Scotland is projected to increase to potentially £167m by 2020 (from an estimated economic value of around £130m in 2015), exceeding its initial £145m target.[96] The growth in economic value of marine tourism is also projected to rise from £360m in 2015 to around £450m in 2020 supported by Scotland’s National Marine Tourism Strategy ‘Awakening the Giant,’ which is set to provide authentic experiences through new cruise routes and themed journeys among others.[97] Further, there is a growth globally in more sustainable forms of tourism generally, and this can support social and environmental benefits in local areas. For example, well-managed wildlife-based tourism can offer an economic opportunity that supports wildlife, as well as a range of well-being benefits.[98] However, it must be responsibly managed and operators must engage with staff, customers and, most importantly, local people.

Broader sector trends

3.107 Coastal and maritime tourism has become a major economic sector for countries with accessible and attractive coastlines, and is considered to be one of the fastest growing forms of tourism. In global terms, the marine tourism market was worth US$ 59 billion in 2018, and is anticipated to grow 7% to US$ 93 billion by 2025.[99] Cruise tourism is a major component of this. In 2010, 19 million passengers across the world booked cruise trips and by 2017 the number had risen to 26.7m, exceeding all projections.[100] Europe accounted for 26% of this total, equating to almost 7 million passengers.

3.108 Sailing and yachting is also anticipated to grow. There is a huge potential for boating growth in Europe – it is home to an estimated 36 million boaters, a fleet of around 6 million boats, and some of the world’s most popular sailing grounds served by more than 4,500 marinas.[101] However, participation in sailing has been trending downwards since 2002.[102] In contrast, marine leisure activities such as paddle-boarding, kayaking and surfing are growing.

3.109 Wildlife-based tourism is growing rapidly worldwide as the number of tourists continues to grow and as travellers seek out new and more enriching personal experiences with local cultures and wildlife. It is estimated that 7% of the world’s tourism in 2017 related to wildlife tourism, growing annually at about 3%, and much higher in some places (like UNESCO world heritage sites).[103] Around 4% of holiday trips in the UK include some element of wildlife. Wildlife operators see the majority of their visitors as combining a strong interest in wildlife watching (such as whale and dolphin watching, along with other species including seals and birds) with other activities, such as walking, cycling, touring, sightseeing, photography, history, culture and visiting distilleries, which may make up the primary purpose of their visit.[104]


Contact

Email: Amy.McQueen@gov.scot