The economy of rural Scotland is both similar to, and tightly integrated with the economy of urban Scotland. However, distinct differences, often related to distance and scarcity, remain between urban and rural economies. The rural economy has undergone significant structural change over the past twenty years. This working paper sets out our current understanding of the Scottish rural economy, using the available data; develops the information on household and employment data and points to key challenges for the rural economy including broadband services, and fuel poverty. This paper does not deal with natural capital, ecosystem services or the wider public benefits supplied to or by businesses in rural Scotland. However, it supports a more detailed approach towards defining the rural economy as particularly industry sectors in Mainly Rural parts of Scotland develop differently than in the Islands and Remote Rural areas.
- The largest sectors of both the rural and urban economy are 'Public Administration' and 'Distribution, Wholesale and Retail' in terms of their Gross Value Added. In Islands and Remote areas, 'Real Estate' (11% GVA of the total economy in Islands and Remote) and 'Construction' (9% GVA) come next, whereas in more accessible Mainly Rural areas 'Manufacturing' (14% GVA) and 'Real Estate' (12% GVA) are the third and fourth largest sectors.
- 'Agriculture, Fisheries and Forestry' account for 4% of the GVA in Islands and Remote and 3% in Mainly Rural Scotland. On Scottish average, the sector accounts for 1.3% of the GVA. It is the smallest employer in Mainly Rural Scotland (4.4%) and the fifth smallest employer in the Islands and Remote areas (7.7%).
- Overall GVA growth since 1997 has been positive for rural Scotland and highest in Mainly Rural areas. The fastest growing sector is 'Business Services' (up by 169 %) and the smallest growth was in 'Agriculture, Fisheries and Forestry' (up by 34%). Growth rates for the Islands and Remote Rural Scotland are largest in Construction (up by 131%). The worst performing sectors here are 'Agriculture, Fisheries and Forestry' with no growth and 'Financial Services' with a decline of 29%.
- GVA growth between 2007 and 2015 has been positive across Scotland and strongest in Mainly Rural areas (24%), followed by GVA growth in Larger Cities and Islands and Remote Rural areas (both 19%) and Urban with Substantial Rural areas (14% GVA growth since 2007).
- The rural economy is highly variable in economic performance between sectors and local authorities. Aberdeenshire and Highland councils have the largest GVA in most sectors; the island authorities are much smaller in employment and GVA terms.
- Women living in Remote Rural Scotland have the lowest annual income of any group, and the largest median Gender Pay gap being at £5,076.
- Unemployment is lower in Rural Scotland than urban Scotland, and employment and activity rates are higher, though East Ayrshire in particular has unemployment far above the national average. Rural out-migration may mitigate this difference.
- The pattern of employment is different in Rural Scotland. More people are in part time employment in Remote Rural Scotland (31%) than urban Scotland (27%); and self- employment is more common in Remote Rural Scotland (22%) than urban Scotland (10%).
- Households in rural areas show differences between Accessible Rural and Remote Rural Scotland. Accessible Rural areas are characterised by higher incomes, and better access to household services, and lower levels of fuel poverty.
- 68% of private sector employees in Remote Rural Scotland are in small businesses. This compares with 54% of private sector employees in Accessible Rural Scotland and only 32% of private sector employees in the Rest of Scotland.