The Energy (including renewables) growth sector is defined by the Standard Industrialisation Classification (SIC) 2007 codes:

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1 Growth Sector Briefing Energy (including renewables) Office of the Chief Economic Adviser, Scottish Government February 2015 Growth Sector Definition Scotland s Energy (including renewables) sector was identified in the Government Economic Strategy 1 as one of the growth sectors in which Scotland can build on existing comparative advantage and increase productivity and growth. Since the 1970s, the North Sea oil and gas industry has supported thousands of jobs, both directly and in the wider supply chain. At the same time, Scotland has long been a net exporter of electricity and in the past decade, has seen rapid expansion of wind power, added to existing output from hydroelectric plants. Renewable electricity generation continues to grow, with onshore wind capacity expanding and offshore wind, wave and tidal resources ready to be harnessed. The Energy (including renewables) growth sector is defined by the Standard Industrialisation Classification (SIC) 2007 codes: SIC 05: Mining of coal and lignite SIC 06: Extraction of crude petroleum and natural gas SIC 09: Mining support service activities SIC 19: Manufacture of coke and refined petroleum products SIC 20.14: Manufacture of other organic based chemicals SIC 35: Electricity, gas, steam and air conditioning supply SIC 36: Water collection, treatment and supply SIC 38.22: Treatment and disposal of hazardous waste SIC 71.12/2 Engineering related scientific and technical consulting activities SIC 74.90/1 Environmental consulting activities There is an issue with regards to the treatment of SIC 6: Extraction of crude petroleum and natural gas. Estimates of GVA (from the Scottish Annual Business Statistics) and (from the Business Register and Employment Survey) are allocated to UK regions (including Scotland) according to the address at which the business is registered - onshore and offshore Oil & Gas extraction and activities are allocated in this way. GVA associated with off-shore activity, under UK regional accounts procedures, is normally allocated to a separate Extra Regio category rather than allocated to a region within the UK. The renewable energy industry is not assigned a Standard Industrial Classification (SIC) code and therefore is not identified as a separate sector of the economy for statistical reporting purposes. While some portion of renewable energy related output and will be captured in other energy sectors, for example large electricity generators based in Scotland will have a renewable energy division, other activities focussed on servicing the sector will be categorised under the core function of the business, for example, construction, manufacturing or business services. Note that we are working with the Office for National Statistics to undertake a more fundamental review of how to estimate renewable and low carbon jobs. 1

2 Key Statistics Recent trends in GDP (Q3 2014) - updated February 2015, next update April 2015 Decrease in output of 1.9% in latest quarter, but an increase of 3.8% over the year The latest GDP data 2 shows that output in the Energy growth sector, decreased by 1.9 per cent in the most recent quarter, but in year on year terms output increased by 3.8 per cent. The quarterly change in output for the Energy growth sector is in the opposite direction as that measured across the economy as a whole (shown by the total GVA line in the accompanying graph) where output increased by 0.6 per cent in the last quarter. Over the year however, the increase in output in Energy outperformed that of the economy as a whole, which increased by 3.0 per cent year on year. Since 2009 output in the Energy growth sector has increased substantially, with the Energy GDP index increasing by 14.5 per cent between the first quarter of 2009 and the third quarter of 2014, whilst in the economy as a whole output increased by 6.3 per cent =100 Scottish Quarterly GDP index, 2014 Q Total Gross Value Added Energy (including Renewables) Increase in between 2012 and 2013 Nearly 30% of in Mining support service activities Employment (2013) updated October 2014, next update November 2015 Employment in the Energy growth sector stood at 66,000 in 2013, representing an increase from 2012 (up 2,600 jobs). In Scotland, the sector accounts for 2.7 per cent of, whilst across Great Britain as a whole, the Scottish sector accounts for 22.8 per cent of GB in Energy, and for 60.6 per cent of all GB in Extraction of crude petroleum and natural gas. Within the Energy growth sector, 27.6 per cent (18,200) of jobs are in Mining support service activities, which includes support activities for petroleum and natural gas extraction. A further 25.2 per cent (16,600 jobs) are in Electricity, gas, steam and air conditioning supply, which includes Electric power generation, transmission and distribution. 2 The index represents the volume of GVA created compared to the 'base' year (currently 2011). Figures are deflated to remove the effect of price changes over time to produce an estimate of real terms (or constant price) growth. The figures are seasonally adjusted to remove the effects of regular, calendar based cycles in certain industries.

3 5.0% 2.8% 1.1% 0.8% 1.6% 2.4% 1.7% 1.7% 1.2% Employment in Energy in Scotland % 25.2% 22.0% 14.2% 66, % 23.0% 19.4% 14.4% 63, ,000 20,000 30,000 40,000 50,000 60,000 70,000 SIC 09: Mining support service activities SIC 71.12/2 Engineering related scientific and technical consulting activities SIC 36: Water collection, treatment and supply SIC 74.90/1 Environmental consulting activities SIC 20.14: Manufacture of other organic based chemicals SIC 35: Electricity, gas, steam and air conditioning supply SIC 06: Extraction of crude petroleum and natural gas SIC 05: Mining of coal and lignite SIC 19: Manufacture of coke and refined petroleum products SIC 38.22: Treatment and disposal of hazardous waste Employment across Scotland (2013) updated October 2014, next update September % sector employme nt in Aberdeen City and Aberdeens hire Employment in the Energy growth sector is highly concentrated, with 56.4 per cent of being located in Aberdeen City and Aberdeenshire local authority areas. To better understand the importance of the Energy growth sector to local economies, it is useful to consider location quotients 3. The top two local authority areas in terms of location quotients are: Aberdeen City 6.0 and Aberdeenshire 3.0. In these local authority areas the Energy growth sector is over-represented, where in Scotland as a whole 2.7 per cent of is in this sector, in Aberdeen City this is 15.7 per cent and in Aberdeenshire 7.7 per cent. 3 The location quotients used here compare the percentage of jobs in a local authority that are in Energy against the percentage of all jobs in Scotland that are in Energy. Therefore, in a local authority with a location quotient of 1.0 the percentage of jobs in Energy is the same there as in Scotland as a whole. In a local authority with a location quotient greater than 1.0 the percentage of jobs in Energy is higher there than in Scotland as a whole, and in a local authority with a location quotient lower than 1.0 the percentage of jobs in Energy is lower there than in Scotland as a whole.

4 Exports increased by 6.6% compared to 2012 Exports - Global Connections Survey (2013) 4 updated February 2015, next update January 2016 Total exports from the Energy growth sector stood at 15.7 billion in 2013, accounting for 21.2 per cent of Scotland s total exports. Exports from the sector were 6.6 per cent up in real terms 5 from their 2012 level. Exports to the Rest of the UK (RUK) stood at 11.1 billion in 2013 and accounted for 70.3 per cent of total Energy exports. Exports to the Rest of the World (RoW) stood at 4.7 billion and accounted for 29.7 per cent of total Energy exports. Turnover/Gross Value Added (2012) updated August 2014, next update September 2015 Extraction of crude petroleum and natural gas accounted for 43% of turnover In 2012, total turnover in the Energy growth sector was 55.3 billion, down 13.8 per cent in nominal terms on A large share of this turnover was generated by Extraction of crude petroleum and natural gas (43.0 per cent). Gross Value Added 6 for the Energy frowth sector totalled 23.1 billion, down 10.9 per cent in nominal terms on This decrease was driven by a fall in Extraction of Crude Oil & Natural Gas activity value added (down 4.4 billion over the year), which was partly due to a drop in production. This drop in production was driven by a number of short-term impacts such as unplanned stoppages and maintenance downtime. Enterprises (2014) 7 updated January 2015, next update November 2015 Just over 80% in large businesses In March 2014, there were 3,580 registered enterprises operating in the Energy growth sector, representing 2.1 per cent of all registered businesses operating in Scotland. The Scottish Energy growth sector is characterised by small businesses. In 2014, 95.8 per cent of registered enterprises in the Scottish Energy growth sector were small (0-49 employees), although these accounted for only 11.7 per cent of in the sector. In contrast, large enterprises (250+ employees) which accounted for just 1.7 per cent of registered enterprises, accounted for 80.1 per cent of in the sector. Enterprise Size and Employment in Energy % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Enterprises Employment Large (250+ employees) 1.7% 80.1% Medium ( employees) 2.4% 8.2% Small (0-49 employees) 95.8% 11.7% 4 The figures for growth sectors are derived by aggregating estimates based at a low Standard Industrial Classification (SIC) level. The Global Connections Survey is not designed to collect data at this level of accuracy, therefore these results should be treated as indicative prices based on Treasury GDP deflators (December 2014). 6 Please note that this includes off-shore activity, see Growth Sector Definition above. 7 Employment statistics referred to here are not directly comparable with Business Register and Employment Survey (BRES) data.

5 94% businesses Scottish owned, but nearly 53% employed in foreignowned Median earnings highest of the growth sectors R&D spend variable The majority of enterprises in the sector are Scottish owned (94.4 per cent), but these accounted for 31.7 per cent of in Although only 3.9 per cent of businesses in the sector were foreign-owned 8, they accounted for 52.9 per cent of in Earnings (2014) updated January 2015, next update November 2015 Median weekly full time earnings across the Scottish Energy growth sector stood at 721 in 2013 down 2.6 per cent on 2013 (nominal terms). This comes after an 11.6 per cent increase between 2012 and Earnings in the Energy growth sector compare favourably to the Scottish average, which stood at 519 in 2014, and are the highest of all the growth sectors. Research and Development (2013) updated January 2015, next update December 2015 Business Enterprise Research and Development (BERD) spending in the Energy growth sector was disclosive in In million was spent on research and development. R&D spending in this sector is variable, with a peak of 75 million in Sources of Information GDP Scottish Government Quarterly GDP Index. Employment Business Register and Employment Survey. Exports Global Connections Survey. Turnover & GVA - Scottish Annual Business Statistics for food and drink manufacturing and fishing; Agriculture Census for agriculture sub-sector. Enterprises Inter Departmental Business Register. Earnings Annual Survey of Hours & Earnings. Research and Development Business Enterprise Research and Development survey. All data are available from the Growth Sector Statistics Database, at: For more information about the methodology behind the Growth Sector Statistics Database, please see the Methodology Note, at 8 Foreign-owned is defined as not Scottish or Rest of the UK owned.