Peter Jones: Unreliable numbers don’t add up

Much was made of Grangemouth's sales rising by 37%, but that was only because gas prices rose. Picture: Jane Barlow
Much was made of Grangemouth's sales rising by 37%, but that was only because gas prices rose. Picture: Jane Barlow
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If Scotland’s import-export balance is in 
deficit we should know about it, but none of the figures agree, writes Peter Jones

Exports are one of Scotland’s big success stories. Last week, John Swinney, the finance secretary, welcomed figures showing a growth in manufactured exports in autumn 2012 and a few days earlier, Alex Salmond hailed statistics which he said showed “rocketing” exports. But how reliable are these numbers? And while these figures subliminally suggest that Scots are a nation of exporters, is that really true?

The answers, I’m afraid, are that the numbers are not at all reliable, are less impressive than they look, and we might actually be a country dependent on imports unless, of course, we get our hands on oil with independence.

Knowing the truth of this matters, for Scotland’s balance of trade is an important piece of information that will help everybody calculate whether to vote Yes or No in the independence referendum. And right now, no more than an educated guess is available as to whether Scotland’s non-oil balance of trade is positive or negative.

Let’s start with the export figures. In January, the Scottish Global Connections survey was published. It showed that in 2011, the value of Scottish exports outside the UK rose by 7 per cent to £23.9 billion, prompting Mr Salmond’s “rocketing” claim.

The first point to note is that this total sales value is only 4.85 per cent of total UK exports of goods and services in 2011 of £492.6bn recorded in the UK National Accounts Blue Book, and much less than Scotland’s 8.4 per cent share of UK population. So it looks like we are not much better than half as good as the rest of Britain at selling our products overseas.

A second point is that UK exports rose by 12.2 per cent between 2010 and 2011, so if Scottish exports were “rocketing”, UK exports went into warp drive.

Then thirdly, when you look into the survey detail, you discover that much of the 2011 increase is down to bulk chemicals, the ethylene and other hydrocarbon derivatives produced by Grangemouth and Mossmorran, the export value of which rose from £2.7bn to £3.7bn, a 37 per cent increase.

That looks impressive, until you realise that all the rise stems from the increase over that period in the cost of the raw material – natural gas – the UK price of which also rose by 37 per cent. So we didn’t sell any more chemicals, we just had to charge a lot more for what we do sell.

And when you strip chemicals out of the export mix, all other export sales values rose by just 2.9 per cent, in line with the 2.8 per cent increase in GDP across the G20 countries. So in the international exports race, Scotland is an average competitor, and well off the pace set by the UK.

Well, maybe these figures aren’t accurate, so let’s check them. An interesting feature of this latest Global Connections Survey is that it shows, when you add in fine and speciality chemicals, that total chemicals exports in 2011 were £4bn.

Rather surprisingly, that outstrips Scotland’s usual No 1 export – whisky and other distilled spirits – which was recorded in the survey as valued at £3.5bn. However, no sooner than I had written that elsewhere than the Scotch Whisky Association was in touch, indignantly pointing out that according to HMRC figures, whisky exports alone were worth £4.23bn in 2011.

A £700 million difference? That’s a bit more than statistical error. Out of curiosity, I looked up HMRC figures on the chemicals sector. Turns out the taxman reckons that Scottish chemicals exports in 2011 were a piffling £1.6bn, some £2.4bn short of the Global Connections figure of £4bn.

Come on! This is getting ridiculous. Let’s try looking at the totals. HMRC do not collect figures on service exports because it relies on importers and exporters filling in customs forms, which only covers goods, or visible trade in old money jargon. Excluding services exports figures, that gives a Global Connections goods exports value of £16.2bn.

This is short of the HMRC goods export total of £17.4bn. But given the claimed over/under-estimates on both sets, neither looks particularly reliable.

Irrespective of what the correct exports value is, what matters is that it should be higher than the imports bill. True, countries can survive for years, decades even, with a balance of trade deficit. The US and the UK are outstanding examples of that. It does lead to long-term problems though, one being a large amount of public and private debt built up to pay the import bill.

But unfortunately statistics on imports are not collected. There is, however, an estimate of imports, which is produced by Scottish Government economists and which can be found in a set of experimental figures called the Scottish National Accounts Project (SNAP).

This gives yet another figure for goods and services exports to the rest of the world – £25.8bn – which is higher than the other figures. And imports from the rest of the world according to SNAP total £20.6bn. Hooray, now Scotland has a trade surplus.

But that’s not the story for an independent Scotland. The SNAP data say that exports to the rest of the UK, which would be a foreign country with independence, total £35.7bn. And imports from the rest of the UK add up to £48.6bn, yielding a UK trade deficit of £12.9bn. Boo.

Add this UK trade deficit to the rest of the world surplus, and you end up with a total trade deficit of £7.7bn. Boo again.

But the SNAP import figures, it turns out, are no more than a balancing figure estimated to make a macroeconomic sum for the overall Scottish economy to work out. Given the wide variation in export numbers, they cannot possibly be reliable.

Of course, that isn’t the end of the story as far as independence is concerned, for these figures do not include the export value that would come from Scottish control of most of the North Sea. This would certainly turn a trade deficit, whatever it may be, into a whopping great surplus, but how much of a surplus no-one really knows.

You can draw your own conclusions from this. Politically, you can either decide that independence is a safe bet, or that Scotland alone is so dependent on oil as to be highly vulnerable. But for both sides of the fence and those sitting on it, a pile of better and more reliable numbers would be good.