Fast Track Scotland - Making the Case for High Speed Rail Connections with Scotland

2. Strategic and Economic Context

2.1 EU Policy Context

Establishing an efficient trans-European transport network (TEN-T) has constituted a key element in the relaunched Lisbon Strategy for competitiveness and employment in Europe and will play an equally central role in the attainment of the objectives of the Europe 2020 Strategy. The European Commission argues that to "fulfil Europe's economic and social potential, it is essential to build the missing links and remove the bottlenecks in its transport infrastructure, as well as to ensure the future sustainability of the transport networks by taking into account the energy efficiency needs and the climate change challenges"[14]. A national high speed rail network which includes Scotland will clearly contribute to the TEN-T objectives.

2.2 UK Policy Context

The UK Government's economic policy objective is "to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries"[15]. While many of the UK Government's regional economic development policies[16] are restricted to England, its overall growth policy "aims to create growth in all parts of the UK", and it is committed to working "closely with the devolved administrations to achieve this aim"[17].

Key Message

A new high speed line must be built to Scotland to realise the fullest economic benefits for the UK. As Britain's cities are drawn closer together, all will benefit.

The UK Government's Plan for Growth includes an overarching ambition "to encourage investment and exports as a route to a more balanced economy". Progress towards that ambition will be measured by "an increase in private sector employment, especiall in regions outside of London and the South East"[18].

The National Infrastructure Plan[19] firmly positions high speed rail as making a transformational contribution to the goal of sustainable and balanced economic growth:

"investment in a high-speed rail network that would make rail increasingly the mode of choice for inter-city journeys within the UK, and for many beyond. A new high speed rail network could transform journey times on key inter-urban routes and radically reshape the UK's economic geography: connecting this country's great cities and international gateways and helping to bridge the North-South divide that has, for too long, limited growth outside London and the South East."

2.3 Scotland's Strategic Vision

The Government Economic Strategy[20] (2011) sets out the core Purpose for the Scottish Government:

To focus Government and Public Services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth.

It sets out six Strategic Priorities:

  • Supportive Business Environment
  • Learning, Skills and Well-being
  • Infrastructure Development and Place
  • Effective Government
  • Equity
  • Transition to a Low-Carbon Economy.

Three of these in particular highlight the importance of Scotland's inclusion in a UK high speed rail network. These are shown below, together with their key strategic approaches.

Infrastructure Development and Place

  • To focus investment on making connections across and with Scotland better, improving reliability and reducing journey times, seeking to maximise the opportunities for employment, business, leisure and tourism
  • To provide sustainable, integrated and cost-effective public transport alternatives to the car, connecting people, places and work across Scotland.

Supportive Business Environment

  • Targeted support to business in the pursuit of opportunities outside Scotland and the development of internationally competitive firms
  • A particular policy focus on a number of key sectors with high growth potential and the capacity to boost productivity.

Transition to a Low-Carbon Economy

  • Support innovative low-carbon technologies
  • Decouple trends in emission levels from trends in economic growth
  • Policy focus on resilience against commodity and energy price volatility.

The Scottish Government's National Transport Strategy (2006)[21] sets a long term vision for the future of transport in Scotland: a transport system fit for the 21st century that provides everyone in Scotland with integrated, modern, reliable and environmentally efficient transport choices.

The strategy identifies three strategic outcomes as being central to achieving this vision:

  • Improving journey times and connections, to tackle congestion and lack of integration and connections in transport
  • Reducing emissions, to tackle climate change, air quality and health improvement
  • Improving quality, accessibility and affordability to give a wider choice of public transport, better quality services and value for money.

The political, social and economic landscape has changed significantly since publication of the National Transport Strategy in 2006. However, the Strategy's priority of achieving a higher level of sustainable economic growth for the whole of Scotland remains. The National Transport Strategy outcomes, which directly contribute to securing sustainable economic growth, are consistent with Scotland's ambitions for high speed rail.

2.3.1 National Planning Framework 2

A high speed rail link to London is recognised as a national priority development within Scotland's National Planning Framework 2[22]. Developments designated as national developments will still require to secure planning permission and other relevant consents, but the Scottish Ministers may intervene at any stage of the process to ensure that decisions are made expeditiously.

2.4 Economic context

Scotland has a population of just over 5 million (forecast to rise to 5.5 million by 2030[23]) and output with a value in excess of £102 billion in 2008. This is equivalent to around 8% of the UK economy. The service sector is the largest sector in the Scottish economy, accounting for 79% of all employees, followed by the production (12%) and construction sectors (8%)[24]. The largest sub-sector within services is public sector, education and health while Scotland also has strong business and financial services sectors. The largest sub-sector within manufacturing is electronics and electrical engineering, followed by food & drink.

Table 2, opposite, provides an overview of key economic indicators for the Scottish economy overall, and split by region. UK values are also provided for comparison.

Taken together, wider Edinburgh and wider Glasgow have a population and working age population of a similar magnitude to each of West Midlands and Greater Manchester, but a GVA per capita that is significantly higher than both[25]. The wider Edinburgh and wider Glasgow areas, collectively known as the Central Belt, represents the heart of the Scottish economy.

A recent study by Aecom[26] suggests that Glasgow and Edinburgh have complementary strengths in all the Scottish Government's key sectors to the extent that together the provide an important counter-balance to London's dominance in some key sectors such as Financial Services and Creative industries, thereby helping to secure the growing strength of these sectors in the UK. The research also highlighted the fact that Glasgow and Edinburgh each have strong links with London and beyond; more so than an other parts of the UK, suggesting that intercity rail investment that excludes Scotland will jeopardise the growth of key sectors and impact on Scotland's overall competitiveness.

Strategic Development Plans are being developed for Glasgow and the Clyde Valley and South-East Scotland which predict population growth and increases in economic activity. This reinforces the need for greater connectivity with the rest of the UK.

Table 2

Overview of the Scottish economy by region
Eastern Scotland[1] South Western Scotland[2] North Eastern Scotland[3] Highlands & Islands[4] Scotland UK
Population (000s 2010) 2,011 2,281 463 468 5,222 62,262
GVA £m (2008) 41,691 42,583 12,376 6,883 102,552 1,234,445
GVA per head £ (2008) 21,061 18,587 27,388 15,426 20,031 21,103
Employment % Apr 2010 - Mar 11 72.9% 68.3% 80.3% 77.7% 71.0% 70.2%
Unemployment % Apr 2010 - Mar 11 6.9% 9.4% 4.7% 6.0% 7.8% 7.6%
No. of businesses* (2010) 70,785 73,220 23,695 25,590 193,305 2,574,230
Business per 1000 population 2010* 35.2 32.1 51.2 54.7 37.0 41.3
Business birth rate (new businesses per 1000 population in 2010)* 2.7 2.5 3.5 2.7 2.8 3.8
Business Expenditure on Research and Development (BERD) £m (2009) 293 237 76 3.9 644 15,600

* Refers to VAT registered businesses only
[1] Includes Angus and Dundee City, Clackmannanshire and Fife, East Lothian and Midlothian, Scottish Borders, City of Edinburgh, Falkirk, Perth & Kinross and Stirling, West Lothian.
[2] Includes East Dunbartonshire, West Dunbartonshire and Helensburgh & Lomond, Dumfries & Galloway, East Ayrshire and North Ayrshire Mainland, Glasgow City, Inverclyde, East Renfrewshire and Renfrewshire, North Lanarkshire, South Ayrshire and South Lanarkshire.
[3] Includes Aberdeen City and Aberdeenshire
[4] Includes Caithness & Sutherland and Ross & Cromarty, Inverness & Nairn and Moray, Badenoch & Strathspey, Lochaber, Skye & Lochalsh, Arran & Cumbrae and Argyll & Bute, Eilean Siar (Western Isles), Orkney Islands, Shetland Islands.

Source: Scottish Government, ONS, GROS

2.4.1 Wider Edinburgh economy

The wider Edinburgh economy has an annual output of over £32 billion (32% of the Scottish total) and a population of 1.6 million (31% of the Scottish total). The region is made up of nine local authority areas - Edinburgh; East, West and Midlothian; Falkirk; Clackmannanshire; Stirling; Fife and the Scottish Borders.

The wider Edinburgh region has a unique mix of characteristics, such as its culture, geography and history that make it a dynamic and attractive location to reside for both businesses and individuals. Businesses are attracted by the strong pool of highly skilled labour within the region. Over a third of working-age residents of Edinburgh are graduates compared to a fifth for Scotland. The higher skills mix leads to higher earnings and productivity within the region, with GVA per employee in the wider Edinburgh region being 12% above the Scottish average.

The wider Edinburgh region is home to a large number of highly innovative companies, investing in research and cutting edge technologies such as biotechnology, electronics and renewable energy technologies. Businesses in the region spent £246 million on research and development in 2009 (38% of the Scottish total). Four of the UK's 50 fastest growing technology companies are based in the region, which has received an Award for Excellence for Innovative Regions from the European Commission.

The key sectors of the wider Edinburgh region include financial services, tourism, energy, life sciences, electronics, textiles and creative industries.

The wider Edinburgh region employs more than 85,000 people in financial services - over 50% of the Scottish total - with critical mass in banking, fund management, asset servicing and insurance and pensions. Edinburgh has been ranked the most competitive financial centre in the UK outside of London and the seventh most competitive in Europe. Eight of the world's 10 largest banks have a presence in the region, including the Royal Bank of Scotland Group, which has its global headquarters in west Edinburgh. Other global financial services firms with operations in the region include AEGON, State Street and BNY Mellon.

Edinburgh is the most popular destination amongst overseas visitors to the UK after London[27]. The city's year-round festivals are attended by over 5 million people each year generating more than £260 million for the Scottish economy. The National Galleries of Scotland are the most popular visitor attraction in the UK outside of London.

2.4.2 Wider Glasgow economy

The wider Glasgow economy accounts for 35% of Scottish output, at over £35 billion, and contributes to over 36% of Scotland's exports. Glasgow City Region is home to more than one in three Scots, supporting 1.76 million people. The region comprises the local authority areas of Glasgow, East and West Dunbartonshire, Renfrewshire, North and South Lanarkshire, East Renfrewshire and Inverclyde.

The city region is an important provider of further and higher educational opportunities on a national and increasingly international stage and there are important commuter flows from Argyll and Bute, Ayrshire, Stirling and Edinburgh City Region.

The region is a focal point for the Scottish Government's key growth sectors. It is home to nearly 40% of all jobs in financial services, aerospace, defence and marine as well as accounting for one in three of all jobs in the tourism, food and drink and construction sectors.

Glasgow City alone supports nearly 600,000 people. Its key sectors are life sciences, tourism and events, financial and business services, engineering, design and manufacturing and low-carbon industries. The creative industries (digital media, TV & film production, music and design) are also recognised as making an important contribution to Glasgow's quality of life and investment offer.

Glasgow is the UK's second most popular city after London for inward investors and the UK's second largest retail centre outside the West End of London. Although the city's manufacturing base has contracted it retains high value-adding specialisms in areas such as ship-building and marine (naval shipbuilding, commercial ship management and training) and enabling technologies (optoelectronics).

The development of Glasgow's International Financial Services District (IFSD) has contributed to Glasgow becoming one of the UK's largest financial services sectors, employing more than 30,000 people. The IFSD has also played a major part in Glasgow's inward investment success, attracting international players to set up in the city. Glasgow provides a specialised labour pool for: banking and insurance; fund management; stockbroking; technology support for financial services companies and back office functions. The Clydesdale Bank is headquartered in Glasgow while a number of other key banking sector companies have also relocated some of their services to the city. Global companies within the banking sector who have a considerable presence within Glasgow include Barclays Wealth, Morgan Stanley, BNP Paribas, AON, ACE Insurance, JP Morgan, Lloyds Banking Group and HSBC.

With five higher education institutions in the city (Glasgow, Strathclyde and Glasgow Caledonian Universities, Glasgow School of Art and the Royal Conservatoire of Scotland), investors have access to a highly talented labour force. The city's efficient public transport network also enables the 1.76 million living in the wider Glasgow area to access the city centre.

In Glasgow City tourism provides employment for 7% of the workforce. Growth has been driven by Glasgow's emergence as a business conference centre, its status as the second largest retail centre in the UK, the development of new visitor attractions and the expansion of the events and festivals portfolio to an all-year programme. In the financial year ending March 2011, Glasgow City Marketing Bureau's Convention Bureau secured £155 million in conference sales, equating to 509,240 delegate days. Confirmed major conferences being hosted in Glasgow in 2012 - and their forecast local economic benefit - include the International Convention on Science, Education and Medicine in Sport (ICSEMIS) in July (£5.4 million), the European Federation of Immunological Societies in September (£7.2 million) and the Renewable UK Annual Conference & Exhibition at the end of October (£4.4 million).

2.4.3 Wider Scotland

The population of Aberdeen City was around 217,000 in 2010, accounting for 4% of Scotland's people. The city and surrounding shire produces approximately 12% of Scotland's output and ranks second in the UK, only to Inner London, in terms of GVA per head, equalling £27,388 per head in 2008. A key cross-border flow for the city is to Newcastle, with Aberdeen accounting for almost 10% of Scotland - Newcastle journeys. High speed cross border links have the potential to strengthen the knowledge economy clusters on the east coast.

Aberdeen is the energy capital of Europe and its buoyant modern economy is driven b the oil industry, which is expected to support growth for decades to come. Aberdeen City has become increasingly dominated by the service sector, accounting for 78% of jobs in the city in 2008. The tourist industry is also becoming increasingly important in Aberdeen, with 7.1% of jobs being tourism related. The region has also been re-branded 'Aberdeen City and Shire' to reflect its strong regional offering which also includes distilling, life sciences and traditional industries such as fishing and farming.

Dundee is the fourth largest city in Scotland, with a population of around 144,000. It currently contributes approximately 4% of Scotland's GVA, and the Dundee Waterfront has been identified as offering substantial strategic growth potential due to the opportunit to exploit knowledge economy linkages. Dundee's economy is also dominated by the service sector, which accounted for over 84% of jobs in 2008. It is buoyed by biomedical and technological industries, in which the University of Dundee plays an important role. The city is also well known for its leadership of Britain's digital entertainment and computer games industry.

Tourism plays an important role throughout Scotland, especially in more rural areas. Tourism related employment, for example, accounted for approximately 9.5% of employment in Argyll and Bute and the Highlands and Islands, where key visitor attractions include the Isle of Bute Discovery Centre, Urquhart Castle and James Pringle Weavers of Inverness. In Dumfries and Galloway, tourism accounts for approximately 6% of employment, and attractions include the World Famous Old Blacksmith's Shop Centre at Gretna, the seventh most popular attraction in Scotland[28].

While it is not envisaged that all areas in Scotland will be directly accessed by high speed rail services, the construction of high speed rail lines between the Central Belt and London will provide the whole country with greater connectivity to the rest of the UK and vice versa. This is discussed in more detail in section 4.2.1.