Pentland Firth Orkney Waters Marine Spatial Plan: Value Added in the Fish Supply Chain in Orkney and Northern Highlands

Executive Summary

Introduction: Orkney crab is a high value product sold throughout the UK and is sourced from seas adjacent to Orkney, the Northern Highlands and crabbing grounds further afield. The sea bed is also of high commercial interest for marine renewables, therefore future development needs to be balanced with current users to adequately support local businesses and communities. This report is the one of a suite of evidence documents to support the development of a pilot Pentland Firth and Orkney Waters Marine Spatial Plan. It is intended that this plan will be submitted for consultation in 2015. This report estimates the value of marine species caught in the Pentland Firth and Orkney Water ( PFOW) region and specifically in the Pentland Firth and Orkney Water Strategic Area ( PFOW-SA to onshore processing in both Orkney and the North Highlands.

Aims: The aims of this research are to: 1) quantify the value of species landed into the Pentland Firth and Orkney Waters ( PFOW) region to the catching sector; 2) quantify the proportion coming from inside the strategic area ( PFOW-SA) going into the processing sector; 3) conduct input-output ( IO) analysis to examine the economic linkages and benefits from Orkney/Northern Highland based processing; 4) produce scenario based analysis to quantify the wider economic impacts from reduced fishing opportunity and; 5) to contextualise potential community impacts from reduced fish landings.

Results: Landings into Orkney and the Northern Highlands are dominated by crustaceans and demersal species. In 2011, £42.4 million (21,559 tonnes) of marine species were landing into PFOW, £36.8 million from the over 15m fleet and £6.1 million from the under 15m fleet. Crustaceans are the key species from the under 15m vessels whilst demersal species are the target group for over 15m vessels. Overall 17% of the value and 16% of volume landed into the region comes from inside PFOW-SA with 5.6% of the value to over 15m vessels and 90% of the value to under 15m vessels. This indicates little impact would be felt by the over 15m fleet, but that under 15m vessels are more dependent on PFOW-SA waters.

Spatially, Scrabster received the bulk of landings (£29.5 million) followed by Kirkwall (£3.8) and Stromness (£3.2). Almost all Orkney ports with the exception of Stromness receive around 50% of their landings from the under 15m vessels landing crustaceans from inside PFOW-SA. Northern Highland ports received almost all of the demersal landings and a large volume of crustaceans from over 15m vessels. Mollusc landings are spread throughout the region. Sales data from the Register of Buyers and Sellers shows receipts from processors and merchants in the Northern Highlands of £1.3m and £4.8m (total £6.1m) respectively of crustaceans and demersal species, whilst processors and merchants from Orkney purchased £4.8m, £26,000 and £446,000 (total £5.3m) of crustaceans, demersal and mollusc species respectively. This equates to 26.5% of landings into the region being utilised by Orkney and Highland based merchants/processors. Using these and the landings data, it is estimated that 35% of crustaceans and 3% of demersal landings purchased by Orkney and Northern Highland businesses come from inside PFOW-SA, equating to £2.5m of the raw product entering onshore fish business.

Using IO analysis it is estimated that the initial £2.5m of raw material from PFOW-SA contributes, directly and indirectly, to £10.4m in output at the local level and £18.4m at the Scottish level. This output supports £2.9m in income and 159 FTE jobs at the local level. At the Scottish level output supports £5.7m in income and 244 FTE jobs. This analysis is an estimate and it is important to be aware of the assumptions and limitations which underpin such IO analysis. These assumptions and limitations are discussed further in section 3.

Qualitative data from key informant interviews highlighted the importance of inshore fisheries to onshore processors in Orkney. Orkney has developed a business model, managed by local fishermen who supply the Orkney factories. Whilst larger crabbers also land into these facilities to ensure consistency of supply, the companies are keen to stress that their unique market brand is dependent on inshore fishing. The Northern Highland processors do not show any preference to inshore vessels, but do stress the importance of having produce landed locally to help keep down costs.

Geographically, facilities in this region are perfectly situated for proximity to raw material, but a fundamental business challenge is remoteness. Local markets are small in comparison to the available product, therefore focus is on the UK food retailers. Crab has a short shelf life and low profit margins, so processing and transportation needs to be short and the direct delivery of the raw produce to the factories facilitates this. In the Northern Highlands transportation over land is easier but expensive, so to remain competitive businesses have to counter this which they say is achievable because of the quality of produce sourced from regional fishing grounds. Should inshore access decrease some interviewees felt that larger vessels could not supply the short fall due to the need for capital investment. Small scale creeling vessels cost around £50,000 whereas large crabbers are in the realms of £1 million which is just not available to local fishermen.

Regarding pay and opportunity, people working in processing in Orkney are earning less than the national average, however Orkney Fishermen's Society ( OFS) is the largest private sector employer in Orkney and is a modern BRC Global Standards A accredited food processing facility. Within this facility there are a high diversity of workers where low skilled workers can access full time permanent employment and develop with the company as well as graduates and post graduate workers due to the technical requirements of the UK retail contracts that the OFS supply.

Discussion: Owing to the patterns of landings, onshore activity in Orkney and Northern Highlands has evolved to handle crustaceans in Orkney and whitefish in the Northern Highlands. However diversification does seem to be taking place in the Northern Highlands. Scrabster is the busiest port by value with the majority of species being landed there. Orkney however has a wide geographical spread of ports receiving landings with both Kirkwall and Stromness receiving significant volumes. Orkney ports are more dependent on inshore fishing grounds than the Northern Highlands with just under half of their landings coming from these waters, which increases to 90% for crustaceans across all Orkney ports.

In the Northern Highlands there would appear to be limited impact to onshore activity from a reduction in fishing opportunity as almost all landings into the area come from outside PFOW-SA. For merchants on Orkney there is potentially a higher impact as whilst Orkney processors have larger vessels who can fish further afield, merchants trading from the small ports are sourcing from inshore vessels, the boat most likely to be effected by reduced access. However Orkney processors also argued that that their business viability is also directly linked to this proximity to local fishing grounds and due the low profit margins on crab, importing raw material for processing from other area is not feasible for business viability. Equally at least one of the processors is tied to inshore/small-scale fishing and there is a question on whether a reduction in inshore activity would negativity impact on market demand and jeopardise this business model.