Scotland's seas: towards understanding their state

ANNEX 4 THE INPUT-OUTPUT APPROACH TECHNICAL NOTE

Mapping SIC03 classifications to Input-Output industry groups

The 128 Input-Output industries are constructed from groups of full 5 digit SIC03 industries. The marine environment component identified using SIC03 will therefore not always map directly to an Input-Output group. Where this occurs it has been necessary to apportion the economic contribution of the Input-Output group using the Office for National Statistics Annual Business Inquiry ( ABI) full 5 digit SIC03 industry output information. For example, SIC 45.24: Construction of water projects, will be included in Input-

Output category Construction ( SIC 45). Analysis of the ABI estimates 0.06% of the Construction industry output to be from companies in SIC 45.24. This proportion is then applied to the total economic value of the Construction group detailed in the Input-Output table.

Economic value - industry contribution to overall Scottish GDP

In order to estimate the economic value of industries, this analysis uses the latest Gross Value Added estimates as detailed in the Scottish Input-Output tables published by the Scottish Government in December 2007.

Gross Value Added is defined as GDP at basic prices (i.e. excludes taxes less subsidies on products) and is a measure of the contribution to GDP made by an individual producer, industry or sector. The GVA estimates relate to activity in 2004 and are in 2004 prices.

In the case of the core marine environment industries the GVA estimate is taken from Input-Output Industry by Industry table. Scottish employment figures are estimated full time equivalent employment figures taken from the Office for National Statistics Annual Business Inquiry (2004).

Note that these figures will include the GVA and employment associated with the final demand for the core industries' output as well as the GVA associated with the supply to other, non-core industries. As discussed, the GVA (or employment) created as a result of adding further value by other industries should not be considered marine related.

Core marine environment indirect economic activity

Although there are industries that are wholly marine environment (such as shipbuilding or fishing), and will therefore be picked up in the identification of the core industries, others will generate value (and employ people) by supplying these core industries. The value of this economic activity should be attributed to the marine environment because without the core industry demand, the economic value of these non-core industries would be affected.

Since the Input-Output Supply and Use tables detail the flows of products between industries it is possible to identify the industries that supply the core marine environment industries and to construct the Input-Output analytical tables. The Input- Output type I Leontief inverse matrices have been used to estimate the indirect GVA and employment effects relating to the final demand for the core marine environment products.

Supported upstream economic activity

The core industry economic activity will include the GVA associated with the sale of products to other industries for further processing. Any further value added by these industries should not be considered to be marine related.

The Input-Output tables can be used to highlight the main buyers from the core industries. A very rough proxy estimate of the GVA generated by these industries as a result of these purchases has been provided. This estimate is arrived at by firstly calculating the value of these purchases as a proportion of total purchases (total intermediate demand including imports) by the purchasing industry, then applying this proportion to the purchasing industry total GVA.

It should be stressed again that this additional economic value is not considered in this report to be marine related.

Indirect and supported upstream double counting

Some of the indirect and supported upstream effects for each of the identified marine related industries will be within other industries identified as marine related. This activity cannot be included when looking at the marine sector as a whole since this is already taken account of in the core industry activity figure and would therefore be double counted. When summing the indirect and supported upstream effects to arrive at the all marine sector totals, any effects within any of the other identified marine related industries are excluded. As a result, the indirect and supported upstream totals for the all marine sector will always be lower than the sum of effects seen in the individual industry group analyses.