Regional Skills Assessment Highlands and Islands Insight Report

Transcription

1 Regional Skills Assessment Highlands and Islands Insight Report

2 2 Contents 1 Introduction 3 The importance of skills planning in Scotland 4 Regional Skills Assessments and Skills Planning 5 National Skills Issues 6 Content 7 Appendix 1: Oxford Economics 60 Definitions Appendix 2: Key Sector Definitions 62 2 The Highlands and Islands 8 The Highlands and Island s Economy and Place 9 The Highlands and Island s People 19 3 Demand for Skills in the Highlands and Islands 29 Employment 29 Occupations 32 Sectors 39 Qualifications 45 4 Implications for Skills Planning 49 Highlands and Islands -Current Strengths and Weaknesses 50 Looking to the Future 52 Gaps in data/evidence 54 Implications for Skills Planning 55 Utilising the Evidence Base in Planning 58 Contact Us 59

3 1 Introduction

4 Regional Insight Report 1 Introduction 4 The Importance of Skills Planning in Scotland Skills, alongside other wider and social and economic conditions, help to achieve the stated Scottish Government purpose of: creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth Significant public sector funding (some 2 billion) is invested annually to support skills development in Scotland. This, alongside employer and other partner investment, amounts to a substantial resource. To ensure it is invested wisely it is important to ensure that there is a robust evidence base to guide decisions. Current Scottish Government Strategy for skills includes Scotland s Economic Strategy, Scotland s Labour Market Strategy and Scotland s Youth Employment Strategy and also the recent UK Industrial Strategy. These, alongside the Scottish Skills Planning Model (Figure 1.1), influence skills investment. The skills planning model is evolving. Phase 2 of the Enterprise and Skills Review that reported earlier this year included a range of proposals to achieve the dual goals of (1) a dynamic, inclusive globally competitive economy and (2) a high performing, inclusive labour market. Work is ongoing on these proposals that include regional partnership models, learner journey models and, of most relevance to skills planning, proposals for skills alignment. Figure 1.1 Scottish Skills Planning Model The vision for skills alignment is for skills services to be fully aligned to deliver the learning and skills necessary for sustainable and inclusive economic growth. A project is in place to achieve this; the purpose of which is to align the relevant functions of the Scottish Funding Council (SFC) and Skills Development Scotland (SDS) to ensure that Scotland s people and businesses are equipped with the right skills to succeed in the economy, not just now but in the future. The proposals include the development of a Five Step Planning Model (Figure 1.2) and a Governance Structure (Figure 1.3) Figure 1.2 Five Step Model

5 5 At the time of writing, SFC and SDS are engaged with Scottish Government to develop a detailed implementation plan to carry through the reforms identified. Work that has been agreed to take place in the short term includes: The world of work is changing - we need to support businesses and individuals to navigate and embrace that change; The development of Terms of Reference for a strategic Skills Hub of the Strategic Board Skills Committee; Development of the Five Step Model to confirm the deliverables of each stage; and The appointment of a Director of Skills Alignment reporting jointly to the Directors of SDS and SFC. Evidence developed through Regional Skills Assessments now and in their future evolution can help inform Step 1 of the Five Step Model. This iteration, unlike in previous versions, focuses much more on demand side evidence to support Step One of the proposed planning process. Figure 1.3 Governance Regional Skills Assessments and Skills Planning Regional Skills Assessments (RSAs) were first launched in 2014 and have evolved over time as a result of feedback from an independent review (2015 by the Training and Employment Research Unit) and ongoing partner consultation, as part of a continuous improvement process. Their purpose is to: Support partners in strategic skills investment planning including: The two national skills agencies SDS and SFC (in conjunction with Regional Colleges, Strategic Bodies and College Boards) Enterprise Agencies and Regional and local partnerships; and Enterprise Agencies and regional and local partnerships; and Identify gaps in evidence that require to be addressed. To ensure an inclusive approach to their development, dissemination and utilisation, RSAs are produced by SDS in partnership with Highlands and Islands Enterprise (HIE), Scottish Enterprise (SE), SFC and the Scottish Local Authorities Economic Development Group (SLAED). RSAs include the use of recently published datasets. Inevitably, when using published data there is a time lag but the data contained is

6 Regional Insight Report 1 Introduction 6 the most up to date available at the time of writing. Feedback from partners has indicated that an area of evidence they wished to see more was in relation to forecasting. Given this, RSAs also include forecast data that has been commissioned through Oxford Economics. These forecasts are based on three factors: National/regional outlooks all the forecasting models they operate are fully consistent with the broader global and national forecasts which are updated on a monthly basis; Historical trends in an area (which implicitly factor in supply side factors impinging on demand), augmented where appropriate by local knowledge and understanding of patterns of economic development; and Fundamental economic relationships which interlink the various elements of the outlook. As with all forecasts, certain caveats need to be applied. They are based on what we know now and include past and present trends projected into the future. They can therefore be affected by potential disruptors (e.g. Brexit) and unforeseen events and their value is in identifying likely directions of travel rather than predicting exact figures. The more disaggregated they become, especially at smaller geographical units, the less reliable they are likely to be. The historical data on which the forecasts are based is subject to revision and may be volatile, particularly at a sub-regional and sub-sectoral level. Therefore forecasts at a higher, less disaggregated level are more robust than the detailed breakdowns. They also cannot take into account recent developments that may be happening at local level or an individual firm s perspective, so inevitably they lack nuance. Finally, the occupational (SOC) and sectoral (SIC) classifications should be looked at to understand how an occupation or industry is defined. Links have been given to facilitate this in the relevant sections. Education, for example, is an industrial sector that takes in a wide variety of teaching and educative functions e.g. driving instructors. It is recommended therefore that users examine trends over time rather than focusing on changes in individual years, use caution at the more granular level and examine occupational and sectoral definitions where relevant. National Skills Issues Prior to the publication of RSAs, SDS has published a national skills assessment Jobs and Skills in Scotland. This report highlights key strengths of Scotland s skills alongside challenges to be addressed, as well as pointing to drivers that will have an impact on skills and skills planning and outlining potential forecasts for the future. Nationally, it is recognised that, following the recession: Employment in Scotland has recovered and is above pre-recession levels; Many key sectors (see Appendix 2) have had good employment growth despite difficult trading conditions; Scotland has maintained a highly skilled workforce; and The economy offered a range of opportunities for young people after school. That said, on demand for skills, growth rates for the Scottish economy remain behind that of the UK and, although productivity has improved, Scotland s record remains poor. Also, although employment has recovered since the recession we have seen: A rise in non standard jobs - part time employment, self employment and nonpermanent employment have grown; An hour glass labour market structure which presents challenges for progression in the workplace, underemployment and under utilisation

7 Regional Insight Report 1 Introduction 7 of skills; and Low pay and in-work poverty as of continuing concern. The report points to key areas of uncertainty for the skills environment such as the impact of Brexit, productivity challenges, societal change and automation. It also provides some indicative forecasts for the future through modelling by Oxford Economics that highlight the potential: Political uncertainty is likely to restrict the pace of economic development in the short term, and this will curtail job creation. Growth is forecast to accelerate towards the end of this decade, but Scotland is projected to underperform the UK as a whole; Total employment in Scotland is forecast to rise by 84,800 by 2027, equivalent to an average annual growth rate of 0.3 percent. The comparable figure for the UK is 0.5 percent; The next decade (2017 to 2027 inclusive) will see a shift in the sectoral composition of employment in Scotland. Rising employment in Business services, Wholesale and retail trade, Construction and Health and social work will be accompanied by a reduction in Manufacturing and Public administration; These sectoral changes will affect the occupational profile of Scotland s workforce. There will be an increase in the number of Elementary clerical and service occupations and Business and public service professionals. But job losses in Manufacturing will see fewer Process, plant and machine operatives and Skilled metal and electrical trades; and Scotland s largest urban centres will lead job creation. Together, Edinburgh City and Glasgow City are forecast to account for three in every four new jobs created. Employment is forecast to fall in around a third of Scottish council areas over the forecast period (2017 to 2027 inclusive). Finally, the report outlines four significant challenges and opportunities in relation to jobs and skills: 1. Boosting productivity will be vital for our long term prosperity; 2. Our growth needs to be more inclusive; 3. Scotland s demographics represent some significant challenges - and Brexit may exacerbate these; and 4. The world of work is changing - we need to support businesses and individuals to navigate and embrace that change. Content It is within this national context that this RSA has been developed. The RSA for Highlands and Islands is in three parts (1) a summary A3 infographic (2) an insight report and (3) a slidepack of graphs and charts for utilisation by partners. This report the insight report is in three parts: The Highlands and Islands Region an introduction to the region s economy and its people; Demand for skills past, current and forecast demand for total employment, occupations and sectors; and Implications for planning key issues and challenges, gaps in evidence and an assessment of implications for skills and wider economic and social development planning.

8 2 The Highlands and Islands

9 Regional Insight Report 2 The Highlands and Islands Region 9 The Highlands and Islands region is made up of six local authority areas: Argyll and Bute; Eilean Siar; Highland; Moray; Orkney Islands; and Shetland Islands. This section outlines key characteristics of the region focusing on its economy, place and people. It is intended to be a brief introduction rather than a comprehensive picture and will necessarily need to leave out some elements out as a result. The Highlands and Island s Economy and Place GVA and Productivity In relation to the Scottish economy, the Highlands and Islands is a low productivity, low GVA region (Figure 2.1) although there are variations at the local authority level (Figure 2.2). The region is a predominantly rural economy and is home to Inverness, one of Scotland s cities. Based on 2015 data, the region contributed 10,690 million in GVA 1 ; around nine per cent of output for Scotland and the fifth highest regional output in Scotland. At 14 per cent of regional output (2017 figures), the Manufacturing sector accounted for the highest sectoral output in the region, this was followed by Wholesale and retail trade (11 per cent) and Real estate (11 per cent). Regional productivity (measured as GVA per job, 2015) was 41,450, below the Scotland average of 45,900. There was however variation across 1 GVA is the measure of the value of goods and services produced the region: Highland made the greatest contribution to the national accounts, accounting for four per cent of Scotland s GVA. Moray made the next greatest contribution (two per cent) followed by Argyll and Bute (one per cent). The three Island local authorities each accounted for less than one per cent of Scotland s GVA; and Moray ( 51,520) had the highest productivity in the region, and the fourth highest productivity in Scotland. Productivity was below the Scottish average in the remaining five local authorities. The Shetland Islands, Argyll and Bute and the Orkney Islands had the lowest productivity of all local authorities in Scotland. Looking to the future, GVA growth in the Highlands and Islands is forecast 2 to average 1.3 per cent per year between 2017 and This is slower than forecast growth for Scotland (1.7 per cent) and than that of the UK (2.0 per cent). The pace of growth is expected to slow in the short term as the consumer sector loses momentum in the face of rising inflation, businesses investing cautiously due to Brexit-related uncertainty, and fiscal policy remaining tight. The Highlands and Islands most dynamic industries will be within Private sector services 3, but compared to the Scotland average, Private services account for a lower share of the economy (46 per cent in the region compared with 53 per cent in Scotland), and therefore will be unable to drive overall growth to the same extent. Information and communications will be the fastest growing industry over the forecast period, with an average growth rate of 3.2 per cent, followed by Professional, scientific, and technical activities (2.8 per cent), and administration and support services (2.6 per cent). In terms of contribution to total GVA growth in the region, the Manufacturing sector accounts for a relatively large proportion of the economy relative to Scotland, and with growth slightly faster than the regional average (1.4 per cent per annum on average from ), will make the largest contribution. This is followed by significant contributions from Real estate, Wholesale and retail, Construction and Professional, scientific, and technical activities. 2 Forecasts by Oxford Economics 3 Comprised of Wholesale and retail trade, Transportation and storage, Accommodation and food services, Information and communication, Financial and insurance activities, Real estate activities, Professional, and technical activities, Administrative and support services, Arts, entertainment and recreation, Other service activities.

10 Regional Insight Report 2 The Highlands and Islands Region 10 Figure 2.1 Distribution of GVA ( million, constant 2013 prices) and Productivity (per job) by region, 2015 Source: Oxford Economics Productivity Aberdeen and Aberdeenshire Low GVA, High Productivity 2 High GVA, High Productivity Edinburgh, East & Midlothian 1 West Glasgow Region Fife Low GVA, Low Productivity 2 Lanarkshire 1 Tayside 1 2 Ayrshire Output (GVA) High GVA, Low Productivity West Lothian Highlands and Islands Dumfries & Galloway Forth Valley South of Scotland 1 Borders Note: the data is scaled - the units used are standard deviations from the mean.

11 Regional Insight Report 2 The Highlands and Islands Region 11 Figure 2.2 Distribution of GVA ( million, constant 2013 prices) and Productivity (per job) by local authority, 2015 Source: Oxford Economics Productivity Aberdeen City Aberdeenshire 2 Low GVA, High Productivity High GVA, High Productivity Moray Edinburgh, City of East Renfrewshire 1 Inverclyde South Ayrshire East Dunbartonshire West Dunbartonshire Renfrewshire Perth and Kinross Angus Fife Glasgow City Clackmannanshire East Lothian North Ayrshire South Lanarkshire North Lanarkshire Output (GVA) Low GVA, Low Productivity Highland Falkirk West Lothian Midlothian Dundee City Dumfries and Galloway Eilean Siar East Ayrshire 1 Scottish Borders Shetland Islands Stirling High GVA, Low Productivity Argyll and Bute Orkney Islands Note: the data is scaled - the units used are standard deviations from the mean.

12 Regional Insight Report 2 The Highlands and Islands Region 12 The Business Base There are a total of 21,965 businesses operating within the Highlands and Islands, with nearly half (49 per cent) based in Highland, with 18 per cent in Argyll and Bute, 15 per cent in Moray, seven per cent in both Orkney Islands and Shetland Islands and five per cent in Eilean Siar. The largest sector (in terms of the business base) within the region is Agriculture, forestry and fishing, accounting for nearly one-quarter (24 per cent) of all businesses, whilst Construction and Professional, scientific and technical both account for 12 per cent. At the local authority level, the sectoral breakdown of the business base is largely in keeping with the regional breakdown, with the Professional, scientific and technical sector the largest sector in each of the three areas (indeed accounting for nearly half (46 per cent) of all businesses in the Orkney Islands).

13 Regional Insight Report 2 The Highlands and Islands Region 13 Table 2.1 Sectoral breakdown of business base, by local authority, (2016) Source: UK Business Counts Highlands and Islands Argyll and Bute Eilean Siar Highland Moray Orkney Islands Shetland Islands Agriculture, forestry & fishing 24% 21% 26% 20% 20% 46% 39% 10% Production 6% 6% 8% 6% 6% 5% 6% 6% Construction 12% 10% 9% 14% 14% 9% 10% 11% Motor trades 3% 2% 3% 3% 3% 2% 2% 3% Wholesale 2% 3% 2% 2% 3% 2% 1% 3% Retail 8% 11% 9% 7% 8% 7% 7% 8% Transport & storage 3% 3% 4% 3% 3% 3% 4% 3% Accommodation & food services 9% 12% 9% 10% 8% 5% 6% 8% Information & communication 2% 3% 3% 2% 2% 1% 1% 6% Financial & insurance 1% 1% 1% 1% 1% 0% 0% 2% Property 2% 2% 1% 3% 2% 1% 1% 3% Professional, scientific & technical 12% 10% 10% 13% 14% 7% 10% 19% Business administration & support services 6% 5% 6% 7% 6% 4% 5% 7% Public administration & defence 4 0% 0% 0% 0% 0% 0% 0% 0% Education 1% 1% 1% 1% 1% 0% 1% 1% Health 3% 4% 4% 3% 3% 2% 2% 4% Arts, entertainment, recreation & other services 6% 7% 6% 6% 6% 4% 4% 7% Scotland Total 21,965 3,855 1,175 10,840 3,190 1,470 1, ,905 4 Please note from ONS: All figures are rounded to avoid disclosure. Values may be rounded down to zero and so all zeros are not necessarily true zeros. Totals across tables may differ by minor amounts due to the disclosure methods used. Furthermore, figures may differ by small amounts from those published in ONS outputs due to the application of a different rounding methodology.

14 Regional Insight Report 2 The Highlands and Islands Region 14 In relation to all regions in Scotland, the business density (number of businesses per 10,000) in Highlands and Islands ranks second out of the 14 regions. Within the region however, there are slight local authority differences. Orkney Islands and Shetland Islands have the highest and second highest business density in the region and rank first and second out of 32 local authorities, respectively. Highland and Argyll and Bute rank forth and fifth respectively, Eilean Siar seventh, whereas Moray ranks the lowest in the region, ranking 14th out of 32 local authorities. In terms of business size (2016), the Highlands and Islands region has a similar picture to Scotland in that micro businesses (employing 0-9 people) make up the majority of businesses within the region (Table 2.2). This is the same throughout the local authorities within the region. Table 2.2 Proportions of businesses by size band, 2016 Source: UK Business Counts % of businesses by size band Argyll and Bute Eilean Siar Highland Moray Orkney Islands Shetland Islands Highlands and Islands % 90% 89% 89% 91% 88% 89% 88% % 10% 9% 10% 9% 11% 10% 10% % 0% 1% 1% 0% 1% 1% 2% % 0% 0% 0% 0% 0% 0% <1% Scotland

15 Regional Insight Report 2 The Highlands and Islands Region 15 The number of business births within a region can indicate dynamism in the economy. By business births per 10,000 of the population, Highlands and Islands ranks 6th out of 14 regions within Scotland. However, much like business density, there are wide local authority differences. Highland ranks 6th out of 32 local authorities, whilst Shetland Islands ranks 9th out of 32 local authorities. Eilean Siar and Argyll and Bute rank lower, at 18th and 23rd out of 32 local authorities, respectively, whereas Moray and Orkney Islands rank near the bottom, at 28th and 31st out of 32 local authorities, respectively. Highland therefore drives business activity in the Highlands and Islands, in terms of business births. Figure 2.3 illustrates the pattern of business births and deaths for the region over the period As might be expected births fell/were static in the recession, and as the economy has recovered so have business births. During the economic downturn business births decreased as business deaths increased. Since then, there has been an overall increase in business births including a sharp spike between More recently however this has flattened off and decreased somewhat, accompanied by a rise in business deaths. Finally, taking the 2010 figure as the baseline, the Survival Rate of business over has continued to decline. Figure 2.3 Business births and deaths per 10,000 population ( ) and Business Survival Index ( Source: ONS Business Demography and Mid-Year Population Estimates Business Births per 10,000 population Business Survival Rates, per 10,000 population Recession Business Deaths per 10,000 population Index = Note: for Business Survival Rates only available for in Evidence Base.

16 Regional Insight Report 2 The Highlands and Islands Region 16 Business Expenditure on Research and Development (BERD) The value of BERD in the Highlands and Islands is one of the lowest in Scotland. Measured by BERD per head of the population expenditure in the Region is 63 5, the Scotland average was 162. Highland has the most investment within the region, possibly due to the presence of Inverness which is home to a high concentration of businesses compared to rest of the region. Eilean Siar by comparison is the lowest at 6, this reflects the industrial structure within this locality which consists predominantly of public services and tourism related sectors which typically have low BERD. Earnings The average weekly resident earnings in each local authority within the Highlands and Islands is varied, with earnings in the Shetland Islands 58 above the national average and 69 below in Moray. The variation is greater within the average weekly workplace earnings. Workplace earnings are 68 higher than the national average in the Shetland Islands. By comparison workplace wages are 64 lower than the national average in Eilean Siar, and 132 below those in the Shetland Islands. The above average earnings in the Shetland Islands are reflective of the oil and gas sector, and associated supply chain that have a presence in the locality. Further information is provided in Table 2.3. Table 2.3 Resident and workplace based earnings, 2016 (Median) Source: Annual Survey of Hours and Earnings, 2016 Provisional Figures. Figures based on weekly pay of all workers. Area Resident Earnings Workplace Earnings Argyll and Bute Eilean Siar Highland Moray Orkney Islands Shetland Islands Scottish Average The difference between where a person lives (resident earnings) and where they work (workplace earnings) can tell us whether: Individuals are more likely to travel to other local authorities to work and, therefore, Whether their skills are retained within that local authority or leak outside. 5 Note this is based on BERD in Highland, Moray, Argyll and Bute and Eilean Siar and the population of the Highlands and Islands Region as a whole. BERD in the Shetland Islands and Orkney Islands is disclosive so has not been included Difference between resident and workplace earnings Commuting flows can also help us understand this.

17 Regional Insight Report 2 The Highlands and Islands Region 17 Commuting As could perhaps be expected given the relatively remote locations and challenges of transport and connectivity within some of the local authorities in the Highlands and Island region, levels of out commuting are particularly low. Indeed, the region is home to four of the five lowest out commuting areas across Scotland. Data from the 2011 UK Census shows: The majority of those from Argyll and Bute remain in the area for employment, with 17 per cent commuting out this is the highest proportion of any local authority within this region. Of those who do, the most frequent destination is Glasgow City (seven per cent), whilst just one per cent commute elsewhere across the Highlands and Islands; Some 12 per cent commute out of Moray, with four per cent to Aberdeenshire and Highland, and three per cent to Aberdeen City. Overall, four per cent commute elsewhere within the region; Only four per cent of those from Eilean Siar commute out of the area the 5th lowest of any Scottish local authority. Of those commuting out, two per cent remain within the Highlands and Islands region; Highland has the fourth lowest share of out commuters in Scotland, with just three per cent commuting out of the area. Of this, two per cent commute elsewhere across the region; Orkney Islands have the second lowest rate of out commuters in Scotland, at just two per cent. Aberdeen City is the most common destination (0.9 per cent), whilst one per cent commute elsewhere across the region; and Shetland Islands have the lowest rate of out commuting of any Scottish local authority, with just 1.5 per cent commuting outside the area. Again, Aberdeen City is the most common destination with 0.9 per cent commuting there, whilst 0.1 per cent commute elsewhere across the region. If we look only at those who commute out of their local authority by occupational grouping, we see that the largest grouping in each area is higher skilled occupations (SOC 1-3) 6, ranging from 41 per cent in Eilean Siar to 55 per cent in the Highlands. This, somewhat, contrasts the occupational composition of the local authorities within the region, which tend to cluster around the middle (SOC 4-6) occupations. 6 Managers, Directors and Senior Officials (SOC 1), Professional Occupations (SOC 2) and Associate Professional and Technical Occupations (SOC 3) This perhaps suggests that higher skilled jobs are harder to come by in the local authority areas within the Highlands and Islands, thus higher skilled people tend to travel further to access these opportunities.

18 Regional Insight Report 2 The Highlands and Islands Region 18 Table 2.4 Highlands and Island s local authorities out commuting proportions by occupational grouping (SOC 7 ) Source: Census 2011 SOC 1-3 SOC 4-6 SOC 7-9 Argyll and Bute 57% 25% 18% Eilean Siar 41% 29% 30% Highland 55% 23% 22% Moray 46% 31% 23% Orkney Islands 50% 26% 24% Shetland Island 45% 27% 28% Deprivation The main indicator of deprivation is the Scottish Index of Multiple Deprivation (SIMD). Based on this measure, overall deprivation in the Highlands and Islands is low. Of the 658 datazones in the Highlands and Islands, 13 (two per cent) were in the top ten per cent most deprived in Scotland with 22 (three per cent) in top ten per cent least deprived areas (Figure 2.4). In Highland, parts of Inverness have higher levels of deprivation, as well as areas such as the south of Wick and the east of Helensburgh in Argyll and Bute. The area of Inverness Merkinch in Highland is identified as an area of deep rooted deprivation i.e. it has been consistently among the 5 per cent most deprived in Scotland since SIMD That said, SIMD identifies deprived areas - not people. Guidance on the use of SIMD by Scottish Government highlights that: Not all deprived people live in deprived areas: Two out of three people who are income deprived do not live in deprived areas; and 7 A link to the Standard Occupational Classification is here: ard-occupational-classification/ons_soc_hierarchy_view. html 8 Not everyone in a deprived area is deprived: Just under one in three people living in a deprived area are income deprived 8. This is important when analysing deprivation, particularly in rural areas.

19 Regional Insight Report 2 The Highlands and Islands Region 19 Figure 2.4 Deprivation in Highlands and Islands by SIMD (2016)9 Deciles 1-10 Source: Scottish Government and Ordnance Survey, 2016 Shetland Islands Highland Highlands & Islands Deprivation (SIMD 2016) Deciles 1-2 (Most Deprived) Deciles 3-4 Deciles 5-6 Deciles 7-8 Deciles 9-10 (Least Deprived) Argyll and Bute Data contains Scottish Government data Crown copyright Base: Ordnance Survey Crown copyright 2016 & database right See SIMD interactive map here: simd2016/btttftt/11/ / /

20 Regional Insight Report 2 The Highlands and Islands Region 20 Highlands and Islands People In introducing Highlands and Islands people we outline information on demography, labour market participation, qualifications and attainment. Demography The total population of Highlands and Islands in 2016 was 489,920. This made the region the fifth largest of all 14 regions by population size, whilst it was the largest spatially. Within the region, Highland had the greatest number of residents (234,770) and accounted for almost half (48 per cent) of the region s population. It was also one of the largest local authorities in Scotland with a similar population size to Aberdeen City. Moray was the second largest local authority in the region with a population of 96,070, one fifth (20 per cent) of the region s total. Argyll and Bute was slightly smaller accounting for slightly less than one fifth (18 per cent) of the population. The Island local authorities were the smallest in the region and Scotland as a whole. Eilean Siar was the largest Island locality, with a population of 26,900 (five per cent of the region s population) followed by the Shetland Islands (23,200; five per cent) and the Orkney Islands (21,850; four per cent). Islands, Moray and Highland all had a higher proportion of the population aged 0-15 years than the national average. Their larger retirement (65+) populations and smaller working age (16-64) populations mean that, overall, their populations are older. Based on 2014 population projection data, it is estimated that the population of the Highlands and Islands will be 488,944 by 2039; this means that the population will remain almost static with only a small increase of 1,394 (or zero per cent). A static population differs to what is expected nationally as Scotland s population is projected to grow by seven per cent over the period. Population change will however be uneven within the region. The population will grow in Moray (four per cent), Highland (three per cent) and the Orkney Islands (two per cent). Whilst declines over the period will occur in Eilean Siar (-14 per cent), Argyll and Bute (-eight per cent) and the Shetland Islands (-one per cent). Overall the age profile of the Highlands and Islands is older than the population of Scotland. This is due to the large proportion of the population aged early 40s and older compared to the national average. Compared to the national picture, all six local authorities within the region had older populations. However the Shetland

21 Regional Insight Report 2 The Highlands and Islands Region 21 Table 2.5 Population projections, % change by age band, Source: National Records of Scotland Argyll and Bute -13% -24% -22% -29% 5% 80% Eilean Siar -28% -35% -27% -24% 5% 64% Highland -6% -11% -8% -16% 19% 105% Moray -8% -12% -7% -12% 28% 97% Orkney Islands -7% -15% -4% -17% 10% 101% Shetland Islands -11% -19% -16% -10% 25% 108% Highlands and Islands -9% -15% -11% -18% 17% 96% Scotland 1% -8% -2% -6% 27% 85% Within the region and for Scotland as a whole, the overall finding of population change by age band is growth of those aged 65 and over (Table 2.5). Within the region declines in all age groups up to age 65 are expected. Additionally the declines that occur are expected to be greater than the declines forecast nationally. The 75+ population is expected to grow by more than 100 per cent in Highland, Orkney Islands and the Shetland Islands. This will lead to further aging of the region s population, compared to the national average.

22 Regional Insight Report 2 The Highlands and Islands Region 22 Labour Market Participation The overall employment rate in the region (78 per cent) was above the national average (73 per cent) in 2016 and it was the highest of all 14 regions. Within the region, all local authorities had an employment rate in excess of the national average. The Shetland Islands had the highest employment rate of all local authorities in Scotland (87 per cent), the second highest was in the Orkney Islands (86 per cent) and joint third highest were Argyll and Bute (78 per cent) and Eilean Siar (78 per cent). The employment rate was similarly high in Highland (77 per cent) and Moray (75 per cent). The pattern of labour market participation was consistent across the region. Argyll and Bute, Eilean Siar, Highland and Moray all had low unemployment and low inactivity. As of 2016, 9,400 working age people were unemployed in the region, accounting for seven per cent of the national total (128,400) 10. As might be expected the majority were in the most populous local authorities. Half of those unemployed in the region were in Highland and almost one quarter (23 per cent) were in Moray. Unemployment was lowest in Eilean Siar where 500 people were unemployed, five per cent of the region s total. The ILO unemployment rate in the region was 4.0 per cent, which was lower than the national average (4.9 per cent). Similar to other indicators of labour market participation, all local authorities in the Highlands and Islands appeared to be performing well compared to the national average as all had a lower unemployment rate. Moray was the highest at 4.8 per cent and Argyll and Bute was the lowest at 3.0 per cent, this was the lowest unemployment rate of all local authorities in Scotland. The economic inactivity rate in the Highlands and Islands was 19 per cent in 2016, lower than the national rate (23 per cent) 11 and the lowest of all regions. Within the region, economic inactivity was highest (21 per cent) in Moray and lowest in the Shetland Islands (9 per cent). People can be economically inactive for a number of reasons, for instance they might be a student, looking after their family and home, long term or temporary sick, discouraged or retired (before age 65). The low economic activity rate in the region suggests that most working age people are economically active. Some of the people who are economically inactive will be students at the University of the Highlands and Islands (UHI) which has a number of campuses located across the region. Figure 2.4 illustrates comparisons of unemployment and inactivity for the Highlands and Islands local authorities and others in Scotland. Finally, the youth (16-24) unemployment rate 12 for the Highlands and Islands was 11 per cent in 2016, higher than the national rate (12 per cent). Again, there were some regional differences; Shetland Islands had the highest youth unemployment rate in the region (23 per cent), followed by Moray (15 per cent), Argyll and Bute (12 per cent) and Highland (nine per cent). 10 Source: ILO Unemployment rate. 11 Source: Annual Population Survey, Economic inactivity rate. 12 Source: Annual Population Survey, Unemployment rate.

23 Regional Insight Report 2 The Highlands and Islands Region 23 Figure 2.5 Unemployment (ILO) and Economic inactivity by RSA region, January-December 2016 Source: Annual Population Survey (resident based) Economic inactivity rate, working age population Glasgow Region Ayrshire Low Unemployment, High Inactivity High Unemployment, High Inactivity Edinburgh, East & Midlothian 1 Fife -2 West Lothian Tayside Working Age Population (ILO) Lanarkshire Dumfries & Galloway West Region Forth Valley South of Scotland Borders Aberdeen and Aberdeenshire 1 Low Unemployment, Low Inactivity Highlands and Islands High Unemployment, Low- Inactivity 2 Note: the data is scaled - the units used are standard deviations from the mean.

24 Regional Insight Report 2 The Highlands and Islands Region 24 Figure 2.6 Unemployment (ILO) and Economic inactivity by local authority, January-December 2016 Source: Annual Population Survey (resident based) Economic inactivity rate, working age population Glasgow City Dundee City East Ayrshire North Ayrshire Low Unemployment, High Inactivity 1 Edinburgh City South Ayrshire Inverclyde West Dunbartonshire Fife Stirling East Lothian Aberdeen City Clackmannanshire High Unemployment, High Inactivity North Lanarkshire East Dunbartonshire West Lothian Dumfries and Galloway Midlothian Renfrewshire South Lanarkshire East Renfrewshire Moray Perth and Kinross Falkirk Argyll and Bute Angus Highland Scottish Borders Working Age Population (ILO) Eilean Siar 1 Aberdeenshire 2 Low Unemployment, Low Inactivity High Unemployment, Low- Inactivity Shetland Islands Note: the data is scaled - the units used are standard deviations from the mean. ILO Unemployment estimate for Orkney Islands is not available since the group sample size is zero or disclosive (0-2) and thus omitted.

25 Regional Insight Report 2 The Highlands and Islands Region 25 Working Age Qualifications (16-64) The Highlands and Islands had lower levels of advanced qualifications (SCQF 7 12) compared to the national average (41 per cent compared to 44 per cent in 2016). However, the level of intermediate qualifications (SCQF levels 5 and 6) in the region was above the national average 32 per cent compared to 28 per cent. There were fewer people within the Highlands and Islands with no qualifications than at the national average eight per cent compared to ten per cent, one of the lowest proportions in Scotland. Within the region the qualification profile of the local authorities varied. Shetland Islands (45 per cent) and Eilean Siar (44 per cent) were the only local authorities in the region that had the same or a higher proportion of residents with higher level qualifications (SCQF 7-12) than the national average. All six local authorities in the region had an above average proportion of the population with intermediate qualifications (SCQF 5-6). This ranged from 32 per cent in Highland, Moray, and the Orkney Islands to 29 per cent in Eilean Siar. Moray was the only local authority in the region that had a greater proportion of people with no or low (SCQF 1-4) qualifications, 20 per cent compared to 19 per cent nationally. The remaining local authorities all had a lower proportion than the national average, ranging from 18 per cent in Eilean Siar to 11 per cent in the Shetland Islands. School Leavers Destinations In 2015/16, 35 per cent of school leavers in the Highlands and Islands went into higher education (Table 2.6); this was below the Scottish average (37 per cent). Within the region, the proportion going into higher education varied from 41 per cent in Eilean Siar (one of the highest in Scotland) to 28 per cent in the Shetland Islands (the second lowest in Scotland). The proportion of school leavers going into higher education has increased in Argyll and Bute, Eilean Siar, Highland and Moray since 2009/10 and declined in both the Orkney and Shetland Islands.

26 Regional Insight Report 2 The Highlands and Islands Region 26 Table 2.6 School Leaver Destinations, 2009/10 and 2015/16 Destination Highlands and Islands Argyll and Bute Eilean Siar Highland Moray Orkney Islands Shetland Islands Higher education (%) 2009/10 32% 33% 37% 32% 30% 35% 32% 2015/16 35% 39% 41% 34% 37% 32% 28% Change 3% 5% 4% 2% 7% -3% -3% Further education (%) 2009/10 21% 19% 25% 21% 26% 23% 0% 2015/16 19% 16% 16% 19% 23% 20% 25% Change -1% -3% -10% -2% -3% -3% 25% Employment (%) 2009/10 31% 32% 29% 31% 29% 30% 46% 2015/16 35% 36% 37% 37% 29% 41% 39% Change 4% 4% 8% 6% 0% 10% -7% Unemployment (%) * 2009/10 11% 12% 5% 13% 12% 0% 7% 2015/16 5% 4% 0% 5% 7% 3% 2% Change -6% -8% -5% -8% -4% 3% -5% * Unemployment Seeking and Unemployment Not Seeking

27 Regional Insight Report 2 The Highlands and Islands Region 27 The proportion of school leavers going into further education has decreased since 2009/10, with one percentage point fewer leavers in the region taking this option and decline occurring in all but one of the local authorities in the region. The exception being the Shetland Islands where the proportion increased by 25 percentage points, however the low number of leavers in the Shetlands can cause fluctuations in the data. Overall almost one fifth (19 per cent) of school leavers in the Highlands and Islands went into further education as their initial leaver destination, this was slightly lower than the national average (22 per cent). By local authority the proportions varied, with almost one quarter (23 per cent) of school leavers going into further education in Moray. Whilst in Argyll and Bute and Eilean Siar the proportion was lower at 16 per cent. Employment as an initial leaver destination has increased in the region and Scotland as a whole since 2009/10. Regionally more than one third of school leavers entered employment after school. Within the region the proportion was highest in the Orkney Islands (41 per cent) and the Shetland Islands at 46 per cent however this was a seven percentage point decline in this local authority compared to 2009/10. Moray had the lowest proportion of school leavers entering employment (29 per cent). Young people becoming unemployed after school was below the national (eight per cent) average in the region five per cent). Eilean Siar had no school leavers becoming unemployed after school which was the lowest rate in Scotland. The highest rate in the region was seven per cent in Moray which was still below the national average. The Orkney Islands was the only local authority to have an increase in the proportion of school leavers entering unemployment from 2009/10, rising by three percentage points. Over the period 2009/10 and 2015/16, overall within the region there has been an increase in the proportion of school leavers entering higher education or employment. Decreases have occurred in the proportion of young people entering further education or unemployment. However as mentioned this does vary by local authority. The economic downturn may have affected the destinations of school leavers in 2009/10, with young people becoming unemployed due to labour market contraction at the time and entering further or higher education due to a lack of opportunities in the labour market. Economic recovery will account for the increase in the proportion of young people entering employment after school, and reductions in other post school destinations. In terms of the 2017 Annual Participation Rate (16-19 year olds) 12, within the region Eilean Siar had the highest rate (96.9 per cent) and was in excess of the Scotland average (91.1 per cent). The Shetland Islands (96.1 per cent), Orkney Islands (93.8 per cent), Highlands (93.0 per cent) and Argyll and Bute (93.0 per cent) also had rates in excess of the national average. Moray (89.8 per cent) was the only local authority in the region to have a participation rate below the national average Annual Participation Measure, % of year olds participation 1st April 2016 to 31st March As agreed by Scottish Ministers, from August 2017, the Annual Participation Measure will be adopted within the Scottish Government s National Performance Framework. It is replacing the school leaver destination follow up as the source of the indicator, increase the proportion of young people in learn ing, training or work, published through Scotland Performs. See below for details:

28 3 Demand for Skills in Highlands and Islands

29 Regional Insight Report 3 Demand for Skills in Highlands and Islands 29 Demand 13 for Skills in Highlands and Islands This section outlines past, current and forecast trends for total employment and sectors, occupations and qualifications. These forecasts have been developed by Oxford Economics 14 and, like any forecasts, they are based on what we know now; past and present trends projected into the future. They can therefore be affected by potential disruptors (e.g. Brexit) and unforeseen events and their value is in identifying likely directions of travel rather than predicting exact figures. Finally, the more dissagregated they become, especially at smaller geographical units, the less reliable they are likely to be. Employment As shows in Figure 3.1, total employment (jobs) within Highlands and Islands is 261,400 currently ( ), representing regional employment growth of 23 per cent since 2000 (more than double the national rate of ten per cent). Employment increased sharply from the year 2000, rising from 212,500 in 2000 to 258,200 in 13 Note: the analysis here is workplace based. Note the forecast period for skills demand is defined as follows: Total employment: 2017 and 2027; Total requirement: 2017 and 2027 (inclusive). For more information on Oxford Economics definitions please see Appendix For more information of the methodology used in the Oxford Economic forecasts, please see the Regional Skills Assessments section of the Skills Development Scotland website: partnerships/regional-skills-assessments/ 15 Note 2017 is itself a forecast Whilst the onset of the recession saw a period of moderate decline, there has been recovery since 2012 and employment has overtaken pre-recession levels. In terms of the future, total employment in the Highlands and Islands is forecast to be 260,900 in 2027, a decrease of 500 on current levels (2017). This is equivalent to a decline of per cent over the period. This is in contrast to the Scotland growth rate of 3.1 per cent. At local authority level, Highland, as the largest local authority, drives the regional trend. It accounted for almost half (49 per cent) of regional employment in 2017, followed by Argyll and Bute with 18 per cent and Moray with 17 per cent. The island authorities Shetland Islands (seven per cent), Orkney Islands (five per cent) and Eilean Siar (four per cent) have subsequently smaller proportions. Highland has rapid growth in employment from 2000, a slight decline before and during the recession, and subsequent growth. Eilean Siar saw a drop-off of 14 per cent in employment between 2007 and 2008, attributable to a decline of 1,500 jobs in the Agriculture, forestry and fishing sector, from which it has not recovered since. However, the other local authority areas appear to have been relatively untroubled by the recession, maintaining steady employment figures; indeed both the Orkney Islands and Shetland Islands saw substantial employment growth between 2008 and Over the forecast period, both Highland, and the Shetland Islands are projected to experience growth in employment, while the other four local authorities register slight declines.

30 2023 Regional Insight Report 3 Demand for Skills in Highlands and Islands 30 Figure 3.1 Total employment projections (jobs), Source: Oxford Economics. Figure 3.1: Total Employmen t Projections (jobs), Total employment (jobs) '000s Source: Oxford Economics

31 Regional Insight Report 3 Demand for Skills in Highlands and Islands 31 Moving on to employment by gender and status (fulltime/part-time), Figure 3.2 illustrates the change in employment over time. The number of male full-time jobs has grown steadily over recent years, following a post-recession dip, but is expected to fall slightly over the forecast period, by two per cent. In contrast, female full-time employment has been far steadier, and is projected to increase by a further five per cent to Part-time employment is forecast to decrease for males and remain static for females over the forecast period, in contrast with the national trend of increasing parttime employment. Figure 3.2 Total employment (jobs) projections, by status and gender Source: : Oxford Economics. '000s Male full-time Male part-time Female full-time Female part-time

32 Regional Insight Report 3 Demand for Skills in Highlands and Islands 32 Occupations In this section, we look at two measures of forecast demand: Total Employment: the numbers within each occupational grouping. The total numbers employed in 2017 and then in 2027 are contrasted. Total Requirement: instead of overall numbers employed, we look at the numbers of positions that are actually forecast to open up, mainly due to people retiring but also net migration and movement into other occupations (replacement demand) as well as those that open up due to new, additional positions being created (expansion demand). Total Requirement is summed across the years (inclusive). At any one time, Total Employment will be higher than Total Requirement; that is, the total numbers in the occupational structure will be higher than the positions that open up within that structure.