Alex Salmond’s claim that Scotland is one of the richest countries in the developed world has been challenged in a study by Glasgow University academics which finds it is a middle-ranking economy with high levels of foreign ownership.



The domination of non-Scottish firms, particularly in key industries such as North Sea oil, financial services and banking, whisky and salmon, means a significant amount of Scotland’s wealth is exported to the rest of the UK and overseas.

According to the study, the level of outside ownership means that Scotland’s actual income is as much as $5,000 (£2,990) less per head than Salmond suggests. The study uses a measure for national income that puts Scotland at 20th among the 34 countries in the OECD group of developed nations, behind Ireland, Denmark and Japan. Salmond’s argument that Scotland’s gross domestic product (GDP) places the country 14th in the OECD has been a crucial plank in the case for independence.

A separate Guardian investigation has found that key industries are dominated by foreign and London-based firms:

• Nearly all Scotland’s North Sea oil and gas production is licensed to foreign firms. Only one privately owned Scottish firm, First Oil, can be identified as holding licences. It produces just 6,000 of the total 1m barrels of crude produced every day.

• In the financial and banking sector, Scottish-owned institutions earn only £17bn in UK revenues, compared with £34bn earned by UK and overseas firms based in Scotland.

• Another 90 banks and finance companies operate in Scotland with no Scottish registered office, including global firms such as Barclays, HSBC and Morgan Stanley, whose earnings flow directly to London or overseas.

• More than 70% of Scotland’s total economic output – excluding banking and finance and the public sector – is controlled by non-Scottish-owned firms, according to Scottish government data. The figure for the UK is 36%, according to Office for National Statistics figures.

• Of firms in Scotland employing 250 or more people, 83% are owned by non-Scottish companies. By contrast, at UK level, the ONS shows 28% are overseas-owned, and control 47.5% of the income.

• Well over 80% of Scotland’s whisky industry – the UK’s largest food and drink export – is owned outside Scotland. Nearly 40% of total output is in the hands of one London-based company, Diageo.

• More than 80% of Scottish farmed salmon, Scotland’s most valuable food export, is foreign-owned. About two-thirds of it is controlled from Norway.

Salmond, the first minister, emphasised Scotland’s wealth on Wednesday when he published a document pushing the economic case for a yes vote, arguing: “Scotland is one of the wealthiest countries in the world, more prosperous per head than the UK, France and Japan. But we need the powers of independence to ensure that that wealth properly benefits everyone in our society.”

By the GDP measure, Scottish government data gives every Scottish citizen an amount of $39,600 per head. As Salmond argues, that puts Scotland comfortably ahead of the UK in the OECD rankings – the UK comes 17th at $34,800 per head - and above other major economies such as France and Japan, based on 2012 figures. But that ranking has been challenged by the study by University of Glasgow economists John McLaren and Jo Armstrong. Drawing on their previous work at the Centre for Public Policy for Regions, they confirm that the wealth actually held in Scotland – its national income – is lower, and that makes a significant difference to Scotland’s rankings and standard of living.

Using gross national income (GNI) – a more accurate measure of wealth, which assesses the money kept inside a country, rather than GDP, which measures overall economic output – Scotland’s actual wealth per head slips by $2,000 to $37,400. However, it falls by about $5,000 to $34,600 using a more robust alternative measure, as applied by McLaren and Armstrong, whose methodology includes discounting the profits and share dividends earned by foreign companies. Scotland is a prosperous country, with significant natural resources and industries, but the high level of external ownership in key industries has reduced the wealth held in Scottish hands. That means that while Scotland’s GDP was £144.7bn in 2012, its GNI, using the lower alternative measure, was £125.5bn.

McLaren said: “The Scottish government’s own estimate of Scottish GNI is 5% below its estimate of Scottish GDP. However, this assumes the majority [around two-thirds] of North Sea profits stay in Scotland. Both survey and company ownership data suggests that this would not be the case.” The gap between GDP and GNI directly affects taxes paid to a future independent Scottish government.

Ian Murray, shadow business minister at Westminster and MP for Edinburgh South, said the high level of foreign interests in the Scottish economy highlighted the risks that foreign investors would take fright over rows about its currency, its place in the EU and its economic ties to the UK after independence. “These new figures show Scotland is a vibrant place economically, but as part of a stable and secure UK and EU,” he said.

A Scottish government spokeswoman said independence would allow Scotland to ensure the country’s wealth “properly benefits everyone in our society”, and defended the use of GDP figures rather than gross national income.

“We use GDP per capita because it is the most commonly used and accepted measure of relative economic strength,” she said.

“The Scottish government has already published an estimate of GNI for Scotland, which was produced in November last year. It uses a range of highly detailed data sets to account for international ownership of Scottish companies and the associated income flows, and income brought back into Scotland from the activities of Scottish firms abroad. It also looks at cross-border wages and salaries, such as Scottish workers abroad and in the rest of the UK.”

From that data, she said, “It is clear under any measure that Scotland is one of the top 20 economies in the OECD.”

WHAT IS SCOTLAND REALLY WORTH?



Whisky

There are very few products identified with their home country so clearly as Scotch. Scotch whisky earned the UK £4.3bn in export sales last year, making it the country’s most valuable single food and drink export, yet little is actually owned by Scots.

About 85m cases were sold overseas in 2012, but more than 80% of whisky production is owned by non-Scottish companies. You can trace whisky’s best-known brands to Pernod Ricard’s base in Paris (Chivas Regal), the Bacardi headquarters in Bermuda (Dewar’s); and the Jim Beam HQ in Illinois (Teachers and Laphroaig).

This globalisation is underscored by two recent transactions: ownership of Whyte & Mackay has just moved from India to Emperador of the Philippines; and the Japanese company Suntory is merging its liquor business with Jim Beam, adding Bowmore malt to the same stable as Teacher’s and Laphroaig. The largest of all, Diageo in London, owns nearly 40% of Scotch blended and malt whisky production, and sold 36.5m cases in 2012. Its brands include the world’s biggest, Johnnie Walker, which sells 20m cases a year, Bell’s and J&B.

The only significant surviving whisky producers owned in Scotland are privately held: William Grant, which makes Glenfiddich, has 10% of overall production, is family-owned and based in Aberdeenshire. So too is Ian Macleod Distillers, which makes own-label whiskies for supermarkets, with just 1.2% of production. Edrington Group, which owns Famous Grouse and controls 5% of production, is run by a family trust.

But these three firms own just 16.1% of total production, according to the Scotch Whisky Industry Review. Of the top 10 Scotch whisky firms by bottles produced, seven are based and owned outside Scotland, and they control more than 76% of total production.



Professor John Kay, an economist who has advised Alex Salmond, estimates that in 2012 the industry was only worth £400m to Scotland, through wages, production costs and purchases of ingredients. But an analysis for the Scotch Whisky Association says the industry’s taxes in Scotland are worth at least another £282m.There are dozens of smaller firms and producers, mainly niche malt whisky brands. Many are Scottish, but some of the best-known smaller brands are not. Scotland’s top-selling malt whisky and the UK’s second biggest seller, Glenmorangie, is owned by the luxury goods firm LVMH. SC

Oil and gas



The ownership of North Sea oil and gas production is spread around the world from the US to China to France, but Scotland barely features.



The Holyrood government believes that £1.5tn worth of value remains to be harvested from oil and gas reserves waiting to be exploited offshore, but much of that money will go elsewhere. That is because although there are dozens of oil companies with large offices in Britain’s oil centre, Aberdeen, almost all their owners are based outside Scotland.

There are some key Scottish-owned engineering firms that would get a good share of development work, while a Scottish government would expect billions in tax revenue. But most North Sea money is taken by the companies with licences to produce oil, and there is only one really large oil company with a formal headquarters in Scotland: Cairn Energy, which is worth £1bn in stock market terms – compared with £94bn for BP – but only has 25% or 30% interests in two North Sea fields and they are not producing anything yet.

Facebook Twitter Pinterest A North Sea oil platform, about 100 miles east of Aberdeen. Photograph: WPA Pool/Getty Images

Edinburgh-based and privately owned First Oil is a truly Scottish company but it is a tiddler in production terms with output of 6,500 barrels a day out of a total UK output of almost 1m.

Those developing the UK North Sea are international. The largest producing field, Buzzard, 60 miles north-east of Aberdeen, is owned 22% by London-based BG (formerly British Gas), 43% by Nexen, nominally based in Canada but ultimately owned by CNOOC of China, and 30% by Suncor of Canada. The other 5% is controlled by Edinburgh Oil & Gas, a company owned by Dutch interests. Of the top 20 companies investing heavily to increase production between now and 2017, five are registered in England and none in Scotland.

The Aberdeen and Grampian Chamber of Commerce has about 450 members from the broader oil and gas sector but only 20 are defined as exploration and development companies, with 430 regarded as “supply chain”, which could mean anything from engineering to legal services. TM

Salmon



Large sides of fresh Scottish salmon often have pride of place on Britain’s fish counters. The marketing puts heavy emphasis on the Highlands and Scotland’s rugged coastline, with a fringe of tartan curled alongside.



But buy a pack and the profits will most likely end up in Norway, London, Canada and in one case travel via Edinburgh to Jersey, Switzerland and the British Virgin Islands. For while it is the country’s most valuable food product, with a retail value of roughly £1bn, well over 80% of Scotland’s salmon industry is owned by companies based outside Scotland.

In 2000, there were 68 salmon farming firms in Scotland, with 15 accounting for 74% of production. But most have been swallowed up: there were 22 companies operating in 2012, with just eight accounting for 98% of output, and 6,200 jobs reliant on the industry.

Norway has the biggest stake. Only a few Scottish-owned firms are left, including the premium-branded Loch Duart in Sutherland, responsible for just 3% (5,000 tonnes) of 2012 total production, and Wester Ross Salmon, which does not publish harvest figures. The largest producer is the Norwegian global giant Marine Harvest: it owned 25% of the total production of 162,223 tonnes in 2012, landing 40,000 tonnes of fish. Scottish Seafarms is based in Bergen, Norway, and it landed 27,200 tonnes in 2012. SC



Financial services



Companies owned and registered in Scotland account for only one third of UK revenue generated by the Scottish financial services and banking sector.



An analysis by the Guardian of 157 financial services companies registered in Scotland suggests most money is created by businesses owned in England and overseas. Accounts filed at Companies House of more than 150 Scottish-registered banks and financial services companies show only £17bn of the £51bn UK revenue generated from the Scottish sector was attributable to “pure” Scottish businesses owned, headquartered and registered in Scotland. Companies registered in Scotland but ultimately owned in England or overseas generated the other £34bn.

A similar picture emerges from analysing the global net worth of Scottish-registered financial services companies. Only a third of the combined global net assets – worth £103bn – of the Scottish-registered companies analysed were owned by pure Scottish companies.

The research understates the sales generated by companies owned and registered outside Scotland, which could be even greater than the £34bn identified in the investigation. It excludes 93 companies operating in Scotland without Scottish-registered units, including big employers such as HSBC and Barclays.



The Office for National Statistics’ 2010 regional survey suggested financial services contributed £8.8bn to the Scottish economy. However, the Guardian’s analysis of Scottish-registered financial services companies suggests UK revenue generation is dominated by those owned outside Scotland. IG