Some time ago someone asked me in the context of the referendum debate: "How many jobs in Scotland depend on links with the UK?" I said: "I don't know but I can attempt to find out. But the harder question is determining how many of these jobs might be at risk if Scotland chooses to become independent."

So in a later post I shall look at the jobs in Scotland that can be said to be dependent on the UK.

In the next post I shall try and make an assessment of which and how many of those jobs might be at risk through the process of Scotland became politically independent.

Jobs dependent on the UK

We can identify 5 broad categories of jobs that depend on the UK in some sense. These are jobs in:

Rest of UK owned/controlled companies

Companies exporting from Scotland to the rest of the UK

The reserved public sector, less financial institutions in current UK state ownership

UK public sector contracts for Scottish companies, especially defence

Scottish R&D in the HEI sector financed by UK grants

These jobs we can call the direct jobs dependent on the UK. But there are also further jobs that depend on the jobs that are dependent on the UK. These are the secondary jobs in local companies supplying the direct jobs in one or more of the above categories. They are obtained technically by applying Type 2 Employment multipliers at the appropriate sectoral level using the Scottish Government's input-output tables.

The grand table with source links and descriptions of the calculations is presented below

Source: Own calculations using the following (1) http://www.scotland.gov.uk/Topics/Statistics/Browse/Business/Corporate/alltables Table 3 (2) BIS calculations based on Scottish Input-Output tables 2009 data, retrieved May 2013, http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/Input-Output/Downloads and http://www.scotland.gov.uk/Topics/Statistics/Browse/Labour-Market/BRES-Employee-Jobs-Sco (3) http://www.scotland.gov.uk/Topics/Statistics/Browse/Labour-Market/TrendPublicSectorEmp (4) http://ukdefencejournal.org.uk/what-impact-would-independence-have-on-scotlands-defence-industry/ 75% of jobs assumed to depend on MOD spending (5) 9,034 research staff: active academics plus research fellows and assistants equals 12.1% of UK total. Assume at a minimum without UK R&D grants Scotland would have a UK population share at 8.3% - Source: http://www.universities-scotland.ac.uk/uploads/briefings/Research%20facts%20and%20figs(2).pdf (6) Derived from 2009 Scottish Input Output tables by aggregation to appropriate sector http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/Input-Output/Downloads/IO1998-2009All

The source spreadsheets for these calculations can be accessed here: Download Business in Scotland 2013. Download Jobs in Sco-ruk exports 2009 Download Scottish I-O tables 1998-2009

Now this table must be viewed with great care.

First, there will be some, probably quite a bit of, overlap between at least two of the categories of direct jobs: in rUK owned firms and in companies exporting to rest of UK. Clearly, many jobs in rUK owned firms will be associated with export sales to rest of UK. We have no data for the overlap, so we take the share of employment that is in rest of UK owned firms in Scotland (18.7%) apply that to the estimated direct export jobs 247,000, giving 46,000, then reduce the jobs in rest of UK owned firms – 359,000 - by that amount. The adjusted – rounded - numbers are presented in Table 2.

Table 2: Scottish Jobs Dependent on UK adjusted for overlap

Type of Job Direct Secondary Total rUK owned firms 313,000 204,000 517,000 Exports to rUK 247,000 350,000 597,000 Other to UK 75,000 86,000 161,000 Total 635,000 640,000 1,275,000

There is a further problem with the estimates presented in Table 2: the estimated secondary effects are almost certainly too high. Where there is a large change in the demand for goods services, and labour in the economy prices and wages will adjust as well as output. In the event of a reduction in demand and loss of jobs prices and wages will fall and so the competitiveness of supplying firms will increase to partially offset the loss of demand. In our – the Fraser of Allander Institute's – analysis, in the June 2010 Economic Commentary,of the impact of cuts in the Scottish DEL under the austerity proposals of the new UK Government, a flex-price analysis led to a reduction in jobs which was about half – 51% - of the fall when prices were held fixed under the standard Input-Output multiplier approach.

Applying that adjustment uniformly across all categories to the secondary jobs in Table 2 we get Table 3

Table 3: Scottish Jobs Dependent on UK adjusted for price and wage change

Type of Job Direct Secondary Total rUK owned firms 313,000 104,000 417,000 Exports to rUK 247,000 179,000 426,000 Other to UK 75,000 44,000 119,000 Total 635,000 327,000 962,000

So, with the adjustments in place, Table 3 tells us that almost 1 million jobs – 962,000 – depend on links to the rest of the UK. This is a clear indication, if anyone wanted one, of the extent to which the Scottish economy is integrated with the rest of the United Kingdom.