This paper examines data published by the Scottish Government on Scotland’s Gross Domestic Product (GDP) and Gross National Income (GNI) which lays out the extend to which the profits from foreign-owned companies in Scotland are extracted outwith Scotland, how it is done and where the profits go.
― Scotland is one of the most foreign-owned countries in the world and one of only a handful of such countries that is both rich and developed but is not a micro-state or an outright tax haven.
― Comparing Scotland’s GDP (Gross Domestic Product) and its GNI (Gross National Income) found that in 2021, £36.5 billion was extracted from Scotland – largely in the form of profits and dividends to foreign companies and shareholders – while only £26.4 billion flowed into Scotland – largely as foreign investment income. A net outwards flow of £10.1 billion.
― Of this outwards “economic flow”, £3.9 billion was extracted to elsewhere in the UK whereas £6.2 billion was extracted to elsewhere in the world.
― This is equivalent to 5.59% of GDP which is greater than the average of any World Bank income group, including the world’s least developed and most heavily indebted nations.
― Scotland has experienced a net outflow of wealth in every year since records began in 1998 – totalling around £277.4 billion between 1998 and 2021. Of this, £134.7 billion was extracted to the rest of the UK and £142.7 billion was extracted to the rest of the world.
― In 2021 only five polities in the World Bank GNI database were both richer than Scotland in terms of GNI/capita and had a higher net rate of outwards economic flow. San Marino, Singapore, Ireland, Luxembourg and The Cayman Islands.
― The Scottish Government’s intensive support of “Foreign Direct Investment” aims to create a net flows of investment towards Scotland, but these investments will, if they are successful, result in greater flows of profit extraction in years to come.
― Over-reliance on foreign capital has and will lead to capture of Scotland’s democracy as politicians will be pressured to appease investors who have already demonstrated the ability to move investments elsewhere if demands are not met regarding tax breaks, erosion of workers rights, capture of environmental standards or any other legislation that may reduce rates of profit extraction.
― While the latest publication of GNI figures is welcome, the gap between 2017 and 2023 as well as the two year lag time for the latest data is an issue that should be addressed as a matter of urgency. The Scottish Government should commit to publishing GNI figures at least annually, and preferably as frequently as and alongside GDP figures.
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