New report demonstrates the value of Scotland’s pharmaceutical industry, but ABPI warns against complacency.
The pharmaceutical industry is a significant contributor to the Scottish economy and a key player in Scotland’s life sciences sector, according to an independent report from the University of Strathclyde’s Fraser of Allander Institute (FAI).
The report shows a significant increase in total turnover for pharmaceuticals manufactured in Scotland from £690 million in 2019 to £1.65 billion in 2022, having risen to a peak of £2 billion during the height of the pandemic in 2020.
Despite these increases in turnover, some of the report’s findings are less positive, for example, pharmaceutical exports have contracted between 2018 and 2019, down from £570m to £500m, largely due to falls in exports to the rest of the UK, and there has been a slight decrease in total employment in the wider pharmaceutical industry. The ABPI is now calling on the Scottish Government to take action to maximise the sector’s potential and secure more sustained long-term economic benefits.
The report, ‘The economic contribution of the pharmaceutical sector in Scotland’ assessed the impact of the pharmaceuticals and life sciences sectors on the Scottish economy, noting significant economic and wider contributions to Scotland’s National Strategy for Economic Transformation (NSET).
The report also includes analysis of the ‘wider pharmaceutical sector’, defined as the manufacturing of pharmaceuticals, pharmaceuticals R&D, medical sales, and head office activities. This report finds that this wider sector is estimated to support £1.7 billion in Scottish GVA.
Over 5,900 people are employed directly by the Scottish wider pharmaceutical sector, with an additional 9,030 people elsewhere in the Scottish economy due to the wider pharmaceutical sector’s activities. These highly productive jobs are located across Scotland, with a large concentration of direct jobs in rural areas such as the Highlands and income deprived areas like North Ayrshire.
The Scottish Government identify life sciences as a key growth sector due to their substantial ongoing economic contribution to the Scottish economy. In total, life sciences contributes £3.4 billion in Scottish GVA, according to the latest FAI modelling.
Scotland, particularly Edinburgh, performs well when it comes to life sciences innovations from Higher Education Institutions. However, scale-up is a barrier to success, and Scotland needs to work on not losing spin-outs and talent to England.
Another area needing focus to remain competitive is clinical trials. While innovation is being supported in some areas, clinical trials have been struggling for several years in Scotland and the rest of the UK. A recent ABPI report found that the number of clinical trials initiated in the UK per year has fallen by 41% between 2017 and 2021.
Alison Culpan, Director of ABPI Scotland said: “Scotland’s life science offering continues to provide high quality jobs, education and research and development. This report illustrates how vital our industry is to the economy and the positive impact it has on the lives of people across all of Scotland.”
“While the sector continues to do well in Scotland, there are also warning signs that tougher times lie ahead. Scotland has proved that it has the skills and infrastructure required for a thriving pharmaceutical sector, but the Scottish government must now capitalise on this to avoid the return to pre-pandemic levels of output. Challenges around the delivery of clinical trials and the deterioration of the wider UK commercial environment for life sciences could spell trouble unless decisive action is taken to correct course this year.”
The pharmaceuticals sector is Scotland’s second largest contributor to business R&D. A major driver for this is the quality of higher education institutions in Scotland, of which three were recently ranked in the world top 100 universities. When compared to the rest of the UK, relative to size, the nation had the highest number of students enrolled in STEM-related subjects.
Professor Mairi Spowage, Director of the Fraser of Allander Institute, said: “Scotland’s pharmaceutical industry is a key driver of growth in the Scottish economy, supporting productive jobs not just in Scotland’s big cities but across the country.
Our latest modelling estimates highlight the sector’s considerable economic impact in terms of economic growth and employment, but it also demonstrates the wider impact of the sector in supporting the Scottish Government’s economic strategy.
Since the pandemic, economic inactivity due to long-term sickness has been a growing concern, with almost a third of Scotland’s inactivity now due to long-term health issues. This growing problem has serious implications for public finances, productivity, and longer-term economic growth. However, as demonstrated in our latest findings, pharmaceuticals have and will continue to play a fundamental role in improving the health of the people in our economy.”
The report also found:
- For every 1 job created in the Scottish manufacturing of pharmaceuticals industry, 1.7 jobs are created elsewhere in Scotland.
- GVA per head of employment in the manufacturing of pharmaceuticals industry was almost £200,700 in 2020, more than double its nominal value in 2015 and significantly above the Scottish industry average of £60,000.
- The £164 million invested in 2018 in Scottish pharmaceutical R&D is estimated to generate £1.5 billion in economic benefits for the Scottish economy over the next three decades.
- Scotland’s life sciences sector sees strong business survival rates, 67% between 2017 and 2020, compared to a Scottish average of 57%.
- Growth has been spurred along through close links and partnerships between the private sector, NHS Scotland, and university research. Scotland has one of the largest life science clusters in Europe, with many leading start-ups setting up in the nation.
The report was commissioned in September 2022 by The Association of the British Pharmaceutical Industry (ABPI) and is available here.
Authors
Adam is an Economist Fellow at the FAI who works closely with FAI partners and specialises in business analysis. Adam's research typically involves an assessment of business strategies and policies on economic, societal and environmental impacts. Adam also leads the FAI's quarterly Scottish Business Monitor.
Find out more about Adam.
Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.
Kate is a Knowledge Exchange Assistant at the FAI working across a number of project areas. She is currently studying for her MSc in Economics at the University of Edinburgh and has a bachelor’s degree in Economics from the University of Strathclyde. Kate is also the Outreach Coordinator at the Women in Economics Initiative which aims to encourage equal opportunity and improve representation in the field.
Jack is an economist at the Fraser of Allander Institute.
Calum is an Associate Economist at the Fraser of Allander Institute (FAI) and a Researcher at the Centre for Inclusive Trade Policy (CITP). He specialises in economic modelling and trade, and holds an MSc in Economics from the University of Edinburgh.