The pharmaceuticals sector is a significant contributor to the Scottish economy and a key player in Scotland’s life sciences sector.
In this report, we use our detailed model of the Scottish economy to quantify the economic impact and wider spill-over effects of Scotland’s Manufacturing of Pharmaceuticals sector.
This report also includes analysis that considers a broader group of pharmaceutical contributors, which is most representative of ABPI members, that we call the ‘Wider Pharmaceuticals sector’.
Additionally, this report models the impact of the Life Sciences sector – a Scottish Government ‘Growth Sector‘.
This report goes beyond economic impact assessment, highlighting these sectors’ wider impact on the Scottish economy.
To do so, this report evaluates the pharmaceuticals and life sciences sectors’ contribution to the Scottish Government’s National Strategy for Economic Transformation (NSET), setting out the
evidence base of these sectors’ economic and wider impact on the Scottish economy.
This report finds that, across the entire Scottish economy:
- The Manufacturing of Pharmaceuticals contributes just under £1.5bn in Gross Value Added
(GVA) to Scotland, supporting a total of 11,350 Full-time Equivalent (FTE)3 Scottish jobs
- The Wider Pharmaceuticals industry supports over £1.7bn in GVA and under 15,000 FTE jobs.
- The Life Sciences industry supports just under £3.4 billion in GVA and over 38,000 FTE jobs.
Additionally, this report sets out how these sectors contribute to the following five Scottish Government programmes of action:
1. Entrepreneurial people and culture
- Between 2017 and 2020, business survival rates in the life sciences sector stood at 67%,
indicating that over two-thirds of life sciences enterprises that started in 2017 were still
running by 2020. This rate exceeds all growth sectors and the overall survival rate across the
- Pharmaceuticals have experienced significant growth in Scotland in recent years. Between
2019 and 2021, the total turnover of the pharmaceutical manufacturing sector rose from
£690m to £1.65bn – down from the 2020 peak of more than £2bn. It is important that
businesses are properly supported so that the increased jobs and growth they support
- 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
loses spin-outs and talent to England.
2. New market opportunities
- Although international exports increased by 9% in 2019, pharmaceutical manufacturing
exports have contracted since 2018, down from £570m. This is due to a fall in exports
to the rest of the UK (rUK) – down from £155m in 2018 to £50m in 2019. Given the recent
performance of indicators such as turnover, we will likely see exports rise in 2020’s data.
- Despite this, the manufacturing of pharmaceuticals sector’s international export to GVA ratio
of 42% is well above Scotland’s overall – across all industries – target of a 25% ratio.
- Clinical trials play a key role in pharmaceutical export growth potential however, across the
UK, patient access to industry research has fallen 44% since 2017/18, median wait time for
regulatory approvals in trials rose by 25 days to 247 days in 2018 – 2020, and the number of
clinical trials in the UK per year contracted by 41% between 2017 and 2021.
3. Productive businesses and regions
- The manufacturing of pharmaceuticals industry is Scotland’s second largest contributor
to business R&D, and these investments have significant long-term impacts on economic
growth. This report estimates that the £164m invested in pharmaceutical R&D in Scotland
in 2018 is expected to generate over £1.5bn in economic benefits for the Scottish economy
over the next three decades.
- Despite this, pharmaceuticals is an extremely productive sector. GVA per head (of those
employed) in pharmaceuticals manufacturing was almost £200,700 in 2020, almost double
its nominal value in 2015, and significantly above the Scottish industry average of £60,000.
Additionally, employment in the wider pharmaceutical sector is well-spread across Scotland,
and supports productivity outside Scotland’s cities, with the majority of employment in the
Highlands and North Ayrshire.
4. Skilled workforce
- Relative to population size, Scotland has the highest number of higher education students
enrolled in STEM-related subjects compared to the rest of the UK. However, ensuring there
are enough graduates going into the pharmaceuticals industry is a challenge.
- The pharmaceutical manufacturing industry directly employs over 4,000 workers in
Scotland, and for every 1 job supported in the manufacturing of pharmaceuticals industry,
1.7 jobs are supported elsewhere in the economy. This part of the wider pharmaceuticals
and life sciences sectors drives the greatest job creation elsewhere in the economy.
- Almost a third of Scotland’s inactivity rate is driven by long-term sickness and this is a
growing concern for the economy. Through reducing patient wait times and introducing
innovative medicines, pharmaceuticals play a vital role in improving long-term health
outcomes across the country.
5. A fairer and more equal society
- In 2022, hourly wages across all percentiles of the manufacturing of pharmaceuticals’ wage
distribution exceeded the real living wage in the UK. However, in Scotland, women earned
22% less than men working in the pharmaceuticals sector; in the UK, the gap was just 6%.
- Whilst the pharmaceutical manufacturing industry is still working to improve gender
equality, the industry does support significant social outcomes. For example, North Ayrshire
is one of Scotland’s most deprived areas, with the second highest child poverty rate in the
country, after Glasgow. The wider pharmaceuticals sector employs more people in North
Ayrshire than anywhere else in Scotland – providing high-skilled, high-paid jobs to the area.
The report was commissioned in September 2022 by The Association of the British Pharmaceutical Industry (ABPI).
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.
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.