Economic Report 2019

ECONOMIC REPORT 2019

3.3 Contribution to Gross Domestic Product and Gross Value Added The energy industry makes an important contribution to UK GDP (the total value of economic activity within a country), with figures for 2018 outlining that the energy sector made up 3.2 per cent of the UK total (a contribution of £64 billion). Of this, the production of oil and gas accounted for over one-third of the energy sector’s total contribution and 1.2 per cent of overall UK GDP (equal to around £24 billion). The trend seen in Figure 4 reflects the reduced output from the UK oil and gas industry over time, as well as the changing nature of the UK economy, in line with a larger shift towards the provision of services. Service industries now account for around 80 per cent of UK GDP, compared with 64 per cent in 1990, whilst in that time total manufacturing has fallen from just under 25 per cent of GDP to around 10 per cent. At the same time, the energy intensity of the UK economy has reduced. Total energy demand today is around 7 per cent lower than in 1990 (down from just under 214 mtoe to 200 mtoe per year), while UK GDP has grown by more than 75 per cent in real terms over the same period.

Figure 4: Contribution of Energy Industry to UK Gross Domestic Product

6%

Oil and Gas Production

Coal Extraction

Refining

Nuclear Fuel Processing

5%

Electricity Generation

Gas Transmission

4%

3%

2%

Contributuion to GDP (Percentage)

1%

0%

1990

1995

2000

2005

2010

2015

Source: BEIS

The gross value added (GVA) of the UK economy – defined as the value of sales minus the production costs, and a similar metric to GDP — is also boosted by the oil and gas industry. In 2018, the extraction of oil and gas was the fifth-largest industry within the production, manufacturing and construction sector (representing £20.5 billion, or 5 per cent of the sector), behind specialist construction, building construction, civil engineering and electricity generation, transmission and generation. However, this is an underestimate of the true contribution of the wider oil and gas industry, as supply chain companies contribute a further 0.13 per cent to the UK total (£2.4 billion). With the inclusion of the GVA of supply chain companies, the industry’s total contribution would overtake that of electricity generation and transmission, and is almost 38 per cent greater than other major industries such as motor vehicle production.

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