1. Scottish Enterprise Denmark’s economy and comparisons with Scotland SE Board performance Committee November 2006

2. Overview Denmark is considered to be among the world’s most competitive economies Has been among the OECD’s most prosperous countries, although slipped in recent years due to slowing productivity growth Denmark’s GDP per head $2,500 higher than Scotland’s GDP growth has been slightly higher than Scotland’s since 1990… …although GDP per head growth has been lower Denmark’s employment rate is 2 nd highest in the OECD – due to liberal labour markets and highly educated population – although Danes work fewer hours

3. Overview Denmark has relatively high productivity driven by:  Strong capital investment  High business R&D  Highly skilled workforce Entrepreneurship levels in Denmark are slipping – now behind Scotland’s Knowledge intensive output in Denmark is relatively low Denmark has the 2 nd highest tax burden in the OECD… …and the 2 nd highest level of public sector spending  social protection spending especially high  most equal distribution of incomes in OECD

4. Denmark and Scotland Key Statistics ScotlandDenmark Population (2005) 5,094,800 5,415,978 GDP ($, millions, 2004)147,939174,474 GDP per head ($, 2004)29,89432,292 Annual ave GDP growth (1990-2004)1.9%2.1% Employment (2005) 2,415,400 2,732,000 % employees manufacturing (2004)1417 Exports as % GDP (2003)6146

5. Denmark is one of the most ‘competitive’ countries in the world according to the World Economic Forum…

6. …and according to the IMD

7. WEF ranking based on: Rank (out of 125) Quality of institutions2 Higher education & training2 Health & primary education4 Infrastructure5 Market efficiency6 Business sophistication9 Tech readiness10 Innovation10 Macro economy14 IMD ranking based on: Rank out of 61 ScotlandDenmark Economic performance5131 Govt efficiency303 Business efficiency263 Infrastructure263

8. Prosperity: both Denmark and Scotland are in the 2 nd quartile of OECD countries – but $2,500 per head difference. Denmark has been slipping down the rankings, from 5th in the 2000 to 10th in 2004, due to slowing productivity growth

9. The Danish economy has grown slightly faster than Scotland’s over the last 15 years. Scotland, though, has performed far better since 2000 Denmark - 2.1% ave growth p.a Scotland - 1.9% ave growth p.a.

10. The prosperity gap has changed little between 1990 and 2004

11. Scotland’s GDP/head growth, however, has been better than Denmark’s Denmark – 1.8% ave growth pa Scotland – 2.0% ave growth pa

12. More of Scotland’s output is from knowledge intensive sectors

13. Scotland’s economy is more dependent on exports

14. Denmark’s better GDP growth linked to faster population growth

15. Positive net migration helping to boost population growth

16. Denmark’s employment rates is 2 nd highest in the OECD (boosted by liberal labour markets) – but Scotland catching up

17. Although Dane’s work less – average hours among the lowest in the OECD). Could be due to high personal taxation? Denmark – 44.3% ave income tax/ss contribution Scotland – 32.1% ave income tax/ss contribution

18. Productivity – output per hour is higher in Denmark, but gap narrowing

19. Higher productivity driven by higher investment GFCF rate in Scotland assumed to be the same as the UK (ONS data for 2000 suggests little difference between UK and Scottish levels)

20. Danish productivity also driven by business R&D (one of the OECD’s top performers)

21. Denmark’s productivity also driven by skills base - among the highest educated in the OECD

22. Denmark’s population is showing signs of becoming less entrepreneurial

23. Denmark is a high tax economy – but corporation tax lower than UK (28% compared to 30%)

24. Public spending (expressed as a % GDP) is high in both countries – Denmark has high social protection spending

25. Conclusions Denmark scores highly in competitiveness rankings mainly due to the strength of its institutions, education sector and business efficiency Denmark’s higher GDP per head due to very high labour force participation rate and relatively high productivity However Denmark’s recent GDP/head performance has been relatively weak due to slowing productivity growth - and Scotland is catching up Scotland outperforms Denmark on:  knowledge intensive output  exports  net migration  entrepreneurship

26. Conclusions Scotland is narrowing the gap with Denmark on:  GDP per head  employment rates  productivity  skilled population Scotland is struggling to narrow the gap on:  population growth  investment  business R&D