The economic history of Scotland charts economic development in the history of Scotland from earliest times, through seven centuries as an independent state and following Union with England, three centuries as a country of the United Kingdom.
Before 1700 Scotland was a poor rural area, with few natural resources or advantages, remotely located on the periphery of the European world. Outward migration to England, and to North America, was heavy from 1700 well into the 20th century. After 1800 the economy took off, and industrialized rapidly, with textile, coal, iron, railroads, and most famously shipbuilding and banking. Glasgow was the centre of the Scottish economy.
After the end of the First World War in 1918, Scotland went into a steady economic decline, shedding thousands of high-paying engineering jobs, and having very high rates of unemployment especially in the 1930s. Wartime demand in the Second World War temporarily reversed the decline, but conditions were difficult in the 1950s and 1960s. The discovery of North Sea oil in the 1970s brought new wealth, and a new cycle of boom and bust, even as the old industrial base had decayed.R. A. Houston, A. and W. Knox, eds., New Penguin History of Scotland, (2001)Bruce Lenman, An Economic History of Modern Scotland, 1660-1976 (1977)
Since the end of World War II, Scotland has shrunk as a share of the British economy, falling from 9.3% of the UK total in 1948 to 7.5% in 2018. For most of the period after first production of North Sea oil and gas, Scotland has had higher gross value added per capita than the UK.
Earliest times
Scotland is roughly half the size of England and Wales, but has only between a fifth and a sixth of the amount of the arable or good pastoral land, which made marginal pastoral farming and, with its extensive coastline (roughly the same amount of coastline as all of the rest of Great Britain at ), fishing, the key factors in the pre-modern economy.E. Gemmill and N. J. Mayhew, Changing Values in Medieval Scotland: a Study of Prices, Money, and Weights and Measures (Cambridge: Cambridge University Press, 1995), , pp. 8-10. Only a fifth of Scotland's land is under 60 metres above sea level. Its east Atlantic position means that it has very heavy rainfall: today about 700 cm per year in the east and over 1,000 cm in the west. This encouraged the spread of blanket peat bog, the acidity of which, combined with high level of wind and salt spray, made most of the islands treeless. The existence of hills, mountains, quicksands and marshes made internal communication and conquest extremely difficult.C. Harvie, Scotland: a Short History (Oxford: Oxford University Press, 2002), , pp. 10-11.
Mesolithic hunter-gatherer encampments are the first known settlements in the country, and archaeologists have dated an encampment near Biggar to around 8500 BC. Neolithic farming brought permanent settlements, and the wonderfully well preserved stone house at Knap of Howar on Papa Westray dating from 3500 BC predates by about 500 years the village of similar houses at Skara Brae on West Mainland, Orkney.C. Arnold, Stone Age Farmers Beside the Sea: Scotland's Prehistoric Village of Skara Brae (Houghton Mifflin Harcourt, 1997), , p. 13. From the commencement of the Bronze Age to about 2000 BC the archaeological record shows a decline in the number of large new stone buildings constructed. Pollen analyses suggest that at this time woodland increased at the expense of the area under cultivation. Bronze and Iron Age metalworking was slowly introduced to Scotland from Europe over a lengthy period. Scotland's population grew to perhaps 300,000 in the second millennium BC.A. Moffat, Before Scotland: The Story of Scotland Before History (London: Thames and Hudson, 2005), pp. 154, 158 and 161.Whittington, Graeme and Edwards, Kevin J. (1994) "Palynology as a predictive tool in archaeology" (pdf) Proceedings of the Society of Antiquaries of Scotland. 124 pp. 55–65.
Following a series of military successes in the south, forces led by Gnaeus Julius Agricola entered Scotland in 79 and later sent a fleet of galleys around the coast as far as the Orkney Islands. The geographer Ptolemy's identified 19 "towns" from intelligence gathered during the Agricolan campaigns. No archaeological evidence of any truly urban places has been found from this time and the names may have indicated hill forts or temporary market and meeting places and most of the names are obscure.A. Moffat, Before Scotland: The Story of Scotland Before History (London: Thames and Hudson, 2005), pp. 268-70. Archaeology and dendrochronology suggests that the occupation of southern Scotland started before the arrival of Agricola. Whatever the exact dating, for the next 300 years Rome had some presence along the southern border.
Middle Ages
Early Middle Ages
476 AD – 1000 AD
The early Middle Ages was a period of climate deterioration, with a drop in temperature and an increase in rainfall, resulting in more land becoming unproductive.P. Fouracre and R. McKitterick, eds, The New Cambridge Medieval History: c. 500-c. 700 (Cambridge: Cambridge University Press, 2005), , p. 234. Lacking the urban centres created under the Romans in the rest of Britain, the economy of Scotland in the early Middle Ages was overwhelmingly agricultural. With a lack of significant transport links and wider markets, most farms had to produce a self-sufficient diet of meat, dairy products and cereals, supplemented by hunter-gathering. Limited archaeological evidence indicates that throughout Northern Britain farming was based around a single homestead or a small cluster of three or four homes, each probably containing a nuclear family, with relationships likely to be common among neighbouring houses and settlements, reflecting the partition of land through inheritance.A. Woolf, From Pictland to Alba: 789 - 1070 (Edinburgh: Edinburgh University Press, 2007), , pp. 17-20. Farming became based around a system that distinguished between the infield around the settlement, where crops were grown every year and the outfield, further away and where crops were grown and then left fallow in different years, in a system that would continue until the 18th century.H. P. R. Finberg, The Formation of England 550-1042 (London: Paladin, 1974), , p. 204. The evidence of bones indicates that cattle were by far the most important domesticated animal, followed by pigs, sheep and goats, while domesticated fowl were very rare. Imported goods found in archaeological sites of the period include ceramics and glass, while many sites indicate iron and precious metal working.K. J. Edwards and I. Ralston, Scotland after the Ice Age: Environment, Archaeology and History, 8000 BC - AD 1000 (Edinburgh: Edinburgh University Press, 2003), , p. 230.
High Middle Ages [around AD 1000 to 1250]
Although the Scottish economy of this period was still dominated by agriculture and by short-distance, local trade, there was an increasing amount of foreign trade in the period, as well as exchange gained by means of military plunder. By the end of this period, coins were replacing barter goods, but for most of this period most exchange was done without the use of metal currency.Stringer, "Emergence of a Nation State", pp. 66–69
Most of Scotland's agricultural wealth in this period came from pastoralism, rather than arable farming. Arable farming grew significantly in the "Norman period", but with geographical differences, low-lying areas being subject to more arable farming than high-lying areas such as the Highlands, Galloway and the Southern Uplands. Galloway, in the words of G.W.S. Barrow, "already famous for its cattle, was so overwhelmingly pastoral, that there is little evidence in that region of land under any permanent cultivation, save along the Solway coast."Barrow, Kingship and Unity, (1981), p. 12 The average amount of land used by a husbandman in Scotland might have been around 26 acres.Barrow, Kingship and Unity, (1981), p. 18 There is a lot of evidence that the native Scots favoured pastoralism, in that Gaelic lords were happier to give away more land to French and Middle English-speaking settlers, whilst holding on tenaciously to more high-lying regions, perhaps contributing to the Highland/Galloway-Lowland division that emerged in Scotland in the later Middle Ages.e.g. for Galloway, Oram, Lordship, pp. 212–213; for Strathearn and Lennox, see Neville, Native Lordship, pp. 79–130 The main unit of land measurement in Scotland was the davoch (i.e. "vat"), called the arachor in Lennox. This unit is also known as the "Scottish ploughgate." In English-speaking Lothian, it was simply ploughgate.Barrow, Kingship and Unity, p. 12–15 It may have measured about ,Barrow, Kingship and Unity, (1981), p. 15 divided into 4 raths.Neville, Native Lordship, p. 96 Cattle, pigs and cheeses were among the most produced foodstuffs,Driscoll, Alba, (2002), p. 53 but of course a vast range of foodstuffs were produced, from sheep and fish, rye and barley, to bee wax and honey.
Pre-Davidian Scotland had no known chartered burghs, though most, if not all, of the burghs granted charters by the crown already existed long before the reign of David I. His charters gave them legal status, a new form of recognition. Scotland, outside Lothian, Lanarkshire, Roxburghshire, Berwickshire, Angus, Aberdeenshire and Fife at least, largely was populated by scattered hamlets, and outside that area, lacked the continental style nucleated village. David I established the first chartered burghs in Scotland, copying the burgher charters and Leges Burgorum (rules governing virtually every aspect of life and work in a burgh) almost verbatim from the English customs of Newcastle-Upon-Tyne.Barrow, Kingship and unity, p. 98 Early burgesses were usually Flemish, English, French and German, rather than Gaelic Scots. The burgh’s vocabulary was composed totally of either Germanic and French terms.Murison, "Linguistic Relations", (1974), p. 74 The councils which ran individual burghs were individually known as lie doussane, meaning the dozen.Murison, "Linguistic Relations", (1974), p. 102
Late Middle Ages [around 1300 - 1500]
In this period, with difficult terrain, poor roads and methods of transport there was little trade between different areas of the country and most settlements depended on what was produced locally, often with very little in reserve in bad years. Most farming was based on the lowland fermtoun or highland baile, settlements of a handful of families that jointly farmed an area notionally suitable for two or three plough teams, allocated in run rigs to tenant farmers. They usually ran downhill so that they included both wet and dry land, helping to offset some of the problems of extreme weather conditions. Most ploughing was done with a heavy wooden plough with an iron coulter, pulled by oxen, which were more effective and cheaper to feed than horses. Obligations to the local lord usually included supplying oxen for ploughing the lord's land on an annual basis and the much resented obligation to grind corn at the lord's mill.J. Wormald, Court, Kirk, and Community: Scotland, 1470-1625 (Edinburgh: Edinburgh University Press, 1991), , pp. 41-55. The rural economy appears to have boomed in the 13th century and in the immediate aftermath of the Black Death was still buoyant, but by the 1360s there was a severe falling off incomes that can be seen in clerical benefices, of between a third and half compared with the beginning of the era, to be followed by a slow recovery in the 15th century.S. H. Rigby, ed., A Companion to Britain in the Later Middle Ages (Oxford: Wiley-Blackwell, 2003), , pp. 111-6.