THE oil sector’s key role in Scotland’s ranking of fourth out of the 12 nations and regions of the UK for productivity performance has been highlighted by KPMG in a new report.

The accountancy firm, publishing the report today, emphasises its view that Scotland has done well in a UK context in terms of improving its relative productivity performance over the last decade but declares that more needs to be done.

KPMG, noting Scotland is behind London, and the south-east and east of England regions in the league table based on output per hour worked, highlights the boost to overall Scottish labour productivity from the “high value-added oil sector” in the north-east.

This sector has seen thousands of job losses in the wake of a plunge in crude prices, which have staged a partial recovery in recent times.

Catherine Burnet, senior partner for KPMG in Scotland, declared Scotland’s “oil and gas [sector], in particular, has made significant productivity gains over the last 18 months”.

KPMG’s report on productivity also notes the east of Scotland economy is dominated by a “high value-added financial services and a burgeoning fintech sector”.

However, the report also notes that Scotland’s large proportion of rural areas creates “marked differences in productivity” between cities and the countryside.

In the current environment of above-target annual consumer prices index inflation of three per cent, fuelled by sterling’s tumble following the Brexit vote, driving up the efficiency of production is viewed by economists as crucial to enabling higher pay and boosting living standards.

The KPMG report concludes companies based in Scotland perform well on innovation indicators, which include research and development expenditure and number of patents. It also notes the accessibility of higher education north of the Border helps boost the share of skilled workers, with Scotland outperformed only by London on this measure.

The report also observes Scotland has seen “strong growth” in the number of foreign direct investment projects attracted in recent years.

Ms Burnet, in the context of average UK productivity and on the basis of data from the Office for National Statistics, said: “Scotland has done well over the last 10 years in closing the productivity gap with the rest of the UK.”

However, Ms Burnet declared “the UK level remains a low benchmark by international standards and more can be done”.

In its report, KPMG makes several recommendations for boosting productivity in Scotland.

Ms Burnet said: “Looking ahead, we believe there are some key actions for business and policy-makers to drive further improvements.”

She recommended “further enhancing digital and technology skills across the workforce; providing more managerial and leadership training in both [the] private and public sector; and improving numeracy, literacy and science skills in schools”.

Ms Burnet added that such measures would “play a significant role in improving productivity” across Scotland.

KPMG’s report, noting availability of fourth-generation mobile technology

in Scotland is far below that of London at 50.4 per cent compared with 69.7 per cent, says: “The digital infrastructure

needs improving in rural areas – although access to superfast broadband is also an issue in some areas within cities. Furthermore, 4G availability is comparatively low.”

The report also highlights potential to boost Scottish productivity by increasing further inward investment and by raising the number of companies that are exporting. It says only six per cent of Scotland’s non-financial companies are exporters.

KPMG meanwhile notes that, “promisingly, the report reveals that employers have a very favourable view of the current skills mix of school leavers and graduates - a key factor in high-productivity economies”.

The report observes Scotland’s food and drink production activities “are primarily based in the Highlands and Islands area”.

KPMG notes a “shortage of housing” in some areas of Scotland.

It also says significant investment in recent years in major transport links between regions of Scotland has had a positive impact. But it adds that “additional connectivity within regions, including more bus routes, would improve access to employment opportunities across Scotland, particularly for those from more deprived communities”.