Outlook is Strong for Scotland’s Forestry Sector
ICF Council Member Guy Warren MICFor outlines the value of Scotland’s forestry sector to the wider economy.
The forestry sector in Scotland is an environmental and economic success story with the industry now displacing some £1 billion worth of imports annually and contributing an estimated £1.67 billion (indirect) to Scotland’s economy.
It is the synergy between natural growth and the security of land ownership that has established forestry as a proven asset class amongst existing owners.
In recent years forestry has outperformed many other asset classes, performing extremely well during the recent economic downturn with strengthening timber prices being achieved for growers. It’s also worth noting that capital values have also risen with increases in both average values and market size since 2012.
As a result a mature investment market has emerged in recent years in the UK’s premium plantation forestry sector, which also offers a number of tax efficiencies. Whether you are an existing forest owner or considering ownership for the first time I believe the outlook for forestry as an asset class in Scotland is particularly strong.
Global timber consumption, for all types of industrial use, is forecast to rise rapidly in all regions, particularly Asia. Globally, sawn timber accounts for approximately 40% of the volume of harvested timber however, in Scotland this market share is much higher at approximately 65% as sawlogs are and will always be the backbone of the UK industry.
In addition, softwood availability in the UK is forecast to increase over the next two decades before declining through 2040 to 2060, largely as a result of the age profile of our existing timber resource compounded by a reduction in commercial restocking and insufficient levels of productive forestation.
The advantages of energy from wood are also evident in helping generate a low carbon economy however, I must point out it is imperative that supply and demand are balanced to ensure a sustainable future for the whole sector.
In Scotland action is required now to mitigate for the forecast dip in timber availability, thus productive woodland creation must commence now and continue at levels that can really contribute to the sustainability of the sector in the long term.
Those seeking long term capital appreciation might well consider investigating productive new planting opportunities. Woodland creation grants remain available under the existing SRDP scheme and political support has been expressed for further incentivising more productive woodland creation in Scotland, details of which will be outlined in the new SRDP woodland scheme due to be launched later this year or early 2015.
To view my full Forestry Outlook Report please click here.
Guy is Head of Forestry at CKD Galbraith based in Edinburgh and has been a member of the Institute for 8 years.