It is no accident that Scotland remains the top destination, outside of London, for foreign direct investment in the UK. With a population of only 5.4 million people and a workforce of under 3 million, the country’s economy has been steadily growing over the past few years, with unemployment figures dropping to an all-time low at the beginning of last year.
Today, there are many Scottish stocks worth looking at as you make some portfolio changes. However, there are a few things you should know as you consider investing in Scotland for this year.
Scottish economy facts
Scotland is known to have one of the strongest economies in the world, offering a wealth of resources and advantages only a few nations can match.
Ever since the Acts of Union 1707 took effect, the country’s economy has been closely intertwined with the rest of the UK, with England being its main trading partner. However, after Scotland became a part of the European Union, as a constituent nation of the UK, it has broadened its horizons by developing and establishing strong connections with other European economies.
Scotland’s gross domestic product (GDP) per capita is higher than in all other areas of the UK, outside of London and England’s eastern regions. In 2018, the Scottish economy had an estimated nominal GDP of up to £170bn. This figure represented an increase of 0.03 per cent, which was higher than the growth rate for the United Kingdom overall.
Scotland consistently accounts for roughly 5 per cent of the UK’s overall export revenue. Oil and natural gas exports are one of the key drivers of the country's economy, with a wealth of resources available in the North Sea.
Manufacturing and construction industries contribute more than one-fourth of Scotland’s annual GDP. Engineering industries export most of their output. While there has been a historical focus on heavy industry, recent developments in technology manufacturing also look rather promising.
Finally, agriculture, forestry and fishing are also a crucial pillar of the Scottish economy.
As a constituent of the UK, Scotland is a member of several key international economic and political organisations, including the World Trade Organisation, the Commonwealth of Nations, the United Nations, the G7, the G8, the G20, the Organisation for Economic Co-operation and Development and the World Bank.
Pros and cons of investing in Scotland
There are many reasons why you might want to invest in Scotland. In recent years, the Scottish government has set up economic initiatives to support investors and attract companies to move there. Today, Edinburgh is considered one of the best places in Europe for entrepreneurs, particularly in the tech sector. There is a high concentration of universities in the area, which means there is an excellent talent pool for companies to draw from and plenty of potential for collaboration.
In general, the atmosphere in the country is one that supports growing businesses, which makes it a great place to put your money.
As with any country, there are some disadvantages to investing in Scottish companies. Brexit is fast approaching, and the outcome could be potentially problematic for Scotland, depending on how things are handled. The economic impact could be particularly difficult for new, emerging businesses that are much more volatile than older, well-established companies, which have been presented on the Scottish stock market for many years, if not decades.
Factors influencing the performance of Scottish companies
While there are many benefits of investing in Scottish stocks, there are also potential economic factors that could influence their growth in the future. The most pressing factor at the moment is, obviously, a looming Brexit. And while no one is still quite sure how exactly the event is going to affect the global economy, it could dramatically lower the value of the pound and severely limit trade and travel between the United Kingdom and various European countries.
There is also a growing political movement for Scottish independence, which could further complicate things if it ever comes to fruition. Scottish independence would mean that the country could remain in the EU, but would present extremely challenging economic problems as the UK currently controls many aspects of the Scottish economy.
Another factor to consider when willing to invest in Scotland is the global shift away from oil and gas to more sustainable energy solutions. Since a decent part of Scotland’s economy is centred around these commodities, it could potentially be problematic.
Nonetheless, there are many well-known and rapidly growing Scottish companies focused on modern engineering and technology that could play a part in the shift towards sustainable energy. The economy is also diversifying naturally, and eco-friendly Scottish stocks could offset this issue.
The top 5 Scottish companies to invest in today
Based in Perth, Scotland, this is one of the UK’s leading energy companies. As the country is one of Europe’s leaders in oil and gas, SSE PLC has consistently been at the forefront of both production and distribution throughout the region. Since energy is such an important part of Scotland’s economy, SSE makes for one of the most reliable Scottish companies to invest in. Its market cap currently stands at £15.36bn.
Trade SSE PLC - SSE CFD
This global investment trust is based in Edinburgh and has been in business since 1887. Although it has been around for well over a century, it is still a reliable Scottish investment option. The trust has a diversified portfolio with companies from all over the world. It focuses on providing investment options that may currently be undervalued and offer long-term potential. The company’s current market cap is £610m.
This Glasgow-based company provides unique portable power generation solutions as well as temperature control solutions. Its goods are used in a variety of heavy industry settings. Aggreko’s power generation solutions can make production highly efficient in many different industries. As the world continues to look for new and efficient power sources, this is a company to watch. As of today, its market cap is £2.18bn.
This Scottish company provides transportation services to various agencies throughout the UK. It is the largest bus operator in Britain, and it runs train services throughout the UK as well. With the fear of climate change becoming increasingly pressing, many people will start relying on buses, trains, and other forms of public transport to get around – which makes this company an interesting prospect. Its market cap is now around £1.15bn.
Weir Group is an engineering company based in Glasgow. It focuses on providing solutions for the oil, gas and mining industries, as well as some projects in other heavy industries as well. This company creates innovative solutions that allow these industries to work more efficiently and safely. Its market cap is over £3.8bn.
How to invest in Scottish CFDs
Scotland is a rather unique country that can provide both investors and traders with lots of opportunities. Many Scottish shares offer great potential for growth and could become a valuable addition to one’s portfolio.
Now, you can start trading stocks of Scottish companies online through contracts for difference (CFDs). A CFD is a type of a contract between the two parties, typically the "seller" and "buyer", in order to profit from the price difference between the opening and the closing value of the trade.
Using CFDs to trade the stocks offers you an opportunity to go short or long on the market without having to deal with conventional exchanges. It also allows you to trade on margin, providing bigger exposure to the chosen markets.
However, as CFDs are a leveraged product, losses, as well as winnings, are magnified.
Join Capital.com to learn the latest information and trade Scottish stocks CFDs today.