Aberdeen’s slowdown shows the dangers of being a one-industry town

Another sunny day over Aberdeen. Image: Getty.

Aberdeen has long been one of the UK’s most economically buoyant cities. In the 11 years that  Centre for Cities has published Cities Outlook – our annual health-check on UK city economies – Aberdeen has ranked among the best performing cities when it comes to wages, skill-levels and innovation.

This year’s Cities Outlook shows that Aberdeen continues to be a strong performer, with impressive figures for number of skilled workers, patent applications published and average wages. However, the downturn in the city’s standing in a number of key areas in recent years suggests that all may not be well in the Granite City’s economy.

There are five different indicators that show that Aberdeen’s economy has struggled in the last few years:

  • In terms of population, Aberdeen is the only city in the UK to see a decline in its number of residents between 2015 and 2016 – a fall of 0.3 per cent. This was driven by a sharp decline in those aged 20-24.
  • Business closures per capita have increased by 76 per cent, while business start-up rates have decreased by 21 per cent per cent between 2013 and 2016.
  • The employment rate was 2.7 percentage points lower in 2016 than in 2014.
  • Gross value added data shows that the economy was 7 per cent smaller in 2016 than 2014. As this isn’t adjusted for inflation, the real terms fall will have been even larger.
  • House prices have fallen by 9 per cent since 2015.

While local data is not detailed enough to say conclusively, Aberdeen’s economy appears to have been in recession in recent years. And this is counter to the experiences of other UK cities. While Aberdeen’s reliance on oil and gas appeared to shelter the city from the worst of the global financial crisis, the oil sector’s recent turbulence has pulled the city into reverse at a time when other cities have been slowly improving.

When we consider these findings in light of research published last July by Centre for Cities and the Centre for Economic Performance – which suggested that Aberdeen’s economy would be hit harder than that of any other city by either a ‘hard’ or ‘soft’ Brexit – It all adds up to a worrying picture.

So what’s going on? Much of this is likely to be down to Aberdeen’s dependence on the oil industry, which has hitherto been the source of the city’s economic success. However, in recent years there has been a well-publicised global slump in oil prices, with prices dropping from a peak of $115 per barrel in June 2014 to a low of $26 per barrel in January 2016. Prices have increased more recently, but remain around $50 below their 2014 peak.


This large reliance on a particular sector in Aberdeen draws out three wider policy lessons which have implications in particular for the Government’s Industrial Strategy, and the local industrial strategies that places will develop as part of this initiative:

Having a diverse economic base will help cushion cities against changes in the fortunes of specific industries

Reliance on an individual sector means that your fortunes are hooked on the performance of that sector. And this is something that has been seen throughout the last century – a number of cities have struggled after they’ve seen a decline of a dominant industry, be that steel in Sheffield (which accounted for 24 per cent in 1911), mining in Wakefield (which provided one in three jobs in 1911) or textiles in Burnley (which accounted for over half of all jobs in 1911).

While cities tend to be much more diversified today than they did 100 years ago, cities such as Sunderland (Nissan) and Derby (Rolls Royce) continue to be reliant on individual businesses to generate a large bulk of their exports. Diversifying their economies now by attracting in a broader range of business investment would help offset any future troubles that these businesses may face.

A local industrial strategy should have a place-based approach rather than sectoral approach

Despite the risks that an over-reliance on a small number of industries poses for places, the government’s Industrial Strategy has a strong sectoral dimension to it. The worry here is that will encourage cities to focus their local industrial strategies on what they perceive to be their sector strengths, rather than setting out a plan to attract in business investment from a range of sources. To do this requires an understanding of what the barriers that a city faces to attracting business investment are, and a set of coherent policies to overcome this.

Aberdeen’s recent City Deal very much focused on oil and gas, with three quarters of the £250m deal dedicated to establishment of Oil & Gas Technology Centre (which opened in February 2017). This is likely to be a great asset for the city while the sector is located in the city – but it does little to help it broaden the activities based there.

Encouraging diversity isn’t only the responsibility of the public sector, and the private sector has a role to play

Aberdeen’s over reliance on oil and gas led to the creation in 2015 of Opportunity North East (ONE), a private sector economic development body established with the aim of diversifying the local economy.

While ONE’s identification of a handful of sectors (food, drink and agriculture, life sciences, tourism) runs the risk of being too focused on sectors and not the drivers of business investment, the formation of this organisation reflects that fact that it’s not just the job of the public sector to help places adapt to on-going change – and that private sector will also have an important role to play. The local industrial strategies should define exactly what that role is.

Sania Haider was an intern at Centre for Cities, on whose blog this article first appeared.

 
 
 
 

What would an extended Glasgow Subway look like?

West Street station. Image: Finlay McWalter/Wikimedia Commons.

There are many notable things about Glasgow’s historic Subway.

It is the third oldest in the world. It is the only one in the UK that runs entirely underground. It runs on a rare 4ft gauge. For reasons passing human understanding, it shuts at teatime on a Sunday.

But more significantly, it’s the only metro system never to have been expanded since its original development. A couple of stations have come and gone in the 122 years since the Subway opened (and promptly shut again following a serious accident before the first day was out). But Glasgow’s Subway has remained a frustratingly closed loop. Indeed, while a Scottish newspaper recently estimated there have been more than 50 proposed new stations for Glasgow's iconic Subway since it first opened, all we’ve had are a couple of replacements for closed stops. 

The original route map. Image: SPT.

It’s not for a lack of trying, or at the least discussion. Glasgow’s SNP-led council pledged a major expansion of the Subway as part of their election pledge last year, for example, vowing to find the funding to take the network beyond the existing route.

All this sounds very familiar, of course. A decade ago, with the 2014 Commonwealth Games in mind, operators SPT began looking into a near-£3bn expansion of the Subway into the East End of the city, primarily to serve the new Velodrome complex and Celtic Park.

In the end, the plans — like so many discussed for expanding the Subway – failed to materialised, despite then SPT chairman Alistair Watson claiming at the time: “We will deliver the East End extension for 2014. I am being unequivocal about that.”

As detailed previously on CityMetric, that extension would have seen seven new stations being opened along a second, eastern-centric loop, crossing over with the original Subway at two city centre sites. Had that gone ahead, we would by now have had a new route looking something like this:

The 2007 proposals for an eastern circle. Image: Iain Hepburn.

St Mungo’s would have been close to Glasgow Cathedral. Onslow, presumably located on or near Onslow Drive, would have principally served Dennistoun, as would have a link-up with the existing Duke St overground station.

Gorbals, benefiting from the ongoing redevelopment and residential expansion that’s all but erased it’s No Mean City reputation, would have gained a station, while Newhall would have been next to Glasgow Green. Dalmarnock station would, like Duke Street, become an interchange with Scotrail’s services, while crucially Celtic Park would have gained the final stop, serving both the football stadium, the nearby Emirates Arena and velodrome, and the Forge shopping centre.


Those plans, though, were drawn up more than a decade ago. And if the SNP administration is serious about looking again at the expansion of the Subway, then there’s more than a few changes needing made to those plans.

For starters, one stop at the far end of the loop serving Celtic, the new sports arenas and the Forge feels a bit like underselling the area, particularly with so much new residential development nearby.

Two feels more realistic: one serving the Forge and the rest of Dennistoun, and the other sited on London Road to serve the mass volumes of football and sports traffic. And if Ibrox can have a stop, then it seems churlish not to give the other of the Old Firm clubs their own named halt.

That’s another thing. The naming of the proposed stations is… arbitrary, to say the least. You’d struggle to find many Glaswegians who’d immediately identify where Newhall or Onslow were, off the top of their head. 

The former, especially, seems like there’s a more natural alternative name, Glasgow Green; while the latter, with a second Forge stop also serving Dennistoun, would perhaps benefit from named for the nearby Alexandra Place and park.

(Actually, if we’re renaming stations from their unlikely original choices, let’s say goodbye Hillhead and a big hiya to Byres Road on the original Subway while we’re at it…)

So, what would a realistic, 2017-developed version of that original 2007 proposal give us? Probably something like this:

Better. Image: Iain Hepburn.

One glaring issue with the original 2007 study was the crossover with the… let’s call it the Western Subway. The original proposal had St Enoch and Buchanan St as the crossover points, meaning that, if you wanted to go out east from, say, the Shields Road park and ride, you had to go into town and double back. 

Using Bridge Street as a third interchange feels a more realistic, and sensible, approach to alleviating city centre crowding and making the journey convenient for folk travelling directly from west to east.

There’s a good case to be made for another south east of the river station, depending on where the Gorbals stop is sited. But these are austere times and with the cost of the expansion now likely more than £5bn at current rates, an expanded Bridge Street would do much of that legwork.

Putting all that together, you’d end up with something looking like this:

 

Ooooh. Image: Iain Hepburn.

Ahead of last year’s election, SNP councillor Kenny McLean vowed the party “[would] look at possible extension of the Subway and consider innovative funding methods, such as City Bonds, to fund this work. The subway is over 120 years old. It is high time that we look to connect communities in the north and east of Glasgow.”

Whether Glasgow could raise the £5bn it would probably need to make the 2007 proposal, or an updated variation of it remains, to be seen. And this still doesn’t solve how many places are left off the system. While a line all the way out to Glasgow Airport is unrealistic – after all, an overground rail service to the airport from Paisley has failed to materialise after 30 years of discussion and planning – there’s plenty of places in the city not well served by the Subway, from Maryhill in the north to Hampden in the south, or the riverside developments that have seen flats replace factories and new media hubs, museums and hotels line the Clyde.


Image: Iain Hepburn.

Key city landmarks like the Barrowlands, the Riverside Museum – with its own, fake, vintage subway stop, or the Merchant City are woefully underserved by the subway. But their incorporation – or connection with a Glasgow Crossrail – seems a very expensive pipe dream.

Instead, two adjoining loops, one to Ibrox and one to Celtic Park, seems the most plausible future for an extended Subway. At least colour coding the lines would be easy…

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