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.

 
 
 
 

Never mind Brexit: TfL just released new tube map showing an interchange at Camden Town!!!

Mmmmm tube-y goodness. Image: TfL.

Crossrail has just been given a £1bn bail out. This, according to the Financial TImes’s Jim Pickard, is on top of the £600m bailout in July and £300m loan in October.

That, even with the pound crashing as it is right now, is quite a lot of money. It’s bad, especially at a time when there is still seemingly not a penny available to make sure trains can actually run in the north.

But the world is quite depressing enough today, so let’s focus on something happier. On Saturday night – obviously peak time for cartographic news – Transport for London emailed me to let me know it would be updating the tube map, to show more street-level interchanges:

Connections between several pairs of stations that are near to each other, but have traditionally not been shown as interchanges, now appear on the map for the first time. These include:

  • Camden Road and Camden Town
  • Euston and Euston Square
  • Finchley Road and Finchley Road & Frognal
  • Kenton and Northwick Park
  • New Cross and New Cross Gate
  • Seven Sisters and South Tottenham
  • Swiss Cottage and South Hampstead

The stations shown meet a set of criteria that has been used to help determine which should be included. This criteria includes stations less than a 700m or a 10 minute walk apart, where there is an easy, well-lit, signposted walking route and where making the change opens up additional travel options.

The results are, well, this:

In addition, interchanges between stations have traditionally appeared on the Tube map as two solid lines, irrespective of whether they are internal or external (which means customers need to leave the station and then re-enter for the station or stop they need). This approach has now been updated and shows a clear distinction between the two types, with external interchanges now being depicted by a dashed line, linking the two stations or stops.

And lo, it came to pass:

I have slightly mixed feelings about this, in all honesty. On the positive side: I think generally showing useful street-level interchanges as A Good Thing. I’ve thought for years that Camden Road/Camden Town in particular was one worth highlighting, as it opens up a huge number of north-east travel options (Finchley to Hackney, say), and apps like CityMapper tell you to use it already.


And yet, now they’ve actually done it, I’m suddenly not sure. That interchange is pretty useful if you’re an able bodied person who doesn’t mind navigating crowds or crossing roads – but the map gives you no indication that it’s a harder interchange than, say, Wanstead Park to Forest Gate.

The new map also doesn’t tell you how far you’re going to be walking at street level. I can see the argument that a 400m walk shouldn’t disqualify something as an interchange – you can end up walking that far inside certain stations (Green Park, Bank/Monument), and the map shows them as interchanges. But the new version makes no effort to distinguish between 100m walks (West Hampstead) and 700m ones (Northwick Park-Kenton), which it probably should.

I’m also slightly baffled by some of the specific choices. Is Finchley Road-Finchley Road & Frognal really a useful interchange, when there’s an easier and more direct version, one stop up the line? No hang on West Hampstead isn’t on the Metropolitan line isn’t it? So that’s what it’s about.

Okay, a better one: if you’re switching from District to Central lines in the City, you’re generally better off alighting at Cannon Street, rather than Monument, for Bank – honestly, it’s a 90 second walk to the new entrance on Walbrook. Yet that one isn’t there. What gives?

The complete new tube map. The full version is on TfL’s website, here.

On balance, showing more possible interchanges on the map is a positive change. But it doesn’t negate the need for a fundamental rethink of how the tube map looks and what it is for. And it’s not, I fear, enough to distract from the Crossrail problem.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.