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 other British cities can learn from the Tyne & Wear Metro

A Metro train at Monument. Image: Callum Cape/Wikipedia.

Ask any person on the street what they know about Newcastle, and they’ll list a few things. They’ll mention the accent; they’ll mention the football; they’ll mention brown ale and Sting and Greggs. They might even mention coal or shipbuilding, and then the conversation will inevitably turn political, and you’ll wish you hadn’t stopped to ask someone about Newcastle at all.

They won’t, however, mention the Tyne and Wear Metro, because they haven’t probably heard of it – which is a shame, because the Metro is one of the best things the north-east has to offer.

Two main issues plague suburban trains. One is frequency. Suburban rail networks often run on poor frequency; to take Birmingham for an example, most of its trains operate at 30-minute intervals.

The other is simplicity. Using Birmingham again, the entire system is built around New Street, leading to a very simple network. Actually, that’s not quite true: if you’re coming from Leamington Spa, Warwick, Stourbridge, Solihull or a host of other major minor (minor major?) towns, you don’t actually connect to New Street – no, you don’t even connect to the ENTIRE SYSTEM BUILT AROUND NEW STREET except at Smethwick Galton Bridge, miles away in the western suburbs, where the physical tracks don’t even connect – they pass over each other. Plus, what on earth is the blue line to Walsall doing?

An ageing map of the West Midlands rail network: click any of the images in this article to expand them. Image: Transport for the West Midlands/Centro.

But Newcastle has long been a hub of railway activity. Tragically, the north-east has fewer active railway lines than any other region of the UK. Less tragically, this is because Tyne and Wear has the Metro.


The Metro was formed in 1980 from a somewhat eccentric collection of railways, including freight-only lines, part of the old Tyneside Electrics route, underground tunnelling through the city centre, track-sharing on the National Rail route to Sunderland, and lines closed after the Beeching axe fell in the early 1960s.

From this random group of railway lines, the Metro has managed to produce a very simple network of two lines. Both take a somewhat circuitous route, the Yellow line especially, because it’s literally a circle for much of its route; but they get to most of the major population centres. And frequency is excellent – a basic 5 trains an hour, with 10 tph on the inner core, increasing at peak times (my local station sees 17 tph each way in the morning peak).

Fares are simple, too: there are only three zones, and they’re generally good value, whilst the Metro has been a national leader in pay-as-you-go technology (PAYG), with a tap-in, tap-out system. The Metro also shares many characteristics of European light rail systems – for example, it uses the metric system (although this will doubtless revert to miles and chains post-Brexit, whilst fares will be paid in shillings).

 

The Metro network. Image: Nexus.

Perhaps most importantly, the Metro has been the British pioneer for the Karlsruhe model, in which light rail trains share tracks with mainline services. This began in 2002 with the extension to Sunderland, and, with new bi-mode trains coming in the next ten years, the Metro could expand further around the northeast. The Sheffield Supertram also recently adopted this model with its expansion to Rotherham; other cities, like Manchester, are considering similar moves.

However, these cities aren’t considering what the Metro has done best – amalgamated local lines to allow people to get around a city easily. Most cities’ rail services are focused on those commuters who travel in from outside, instead of allowing travel within a city; there’s no coherent system of corridors allowing residents to travel within the limits of a city.

The Metro doesn’t only offer lessons to big cities. Oxford, for example, currently has dire public transport, focused on busy buses which share the same congested roads as private vehicles; the city currently has only two rail stations near the centre (red dots).

Image: Google.

But it doesn’t need to be this way. For a start, Oxford is a fairly lateral city, featuring lots of north-south movements, along broadly the same route the railway line follows. So, using some existing infrastructure and reinstating other parts, Oxford’s public transport could be drastically improved. With limited engineering work, new stations could be built on the current track (blue dots on the map below; with more extensive work, the Cowley branch could be reinstated, too (orange dots). Electrify this new six-station route and, hey presto, Oxford has a functioning metro system; the short length of the route also means that few trains would be necessary for a fequent service.

Image: Google.

Next up: Leeds. West Yorkshire is a densely populated area with a large number of railway lines. Perfect! I hear you cry. Imperfect! I cry in return. Waaaaaah! Cry the people of Leeds, who, after two cancelled rapid transit schemes, have had enough of imaginative public transport projects.

Here’s a map of West Yorkshire:

Image: Google.

Here’s a map of West Yorkshire’s railway network:

 ​

Image: West Yorkshire Metro.

The problem is that all of the lines go to major towns, places like Dewsbury, Halifax or Castleford, which need a mainline connection due to their size. Options for a metro service are limited.

But that’s not to say they’re non-existent. For example, the Leeds-Bradford Interchange line passes through densely populated areas; and anyway, Bradford Interchange is a terminus, so it’s poorly suited to service as a through station, as it’s currently being used.

Image: Google.

With several extra stops, this line could be converted to a higher frequency light rail operation. It would then enter an underground section just before Holbeck; trains from Halifax could now reach Leeds via the Dewsbury line. The underground section would pass underneath Leeds station, therefore freeing up capacity at the mainline station, potentially simplifying the track layout as well.

 

Image: Google.

Then you have the lines from Dewsbury and Wakefield, which nearly touch here:

Image: Google.

By building a chord, services from Morley northwards could run into Leeds via the Wakefield line, leaving the Dewsbury line north of Morley open for light rail operation, probably with an interchange at the aforementioned station.

Image: Google.

The Leeds-Micklefield section of the Leeds-York line could also be put into metro service, by building a chord west of Woodlesford over the River Aire and connecting at Neville Hill Depot (this would involve running services from York and Selby via Castleford instead):

The path of the proposed chord, in white. Image: Google.

With a section of underground track in Leeds city centre, and an underground line into the north-east of Leeds – an area completely unserved by rail transport at present – the overall map could look like this, with the pink and yellow dots representing different lines:

Et voila! Image: Google.

Leeds would then have a light-rail based public transport system, with potential for expansion using the Karlsruhe model. It wouldn’t even be too expensive, as it mainly uses existing infrastructure. (Okay, the northeastern tunnel would be pricey, but would deliver huge benefits for the area.)

Why aren’t more cities doing this? Local council leaders often talk about introducing “metro-style services” – but they avoid committing to real metro projects because they’re more expensive than piecemeal improvements to the local rail system, and they’re often more complex to deliver (with the lack of space in modern-day city centres, real metro systems need tunnels).

But metro systems can provide huge benefits to cities, with more stops, a joined-up network, and simpler fares. More cities should follow the example of the Tyne and Wear Metro.