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.

 
 
 
 

The mountain in North Wales that tried to stop the UK’s blackout

Elidir Fawr, the mountain in question. Image: Jem Collins.

Last Friday, the UK’s National Grid turned to mush. Not the official term perhaps, but an accurate one after nearly one million people were left without power across the country, with hundreds more stranded at train stations – or even on trains (which isn’t nearly as fun as it might immediately sound). 

Traffic lights stopped working, back-up power failed in hospitals, and business secretary Andrea Leadsom launched an investigation into exactly what happened. So far though, the long and short of it is that a gas-fired power station in Bedfordshire failed just before 5 o’clock, followed just two minutes later by Hornsea offshore wind farm. 

However, amid the resulting chaos and inevitable search to find someone to blame for the outage, a set of mountains (yes, mountains) in North Wales were working extremely hard to keep the lights on.

From the outside, Elidir Fawr, doesn’t scream power generation. Sitting across from the slightly better known Mount Snowdon, it actually seems quite passive. After all, it is a mountain, and the last slate quarry in the area closed in 1969.

At a push, you’d probably guess the buildings at the base of the mountain were something to do with the area’s industrial past, mostly thanks to the blasting scars on its side, as I did when I first walked past last Saturday. 

But, buried deep into Elidir Fawr is the ability to generate an astounding 1,728 megawatts of electricity – enough to power 2.5 million homes, more than the entire population of the Liverpool region. And the plant is capable of running for five hours.

Dubbed by locals at the ‘Electric Mountain’, Dinorwig Power Station, is made up of 16km of underground tunnels (complete with their own traffic light system), in an excavation which could easily house St Paul’s Cathedral.

Instead, it’s home to six reversible pumps/turbines which are capable of reaching full capacity in just 16 seconds. Which is probably best, as Londoners would miss the view.

‘A Back-Up Facility for The National Grid’

And, just as it often is, the Electric Mountain was called into action on Friday. A spokesperson for First Hydro Company, which owns the generators at Dinorwig, and the slightly smaller Ffestiniog, both in Snowdonia, confirmed that last Friday they’d been asked to start generating by the National Grid.

But just how does a mountain help to ease the effects of a blackout? Or as it’s more regularly used, when there’s a surge in demand for electricity – most commonly when we all pop the kettle on at half-time during the World Cup, scientifically known as TV pick-up.

The answer lies in the lakes at both the top and bottom of Elidir Fawr. Marchlyn Mawr, at the top of the mountain, houses an incredible 7 million tonnes of water, which can be fed down through the mountain to the lake at the bottom, Llyn Peris, generating electricity as it goes.


“Pumped storage technology enables dynamic response electricity production – ofering a critical back-up facility during periods of mismatched supply and demand on the national grid system,” First Hydro Company explains.

The tech works essentially the same way as conventional hydro power – or if you want to be retro, a spruced up waterwheel. When the plant releases water from the upper reservoir, as well as having gravity on their side (the lakes are half a kilometre apart vertically) the water shafts become smaller and smaller, further ramping up the pressure. 

This, in turn, spins the turbines which are linked to the generators, with valves regulating the water flow. Unlike traditional UK power stations, which can take hours to get to full capacity, at Dinorwig it’s a matter of 16 seconds from a cold start, or as little as five if the plant is on standby.

And, designed with the UK’s 50hz frequency in mind, the generator is also built to shut off quickly and avoid overloading the network. Despite the immense water pressure, the valves are able to close off the supply within just 20 seconds. 

At night, the same thing simply happens in reverse, as low-cost, surplus energy from the grid is used to pump the water back up to where it came from, ready for another day of hectic TV scheduling. Or blackouts, take your pick.

Completed in 1984, the power station was the product of a decade of work, and the largest civil engineering project commissioned at the time – and it remains one of Europe’s largest manmade caverns. Not that you’d know it from the outside. And really, if we’ve learned anything from this, it’s that looks can be deceiving, and that mountains can actually be really damn good at making electricity. 

Jem Collins is a digital journalist and editor whose work focuses on human rights, rural stories and careers. She’s the founder and editor of Journo Resources, and you can also find her tweeting @Jem_Collins.