Rise of the supercity bypasses Scotland in new economic landscape

Published on Thursday 28 May 2009 21:45

RECESSION has very few upsides. But it has, at least, made people think more deeply about the future. It has forced policy-makers to rethink their ideas. Part of that process is to ask what will be the big industries of tomorrow?

Less than two years ago, if someone had predicted not one but two major Scottish clearing banks would be nearly bankrupt, most would have laughed them out of the country.

Now no-one is laughing. There is a realisation that Scotland, and the UK, has perhaps put too much emphasis on banking.

So if banks are no longer the business safe havens they used to be, what lies ahead? A report published yesterday attempts to "map" the future of the UK's "business landscape".

The problem is, the cartography reveals a grim picture for some of Scotland's leading industries, especially financial services, as other UK cities surpass Edinburgh and Glasgow as "power bases".

The map, produced as part of the HSBC Future of Business report, was drawn up by a trend forecasting consultancy, the Future Laboratory.

It replaces the traditional industrial landscape, which has pictographs symbolising factories, power stations and farms, with symbols depicting where the likes of robotics and wind farms will be the new economic powerhouses.

The report that accompanies the map also posits the rise of "supercities", each with a specialism that will make it stand out from the others. Supercities will derive "status, income and prestige" from "new economy income streams". But there will only be five in the UK and none of them will be in Scotland.

According to the report, Leeds is set to become a "financial services supercity" second only to London, while Newcastle will become a supercity for science.

Liverpool will become a "brand" supercity, while Brighton will excel as "alternative economy" supercity.

While Oxford and Cambridge could also quite reasonably vie to be "science supercities", London is the only UK city to maintain its pre-eminence in the new landscape, designated by the report's authors as a "city state" supercity.

The report says changes are being driven by the recession, which will push new ways of working, increased international business and entrepreneurship.

The report, however, has met with some scepticism.

Grahame Bulfield, the former head of the College of Science and Engineering of the University of Edinburgh, questioned its methodology. He defended Edinburgh's pre-eminence in the sciences currently and in future.

"I would claim Edinburgh is already one of Britain's scientific supercities," said Bulfield.

"It doesn't seem to me there is any evidence for these supercities. It is not going to work like that."

Bulfield argued the city's sciences – particularly in biotech and bioinformatics – are world leading.

Professor Helen Lawton Smith, who is credited as one of the report's 18 "consultant experts", distanced herself from some of the report's findings.

A professor of entrepreneurship at the School of Management and Organizational Psychology at Birkbeck, University of London, she said she "could not think of any reason" why Leeds would surpass Edinburgh as a financial services centre.

"Certainly the east coast of Scotland has a high density of financial services as also parts of the north-west of England. I can't see any reason why that would be.

"I would have to be convinced there was the necessary skills in Newcastle. Also Edinburgh is such a fantastic place to live, as is Glasgow. People want to live there."

A spokeswoman for industry body Scottish Financial Enterprise said Scotland had "the experience, the skills and the expertise across the industry" to remain a key player as a global financial centre.

She also argued that Scotland would continue to appeal to cash-strapped financial services companies who found Scotland a less expensive place to do business.

"It is interesting to note that companies are looking to move out of London to more cost-effective areas. Edinburgh and Glasgow and other Scottish cities offer a competitive business environment, with high quality people, a ready-made infrastructure and good transport links. And Scotland is a great place to live."

Beyond the controversial supercities, the New Entrepreneurial Landscapes report also outlines future industries that Scotland will dominate.

It says Edinburgh will excel at robotics, stem cell research and gaming. Glasgow will be a leader in the development of renewables and gaming, while Dundee, will be strong in biotech, gaming and "neutraceuticals", which are foods with disease-fighting properties.

Councillor Tom Buchanan, convener of economic development at Edinburgh City Council, said: "I'm pleased the report acknowledges Edinburgh's strengths in robotics, stem cell research and gaming but disappointed that it fails to recognise our wider position as an internationally renowned centre for scientific research and innovation.".

The report's author, Martin Raymond, executive editor of the Future Laboratory, defended his methodology and said Scotland was "lucky" it would not have any supercities as it would mean nowhere would be too reliant on any one industry.

"Supercities is slightly misleading," said Raymond. "It doesn't necessarily make it a positive characteristic as it potentially makes such cities more vulnerable than cities which demonstrate more diverse businesses.

"If I was looking at Scotland as a country actually I would say it was more placed for the future than, say, the Midlands."

Noel Quinn, the UK head of commercial banking for HSBC, said the bank commissioned the report to help guide its future policies and "to explore the future of the UK business landscape and investigate how and why the UK business models will change".

A Scottish Government spokesman said:

"Scotland's cities already play a significant role in driving economic growth, building on real strengths across Scotland's key sectors.

"We will continue to work with economic development agencies and invest in our cities to maximise the potential of Scotland's economy."

How they figured out this apparently outrageous claim

IN AN assertion that will have them choking on their malts in Edinburgh's New Club, Leeds has laid claim to the title of the UK's second city of financial services.

From the perspective of the Scottish capital, this may seem absurd.

In Royal Bank of Scotland, Edinburgh still has a large – albeit hobbled – global bank within its city boundaries.

The city also remains a centre for fund management and large life and pensions groups such as Standard Life.

Financial services leaders in Yorkshire acknowledge this but stand by their claim that Leeds is second only to London.

And they have what they maintain are the facts to prove their case.

The area's financial and business service sector output is valued at almost 13 billion a year, according to Leeds Financial Services (LFS), the body set up to promote the area.

But a look at the figures reveals that they do not apply only to Leeds itself, but to the city region around it.

By including the area around Leeds – places such as York, Halifax and Skipton – the figures show the region has significant financial services clout.

The city region is, they say, is the UK's largest centre for financial and professional support services outside London. According to their data, the sector employs approximately 240,000 people.

It can point to having been at the heart of the development of the building society. And it remains the home of three of the eight largest in the UK – the Yorkshire, the Skipton and the Leeds.

Companies such as Aviva, First Direct and Direct Line have substantial operations in the region.

Halifax and Leeds between them have a big part of what was HBOS, now part of Lloyds, employing about 9,000 people.

And the UK's largest provider of risk capital to SMEs, YFM group, has its headquarters in the region.

Leeds – the city not the region – also has a large number of law and accountancy firms, important to service financial services.

Howard Kew, the chief executive of LFS, is diplomatic about the rivalry with the Scottish capital.

He says: "It would be foolish to claim that we can compete with Edinburgh in terms of asset management.

"But we are exploiting our experience with building societies and telephone banking to innovate and evolve for the future."

Glasgow traditions 'can translate into renewable energy'

GLASGOW'S economy will be transformed by gaming, along with Dundee and Edinburgh, but it will also increasingly translate its traditional engineering base into the burgeoning renewables sector.

The report acknowledges the UK has yet to establish itself as a front-runner in the renewable energy sector.

But Glasgow, along with Cardiff, Cornwall and London, is set to change that.

Geopolitical factors such as the UK's over-reliance on oil from the Middle East will drive the industry, as well as the current recession, as consumers search for more sustainable fuel sources.

Eco-conscious Britons and the government's commitment to the Kyoto protocol will make renewables commonplace.

The report's author, Martin Raymond, said he expected Glasgow would have been a little more like Brighton, which excels in the "MDMA industries" – marketing, design, media and advertising. However, he said the people his researchers spoke to repeatedly pointed to renewable energy.

"A few years ago, I would have thought Glasgow would have been more dominated by media, and renewables didn't feature much. Recently, it has become much more important and people are telling us that renewables is the future."

The University of Strathclyde is one of the leading energy research institutes in Europe, with a multi-million pound research portfolio. The energy-related research activities at Glasgow Caledonian University are based within its Division of Energy Systems Engineering.

According to the 2001 Census, 11 per cent of the working age population were participating in further or higher education. This was higher than the Scottish average of 9 per cent.

One Tay watch

DUNDEE is the one that surprised the report's researcher's the most, being home to not one but three potentially world beating industries of the future.

Dundee and York were highlighted for being "hot spots" in biotechnology.

They will exploit the opportunities which arise from an ageing population and the massive demand for the efficient and affordable medicines biotech produces.

Dundee and Southampton will also be forerunners in the increasingly important area of "nutraceuticals", foods that have health or beauty benefits. They are estimated to be worth $80 billion globally and will only become more important with an ageing population.

Rising obesity levels are also driving nutraceuticals.

If gaming hotspots are centred almost exclusively in Scotland, Dundee will have to be the leader with some of the most creative talents working and teaching there.

The University of Abertay Dundee has strong links with games companies across the world, while companies like Real Time Worlds continue to thrive and innovate.

The Scottish digital media and creative industries are currently estimated to be worth about 5bn annually.

Robotic future can't outshine Dolly

ROBOTICS is the future. According to yesterday's report, as work becomes increasingly automated, the robotics industry will come to the fore. This next generation of robotic manual workers are efficient, work 24/7 uncomplainingly, and don't need loo breaks.

Edinburgh, along with Birmingham, Essex, London, Manchester and Plymouth are set to become hotspots in this area.

A more familiar specialism for Edinburgh, however, is stem cell research. Dolly the Sheep, the world's first cloned mammal, is still the most famous product of this kind of research. Along with Cambridge, London, Liverpool and Manchester, Edinburgh will lead this area, the report predicts.

With companies like Rockstar North, the developers behind big games that are popular world-wide such as Grand Theft Auto, Edinburgh will also join Dundee and Glasgow as a leader in the gaming industry.

Professor Grahame Bulfield said: "The science base in Edinburgh is absolutely enormous. Dundee is strong in biotech but Edinburgh is bigger. They are mostly in biochemistry and intracellular signalling. Ed-inburgh is strong across the piece.

"As far is informatics is concerned, Edinburgh is the strongest in Europe. There are 120 academics in that new building."

But he added: "I don't think we are particularly strong in gaming. We are probably stronger in informatics other than that. Gaming is a rather unusual one."

Edinburgh is home to four universities, three colleges of further education, the Scottish Agricultural College and the Edinburgh College of Art. The University of Edinburgh was named the 23rd best university in the world in 2008.

Latest figures show that 44.2 per cent of the city's working-age population is educated to at least degree level, compared to 20.1 per cent for Liverpool, 27.6 per cent for Leeds and 30.4 per cent for Newcastle-upon-Tyne.