Bill Jamieson: Edinburgh truly does tell a tale of two cities

Published on Thursday 12 November 2009 20:48

POOR old Edinburgh. Greetings from the town with no banks. If you're coming, bring your own money. We're on our knees.

The banks are sinking and with them that armada of specialist little businesses that depend upon them. Unemployment will soar. Hotels will close.

As for house prices, be braced for price falls of 30 per cent and more. Buyers at the top end will withdraw and thousands of out-of-work first-time buyers will be forced sellers. Inward investment? Forget it. The Festival? It will struggle. The city that waxed fat on the relentless expansion of its two giant banks will be among the hardest hit in Britain. Edinburgh is set for a mighty and humiliating fall.

Such was the prognosis a year ago. I should know. I chipped in my ha'penny worth at the darkest hour. As our stock market reports screamed "Sell!" and the features staff switched from lists of aspirational stocking fillers at Harvey Nicks to recipes for Holyrood Depression Soup and New Town Austerity Pie, the city hunkered down for the mother of recessions.

Yes, the city has suffered. The two big banks, as former Royal Bank of Scotland chief economist Jeremy Peat warned earlier this week, are at risk of being hollowed out from within as key functions are moved to London. Jobs have been lost and hundreds more are under threat. Planning applications have plunged. And there is no doubt the city's finances are dire.

But here's a funny thing. There is another Edinburgh. There is a capital city that has borne up better than most expected. The world has not stopped. The airport's never been busier. Restaurants are busy. The economic ice age set to grip the capital has not transpired.

The recession so far has brought a tale of two cities. The fact is that Edinburgh, despite the crisis that has befallen its two giant banks, is doing better than other comparator cities across the UK. Indeed, the word that springs from the streets of Edinburgh is not "recession". It is "resilience".

Take claimant count unemployment. The figure stood at 3.1 per cent in September, compared with 4 per cent for Scotland and an average of 5.8 per cent across comparator cities in the UK (Birmingham, Bristol, Cardiff, Glasgow, Leeds, Liverpool, London, Manchester, Newcastle, Nottingham and Norwich). The city has a younger workforce, more skilled and more mobile than most in the UK.

The number of new businesses incorporated in the three months to end September was the highest in 18 months, growing by 9 per cent, while comparator cities saw a fall of 2.9 per cent.

Edinburgh airport had its busiest day in June. Passenger numbers were up 3.8 per cent in September on a year ago. Comparator cities suffered a decline of 4.7 per cent.

Inward investment has not totally dried up. Over the past 12 months, 19 large-scale foreign direct investment projects in Edinburgh have been announced, bringing the prospect of more than 860 jobs.

Planning applications are sharply down, but the annual rate of decline has eased in each month since March. And property developer AWG has submitted plans for a 20 million, 250-bedroom hotel in Leith.

Hotels have been resilient. Average room rate and occupancy are higher than in any other city, bar London. Hotel room occupancy has actually inched forward to 87 per cent this year, though room rates fell slightly.

The Edinburgh Festival, the Book Festival and the Royal Highland Show all enjoyed record ticket sales in the year of the Great Depression.

And then there is the housing market. Activity is down, but by far less than feared. The average house price in Edinburgh, at 208,762, is actually higher than in March 2008, while the average for comparator cities fell.

As for turnover, the staff at Savills and Retties are not exactly weeping into their repossessed Porsches – 727 houses were sold in Edinburgh in August, the highest for 11 months and the sixth consecutive month in which activity has increased.

A flash in the pan? Not if figures out earlier this week from Retties are a guide. The firm said it sold 10m worth of property in Edinburgh in the week beginning 19 October – normally one that sees the start of an annual property slowdown. Said Tony Perriam, director of residential sales: "This sales bonanza at the end of October has taken even seasoned agents by surprise. There was a wide spectrum of buyers, from the aspirational owner/occupier to wealthy buyers with links to the Aberdeen area buying homes in Edinburgh for retirement purposes, to the investor looking for a good deal."

As for the financial sector, here, too, the picture is not uniformly black. Last month, more than a quarter of all jobs advertised in Jobcentre Plus were within the financial services sector. While more job losses were announced this week, the massive job losses once feared have not materialised. Edinburgh-headquartered Tesco Bank is creating 250 jobs, Virgin Money 100, Hymans Robertson 90.

Owen Kelly, chief executive of Scottish Financial Enterprise, writes in our Letters page today that there is more than one centre of gravity in financial services and fund management is one of them. Asset servicing is also doing well. And, contrary to fears, Scottish Widows is to remain headquartered in Edinburgh. As for the future, Experian forecasts an improvement in GDP growth to 2.4 per cent a year for the Edinburgh region out to 2020 – trailing many European comparator cities, but doing better than most UK ones.

The tramworks frustrate and infuriate us. But they are not part of some epochal downturn. They should not blind us to the other side of the "Edinburgh deep in recession" story.

Overlook it, and we could fall into that familiar trap of Scots – talking ourselves into something worse.