Financial centre: 'The industry is vital to the local economy'

Published on 06/11/2008 08:42

Evening News Comment AT a time when there is growing concern over Edinburgh's ability to ride out the current financial storm it is somewhat reassuring to see that not only do we remain the UK's second largest financial centre but that our standing in world terms is also being maintained.

With 31,000 people reliant on the financial sector for their livelihood and a further 50,000 in support services partly dependent on it for a living, the health of the industry is vital to the local economy.

While the true effects of the worldwide recession may not have hit home quite yet there is some comfort to be taken from the fact that in the last six months Edinburgh has improved its standing in the Global Financial Centres Index while others have grown less slowly or have seen their rating fall.

Business leaders have welcomed this as a positive sign that the Capital is not suffering disproportionately to other major finance capitals in the wake of the economic gloom.

Encouragingly, in the ratings Edinburgh earned ninth place in the asset management sector– showing that the city's financial services sector is relatively diverse and does not solely rely on banking and insurance.

But it is still worrying that there is also an apparent slowdown in commercial property lettings during the same period, with the amount of available office space having risen by 11 per cent, despite no new developments becoming available.

And that situation could worsen as four major developments are due to open next year. Much of this slowdown has understandably been put down to what is politely described as a lack of growth in the financial sector.

The one encouraging factor is that the empty space has not yet reached a critical level, and there is optimism in the medium, if not short term, that the situation could quickly change should a few major properties be let.

So while there is no room for complacency at present there is certainly no need for panic. But it has to be accepted that the GFCI figures are only an indication of the early fall-out from the economic collapse. In the past few months things have worsened rather than improved.

It remains to be seen how the collapse of HBoS and the troubles facing the Royal Bank will impact on the city's future standing.

The Lloyds-HBoS merger will inevitably lead to substantial job losses, but so too will any alternative to the takeover. The question is how many and what could the ripple effect be?

Although the city's other financial institutions seem to have weathered the early storm better there is also acceptance that the recession may last a year, if not two. There is a long way to go before things get any better.