Insight: Aberdeen's oil industry running on empty

VIEWED from the top of a mound on Balnagask Golf Course, Aberdeen doesn't look like a city in the grip of a ­crisis. Its soon-to-be extended harbour appears busy and, on the horizon, more than a dozen supply vessels sit like a paddling of ducks, their heads bent purposefully against the wind. Turning inland, the austere granite buildings, which have weathered both boom and bust, are interspersed with cranes labouring to restore old buildings and put up new ones: an act of defiance in the face of falling oil prices.

Gareth Boswell at Aberdeen Harbour. The former projects co-ordinator is thinking of returning to South Africa. Picture: Ian Rutherford

You have to zoom in on the townscape to see the fraying; there’s the proliferation of bookies and pound shops on once-upmarket Union Street, for example, or the men in suits and ties now joining the queue at the Citizens Advice Bureau. There’s the diminishing number of customers at the city’s smart restaurants, and the increasing number at its food banks.

The clearest sense of what the city is going through, however, is gained by talking to those experiencing its belated downturn: the former high-earners now working as waiters, the taxi drivers whose takings are down £100 a week. “My mum and sister have both been made redundant,” says one woman working behind the counter in a city centre shop. “Everyone knows someone who has been affected, everyone’s cutting down. Debts are accumulating and no-one knows how long it’s all going to last.”

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Aberdeen lived so well, so long. While the rest of the UK buckled under the banking crisis, its economy – founded on the oil and gas industry – continued to thrive. Unemployment was low, salaries were inflated and houses in the suburb of Cults sold for mind-boggling sums. Today, however, with the oil price standing at $30 a barrel (compared with $112 in June 2014) and fresh redundancies being announced almost every day – the whole city is feeling the pinch. Dramatic tales are circulating: of sports cars being handed back to showrooms, of private school rolls collapsing, of houses that would once have been snapped up immediately staying on the market for months. Some may be apocryphal, but they hint at a barely contained panic as the impact of the year-old crisis filters down through the sectors.

Even Union Street has been affected by the downturn. Picture: Ian Rutherford

There have already been in excess of 70,000 oil-related job losses in the UK, with some experts predicting 200,000 out of 400,000 will eventually go as new fields become harder to find and exploit. Many of those who have kept their jobs are on vastly reduced hours or salaries; and it’s not just the high-earners who are affected. “What you have to understand about Aberdeen is that the fortunes of almost every business here are connected to those of the oil and gas industry – all the firms that supply them goods or services, all the shops that rely on those with cash to splash,” says one women who has lived all her life in the city.

The hospitality sector has been particularly badly hit. Just as new premises were opening up to deal with under-­capacity, the demand dropped so it is now possible to book a room in almost any four-star hotel for less than £100. Restaurants that were once turning customers away are now taking out ads to entice them in.

As multinationals slash their overheads, there are other, less obvious repercussions too. Cancelled awards ceremonies mean fewer sales for food producers. No longer do staff have carte blanche to buy expensive stationery. “People have stopped putting a brave face on things,” the woman says, “They are beginning to admit just how bad things are.”

At the Citizens Advice Bureau on Union Street staff have long been kept busy helping those Aberdonians who face high living costs without the high wages. However, in the past year, there has been a shift in the type of support being sought. The bureau is still dealing with evictions, but the number of people with inquiries about redundancy and mortgage arrears has gone up and there have been repossessions.

Even Union Street has been affected by the downturn. Picture: Ian Rutherford

“Unfortunately, a lot of people who take the initiative and come in here find it hard to take the next step – to go down the Jobcentre and sign on,” says manager Zara Strange. “There’s still a stigma in asking for help.”

Last week, David Cameron travelled to Aberdeen to confirm the long-awaited City Deal – £540 million of funding over the next 10 years to improve infrastructure (including the harbour expansion) and attract jobs. He also announced a further £20m to fund “further exploration, innovation and skills development”. The Scottish Government has already promised £254m for key infrastructure projects including better rail links and improvements to the A90 junction at Laurencekirk.

There is a widespread recognition that the city needs to diversify its economy, focusing on the life sciences, food and drink and tourism. No doubt this approach will reap dividends in the long term, but it is little consolation to those facing a protracted period of unemployment.

Gareth Boswell, 39, a chemist from South Africa, was earning just over £40,000-a-year as a projects co-ordinator with a large global company when he was told his job was being axed at the beginning of 2015. Last year, he spent six months working as a waiter in a Spur Steak Ranch until it closed down. Since then, he has been focusing on completing an MBA. With no dependants and few overheads, Boswell considers himself lucky. “I found I enjoyed interacting with people as a waiter more than I’d enjoyed working in an office and I wouldn’t want to go back to my old job,” he says. Even so, despite having gained British citizenship, he is now contemplating a return to his homeland.

His friend Peter Hutchison, 36, was about to move house when he was told his six-month contract with an oil services company would not be renewed. Back then, he was earning £25-an-hour (£4,000 for two weeks off-shore) as a rope access and NTD technician, checking the integrity of steel pipes, but 300 unsuccessful job applications later, he would be happy with a salary of £20,000 a year. “I would like to work in health and safety, but there are lots of people with more experience than me,” Hutchison says. “In terms of jobs like working on a checkout, they look at your CV and know that the minute the economy bounces back you will be off.”

Hutchison, who has a 20-month-old son, Finlay, doesn’t go out much and there’s no prospect of a family holiday. But, like Boswell, he says he is lucky – his wife is a lawyer and they have always lived within their means. “We’ve always been quite prudent, putting money away,” he says, “but I know quite a few guys who were quite frivolous. They were earning big bucks and spending big bucks and not saving for a rainy day.”

So many tears have been shed at Thorpe Molloy Recruitment over the past few months, a box of tissues has been placed in every interview room. “There are lots of people coming in who are upset, who are angry,” says managing director Amanda McCulloch. “We have seen situations where both the mum and dad are in a redundancy situation and they have commitments – mortgages, kids in private school or whatever. They come in here and realise, it’s not just that they have lost their job, it’s that the market place is really competitive, so securing the next position is going to be a real challenge.”

In boom times, the issue for Thorpe Molloy has been to find enough skilled workers to fill the vacancies and to attract new talent to the region. Now the agency’s focus is on supporting workers and encouraging them to be flexible. “For some people that means looking outside the region, for some it means looking outside the sector and for some it means looking at more flexibility in terms of working patterns, salary expectation,” McCulloch says. She is worried the dearth of opportunities will lead to graduates and others moving away. “We don’t want to be in a position a few years down the line where we are once again talking about a skills gap and succession planning,” she says.

It would be a mistake to think everyone in the region is struggling; those who have held on to their jobs are still earning well, and though the housing market has slowed (in the year ending November 2015, sales dropped by 4 per cent in Aberdeen and 11 per cent in Aberdeenshire) properties in excess of £1m are still changing hands, with sales of houses in the £500,000-£1m bracket harder hit. In the BMW showroom on Wellington Road, there were still people looking to buy cars, and at 5pm on Union Street the shops were busy.

But there are plenty of oil executives who were mortgaged up to the hilt and now find themselves struggling to pay their bills. Dave Simmers, who leads the Aberdeen Food Banks Partnership, says in the past eight months, between 10 and 20 previously high earners have turned up looking for a bail-out. One man arrived in a Porsche which he was about to hand back. “He had a welfare reform grant from the local authority so they obviously recognised he was in dire straits,” Simmers says. You can only imagine what food-bank users from areas of multiple deprivation make of such scenes, but Simmers reckons, in a world where living on credit is encouraged, many of us are just two or three pay cheques away from a black hole.

Living in a climate of uncertainty is also taking its toll on people’s mental health. After attending a Job Fair, and witnessing first-hand the trauma being experienced, Neil Murray, the Aberdeen and Aberdeenshire co-ordinator for Choose Life – a suicide prevention ­charity – urged those who were struggling to cope to get in touch. And on Friday, four businessmen launched a support group to allow people in and out of work to meet and discuss their anxieties.

“This problem is right across the board, from CEO to secretary,” says one of the four, Jim Grimmer. “Some businesses that were very specialist, focused on North Sea oil and gas, have already gone under; others are having a difficult time, laying off staff, looking at all costs and trying to diversify. But that takes time and what you are left with is a group of people who have been laid off – maybe 300 to 400 people applying for the same job. From a male perspective, I know what that feels like. It really is a knock to your self-esteem.”

It is tempting for outsiders to see Aberdeen’s plight as a morality tale about the pitfalls of hedonism, complacency and a failure to read the runes. But there are signs the region is finally working to build a more secure future. With the City Deal in place, several major projects, such as the building of the bypass, now under way, and others, such as the new conference and exhibition centre, agreed, strides are being made towards broadening the economy and boosting the tourist industry.

“No-one has made an attempt to ­market the North-East as a leisure destination properly for about 30 or 40 years,” says Steve Harris, chief executive of ­Visit Aberdeen, who believes falling hotel prices will help attract visitors. “But we are confident of our product – we have whisky, castles, outdoor activities, a ­vibrant city with a beach running through it and dolphins playing in the harbour.”

Offshore industry doyen Sir Ian Wood has pointed out that while the impact of the infrastructure improvements may be “game-changing”, they are unlikely to be felt until early next year. But Aberdeen has been buffeted by economic storms before. It has seen textile mills, paper-making and shipbuilding come and go; it has known both hardship and prosperity. Though the current ill wind looks set to blow for a considerable time yet, those who have lived through previous downturns are convinced that, like granite, the city will endure. «

Twitter: @DaniGaravelli1