Capital can lead UK out of global recession

The study says the city has the right ingredients to succeed after the recession has passed, with a strong private sector, a strength in entrepreneurship and an educated workforce.

But the study of 64 cities and major towns by the Centre for Cities think tank has underlined deep divisions between different regions in Scotland and the UK and left question marks over how well some will be able to recover.

While Aberdeen, bolstered by the oil industry, has weathered the recession best in Scotland and, together with Edinburgh, is in a strong position to move forward, there is a mixed picture for Glasgow and the outlook for Dundee is described as "tough". The report has also reopened the debate over how well the UK and Scottish governments are supporting economic development in its key centres.

With the first reading of the Scottish budget due this week, the report has also ignited the row over infrastructure in Scotland, especially over the plans by the Scottish Government to cancel the Glasgow airport rail link (Garl).

Edinburgh was identified, along with Brighton, Milton Keynes, Reading and Cambridge, as "a city to watch".

In particular, the capital is second best in the UK for degree-level qualifications and third best for knowledge-intensive jobs.

It is a far cry from the bleak assessment made by the former RBS chief economist, Jeremy Peat, to Holyrood's economy committee in November on Edinburgh's future, when he warned that the "centre of gravity" in Scottish banking was shifting to London.

Edinburgh Chamber of Commerce's deputy chief executive, Graham Birse, said the report reflected confidence that the city had a diverse range of strengths that meant it was able to get over the banking crisis.

In particular, he highlighted sectors such as IT, life sciences, retail, the creative industries and the universities.

He also said that, despite the problems suffered by RBS and HBOS, he felt sure the financial sector would recover, and he pointed out that Tesco Finance, HSBC and Santander had all expanded their operations recently in the city.

But he called for a rethink on the way funds are allocated in Scotland away from "social engineering" to supporting economic growth.

"What we need is for Edinburgh to be allowed to lead the recovery," he said. "For many years, governments tend to have confined their economic strategy to social policy, but that is not how the market works. What we need is investment for the city regions, such as Edinburgh, which are the drivers for new jobs and economic growth."

His words were echoed by the leader of Aberdeen City Council, John Stewart, who believed his city would see a "tipping point" in the next five years, where it could slip away from being one of the most dynamic to being stuck in a downward spiral.

The Granite City's employment level is third best in Britain, and it appears in the top ten for business dynamism.

But Mr Stewart pointed out that Aberdeen and the surrounding Aberdeenshire were among the three worst-funded areas per head of population in Scotland.

"We all know that oil has just 20 or 30 years left in the North Sea and we will see a decline in production," he said. "What we need is investment to develop new industries. The councils here cannot do that alone, and they are not getting enough support."

The picture for Glasgow is not as rosy, with the report suggesting that it is at high risk because of the number of public-sector jobs. But it scores well on high-skilled jobs, coming tenth in the UK, and has been in the top ten for employment growth.

Dundee is hamstrung by having the slowest population growth in the UK and the second-worst business birthrate.

Iain McMillan, the director of CBI Scotland, said it was important that Glasgow, Scotland's biggest city, "is not written off".

"There is no doubt that economic growth is driven by city regions," he said. "But for that to happen we need the investment in infrastructure, such as proper transport links to our airports."

It was a call supported by Scottish Labour leader Iain Gray, who fears that many parts of Scotland will be in grave danger of missing out on the upturn.

"It is clear that the SNP are just not doing enough to help people through the recession and prepare for the recovery," Mr Gray said. "They have made serious mistakes on skills and training.

"Although their budget is going up, they are cancelling key capital investment projects, like Garl."

He added: "The findings on Dundee are a real wake-up call to SNP ministers. We need to see dedicated assistance to support people in Tayside and help them through these tough times."

However, the Scottish Government has insisted it is using its resources as best it can at a time when it faces real-terms cuts from the Treasury.

A spokesman for finance secretary John Swinney said: "Cities are engines of economic growth and contain vital skills and industries to boost employment and quality of life in the long term.

"The Scottish Government is committed to working in partnership with Scotland's cities – including with business, local government, trade unions, the voluntary sector and other agencies – to ensure that we maximise long-term opportunities as we build recovery."

One of the report's authors, Dermot Finch, chief executive of the Centre for Cities, claimed that all politicians needed to wake up to the reality that some cities would still feel in the middle of a recession until well after the election.

He added: "The next UK government needs to help these struggling cities fix the basics, like improving schools and public transport, so they can attract new business and jobs."

Scotland's big four provide a mixed message on hopes of recovery

Edinburgh

% of working age population in work 2009 77.1% (12th)

Rate at which the number of jobs increased 2006-2008 -0.6% (40th)

Business startups per 10,000 population 2008 39.5 (20th)

Average weekly earnings 2008 520 (7th)

% of working age population with high level qualifications (NVQ4+) 2008 45.1% (2nd)

Increase in JSA claimants Feb 2008-Nov 2009 1.5% (7th)

Glasgow

% of working age population in employment 2009 69.6% (48th)

Rate at which the number of jobs increased 2006-2008 4.6% (8th)

Business startups per 10,000 population 2008 32.1 (44th)

Average weekly earnings 2008 472 (15th)

% of working age population with high level qualifications (NVQ4+) 2008 35.2% (10th)

Increase in JSA claimants Feb 2008-Nov 2009 2.1% (29th)

Aberdeen

% of working age population in employment 2009 79.6% (6th)

Rate at which the number of jobs increased 2006-2008 6.7% (3rd)

Business startups per 10,000 population 2008 45.2 (10th)

Average weekly earnings 2008 495 (10th)

% of working age population with high level qualifications (NVQ4+) 2008 41.2% (3rd)

Increase in JSA claimants Feb 2008-Nov 2009 1.0% (2nd)

Dundee

% of working age population in employment 2009 69.1% (52nd)

Rate at which the number of jobs increased 2006-2008 -0.3% (37th)

Business startups per 10,000 population 2008 23.2 (63rd)

Average weekly earnings 2008 418 (42nd)

% of working age population with high level qualifications (NVQ4+) 2008 33.3% (12th)

Increase in JSA claimants Feb 2008-Nov 2009 1.7% (9th)