Graham Birse: Hurdles ahead for city economy

The performance of our Olympians over the past fortnight has been nothing less than heroic.

Politicians have not been slow to exploit the surge in national pride – hoping for an “Olympic Bounce” in confidence to restart an economy which has started to misfire.

It’s going to take the same levels of discipline, commitment and energy as our athletes have shown to shake off a double-dip recession.

Two reports this week give cause for concern. Firstly, the Charted Institute for Personnel and Development survey, which indicated that a third of private sector employers had retained more staff than they needed to avoid losing skills; but two third of those said they would shed jobs if the economy failed to pick up.

With the UK economy slipping back into negative growth in the last quarter, that’s a cause for concern.

Secondly, the Bank of Scotland PMI survey gave us a Scottish picture, showing that although growth in Scotland was still positive, manufacturing orders were slowing at their fastest rate since 2010, a worrying development.

It’s worth bearing in mind, however, that we are not the only country facing these challenges.

Indeed, our prescription in tackling public debt has enabled the UK to retain its AAA credit rating when others are being downgraded and the Eurozone limps along from crisis to crisis.

And what of Edinburgh? Is our economy in a fit condition to lead Scotland out of recession?

Well, yes and no. Clearly, there is durability in the Edinburgh economy with inward investment, property prices and jobs vacancies all up, relative to last year.

On the other hand, unemployment, especially youth unemployment, continues to rise, businesses cannot find capital to fund growth and costs, of fuel and raw materials, continue to rise, with CPI and RPI inflation growing to 2.6 and 3.2 per cent respectively in June.

There is, however, an underlying durability and confidence in Edinburgh that give us good reason to hold our nerve.

Major international investors like Aveloq and Gamesa are choosing Edinburgh as an international base.

Our universities continue to develop research capability and spin out innovations in the form of ideas and companies that have the potential to become winners in the global economy.

And as our Festivals draw to a close, we are reminded of this city as an incubator of talent, ideas and the creativity of the human spirit.

It is for these reasons, and more, that I am optimistic about the Edinburgh economy.

Tough times lie immediately ahead for many businesses, though, and the Chamber of Commerce will make its voice heard on behalf of members who are baffled by bureaucracy, frustrated by regulation and constrained by indirect taxation.

We need to be absolutely clear about what recovery means. It means growing the private sector, especially SMEs. Manufacturing job creation schemes and growing the size of the public sector is not an option. At a time of public sector austerity, the only way to generate jobs is to generate growth.

That growth has to come from the private sector, especially the SMEs who represent 90 per cent of private sector employment and the majority of members of the Edinburgh Chamber of Commerce.

When I talk to businesses about the factors inhibiting their growth, they talk about lack of finance, taxation, regulation and red tape as serious constraints.

At UK, European and Scottish Government level, we need to see evidence of the state in retreat. It has been a long time coming.

• Graham Birse is managing director of Edinburgh Chamber of Commerce