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Scotland's capital and recession
Party time
Aug 13th 2009 | EDINBURGH
From The Economist print edition
Looking for an upside to the downturn
Getty Images
On the up, at least for now
PICKING past rotting rubbish left after an on-off strike by refuse collectors, and wending their way around
streets blocked by seemingly endless roadworks for a new tramline, visitors to this year’s Edinburgh
International Festival might well think the city is in serious trouble. With its once-mighty banks, RBS and
HBOS, the heart of the Scottish capital’s financial industry, brought low by reckless profligacy, the
problems look deep.
Indeed, before the credit crunch 11% of Edinburgh’s jobs were in financial services and about half were in
these two big banks. Over the past year the number claiming unemployment benefit has risen by 75%
(though, at 3.2%, the city’s claimant rate is still below the national average).
Yet the discerning visitor may also notice something else. Streets and restaurants are jam-packed; pubs
and clubs are buzzing. Festival and Fringe ticket sales are way up on last year (see article), only partly
because the number of Scots drinking in the arts at home instead of wine in the Mediterranean has shot
up.
Fuelled by the weak pound, which has made Britain much cheaper for Europeans than two years ago,
Edinburgh has been enjoying a tourist boom. The number of passengers passing through its airport has
risen each month since March, and by 5.6% in July, the only British airport to record such growth. BAA, its
owner, reckons that since domestic British air-passenger numbers have dropped by about 5%, the
increase comes entirely from European sightseers taking advantage of 20 new international routes added
since January, mainly by budget airlines.
The national recession has had another surprising effect: a big rise in the number of foreign firms
investing in Edinburgh. Thirteen have come in during the first half of 2009, compared with 12 in the whole
of 2008. Greg Ward, of the council’s economic development unit, thinks investors had been put off by the
city’s high employment rate, which stood at just over 80% of the working-age population in 2008. They
feared having to pay too much to recruit the people they needed. Rising unemployment, in particular
among the highly skilled, has eased those worries.
Some established financial firms are also expanding. Tesco Personal Finance has announced plans to
increase staff at its Edinburgh headquarters from 250 to 450 by the end of the year. Virgin Money also
announced plans to grow. Even property prices have fallen by only half as much as in comparable British
cities. All in all, civic leaders feel justified in boasting that Edinburgh is weathering the recession well.
This satisfaction may not last. The slimming-down of RBS and the cost-cutting integration of the
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