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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 -77-
operations of Lloyds and HBOS have yet to take their full toll. Of their combined pre-crisis workforce of about 18,000, only around 500 have lost their jobs so far. More will no doubt follow. If the economy does recover as fast as the government hopes, the currency advantage now enjoyed by Europeans may disappear and the travellers with it. And this year’s stay-at-home holiday-making Scots (78% of fringe credit-card ticket sales have an Edinburgh postcode this year, up from 60% last year) may revert to sun-seeking. Meanwhile, the city is partying. Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved. -78-
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Politics this week Aug 13th 2009 Fr
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Business this week Aug 13th 2009 Fr
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KAL's cartoon Aug 13th 2009 From Th
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Asia’s rebound has several causes
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democratic region. But Brazil’s l
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World trade and commercial aircraft
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Galileo, four centuries on As impor
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Correction: America's sex laws Aug
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SIR - You mentioned the slaughter d
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Professor of the history of art Sch
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Their arrival coincides with, and i
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and integrated well.) Peru has beco
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Clean energy in the Midwest Greenin
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Page 34 and 35: Drought in Texas Not a cloud Aug 13
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Page 42 and 43: Energy v environment in Canada Bomb
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Page 56 and 57: Iran and human rights The crackdown
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Page 64 and 65: Southern Italy's ills The messy mez
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Engels (whose name resembles the wo
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prose, having gone from Uighur to G
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anks to hold more capital, the flow
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Football and economics Game for gee
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There are two intellectual bugbears
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she continued to lurk, roiling the
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Output, prices and jobs Aug 13th 20
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The Economist commodity-price index
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Trade, exchange rates, budget balan
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Markets Aug 13th 2009 From The Econ
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Office vacancy rates Aug 13th 2009
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