The North East is currently in a very bad way – there’s simply no getting away from the shocking and sudden decline of this most oil-rich of regional economies.
We’re all aware of just how close a link there is between Aberdeen’s prosperity and its oil industry, but new figures suggest that it is a vitally symbiotic relationship – one intimately benefitting the other and vice-versa. Predicated on such a delicate balance, there is of course ample opportunity for both terrific highs and terrible lows. Rarely is there a middle ground.
Fundamentally, when the industry is booming, so is the North East. However, when the industry is going through a rough patch with falling oil prices, then we see the region beginning to really struggle as its workers either feel its worst ravages or move away altogether, to be replaced by far fewer moving in. In both instances, the region’s economy takes a severe battering.
With some 70,000 job losses and counting, the North East has already undoubtedly been hit hard by the recent oil crisis with numbers claiming out-of-work benefits continuing to climb. Those that have remained in work have often seen their terms and conditions altered. In amongst it all, it’s painfully clear that workers are only two or three pay slips away from a hand-to-mouth existence.
Unsurprisingly then, there have been major knock-on effects – all of the kind that traditionally represent the lifeblood of a thriving economy. There’s been a decline in house sales and planning applications, a massive drop in hotel stays, and abundant evidence of less disposable income being spent, including quieter shops, bars, restaurants, and cinemas.
Worse have been reports of former oil workers queueing up to use local food banks – surely one of the most stark representations of prosperity swiftly and inexorably turned in on itself – and predictions that the true nadir has not yet been reached, with some suggesting that as many as 200,000 jobs could eventually be lost.
New figures show that the number of benefits claimants in Aberdeen has risen by a staggering 69 per cent, while those for Aberdeenshire as a whole increased by a hugely worrying 92 per cent over the year.
It’s been pointed out that the rate for both areas remains below the Scottish average – but surely such huge leaps simply represent major economic and social problems being stored up for the near future, before exploding violently like the emblematic uncapped oil wells of the 19th century.
Indeed, perhaps more indicative is the fact that the annual change in residential property sales in the North East has been in the negative for the past 18 months. This is in marked contrast to Scotland as a whole where it has remained on a positive footing for the last nine months.
With the next Budget being delivered on March 16, it represents an appropriate time for government intervention. Pledges to offer retraining and the prospect of workers transitioning to other roles and industries only serve to paper over the cracks; concerted action is required at the highest level.
Let’s be clear – significant investment is now required. However, that must be evenly distributed, benefitting not just the oil industry and the creation of new jobs, but also encouraging a wider base of skills and the development of effective infrastructure for a more sustainable future that’s no longer wholly dependent on oil.
It must include investment in food production, life sciences and tourism, not to mention improvement of transport and educational outcomes for the next generation of North East workers.
The region has survived previous slumps, and I’ve no doubt it will again, but serious lessons must be learnt to ensure that the vagaries of rising and falling oil prices do not mean that the entire North East rises or falls by its side.
Colin McKee is a director of Glasgow-based recruitment specialist Lusona.