ACSEF maps out vision for the future

At yesterday’s ACSEF Economic Summit, the chairman, Tom Smith, admitted that he is fond of saying that this region has had “more visions than Joan of Arc”.

I can certainly relate to that. I used to be in charge of promotional activity for NESDA, the regional development organisation. Then, having switched to the PR consultancy business, I became part of the Communications Task Force for the Grampian Initiative.

I witnessed a parade of visions to strengthen and diversify the local economy. As Sue Bruce, the new Chief Executive of Aberdeen City Council said yesterday: “there is a narrow line between vision and hallucination”.

I do dare to hope that ACSEF can be different.

Offshore platform
North Sea oil and gas has made Aberdeen City and Shire very successful, but they have also made it vulnerable

For a start, the board of ACSEF has a majority representation from the business community. These, after all, are the people who have made the local economy the success that it has been in the past 40 or so years. So we are coming at this from a postion of relative strength.

At a previous ACSEF economic summit, the Greater Houston Partnership representative talked about that as a huge benefit. But, it was Sir Ian Wood who pointed out, at yesterday’s meeting, that Aberdeen’s success had also made it vulnerable.

While the oil and gas economy has developed and grown to the point where the North Sea industry is meeting 75% of the UK’s prime energy needs (and far from declining this is expected to grow to 80% by 2020), the traditional business sector in Aberdeen has suffered.

Governments traditionally do not invest in success. Starved of support, traditional industries, have been unable to compete with wages in the oil sector. On top of this, chronic lack of investment in infrastructure has stacked the odds against them.

Who knows when the oil and gas industry will run down. But, as Sir Ian pointed out – be it in 25 years or 50 years – Aberdeen will be in a weak position unless governments and the local community plan ahead now.

Part of the region’s salvation may be its traditional outward-looking mentality. Business here has always been globally focussed.

These days you will find Aberdonians working in oil patches anywhere around the world. Around 40% of the output of the 300-plus energy companies based in this area, is exported. Westhill, the Aberdeen suburb, is home to world’s largest concentration of subsea engineering companies.

This success is underlined by Aberdeen City and Shire’s status as the third most productive region in the UK, in terms of GVA (gross value added) per head. The region also has the headquarters of a third of Scotland’s top 100 companies.

Those looking superficially see only this success. As a result government investment in Aberdeen City and Shire has been conspicuously lacking.

Sarah Boyack, then Minister of Transport, famously told us that, if we wanted a by-pass round Aberdeen then we would have to pay for it ourselves. (Notwithstanding, that virtually every other city in Britain had already had already had this essential bit of transport infrastructure built for them using public money!) Years of lobbying finally secured government backing.

Two years ago, the current Transport Minister Stewart Stevenson phoned me in my role as chairman of IoD Aberdeen to assure me that –although the Scottish Government were announcing the road’s completion date was being put back to 2012 – it was a firm commitment.

With only three years to go to the opening date for the new 28-mile road, there were concerns at yesterday’s summit that the 2012 pledge looked very optimistic.

So, with a history of under-investment, how does ACSEF secure funding for its proposals?

With the current economic turmoil and gloomy news about government borrowing, public spending seems likely to be constrained for many years. Sir Ian Wood may have pledged £50 million of his own money for the new city centre development. But, where is the remaining £100 million to come from?

We can wring our hands and complain that Aberdeen City and Shire has been at the core of the industry that has bolstered the economy of UK plc for the past 40 years and assert that now it is the time for payback. But, realistically we know there is going to be no financial bonanza.

Tom Smith, Chairman of ACSEF, floated the idea at yesterday’s summit, for a 1% addition to the business rate to fund its programme. Clearly, this is the worst of all times to be seeking business support for an increase in their basic costs.

But the question is, where else is the money to come from? Time for debate.
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