As oil prices fall, Aberdeen faces a future less reliant on black gold
THE shop tills have been ringing at the post-Christmas sales in Aberdeen, but many people in the north east fear they will have to make cutbacks in the New Year.
The dramatic drop in the oil price – currently at an 11-year low of $36 a barrel – has had a devastating impact across the region, with oil firms and contractors cutting costs and laying off staff.
It is estimated 65,000 jobs linked to the industry have been lost, with more expected to go in 2016.
Over the past 12 months or so house prices have fallen by 2.2 per cent, hotel occupancy has dropped by 13 per cent and new car sales are down by some 10 per cent.
“This is the worst time I can remember,” said Stuart Benzie, a businessman in the city. “I don’t think the slowdown in the 1980s was as bad and I am worried next year is going to be even worse.”
Mr Benzie, the managing director of Westhill Cars in Aberdeen, said the drop in sales of high-value models such as Audis, BMWs and Range Rovers has been particularly sharp.
He is convinced there is a “direct correlation” between the struggles of the wider economy and the slowdown in his own business.
“One regular customer who works in the oil industry came in a few weeks ago. She spotted an Audi TT she wanted and went off to sort out a loan,” he said.
“That was on the Tuesday. She came back on the Thursday in tears to say she had lost her job that day and couldn’t buy the car.
“As well as being a disaster for her, the job loss had an impact on my business and also on the firm about to lend her the money for the car. It’s the sort of thing that is happening every day across the area.”
Ryan Crighton, director of law firm and estate agent Aberdein Considine, said the drop in oil price has affected the housing market, both in terms of confidence and volume of buyers.
“There are fewer buyers looking to purchase at the top end of the market at present, which is what you would expect given the current state of flux in the North Sea,” he said.
However, he added the demand for smaller properties continues to be strong and is optimistic that sales of larger homes will pick up.
Mr Crighton insisted that while the oil and gas industry is hugely important to the region, the city is not wholly dependent on it, and similarly not everyone who works in the sector lives in the region.
“Many businesses in the area have thrived on the back of oil, but not everyone is dependent on it. We have a diverse economy,” he said.
“Food and drink, tourism, particularly golf, life sciences, fishing – these are all industries which are thriving at the moment. All of them employ large numbers of people in the area.”
The local authorities in Aberdeenshire and Aberdeen city are working to attract up to £3 bilion City Deal funding from the UK and Scottish governments to spend on improving transport links and infrastructure over the next two decades. And in the private sector the entrepreneur Sir Ian Wood has launched the initiative Opportunity North East (One), which will work alongside the council’s drive for City Deal resources and plans to support investment in a number of areas such as food and drink, agriculture, life sciences and tourism.
“Many areas of the economy have undoubtedly been affected,” said Catherine Ward, development manager, North East Scotland Federation of Small Businesses.
“But the region is still a good place to do business. We have a very low rate of new business failure. There are two universities and sectors such as life sciences, food and tourism are doing well.”
James Bream, research and policy director at Aberdeen and Grampian Chamber of Commerce, said support from central government was vital in turning around the region’s fortunes.
“We have seen great private sector investment over the past decade, but the city has been heavily impacted by this downturn and needs support from the Government,” he said.