The collapse in the oil price is a painful reminder that Britain’s time as an oil producer won’t last forever. We have been here before, of course, and the oil price has always bounced back giving us another period of buoyancy. But, as each year passes, we get closer to the end of the North Sea Oil era.
We don’t have to look to far back into history to see what could happen if we don’t heed the warning signs and act now to plan and secure our future.
In the mid 1960s – when the suggestion of oil and gas in the North Sea would have invited ridicule in most quarters – unemployment in some towns in North-east Scotland was three times the national average. Traditional industries like fishing, agriculture, marine engineering, shipbuilding, textiles and paper were in decline. Almost 20,000 people left the region in the five years to 1966 – significantly the majority were in the most economically active 20 to 40 year-old age group.
Something had to be done. Professor Maxwell Gaskin of the University of Aberdeen was commissioned to lead a report examining how the economy of North East of Scotland could be diversified to create opportunities that would stem this flow of young people out of the region.
As fate would have it, publication of Gaskin Survey came almost exactly as the first commercial oil was being extracted from the North Sea.
Aberdeen, of course, had no experience of oil and gas. Central Scotland had seen a shale oil boom in the 19th century, but few could have imagined that there were oil reservoirs under the North Sea. The story how the region’s entrepreneurs and business leaders seized the opportunities and transformed the Aberdeen area into an global upstream oil and gas centre, second only to Houston in Texas, is epic.
Now, despite its decades as the economic powerhouse, Aberdeen still has an infrastructure little changed from the gloom years of the 1960s.
- The city is recognised as the traffic congestion capital of Scotland.
- Only now is the city getting the key element of infrastructure that every other comparable city in Britain has had for years – a bypass.
- Despite substantial investment, our broadband stutters and stalls incessantly.
- It is actually quicker to drive to the Central Belt than to take the slow train.
- Most of the commuter rail links dismantled in the Beeching era have not been replaced.
- There are still no direct flights from Aberdeen International Airport to Houston and other global oil centres.
- Travel to and from the airport involves taxis, buses, or a railway shuttle. If you are unlucky you will still be stuck at “Britain’s worst roundabout” as your flight takes off.
- Aberdeen is the lowest funded per-capita local authority in Scotland.
That list underlines how little of the wealth generated by the oil and gas industry has been invested into the future prosperity of the host region.
It is hard to avoid the conclusion that successive UK Governments sought to downplay the significance of the oil and gas industry. Andrew Marr famously points out that – despite the fact that Margaret Thatcher’s economic reforms would have been doomed to failure had it not been for oil and gas – there is no mention of the industry in her memoirs, or those of her cabinet.
A City Region Deal appeared to offer an opportunity for the region to improve its competitiveness by finally seeing some of the investment which it had been starved of during the boom years.
Aberdeen and Aberdeenshire put forward a joint bid for a deal worth £2.9 billion – a modest figure compared with the £300 billion that the North Sea oil and gas industry has contributed to the UK Treasury. The industry, predominantly based in Aberdeen, is estimated to generate 16.4% of all UK Corporation Tax – not bad for a region with around 0.5% of the UK population.
While many people put on a brave face after the announcement of the Aberdeen City Region Deal, there was a real sense of disappointment. Not only was the £250 million a fraction of other City Deals, it was less than 9% of the value of the bid – albeit that the valuation was calculated over 20 years.
Making the most of the Aberdeen City Region Deal is a new economic development organisation ONE (Opportunity North East). There have, of course, been initiatives before, aimed at developing the region’s economy.
In the 1980s I worked for NESDA, the North East Scotland Development Agency that was set up at the time of the Gaskin Survey. Since then we have seen the Grampian Initiative and, more recently, ACSEF.
As the timescales get tighter, the need for real tangible results is more pressing. With Sir Ian Wood at the helm and an initial budget boosted by £25 million from the Wood Foundation, ONE has a strong team to achieve its challenging remit.