I am often asked: Is the north-east economy getting back on its feet?
In recent weeks, my answer has been: “Probably, but there is more pain yet to come”.
At the top end of the food chain – the oil and gas operators – there is a sense that the worst may be over.
The price of a barrel of oil sure ain’t what it used to be, but at least it has stabilised somewhat. And the global giants for whom hydrocarbons is literally their lifeblood, have had a good 18 months to get their houses in order to adjust their costs accordingly – hence the tens of thousands of job cuts, resulting industrial disputes and budgets for anything other than operational necessity cut to the bone.
When I met with employment and HR specialists at The Stack in Muchalls they said that the number of calls they had been getting from employers asking for help to sack employees has decreased – which is a pretty good indicator.
But the oil industry is just so vast in relation to other, more local sectors which hang onto its coat-tails. It’s not just a matter that when big oil sneezes the region’s businesses catch a cold – some come close to death.
In recent weeks well known Granite City restaurants like Cue and the Adelphi – both owned by Beetroot Restaurants – have closed down. Meanwhile, another stalwart drinking hole, the Albyn, is in administration and being kept open while a new buyer is found. Not only this, but a hotel nearby to the Aberdeen Exhibition and Conference Centre is in the same administration boat as the Albyn bar. And when the new AECC relocates by the airport in 2018, I can’t imagine that demand for the new owner of the hotel at Bridge of Don will be anything like what it was in the good old days of big budget conferences fuelled by $100+ oil.
Casualties such as these represent the long tail of the downturn. The top end may have stabilised, but businesses from professional services through to hotels and restaurants all down the food chain have been starved of cash for so long they are now starting to expire.
Nor does it seem likely that big budgets for entertaining and bottomless taxi accounts will be back any time soon.
Sadly there is little that can be done to reverse a tide when it goes out. There will be calls for government support at all levels which, should it be forthcoming, could only ever be a drop in the bucket.
So how do we feed and water these hungry, parched businesses? Economic diversity is the key – and this is what some government funding is being used for – but this is a long game. Others, like the big boys at the top, will be adjusting their costs and expectations to the new, low water level.
When the banking crisis led Western economies to the brink of destruction, banjaxing financial services firms particularly in Edinburgh, there was lots of talk a few years after about “the new normal”. As lunch attendee Euan Smith, a partner and employment law specialist with Pinsent Masons pointed out, there are many similarities between the two crises.
The new normal comes to the north-east when the economic shock of the oil price collapse has worked its way through to food chain from top to bottom. Let’s just hope we can get there soon.