An independent report on the state of Aberdeen city region’s economy said there needs to be continued focus on the factors critical for the long-term success of the region
Monday, December 20, 2021
An independent report on the state of Aberdeen city region’s economy published on 20 December 2021 said there needs to be continued focus on the factors critical for the long-term success of the region - economic diversification, skills, infrastructure investment, and energy transition.The 2021 Economic Policy Panel Report said the relentless focus on clear prioritisation, co-creation of policy with stakeholders, and timely delivery needs to continue.The fourth annual report comes at a time of continuing global economic challenge from the Covid-19 pandemic and the uncertainty that has brought along with the ongoing challenges from the changes to the oil and gas sector and the transition to net zero.It also said the future success of the North-east is critical for the long-term health of the Scottish and UK economies and the region cannot be expected to meet the complex challenges ahead alone. A more joined up and coordinated approach across the Council, UK Government and Scottish Government on all issues that impact on regional economic development would aid long-term planning in Aberdeen.The report said it was the right time to develop a new Regional Economic Strategy with Aberdeen taking a regional lead on managing natural assets in the transition to Net Zero, building on the recognition in the current Regional Economic Strategy which stated the region’s natural assets and clean environment are vital to its economic success.It highlighted recent progress on the City Centre Masterplan and plans for redevelopment of the beachfront are welcome first steps in meeting a recommendation from the 2020 report that policy focuses on making Aberdeen a resilient and attractive place to live, work, and invest. The downturn in oil and gas, which started in 2014 but had not fully recovered even by the start of the pandemic, led to a decline in relative economic performance across the region. The number of employees in the region fell by more than 15,000 between 2015 and the start of the pandemic in early 2020. Despite this, on a GVA per head basis, the North-east remained some 31% and 19.3% above the Scottish and UK averages respectively in 2019, with earnings also higher than the national average (£32,747 in Aberdeen in 2021 compared with £31,672 in Scotland and £31,285 in the UK).The report said the energy sector is critical to the success of the area with 40% of Scottish energy sector enterprises located in the North-east and about 60,000 jobs supported by the sector in the region.Aberdeen City Council Leader Councillor Jenny Laing welcomed the report. Cllr Laing said: “I agree with the report’s focus on continued diversification into energy transition activities along with other sectors such as tourist, food and drink, creative industries, digital, and life sciences.“It clearly shows that Aberdeen can be at the forefront of the UK’s ‘green recovery’, and it underlines the importance of the city as a driver of economic activity and highlights the key role the city region has in the future success of Scotland and the UK as a whole.”“I am pleased the report comments positively on our recent progress with the City Centre Masterplan and plans for redevelopment of the beachfront along with connectivity to the city centre and I agree with the panel that this ongoing investment will help to drive both economic growth for the area and make Aberdeen a more attractive place to live, work and visit.“It is important that investment continues in the North-east in physical and social infrastructure that in turn supports us attracting new inward investment.” Aberdeen City Council city growth and resources convener Councillor Ryan Houghton said: “We as a council are committed to helping to ensure Aberdeen continues on the transition to net zero with the publication of our Net Zero Vision and Climate Change Plan, and a Strategic Infrastructure Plan to leverage support for the region’s transition towards net zero. “These important documents will help to create jobs for our young people, retain and attract new talent and investment here in Aberdeen, and safeguard existing skills. "Aberdeen needs the continuing support of the wider public sector and the private sector to build resilience and future prosperity while the city and region transitions towards net zero."The report said Aberdeen and the wider North-east region is one of the most prosperous parts of the UK, with a higher-than-average GVA per head. It has historically had a strong labour market where employment rates, earnings and productivity have been amongst the best performing regions in the UK. It has a reputation for hosting an innovative and international business base with consistently above average business creation that invests heavily in research and development, double that of the Scottish average.Policymakers and business leaders should continue to take bold decisions to support a Just Transition into new forms of sustainable energy, the report said. This transition continues to be led by industry through the Aberdeen City Region Deal funded, Net Zero Technology Centre (NZTC) and Oil & Gas UK development of a North Sea Transition Deal. The report notes that the skills requirements to meet that transition are considerable. About 200,000 people are forecast to be required in 2030 to meet energy demand, including in offshore wind, hydrogen, and CCUS. This workforce mix is expected to evolve over time, with over 65% of the workforce in 2030 anticipated to support low carbon energy activities and more than 90% of the oil and gas workforce have skills transferable to adjacent energy sectors.The full 2021 Economic Policy Panel Report is available here.The Economic Policy Panel comprised Professor Graeme Roy, Professor of Economics and Dean of External Engagement in the College of Social Sciences at the University of Glasgow, Dougie Peedle, Economic Associate for Pro Bono Economics and formerly Chief Economic Adviser to the States of Jersey, and Dr Hanan Morsy, global strategist and macroeconomic and public policy expert. Mr Roy said: “Our report last year emphasised that during such uncertain and difficult times it is important to focus on the long-term opportunities and challenges that the region will face. This year’s report continues in this vein with further focus on the factors critical for the long-term success of the region: economic diversification, skills, infrastructure investment and energy transition. We continue to encourage a relentless focus on clear prioritisation, co-creation of policy with stakeholders and timely delivery.”Mr Peedle said: “Recent progress on the City Centre Masterplan and plans for redevelopment of the Beachfront are welcome first steps in meeting our recommendation from last year that policy focuses on making Aberdeen a resilient and attractive place to live, work and invest. As the region sets out on this journey there is still a need for plans to be guided by a new Route Map for the Transformation of Aberdeen the Place. This needs to be complemented by the development of a new Regional Economic Strategy in 2022, further clarifying what the region values in terms of inclusivity and wellbeing.”Mr Morsy said: “The economy in the North-east has continued to face challenges from the Covid-19 pandemic, Brexit and the transition to Net Zero. The structure of the North-east economy and the fact that the pandemic followed on the heels of the downturn in oil and gas have translated into a disproportionate impact of Covid-19 on the region’s economy and labour market. Uncertainty about the implications of Omicron and the risk of further restrictions on economic activity poses an additional risk to the economic recovery in the North-east and the rest of the UK."The City Council approved the appointment of an independent Economic Policy Panel in March 2017 to provide independent commentary on the state of the Aberdeen economy in the form of an annual report.