The assessment that Edinburgh is expected to be hit harder by the economic downturn than anywhere in Scotland will deepen the fears of many that there is worse – much worse – news to come.
Senior officials at Edinburgh City Council have been braced for weeks that a shake-out of jobs, not just at HBOS and Royal Bank of Scotland but right across the financial sector – IT workers, asset management, global custody and document printing together with specialist legal and accountancy services – would have a major impact on economic growth in the city region.
Add to this the knock-on effects on the broader service sector – restaurants, hotels, taxi firms, clothes stores, furnishers and household services – and the crisis at the banks could ripple out into a growth implosion for the city overall.
Since a detailed report was prepared in October, the economy has deteriorated sharply, with a generalised loss of confidence spreading across the service and retail sectors.
This in turn bodes ill for city hall revenues if – as some have warned – one in ten retail businesses could be closed down by the recession.
The bleak report by Dave Anderson, director of economic development for Edinburgh City Council, set out the potential extent of the damage that could be done to the capital as a result of the financial sector shake-out.
It warned that Edinburgh, widely seen as the engine room of Scotland's economy, was especially vulnerable.
The financial sector in Edinburgh employs some 30,000 – one in ten of the capital's workforce. It is also reckoned to support a further 53,000 jobs in the city.
The future of the financial sector in the city is seen as key to the delivery of some £7.5 billion worth of developments, which had been widely expected to take place, including the regeneration of the city's waterfront, an overhaul of Princes Street and the expansion of Edinburgh Airport.
Mr Anderson said: "The finance sector is a major pillar of Edinburgh's economy, both in terms of wealth creation and employment.
"As Edinburgh has an abundance of major financial institutions, structural changes among these businesses are likely to have significant repercussions on the city and its economy."
He said the extent to which the local economy would be affected by the Lloyds TSB take over of HBOS was unclear – estimates of job losses across Scotland range from 20,000 up to 60,000 – "but there is a significant risk of a medium-term negative impact on jobs and the ability for businesses to acquire capital for growth.
"Following the takeover of Scottish & Newcastle by the Heineken-Carlsberg consortium, the loss of a second major headquarters in a year for the capital could also affect Edinburgh's reputation as a desirable head-office location."
Recent months have seen visible signs of economic slowdown in the city's property and development market.
The property analyst David Alexander, owner of Edinburgh-based firm DJ Alexander, said: "We are seeing the kind of downturn in Edinburgh at the moment that we haven't seen for more than 20 years.
"Edinburgh is so reliant on financial services that when it takes a hit, it is clearly going to have an impact on the whole economy of the city."
THE SCOTSMAN, 10 January 2009