There are still first-time visitors to Aberdeen who step out of the railway station and expect to be greeted by a forest of smokestacks and oil pumps. This misguided belief founders, of course, on the reality that the production areas are all offshore and that there is little visible evidence of the industry in the city itself.
Oil and gas, and the transition into renewables, is economically still hugely important to the area. But it is not the be all and end all when it comes to commercial activity. The city and its rural hinterland are home to a rich and diverse range of healthy and growing economic sectors.
There are dozens of different development projects underway at present, many of them documented in the latest issue of the Aberdeen City Region Investment Tracker. Russell Borthwick, the chief executive of the Aberdeen and Grampian Chamber of Commerce, describes the recent pace of change as “breath-taking”.
He points out that more than £3 billion worth of projects have been completed in the last year alone, taking the running total since 2017 to more than £6.5 billion. Aberdeen consistently ranks in the UK top 10 for foreign direct investment, and regional gross value added per capita and average earnings are consistently among the country’s highest.
However, no one is resting on their laurels. The aim is to create enough innovative spaces and ecosystems to make the area a world-class entrepreneurial location. Bodies such as Opportunity North East (ONE), the city and shire councils and Scottish Enterprise are working together to build a gold standard model for private and public sector regional economic development.
Large scale infrastructure developments include the £400 million expansion of Aberdeen South Harbour, making it the largest berthage port in Scotland and fostering ambitions to become the country’s premier net-zero port. It can also now accommodate larger cruise vessels, creating the potential for more tourism.
A recently opened £40 million BioHub in Aberdeen is a testament to the city’s excellence in life sciences. The intention behind the hub is to work with the local universities and NHS to turn world-leading research and ideas into spinout and start-up businesses.
The energy transition is being supported through the development of a £2.5 billion, 882mW offshore wind farm in the outer Moray Firth, which is set to deliver electricity to up to 40,000 homes. Another project, the Torry Heat Network, aims to connect hundreds of houses to a new heat network.
Investment in transport and infrastructure includes First Bus’s upgrade to electric and hydrogen buses, a feasibility study examining the opening of a freight and passenger railway connecting Dyce, Ellon, Peterhead and Fraserburgh, and a spend of £3 billion dualling the A96 road between Aberdeen and Inverness.
First Bus, which is Scotland’s largest bus operator, is fully committed to sustainable solutions and aims to achieve zero emissions across its 850-vehicle fleet by 2035. It launched hydrogen-powered double-decker buses in the city more than two years ago and has begun to augment these with a fleet of 24 electric vehicles.
“There are a huge number of things happening outside oil and gas and the transition,” says Borthwick.
Borthwick, who worked in the north east of England before returning to his native area of Scotland, believes that the oil price crash in 2015 may have provided the impetus for the current frenzy of economic activity.
“It acted as a kind of mild heart murmur, providing a warning about what we needed to do,” he says. “At that point we saw the formation of the city region deal, and for the first time we had a pretty cohesive regional economic strategy designed by agencies, local government, business organisations and other partners.
“There were a series of actions that said we needed to take control of our own destiny, put together a programme of investment and understand that we had to diversify away from just being seen and known as an oil location.”
He points out that there are some real strengths in the local economy, including in food, drink, agriculture and fishing. “We are asking how we build on the fact that this small part of Scotland, with just 8 per cent of its population, accounts for 20 per cent of its food and drink produce.
“Then in life sciences, some of the most advanced and incredible drug treatments in the UK are happening in Aberdeen. For a long time, we were closed to tourism because there was no accommodation and it was too expensive. But we are putting a lot of focus on that now.”
Borthwick adds: “We have momentum, but we need to keep doing more.” He fully recognises the challenges of getting outsiders to recognise the diversity and potential of the area – “at best, it’s a blank canvas” – but believes perceptions can be overcome.
Even with the move to net zero, oil and gas will continue to be important to the area and the economy. “We will require this, and particularly gas, to be part of our energy mix well beyond 2050.”
He warns that the continuing requirement for hydrocarbons needs to be factored in. “We are at risk of a quadruple whammy – losing investment, losing jobs, having to import from elsewhere while these fuels are still needed, and not having the ability to drive new technologies such as hydrogen, offshore wind and carbon capture and storage.”
The 282-member Aberdeen Renewable Energy Group (AREG) was established 20 years ago to encourage diversification away from oil and gas and champion the energy transition locally, empowering the supply chain and leveraging its expertise.
Its chair, Jean Morrison, says that the organisation has specialist supply chain and professional services forums. “One of the big areas we need to keep a track on is policy, either at local or UK level, so we have a forum on that too.
“We have worked with biomass projects in Aberdeenshire, including the Aboyne Community School and one in Banchory. When it comes to the production of hydrogen, a lot of this will be exported, though there will be a major use of it in the city.”
Among other projects, AREG has contributed £1.3 million towards a renewable heating system at the Aberdeen Exhibition Centre. Groups are coming from all over the world to see what is happening in the north east, Morrison adds.
“The city is quite buoyant just now. A lot of it is under the surface. We know of lawyers that are opening offices in Aberdeen and looking at having an energy unit. It’s a nice place to live.”
Aberdeen’s dynamism is boosted by its Business Improvement District (BID). This covers the area around Union Street and is stewarded by Aberdeen Inspired with the aim of promoting the city and fostering new projects.
Adrian Watson, the body’s CEO, points out that it remains an important regional capital and retail destination. There has been cultural investment and a gift card programme has turned out to be hugely successful.
“People have their perceptions about Aberdeen – energy, oil and gas – but we are pursuing projects such as Nuart, which has come out of Scandinavia and is one of the biggest and best street art festivals in the world. It’s a massive event for the city and country.”
One advantage the area has is a genuine desire for collaboration across public and private sectors and academia. “We have the European Pipe Band Championships coming in June, supported by the council and private sponsors. Plus, we’ve captured the tall ships in 2025. We’re delighted to have secured these exciting events.”
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