Host City Glasgow: out with shipyards, in with business services and technology

Glasgow’s Broomielaw district plays host to call centres and financial services. Graeme Maclean, CC BY-SA

Glasgow is Scotland’s largest city and the centre of its only true metropolitan economy, with a population of around 1.2m. As governments worldwide recognise -– including those in Scotland and the UK – cities and city regions are increasingly the drivers of economic growth. This is true of Glasgow, which has posted significantly higher population and working-age population growth than Scotland since 2008, as the following table shows.

ONS 2011

The Glaswegian economy of old is as well known as its subsequent decline. The city’s strength in British Empire-era products such as tobacco and cotton gave way in the second half of the 19th century to heavy industry, including steel, chemicals and, in particular, shipbuilding.

The Govan shipyards that made the one-time second city of the empire the envy of the world went into decline after World War II. This was thanks to Asian rivals such as Japan and South Korean, who began producing ships at prices against which the Scots could not compete. Fast-forward several decades and Glasgow had become a byword for rapid decline in manufacturing; a decline faster than any other city in Western Europe, which was mirrored in both its employment and subsequent health statistics.

The turnaround in the Glasgow economy was partly thanks to a McKinsey report in the late 1980s commissioned by the Scottish Development Agency, entitled The Potential of Glasgow City Centre. It was a blueprint for a new phase of economic activity to be based on services, particularly financial services, software and tourism.

The international financial services district. Jeroen Mul, CC BY-SA

It led for example to the creation of the city’s international financial services district, which has attracted a number of big blue-chip players such as Tesco Bank, Shell, Morgan Stanley, JP Morgan and Direct Line Insurance. They initially set up call centres, though several have developed global IT, software and other specialist functions (JP Morgan has one of its global software centres in the city, for example). Business services now makes up 35% of the city’s economy.

Glasgow’s economic activity

Glasgow is also home to the headquarters of a number of major international companies, a fact that is too often overlooked. There are FTSE 100 companies such as engineers Weir Group and temporary power specialist Aggreko; big internationally-owned players such as Scottish Power and Clydesdale Bank; and private groups such as industrial manufacturer and venture capitalist Clyde Blowers Capital and whisky (and now premium rum) maker Edrington. Partly thanks to the presence of Edrington, Whyte & Mackay and Chivas Regal, Glasgow ships more Scotch whisky through its docks that anywhere else in the world.

There are also a significant number of smaller high-growth companies such as components maker Castle Precision Engineering and luxury hi-fi specialist Linn Products. These kinds of companies link Glasgow firmly to international markets and use and develop Glasgow’s enviable skills and graduate base as well as attracting global talent to the city. Glasgow has a higher number of graduates in its workforce and significantly higher levels of productivity than many of the large UK cities and city regions with which it compares itself.

On the eve of the Commonwealth Games, there is a feeling that the city has moved past the first wave of regeneration foreseen in the McKinsey report and into a new second wave. This builds on the previous advances while refocusing on the wider city region’s historic role as Scotland’s engineering and technological heartland. The city has become a base for renewable energy technologies, not least after becoming the headquarters for the UK government’s renewable energy catapult. It has also become important in life sciences, especially stratified medicine and medical technologies, while in the engineering sector it boasts both manufacturing and engineering services (the Jacobs group is a good example of the latter). It is also Scotland’s pre-eminent centre for the creative industries, particularly print, broadcasting and film-making.

Working hand-in-hand with the city’s colleges and universities (which educate a third of Scotland’s students) is seen as vital to these developments. It will help to bring the innovation to the table seen as necessary for long-term growth across all sectors – including digital and web-based technologies. The city also houses by far the biggest shopping district in Scotland, the most recent addition to which is the Forever 21 mall in the centre, completed several years ago. It also goes without saying that the city has also received a major boost from the Commonwealth Games. According to the Scottish government, getting the city ready has created about 6,000 jobs and boosted the economy by about £52m.

Forever 21: Glasgow’s latest church for retail worshippers. Lis Ferla, CC BY-SA

Naturally there is still much needing to be achieved in the city. Glasgow still only employs 63% of its working-age adults, eight points lower than the Scottish average. It also pays out on higher rates of unemployment and incapacity benefit, albeit these rates have fallen sharply in recent years (unemployment benefit from 29% in 2000 to 20% now; incapacity from 18% in 2000 to 12% now).

Another useful indicator is house prices. According to the latest figures from Nationwide, Glasgow’s average house price of over £169,000 is nearly £30,000 above the Scottish average, though still well behind the likes of Edinburgh and Aberdeen and somewhat below big English cities like Manchester, Liverpool and Birmingham. This has the advantage of making the city attractive and affordable to investors and their workforces.

But while there are challenges ahead, it is impossible to argue that the Glasgow economy of 2014 is the same as it was 30 or 40 years ago. The city can now speak to a large, strong and deepening financial and business services sector alongside ongoing strengths in innovation, technology, engineering, life sciences and tourism and events. The Glasgow economy is rebalancing and arguably is returning to its economic roots as a global trading city – trading on its skills and talent, innovation, technologies and business acumen. In many ways this was the vision of Glasgow’s Victorian business and civic leaders. It is a reality that they would recognise in Glasgow today.

You can read previous parts of our Host City Glasgow series here.

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