ID 8735
Alers, Tim: Economic Development in Scotland -
Changes and Prospects for the Economic Core Region Edinburgh
Hamburg: Diplomica GmbH, 2005
Zugl.: Rheinisch-Westfälische Technische Hochschule Aachen (RWTH),
Magisterarbeit, 2004
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E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
Content
Abbreviations...V
List of Figures ...VI
List of Tables ... VII
Introduction... 1
1 SCOTLAND ...3
1.1
P
HYSICAL
E
NVIRONMENT
...3
1.2
P
OPULATION AND ADMINISTRATIVE STRUCTURE
...7
1.3
T
HE
S
COTTISH ECONOMY
...10
1.3.1
Early industries ... 10
1.3.2
Silicon Glen ... 12
1.3.3
North Sea Oil ... 13
1.4
E
CONOMIC
D
EVELOPMENT
...15
1.4.1
History of economic policy ... 17
1 . 4 . 1 . 1
R e g i o n a l S e l e c t i v e A s s i s t a n c e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9
1 . 4 . 1 . 2
D e v e l o p m e n t A g e n c i e s t h e S c o t t i s h D e v e l o p m e n t A g e n c y
a n d t h e S c o t t i s h E n t e r p r i s e N e t w o r k s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0
1 . 4 . 1 . 3
I n s t i t u t i o n a l P r o b l e m s t h e Q u a n g o d i s p u t e . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2
1 . 4 . 1 . 4
T h e S c o t t i s h d e v e l o p m e n t a g e n c i e s t o d a y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4
1.5
S
COTTISH
P
LANNING
S
YSTEM
...26
1.5.1
Structure Plans... 28
1.5.2
Local Plans... 30
1.5.3
Conclusion... 31
2 EDINBURGH AND LOTHIAN ...33
2.1
T
HE
L
OTHIANS
...33
2.2
E
DINBURGH
...37
2.2.1
Introduction ... 37
2.2.2
Population ... 40
2.2.3
Sectoral structure and changes ... 44
2 . 2 . 3 . 1
F i n a n c e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 6
2 . 2 . 3 . 2
R e t a i l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 8
2 . 2 . 3 . 3
T o u r i s m . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 9
2 . 2 . 3 . 4
C r e a t i v e I n d u s t r i e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0
2 . 2 . 3 . 5
F u r t h e r a n d H i g h e r E d u c a t i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1
2 . 2 . 3 . 6
B i o t e c h n o l o g y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2
2.2.4
Perroux and Peripherality ... 54
2.2.5
Development constraints ... 56
2.2.6
LEC Edinburgh and Lothian ... 59
2.2.7
The City of Edinburgh Council... 61
2.2.8
The Plans ... 64
2 . 2 . 8 . 1
E d i n b u r g h a n d L o t h i a n s S t r u c t u r e P l a n 2 0 1 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4
2 . 2 . 8 . 2
W e s t E d i n b u r g h L o c a l P l a n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7
3 WATERFRONT REVITALISATION IN EDINBURGH THE GRANTON
WATERFRONT PROJECT ... 69
3.1
I
NTRODUCTION
...69
3.1.1
Restructuring the Waterfront... 71
3.1.2
The history of Granton... 74
3.2
T
HE
P
ROJECT
...80
3.2.1
Structure and plans ... 81
III
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
3.2.2
The Landowners and the individual plans... 84
3.2.3
Transport... 92
3.2.4
Organisation and Progress... 94
3.3
C
ONCLUSION
...96
4 FINAL STATEMENT ...103
References ... 108
IV
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
Abbreviations
AEF
Aggregate External Finance
CDA Central Development Area
CEC
City of Edinburgh Council
EICC
Edinburgh International Conference Centre
EIP
Examination in Public
EZ
Enterprise Zone
FDI
Foreign Direct Investment
GB
Great Britain
GDP Gross
Domestic Product
GEAR
Glasgow Eastern Area Renewal
HBOS Halifax/Bank of Scotland
HIDB
Highland and Island Development Board
HPI
Highland Perthshire Initiative
IDC
Industrial Development Certificate
IPR
Intellectual Property Rights
LEC
Local
Enterprise Company
NEAR
North Edinburgh Area Renewal
NHS
National Health Service
NPPG
National Planning Policy Guidelines
ONS
Office of National Statistics
PAN Planning Advice Note
PLI
Public Local Inquiry
R&D Research
and Development
RDA Regional Development Agency
RSA
Regional Selective Assistance
SDA
Scottish Development Agency
SEEL
Scottish Enterprise Edinburgh and Lothian
SIMD
Scottish Index of Multiple Deprivation
SME
Small and medium sized enterprises
SPP
Scottish Planning Policies
UK
United Kingdom
VR
Virtual Reality
WEL
Waterfront Edinburgh Ltd
WTC World Trade Centre
WWI/WWII
World War I/II
V
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
List of Figures
Figure 1:
Scotland
3
Figure 2:
Unitary council areas in Scotland
9
Figure 3:
SE and HIE Areas 21
Figure 4:
The Lothians
33
Figure 5:
Industrial structure of Enterprises in 2000
34
Figure 6:
Mix of Employee Jobs in Lothian
35
Figure 7:
GDP in Lothian (1998)
39
Figure 8:
Unemployment Rate 1993 2003
39
Figure 9:
Edinburgh Population (1990 2002)
40
Figure 10:
Age-structure in Great Britain
and Edinburgh (2002)
41
Figure 11:
Population change and net migration
42
Figure 12:
Jobmix in Edinburgh 2002
45
Figure 13:
Industrymix in Edinburgh 46
Figure 14:
Tourism in Edinburgh and Scotland
50
Figure 15:
Typology of regions
55
Figure 16:
Average House Prices 1993 1998
56
Figure 17:
Indicators of social and economic
disadvantages in Edinburgh (wards)
58
Figure 18:
SEEL Expenditure Breakdown 2002/3
60
Figure 19:
BT building and JP Morgan building
in Edinburgh Park
63
Figure 20:
Ocean Terminal and Royal Yacht Britannia
64
Figure 21:
Untitled (model of port-city-interface)
73
Figure 22:
The Granton area today
75
Figure 23:
Granton harbour around 1927
76
Figure 24:
Aerial view of the site looking west
with the Forth Rail Bridge in the background
80
Figure 25:
Structure (of the Waterfront Developments)
82
Figure 26:
The Llewelyn-Davis Masterplan (2000)
82
Figure 27:
The Quarters
83
Figure 28:
Scottish Gas Call Centre (SecondSite)
85
Figure 29:
Forth Properties site
85
Figure 30:
VR model by Cooper Cromer (Forth Property)
86
Figure 31:
WEL Masterplan
86
Figure 32:
Predominant Land Use Mix in
Granton as planned
87
Figure 33:
Central Development Area
91
Figure 34:
Traffic connection of Granton Waterfront
93
Figure 35:
Organisational structure of the development
94
Figure 36:
The Spine on the CDA
95
Figure 37:
The Saltire Square after completion
95
VI
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
List of Tables
Table 1:
Population and population
change by council area
7
Table 2:
The structure of the Scottish economy
by distribution of employment sector
14
Table 3:
Differences between national-level
regional policies and RDAs
18
Table 4:
Components of Change
In Edinburgh (1991 - 2000)
42
Table 5:
Reasons for moving within
Great Britain (1991 2000)
43
Table 6:
Reasons for moving by distance moved;
Great Britain (1991 to 2000)
43
Table 7:
Rates of job-related migration between regions
by sex, age, skill level and occupation;
Great Britain (1991 to 2000)
44
Table 8:
Key Employers in Edinburgh's Financial Sector
47
Table 9:
Edinburgh and Lothians biotech cluster 1999
52
Table 10:
Companies with their head offices in Edinburgh
53
Table 11:
Strategic development projects in Edinburgh
80
VII
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
Introduction
This thesis tries to examine the structures, activities, changes and spatial im-
pacts of economic development in Scotland. Looking at the Scottish
economy it has to be considered that Scotland is both an integrated part
of the UK and the UK economy and a peripheral region within the UK.
Therefore Scotland does not have an economy of its own, but the distinct-
iveness of the region in terms of location, history and recent political devel-
opments justifies a closer examination of the matter. Scotland is in many
aspects a very heterogeneous region. This is in particular true for the eco-
nomic structure and a focus on one region cannot be representative. Ed-
inburgh is an exceptionally prosperous region, not only in Scottish terms.
However this prosperity and activity in economic development makes Ed-
inburgh an interesting subject for examination. Thus the focus of this thesis
lies on the developments in Edinburgh. Economic development is certainly
influenced by a vast number of factors and it is impossible to take all of
them into account. Within this thesis the emphasis lies on governmental in-
fluence on the developments. However European development measures
are not considered. Accordingly the thesis aims to look at the ways the
promotion of economic development is carried out in Scotland and tries to
assess the measures on the background of the distinctiveness of Scotland
and Edinburgh.
Thus in the first chapter the thesis takes a look at Scotland as a whole, ex-
amining the physical environment, the administrative framework and its re-
cent changes. Furthermore it looks at the economic legacy of the heavy
industries and the recent developments in the Scottish economy. Subse-
quently the history and institutions of the promotion of economic develop-
ment in Britain and Scotland are presented. The last part of the first chapter
deals with the planning framework in Scotland. The second chapter por-
traits Edinburgh's economic structure. The key industries are presented
briefly as are the institutions of economic development. Afterwards parts of
the Edinburgh development plan are examined. The third chapter focuses
on the Waterfront project in Edinburgh. The background of waterfront revi-
1
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
talisation is presented. The project and its participants are then examined in
some detail. Finally a conclusion is drawn on the developments in Edin-
burgh.
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C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
1 Scotland
1.1 Physical
Environment
Scotland occupies the northern part of the biggest of the British Isles and is
located between latitudes 54° 37' N (Mull of Galloway) and 60° 52' N
(Muckle Flugga, Shetland) and between longitudes 0° 45' W (Out Skerries,
Shetland) and 7° 40' W (Mingulay). It covers an area of 79 000 sq km includ-
ing numerous lakes and islands. Scotland, exposed to the Atlantic ocean
and the north
sea and very
much formed
through vol-
canic and gla-
cial activity is
quite a het-
erogeneous
and dissected
region. Scot-
land can be
divided into
three parts
separated by
the main faults as follows. In the north there are the Highlands which are
separated from the Midlands by the Highland boundary fault. In the south
then follows Southern Scotland divided from the Midlands by the Southern
Upland fault. However these parts are often very diverse in itself and need
to be subdivided.
Source: De Grote
Bosatlas
Figure 1: Scotland
The Highlands occupy two thirds of the total area of Scotland and are sub-
divided by the Great Glen fault into the northern zone and the central
zone. Most of this area lies above 1500 ft (460 m). The rainfalls are heavy
3
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
and the summers are cool and short. There is little mineral wealth and ex-
cept for Brora, coal is absent.
The north-west Highlands are a plateau of bleak monotonous rocks which is
the least populated large area in the British Isles. The mountains are cov-
ered with wet, peaty moor land and raise to heights up to 3500 ft (1070 m).
In some more favoured areas covers of heather and grass can be found.
The height of this area lifts the annual rainfall up to over 200 in (5080 mm).
Snow falls on an average of forty days a year and the frost-free period is
under ninety days. The area with its high rainfall, steep slopes and pattern
of valleys is important for hydroelectric power.
To the west the isles, consisting of Arran and Bute, the inner Hebrides, the
outer Hebrides, The Orkneys and Shetlands, are in itself quite diverse though
all show lower rainfall than the mainland Highlands. While Arran and Bute
and the inner Hebrides are dominated by complex intrusions and meta-
morphoric schists arising from Silurian to Permian volcanic activity as well as
glacial shaping and morainic deposits, the Orkneys consists mainly of Old
Red Sandstone, are very flat and exposed to strong marine erosion. On the
outer Hebrides the Lewisian gneiss is predominant. Peaks here can rise up
to 2600 ft (790 m). The Shetlands are rather similar to the mainland High-
lands.
On the east coast there are the Plain of Caithness and the western Moray
Firth Lowlands. In this area Old Red Sandstone overlain by deposits from
glacial debris makes for favourable soils. In Brora there is a small coal field.
South of the north-west Highlands and separated from them by the Great
Glen is the central zone. The largest area is occupied by the Grampians.
This area shows a vast variety of features because of the differences in
structure weathering and erosion. Especially in the east the rainfalls reach
120 in (3050 mm) and the peaks can rise up to 4000 ft (1220 m) in the
Cairngorms. The floor has much poor morainic debris and some soils de-
rived from the occasional Old Red Sandstone. As a result of the two glacial
periods the typical U-shaped valleys, hanging valleys, high corries and
many low cols can be found. The area is dissected by numerous lakes and
4
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
streams, which isolate the few arable parts from each other. The lakes and
valleys however are important for the generation of hydro electricity.
On each side of the Grampians to the east and the west there is the low-
land fringe. On the east the Moray Firth lowlands and the Buchan peninsula
offer average to good soils and rainfall is under 25 in (635 mm). The highest
tips here are no higher than 500 ft (150 m). The climate is sunny and the
summer days are long. The Buchan area has probably been spared from
glacial stripping and thus being one of deposition of drift material rather
than intense erosion. On the west coast is the very dissected area of Lorne,
Cowal and Kintyre. It is lower in height and has a mild, moist climate. This
area again is utilised for the generation of hydro electricity.
The Midlands of Scotland, located between the two main Scottish fault
lines, are another geographical entity. The term "lowlands" is often used to
describe this area though most of the area is over 400 ft (120) high with hill
masses rising up to 2000 ft (600 m) and above. The climate is mainly con-
trolled by the Atlantic, but there are variations from east to west. While the
west is wetter with 40 50 in (1016 1270 mm) of rainfall and milder, the Lo-
thians get about 25 in (635 mm). However the east is likely to be affected
by cold continental air masses during winter. The Midlands are even more
diverse than the Highlands and their complex structure and relief, as a re-
sult of earth movements and the effects of glacial deposition make a sub-
division difficult but necessary.
In the north, next to the Grampians but separated from them by the High-
land boundary fault, there is the Strathmore corridor. This stretches from
Loch Lomond to Stonehaven. Old Red Sandstone is predominant in this
area, but the soils vary from wet and acidic in the west to rich soils derived
from glacial clays and alluvium in the east, where most of the land is culti-
vated.
Parallel to this area in the south there are the volcanic hills. They consist of
horizontally bedded lava capping the Carboniferous shales. The rocks give
comparatively poor soils and the steep slopes of the hills often carry heath
or peat bogs.
5
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
To the south lies the "waist" of Scotland. The climate and the soils of this
area allow varied farming and the minerals created manufacturing indus-
tries. Therefore this is the most densely populated area in Scotland. Various
coal basins, broken by submergence, uplifting or faulting exist here. The
major basins of coal measures are Ayrshire, Lanark-Stirling-Clackmannan
and Fife-Midlothian. The Lanarkshire coalfield in the west is the most readily
accessible and was therefore the first to be worked on.
The slopes of the Clyde valley rise to 500 ft (150 m) and the soils are rather
shallow. The climate is wet but the rainfall is well distributed over the year
and the land is suitable for farming.
Going further east the rainfall becomes lighter and the soils get better. The
Fife peninsula features a few of the better soils but the Lothians with their
soils from Red Old Sandstone in combination with a sunny climate offer
some excellent farmlands.
Southern Scotland, occupying the area between the Southern Upland fault
and the Scottish-English Border, is not quite so heterogeneous as are the
other two parts. However a subdivision might be useful.
Thus the central highland area of southern Scotland is flanked by two low-
land zones. The sandstones of the Ordovician and Silurian series produced
a broad plateau in the central zone with only a few high peaks rising to
2500 2700 ft (760 820 m). The hills are mainly covered with grass and
heather but also peat. Especially in the east there are granite intrusions and
the climate is wetter here. The rainfall of 60 100 in (1524 2540 mm) is
evenly distributed. So this is another area ideal for the generation of hydro-
electricity.
The area to the east lies generally below 600 ft (180 m). This part shows a
high population density. Thick deposits of boulder clay make up for agricul-
turally good soils. The moderate rainfall of 25 30 in (635 762 mm) is evenly
distributed over the year and the summers are warmer than in the rest of
the country. This region boasts a few of the oldest towns in Scotland like
Jedburgh or Kelso.
6
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
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The Silurian rocks in the west are covered with drift. The climate is wet but
the drift and alluvial soils permit cultivation (King, W. J., p. 107 155).
1.2
Population and administrative structure
Scotland is a country within the United Kingdom of Great Britain and North-
ern Ireland. In 2002 the
estimated population of
Scotland was 5.1 million
which accounts for 8.5%
of the UK population.
Scotland as a whole has
experienced a 0.6%
decline in population
numbers in the time
from 1991 to 2002,
though there is a con-
siderable variation
across Scotland. The
council area of West
Lothian had a propor-
tional increase of 10.3%,
while Eilean Siar saw a
decrease of 10.7% (see
Table 1). The population
density averaged 65
people per square kilo-
metre in 2002, which is
the lowest in the UK. This
may however be mis-
leading, since again
there is a considerable
amount of variation
Table 1:
Population and population change by council
area, June 2002, Scotland
Population
(thousands)
Change in
population
19912002 (%)
Aberdeen City
209
2.3
Aberdeenshire
227
5.3
Angus
108
0.2
Argyll & Bute
91
2.7
Clackmannanshire
48
0.4
Dumfries & Galloway
147
0.1
Dundee City
144
7.3
East Ayrshire
120
3.5
East Dunbartonshire
107
2.6
East Lothian
91
7.5
East Renfrewshire
90
4.5
Edinburgh,City of
448
2.7
Eilean Siar
26
10.7
Falkirk
146
2.1
Fife
351
1.0
Glasgow City
577
8.2
Highland
208
2.1
Inverclyde
84
8.5
Midlothian
81
1.2
Moray
87
3.3
North Ayrshire
136
1.7
North Lanarkshire
321
1.7
Orkney Islands
19
1.6
Perth & Kinross
135
6.1
Renfrewshire
172
2.1
Scottish Borders,The
107
3.4
Shetland Islands
22
2.6
South Ayrshire
112
1.3
South Lanarkshire
302
0.1
Stirling
86
6.5
West Dunbartonshire
93
4.5
West Lothian
160
10.3
Scotland
5,055
0.6
Source: ONS, 2004b, p. 19
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E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
across Scotland. The highest density is reached in Glasgow (3,290 peo-
ple/km
2
) and the lowest in the Highlands (8 people/km
2
). The vast majority
of people (around 3/4 of the population) lives in the central belt where the
two biggest cities, Glasgow (577,000) and the capital Edinburgh (448,000),
are located.
In terms of administration there has been a considerable amount of
change in the UK and Scotland. In 1997 the White Paper Scotland's Parlia-
ment has been published to set out a framework for devolution. In the
same year a referendum was held in Scotland in which 74% of those who
voted endorsed the proposal for a Scottish Parliament and Executive. In the
following year the Scotland Act 1998 established the Scottish Parliament
and Executive and parliamentary elections were held in May 1999. On 1
st
July 1999 the Scottish Parliament and Executive took up their work and the
first Scottish Parliament for almost 300 years came to power. The Scottish
Parliament is responsible for anything that is not reserved to Westminster by
the Scotland Act 1998. Thus the Scottish Parliament is responsible for most
health issues, education and training, local government and social services,
housing and planning inward investment and promotion of trade, eco-
nomic development and tourism further more for most aspects of law and
home affairs, including prisons, the prosecution system and the courts. It is
responsible for the police and the fire services, the road network, bus pol-
icy, ports and harbours, agriculture, the environment, fisheries, forestry and
food, the natural and built heritage, sport, culture and the arts and lan-
guage and statistics, public registers and records. Other responsibilities are
administration of public education, science and technology, youth and
community services, the arts, libraries, museums and galleries, Gaelic,
broadcasting, sport and tourism as well as protection and presentation to
the public of historic buildings and ancient monuments.
The Scottish parliament is mainly financed by a block grant from the UK Par-
liament. Other sources of revenue include non-domestic rate income. The
Scottish Parliament is solely responsible for the allocation of the budget. The
Scottish Parliament has the power to change the basic rate of income tax
in Scotland by 3 pence commonly called the tartan tax. The right to vary
8
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
the income tax has not yet been exercised and possible effects are said to
be marginal (ONS, 2004b, p. 19 21/487).
Figure 2: Unitary council areas in Scotland
100 km
0
Source: ONS, 2004b, p. 22; scale added
Scotland has a single-tier administrative system. During the last century the
local government structure has been changed three times (1929, 1979 and
1996). The latest restructuring saw the change from a two-tier system with
split responsibilities between upper-tier districts and lower-tier councils to
the unitary system of today (Fairley, J. p. 103/104). Scotland's 32 unitary
councils (see figure 2) are responsible for services including education, so-
cial work, police and fire services, roads, public transport, local planning,
urban development, housing, libraries and recreation. Though the councils
9
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
are independent in their day-to-day businesses, their activities in planning,
finance, transport and housing is subject to governmental supervision.
1.3
The Scottish economy
This chapter aims to give a brief overview of the main developments in the
Scottish economy since the beginning of the last century.
1 . 3 . 1 E a r l y i n d u s t r i e s
One of the major industries in Scotland in the late 19
th
century was the tex-
tile industry. Cotton spinning and jute manufacturing was predominant in
Dundee. Though at the turn of the century cotton spinning went into de-
cline this was compensated by textile giants like J.&P. Coats in Paisley
which was then one of the biggest companies in Britain. At the eve of WWI
the Scottish textile industry displayed the entire spectrum of firm sizes (De-
vine, T. M., p. 25; Payne, P. L., p. 14). Another very important sector of the
Scottish economy was coal mining. In the early years of the 20
th
century
Scottish coal mining was the most concentrated in Britain and had the
highest average output per man-hour in the United Kingdom. Mining saw
some heavy capital investment since 1850 and family partnerships were
turned into limited companies. The large Scottish colliery proprietors were
all steel masters, reflecting a high degree of vertical integration. By 1885
40% of the British make of Siemens steel was produced in Scotland. Around
3/4 of the combined products went into what was indisputably the most
prominent of all Scottish industries, namely shipbuilding. On the eve of WWI
the Clyde built 1/3 of the British and 1/5 of the world's shipping tonnage.
The sector was dominated by independent family firms. Shipbuilding in
Scotland was characterised by labour intensive techniques which enabled
the employer to react to downswings in the economic cycle by simply
reducing the capacities through redundancies. Scottish heavy industries
were not confined to shipbuilding. Scottish heavy engineering produced
locomotives, railways, bridges or piers. By 1913 a collection of these interre-
10
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
lated activities employed ¼ of the Scottish labour force (Payne, P. L., p.
15/16). The Scottish economy was heavily export orientated and Scotland
was depended on the access to overseas markets. Scotland benefited
from the expanding British Empire and the global trade revolution as well as
the vast investments in the global transport system. Furthermore Scottish in-
vestors put money into American, Canadian, Australian and Asian railway
stock, land and cattle companies or mines. Scottish foreign investment rose
from 60 million to 500 million between 1870 and 1914 which was highest
per head in the UK (Devine, T. M., p. 28). However the well-being of the
Scottish economy depended on these basic heavy industries which Scot-
land was more intensely committed to than any other region of the UK. This
over-commitment was strengthened by the upcoming world war and the
post-war period even saw a boom and a labour rise in these industries. This
was despite the fact that the first flaws became visible. The Lanarkshire coal
fields had become progressively more exhausted and the eastern fields
were increasingly confronted with German and Polish competition. Al-
though there was an overall decline in the traditional industries, the re-
source did not move to activities that possessed greater potential for
growth. The heavy industries clung to their resources since a permanently
decline was not foreseeable. Furthermore was the industry dominated by
private limited companies which appeared to be more resistant to change
or even closure especially since there existed a considerable amount of
collusion. The advent of WWII once more promoted the traditional Scottish
industries and in effect helped to freeze the structure of the Scottish econ-
omy which reflected comparative advantages that had ceased to exist.
On the other hand there was a lack of light industries and services induced
by a lack of skilled labour, a lack of materials, a low level of income and
marketing problems, all of which added to the persistence of the traditional
heavy industries. So did the socially motivated political interventions to sup-
port the declining industry. Anyway change was inevitably and in the 1970s
the network of interdependent industries collapsed. Contrary to other re-
gions in the UK to a certain extent, service industries were not able to soak
up the redundant labour force. However a strong financial industry was es-
11
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
tablished in the 1980s mainly in the east. Building upon the 19
th
century leg-
acy of the Bank of Scotland, companies like Standard Life, Scottish Amica-
ble or Scottish Widows gained considerable importance (Payne, P. L., p. 17
- 24).
1 . 3 . 2 S i l i c o n G l e n
Within the last three decades Scotland's industrial structure caught up with
that of the rest of the UK. The restructuring was primarily achieved through
foreign direct investment in the electronics sector. American companies
established branch plants in Scotland to exploit the European market and
circumvent the high European tariffs in the 1950s (Payne, P. L., p. 24). The
pioneer was IBM, which come to Scotland in 1954 to avoid the bombed
London. IBM moved into buildings in Greenock which were erected by the
government (Hilpert, M., p. 21). IBM was followed by NCR, Burroughs and
Honeywell. The companies were influenced in their decision by govern-
mental regional policy like financial assistance or custom-made facilities in
New Towns and moved into the Scottish central belt to East Klibride,
Livingston, Glenrothes and Cumbernauld. In the 1960s followed companies
like National Semiconductor, Motorola and Hewlett Packard. By 1983 about
300 companies in Scotland were engaged in the manufacturing of infor-
mation systems, defence related products and avionics. Scotland pro-
duced 79% of the UK and 21% of Western Europe's output of integrated cir-
cuits. By 1990 these accounted for 42% of Scotland's manufactured exports.
In the 1990s Japanese companies established branch plants in Scotland:
NEC in Livingston, Mitsubishi in Haddington, Glenrothes and Livingston; Oki
in Cumbernauld, JVC at East Kilbride and Terasaki at Clydebank. Electron-
ics have become the crown jewel in the Scottish economy. The agglom-
eration of these industries in the traditional industrial belt bounded by Edin-
burgh, Dundee, Greenock and Ayr has become known as Silicon Glen
1
.
The cluster of electronic firms generated concentration economies which
led to the area's attractiveness to high-technology companies (Payne, P.
12
1
Glen is Gaelic meaning valley
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
L., p. 24 - 26). Silicon Glen is the most important high-tech region in the UK
apart from the Western Crescent in the prosperous south of England. There
are more computers produced per head in the Silicon Glen than anywhere
else in the world (Hilpert, M., p. 23). The establishment of a network of inter-
dependent structures was hoped to promote growth and support indige-
nous development. But in Scotland this development has rather led to in-
creasing dependence on multinational companies. Scotland faces interna-
tional competition for the volatile capital of these cost-cutting, footloose
companies and the threat of closure. Scottish companies fall behind, since
the multinationals import their material inputs or are subcontracting local
companies without R&D or own products. This development has prevented
considerable indigenous growth in this sector and Scottish companies are
held to develop own products and shift the attention towards software de-
sign. However this depends to a certain degree on the willingness of the
multinational companies and the capacity of the education system
(Payne, P. L., p. 24 29).
1 . 3 . 3 N o r t h S e a O i l
Another very important element of the economic development in Scotland
is North Sea oil. The discovery of the oil in 1969 was expected to have the
potential to restructure the Scottish economy. However Scottish companies
had only a share of 22% in the oil industry. North Sea oil could not transform
the structure of the Scottish economy, since an indigenous oil sector was
not established. Multinational companies were already established at the
time the oil was discovered off the Scottish coast and national companies
were not equipped to compete. The steel industry was not sufficiently able
to supply the industry with platforms, because it was unable to attain the
required production processes in time. The Scottish industry did not under-
stand the requirements of the oil and gas industry until the opportunity was
lost to foreign companies (Payne, P. L., p. 29 32). The government was
quick to grant licences to interested international companies to solve the
crisis in the public finance, which prevented Scottish companies from de-
13
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
veloping the required expertise (Devine, T. M., p. 597). Despite this general
trend some Scottish companies could establish themselves like the Wood
Group, Ramco, Rigblast plc or Ferguson Seacabs (Payne, P. L., p. 32). And
while the overall impact of North Sea oil on the Scottish manufacturing in-
dustry may have been insignificant, the impact on employment and house
prices in the north-east and the Shetlands is undeniable. By the 1990s the
Grampian region had become one of the most prosperous regions in Britain
and Aberdeen became the oil capital of Europe (Devine, T. M., p. 597).
Anyway a large number of firms established around Aberdeen, but the
structure was similar to that of the electronic sector and no indigenous
technology was built up, which could also have been exported. The reces-
sion between 1985 and 1987 led to a leaner structure but also hit the na-
tional companies hardest. By 1987 three dominant conglomerates
emerged, namely
Baker Hughes, Halli-
burton and Schlum-
berger which to-
gether controlled
most of the Scottish
oil industry (Payne, P.
L., p. 32 36).
Table 2:
Conclusively it can
be said that since
the 1960s Scottish
policy put the em-
phasis on the num-
ber of firms rather
than on the structure.
The structure of the Scottish economy by distribution of em-
ployment by sector - %
Employment Categories
1901
1990
Agriculture, Forestry and Fishing
12.0
1.5
Energy and Water Supply
6.8
3.1
Metals, Minerals and Chemicals
3.6
2.4
Metal Goods, Engineering, Vehicles
8.0
8.5
Other Manufacturing
21.7
10.3
Construction
7.4
6.0
Distribution, Hotel, Catering
7.7
19.4
Transport, Communication
7.7
5.8
Banking, Finance, Insurance, Business
Services, Leasing
0.9
9.0
Public Administration and other ser-
vices
17.0
34.1
Not Classified
7.3
-
Source: Payne, P.L., p. 14
14
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
1.4 Economic
Development
The classical factors of production, labour, land and capital are added
technological innovation which together produce economic output. Neo-
classical theory demands the government simply to provide a framework in
which the market forces can act freely in order to achieve an optimal allo-
cation of factors of production and wealth and economic progress.
According to Schumpeter, innovation is exercised by entrepreneurs, which
is the mainspring of economic and social progress. The extent of progress is
determined by the social climate in which the entrepreneurs are acting.
Though in fact an element of market failure, monopoly is needed in this
context to provide the background for the entrepreneur to take the neces-
sary risks. Thus economic development emanates from an innovator who
successfully brings together factors of production and is eventually copied
by a cluster of followers, who in turn break up the monopolistic structures.
As does Schumpeter's theory, most economic theories lack a spatial ele-
ment. Building upon Schumpeter's theory Perroux added the observation
that the entrepreneurs are concentrated in particular places, leading to a
domination of some places and to the dependence of others. While
Schumpeter thought monopolies to be a necessary part of development,
Perroux thought this to be true for spatial concentration, since resources are
not spread evenly throughout space. This considered, the classical assump-
tion of costless mobility of factors of production becomes doubtful (Higgins,
B., p. 39 41).
Going back to neoclassical theory of markets and the role of government,
the mentioned framework contains the government functions of stabilisa-
tion, allocation and distribution. The stabilisation function refers to the gov-
ernment's macroeconomic role. An optimal allocation of resources is only
given when individuals are fully informed about choices, there is no mo-
nopoly power, property rights are defined and factors of production are
perfectly mobile. Since the market fails to meet these conditions, govern-
ment is required to improve the allocation process. Specific goods and in-
15
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
come are unlikely to be distributed in a desired way by market forces, thus
the government is required to take redistributive measures (Newlands, D.,
1999, p. 11/12). This is especially the case when the private costs and bene-
fits of using resources do not corresponded to the social costs and benefits.
Therefore the provision of public goods, characterised by non-rivalness,
non-excludability and non-rejectability is a government requirement. How-
ever there are only few pure public goods such as defence or the mone-
tary system, since spatial aspects like jurisdictional partitioning, tapering
and externalities abate the characteristics of pure public goods (Pinch, S.).
Apart from being site specific, externalities like pollution are social costs
which have to be regulated by public intervention. On the other hand
there are external benefits like parks, schools or research and develop-
ment. Swales argues that if R&D is left to the free market, only a sub-optimal
expenditure can be expected and thus calls for public intervention, which
here can be defined as a positive externality (Swales, J. K., 1983b, p. 189).
Newlands even claims that government should, in addition to the three
neoclassic functions already mentioned above, hold a growths function to
increase the dynamic efficiency of the economy (Newlands, D., 1999, p.
12). Additionally private costs may differ from social costs in terms of oppor-
tunity costs. This is the case when the costs for putting an unemployed la-
bour force into work, in terms of lost profit, is lower to the society than to the
potential employer. This means that labour has to be subsidised to benefit
the employer (Swales, J. K., 1983b p. 189).
Summoning up these few thoughts, market failure, arising from risk aversion,
imperfect information and the existence of externalities provides a ration-
ale for state intervention. Economic development policies can be seen as
a public good incorporating a dynamic element and occupy distinct
ground between macroeconomic policy and service provision (Newlands,
D., 1999, p. 11 - 14). Conclusively economic policy describes all principles
and measures taken by public bodies concerning the spatial structure of
the economy within a country (Sedlacek, P., p. 93).
16
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
1 . 4 . 1 H i s t o r y o f e c o n o m i c p o l i c y
An interventionist policy has to be justified, because the ideal of self
regulating market forces is deeply imbedded in the western society. This is
surprising since an economy left to its own has only been realised for a short
period of time, if at all, in the economic history. Between the 16
th
and 18
th
century in Europe, mercantilism established a culture of various govern-
ment interventions, since the paramount aim was to achieve a positive
balance of trade. In the early times of industrialisation on the continent, in-
novations were often imposed on the entrepreneur by the government
rather than self-induced. The 19
th
century saw a liberalistic period, which in
turn led to monopolistic structures, exploitation and deficient urban struc-
tures. As a consequence of these developments communism and socialism
emerged. In the post-war period governments emerged which provided a
legal framework for the economy, supervised the economy, dealt with so-
cial problems and influenced the spatial structure of the economy (Sed-
lacek, P., p. 95 97).
In the more recent past there has been a considerable degree of change
in terms of regional policy in Europe. The spatial policies which aimed at the
redistribution of economic activity within a national economy from pros-
perous to more disadvantaged areas have been replaced by suprana-
tional programmes which are not further considered in the context of this
thesis as well as local initiatives promoting economic development 'from
below'. Regional development agencies (RDAs) have been part of the re-
gional policy in a number of countries in Europe since the 1950s (Danson,
M., Halkier, H., Damborg, C., p. 14). According to Yuill and Allan an RDA is a
'publicly-financed institution outside the mainstream of central and local
government administration' designed to promote economic development
'in regions that are generally designated as problem or priority areas'
(quoted in Danson, M., Halkier, H., Damborg, C., p. 17). This however may
be too narrow, since many agencies have, in addition to the economic
function, responsibilities for environmental and social developments (Dan-
17
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
son, M., Lloyd, M.G., Newlands, D., 1992a, p. 297). Also is it questionable if
an area covered by an RDA has necessarily to be a problem or priority
area. Thus Danson, Halkier and Damborg employ a more restrictive and
plain definition: An RDA is 'a regionally based, publicly financed institution
outside the mainstream of central and local government administration
designed to promote economic development' (Danson, M., Halkier, H.,
Damborg, C., p. 17).
The development tools of traditional regional policies and the RDAs are
very different indeed. While national-level policies are obviously employed
by central government, RDAs are established at the regional level. This is
intended to have the advantages of tailor-made strategies for specific ar-
eas and a more business-like approach outside the bureaucracy. Further-
more RDAs, as semi-autonomous bodies, are not the target of direct politi-
cal interference and are supposed to act beyond the short term horizon of
party political manoeuvring. This is often described as an arms-lengths de-
gree of operational freedom (Danson, M., Halkier, H., Damborg, C., p.18).
The following table highlights the differences between national-level re-
gional policies and RDAs.
Table 3: Differences between national-level regional policies and RDAs
Characteristics
Traditional top-down
New-model bottom-up
Organisation
National
Government department
Bureaucracy
Generalist qualification
Regional
Semi-autonomous body
Business-like
Specific expertise
Operational freedom
Limited
Arm's length
Economic Objectives
Interregional equality
Growth of national economy
Redistributed growth
Interregional competitiveness
Growth of regional economy
Indigenous/imported growth
Mode of operation
Non-selective
Automatic/discretionary
Reactive
Selective
Discretionary
Proactive
Policy instruments
Bureaucratic regulation
Financial inducements
Advisory services
Public provision
Financial inducements
Advisory services
Public provision
Source: Danson, M., Halkier, H., Damborg, C., p.19
In the following the development of economic development policies in
Scotland is presented briefly.
18
E c o n o m i c D e v e l o p m e n t i n S c o t l a n d
C h a n g e s a n d P r o s p e c t s f o r t h e E c o n o m i c C o r e R e g i o n E d i n b u r g h
1 . 4 . 1 . 1 R e g i o n a l S e l e c t i v e A s s i s t a n c e
In 1934 on the background of the Special Areas Act, some areas of Great
Britain were designated for government promotion as Special Areas. These
areas have been chosen because of their high unemployment numbers.
Scotland was assigned a Special Area in west-mid Scotland around Glas-
gow. The British government allowed advantageous credits for start-ups
within this area and promoted the location of enterprises within trading- or
industrial estates. The Distribution and Industry Act (1945) led to the renam-
ing of the areas into Development Areas which in Scotland now included
additionally the areas around Inverness and Dundee. The Town and Coun-
try Planning Act (1947) introduced the Industrial Development Certificate
(IDC), which had to be awarded by the ministry for all industrial develop-
ments of more than 465 m
2
. This was intended to decentralise the eco-
nomic agglomeration in south-east England, but failed to benefit the pe-
ripheral regions of the north rather than the neighbouring regions in the
south. In 1960 the Development Areas were abolished in favour of Devel-
opment Districts. These were again based on unemployment numbers and
their location was often changed and extended in the following years. At
some point almost half of Scotland's area was covered. The success of a
relocation of jobs decreased with distance to the southern agglomeration
areas. This means that Scotland did not gain significant numbers of jobs.
Though unemployment remained highest in the development areas, the
areas which were renamed Development Areas again in the late 1970s
expanded ever further and were subdivided into Special Development Ar-
eas, Development Areas and Intermediate Areas. The Thatcher govern-
ment introduced considerable changes to the system in 1979. This was
foremost characterised through a major financial cutback in public ser-
vices and thus in the promotion of economic development leading to a
substantial downsizing of the development areas. In 1984 the development
areas where once again renamed Assisted Areas and subdivided into De-
velopment Areas and Intermediate Areas. The regional promotion of the
economy has been reduced recently in financial terms. Parallel to that de-
19
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