Capital's economy 'well placed' to continue recovery

THE Capital's economy is in better shape than most other UK cities of a similar size and appears to be well placed to continue weathering the economic storm, experts said today.

The latest economic indicators paint a picture of a city that remains vibrant in key areas, despite suffering significant job losses and business failures during the recession.

A 16 per cent rise in the number of new businesses being launched and a surge in interest in commercial property - as well as signs that retail and tourism are holding up - are among the positive signs welcomed by business leaders and economists.

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Other key indicators, such as unemployment and developments plans, however, showed slight turns for the worse.

As the city watches eagerly for "green shoots" of recovery in the months ahead, the Evening News will be charting the changing fortunes of the Capital economy. Starting today, our Edinburgh Index will bring regular updates on what progress is being made, as well as keeping tabs on the expected rise in the cost of living.

Graham Birse, managing director of Edinburgh Chamber of Commerce, said the city is showing signs of recovery other cities have not seen, despite suffering significant job losses.

He said: "The economy depends on confidence and it is encouraging to see so many people have the confidence to start a business in the current climate.

"There have been significant job losses, but not as bad as people feared they would be, to date.

"We've seen new players come in, including Virgin and Tesco Bank, and a doubling in the take-up of commercial property, albeit from a low base, is also very positive."The crucial test will be the recovery of the construction industry, which lies at the heart of inward investment."

The property market has seen a slight dip and the expectation of a rise in interest rates means that trend is not likely to change in the coming months.

David Marshall, business analyst for the Edinburgh Solicitors Property Centre, said: "The latest inflation figures increase the likelihood of a rise in interest rates in the next few months and we expect prices to come down a bit further early in 2011 - the average is likely to come back down to around 200,000 - before levelling off in the second half of 2011."

In the longer term, the city looks well placed to benefit from emerging markets, according to Dr Simon Clark, head of economics at Edinburgh University.

"The advantage that Edinburgh has is that it has industries and occupations like biomedical sciences, financial services and education - with the universities - which are forward-looking," he said.

"Traditional manufacturing, shipbuilding, even electronics to a certain extent, have been hit and you can see how low-cost economies in other parts of the world have an advantage.

"The Edinburgh universities, for instance, are involved in carbon capture, which could really take off, the academic sector is a big asset and a big employer, but there is a certain amount of uncertainty about the future of university funding."

In retail, despite a poor start to December due to the severe weather, the number of shoppers on the streets rose sharply later in the month.

John Lewis Edinburgh's managing director, Barry Matheson, said that despite weather-related problems, the department store - often seen as a bellwether for retail - posted some record sales later in December.

Tom Buchanan, the city's economic development convener, cautiously welcomed the positive trend emerging from the key economic indicators.

He said: "I'm particularly pleased to see that Edinburgh is managing to cope better than our competitor cities. This is due to the fact that the underlying fundamentals to our economy are really quite strong. We've a well-educated workforce, people want to come and work here, and that makes things easier in difficult times.

"Unemployment will lag in the recession but we need to get a handle on where it's going and what the general trend is."

Confident for future

AMONG the entrepreneurs making Edinburgh a breeding ground for new business is Daley Conner who runs the Slinte Mhath bar in the West End.

The 30-year-old left his secure job as a risk analyst for the Royal Bank of Scotland after eight years to run the Melville Place pub.

At first he took on the previous establishment but, after four months of struggle, he took a huge decision. Closing the existing business, he ploughed his own savings into revamping it into a trendy bar which opened just before Christmas.

He said: "I decided I wanted a change and I had worked in the pub industry for years as a student. After handing in my notice - and my secure salary - it was kind of thrust upon me.

"We started running the existing bar in August but business was not good and I had to put my own money in to keep it afloat. We always planned to relaunch and closed in November.

"We reopened on December 17 and had a good few weeks of business. It is difficult opening in December for any business because after the trade from Christmas and New Year you've got January and that's the quietest month.

"It's been quiet for weeks now but we see light at the end of the tunnel. We're confident for the future."