Local heroes
29 Jun 09
Despite the downturn, the Highlands and Islands has a knack of overcoming adversity, writes Richard Goslan
by Richard Goslan
In a global economy, there’s nowhere to hide from the effects of the economic turbulence of the past year, and most of the Highlands and Islands (H&I) region is no exception.
It’s a large and diverse area, stretching for about 400 miles from Shetland in the north, to Campbeltown at the southern tip of Argyll, and encompassing some 5,500 miles of coastline. The 15,000 square miles which the H&I area includes has a population of just 400,000, making it one of the most sparsely populated parts of the European Union.
Historically beset by problems of out-migration, unemployment and low levels of pay, developments in communications and infrastructure have improved the area’s quality of life and its attractiveness as a business base.
Traditional industries of agriculture, fishing and forestry continue to play a key role in the area’s economy. But now, the region is attracting new initiatives in key technology industries such as medical products and pharmaceuticals, alongside oil and gas-related services and a range of SMEs and micro-enterprises.
The public sector accounts for more than half of the jobs in the H&I, with Inverness in particular benefiting from the concentration of government bodies located there.
But with the Internet revolution, the H&I is now both better connected with, and subsequently more reliant on, market forces beyond its control.
“Broadband is a new level playing field which all businesses need to have,” says Alastair Nicolson, head of strategic planning and research with Highlands and Islands Enterprise (HIE), the area’s economic development agency.
“But the decline in global demand has certainly affected the economy here as a whole.
“It’s the businesses which are most in touch with and aware of their markets, which have the best management information at their fingertips, that are best able to perform well and compete in the current climate.”
The Highlands and Islands also has a history of finding ways to overcome adversity, a mentality which has fostered an independent nature, according to Chris Kerr, corporate partner at Harper Macleod’s legal practice in Inverness.
“The people of the H&I have been forced, if they want to stay in this area, to be quite entrepreneurial in their approach,” he says. “They have also been good at just getting on with their work, and to some extent hiding their light under a bushel, perhaps not shouting about their success stories in the same way as might happen in the central belt.”
Now companies such as Orion Engineering, headed by former Ernst & Young Entrepreneur of the Year Alan Savage, use Inverness as a base for their global operations. John MacLean and Sons, which supplies electrical components to the oil industry, has kept its base in Dingwall while expanding in the UK and overseas.
“What we’ve seen in the past five years is that there is a growing number of world class Highland businesses which have been expanding into England, and globally,” says Peter Mearns, managing partner in Ernst & Young’s Inverness office. “But they don’t see having a head office here as a downside. To me that shows the growing confidence in this area.”
In such a diverse region, the economic conditions also vary dramatically depending on where you are. The Shetland Islands, for example, has remained more sheltered than most areas from the downturn.
“We’ve got our own little micro-economy here in Shetland, so we feel fairly protected at the moment,” says Irene Hambleton, managing partner of Baker Tilly’s office in Lerwick.
“A lot of Shetland’s economy is food related, with fishing and fish farming, so although they have their own problems, they’ve not necessarily been affected by the credit crunch issues, because people still have to eat.
“And the local authority, through the investments made when the oil industry came up to Shetland, have had money to pump into the economy through capital projects, which has kept a lot of businesses busy.”
Elsewhere, the key challenges facing businesses across the region are the same as anywhere else in the country right now, according to Iain Fraser, an insolvency practitioner who is managing director for Tenon’s offices in both Inverness and Aberdeen.
“Companies need to manage their cash flow and ensure that they’ve got their cost base trimmed as far as possible to make sure they can ride through the current economic conditions,” he says.
John Yeoman, managing partner of Ritsons, says his firm is spending more time now advising clients on cash flow and helping them in their dealings with banks.
“We have to make sure that the banks provide companies with the necessary finance to allow them to expand, at a price they can afford, without horrendous things such as huge arrangement fees and non-utilisation fees,” he says.
But Mike Evans, who runs the AA Mackenzie practice in Dingwall and is chair of the Highlands and Islands area committee for ICAS, predicts that the squeeze on businesses is also going to hurt CA firms in the region.
“It’s a case of too many accountants and not enough business, exacerbated now by the economy,” he says.
“Our client base is very much a micro business in the Highlands, and they are looking for as low a price as possible. So the challenge is providing a quality service at the price that is demanded of us.
“I see it being a very, very tough fight to probably win clients from other accountants and they’re trying to win clients from us. There’s no new blood, really – we’re all trying to bite each others’ hands off.”