Financial turmoil: 'The crisis will reach into every aspect of city life'

Evening News comment
AFTER another tumultuous week on world markets and the British Government's £500 billion banks bail-out, it was hoped there would be some sign of a return to something we might recognise as normal. How quickly that proved to be very wishful thinking and the reality is sinking in that it could be months yet before the full effects of the global emergency measures are felt, if they are to be felt at all before it's too late.

Iceland might be all but bankrupt now but Edinburgh too remains on the edge of a precipice. The effect on the City of London and Wall Street has been cataclysmic, but as world financial centres they will rise again as they did after the Great Crash of 1929 and the Second World War. Edinburgh's position is much more precarious and with the virtual nationalisation of the big two banks, the city's place as Europe's fourth financial centre is very much in danger.

For HBoS and RBS, the big decisions will now be taken in London and more shattering day for Edinburgh's confidence is hard to imagine.

Scotland has seen bad times before, with the collapse of the mining, shipbuilding and steel industries and more locally the closure of Motorola at Livingston and Leyland at Bathgate. But while Edinburgh gradually lost its manufacturing base, the traditional strength of financial and legal services insulated it against previous crises. This time it is different and the effect will reach out into every aspect of city life.

Those who work in financial services aside – 30,000 people in the top six firms – the sector supports an additional 50,000 jobs in external services. Job losses in the big financial firms are inevitable and, as sure as day follows night, employment opportunities in businesses that serve them will also go.

Several weeks ago, when the first signs of this crisis began to emerge, the Evening News called for the city to accelerate the process of diversifying the city economy. Now the banking collapse has been far greater and quicker that anyone could have imagined, the danger of having so many eggs in the one basket is plain to see.

But all is not doom and gloom quite yet. While HBoS and RBS have both continued to take a hammering and are both heading towards being 50 per cent publicly owned, the insurance sector has so far escaped the worst and the banks would eye Standard Life's ten per cent drop in share value on Friday with envy.

Council economic leader Tom Buchanan is bravely talking up the city when he writes in the Evening News that he remains confident that Edinburgh can weather the storm and that within a few years this will all be forgotten. If only that were true.

Today will turn out to be one of the most momentous in Edinburgh;s history for 300 years, but for all the wrong reasons. In was inevitable that having held out the begging bowl that RBS chief Sir Fred Goodwin would have to go. It's no surprise that Andy Hornby at HBoS wasn't far behind.