Opportunity North East (ONE) is at the forefront of private sector action and investment to diversify the economy in Aberdeen and Aberdeenshire. In its annual review, it sets out the challenges and opportunities involved.
North east Scotland has had a long period of prosperity with North Sea oil and gas activities driving the economy. There has been a significant reduction in UKCS activity in the last 10 years. We now face the extraordinarily challenging Covid-19 pandemic, low oil and gas prices, the climate emergency threats and a national economic downturn, which is already severe in our oil and gas, tourism and hospitality sectors. Up to 9,000 UK oil and gas jobs have already gone and clearly the pressure is on to develop energy transition activities as fast as we can. In the meantime, we could face alarming levels of unemployment as the furlough support is phased out.
ONE was formed four years ago as a private sector led, not for profit economic development company to broaden our economy with less dependence on oil and gas. It has become a leading force in economic and business development in the region, at the forefront of private sector action and investment and an important co-funder of projects with regional and national partners.
ONE has a 10-year £62 million funding commitment from The Wood Foundation on which it has to achieve at least matched funding. ONE's approved project commitment to date of £18.6 million has secured public, private and philanthropic matched funding of £44.6 million over the past four years. With the focus on matched funding, we should have £10 million per annum to invest in the next six years. A huge plus is our focus on the region's major industry sectors – Food, Drink, Agriculture & Fishing; Life Sciences; Tourism; Digital & Entrepreneurship; and, of course, Energy.
Our regional economic development model is the most successful in Scotland with private sector engagement across multiple industry sectors. An additional strength is our partnership approach with the local authorities, universities, various oil and gas bodies and the wider private sector working to accelerate industry projects to support economic recovery.
ONE is an obvious strength in an extremely enterprising city region with a highly entrepreneurial business base plus in-depth technology, skills and know-how. Our boards bring together a wealth of industry expertise and experience, enabling us to develop and test projects quickly for potential impact. Our own small team combines sector knowledge and extensive development experience and can apply resources to accelerate project development and delivery. Our ability to co-fund is also important.
We have had the benefit of 50 years of high-tech oil and gas developments and the sector skills clearly lend themselves to diversification. We are a world leader in underwater engineering. We are undoubtedly internationally orientated with an oil and gas supply chain active in global markets, albeit challenged just now.
We also have economic strengths beyond energy with major shares of national food and drink production, enormous tourism potential, a dynamic life sciences cluster and exciting digital developments.
The BioHub and SeedPod projects led by ONE – with capital funding from the Scottish Government and UK Government via the Aberdeen City Region Deal and additional funding from ONE – are catalysing change in food and drink and life sciences businesses.
We have two fine universities, a strong North East of Scotland College, and nationally significant economic infrastructure. For example, the new Aberdeen South Harbour will be a major plus as we grow participation in Energy Transition.
In terms of quality of life, we fair well. We have beautiful countryside, an exciting coastline, an attractive city and region to help attract new businesses and people.
Now faced with some major challenges, our businesses are demonstrating resilience, adaptability and agility, and we need to harness these to redefine the region's key industries and build a more diverse and resilient economy.
North Sea oil, although struggling right now, still has a long way to go. To achieve net-zero by 2045, oil and gas needs to be contributing about 20% of our current production with the carbon being handled by CCUS. Domestic oil and gas will probably have largely depleted by 2070.
Energy Transition is a massive opportunity for the region. Offshore wind, hydrogen as a fuel and carbon capture and storage are highly relevant in the green recovery.
Aberdeen should become the principal UK east coast port for offshore wind – particularly floating – and we could also become a centre for green and blue hydrogen production. Carbon capture and storage has excellent potential with St Fergus on and offshore pipelines available for transporting the gas offshore. We also have huge saline aquifers capable of storing carbon underground, possibly for at least 200 years.
Our North Sea oil and gas expertise gives us a great starting advantage. With the gradual transition to net-zero, we can build a new non-depleting green energy economy that will contribute to climate change targets and provide employment for decades to come.
The pandemic has highlighted the importance of the health economy and its growth potential. Life sciences companies, clinicians, researchers and academics in the region are collaborating across multiple digital and drug development projects addressing COVID-19 challenges. They are also maintaining their long-term focus on new therapies for cancer and Alzheimer's disease and transforming clinical delivery through digital in areas including diagnostics and patient monitoring.
BioHub is building on our strengths in biologics and digital health. It will encourage more collaborative innovation, commercialisation, fast-track drug development and take advantage of new digital health opportunities.
SeedPod is a centre of excellence – regionally and nationally – for our food and drink sector. It will accelerate company growth and exports, drive new product development, provide global market and consumer insights, and use digital and advanced manufacturing technology to increase business efficiency and productivity.
Projects for the seafood sector, food supply chains and tourism are all driving ahead as part of regional economic recovery plans.
With the right funding, we can significantly expand seafood processing activity – our largest food and drink manufacturing sector – to take advantage of increased fish landings. Investing in capacity, automation, market and product development will support more value-adding activity and jobs locally and create a much larger, international Scottish fishing industry. We are working with industry, local and national government on that business case right now.
The application of agrifood tech – digital, automation and advanced manufacturing – will transform food supply chains, processing and manufacturing as part of the green recovery. The region accounts for more than 20 per cent of Scotland's sector output, so productivity gains regionally have a big impact.
We also have high-value natural capital to protect and develop – coast, mountains, countryside, with unsurpassed scenery and leisure opportunities. The north east adventure tourism project is building on the region's natural assets to make us a world-class destination for adventure sports – one of the industry's fastest-growing sectors and more relevant than ever as people re-evaluate their lifestyles and wellbeing post lockdown.
In digital, the opportunity is to accelerate tech company growth in the region and to increase digital adoption across all our key sectors. Digital is transforming healthcare, and we have specific expertise in the field that can be commercialised, particularly in relation to diagnostics and patient monitoring. Equally, the industrial digital opportunity to drive efficiency and productivity through digitisation, automation and advanced manufacturing exists across energy, food and drink, agriculture and fish processing and is a focus within each of the sectors.
ONE's submission to the Scottish Government's independent advisory group on economic recovery was clear:
We are encouraged that these recommendations were reflected in the group's final recommendations in July and in the Scottish Government's own response earlier this month.
The North East of Scotland has made a major contribution to the UK's energy requirements in the last 50 years. We now have the opportunity to lead in the development of the new energies and make a huge contribution to the environmental challenge by helping Scotland and the UK achieve their net-zero targets. Additionally, we should be aiming to develop this overseas.
Commenting on the outlook for the region, Sir Ian Wood KT GBE, Chair of ONE, said: "Building on north east Scotland's economic strengths will be critical to achieving a green recovery that supports jobs for the future across the region.
"Businesses have demonstrated resilience, adaptability and agility in this crisis, and government has acted quickly to support the economy. In recovery, we are harnessing that adaptability and agility to redefine the region's key industries and build a more diverse and resilient economy.
"Our partnership approach to turning growth opportunities into funded projects is the most successful in Scotland. We are now accelerating industry sector-specific projects to support economic recovery.
"The Aberdeen city region can deliver the national priorities by supporting jobs and skills for the future, building green infrastructure and tackling the climate emergency.
"Net-zero north east Scotland has the potential to drive the energy transition, creating a major non-depleting industry for the future and making a significant contribution to national environmental targets.
"Overall, we know our strengths and opportunities. We have projects to maximise these. Net-zero and digital remain the significant drivers of change. Our focus is on accelerating the pace of funding and delivery.
"It's not going to be easy, but the region can achieve future prosperity and opportunity for our people and communities with success lying entirely in our own hands."
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Opportunity North East Ltd
11 Queens Gardens