Harsh times ahead for fragile economy: The recession is hitting once successful industries in the Highlands and Islands. James Cusick reports

THE HIGHLANDS and Islands of Scotland, the most remote regional economy in the European Community, is preparing for an economic crisis that threatens to undo much of the area's success story of the past 30 years.

The fragile economy serving a scattered population of 370,000 faces jobs losses in every sector. A decline in oil-related jobs, worry over agriculture and fish farming, the running down of the UK Atomic Energy Authority's Dounreay complex, the final withdrawal this year of the American base on the Cowal Peninsula, and question marks over the survival of a declining tourist industry, have led senior economic analysts to predict a bleak future for the Highlands and Islands.

The region's main government development agency, Highlands and Islands Enterprise, yesterday published its first annual report since taking over the role of the former development board.

Although a relatively rosy picture is painted of 2,700 created and retained jobs and 1,000 business projects assisted, Sir Robert Cowan, HIE's outgoing chairman, said 'tough tasks' were ahead.

In the 12 months to March this year, Highland unemployment jumped from just over 9 per cent to more than 11 per cent, which is above the Scottish average. These are set to jump this week when McDermott's, the oil platform construction yard at Ardersier, begins to lay off 1,300 of its workforce. The American-owned company is the largest private sector employer in the Highlands. The redundancies, which represent 2.5 per cent of the total Highland workforce, are likely to cause a further 4,000 related jobs to go and will, on latest estimates, cost the local economy pounds 30m.

Sandy Brady, HIE's director of strategic planning, has the job of monitoring the Highlands' economic performance. In discussion with the Independent his analysis, based on information from all the HIE's related enterprise companies, is in sharp contrast to the optimism of the HIE's formal report. 'McDermott's is merely the first casualty. The North Sea is maturing as an oil province and we are at the point of seeing the long-term decline of oil-related employment.'

Scotland's three major fabrication yards - McDermott's, Highland Fabricators at Nigg just north of Inverness, and RGC at Methil in Fife - are now competing for fewer orders. If, as expected, Highland Fabricators announces it too is substantially reducing its workforce, a decline may well turn into a virtual termination.

However, oil is not the only concern. Nearly 10 per cent of the Highlands' workforce, make their living from the land - worth about pounds 200m to the region.

With reforms to the EC Common Agricultural Policy about to come on stream, Mr Brady predicted: 'It is a now a question of holding what we've got, at best.' Reduced subsidies for many marginal farmers in the Highlands 'will mean many farms just disappearing completely'.

The HIE report states that crofting, the small-scale low-intensity farming that covers much of the west coast and Western Isles, is also at risk from the planned CAP reforms.

Fish farming, once heralded as an economic saviour, is also in decline. 'We have 6,000 jobs we didn't have 20 years ago, but over the next 10 years we'll do well to hold these,' Mr Brady said. Many fish farmers, competing against imported salmon from Norway, are now having to sell at prices below their production costs. The food company Unilever's recent pull-out from its Scottish aquaculture business did little to boost confidence.

About 25 per cent of the Highlands and Islands income centres on tourism. It is the region's most important industry - and it is in real trouble. The poor figures for last year, with the Gulf war and even 'lack of snow' offered as excuses, are certain to worsen in this and in coming years. According to a spokesman in the HIE 'the attitude in Scotland is still that tourism is servile, not service'.

The tourist industry in the Highlands last year turned over pounds 500m and employed 30,000. But with the Scottish summer meaning only a short season, training is not a priority and private sector investment is currently low.

'That will have to change. As remote areas especially become tourist-dependent, in 10 years' time it will be hard to identify any alternatives,' said Mr Brady.

Of all the casualties on the HIE's list - including the attempts to resurrect Dunoon after the US Navy base finally closed this year, resulting in the loss of an estimated 800 job losses and millions of pounds from the Cowal economy - the potential impact of the UKAEA's decision to leave its nuclear reactor project at Dounreay in Caithness is causing most concern.

McDermott's 1,300 job losses are matched by 1,500 to go at Dounreay. 'Take away Dounreay from Caithness and what are you left with? Not a great deal. It's difficult to conceive how you get 1,500 jobs back in a region as remote as this. The answer is you can't,' Mr Brady said.

Population decline, with the young leaving in droves, is not only predicted for Caithness, but also in the Western Isles. Although the effects of the local council's disastrous losses in the collapse of Bank of Credit and Commerce International are contributing to their problems, their present difficulties emerged well before the BCCI crisis.

'All the symptoms we had in the 1960s are now reasserting themselves, ' Mr Brady said. 'The 1991 census figures are showing loss of population, the young moving away. In fact if you identify all the Highlands and Islands problem areas - fish farming, crofting, agriculture, sea fishing, poorly developed tourism - the Western Isles have got them all.'

The Arnish oil construction yard on Lewis is 'doing well', a company spokesman said. But it is highly dependent on sub-contracted work from McDermott's and Highland Fabricators. If the big firms catch a cold, Arnish will catch pneumonia.

But just what the economic medicine for a cure is, not just in the Western Isles, but throughout the Highlands, is becoming increasingly unclear.

The problems that forced the government to set up the Highland and Islands Development Board 30 years ago 'are revisiting us now', Mr Brady said.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Recruitment Genius: Head of Content and PR

£35000 - £37000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Recruitment Genius: PHP Developer - Mid / Senior

£25000 - £40000 per annum: Recruitment Genius: This fast growing digital agenc...

Recruitment Genius: E-commerce Partnerships Manager

£50000 - £100000 per annum: Recruitment Genius: This is a newly-created partne...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor