By Frank Simpson
Construction start-up on the £330m Aberdeen Exhibition and Conference Centre (AECC) mixed-use development near Dyce Airport is another milestone in the biggest-ever regeneration programme in the city.
Around £800m investment in transport infrastructure commitments include the Aberdeen Western Peripheral Route (AWPR); a recently opened new road bridge across the river Don; and planned upgrading of main roads in the city’s so-called Berryden Corridor.
The AWPR, already under construction, is a new, 36-mile road around the west of the city from south to north. Scheduled to open late 2017, it will significantly reduce travel times and decongest the city centre.
Recent news emphasises the continued appeal of Aberdeen and its region to business. Planning approval was granted for the Jack Nicklaus-designed Ury Estate golf development near Stonehaven. Ashfield Land and Kirkwood Homes jointly lodged a £150m application with Aberdeenshire Council for a mixed-use development at Blackdog, north of Aberdeen.
Fast-growing brewer BrewDog is expanding its headquarters in Ellon, Aberdeenshire, as part of a £25m investment including a sour beer facility and a distillation plant. Onshore construction starts this year for Statoil’s Hywind floating wind-farm pilot project off Peterhead, Aberdeenshire.
Hywind symbolises diversification of the region’s role in energy industries, dominated hitherto by offshore oil and gas. Energetica (energetica.uk.com), a world class business facilities, leisure and housing development initiative is being progressed by the public and private sectors along a 30-mile corridor from Aberdeen to Peterhead to strengthen the area’s position as a global energy hub. Oil and gas, carbon capture and storage, hydrogen fuelling, and onshore and offshore renewable energy are on its agenda.
Aberdeen City Council’s newly approved City Centre Masterplan includes tens of millions of pounds in environmental improvements, community initiatives and infrastructure proposals for the next 25 years.
In recent years, the private sector has committed more than £200m to flagship modern commercial space: Muse Developments and Aviva Investors’ joint development of the Marischal Square site; Titan Investors’ Silver Fin office block; and Knight Property Group’s Capitol Theatre office building. Work has begun on BAA-owned Aberdeen International Airport’s £20m modernisation of its terminal and facilities.
The new AECC is itself a mixed-use project being built by owner Aberdeen City Council’s development partner Henry Boot Developments, and is forecast to attract 600,000 visitors in year one. The city’s Art Gallery and Music Hall redevelopment equates to £40m investment. Local developer Carlton Rock has planning permission for a proposed £40m Hazlehead Country Club, which would add a 200-bed hotel, spa, swimming pool, conference facilities and equestrian centre to the area’s leisure and tourism assets.
The massive programme of regeneration will reaffirm Aberdeen’s position as Scotland’s “northern powerhouse” and help mitigate the effects of the North Sea oil and gas industry crisis, according to councillor Jenny Laing, leader of ACC. “We at Aberdeen City Council have sprung into action with an investment plan designed to propel us forward and out of the economic mire [of lower oil prices].”
Afflicted by lower oil prices, the oil and gas industry is in the trough of one of its periodic cycles. However, Aberdeen City Council and Aberdeenshire Council expect it to sustain jobs and investment for decades more. They are, meanwhile, supporting efforts to broaden the economic base further. A proposed Regional Economic Strategy up until 2035 has four key strands: investment in infrastructure, innovation, inclusive economic growth and internationalisation.
Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “There is capacity to exploit opportunities in renewables, biopharmaceuticals – Aberdeen has the UK’s second largest cluster in this sector outside of Cambridge – food and drink, and tourism.”
Proposals such as innovation hubs for food and drink and for biopharmaceuticals, supporting infrastructure for expanding Aberdeen harbour, and improvements to digital connections will support diversification, he said. “The strategy will also support continued oil and gas operations while positioning the region as a recognised global technology hub.”
The turbo-charger for infrastructure is £250m pledged by the UK and Scottish governments under the Aberdeen City Region Deal (‘the Deal’) to contribute to more than £900m worth of projects.
For example, the Oil and Gas Technology Centre being established in Aberdeen with funding support from the Deal, will bolster its status as a centre of excellence in offshore and subsea engineering and research.
£25m from the Deal is earmarked to improve road connections to the proposed £440m Aberdeen Harbour Expansion Project (AHEP) at Nigg Bay.
“The benefits of AHEP to our customers would be considerable,” explained Colin Parker, chief executive, Aberdeen Harbour Board. The proposal would add more quay, deep water berthage; a wide entrance and turning circle; a large laydown area, heavy-lift capabilities; and fully serviced berths.
Receiving vessels up to 300 metres long would anchor existing business streams such as support for North Sea oil and gas inspection, repair, maintenance and decommissioning.
“Aberdeen Harbour could also increase its support for a wide range of other markets, including greater grain and agricultural shipments, offshore renewables and, if required in future, larger Northern Isles ferries,” Parker added.
Attracting larger cruise ships would boost tourism in a region with attractions including Aberdeenshire’s castles, distilleries, and world-renowned golf courses.
It is estimated that the accumulative economic contribution made by an expanded harbour to the city and region would be approximately £2bn Gross Value Added by year 20, supporting just under 16,000 equivalent jobs, Parker noted.
While AHEP remains a feasibility study, the board submitted applications last December for harbour revision, marine license and planning permission in principle, with the latter already granted by Aberdeen City Council. The board has substantial reserves and has secured debt funding up to £200m from the European Investment Bank for AHEP.
“The preferred contractor will soon be identified,” Parker said. The business case will be finalised after the final tender price is established this summer. Parker anticipated that a final investment decision will be made in October and that, if the project does go ahead, construction will begin in spring 2017 with completion scheduled for 2020.
New Deal is beginning of change
The City Region Deal will not “fix everything”, said Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce. “The region has not been a priority for [government] investment. This relatively modest one will only catch up to where it should have been 10 years ago.
More will be required to address continued barriers to business growth.” Further support is needed for more affordable housing, future-proofing transport infrastructure, improving digital connectivity, and re-skilling people, he said. Oil and gas will remain vital, and maximising the opportunities requires further cuts in tax on operators, or incentives for exploratory drilling, he added.
He urged the UK government to confirm that it will not increase tax on operators should oil prices increase, and to focus efforts supporting supply chain internationalisation. That said, the local economy still “attracts jealous glances” from elsewhere, Borthwick said. “Strong foundations are in place to deliver the robust, diversified business economy we are targeting.”