Small businesses feeling the pinch in credit crunch blitz

A new city council report today highlights the fact that 53,000 jobs in Edinburgh are reliant on the financial sector – in addition to the 31,000 people directly employed by the Capital's financial heavyweights.

The report, compiled by the city's economic development department, also warns that Edinburgh must reduce its reliance on bank business if it is to survive the crunch.

One person who knows only too well the value of the bank worker's pound is Tony Flynn, owner of Scooby's sandwich bar on Morrison Street.

He says nearly all of his trade comes from HBoS, Scottish Widows or Standard Life employees and that uncertainty about jobs in the banking industry in Edinburgh has prompted concerns about his own future.

He said: "I get a lot of customers from Lloyds TSB who work at Scottish Widows and I do overhear their conversations – they are all very worried about their jobs.

"I do think about it. At the moment I haven't seen any downturn in average spend or footfall but all the threatened job losses will happen in the new year so we'll have to see what next year brings."

At the other end of the scale, Andrew Murphy, managing director of John Lewis in Edinburgh, is not immune to the financial slowdown.

"Common sense tells us that the current situation cannot continue without some knock-on.

"My concerns are about the period from February onwards. We will see a knock-on from huge organisations like HBoS to all of us. I think every trader in Edinburgh will be affected."

Today's report also details for the first time the job losses which the council says can be linked to the credit crunch so far in Edinburgh.

At least 75 jobs have gone in property solicitors in the city as the housing market slows, with another 30 job losses at Cala Homes and 73 across the central belt at Stewart Milne.

The report says job losses have so far occurred in "small numbers" in the city but warns the effect of the proposed HBoS takeover by Lloyds TSB is still "unclear".

It also highlights the potential loss of the bank's global headquarters as having "significant negative repercussions" on the reputation of the city.

Edinburgh City Council economic development leader Tom Buchanan – who yesterday said emergency plans were being put in place to deal with mass job losses – said the city had to diversify and reduce its dependency on finance jobs.

"The first thing we're doing is establishing the scale of the problem," he said. "We have to look after the well-being of the city.

"We will talk to people like the Chamber of Commerce to understand where there are growth opportunities.

"Yesterday, I was on the QE2 and met the captain who said we should have a cruise liner terminal in Edinburgh. That's an example – there could be jobs for people picking up passengers and taking them to golf courses, and there's also catering and the service industry that would benefit."

He added: "Clearly these are challenging times for everyone, but Edinburgh has built up key strengths and qualities that should help the city going forward.

"A dedicated group is working on a specific action plan to guide the council and city through any difficult times."

The "current status of the financial sector" report will be considered by councillors next week.

It reveals that city leaders have already approached management at HBoS and Lloyds with a view to opening a "day to day" communication channel as the deal unfolds.

The report's author, Dave Anderson, of the council's city development department, said the Capital's economy had so far "stood up well" compared with other UK cities.

But he warned: "As Edinburgh is more reliant than many of its competitors on financial services, structural change to financial institutions will affect the city more than others and may put Edinburgh at a disadvantage.

"For future sustained economic growth, Edinburgh needs to develop a more diverse economic structure.

"This will ensure an economy that is robust enough to accommodate short-term economic shocks and long-term changing economic trends."

Edinburgh Chamber of Commerce deputy chief executive Graham Birse agreed diversification would be the key to staying afloat. But he added: "Predicting the future is difficult for everyone. What is certain is that there will be an impact on the economy and we will feel that in Edinburgh.

"There will be a period of caution and that may well get difficult. Our advice would be to stay active, ensure costs don't exceed revenues and stay connected with suppliers and customers. Going into a recession doesn't mean the end of the world, but it does mean things are going to get hard."

NUMBERS GAME

Around 31,000 people – just over ten per cent of Edinburgh's workforce – are employed directly in the financial services sector.

• Seven of the city's top 25 employers are finance companies.

• A further 53,000 people, or 17 per cent, of the city's workforce are employed in other business services in some way linked to the financial sector.