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Aberdeen is Scotland's third largest city and is often cited as one of the most prosperous urban centres in the United Kingdom. Below you will find an overview of how the local economy has changed over the decades, together with a summary of the city's main industry sectors.


Aberdeen's traditional economic base

Right until the 1970s, Aberdeen's economy was reliant on the primary and secondary sectors, and particularly in industries related to manufacturing and agriculture. Activities like textile manufacturing, ship building, paper-making, quarrying, and fishing were the predominant sources of income in Aberdeen for more than 300 years, until large oil reserves were discovered in the North Sea during the late 1960s. This discovery thoroughly transformed Aberdeen's economy, putting the Scottish city in the global map as one of the most successful European oil capitals.


Aberdeen's economy today

Nowadays, Aberdeen is considered a highly competitive economy, having a GVA of nearly £18 million, which accounts for 15 per cent of Scotland's total gross value added. There are other economic indicators that highlight the healthy state of the local economy. For instance, Aberdeen has notoriously low unemployment rates (4.2 per cent), which are well below the national average. Private sector job creation has been steadily on the rise for the past five years, reaching 138,200 in 2015. Moreover, in 2014, high-growth SMEs accounted for 13.5 per cent of the total, sixth in the country.

The most recent Centre for Cities report ranks Aberdeen high in terms of business and innovation, with the city being the UK's sixth best location for business start-ups and among the country's top 15 with regards to the number of patents granted. In fact, since Aberdeen's economic indicators rarely follow national trends many analysts consider the city a unique economic micro-climate.

The importance of traditional sources of income has been declining since the 70s, and new industry sectors have become the key players in the local economy, as shown below.


Oil and Gas

For more than 40 years, Aberdeen has been major European hub for the oil and gas industry. It is estimated that in 2015 there were approximately 40,000 oil and gas jobs in and around the city. However, Aberdeen's reliance on the oil and gas industry has made the city's economy susceptible to fluctuations in oil prices. The most recent drop in oil prices (similar to the price slump that took place in the late 1990s) has had repercussions in other industries that were indirectly dependent on oil and gas, such as hospitality, catering, and retail.


Renewable energy

Aberdeen is home to a strong cluster of businesses involved in the renewable energy sector. The marine, hydro, solar, geothermal, biomass, and wind energy sub-sectors well represented in the local economy. These are expected to play a key role in meeting the Scottish government targets of fulfilling 100 per cent of the total electricity demand from renewable sources by 2020.


Knowledge-intensive industries

According to the Centre for Cities, more than 18 per cent of all Aberdeen businesses are involved in knowledge-intensive activities. The life sciences sector is particularly noteworthy, as Aberdeen is home to a leading research base and offers the country's second highest number of jobs in this sector. Also worth mentioning are sub-sectors like petrochemical and structural engineering, along with a burgeoning creative sector that accounts for 66 per cent of all creative jobs in Scotland.


Real Estate

The real estate sector has sustained notable growth thanks to increasing demand from businesses in need of prime office and industrial accommodation. Market analysts at GVA have recently reported that in 2015, 30 per cent of all real estate transactions in Scotland involving office properties took place in Aberdeen. Similarly, investment activities in the city accounted for more than 15 per cent of the Scottish total. Demand is strong for both city centre and out-of-town properties, and a number of business parks have been recently delivered or will undergo expansion in the near future. These include The Core, Energetica, D2, and ABZ.


Tourism

Aberdeen is an attractive destination that is particularly appealing to business visitors. For more than a decade, the city has welcomed high numbers of business visitors (up to 20 per cent of the total according to Visit Scotland), who typically choose the city due to its excellent range of meeting and conferencing facilities. Moreover, a 2014 survey revealed that Aberdeen ranks now in 11th place in the list of top UK cities for business tourism and related events.

Tourism in Aberdeen has also been boosted by an improvement in the city's transport links, in particular following the rise of international flights that now connect the Granite City with global business capitals like Paris, Geneva, and Frankfurt.