Grant rules broken to Kindle new jobs for Edinburgh

Good news Edinburghers!  Amazon is locating a contact centre in the heart of the city centre in the under-used old GPO building on Waverley Place.  So now when your books or CDs go missing or your Kindle breaks down you’ll be able to doorstep them instead of hang about for hours trying to get someone on the phone.

The announcement of 900 new jobs – 500 permanent, 400 temporary over 5 years – is a welcome investment, and of course our First Minister was on hand to issue the glad tidings.  But the burd would have been much more impressed if the jobs had gone to one of Scotland’s unemployment black spots, for Edinburgh has very little need of such artificially engineered inward investment.

It may even struggle to fill the jobs, as anyone running a BPO (business processing operation) or service sector business could testify.  Yes, Edinburgh has a “high quality workforce” but it is actually, largely, gainfully employed elsewhere and it’s unclear if unemployed graduates will be keen to sign up as customer contact operators, instead of as teachers, lawyers and journalists.

Last October, the unemployment claimant count for Edinburgh local authority area was 4.2%, well below the national average of 5.1%.  Yet in West Dunbartonshire, recently claiming the ignominy of worst unemployment black spot in the UK, the rate is double that, at 8.4%.  Apparently, one of the reasons for the location in Edinburgh is because of the proximity to the new warehouse facilities in Fife.  Fair enough.  But couldn’t these contact centre jobs have gone to somewhere like Clackmannanshire which has an unemployment claimant count of 7.5% and is just as close to the Fife warehouse?  Here’s a thought: the jobs could even have been located in Fife itself where unemployment is 5.7%.

Amazon also cited the financial support being given by Scottish Enterprise as a reason for locating the project in Edinburgh.  A grant of £1.8 million has been awarded to help train new staff, among other things:  that’s a nifty £2k per employee.  Nice.  But it is unclear how or why the company qualified for Regional Selective Assistance (RSA), the most likely type of grant to be awarded.*

Rules on awards of RSA are supposedly made according to a set of criteria and ALL these criteria must be met to qualify.  Moreover, companies must be able to demonstrate that “your project needs RSA to proceed as planned.  RSA will not be offered… if we (Scottish Enterprise) believe the project will proceed anyway”.  Given the reasons for choosing Edinburgh, surely the project might have gone ahead without RSA?

No matter, it would seem that the first essential criterion for investment, that it take place in Scotland within an assisted area, is not being met.  The rules are quite labyrinthine so bear with me.  For the purposes of RSA, Scotland is split into three tiers:  Edinburgh is located within a Tier 3 area and according to Scottish Enterprise, only small and medium-sized enterprises (SMEs) can qualify for RSA in a tier 3 area.

Now I’m not the brightest burd in the eyrie and appreciate that sometimes what constitutes a small, medium and large business will be subject to varying degrees of definition and shades of grey.  But in no way could Amazon, with an estimated net global worth of $78.09 billion, be considered anything other than large.

So, on the first essential criterion, Amazon fails and should not have been entertained for Regional Selective Assistance, which incidentally is funded by taxpayers.

Does it matter that rules appear to have been broken by the payment of this investment grant?  According to Scottish Enterprise, no:  not when “it sends a message to the rest of the world that Scotland is a world-class business destination”.  I’m sure the goodly, unemployed folk of West Dunbartonshire and Clackmannanshire and hard-pressed taxpayers all over the country would agree.

*Other types of grant awarded by Scottish Enterprise are Innovation and R&D grants;  loans and innovative co-investment activity by the Scottish Investment Bank;  sector funding (for a specific range of sectors of which BPO is not one);  and other funding which is business gateway, business transformation etc.  RSA comes under the heading “grants for investment projects” which this seems most likely to be.

16 thoughts on “Grant rules broken to Kindle new jobs for Edinburgh

  1. Can I make a humble suggestion that the issues got conjoined with securing occupants for a central property that had undergone significant renovation and upgrade, only to lie empty for years! So I suspect there were a number of forces at work. Including the highly unnecessary (for a large organisation like Amazon) financial incentive of £1.8mil. My fear is that this siting of a key function of their business is not wholly compatible with realistic management of that business and will therefore have a short-term value before (unintended) consequences require them to relocate … to an industrial estate in Fife, Clacks, Dumbartonshire… or heaven forbid, elsewhere overseas!

  2. Excellent point Burd.

    These are things I was not aware of and it would seem Amazon should not have received their subsidies from the public purse.

    A couple of things I would say. I think the Edinburgh jobs market may be about to be under significant pressure. the life and pensions industry is under extreme pressure and is downsizing significantly.

    AEGON are cutting 25% of their jobs right now and I think Scottish Widows may do something similar soon.

    Standard Life has recently announced redundancies and may do more in the future.

    The banks – RBS and HBOS are under huge transformation programmes which will reduce jobs (not all in Edinburgh).

    Where this will leave employment numbers two years down the line I don’t know but the pressure is working through the system.

    Teh second point is they are a commercial company and can and will locate where they feel they need to. Rightly or wrongly they may think east central Scotland is good for a contact centre and, as you say, it is close to the warehouse in Fife. And the comercial interest will tend to gravitate to the most appropriate and sustainable location for the business.

    The point about getting big contracts in Scotland sends a very positive message for Scotland as a whole is a good one – and we have to play to our strengths in attracting inward investment.

    Of course none of this explains why they have so many grants and doesn’t explore whether they could have been persuaded to consider somewhere else which would have helped the jobs situation even more.

    Gavin

  3. I just wanted to clarify that the grant awarded to Amazon for this project was not RSA but in fact a Training Plus grant, which is also available to companies investing in Scotland.

    We do, of course, continue to work with a whole range of companies across Scotland to help them create new jobs and employment opportunities. This includes inward investors like Amazon, but it also includes Scottish businesses which have real potential to grow.

    Financial assistance, through grants such as RSA, Training Plus and R&D grants, is just one of the ways we do that.

    • Thanks for that Neil. I didn’t see that type of grant listed on your website? Also, how does that type of grant apply to the capital side of the project, which your media release indicated was also being supported. This also doesn’t seem to square with the reasons cited by Amazon and the First Minister for the location in Edinburgh, that it was partially down to the high quality, highly skilled workforce or have I picked this up wrongly?

      • I’ve got two degrees, so I’m pretty highly skilled, and certainly a high quality worker. However, if I decided to go and work for Amazon, I would still need to be trained up in how to do the job.

      • At a cost of £2000? Hmmm. I would have thought a morning’s induction on contact centre procedure might cover it. And you’re missing the point. Deliberately!

  4. 900 jobs. Great news

    • Indeed, talk about peeing on someone’s chips. Surely the important thing is that Amazon have yet again chosen Scotland to place its not-insignificant business?

      As to why they’ve chosen Edinburgh, well, there could be all sorts of reasons. They’re moving into an existing building, so perhaps they just couldn’t find anything existing that would fit their needs in West Dunbartonshire or Clackmannanshire? Maybe they just like the idea of Edinburgh being their base? Or maybe it’s something as fickle as preferring their staff to have East coast accents instead of West coast accents?

      Who knows? We also don’t know that the government didn’t try its hardest to get them to locate in one of the unemployment blackspots. Maybe Amazon said “sorry, it’s Edinburgh or bust” and they decided 900 jobs in Edinburgh was better than 0 jobs anywhere?

      I think it’s just nice to see 900 jobs in Scotland, and from a well-known company too, rather than just creating 900 public sector jobs or having a supermarket claim to be adding 900 jobs which are really at the expense of other local jobs.

      Let’s be positive!!!

      • And if they had said “Sorry, its Edinburgh or bust”, then they would have proven that they didnt need the grant… which could have been used to attract jobs to those other areas such as West Dunbarton, or Fife, or even Dundee/Angus.

        It makes me wonder if the first question asked wasnt “Are you going to locate there anyway?” but “Is there a chance of a photo-opportunity for the First Minister?”

      • Oh the jobs are welcome though I have some unease at us styling ourselves as world leaders in BPO. We do have high quality skills to offer the world so why limit them to contact centre type jobs. The point is that investment grant rules are there for a purpose – allowing them to be broken to suit is unhelpful. If Amazon had set its heart on locating in the heart of Edinburgh, then fine but not with wrongly applied taxpayers’ money to help them.

    • Oh yeah, let’s all celebrate at the provision of 900 more jobs in a low skill set sector like BPO and use scarce public money to make them happen. Sorry but my ambition for Scotland is higher than this. I would have thought yours would have been too.

  5. I knew there was something odd about the Government grant that this project got – thanks for digging out this detail.

    You’re right, Amazon shouldnt have got this grant, unless they were locating in an unemployment blackspot. Youth unemployment is particularly bad in some parts of west Scotland, and Dundee/Angus is also badly hit. Why arnt we getting these jobs?

  6. As always, I am enlightened. Living in another economic blackspot I would have been thrilled to see this elsewhere. If economic regeneration is key, that has to move out of the cities. Time to be radical and show we CAN do it, wherever we are based. And if we can’t (because of infrastructure) then time for change there too!

  7. You can delete the “Trust me” bit – not sure what I was going to say!

  8. These are preciesly not the sort of jobs we should be using RSA & Scottish Enterprise funds for. If we’re going to survive, let alone thrive, in an increasingly interconnected and competitive world foot loose service sector jobs for foreign companies leave us vulnerable to competition from other countries with higher graduate wage differentials are emphatically not the answer.

    What Scotland does need is a thriving start up cullture, one which encourages companies that don’t want to move operations on a whim, who pay corporation tax here and who bring all the external benefits of a vibrant private sector.

    The obsession the Scottish Government has with large scale graduate sweatshops providing essentially menial service sector jobs for foreign companies will, in the long run, leave us extremely exposed.

  9. Ah – a “home” question.

    The Training money will probably be under National Programmes that are subject to pre-negotiated block exemptions under EU State Aid Rules.

    RSA is the same only it has a geographic dimension at a sub-national level and in theory covers the most needy 25% (from memory) of the population. The drawing of the map is an interesting process but that’s for another day.

    By the way, has the GPO Building been empty until now? That was redeveloped ages ago.

    Trust me,

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