Edinburgh's concentration of financial services companies means that it will be one of the first cities after London to feel the chill of the credit crunch, according to a new survey by accountancy firm UHY Hacker Young.
Fifty British cities were ranked according to dependence on financial services and construction, the sectors most affected by the credit crunch. In Edinburgh, this comprises 35% of its working population - only Norwich has more exposure among cities in the survey.
In June of this year the accountancy firm identified Edinburgh as "the UK’s strongest economy" with a Gross Value Added (GVA) - a measure of the value of the goods and services that an area contributes to GDP - of £28,432
per resident per year.
The firm noted that Edinburgh's strengths as the second largest financial centre in the UK after London lay in its established and
fast growing banking and insurance sectors and Edinburgh's status as the
capital of Scotland had boosted the public sector, particularly the legal profession.
It also said that the city had benefited from the business embassy effect where companies duplicate headquarter functions from London to Edinburgh in order to get closer to their Scottish clientele.
However, in recent months the turmoil in the markets has sent an earthquake through the financial sector. A wave of job cuts are expected when Lloyds TSB takes over distressed banking giant HBOS - likely to be approved by HBOS shareholders on 12 December - to create a UK megabank.
The new chief executive of the Royal Bank of Scotland, Stephen Hester, is expected to make a swathe of job cuts across the workforce although he has assured that the head office will remain in Scotland. The UK government was recently forced to bail out the cash-strapped company, taking ownership of 58% of it.