Massive Scottish job losses on the cards

The expansion of Scotland's financial services sector has been one of the success stories over the last few years, but now it seems job losses facing the industry could drag down the wider local economy.

Job fears within banking in Scotland are growing, and an over-reliance on the financial services sector in the country means that at least 50,000 (but as many as 117,000) jobs across all industries could be lost north of the border, according to the latest report by the Fraser of Allander Institute at Strathclyde University.

"We take the view that the impact on banking and financial services will be bigger here than in the UK and that there will be a lingering effect in the long term," says the report.

The financial sector employs around 30,000 directly in Edinburgh (which amounts to one in 10 of all jobs), but indirectly supports a further 53,000. It also backs various developments in the capital, such as the overhaul of Princes Street.

Unsurprisingly, the finger has been pointed at the massive losses incurred by RBS and HBOS, even compared to other UK banks, and the report argues that the prudent reputation of Scottish bankers has largely been undermined.

The ongoing drama surrounding the likely takeover of HBOS has spurred Edinburgh City Council to raise concerns about its impact on employment and the economy as a whole.

Dave Anderson, the council's director of city development, says: "As Edinburgh has an abundance of major financial institutions, structural changes among these businesses are likely to have significant repercussions on the city and its economy."

Tavish Scott, Scotland's Liberal Democrat leader, a firm opponent of the Lloyds-HBOS deal, tells us: "The scale of the projected job losses is staggering. It should serve as a wake-up call to both the Scottish and UK government about the impact of the takeover."