What If Edinburgh Developed Beyond Finance and Tourism?

The Actual History

Edinburgh, Scotland's capital city, has developed over the past century into an economy heavily dependent on two key sectors: financial services and tourism. This economic concentration represents a significant shift from the city's more diverse industrial past.

In the late 19th and early 20th centuries, Edinburgh maintained a more balanced economy with notable manufacturing sectors including brewing, printing, and engineering. The North British Rubber Company (later Hunter Boot Ltd) employed thousands at its Castle Mills factory until its eventual closure in the 1960s. Breweries like McEwan's and distilleries were major employers, alongside publishers and printers that supported Edinburgh's intellectual reputation.

The post-war period saw significant economic restructuring across the UK. While Glasgow suffered acutely from deindustrialization, Edinburgh's transition was more measured but still profound. Manufacturing declined steadily through the 1970s and 1980s, with brewing consolidation reducing local employment and many engineering firms closing or relocating.

A pivotal moment came in the 1980s with the Big Bang financial deregulation under Margaret Thatcher's government. Edinburgh, already home to insurance companies like Standard Life (founded 1825) and Scottish Widows (1815), seized the opportunity to reinforce its position as a financial center. The Financial Services Act 1986 accelerated this transformation. The city marketed itself as a cost-effective alternative to London with a highly educated workforce and quality of life advantages.

The 1990s saw further consolidation of this financial focus with the establishment of Edinburgh Park (1992) as a business district and developments like The Exchange. Scottish Financial Enterprise was established in 1986 to promote the sector, which grew to employ approximately 36,000 people directly in Edinburgh (about 11% of the workforce) by the 2020s.

Concurrent with financial sector growth, Edinburgh deliberately cultivated its tourism economy. The Edinburgh International Festival began in 1947, with the Fringe emerging alongside it. The economic potential of cultural tourism was formally recognized in policy through the 1980s and 1990s. The Edinburgh Festival Fringe grew to become the world's largest arts festival, attracting over 3 million visitors by 2019. The creation of the Scottish Parliament in 1999 further enhanced the city's profile and drew political tourism.

Between 2000 and 2020, visitor numbers to Edinburgh grew substantially, with approximately 4.9 million visitors annually by 2019, bringing in over £1.9 billion to the local economy and supporting around 33,000 jobs. Historic Scotland sites, Edinburgh Castle (the most-visited paid attraction in Scotland), and the Royal Mile became globally recognized tourism destinations.

While small technology startups began emerging in the 2010s (with companies like Skyscanner and FanDuel achieving notable success), they remained a relatively minor component of the overall economy. Despite the presence of four universities including the University of Edinburgh (founded 1583), the city never developed a robust technology ecosystem comparable to other European cities of similar size.

By 2025, despite periodic economic diversification initiatives, Edinburgh remains predominantly dependent on financial services and tourism. This concentration has created challenges including housing affordability issues due to short-term rentals, seasonality of employment, and economic vulnerability to external shocks (as demonstrated during the COVID-19 pandemic when tourism collapsed). The city continues to struggle with developing substantial alternative economic sectors despite its educated workforce and quality of life advantages.

The Point of Divergence

What if Edinburgh had successfully diversified its economy beyond financial services and tourism? In this alternate timeline, we explore a scenario where Edinburgh made different strategic economic choices in the late 1980s and early 1990s that positioned it as a major European technology manufacturing and innovation hub rather than becoming predominantly reliant on services.

The point of divergence centers on the period 1987-1992, a critical window when Scotland's "Silicon Glen" initiative was gaining momentum but ultimately failed to establish Edinburgh as a major technology center. In our timeline, Silicon Glen primarily benefited central Scotland between Glasgow and Edinburgh, focusing on electronics manufacturing with limited research and development components. Foreign companies established assembly operations but kept higher-value activities elsewhere.

In this alternate timeline, the divergence could have occurred through several plausible mechanisms:

Policy Divergence: The Scottish Development Agency (later Scottish Enterprise) could have implemented a more focused development strategy specifically targeting Edinburgh as a combined R&D and manufacturing hub rather than spreading investments across central Scotland. This might have involved specialized infrastructure investments and targeted incentives for companies to locate their full operations (not just assembly) in Edinburgh.

University-Industry Integration: The University of Edinburgh, already strong in computer science with the Department of Artificial Intelligence established in 1963, could have developed stronger commercialization pathways. A key moment was the university's decision-making around 1990 regarding research commercialization. In this alternate timeline, the university established more aggressive technology transfer policies and industrial partnerships a decade before such approaches became common elsewhere.

Infrastructure Investment: Local government decisions regarding land use and transportation infrastructure in the late 1980s might have prioritized technology parks with integrated manufacturing capabilities. Instead of developing Edinburgh Park primarily as a business services location, it could have been designed as a comprehensive technology campus with research, development, and production facilities.

Early Investment Success: A catalyzing success could have occurred if an early Edinburgh technology company had achieved major international success around 1990-1992, creating a demonstrator effect and attracting talent. Perhaps a company similar to Wolfson Microelectronics (founded 1984) could have grown more rapidly or attracted more investment, creating an anchor for a growing technology ecosystem.

The convergence of these factors—more focused economic development policy, stronger university commercialization, appropriate infrastructure development, and early successes—could have shifted Edinburgh's economic trajectory at a critical juncture when its path was not yet firmly set toward financial services and tourism dominance.

Immediate Aftermath

The Early Technology Ecosystem (1992-1999)

The immediate effects of Edinburgh's economic diversification strategy became visible within the first few years after the point of divergence. By 1992-1993, the integrated approach began showing tangible results:

Technology Park Development: The expanded vision for Edinburgh Park transformed what was initially planned as primarily an office park into a comprehensive technology development zone. Phase One opened in 1992 with not just office space but also flexible manufacturing facilities and research laboratories. Unlike our timeline, where the park primarily attracted financial and business services firms, in this alternate reality it became home to a mix of international technology companies and local startups.

Manufacturing Renaissance: Rather than allowing manufacturing to decline precipitously, Edinburgh preserved and modernized its manufacturing base through technological advancement. The North British Rubber Company's facilities, instead of closing entirely, underwent partial redevelopment into a modern materials science and manufacturing campus. By 1995, this area housed several advanced manufacturing operations focused on specialized electronics components, employing approximately 2,400 people.

University Commercialization: The University of Edinburgh's more aggressive technology transfer policies paid early dividends. Between 1993 and 1998, the university spun out 27 technology companies (compared to only 8 in our timeline), primarily in software, artificial intelligence applications, and biomedical technologies. A landmark moment occurred in 1996 when Edinsys, a university spin-out specializing in natural language processing, received £4.2 million in venture capital funding—at the time the largest such investment in a Scottish university startup.

Political and Policy Responses (1995-1999)

The emerging success of Edinburgh's technology sector influenced political decision-making across Scotland:

Devolution Context: The push for Scottish devolution took on additional dimensions in this timeline. Beyond constitutional concerns, proponents argued that local control would allow further tailoring of economic policy to support the growing technology sector. The 1997 devolution referendum passed with a slightly higher margin than in our timeline (75.6% vs. 74.3%), bolstered by enthusiasm for Scottish-led economic development.

Cross-Party Support: The technology diversification strategy enjoyed rare cross-party consensus. Conservative Scottish Secretary Michael Forsyth (1995-1997) championed the "Edinburgh Technology Corridor" initiative, which was subsequently embraced and expanded by the Labour government after 1997. This political continuity provided stability for long-term business planning.

Skills Pipeline Development: Recognizing that skilled workforce shortages could constrain growth, the Scottish Office initiated a comprehensive skills development program in 1996. Heriot-Watt University and Napier University (now Edinburgh Napier University) developed specialized degree programs in electronics engineering, software development, and technology management with direct industry input.

Financial Sector Adaptation (1994-2000)

Rather than dominating Edinburgh's economy, the financial sector evolved to complement the growing technology industry:

Specialized Financial Services: Edinburgh's financial institutions developed expertise in technology financing. By 1997, dedicated venture capital funds focusing on Scottish technology emerged, including the Edinburgh Technology Investment Fund (ETIF) with initial capital of £75 million. The Royal Bank of Scotland established a specialized technology banking division in 1998, recognizing the distinct needs of these companies.

Balanced Growth: Financial services continued to grow but as one sector among several rather than the dominant force. By 2000, financial services employed approximately 28,000 people in Edinburgh (compared to about 32,000 in our timeline), while the technology sector directly employed approximately 18,000 (versus fewer than 5,000 in our timeline).

Tourism Evolution (1995-2000)

The tourism sector evolved differently in response to Edinburgh's changing economic profile:

Business Tourism Boom: With international technology companies establishing operations in Edinburgh, business tourism increased significantly. The Edinburgh International Conference Centre, which opened in 1995, hosted 42% more business events by 1999 than in our timeline, many related to technology and innovation.

Cultural Tourism Diversification: While the Festival Fringe and traditional cultural attractions remained important, Edinburgh also developed technology-themed attractions. The "Scottish Innovation Museum" opened in 1998 in a repurposed historical building, showcasing Scotland's technological contributions from James Watt to contemporary innovations.

Infrastructure Balance: Hotel development and tourism infrastructure expanded more moderately than in our timeline. City planning prioritized balanced development that accommodated residents, businesses, and visitors rather than overwhelming conversion to tourist accommodation in the city center.

By the turn of the millennium, Edinburgh had successfully established itself as Scotland's financial center while simultaneously developing a substantial technology sector. This more diversified economic base positioned the city differently for the challenges and opportunities of the 21st century.

Long-term Impact

Technology Sector Evolution (2000-2010)

As the new millennium began, Edinburgh's technology sector entered a maturation phase that differentiated it from other European technology centers:

Specialization Emergence: Rather than attempting to compete broadly with larger technology hubs, Edinburgh developed recognized specializations. By 2004, clear technology clusters had formed in three areas:

Artificial intelligence and machine learning, building on the University of Edinburgh's historical strengths
Financial technology (fintech), leveraging synergies with the established financial sector
Life sciences technology, particularly in medical devices and bioinformatics

Dot-com Resilience: The 2000-2001 dot-com crash affected Edinburgh's technology sector, but its impact was moderated by the manufacturing component of the ecosystem. While pure software companies struggled, the diversified nature of Edinburgh's technology base—combining software, electronics, and specialized manufacturing—provided greater stability than purely digital hubs experienced.

Research Establishment Growth: The proven commercial potential of Edinburgh's research base attracted major research establishments. In 2003, Microsoft established its European Machine Learning Research Centre in Edinburgh rather than Cambridge (as occurred in our timeline). By 2007, six major international technology companies had substantial research operations in the city, employing over 1,200 researchers.

Urban Development Patterns (2000-2015)

The city's physical development followed a different trajectory due to its more diverse economic base:

Distributed Commercial Centers: Rather than concentrating financial services in the Exchange and business services in Edinburgh Park, the city developed multiple specialized districts. The Western Knowledge Corridor along the A8 became home to research-intensive operations, while the Leith Renewal Project (beginning in 2002) transformed the former port area into a mixed manufacturing and residential district with advanced facilities for smaller producers.

Infrastructure Adaptations: Transportation priorities shifted to accommodate the movement of both people and goods. The Edinburgh Tram project, which in our timeline faced numerous delays and cost overruns when finally begun in 2008, started earlier (2005) and included a freight logistics component connecting manufacturing zones to distribution centers. The completed first phase opened in 2011 (versus 2014 in our timeline).

Housing Market Differences: With less pressure from tourism-related short-term rentals and a more diverse employment base, Edinburgh's housing market evolved differently. While still expensive compared to other Scottish cities, by 2015 average housing costs were approximately 14% lower than in our timeline. The city maintained a higher proportion of family homes and fewer properties were converted to tourist accommodation.

Economic Resilience Through Crisis (2008-2012)

The 2008 financial crisis tested Edinburgh's diversified economic model:

Differential Impact: The financial crisis still hit Edinburgh's substantial banking sector hard, particularly affecting the Royal Bank of Scotland. However, the technology sector proved relatively resilient. While financial services employment fell approximately 12% between 2008 and 2010, technology sector employment remained stable and began growing again by late 2010.

Manufacturing Advantage: The advanced manufacturing component of Edinburgh's economy provided stability during the crisis. Unlike pure service economies that suffered immediate contraction, manufacturers maintained operations to serve existing orders, softening the immediate employment impact.

Recovery Leadership: The technology sector led Edinburgh's economic recovery. By 2012, technology companies were creating jobs at three times the rate of the overall economy, absorbing some skilled workers displaced from financial services and accelerating the economic transition.

Global Position and Competitiveness (2010-2025)

By the 2020s, Edinburgh's position in the global economy was substantially different than in our timeline:

European Technology Hub Status: Edinburgh established itself as one of Europe's top ten technology centers by most measures. A 2022 Financial Times analysis ranked Edinburgh 7th in Europe for technology investment, compared to not appearing in the top 20 in our timeline. The city attracted approximately €2.8 billion in technology investment between 2018 and 2022.

Population Differences: Edinburgh's population growth followed a different pattern. By 2025, the city had approximately 590,000 residents (versus about 530,000 in our timeline), with the additional growth primarily consisting of technology workers and their families from both domestic and international origins. This larger population supported a more diverse urban economy.

Wage and Employment Structure: The employment structure featured a broader middle-skill and middle-wage band than in our timeline. Rather than polarizing between high-paid financial services and low-paid tourism jobs, the manufacturing component created substantial technical and skilled trade positions. By 2025, median wages were approximately 8% higher than in our timeline, with lower income inequality measures.

Tourism Transformation (2015-2025)

Tourism remained important but evolved in character and scale:

Balance Restoration: By 2020, tourism represented approximately 9% of Edinburgh's economy (versus about 14% in our timeline). Visitor numbers were approximately 3.7 million annually (versus 4.9 million), creating less pressure on the historic center.

Qualitative Shift: Tourism marketing emphasized Edinburgh as a city of both heritage and innovation. The "Edinburgh: Where History Meets Tomorrow" campaign launched in 2018 specifically targeted higher-spending visitors interested in both cultural and technological attractions.

Festival Evolution: The Edinburgh Festival Fringe and International Festival remained major events but with a stronger technology component. The Edinburgh Technology Festival, established in 2014, became Europe's largest technology arts showcase by 2022, featuring exhibitions on artificial intelligence in art, virtual reality performances, and digital humanities.

Policy and Governance Impact (2015-2025)

Edinburgh's distinctive development path influenced governance approaches:

Balanced Economy Advocacy: Edinburgh became a leading advocate for balanced economic development within the UK. When devising post-Brexit economic strategies, the city's leaders frequently highlighted their diversified approach as more resilient than London's heavy service sector concentration.

Planning Integration: The City of Edinburgh Council developed integrated planning approaches that became models elsewhere. The 2019 Edinburgh City Plan explicitly required mixed-use developments incorporating residential, commercial, and light industrial space—an approach subsequently adopted by several other UK cities.

University-Industry Relations: The Edinburgh Model of university-industry collaboration, formalized in a 2017 framework agreement among the city's universities, became widely studied internationally. By 2025, over 40 international delegations had visited Edinburgh specifically to understand its technology ecosystem development.

By 2025, Edinburgh had emerged as a city with a fundamentally different economic and social character than in our timeline—more populous, more diverse in its economic activities, and more resilient to economic shocks, while maintaining its cultural heritage and quality of life advantages. Rather than being primarily a financial center and tourist destination, it had established itself as a balanced economy with substantial technology innovation and production capabilities alongside its traditional strengths.

Expert Opinions

Dr. Morag Fraser, Professor of Economic Geography at University of Glasgow, offers this perspective: "Edinburgh's alternate development path represents what we might call 'balanced post-industrialism.' Instead of following the common Western city pattern of wholesale deindustrialization followed by service sector dominance, this Edinburgh maintained manufacturing capability but upgraded it through technological integration. The result isn't just economic diversity—it's economic symbiosis, where sectors reinforce each other. The collaboration between financial services, technology development, and advanced manufacturing created multiple pathways for innovation and commercialization that standalone sectors struggle to achieve. I believe this represents a more sustainable model for mid-sized European cities than either pure service economies or attempts to maintain traditional manufacturing."

Andrew Sullivan, Director of the European Urban Economics Institute, notes: "What's particularly fascinating about this alternate Edinburgh is how it affected the spatial development of the city. In our actual timeline, Edinburgh's development followed the typical pattern of gentrified city center, financial district, and suburb formation with manufacturing pushed to the periphery or eliminated. In this alternate timeline, the integration of production with innovation required different urban forms—more mixed-use zones, preservation of industrial space within the urban core, and transportation infrastructure that accommodates both people and goods. The housing market implications alone are profound, with significantly different affordability outcomes and neighborhood compositions. I would argue this represents a more inclusive form of urban development than what we've accepted as inevitable in most Western cities."

Sonia Abercrombie, Chief Economist at Scottish Futures, offers this perspective: "The counterfactual Edinburgh demonstrates the significance of timing and early investments in economic development. The critical window of 1987-1992 represented a moment when Edinburgh's path wasn't yet set—financial services were growing but not yet dominant, tourism was important but not overwhelming. The decisions made in that window had compounding effects over three decades. What's notable is that none of the individual interventions—university technology transfer, manufacturing modernization, infrastructure development—would have been sufficient alone. It was their coordination that created the alternative path. This suggests that effective economic development requires not just good policy ideas but integrated implementation across institutions that typically operate in silos. The lesson for other cities is that windows for transformative economic diversification do exist, but capitalizing on them requires overcoming institutional fragmentation."