Mark Townsend had a smile on his face. The general manager of Tesco in Inverness was busy last week planning for Rock Ness, the local music festival, confident of shifting 1,000 tents this year, not to mention sleeping bags, ice boxes, beer and other paraphernalia beloved by festival-goers.

Inverness is gearing up for a bumper summer for visitors as Brits opt to holiday at home and foreigners take advantage of the relatively weak pound — and few businesses stand to benefit more from the influx than the local Tesco. “At the peak of the season, this store is the No 1 Tesco in the whole of Scotland,” Mr Townsend said, sipping coffee in the in-store 200-seat café. “We get a major seasonal hike.”

The gigantic store attracts 50,000 shoppers a week from as far afield as Orkney to the North and Skye to the West — and there are two more Tescos in the Highlands’ capital and planning permission for one more. So clogged with Tesco lorries had the main arterial road from the south become that the group recently hired Stobart Group to put on a daily train entirely devoted to ferrying some of Tesco’s 30,000 lines north through the Cairngorms to Inverness.

No wonder Inverness has acquired the soubriquet Tesco Town. One thousand people in the city have full or part-time jobs with the retailer and, even in these hard times, sales are up by as much as 2.5 per cent this year.

Tesco is not alone in weathering the economic headwinds reasonably well. According to David Sutherland, chief executive of the Inverness-based housebuilder Tulloch Homes: “Scotland hasn’t been as badly hit as the rest of the UK, and the Highlands haven’t been as badly hit as the rest of Scotland.”

Last year was his annus horribilis. He sold only 180 homes, compared with 400 the year before, but he believes that the worst is already over. He has already sold 81 per cent of his target for the whole of 2009 and rival builders are starting to make offers for some of the 50,000 units in his land bank, an encouraging sign of reviving confidence.

The city’s comparative resilience is a sentiment you hear again and again among local business leaders. Inverness did not boom quite so much as many parts of the UK in the good years and as a result is showing more resilience in the downturn. Willy Roe, chairman of Highlands & Islands Enterprise, the regional development agency, said: “It’s mixed. There’s disappoinment every week and good news every week.” Strathaird Salmon, a smoked salmon plant, closed in March, shedding 326 jobs.

Claimant count unemployment across the region has doubled in the past eight months to 3.5 per cent, Mr Roe said, but that is still resilient compared with the early 1990s, when it peaked at 7 per cent, and the early 1980s, when it hit a disastrous 11 per cent.

One advantage — for now — is that the public sector dominates the local economy. As well as being a large employer in council services and healthcare, the town is home to several quangos, from Scottish Natural Heritage to the Crofters Commission. Inverness is a service centre for the entire region.

“Inverness has a population of 60,000, but probably 150,000 people use it for shopping and other services.” Tony McKay, a local economic consultant, said. He believes that even after the inevitable public spending cuts of the next few years, the city will be treated relatively favourably.

The benefit from the North Sea has long since fizzled out. While Aberdeen, 100 miles to the east, was the main beneficiary, Inverness also did well in the 1970s and 1980s. The platform-building yards at Ardersier and Nigg on the Moray Firth employed 10,000 at their peak. That heritage has left some marine engineering expertise.

One big driver of the local economy has been net immigration, with many people from the South retiring to the Highlands because of the relatively cheap housing, good services and low crime. There have also been strong inflows of workers from Poland and the Baltic states, who work in the tourism industry and construction.

“Until last year there were maybe 3,000 Poles living in Inverness,” Mr McKay said. He estimates that a net 30,000 people have moved to the region in the past ten years, although the growth rate is slowing.

Tourism is another positive economic force. While Americans are still thin on the ground, visitor numbers from the Continent are strong and the domestic market is booming. “Easter was good for everybody,” Craig Ewan, general manager of the Kingsmills Hotel, who also chairs the Inverness Hotel Association, said. “If that continues, we’re going to have a bumper summer.”

British Airways’ decision to scrap its Heathrow-Inverness flights 18 months ago was felt keenly, but services from FlyBe and easyJet have helped to take up the slack. Lufthansa begins a service from Düsseldorf this month.

In terms of sales and occupancy, local hoteliers report activity nudging ahead of last year. But there has been a price to pay in margins: Mr Ewan estimated that the average room rate had fallen about £4 to £61 across the city. He has just begun work on a £4 million sister boutique hotel to sit in the grounds of the existing hotel.

Other hoteliers are also investing. Work starts on a new 160-room Holiday Inn in the city this summer. Near the airport a championship-standard links golf course, the Castle Stuart on the Moray Firth, is due to open in July with ambitions to do for the Highlands what Gleneagles has done for Perthshire.

Another big industry is the call centre business. There are 15 call centres in the Highland region. CapGemini, one of the biggest players, has boosted staff numbers from 400 to 450 in the past two years and has recently won new mandates from WH Smith and the Learning & Skills Council. CapGemini offers IT support to the staff of corporate and government clients.

When employees of Westminster Council face a computer glitch, for example, their call for help goes through to Inverness or the smaller sister centre in nearby Nairn.

George Munro, head of UK service centres at CapGemini, says that Inverness has advantages not only in a well-eductated workforce but also lower wage rates. An average worker, a second grade analyst, in Inverness typically earns £14,000 to £15,000. His CapGemini counterpart in Lancashire or Birmingham is on £16,000 to £17,000.

There are more exotic and ambitious business ideas in the offing. A pilot project to introduce a pioneering “cloud computing” centre in Inverness is going well, according to Peter Swanson, chairman of Alchemy Plus, an IT consultancy based in Dingwall. Alchemy is close to applying for planning permission for the £20 million centre that ultimately could employ 400 people.

Cloud computing or utility computing is where clients outsource all their processing needs and pay a monthly subscription similar to a utility bill. Alchemy is offering a trial service to ten clients and says that they are achieving cost savings of 28 per cent. It hopes to launch a commercial service in six months.

Alchemy picked Inverness because of its strong telecoms links to the rest of the country and the possibility of using excess heat to power neighbouring businesses.

Back at Tesco, Mr Townsend is already contemplating expansion, despite the recent opening of Aldi and Lidl, the discounters, locally. “We may start to think about enlarging the store,” he said, listing on his fingers a string of new product lines that the shop could stock — canoes, quad bikes, fishing tackle and skiing and walking equipment.

The Tesco Town moniker is not about to go away, but in these tougher times the nickname may come to be seen more as a measure of Inverness’s relative prosperity than its retail homogeneity.

Thriving in a fishy business
Company report: Gael Force

Gael Force is one of those energetic, innovative businesses that give the lie to the Sassenach notion that the Highlands missed out when entrepreneurial genes were being handed out.

Founded on the Hebridean lsle of Lewis by Stewart Graham, making steel lobster creels for fishermen, it and he moved to Inverness in 1989 and aggressively pushed into making platforms for fish farms as well as other kinds of marine engineering.

Not content with that, Mr Graham decided to diversify into retailing and the leisure market, opening the biggest marine chandlery in the UK. In a market still dominated by Mom and Pop hobby chandleries, his 10,000 sq ft store is a comparative whale and does a thriving mail order and online trade.

Overall, the group made more than £1 million in pre-tax profits last year on sales of £10 million.

There have been significant setbacks. The collapse in the wholesale price of farmed salmon between 2002 and 2007 was a disaster for the group. “We lost 60 per cent of our business,” Mr Graham said. Staff numbers were cut from 160 to 90.

Employee numbers are back up to 110 and Mr Graham has ambitious plans, aiming to quadruple turnover in the next five years. Fish farming has much further to go, he said, as commercial farmers turn to cod, halibut, bass and bream, as well as the salmon staple.

The aim is to roll out the chandlery megastore format to other locations. West Marine and Boat US have run with the concept in the United States, but there is no equivalent in Britain.

Yet the most exciting areas for growth are from using the technology and skills already developed in producing concrete and steel accommodation and feed storage platforms for fish farms and applying it to other business areas.

Gael Force is well placed to benefit from the considerable investment in wave and tidal power generation schemes, although Mr Graham is cautious about investing heavily until there is more proven commercial success.

More immediately, he is pushing on with developing floating homes. He hopes that his Aqua Homes, floating houses with 1,000 sq ft of living space, could become popular on canals, ports and inner-city dock redevelopments.

Global leader in fighting diabetes
Company report: LifeScan

LifeScan is the elephant in the room in Inverness, because it is by far the biggest single private sector employer, eclipsing even Tesco. Founded only in 1995, it employs more than 1,200 people, designing and manufacturing products to help people with diabetes. Its OneTouch brand of glucose monitoring products and test strips is exported to patients worldwide.

It has mushroomed amid a global diabetes explosion and in 2001 was bought by Johnson & Johnson, the American household and medical products group. Johnson & Johnson appears to be extremely supportive of the subsidiary and is a strong supporter of local community projects. However, there are concerns that the future of a huge driver of local prosperity depends on the whim of American directors in far-away New Jersey, who could, in theory, switch production to a country where wages are lower.

“Why would they?” asks Willie Printie, managing director of LifeScan and a Johnson & Johnson veteran of 26 years, who points to the plant’s recent strong record on product innovation and to the millions of pounds sunk into the state-of-the-art manufacturing facility and research and development. Until recently, LifeScan was developing one new product per year; that level of innovation rose to three in 2007 and four in 2008.

Two years ago the NHS reduced the price that it was prepared to pay for LifeScan products. More recently, demand has shrunk in countries where people pay for their own healthcare because of the recession. That has led to modest retrenchment: LifeScan made 42 people redundant in December.

But patents on its products do not expire “for years and years”, the company says, leaving it less vulnerable to competition from copycat rivals.

Locals see LifeScan as providing the beginnings of what could become a cluster of medical products businesses in the city. It employs 150 people in research and development and helped to support the creation of the Centre for Health Science, a £27 million project with academic, clinical and commercial operations.