The West Midlands region in the centre of the UK has been well established for more than a decade as a hub for shared service centres (SSCs). The business, professional and financial services sector in the region supports about 400,000 jobs and predictions are that it will grow by at least 20% over the next 10 years.
The sector is focused on Birmingham, the UK’s second largest city and home to the country’s largest professional and financial services sector outside of London. Birmingham offers significant benefits for companies seeking to set up SSCs with its excellent central location and accessibility to a comprehensive road, rail and air transportation network. The journey time from Birmingham International Airport to London takes just an hour-and-a-quarter by train. Birmingham International is the second largest UK airport outside of London and offers direct daily flights to Frankfurt, Amsterdam, Paris, Dubai and New York. London Heathrow, the UK’s largest airport, is easily accessible at just over 100 miles (170 kilometres) by road from Birmingham.
A comprehensive independent report, Shared Service Centre for Europe, prepared by Oxford Intelligence/IBM Plant Location International, found that Birmingham is in the “highest quality” group of European cities. Birmingham is in the “star” category along with Amsterdam/Rotterdam, Barcelona, Copenhagen, Dublin and Madrid. However, unlike the other cities, Birmingham was found to offer lower total operating costs and provide “very good value for money” for companies seeking to set up SSCs.
Numerous high-profile and multinational companies have recognised the benefits of setting up SSCs in the West Midlands region, including impressive names such as Ernst & Young, PricewaterhouseCoopers, Davis Langdon and the Britannia Building Society.
Ronnie Bowker, managing partner at Ernst & Young, endorses the firm’s choice of Birmingham for its human resources SSC. “We would not be able to provide the required level of client service and internal support service without the high-quality professional skills that we are able to attract in the region,” he says.
And David Waller, Midlands chairman at PricewaterhouseCoopers, reflects the benefits of being established in the area: “The region has become the foremost location for financial, legal and professional services outside of London. Centres of excellence in banking, accounting and international business services are attracting a whole new generation of talent and business entrepreneurs. Just as our economy is diverse, then so are our people. The vibrant ethnic variety present brings a wonderful fusion of cultures, behaviours and views, which makes for a lively, entertaining environment in which to live.
“In short, the West Midlands has a great deal to offer any business wishing to locate here. Not only is the region the country’s industrial heartland, it is geographically located at the heart of our nation and as such provides easy access to just about anywhere else in the UK.”
The region has recently welcomed the Benelux-headquartered KBC Bank, and the State Bank of India is due to open a new office in Birmingham. The latter is an interesting reversal of the popular view of investment flows as trends reveal that Indian banks are seeing the benefits of opening offices in the West Midlands region. Organisations recognise the benefit of the availability of the large pool of skilled, well-educated and multi-lingual labour force that is on offer. The region is home to 10 universities, and two of the top five UK business schools (Aston University and Warwick Business School) are based in the region.
The professional and financial services sector is characterised by a relatively youthful workforce. About 70% of staff are in the key 25-40-year-old age group, and the region expects to maintain this advantage because the excellent quality of life encourages graduates from regional universities to stay and work in the region.
The cost efficiencies of running SSCs in the West Midlands are significantly less than in London, Dublin and Amsterdam. The region offers attractive and reasonable rental rates. Typical prices for grade A office space on a modern and well-located business park are about £17 per square foot. The cost of skilled labour is reasonable – typically employment costs in the West Midlands are 80% of the costs for an equivalent post in London.
The region has addressed technical and infrastructure issues in a timely manner: it is now 100% broadband enabled. Telecoms exchanges are being high-speed-broadband enabled and many office sites in the region are e-enabled. Organisations choosing to locate in the region therefore have a wide variety of suitable accommodation to choose from.
Advantage West Midlands, charged with developing economic prosperity in the region, recognises the importance of SSCs as a significant component of the thriving economy. The agency helps to facilitate inward investment into the region. A recent research study, commissioned to gain a greater understanding of the context within which business and professional services organisations operate, confirmed that the majority of businesses surveyed had not encountered any constraints on their growth and expected to see the growth of SSCs in the region continue to thrive.
The research also revealed that Advantage West Midlands can expect much of its future investment to be characterised by:
- strong levels of activity in business and professional services, especially increased high-end SSC operations (building on the region’s existing strengths);
- increased competition from other territories to win new investment and re-investments;
- large numbers of new entrants, coming from newly emerging high-tech sectors, as the broad economic base of the West Midlands proves to be a competitive advantage over many other locations;
- a growing pressure on London-based companies to consider relocations and new operations in other UK locations. (The proximity to London is a key advantage for companies choosing to locate their SSCs in the region);
- an expectation that new SSCs will be particularly likely to come to the West Midlands from organisations whose core function involves: high-tech manufacturing; financial and professional services; or IT, telecoms and software.
The UK is an excellent choice as a Sarbanes-Oxley solution. Many businesses affected by Sarbanes-Oxley have reached the conclusion that consolidation of their European financial services (and the related employees) into one physical location is necessary to demonstrate absolute control and, thus, to best comply with the legislation. The UK specifically offers the following benefits:
- The accounting practices and standards in the UK are more aligned with those in the US than any other major EU country.
- The UK’s labour laws are more aligned with US laws than are those of any other major EU country.
- The contract law and general common law system in the UK is aligned more closely with that in the US, than is that of any other major EU country.
In addition, for nearly 15 years, the UK as a whole has enjoyed relative economic stability. Labour market flexibility and sound macro-economic policies have combined to make the country one of the top 10 places in the world in which to do business, a position that it seems set to retain for the foreseeable future. Although many of the new locations, for instance in central Europe and south Asia, offer opportunities at first sight, these territories lack the long-term financial and economic stability that the UK enjoys. Given the costs involved in setting up an SSC, many organisations are choosing to process the business-critical transactions in the UK, due to the mature, business-friendly environment.
In summary, the modern business and professional services in the West Midlands are based on the strong interconnection between traditional and new economic activities. For centuries, the region has relied on being at the forefront of new economic trends for its success. The growth in SSCs is yet another facet of that long-standing regional strength: commercial flexibility.
For everything your business needs to succeed, put yourself at the heart of it all: the West Midlands Region.
For more information, contact:
a The Inward Investment Team at Advantage West Midlands
a Tel: +44 (121) 380 3500