In October, the Bank of England’s monetary policy committee will travel to Leeds. It will be the committee’s first meeting outside London, thus confirming Leeds as the aspiring financial capital of northern England.
Leeds’ financial and business services sector has grown by two thirds in the past decade, spreading beyond retail banking into areas such as corporate finance, stockbroking and private wealth management, not to mention the many call centres in and around the city. The sector now employs about 124,000 people, second only to London, and accounts for one third of the city’s economic output.
Leeds’ success as a financial centre is reflected in the widespread urban renewal that has spread outwards from the central business district to the south and west of the city. During the benign economy of the past 10 years, Leeds transformed itself, as the council sold public buildings to finance regeneration, converted car parks into city squares and pedestrianised central areas. Handsome old industrial buildings are now populated by professional firms, and, although some landmark developments have been put on hold, high-rise buildings are starting to punctuate the city skyline.
The Leeds City Museum reopens in September, the art gallery has been refurbished and a 12,000-seat stadium is planned. Meanwhile, FDI into the Yorkshire region has risen in the past few years, with a record level of 55 projects worth £100m ($197m) last year. Leeds has become an attractive and important business destination.
In the past decade or so, some 40 financial services firms from outside the area have opened offices in Leeds, attracted by operating costs that can be as much as 30% lower than London and the availability of a deep reserve of people with financial services skills. One firm told fDi: “In terms of our cost advantage, it would be very hard for us to provide this level of service anywhere outside Leeds.”
Opportunities to serve the region’s increasingly affluent businesses and individuals has brought to the area major international firms such as Kleinwort Benson (which opened in Leeds at the end of 2007) and Barclays Private Capital. John Ansbro, chief executive of the Leeds Financial Services Initiative (LFSI), says: “Leeds has grown in the past 10 to 15 years to become a national and, increasingly, international financial centre. As London has become increasingly focused on the international financial markets, the opportunity has opened up for Leeds-based firms to do the kind of work that was traditionally done in the City of London.”
The LFSI, which has helped position the city as a national financial centre, is now encouraging international firms to locate in Leeds. It has already encouraged a growing list of foreign firms, among them Allied Irish Bank, Bank of New York Mellon, Capco, Handelsbanken, ICICI Bank, KBC Bank, Kaupthing Singer & Friedlander and Kroll Buchler Phillips. In September, the LFSI plans to launch a London and international committee, which will further raise the profile of the city’s financial sector in major banking centres around the world.
Corporate finance boost
The city’s success as a financial centre began in retail banking, with household names such as Halifax, Yorkshire Bank and more recently First Direct, but strong regional economic growth in the past decade brought an increased need for local corporate finance and investment banking services. Three years ago, PricewaterhouseCoopers identified Yorkshire as a “large, underserved market” and has been rapidly building up its Leeds headcount ever since, particularly in its deal-related services. Its Leeds head office houses a growing staff of 550.
Mark Hannam, a partner at PwC’s Leeds office, says: “Clients are looking for a broader range of services and don’t want to get on a train to London.” Northern companies have come to expect a full range of services to be available locally, ranging from accounting, risk advisory, treasury, corporate finance and consultancy.
Last year, net profits of Yorkshire’s 150 largest companies rose 99% to £2.9bn, spurring a string of large deals, including mergers, flotations and corporate buyouts. Eight corporate finance deals in the region topped the £100m mark in 2007. Major deals such as the £783m management buyout of Doncaster-based construction firm Keepmoat and the £945m acquisition of Sheffield-based precision engineering firm Rixson involved local advisers from within the Yorkshire deal-making community.
Rise in complex deals
Mr Ansbro says: “The size and complexity of deals done in Leeds is increasing all the time, and the scope of advisory services on offer is as good as anything available in London these days, and remains more competitive on costs.”
Leeds is also proud of its role at the forefront of the financial services revolution since First Direct, a Leeds-based telephone banking service owned by HSBC, opened its 24-hour telephone banking service almost 20 years ago on October 29, 1989. First Direct now employs about 2700 staff in Leeds.
Kath Parrington, head of internal communications at First Direct, has worked for the bank for nearly two decades. She says: “Leeds has built a good reputation in the services industry.” There are now more than 30 call centres in the area, employing 20,000 people, including Halifax Direct, Direct Line, GE Capital and Zurich.
Leeds-based outsourcing company Ventura is also at the forefront of the call-centre industry and has seen a rapid growth in its operations in recent years. Ventura has a long and growing list of blue-chip clients keen to outsource a range of customer service-related operations. Adrian Davis, sales and marketing director at Ventura, says: “Pressure to reduce costs and increase operational flexibility have led to increased interest in outsourcing, particularly in the financial services and public sectors.”
Ventura, a 100% owned subsidiary of UK clothing company Next, has grown by at least 10% in each of the past five years, making it one of the UK’s fastest growing outsource companies. Clients include household names such as British Gas, O2, Google, RBS, Barclays, GE Money, American Express and Sky. It is now Yorkshire’s largest private sector employer, employing 10,000 people and with an annual turnover of about £200m.
Both First Direct and Ventura cite the availability of a flexible and qualified workforce as a reason for their success. In June 2007, the first of seven regional financial services academies was launched in Leeds, backed by some of the city’s leading financial services firms. The city has also launched similar schemes at two schools.
Mr Ansbro says: “At the highest levels, firms are competing with London salaries, but overall there is still a cost advantage of about 30% taking into account real estate and overall payroll costs.”
Prime office rents have remained stable in Leeds, and at between £26 and £27 per square foot are considerably lower than other UK cities such as Manchester (£30), Bristol (£27.50) and Birmingham (£33). Leeds recently ranked as the sixth most competitive city in Europe for office costs. Paul Stephens, chief economic officer at Leeds City Council’s economic services division, says: “The question is how far office rents will come down in London. Although we are not complacent, we think we are well placed in the current economic environment.”
Demand for property
For the moment, real estate firms report that demand for premium office developments in Leeds is holding up. Over the past 10 years, £3.5bn-worth of major property projects have been completed in Leeds, £1.4bn are currently under construction and a further £8.5bn are in the pipeline. In the next 15 years, a group of six developers, including MEPC, Town Centre Securities and George Wimpey, plan to create a new business district with 3.25 million square feet of office space to the west of the main train station. The construction cost is estimated at £1bn.
Furthermore, the opening of a new link road to the motorway in 2007 has released a further 250 hectares of industrial land for development to the south-east of the city.
Mr Pearey says: “As Leeds has become more of a national and international centre, the standard of offices has gravitated towards what is acceptable in London or Edinburgh.”
The city’s tallest building, Bridgewater Place, completed in 2007, now houses DWF, Eversheds and Ernst & Young, with DWF taking four times the floor space of its previous offices. Other major office developments include 2 Wellington Place (part of a 22-acre scheme under development that will become one of the largest new business quarters in Europe), Broad Gate, Latitude Red and The Mint.
In July, work was halted on one landmark development until economic conditions improve. Much of the Lumiere scheme was already well under way. The contract for another landmark project, two massive glass buildings known as ‘The Kissing Towers’, was terminated in July, because of the expected downturn in the economy.
Mr Ansbro says: “There are still some very significant projects going ahead in Leeds, particularly office schemes. Because there has historically not been many speculative projects, there is still demand and further opportunities to bring new businesses into the city.”
- Leeds’ financial and business services sector employs 124,000 people, accounting for one third of the city’s economic output.
- FDI into the Yorkshire region rose to a record level last year of 55 projects worth £100m.
- Leeds was recently ranked as the sixth most competitive city in Europe for office costs. Prime office rents in Leeds cost between £26 and £27 per square foot.
- There are 30 call centres in the Leeds area.
- In 2007, net profits of Yorkshire’s 150 largest companies rose 99% to £2.9bn.