In 2012, FDI in the financial and professional services sector in the UK's major cities contracted by 16%. Not in Cardiff though. Investments in this sector in the Welsh capital increased by a massive 83% in the year, and the city recorded its best year since crossborder investment monitor fDi Markets began collecting data on investments in 2003.
Quite an achievement, given that it was not that long ago that the city's economy relied heavily on steel and coal production, its main claim to fame being that it was home to the world's busiest coal port.
“Historically, we have not been known for our financial and professional services sector, but now we are very strong [in this area] and we have the numbers to prove it,” says Professor George Boyne, pro-vice chancellor at Cardiff University.
Deep labour pool
More than 135,000 people work in the Welsh financial and professional services sector, and this number is set to grow to 200,000 by 2021, according to the Welsh government's forecasts. Furthermore, there are 25,000 students in Welsh universities (nearly 40% of all students) enrolled on courses connected to the industry.
“Thanks to the wide pool of labour, we do not have problems with finding the right candidates for our openings. That applies both to graduates and people who are willing to move to Cardiff,” says Chris Williams, partner at Morgan Cole, a law firm with offices in Cardiff and Swansea in Wales, and Bristol, Reading and Oxford in England.
Although nearly half of Morgan Cole's clients are based in London, the company has not had a permanent presence in the UK capital since 2004. “We found out that we do not need an office in London. It takes little more than two hours to get to London from Cardiff, and we can work on the train, so serving our clients in London out of Cardiff makes sense,” says Mr Williams.
It certainly makes sense from a financial perspective. According to the UK's Office for National Statistics, salaries in the financial and professional sector are 25% lower in Wales than the UK average, and 43% lower than in London.
In the current economic climate, more and more companies are looking for ways to save money, which is working to the advantage of Wales. In recent years, a score of large multinational financial and consulting companies, including Lloyds Banking Group, KPMG, Zurich Financial Services and HSBC Direct, have decided to near-shore their operations to the country.
As an increasing number of companies establish operations in Wales, the scope of business activities in Welsh cities is likewise expanding. “After graduating from Cardiff University [in 1997], I wanted to work as a trader. But as much as I wanted to stay in Wales, I had to move to find a job in my profession,” says Michael Shirley, managing director of OSTC, a derivatives trading company.
In 2009, Mr Shirley established OSTC's operations in Swansea, the second largest city in Wales. Mr Shirley says that the decision to establish OSTC's new office in the city was not biased by his own affinity with the Welsh second city. “We were looking for a location with good universities and with lower salaries than in London. That is what Wales offered, and on top of that, we found that the government provides support for capital expenditure, job creation and training,” says Mr Shirley.
OSTC started trading out of Swansea with 10 employees in 2009. Since then, the company has hired 70 graduates and Mr Shirley says that this rapid growth has been made possible due to an abundance of available talent and co-operation with local universities. “Universities here are very commercially minded, and I really appreciate it, as it makes spotting talent so much easier,” says Mr Shirley.
Cardiff University's Mr Boyne says: “We pride ourselves on being a research house and at the same time we respond to the needs of the market. We are academic in a very traditional way, but also very applied."
OSTC has launched a number of initiatives in conjunction with local universities. It has helped equip a trading room at Cardiff Business School and given classes at Cardiff University's finance and trading society. Such initiatives are not only beneficial for the universities and students, as Mr Shirley says that by working with the university, he can spot budding talent, a luxury that he would not have if he were based in a large financial centre such as London or New York, where competition for the best candidates is far more intense.
The growing number of companies in the financial and professional services sector that are deciding to set up operations in Wales is not the only measure of the growing strength of the industry in Wales. The country also has many highly successful home-grown companies in the financial and professional services sector.
One of the biggest examples is Admiral Group, a motor insurance company launched in Cardiff in 1993. Today, the company employs more than 2500 people in eight countries. In 2012, it recorded a revenue of $1.5bn, and it is currently constructing a new 11-storey headquarters building in the centre of Cardiff.
Go Compare, a financial services comparison website established in 2006 by Hayley Parsons, a former Admiral employee, is another example of Welsh home-grown success. The company is headquartered in Newport, a city located 20 kilometres north-west of Cardiff. In 2011, it recorded a pre-tax profit of $52.9m. The company is valued at $763.1m.
“The City [London's financial centre] is not the elite club that it used to be. A lot has changed in the past two decades, and success is not restricted to the City,” says Mr Williams. “Cardiff definitely proves that.”