Banking on success beyond the Square Mile

Anjalika Bardalai

The North West’s role as a major financial powerhouse is underlined in a new report revealing some big numbers for the sector.

The figures are impressive. The North West saw the largest rise in percentage terms in employment growth in financial and related professional services of any UK region or nation in 2016, at 13.6 per cent.

The report, from influential industry group TheCityUK, also reveals that the industry provides 250,000 jobs across the region and collectively accounts for 7.6 per cent of its economy.

And in 2016 the North West’s financial services exports were equivalent to around one-third of those of the whole of France.

The report calls on national, regional and local leaders to develop regional strategies and calls on the government to prioritise the “scaling up” of the UK FinTech sector.

It reveals that after London, Manchester is the UK’s biggest legal services centre and largest management consultancy hub.

The city, also described by the report’s authors as a “blockchain hub”, is home to almost 70,000 digital technology jobs.

The report’s authors say: “The quality of the North West’s infrastructure and access to talent has meant investors have been attracted to a location that can deliver a consistent level of service to its international client base.”

Manchester plays host to a large cluster of financial and related professional services firms and is described in the study as “ not only a cost-effective place to do business but also attractive to employees wanting to combine high-value jobs with a high standard of living.”

The city’s financial quarter Spinningfields hosts Barclays, BNY Mellon, HSBC and RBS. The report adds that the presence of Deloitte, and the arrival of Freshfields Bruckhaus Deringer, also underlines the city’s professional services capabilities.

While Manchester’s role is recognised: so too are its challenges. A key policy priority for the city region is skills retention.

While well-established academic institutions ensure graduates progress into entry-level industry roles, mid-level and senior-level employees can be difficult for firms to attract, according to the ‘Enabling Growth Across the UK’ report authors.

Manchester may lead the way in jobs – a fifth of the region’s workers in the sector are based in the city – but Merseyside also plays an important role in the regional picture.

Almost 23,000 people are employed in financial and related professional services in Liverpool alone.

Many work in Liverpool Riverside, described by TheCityUK as home to a thriving business and professional services community with specialism in maritime insurance, banking and wealth management.

Chester is also playing its part, as home to large back-office and technology operations, with 6,550 people employed in the sector.

Salford, Stockport and Warrington have around 7,000, with some 6,000 people employed in Bolton.

The report says the North West is a particular centre for asset and wealth management, management consulting and accountancy.

It also has expertise in several fast-growing areas including the Alternative Investment Market (AIM) listings, venture capital investment, public-private partnerships, private wealth management, and maritime and environmental law.

Significantly, the North West is also the largest legal centre in the UK after London.

Employers in the region have access to a large pool of financial, accountancy, business management and legal graduates from universities, including Manchester Business School and Lancaster University Management School, as well as Manchester’s College of Law.

Anjalika Bardalai, chief economist at TheCityUK, says: “The region is in a relatively good place and has performed well.” She underlines the strength of its talent pool as a major plus point moving forward.

Bardalai adds that the profile of the industry is changing, pointing to growth of Fintech and predicts that the disruption the sector has seen in recent times will continue.

She says: New business models make the landscape more competitive and that means that the existing players have to embrace that change or they are going to start to suffer.”

And she adds: “Regions that have relatively high degree of economic specialisation tend to grow faster. There is a relatively high degree of specialisation in knowledge-intensive services in the North West.”

Paul Anderson, partner at Squire Patton Boggs, has specialised in financial services matters for more than 20 years and says: “These are exciting times.

“Fintech is now really on the national agenda along with the acknowledgement that the North has much to offer. Cities like Manchester are starting to gain a reputation and are putting the North on the radar.”

He also points to the growing collaboration between the sector and the region’s universities and points to the fact it is cheaper to start and build a business in the North compared to London and the South East.

He says one of the challenges is improving transport links across the Northern Powerhouse area and he urges more collaboration across the region to promote it as a major financial services hub.

That approach is backed by Henri Murison, director of the Northern Powerhouse Partnership. He talks of a FinTech cluster stretching across the Pennines from Manchester to Leeds and speaking earlier this year declared: “We believe we are starting to get some real traction.”

He believes FinTech’s growth will come from existing financial services businesses in the region, pointing to its strength. “Looking at what is achievable in terms of growth, it is about existing businesses bringing new offers to the market. Disruption in retail will also bring other opportunities forward.

“I believe we are on the cusp of something that could be very big and have significant potential for growth.”

Jessica Katsouris, partner at KPMG in Manchester, agrees there is strong growth in the sector, with rising numbers of wealth managers in the region investing in the ‘tech space’

Traditional banks and building societies are also working hard to give consumers “face to face” experiences in the digital world as they look to strengthen customer loyalty.

And with the disruptors continuing their role, she believes the emergence of a new wave of challenger banks is also set to build.

Katsouris says: “We are seeing quite a big inflow of applications for banking licenses from organisations based here in the North West; some of which have started life predominantly as lenders.”

Commenting on TheCityUK report Richard Bell, who chairs the organisation in Manchester, says: “Greater Manchester and the North West has a hugely diverse financial and related professional services offering.

“Here we are seeing a rapidly-growing ecosystem encompassing business, media, politics and academia. Increasingly our centre in Manchester is regarded as a truly global hub, and we need to ensure that new infrastructure – specifically transport and housing – matches this growth.”