birmingham sector profile - financial services

7/28/2019 Birmingham Sector Profile - Financial Services

1/8file of Birminghams Financial Services Sector

Profile of BirminghamsFinancial Services Sector



1,900+firms in the financial

services sector

20,800+employed in the

sector

9%employment growth

between 2005 and

2010

The Financial Services Sector

Introduction

This profile is one of a suite of seven covering key High Growth Sectors in

Birmingham. The profiles were compiled in 2011 and go beyond analysis of the

available datasets, to enable us to understand how the sectors support the local

economy now, and how we can develop their potential for the future. This has

been achieved by integrating data analysis with intelligence from sector experts

drawn from businesses, research institutions and networks.

Each of the profiles presents statisticalinformation, along with case studies, an

analysis of the sector today, and future

challenges and opportunities.

The seven sectors are:

Business and Professional Services

Financial Services

Creative, Media and Digital

Medical Technology

Transport Technologies

Low Carbon

Advanced Manufacturing

Sector overview

The UK has long been recognised as a global financial centre. While the City of

London and the wider South East

undoubtedly lead the way in terms oftheir significance on the international

stage, the financial services sector is

nevertheless an important element of

other regional and city economies in

the country, such as Birmingham.

Indeed, Birmingham has a long and

great tradition of financial services

activity. The sector grew up in the

18th century alongside the development of the city as a major commercial hub. The

UKs first known building society was formed in Birmingham and the Midland Bankwas founded in the city in 1836. It remained one of the largest high street banks in

Britain until its acquisition (one of the largest of its kind at the time) by HSBC in

1992. Birmingham had its own stock exchange as early as 1845. In that year, the

Major sub-sectors

Banking and Building Societies

Financial planners and advisors

Insurance companies and brokers

Fund management and investment

firms



Birmingham was an obvious

hoice for establishing a client

ervice centre in the UK, and

we were delighted with the

welcome and assistance we

eceived from the city

ollowing our decision to

ocate here.

Paul Hutchins,

Deutsche Bank

World Class Service from Birmingham

Deutsche Bank was founded in 1870 in Berlin, and had

opened its first UK branch in London by 1873. Today, it is

one of the leading global investment banks with more than

100,000 employees in 74 countries, generating a net income

of 2.3bn in 2010.

In 2007 Deutsche Bank opened offices in Birminghams city centre. The offices are

part of a global network of support and processing services for the banks

operations and were established with the specific purpose of adding value to the

bank. There is a strong focus on client service within the centre to ensure a

provision that is timely, accurate, rich in quality and efficient.

Together with premises in Dublin, the services that Birmingham provides to

Deutsche Bank extend across Europe and beyond, linking up with other servicecentres in Florida, India and the Philippines. Since establishing the office,

Birmingham has grown by 300 employees per year on average, and expects that

growth to continue this year. As of the beginning of 2011, the Service Centre in

Birmingham employed 930, located in offices on Broad Street.

With a maturing financial services sector, Birmingham and the Midlands

have a wealth of high calibre, talented individuals both in terms of

graduates and those with extensive experience, valuable resources we

consider critical to our future success. Add to that the highly convenient

transport links that we need as an international business, and we have

the perfect environment to provide a service that is world class.

Managing Director, Paul Hutchins

city was home to 19 stock-broking

firms. The exchange was

subsequently absorbed by the

London Stock Exchange in the

1970s.

While internationally prestigious, the

financial services sector is also a

crucial element of the countrys

economy. The size of the sector

varies according to precise

definition, but it is estimated to employ between one and two million people in the

UK. Politically and strategically, the sector is also very important. Not only has the

sector traditionally been a jewel in the crown of Britains commercial activity

internationally, it is also a major contributor to the Exchequer.

Inevitably, the credit crunch and the resulting recession have been turbulent eventsfor the financial services sector across the world, and especially for its banks. In

early 2011, the climate appeared to be a more settled one, with major businesses

returning to profit and fewer fears of financial institutions (and nations) at risk of

defaulting on their debts. But these are still uncertain times. The global economic

recovery remains relatively weak, banks still appear cautious to lend to businesses,

and political debate over sector regulation continues.

Brindley Place



The business base

2010 data shows the following metrics for the financial services sector in

Birmingham:

The sector comprises 1,951 firms, a five per cent increase on 2005 figures,

and represents three per cent of all Birmingham businesses

The vast majority of firms are very small in size; just two per cent employ

more than 50 people each (four per cent in the UK sector)

The sector employs just under 21,000 people, a growth of nine per cent over

the past five years, and represents four per cent of the city workforce

Gross Value Added in the sector amounts to just over 1bn.

Although they are small in number, the largest firms account for a significant

proportion of employees in the sector: the ten largest firms employ 35 per cent of

the sectors workforce between them. These companies tend to be the large banks

and major insurance companies (see below).

A role for financial services beyond the City of London

There are good reasons for businesses to locate in Birmingham. The city has fast

links to London (90 minutes by rail) and its own international airport, providing a

base for firms seeking to service the City of London and global markets. There is also

plenty of high grade office space in the city centre.

Furthermore, the city and the wider region it serves also provide strong retail and

commercial finance opportunities in their own right. The city is the centre of a region

comprising more than 5 million people, nearly half of whom live in the major

Birmingham/Solihull/Black Country conurbation.

The citys universities help to provide a high quality workforce. Aston University and

the University of Birmingham in particular are recognised for their business and

management courses. For business leaders, there are many opportunities for

networking within the sector, and beyond. Birmingham Forward, for example,

promotes the city and the needs of its businesses, and includes sector businesses

such as venture capital companies and financial advisors. Professional bodies, such as

the British Insurance Brokers Association, are also active in the city.

1bn+contribution to thecitys economy

57firms have their

headquarters in

Birmingham

4%of firms are foreign-

owned

Lloyds Banking Group PLC 1,732

The Royal Bank of Scotland Group PLC 1,322

HSBC Holdings PLC 1,211

Wesleyan Assurance Society 820

Barclays PLC 596

Zurich Financial Services Ag 454

Marsh & McLennan Companies Inc. 336

Axa 297

Guk Broking Services Ltd 226

Ten firms account for 35% of the sectors workforce

Deutsche Bank 930



Addressing the local equity gap: Investbx

Investbx is the countrys first regional investment exchange. Established in

Birmingham in 2007, the onset of the credit crunch quickly changed its business

priorities away from share trading and towards helping to address the equity gap

the funding gap facing many small businesses between the levels of finance

available from business angels and that offered by venture capital (typically up to

2m). While the equity gap has been an established business funding issue for

many years across the UK, the problem was exacerbated by the economic

downturn and the reluctance of banks to offer businesses (especially new

enterprises) alternative finance in the form of loans.

Investbx now helps to bridge the funding gap through equity and debt solutions. It

is able to introduce local and regional businesses to its investor network and help

them to raise equity finance. Since January 2010, it has also operated a Business

Loan Fund unique in the UK to provide loans of between 100,000 and 1m for

small and medium sized companies, often at critical times in their growth and

development. The 10m investment pot behind the fund has been provided by

Birmingham City Council.

Birminghams business finance opportunities

Birmingham is one of the most significant centres for business investment and

financing outside of London. This reflects the volume of funds available for

investment in the region, and the commercial opportunities to invest in.

Birmingham is also large enough to be able to service finance and investment

deals with specialist, locally-based professional advice in areas such as law andaccountancy.

Early stage investment (up to 1-2m) is available from local Birmingham venture

capital firms such as Midven, and WM Enterprise, which manages the Mercia

Technology Seed Fund. Both of these companies focus on technology businesses

and SMEs, the technology focus in part being an indication of the commercial

potential of the citys universities, such as Aston and the University of

Birmingham. Investbx offers other equity and debt financing options (see

below). Larger deals are made possible through major corporate finance

advisory firms based in the city, such as Clearwater Corporate Finance and

Rothschild.

Given the underlying economic conditions, there has been limited appetite for

high risk investment in the recent past. But with returns on investment being so

low in other areas, and a sense that the bottom of the recession has been

reached, the local venture capital market is quite upbeat about future prospects.



The feelings Mutual: Wesleyan Assurance Society

Wesleyan Assurance Society is an established part of Birminghams financial

services landscape. Founded in Birmingham in 1841, the Society grew in stepwith the citys rapid rise as a major commercial centre. While its original focus

was on the provision of life assurance to the burgeoning manufacturing classes,

the Society has developed over time to become a market-leading financial

institution, with a particular focus on servicing professionals, primarily doctors,

dentists, lawyers and teachers. The Society also includes a banking arm and a

General Insurance business.

In recent years Wesleyan has been

successful, both in terms of financial

returns and sector awards. The Society

has in excess of 4.4bn of funds undermanagement and in 2010 achieved a

13.7% gross investment return on its

main with profits fund, one of the best in

the industry. Last year, Wesleyan was

named UK Life Insurer of the Year at the

British Insurance Awards for the second time in three years, having been a finalist

for five consecutive years.

Wesleyan was founded as a mutual society and remains so to this day, 170

years later. With no shareholders, it is responsible only to its customers who

share the benefits of good business performance.

A thriving hub for the insurance industry

Birmingham is a major centre for the UK insurance industry. All of the industrys

major companies, national brokers and networks are represented in the city, such

as Zurich, Aviva, Marsh and Blue Fin. There is also a strong sense of community

which reflects the industrys long standing association with Birmingham. For

historical reasons linked to Birminghams development as a major manufacturingcentre, the local insurance market has a strong focus on commercial insurance

packages (professional indemnity, engineering insurance and other specialisms),

but it also offers a wide range of products to other markets.

In recent years the performance of the insurance market in Birmingham has

mirrored that of the country and beyond. With the onset of the recession,

premiums from clients have reduced as their businesses have shrunk. The industry

has also been hit by a series of large claims, for example from large scale flood

damage in the UK. This has driven the industry to consolidate its position through

mergers and a drive for improved operational efficiency. The advent of direct

insurers has been an increasing trend within the sector, in part to improveefficiency and reduce client premiums. Direct Line, one of the largest direct

insurance companies, has a large operation in Birmingham.

The labour pool for the insurance industry in Birmingham is regarded as good by

employers. The industry is recognised for its focus on qualifications and clear career

paths. Recent candidates have been particularly good for underwriting and broking.

Wesleyan is absolute proof

that strong and successful

financial service companies

can locate in Birmingham

and operate at a national

evel. The rail network link

to London is fast and

efficient so that we have

easy access to the City

when necessary.

Craig Errington,

Chief Executive

Wesleyan



Business location

The largest financial services cluster is around Birminghams city centre and on its

western edge. This area includes the Colmore Business District and the

Brindleyplace development in the centre of the city, and the commercial area

towards Edgbaston, heading out towards the M5 motorway. The central cluster

accounts for the majority of the major financial services firms and its largest

employers. Smaller clusters of micro businesses can be seen in other parts of the

city in district level commercial areas, in particular to the north in Sutton Coldfield.

Colmore Business District: Birminghams commercial heart

Colmore Business District sits at the very centre of Birmingham, close to the

mainline railway stations, with their frequent connections to Birmingham

International Airport and London, and the citys major retail and entertainment

areas.

The district provides an interesting

architectural mix of grand Victorian

buildings and ultra-modern offices. It is

home to around 500 businesses, many of

whom are in the financial services sector.


8/8

Future opportunities

While the future looks more positive for the sector compared to the last few years,

rapid growth and expansion is not expected. Regulation remains a potential

challenge for many of the businesses in the sector. The supervisory structure of the

insurance industry is set to change. It is still unclear how banking regulation may

evolve as a result of the credit crunch, but too restrictive an environment coulddrive important elements of the sector offshore, or lead to diverging business

models (for example, high street banking becoming more separate from the more

risky types of investment banking). However, Birmingham is well-placed to take

advantage of any upturn in financial services activity:

Efficiency, rather than business or employment growth, is likely to be the

focus for the sectors firms as they attempt to re-establish their margins and

profitability. The outsourcing of support services and back office functions

from the expensive City of London may benefit Birmingham as a location

Birminghams financial services sector is mature and well-established,

attracting major banks and insurance companies to the city, and especially its

commercial heart.

The sector is of a sufficient size to secure other professional support services,

such as legal and accountancy firms, and generate and sustain a skilled pool

of labour.

Further Information

Reporting and analysis by Consulting Inplace. Unless otherwise specified, the

statistical data in this profile relates to 2010 figures, based on a bespoke sector

definition determined by Birmingham City Council for the purposes of this research.

Data comes from TBRand may therefore differ from ONS and other business

datasets.

Copies of all seven High Growth Sector profiles can be downloaded from:

www.birmingham.gov.uk/birminghameconomy

Further information about this profile can be obtained from:

Economic StrategyBirmingham City CouncilPO Box 14439Birmingham B2 2JE

T +44 (0) 121 464 2114E [email protected]

Get in touch with Business Birmingham's specialist inward investment team to findout more about the opportunities Birmingham offers:

T +44 (0) 121 202 5022

E [email protected] www.businessbirmingham.com

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