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Making Business Sense
City Growth Tracker July 2017
Welcome to the July edition of Irwin Mitchell’s UK Powerhouse report. This is our 8th City Tracker and I’m delighted to say it provides our most in-depth economic analysis yet.
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City Growth Tracker July 2017
I think it’s fair to say that since our last report in April, which coincided with Article 50 being triggered, the political and economic landscape has changed considerably.
you will see on page 8 that we have widened the scope of our report by increasing the number of cities in our league table from 38 to 45.
Not only did the Government call a snap General Election and lose its parliamentary majority, we saw the official start of Brexit negotiations. Although the Government’s proposals on a number of issues have started to emerge, discussions are still at a very early stage which means businesses are continuing to contend with uncertainty and confusion in the short to medium term.
We have also introduced an industry focus (page 21) where we have assessed the important role that financial services play within our city economies. This includes a ‘Financial Powerhouse’ league table which highlights the sector’s contribution to city growth and job creation.
Meanwhile, we have seen the UK economy’s growth start to slow down. In our previous report, quarterly GDP growth in the UK economy stood at 0.7%, whilst in the first three months of the year, this figure stood at just 0.2%. There are numerous reasons why this has happened and in this latest report, we examine the issues and trends by looking closely at the economic strength of our cities. To support our unique analysis in this area,
Irrespective of where you are located, or the sector in which your organisation operates, we are very aware that the current political and economic situation has the potential to create numerous challenges. Whether these obstacles and opportunities relate to employees, a commercial dispute, intellectual property, a financing issue, or an acquisition target, we want to work closely with you to ensure that together we can support and help drive future success for your business.
Victoria Brackett
CEO of Business Legal Services E: victoria.brackett@irwinmitchell.com
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Irwin Mitchell’s Powerhouse Tracker Official economic data sources for the UK’s cities are often dated and fail to provide a reliable snapshot of the UK’s localised economies – the last set of regional economic accounts corresponds to the economy in 2015. To more accurately estimate current economic activity, Cebr has utilised a range of more timely indicators to create a ‘nowcast’ of GVA and employment for a range of key cities across the UK. The latest outputs of this give us a picture of how the regional economies of the UK are performing in 2017.
Contents UK Economy • GDP • Labour Market UK Cities in Q1 2017 • GVA* Growth • Employment Sector Focus: Financial Powerhouse • Recent growth trends • Financial GVA and employment by city • Opportunities and obstacles
*GVA: Gross value added (the value of goods and services produced)
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City Growth Tracker July 2017
Key Facts Quarterly UK GDP growth slowed to 0.2% in Q1 2017, a marked downtick from 0.7% posted in Q4 2016 and the weakest quarterly expansion since Q1 2016. In annual terms, UK output rose by 2.0% in the year to Q1 2017. In Q1, as households reined in spending, the services sector slowed to expand by just 0.2%. Production output also grew by a modest 0.1% in Q1, within which manufacturing industries rose 0.3% on the quarter. With rising inflation eroding real incomes, it is set to be a tough 2017 for many consumer-facing industries, although prospects for many exporting firms are brightening alongside an uptick in international demand. Cambridge topped the table in terms of annual GVA growth in Q1 2017, driven by its flourishing tech sector and benefitting from high investment and innovation. Seven new cities were added to the City Tracker this quarter, including Reading which enters the top five of the Powerhouse Table.
The results of the latest interactive Powerhouse City Growth Tracker can be viewed at www.irwinmitchell.com/ukpowerhouse
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UK economy makes slow start to 2017 Over the first quarter of 2017, the UK economy grew by 0.2%, a considerable slowdown from a quarterly expansion of 0.7% in Q4 2016. Although growth remained resilient in the months following the Brexit vote last year, a number of factors have undermined much of the momentum which had been building in the UK economy. The slowdown in GDP was predominately driven by a weakened performance in the services sector. With the tightening squeeze on household incomes taking hold over Q1, consumer-facing industries such as retail and accommodation were the hardest hit. Although business services and finance fared better, this could not offset the notable deceleration across the wider services sector, which expanded by just 0.2% in Q1. The consumer spending slowdown, which is likely to remain a limiting factor for the UK economy over 2017, has been driven by a combination of rising inflation and stuttering wage growth. Consumer Prices Index including owner occupiers’ housing costs (CPIH) has risen consistently and reached
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City Growth Tracker July 2017
a five-year high of 2.7% in May, eroding household spending power. Rising prices are also exerting pressure on businesses, with firms facing higher input costs and smaller margins. It was also a relatively subdued opening quarter for the production industries. Weighed down by low activity in the energy sector due to warmer than expected temperatures, the UK’s industrial production output grew by just 0.1% over Q1. Manufacturing, the largest production subsector, expanded by 0.3% on the quarter. Having contributed heavily to growth in the previous quarter, net trade made a large negative contribution to GDP. The fall is largely explained by movements in nonmonetary gold and a rise in total imports. In fact, UK exports saw robust growth in Q1, with many UK firms benefitting from strong international demand, partially boosted by increased price competitiveness due to the weaker pound.
Figure 1 GDP growth (RHS); UK expenditure components percentage contribution to GDP growth (LHS), quarter-on-quarter
Source: Office for National Statistics
The UK labour market continues to perform well, with the employment rate reaching a record high of 74.8% in Q1. Over this period, UK employment rose by over 120,000 as the unemployment rate fell to 4.6%. Strong hiring intentions, indicated by high vacancy levels, imply the labour market is set to continue growing over 2017. However, wage growth remains the weak spot of the labour market, slowing consistently in recent months.
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With the UK economy decelerating in the first quarter, most cities similarly saw a slowdown in gross value added (GVA) expansion. Growth varied from 1.4% in Belfast to a peak of 2.9% in Cambridge. The softening in household expenditure particularly hit cities with consumer-facing industries such as retail, while other service sectors held up more resiliently.
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UK Cities in Q1 2017 GVA League table ranking
Growth (YoY)
1
Cambridge
9,044
2.9%
2
Milton Keynes
10,878
2.8%
3
Oxford
8,182
2.5%
4
Inner London
251,568
2.4%
5
Reading
6,560
2.3%
6
Greater Manchester
58,969
2.3%
7
Peterborough
5,323
2.3%
8
London
374,694
2.3%
9
Manchester
16,857
2.3%
10 Derby
6,832
2.3%
11 Bristol
13,699
2.3%
12 Ipswich
4,497
2.2%
13 Exeter
3,981
2.2%
14 Nottingham
8,686
2.2%
15 Coventry
7,563
2.2%
123,126
2.2%
17 Brighton
7,034
2.2%
18 Southampton
5,800
2.1%
19 Swindon
6,520
2.1%
20 Leeds
20,953
2.1%
16 Outer London
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GVA Q1 2017, ÂŁmillions (Annualised, constant 2012 prices)
City Growth Tracker July 2017
UK Cities in Q1 2017 GVA continued 21 York
4,945
2.1%
22 Sunderland
5,663
2.1%
23 Birmingham
24,538
2.1%
24 Wakefield
6,455
2.0%
25 Bournemouth
4,507
2.0%
26 Norwich
2,776
2.0%
27 Liverpool
10,756
2.0%
28 Edinburgh
18,153
2.0%
29 Stockport
6,021
2.0%
30 Rotherham
4,253
2.0%
31 Sheffield
11,100
2.0%
32 Newcastle
8,928
2.0%
33 Hull
5,051
2.0%
34 Stoke-on-Trent
4,688
2.0%
35 Portsmouth
5,248
1.9%
36 Glasgow
19,304
1.9%
37 Leicester
7,337
1.9%
38 Cardiff
9,157
1.8%
39 Bradford
9,306
1.8%
40 Wolverhampton
4,541
1.7%
41 Plymouth
5,080
1.6%
42 Swansea
4,409
1.6%
43 Aberdeen
12,126
1.6%
44 Middlesbrough
3,276
1.5%
45 Belfast
9,313
1.4%
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UK Cities in Q1 2017 Employment League table ranking
Level, Q1 2017
Annual % Change
1
Milton Keynes
166,169
1.9%
2
York
118,390
1.7%
3
Manchester
434,259
1.5%
4
Exeter
128,298
1.5%
5
Coventry
185,742
1.5%
6
Birmingham
547,759
1.4%
7
Nottingham
224,572
1.4%
8
Inner London
3,187,304
1.4%
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Bournemouth
94,488
1.4%
10 Oxford
125,195
1.4%
11 Wakefield
150,961
1.4%
4,983,086
1.4%
13 Cambridge
131,876
1.4%
14 Liverpool
280,142
1.4%
15 Peterborough
104,375
1.3%
16 Greater Manchester
1,271,627
1.3%
17 Outer London
1,795,782
1.3%
18 Brighton
152,157
1.3%
19 Stoke-on-Trent
106,917
1.3%
20 Leeds
433,738
1.3%
12 London
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City Growth Tracker July 2017
UK Cities in Q1 2017 Employment continued 21 Glasgow
423,465
1.2%
22 Leicester
207,683
1.2%
23 Reading
122,571
1.2%
24 Swansea
121,884
1.2%
25 Sunderland
128,605
1.1%
26 Newcastle
215,809
1.1%
27 Derby
136,743
1.1%
28 Wolverhampton
112,453
1.1%
29 Sheffield
277,835
1.1%
30 Belfast
129,359
1.1%
31 Southampton
145,118
1.0%
32 Edinburgh
335,863
1.0%
33 Cardiff
225,783
1.0%
34 Ipswich
80,164
1.0%
35 Hull
145,052
1.0%
36 Swindon
117,791
1.0%
37 Norwich
134,764
1.0%
38 Rotherham
97,091
0.9%
39 Bradford
211,012
0.9%
40 Bristol
332,183
0.9%
41 Portsmouth
108,441
0.8%
42 Aberdeen
184,665
0.7%
43 Plymouth
138,265
0.6%
44 Stockport
122,609
0.6%
45 Middlesbrough
74,528
0.6%
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“It is a challenging time for many businesses, and although many remain nervous as a result of the economic and political uncertainty, we are currently seeing a lot of organisations reviewing their strategic options and taking advantage of the acquisition opportunities that exist, particularly those which can bolster their domestic and international sales channels. We are also seeing some companies taking the opportunity to streamline their operations and disposing of non-core divisions.� Chris Rawstron National Head of Corporate
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City Growth Tracker July 2017
Cambridge takes top spot on the Powerhouse Table This quarter sees Cambridge overtake Milton Keynes to take the first place on the Powerhouse Table. In the year to Q1 2017, total economic output of the city, measured in terms of real GVA, rose 2.9% compared to the same period a year earlier. The city continues to draw strength from a skilled workforce. Cambridge is home to a range of highly productive industries, including advanced engineering, design and pharmaceuticals, with Astra Zeneca soon to complete their new £330 million global research HQ. Cambridge’s tech and venture capital cluster, known as ‘Silicon Fen’, houses over 1,000 high-tech companies including Microsoft, CSR and Jagex, and typifies the city’s flourishing business culture. More patents are published in Cambridge than in any other UK city, and 80% of the city’s start-ups are still in business after three years. In second and third spots respectively, Milton Keynes and Oxford once again posted strong growth in the year to Q1. Milton Keynes continues to benefit from dynamic and productive knowledge-based industries and a professional workforce. The city’s booming real estate market, however, is a double-edged sword as increasing property prices are mirrored in rises in business rates, updated in April this year. This will increase
costs and squeeze the margins for businesses in the city’s most coveted areas. Oxford’s economy has flourished in recent years with the city specialising in a number of hightech industries such as biotech. With strong international investment, and a number of business incubators like the Fab Accelerator, Oxford is set to remain an entrepreneurial hub. London also saw strong growth in Q1, with Inner London expanding by 2.4% annually to return to the top five in the Powerhouse Table. The capital boasts access to a huge pool of talented labour, with almost a quarter of new graduates (24%) working in London.1 Such talent is one factor in London’s successful business climate: no other UK city produces more start-ups per person. Consequently, the capital is home to more than a third of Europe’s tech unicorns – start-ups valued at over $1 billion – including Transferwise, Funding Circle and augmented reality app maker Blippar.2 With falling real wages due to accelerating inflation, it was a poor Q1 on the high street as retail volumes bought fell 1.4% compared to the previous quarter. However, despite a wider UK retail downturn, some cities represent bright sparks. For example,
1 Centre for Cities, 2017 http://www.centreforcities.org/wp-content/uploads/2017/01/Cities-Outlook-2017-Web.pdf 2 Tech nation, 2017 http://technation.techcityuk.com/cluster/london-2/
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Sheffield has seen an uptick in high street activity, boosted by the redevelopment of The Moor drawing consumers into the city centre. The Moor Markets, home to over 90 independent businesses, have helped drive retail activity – total footfall rose over 7% annually in 2016, including a 14% increase over Christmas compared to the previous year.3 Sheffield’s economy is also home to a growing advanced manufacturing sector, with McLaren Automotive announcing they will build parts of their supercars in the city, bringing £100 million and over 200 jobs to the local economy. Rising to 21st on the Powerhouse Table, Sheffield’s economy is estimated to have grown by 2.1% annually to Q1. Many cities in the Midlands, the heartland of British automotive manufacturing, saw robust growth in early 2017. Over 820,000 new cars were registered over Q1, a record 6.2% year-on-year rise, although the Q1 figures were partially distorted by buyers rushing to buy vehicles to avoid tax rises in April. Manufacturers in the Midlands, including Toyota in Derby and Jaguar Land Rover (JLR) in Birmingham, have benefitted from such demand. Coventry and its surrounding area is also home to plants for JLR, Aston Martin, and BMW engines.
Following a record £77.5 billion turnover for the auto industry last year, it could be another strong year in 2017, although there are long-term concerns around losing access to the EU market.
With a poll from the Confederation of British Industry (CBI) indicating manufacturing enjoyed its largest growth in domestic orders since 2014 over April,4 it is set to be a successful year for many manufacturers. Particularly strong order books have been seen in the chemicals and mechanical engineering sectors in recent months,
3 https://realestate.ipe.com/markets-/sectors/retail/retail-uk-a-land-of-powerhouses/realestate.ipe.com/markets-/sectors/retail/retail-uk-a-land-ofpowerhouses/10018844.fullarticle 4 http://www.cbi.org.uk/news/uk-manufactured-goods-in-demand-with-strong-domestic-and-export-performance/
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City Growth Tracker July 2017
likely to benefit cities in the North East manufacturing export cluster, as over 50% of the UK’s petrochemicals are made in this region.
investment in training and reducing long-term unemployment. In the region, Middlesbrough’s unemployment rate of 8.1% over 2016 must be addressed.
The UK’s second most populous city, Birmingham, once again posted steady growth in Q1, expanding 2.1% annually. While the Midlands city has a relatively low exposure to international markets, a high proportion of the city’s economy is based around retail, health and professional services, with expansion seen in construction and manufacturing output. Also, both the city’s employment and output are likely to be boosted by HSBC’s relocation of around 1,000 jobs from London. However, the city’s workforce is amongst the least qualified in the UK, with 16.5% of the city’s working age population lacking any formal qualifications in 2015.5
Another city likely to enjoy greater devolved powers and funding is Manchester. The Greater Manchester metro mayor Andy Burnham will look to build on the area’s strengthening skills base and momentum in the tech sector by increasing education spending. Although losing its place in the top five of the Powerhouse Table, Manchester once again posted robust economic growth of 2.3% over Q1. Manchester’s welldiversified economy, integrating a strong media sector, rich scientific development, and high-tech digital start-ups, mean the city’s prospects are bright.
The election of metropolitan mayors may help drive growth in many local economies. For example, the newly elected West Midlands ‘metro mayor’ Andy Street aims to regenerate high streets and improve public transport, a key catalyst for reducing residents’ reliance on their cars and cutting congestion. Tees Valley mayor Ben Houchen’s priorities include 5 The latest figures from the Annual Population Survey relating to qualifications are for 2015
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Figure 2 Top and bottom five cities by annual GVA growth, Q1 2017
Source: Office for National Statistics, Cebr analysis
Of the seven new cities in the 2017 City Tracker, the highest placed is Reading, fifth in the Q1 Powerhouse Table with annual GVA growth of 2.3%. The city’s highlyqualified workforce has helped deliver consistent economic growth to the city. Reading’s advantageous position along the M4 corridor means it is well placed to absorb skilled workers from London. Home to companies such as Microsoft and Cisco Systems, Reading has become a hub for digital research and development (R&D), fuelled by the Thames Valley Science Park and the city’s university. Driven by the city’s high productivity and qualified workforce,
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City Growth Tracker July 2017
Reading’s average weekly wage of £634 in 2016 was second only to London (£697) on the City Tracker. Another city benefitting from a number of high growth industries is Leeds, specialising in healthcare & medical technologies, education technology and game development. The city is home to large digital companies such as NHS Digital, Rockstar Games, and houses Sky’s Betting, Gaming, and Technology enterprises. Leeds saw GVA growth of 2.2% in the year to Q1 2017.
Figure 3 Five fastest and slowest expanding cities by year-on-year employment growth in Q1 2017
Source: Office for National Statistics, Cebr analysis
Britain’s employers continue to take on more staff. Over Q1, total employment rose by 102,000 compared to the previous quarter, as the proportion of 16-65 year-olds in work reached a record high of 74.8%. Such growth has been reflected in another strong performance in local labour markets.
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UK Powerhouse City Growth Tracker To download all previous City Growth Tracker reports and view data on how all 45 cities performed in Q1 2017, please visit our interactive map online at www.irwinmitchell.com/ukpowerhouse The maps also highlight city economic performance in Q1 2007 and look ahead to what is expected to happen in the next decade. All of the data has been produced by leading think tank, the Centre for Economic & Business Research (Cebr), and is based on the modelling of a range of timely indicators including local labour market data to provide statistics of output and employment. For any media enquiries for UK Powerhouse, please contact david.shirt@irwinmitchell.com
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City Growth Tracker July 2017
Job growth remains impressive in Milton Keynes In the year to Q1 2017, Milton Keynes saw the strongest annual job growth, of 1.9%. Prospects in the South East city’s services sector remain bright with food and support services firm Compass UK winning the contract as a supplier for Milton Keynes University Hospital. Furthermore, hiring intentions in the city remain strong, with the latest Robert Walters Jobs Index showing vacancies in Milton Keynes increased by 53% in Q1 2017.6 Another city with strong jobs growth over the past year is York. The city’s expanding business services sector is helping drive growth. More than 160 jobs are also set to be created with ACM Global Laboratories expanding in the city, with other jobs recently created in the retail and restaurant sector.
The strength in global trade may help support jobs growth in a number of high exporting cities. UK cities with notable exposure to international markets, such as Hull, Derby and Coventry, are likely to profit from strong demand over the year. Derby’s well-performing manufacturing sector is likely to continue delivering jobs, with train maker Bombardier recently signing a contract which will create 2,500 jobs in the city by 2020. Other cities are in a more precarious position. Sunderland’s reliance on automotive manufacturing may leave the city exposed to a slowdown in the industry. Similarly, Aberdeen’s dependence on the oil industry leaves workers vulnerable to global price shifts. With the price of a barrel of Brent Crude falling to below $45 in recent weeks, firms may be unwilling to commit to hiring with pressure on revenues.
For the year ahead, strong vacancy levels are likely to support ongoing momentum in job growth. Strong job creation is likely in cities such as Brighton, Nottingham, and Sheffield, which saw the largest monthly increases in job postings in May, according to CV-Library.7
6 http://www.miltonkeynes.co.uk/news/milton-keynes-sees-53-year-on-year-job-growth-1-7931274 7 http://smallbusiness.co.uk/job-vacancies-rise-2-2538890/
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“In 2016, the financial and insurance services sector contributed over £124 billion in output to the national economy but it is facing some significant challenges, including the loss of passporting, which is almost certain to happen. The loss of freedom of movement upon leaving the single market could limit the availability of skilled European labour and significantly hamper the UK’s financial sector, in particular the fintech sub-sector.” Andrew Watson Head of Business Legal Services, London
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City Growth Tracker July 2017
Sector Focus:
Financial Powerhouse The financial sector is one of the most instrumental elements of the UK’s economy. Over 2016, financial and insurance services contributed over £124 billion in output to the national economy, representing over 7% of total UK GVA. In 2016, over 3% of all workforce jobs in Britain were in the finance and insurance sector, with a million jobs in total.8 With the industry’s environment changing as Britain enters into Brexit negotiations, the sector faces obstacles as well as opportunities. In this quarter’s Sector Focus, we analyse recent trends and examine the key factors affecting the financial industry across UK cities in 2017. Rather than being spread across the UK’s cities and regions, the industry tends to be highly centralised, with concentrations of financial activity located in city clusters. The most prominent of these is in London, with the capital’s financial centre making up just over half of the entire industry output across the UK last year. As seen by the Financial Powerhouse table, which tracks the observed growth in UK’s cities’ financial industries, London not only has the largest financial sector in absolute size but has also posted the strongest growth
in recent years. Between Q4 2012 and Q4 2015, the capital’s total GVA derived from financial and insurance activities rose by £1,436 million, representing a 10% increase. In term of jobs, there were over 170,000 more employed in the capital’s financial sector in 2016 than three years prior. London’s position at the top of Z/ Yen’s Global Financial Centres Index highlights the world-leading position of the capital’s financial industry, with the city’s infrastructure, business environment and human capital underpinning its reputation.9 Outside of the capital, recent years have seen strong breakthroughs in the financial industries of a number of cities. With pressure on the capital’s financial sector, smaller industry clusters have begun to develop. One example of this is HSBC’s decision to locate the headquarters of HSBC UK (the high street lender which recently separated from other parts of the bank) in Birmingham rather than London. Furthermore, Leeds has expanded its financial sector substantially in recent years, placing second only to London in terms of both GVA and employment growth. In fact, the city’s total output from finance and insurance increased 40% from 2012 to 2015. The Yorkshire city is home to the
8 House of Commons Briefing Paper, 2017 - Financial services: contribution to the UK economy 9 http://www.longfinance.net/images/gfci/20/GFCI20_26Sep2016.pdf
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headquarters of three of the five largest building societies and 30 national and international banks. Also in the region, Sheffield’s financial sector is on the up, expanding 28% from 2012 to 2015, with around 43,000 employed in the sector in 2016. Despite its relatively small financial industry, Oxford has also seen some high profile firms relocate to the city. For instance, when in 2013 the well-established fund manager Neil Woodford decided to establish his own firm, Woodford Investment Management, he chose to base it at an estate near Oxford.10 The Scottish cities of Glasgow and Edinburgh have both seen strong output growth in their financial industries, sitting respectively at 3rd and 4th on the Financial GVA Powerhouse Table. Both are established bases for international finance, with firms such as JP Morgan located in each of the cities. In terms of total GVA, Edinburgh is the secondlargest financial centre in the UK, particularly specialising in pensions and investment, with 23% of the city’s total output derived from the sector. Both cities’ highly productive fintech (or financial technology) industries also provide cause for optimism in coming years, with the University of Strathclyde predicting the sector could create 15,000 Scottish jobs in the next 10 years.11
There are also a number of expanding financial clusters in the South. For example, at fifth on the Financial Powerhouse Table for GVA growth, Swindon has grown strongly in recent years. With a maturing banking and insurance sector, the value of the city’s finance and insurance sector increased by over £50 million from 2012 to 2015. Also in the South West, Bournemouth and Bristol have expanded well. Around 4,000 people are employed at JP Morgan’s Bournemouth centre, and Bristol’s employment in the sector grew by over 10,000 from 2013 to 2016. In the South East, Milton Keynes’ financial sector has helped deliver jobs and growth to support the city’s flourishing economy. While many of the UK’s financial centres are developing well, a number of factors may influence future growth. Primarily, the UK’s exit from the EU is sure to have a significant impact on the financial services industry. Of all of the UK’s service exports, the financial sector is most reliant upon access to European markets. The current system of passporting, which allows UK-based financial firms to operate throughout the European Economic Area, is almost certain to be lost. A possible replacement for this is an ‘equivalence’ system, which would facilitate cross-border trading, but there remain legal challenges to a potential agreement. In
10 http://www.thisismoney.co.uk/money/news/article-4347326/BIG-SHOT-WEEK-Fund-manager-Neil-Woodford-56.html 11 http://www.scotsman.com/future-scotland/tech/could-importance-of-fintech-to-scotland-grow-to-rival-north-sea-oil-1-4461055
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City Growth Tracker July 2017
any case, it would be a downgrade from passporting, which allows virtually frictionless financial services exports. Such changes will undeniably affect the UK’s financial industry, in particular in London. While the capital’s world-leading financial sector will not disappear overnight, changing regulations mean the City’s competitive advantage may be diminished. Already, a number of banks have indicated that this may affect their future plans. For example, JP Morgan Chase has said that 4,000 of its UK jobs are at risk.12 Other firms have been more cryptic with their messages, but it is clear that banks will be putting together contingency plans, such as those from Goldman Sachs, which employs over 6,000 people in the UK.13 One organisation which will certainly be leaving the capital is the London-based European Banking Authority, which employs around 160 people and may soon move to Frankfurt. Think tank Bruegel has estimated that in total 30,000 jobs could move from London to the EU due to firms relocating after Brexit.14 Losing access to talent could also significantly hamper the UK’s financial sector. Availability of skilled European labour and the ability to draw from an international pool of talent has helped drive growth
in the financial industry; loss of freedom of movement upon leaving the single market may undermine this. One subsector particularly sensitive to this is fintech. Although there is a great degree of uncertainty over the full impact of the Brexit negotiations upon London’s financial industry, a negative impact to some degree will be impossible to avoid. In the long-run, while London’s position as an international location for finance is likely to endure, the momentum felt in the industry in recent years will probably slow. Given the importance of the industry to the UK economy, a slowdown in the UK’s financial sector would affect the country’s wider growth prospects. Another challenge facing the industry is the ring-fencing regulation which has set a deadline for the UK’s banks to separate retail money from riskier investments. The new rule, which requires banks to ring-fence such operations by 2019, represents one of the largest structural reforms ever imposed on UK banks. Although it should make the sector safer, it may exert pressure on firms. Big banks will each spend an additional £200 million to implement the reforms, and higher costs may be passed onto customers.15
12 https://qz.com/1011160/brexit-negotiations-the-best-and-worst-cases-for-the-uk-finance-industry/ 13 http://www.bbc.co.uk/news/business-39812120 14 http://bruegel.org/wp-content/uploads/2017/02/PC-04-2017-finance-090217-final.pdf 15 http://www.telegraph.co.uk/finance/bank-of-england/11934139/QandA-What-is-bank-ring-fencing.html
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UK Cities Financial Powerhouse GVA
League table ranking
Three-Year GVA Growth, Finance and Insurance, change from 2012 to 2015 (ÂŁ million)
Three-Year % Increase
Share of total city GVA (2015)
1,436
10%
17%
1
London
2
Leeds
177
40%
12%
3
Glasgow
128
29%
11%
4
Edinburgh
99
10%
23%
5
Swindon
51
27%
14%
6
Bradford
50
43%
7%
7
Sheffield
43
28%
7%
8
Newcastle
42
23%
5%
9
Milton Keynes
38
22%
8%
10 Bristol
37
10%
11%
11 Ipswich
33
24%
4%
12 Cambridge
25
26%
3%
13 Reading
22
22%
7%
14 Wolverhampton
22
42%
6%
15 Bournemouth
22
8%
14%
16 Leicester
14
27%
4%
17 Manchester
13
3%
11%
18 Cardiff
13
6%
9%
19 Liverpool
10
7%
6%
20 Rotherham
10
42%
3%
24
City Growth Tracker July 2017
GVA continued 21 Stoke-on-Trent
9
18%
5%
22 Wakefield
8
21%
3%
23 Sunderland
6
9%
5%
24 Middlesbrough
5
22%
2%
25 Derby
4
14%
2%
26 Norwich
4
2%
10%
27 Hull
3
17%
2%
28 Oxford
2
2%
2%
29 Plymouth
1
2%
3%
30 Brighton
-
0%
8%
31 York
-1
-1%
8%
32 Swansea
-1
-2%
6%
33 Aberdeen
-1
-3%
1%
34 Peterborough
-4
-4%
7%
35 Stockport
-4
-4%
6%
36 Exeter
-4
-11%
3%
37 Portsmouth
-6
-17%
2%
38 Southampton
- 10
-9%
7%
39 Coventry
- 12
-9%
6%
40 Nottingham
- 27
-25%
4%
41 Birmingham
- 27
-5%
9%
A report for Irwin Mitchell
Š Centre for Economics and Business Research
@irwinmitchell
25
Employment
League table ranking
Three-Year Employment Growth, Banking, Finance & Insurance, change from 2013 to 2016
Employment, Banking, Finance & Insurance, 2016
1
London
170,600
1,394,300
2
Leeds
21,300
94,300
3
Cardiff
16,800
50,400
4
Bristol
10,200
73,100
5
Milton Keynes
9,300
33,100
6
Edinburgh
8,800
94,300
7
Manchester
6,600
102,300
8
Exeter
5,900
18,100
9
Rotherham
5,600
16,600
10 Birmingham
5,500
97,000
11 York
5,300
20,500
12 Coventry
4,800
27,800
13 Swindon
4,400
23,700
14 Hull
4,000
14,600
15 Leicester
3,800
30,900
16 Ipswich
3,800
47,300
17 Stoke-on-Trent
3,700
14,100
18 Wakefield
3,100
20,100
19 Sunderland
2,900
15,900
20 Oxford
2,700
63,000
26
City Growth Tracker July 2017
Employment continued 21 Newcastle
2,700
35,200
22 Liverpool
2,100
44,300
23 Southampton
2,000
21,600
24 Wolverhampton
1,400
15,700
25 Stockport
1,400
23,500
26 Sheffield
1,300
43,700
27 Derby
1,200
17,000
28 Glasgow
1,200
83,200
29 Brighton
1,000
29,100
30 Plymouth
700
18,300
31 Peterborough
400
19,800
-
26,000
33 Cambridge
- 200
25,700
34 Bournemouth
- 300
21,300
35 Norwich
- 700
23,800
36 Reading
- 800
21,500
37 Portsmouth
- 1,100
15,100
38 Swansea
- 1,100
17,000
39 Middlesbrough
- 2,300
7,800
40 Nottingham
- 2,400
35,100
41 Aberdeen
- 5,800
32,400
32 Bradford
A report for Irwin Mitchell
Š Centre for Economics and Business Research
@irwinmitchell
27
Working together to unlock regional growth Irwin Mitchell has joined forces with the CBI to launch a new high-profile campaign which aims to reduce regional productivity differences and add £208 billion to the UK economy over the next decade. The ‘Unlocking Regional Growth’ report has used special access to ONS data to determine the main drivers of regional productivity differences across the UK. For further information and to view the report, visit www.cbi.org.uk/insight-and-analysis/unlocking-regional-growth Disclaimer Whilst every effort has been made to ensure the accuracy of the material in this document, neither Centre for Economics and Business Research Ltd (Cebr) nor the report’s authors will be liable for any loss or damages incurred through the use of the report. Authorship and acknowledgements This report has been produced by Cebr, an independent economics and business research consultancy established in 1992. The views expressed herein are those of the authors only and are based upon independent research by them. London, July 2017
A report for Irwin Mitchell
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