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Manchester & North-West England

How does the region compare in terms of business develop­ ment?

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FINANCIAL TIMES SPECIAL REPORT | Thursday March 12 2009

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Self­belief helps region punch above its weight Remade since the IRA bomb 13 years ago, Manchester feels more at ease with itself, says Andrew Bounds

M

anchester, to paraphrase John Lewis, the UK department store group, is never knowingly undersold. From the swagger of its football teams, United, the European and World Club champions and City, the world’s richest club, to that of bands such as Oasis and The Stone Roses, there are few on the planet that have not heard of this city of 3m in northern England.

Manchester and its hinterland have punched above their weight since they burst on to the scene in the 18th century as the cradle of the industrial revolution. On a plain, at the foot of the Pennine hills it was blessed with few natural advantages. Cut off from the sea, its business community eventually risked much to build a canal to bring the water – and globalisation – to it.

That same iron self-belief turned a failed Olympic Games bid into a phenomenally successful Commonwealth Games in 2002. It has something else in common with John Lewis, which shares profits with employees – a conviction that all are born equal.

The ornate lobby of the imposing town hall holds the busts of famous scientists, engineers and rabble-rousing free trade campaigners rather than the usual collection of gentry.

Nearby is a statue of a US president – Abraham Lincoln – but it is there to celebrate not him but

the tens of thousands of mill workers who suffered hunger during the American civil war to support a boycott of the slavepicked cotton of the south.

The historian AJP Taylor said: “Manchester is the only English city which can look London in the face, not merely as a regional capital but as a rival version of how men should live in a community.”

Remade since an IRA bomb wrecked the city centre in 1996, the fierce rivalry with London, Liverpool and Leeds that spurred it on is increasingly forgotten as the city feels more at ease with itself.

Graeme Whittaker, managing partner of Grant Thornton, the accountants, in the north, has just returned from a year working in the capital. “I find Manchester more cosmopolitan than London,” he says. “With the

mayor there now it is all about being a Londoner. Here people just take you as you are. It is an incredibly vibrant city.”

As in London, the streets of Manchester may be paved with gold. Colin Sinclair, chief executive of Midas, the inward investment agency, is typical of those now shaping its future. He began his career running nightclubs in disused warehouses.

Tom Bloxham, the founder of Urban Splash, which made city centre living hip again in Britain’s provincial cities, began selling posters in the city as a student. Carol Ainscow, a property developer, helped create its famous nightlife, developing a gay area along its disused canals.

Sir Howard Bernstein, Manchester City Council chief executive, began his career as a clerk.

Sir Richard Leese, the council leader, was a teacher.

Inside this issue Property The market has withstood the downturn well, writes Daniel Thomas, partly because of its attraction to a relatively diverse set of occupiers Page 2 Professional services After rapid growth in recent years, some firms in the sector are feeling the heat, writes Andrew Bounds Page 2

Transport The rejection in a referendum of a package of reforms leaves the challenges of funding for public transport and tackling congestion unresolved, writes Robert Wright Page 3 Visitor economy Cultural diversity is a big part of Manches­ ter’s appeal, writes William Hall Page 4

John Whittaker, the founder of Peel Holdings, which has had a huge impact as owner of the Ship Canal and the Trafford Centre shopping mall, and is developing MediaCityUK, a new home for the BBC, grew up in the deprived ex-cotton belt of Lancashire.

Y e t s o u t h of M anchester, Cheshire is home to some of the wealthiest enclaves in the country, though you might not notice in some towns. Martin Kirby, north-west managing director of Tenon, an accountancy firm, says: “There are a lot of great entrepreneurs here. But when you have earned it you don’t flaunt it. There’s a north-south divide about that.”

Mr Sinclair says that while the recession had slowed decisions by some companies there is still interest in investing. “We have got a full pipeline,” he says.

Greater Manchester already hosts 1,200 foreign companies, accounting for half of gross value added, he says.

Bank of New York Mellon, which moved to Manchester in 2005, has 1,000 employees there, almost all hired locally and trained inhouse. Jackie Williams, the Londoner who relocated to manage the move, says that although there was some initial scepticism about the move, it has shaved a third off costs. “We are delighted we did it. I did not expect to to get such good quality people,” she says.

Manchester is also improving its highbrow cultural offering. It is already home to the Hallé Orchestra and Salford’s Lowry centre, while the Manchester International Festival is growing Continued on Page 2

Still waters run deep: the Lowry footbridge and Manchester Ship Canal

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FINANCIAL TIMES THURSDAY MARCH 12 2009

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Doing Business in Manchester & North­West England

Diverse client base lifts hopes for soft landing PROPERTY

So far the market has withstood the downturn well, says Daniel Thomas

M

ancunian developers were as quick to build new offices during the last years of the property boom as any in the UK but so far the breadth of occupier demand has left the city office market comparatively sound.

Last year saw near record offices take-up of 1.1m sq ft, from 932,700 sq ft in 2007 according to Knight Frank, an impressive performance given the onset of the economic recession. The period also saw an increase in prime rents of 18 per cent.

However, this year would appear more difficult. Even with last year’s occupancy level, the availability of “ready-to-occupy” space in Manchester rose by 37 per cent during 2008 to stand at 1.8m sq ft, according to CB Richard Ellis.

And, while London office demand is more of a straightforward function of the health of the financial

system, there will inevitably be ripple effects in cities such as Manchester as businesses consolidate and reduce headcount.

So far, however, the market has withstood the downturn well, partly because of its attraction to a relatively diverse set of occupiers, from law and accountancy firms to the public sector.

Michael Hawkins, partner of consultancy WHR, says there is more than 150,000 sq ft of office space in solicitor’s hands at the moment,

Agents point to generous incentives being offered by rival landlords to secure income showing that demand is still strong. “Manchester has shown deep resilience given a broad economy that is unusual compared with other cities,” he adds.

Last year benefited from the maturing of Manchester’s largest office scheme, Allied London’s Spinningfields development, which completed a number of large lettings including Bank of

New York Mellon, Pinsent Masons, Baker Tilly, General Medical Council and BDO Stoy Hayward.

The latter few, in particular, show why many agents are hopeful of a softer landing during the property downturn, given the relative resilience of the professional services sector.

The largest requirements for new offices are from law firms Hill Dickinson and Beachcroft. There are also potential moves by accountancy firms such as PwC, PKF and Watson Wyatt.

Meanwhile, the other major office relocation – the short-term move of Manchester City Council while its new headquarters is built – shows the sort of reliance that the office market has on local and central government requirements.

The council has now decided on a move to Spinningfields, but agents are hopeful that central government will still move departments over the next few years in what is seen as the tail end of the Michael Lyons review into public sector office occupation.

Last year, for example, many of the other key lettings were public sector or charity driven: Argent’s 3

Letting things settle: Mike Ingall of Allied London, developer of Spinningfields, is waiting for the economy to stabilise Piccadilly Place letting to the Insolvency Service; The Exchange to social care charity Turning Point and the Parliamentary and Mental Health Ombudsman; and The Hive, a joint venture between the council and Argent, to the Arts Council.

To this should be added the move by the BBC to Peel Holdings and Central Salford URC’s MediaCityUK, which is hoped to bring further benefits as associated companies move nearer their meal ticket.

Rents are predicted to stand firm for these reasons, and because they never saw the same sort of inflation as some areas. Office rents in the city centre have been relatively static at £28.50 per sq

ft, although rents of more than £30 per sq ft were achieved on smaller lettings.

But rents are not expected to grow as demand inevitably slows. Expansion is no longer the main driver of take-up, and instead lease expiries and breaks are likely to become more important. Companies can strike very attractive deals on rents and fit-out costs.

Manchester office agents already point to increasingly generous incentives being offered by competing landlords in order to secure income during the recession.

John Ogden, a director of CBRE, says: “In 2009, we expect rents to remain between £25-£30 per sq ft but expect there to be significant

pressure on incentives.”

The central Manchester market has about 500,000 sq ft of vacant new-build offices and the same again is due for completion or being built. There are reports that Carlyle Group and Orchard Street are offering several years rent-free on 15-year leases at Piccadilly Place and the Belvedere office developments. Ask is still looking for lettings at the 180,000 sq ft One First Street.

The next few years will be more challenging, as witnessed already by a slowdown in pre-letting activity.

Newer developments may struggle to be let, but the good news is that the longer term picture appears positive given the stop on build-

ing work. Agents even predict a shortage of new offices from 2011.

Mike Ingall, chief executive of Allied London, sees a positive medium-term picture for the office market – particularly given lease expiries in 2010 and 2011 – but admits that he will not develop any new buildings until the economy stabilises.

Development has fallen sharply, with nine new starts recorded by the new Drivers Jonas cranes survey, compared with 19 developments in 2008 and 32 in 2007.

The public sector, as partner or occupier, is involved in five of these, again reflecting a key strength of the city centre in its public sector demand.

Sir Howard Bernstein, chief executive of Manchester council, says it will redouble its efforts to work with the private sector on creating places for people to live, work and invest.

“The economic downturn is affecting our partnerships and employers, especially the property sector and it is more important than ever to work together . . . so we are prepared for when we come out of the downturn to make the most of the opportunities.

“It is at these times that real leadership is required, demonstrating that, while the vision we have for our city may now be a little delayed in its execution, we are still on course.”

Dealmaking slows but a wealth of opportunities remain PROFESSIONAL SERVICES

Andrew Bounds on a sector where some are feeling the heat Manchester’s community of professional advisers has grown even faster than the rest of its economy in the past 15 years.

There was a time when many business owners would cross the Pennines to Leeds for funding or advice, where big building societies had spawned a large sector.

Not any more.

“We went through the last recession [1990-2] in awe of Leeds and Bradford who came through it quite strong,” says Michael Shaw, managing partner of Manchester-based Cobbetts, the law firm. “With typical Mancunian pragmatism we decided to build a

financial services sector here.”

There has been wealth in the area since the 18th century cotton barons made their first fortunes and built their mansions in leafy Cheshire to the south. NM Rothschild, the merchant bank, began its life in the city. WH Ireland, the stockbroker that has just merged with Blue Oar, remains headquartered there and Brewin Dolphin has long had a big presence.

Andrew Houston, regional director of Barclays Wealth, says: “It isn’t just United and City that hold wealth in Manchester – the city and its catchment areas include some of the most affluent communities in the country.”

Frenetic dealmaking over the past few years has led to growth and attracted top-quality staff happy to find challenging work outside the London hothouse.

Simon Woolley, Manchester

office managing partner at DLA Piper, the law firm, cites the sale of the Littlewoods department store and mail order group for almost £1bn in 2002 as a turning point. “That broke the glass ceiling. There’s not much we can’t do here now.”

But the market slowed in 2008, according to Pro.Manchester, which represents the financial and professional services sector.

There were 154 transactions, worth more than £6bn in total – a third down on 2007. This placed the city second only to London.

A cluster of private equity firms such as Isis, Midas, Zeus Private Equity and Aquarius continue to look for opportunities to invest, drawing on wealthy entrepreneurs as well as institutions.

Investment banks such as Altium and NM Rothschild are on hand to advise.

Ray Stenton, co-director of

LDC, the private equity arm of Lloyds Banking Group, for the north-west, points out the market is alive for smaller deals. “Last year the north-west was the only region outside the south-east to show a rise in the number of

There have been redundancies among the firms that rely on property and corporate finance deals in the £5m to £50m range – typically involving small and medium-sized companies.

“Bank funding for this size of deal is easier to arrange than it is for larger leveraged buy-outs, so we’re confident this trend will continue,” says Mr Stenton

Graeme Whittaker, managing partner of Grant Thornton in the north, says there is a lot of “pregnant demand” but the economy has declined so fast that people are confused as to how to value businesses. “I would not advise anyone to sell unless they have to,” he says.

Paul Lupton, Deloitte’s head of corporate finance for the north, says his team is busier than ever.

“The deals are smaller, and will take more work to get over the finishing line, but they are out there.”

Insolvency practitioners can hardly recruit fast enough to meet demand. Begbies Traynor, the UK’s largest independent insolvency practitioner, is based in Manchester and has found it straightforward to raise fresh cash from investors.

Simon Allport, of Ernst & Young, notes that the liquidation

of big national businesses such as Zavvi, the DVD and music retailer, has been handled from Manchester. Mr Allport has also been dealing with London Scottish Bank, a Manchester-based sub-prime lender, which was the first UK bank to be allowed to fail during the credit crunch.

Architects have also grown fast. BDP’s Manchester studio was one of three offices worldwide shortlisted for an environmental award at Mipim, the property industry gathering in Cannes.

Other areas of professional services are feeling the heat.

There have been redundancies among those reliant on property and corporate finance.

Cobbetts, Grant Thornton and several other firms have laid off staff. Royal Bank of Scotland, which employs more than 3,000 in the region, is also likely to

Plenty of changes in store PROFILE CO­OPERATIVE GROUP

Andrew Bounds on the movement that practises ‘profit with a purpose’ When the Co-operative Insurance Services’ headquarters building was erected in 1962 it was the UK’s tallest office block outside London, a symbol of Manchester’s claim to rival the capital as a centre of commerce.

The recent property boom has left the 387ft CIS Tower dwarfed by skyscrapers throughout the UK’s provincial cities, just as the country’s largest mutual business itself became overshadowed.

Peter Marks, chief executive of the Co-operative Group, recalls that Co-operative food shops had a market share of 25 per cent when he joined in 1967, almost what the mighty Tesco now enjoys.

The Co-op share in February this year was 5.8

per cent. “We were the first into supermarket retailing but because we were fragmented and inefficient we allowed the big supermarkets to come in.”

Since the first co-operative was founded in Rochdale, Greater Manchester, in 1844, hundreds had sprung up, all with local managers and ways of doing things. Mr Marks says that while the democratic roots of the movement remained vital, its decisionmakers realised in the 21st century that centralisation and efficiency were the keys to success.

“What is the difference to a customer between a co-op in Leeds and London?” he asks.

Even the 32-strong board, which includes many local elected representatives, is set to be slimmed down.

Mr Marks says the big change came in 2007 when the Co-operative Group merged with the smaller United Co-operatives, strong in Yorkshire and the north-west.

It saved the movement £70m in running costs and

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also gave it the financial strength to raise £1.6bn to buy Somerfield, the sixth biggest retailer. The combined group will have almost 10 per cent of the food retail market, close to Morrisons, the fourth biggest chain.

Mr Marks, who ran United, says: “There is nothing wrong with the model. People are searching for an alternative to capitalism. Here we are.”

Through Co-operative Financial Services, the group is also combining with the Britannia Building Society, the second-largest mutual lender, which will transform it into a mortgage powerhouse.

It is now investing millions refitting 700 stores and reinforcing a consistent identity. It also hopes to cross-sell more products to its 3m members. The business spans financial services, pharmacies, travel agencies, funeral parlours, legal services and farms.

The more members spend, the greater share of the profits they receive. It is what Mr Marks calls “profit with a purpose”.

Turnover rose in the year to July 26 by a third from £2.99bn to £4.02bn. Pre-tax profits increased from £84.8m to £102.9m and members received £94.7m in dividends. Its financial services business, including a bank that refuses to invest in arms companies and other “unethical” businesses, remains the most profitable arm. It is the only retail bank in England headquartered outside London and its head office employs 4,000 people,

make redundancies. Troubled Allied Irish Bank and AIG have big operations in the region too.

Halliwells, the law firm that has posted a decade of doubledigit growth in a bid to become a national force, has also had its problems. The firm, which has £25m of debt, has made around 40 redundancies in recent months as it copes with the recession.

There are limits to Manchester’s ambition. Tenon, a fastgrowing professional services firm, has set up a £20m fund to invest in distressed businesses, to be run out of Manchester.

While several local entrepreneurs are chipping in, cash was raised nationally.

“I did about 35 presentations.

Around 30 were in London because that is where the money is,” says Bolton-based Matthew Bowker, who is running the Tenon Capital Management fund.

Region punches above its weight Continued from Page 1

Sunny side up: the CIS Tower making the Co-op a huge contributor to Manchester’s economy.

In keeping with the movement’s resurgence, even the tower has had a makeover. Its mosaic tiles were falling off so in 2005 it was clad with more than 7,000 solar panels to become the UK’s largest solar power station. It generates enough energy each year to brew 90m cups of tea.

This year, after months of deliberation, the group announced plans to build a new headquarters in Manchester rather than leave the city – welcome news as construction grinds to a halt elsewhere in the area.

“It is great to be in the north-west because this is where our history began,” says Mr Marks. “It needs to be a building that is iconic and sends a message about who we are and what we are. This is an exciting time for the Co-op.”

fast. The council hopes to persuade the Royal Opera House to establish a northern base in the city.

However, weaknesses remain. Mark Blakemore, Manchester office managing partner of Baker Tilly, says: “We have lots of entrepreneurs but very few plcs that are headquartered here.”

That makes the region vulnerable during the recession as companies cut costs. It also makes it hard to attract top earners.

The north-west’s productivity, employment levels and educational attainment are all below the national average. While tens of thousands now live in Manchester city centre, a building binge means prices in some areas are among the biggest fallers in the country. Redevelopment projects outside the centre, in Rochdale and Stockport, have been shelved or cut back as builders struggle to raise finance.

East Manchester, which lost almost half its jobs between 1975-85, is proving hard to turn round. It is still one of the most deprived areas in the UK, in sight of the glittering skyscrapers of the new city centre.

Hope now lies with the Abu Dhabi royal family, which bought Manchester City last year. City play at Eastlands, and the council believes the billionaires of the United Arab Emirates have big plans for the area.

“They have made it clear they were not just investing in Manchester City but the city of Manchester,” says

Sir Howard, a City fan.

The double act of Sir Howard and Sir Richard – and Graham Stringer before him – is given much credit for fostering the city’s reinvention after the 1980s manufacturing slump and the IRA bomb. “They are very entrepreneurial,” says one business figure.

The city itself is staunchly Labour but never succumbed to the anti-business stance of many left-wing urban councils in the 1980s.

It has also worked effectively with the other nine councils that make up Greater Manchester – Bolton, Bury, Oldham, Rochdale, Salford, Stockport, Thameside, Trafford and Wigan, some of which are run by the Conservatives or the Liberal Democrats.

Rare for the UK, the 10 take some executive decisions as a group and have agreed to abide by votes where at least seven agree.

However, they did split over plans to introduce a congestion charge. In return for the levy, the first big scheme in the UK, the government would have funded big public transport improvements. To break the deadlock, a referendum was held, which rejected the plan comprehensively.

Despite the fierce campaign, council leaders insist it is business as usual. That means working together to try to achieve another first – to win greater powers from Whitehall in the April budget, that would put it on track to emulate London’s political, if not economic, clout.

FINANCIAL TIMES THURSDAY MARCH 12 2009

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Doing Business in Manchester & North­West England

New model faces test in recession ECONOMY

Andrew Bounds on the constant quest to close the gap between the region and London

T

he Manchester region’s economy has shifted from one based on manufacturing to services during a sometimes painful 20-year transformation. This new model is about to be tested as recession bites.

Law firms and banks are already shedding jobs. The Yang Sing Oriental, a luxury hotel in Chinatown that sought to cash in on business high-rollers, shut this month just eight months after opening.

The downturn comes just as the economy is under the microscope as a series of seven reports forming the Manchester Independent Economic Review is prepared.

“Manchester city region has negotiated the change to a knowledge-rich economy broadly successfully,” says a recent MIER report by Manchester University on skills. However, it has yet to reach “tipping point” where it adds ever-more high-skilled jobs, it says.

While it outperforms many provincial cities, the gap between it and London and Bristol is as wide as ever. Closing that gap has been the holy grail of regional policymakers.

The city region generates half the north-west’s total gross value added, a measure of wealth creation, and with a GVA output of an estimated £54bn in 2007 it is the largest city-regional economy outside London.

GVA has remained at around 12 to 13 per cent lower than the UK average over the past decade – equivalent to an estimated output gap of £13bn per year. However, when London is excluded it measures up fairly well against the UK average.

Growth areas include aviation, creative, media and information

technology, professional services, life sciences and advanced manufacturing. Yet 15 per cent of the workforce has no qualifications and unemployment, now more than 6 per cent, is rising faster in the north-west than anywhere else in the county.

“A lot of the new jobs were just financial services factory jobs,” says one business figure. They are often first to go when banks cut back.

A new skills commission, chaired by Mike Blackburn, head of BT in the region, is starting to track where Mancunians go after graduation. “The question is how can we attract people from Oxford and from Harvard and Insead?” he asks.

Steven Broomhead, chief executive of the North-West Regional

The BBC’s move to the MediaCityUK complex at Salford Quays is also likely to energise the region Development Agency, says its task now is to support businesses through the recession. “We talk of R for recovery rather than recession,” he says.

For example, it is to fund training for some of the more than 10,000 car workers in the region while they are on short weeks awaiting an upturn in the market.

There are bright spots. Macclesfield, home of pharmaceutical company Astra Zeneca, is among areas of South Manchester and Cheshire on a par with the southeast but many research-intensive and headquarters operations have been heading south for years. There is just one FTSE 100 company, United Utilities, headquartered in the region.

The public sector should provide a cushion during recession, says Prof David Leece, of Manchester Metropolitan University.

“What was seen as a weakness could now be a strength,” he

says, with 300,000 public sector jobs accounting for almost half the workforce.

The region has a strong health cluster, attracting bodies such as the British Medical Association and the National Institute for Health and Clinical Excellence.

Companies depending on government contracts are also expected to help fight through recession. BAE Systems has a big regional presence, from air research at Warton in Lancashire to submarines at Barrow in Cumbria, and is cranking up ammunition production at Radway Green.

Dave Allanson, north-west director at Lloyds TSB Corporate Markets, points to privately-held groups doing well even in tough sectors such as retail, citing Matalan and JD Sports.

The BBC’s move to the £500m MediaCityUK complex at Salford Quays in 2011 is also likely to energise the region. Bryan Gray, chairman of Peel Media, the site’s developer, says the topclass facilities and BBC brand will pull in companies from around the world.

The University of Salford in January became the second anchor tenant at MediaCityUK. Start-ups such as 2ergo, a mobile telephone applications company, are already moving in to the complex.

The universities, which with 100,000 students form the UK’s biggest higher education cluster, are also aiming to expand their reach and power a stalled property market. Manchester Metropolitan is seeking to build a £70m campus in Hulme, a deprived inner city area.

John Brooks, vice-chancellor, says it is focusing on producing “work-ready” graduates. Applications have increased 10 per cent recently with an emphasis on professional and vocational courses, he says.

Angie Robinson, chief executive of the Manchester chamber of commerce, says the region’s entrepreneurial spirit will pull it through: “We are at war but we know how to fight.”

£’000 per head

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Fleetwood

Robert Wright on the outstanding issues of funding and congestion Greater Manchester’s transport system looks very different depending on the observer’s vantage point.

From the other side of the Pennines, the picture looks rosy. Business leaders in Leeds and Sheffield can only envy Manchester’s airport, the UK’s busiest outside south-east England, its three fast trains an hour to London and its growing tram network.

From within Manchester, however, the view is obscured by the failure in a referendum last year of a series of transport reforms that were intended to reduce congestion and raise funds for substantial further improvements.

The plans – known as the transport innovation fund (Tif) bid – were controversial because they called for the introduction of a congestioncharging scheme within greater Manchester to reduce congestion and fund some of the improvements.

The proposals were resoundingly rejected in all 10 boroughs polled.

The area’s business community divided over the proposals. Some, such as Peel Holdings, owner of the Manchester Ship Canal, were concerned the congestion charge would discourage investment in the charging area or push logistics businesses elsewhere. Others, such as Town Centre Securities, a property developer, welcomed the potential for the package of measures to regenerate inner-city areas.

It is unclear how the city will now tackle the challenges of funding public transport developments and tackling congestion without the Tif package. Sir Richard Lease, leader of Manchester City Council, said after the result that there would be a “period of reflection” to decide on the way forward.

Mark Threapleton, managing director of Stagecoach

Manchester, the region’s second-biggest bus operator and the operator of the Metrolink tram system, says the Tif bid would have provided opportunities to improve many aspects of Manchester’s transport.

“It would have allowed the completion of the Metrolink network, together with investment in buses and investment in rail to increase the capacity of the rail network,” says Mr Threapleton, who is also chairman of the greater Manchester bus operators’ association.

The priority now is to deal with long-standing problems such as the poor co-ordination between different boroughs that often prevents transport services from working as smoothly and reliably as they could.

“It’s an issue that needs to be resolved,” Mr Threapleton says. “Bus services don’t recognise district boundaries.”

Whatever the confusion about the future direction of its transport policy, it remains easy to understand why other English regions are jealous of the quality of Manchester’s current trans-

port provision. Since December 2008, Manchester and Birmingham have both been linked three times an hour in each direction with London, thanks to the £9bn upgrade of the London-Glasgow west coast main line.

Manchester’s best journey times to London are now under two hours. It is Europe’s highest-frequency long-distance service and is rapidly eroding air’s market

Best journey times to London by rail are under two hours, eroding air’s market share share on the route. In 2004, before improvements on the route started, rail had only 30 per cent of the split with air on journeys to London, against 70 per cent now and the 85 per cent Virgin Trains, main operator on the route, thinks is achievable.

There are concerns that British Airways is no longer serving as many long-distance destinations as before directly from Manchester,

Ticket to ride: the tram system has been a big success

18

ENGLAND

Garstang

A682

A56

A59 A6 M6

Blackpool

12 M65

M55

10

Burnley

Kirkham Preston

8

Accrington

Blackburn

1997

A56

M65

A666

Chorley M61

A59

M66

A58

A5209

06

UK

40

Bury M62

35

Wigan

M58

Greater Manchester

Rochdale

Bolton

Ormskirk Skelmersdale

04

VAT registrations per 10,000 adults 45

M6

Southport

2000 02

Business start-up rate

Leyland

A565

16 14

Poulton-Le-Fylde

A583

UK North-east (England) North-west (England) Greater Manchester

20

A59

A6

Oldham

A49 A570

A572

A5270 M57

St.Helens A58

Liverpool Birkenhead

A562

Manchester

A56 Warrington

25

M60

M60

M62

M62

M62

North-east (England)

A560

20

Stockport

A568

1997 A50

A56 A561

M56

A41 M53

A556

A34

2000 02

04

07

House prices FT house price indices

M6

250

A537

A533

Ellesmere Port

North-west (England)

30

Salford

A580

M6

A580

England & Wales Macclesfield

Northwich

A550

A34 A54

Chester

A49

North 200

A556

A548

North-west

A536

A54

150

A55

WA L E S

A51

A534

A49 10 km

but the airport remains a major gateway for the whole north of England. Some 35m passengers travel annually from the area around LeedsBradford Airport, the other major gateway in northern England, to fly from Manchester.

In freight transport, Manchester’s heavy industry enjoys the unique advantage for an inland British city of access to sea-going ships via the Manchester Ship Canal.

Peel Holdings also hopes to encourage container traffic – normally manufactured or semi-finished goods – on to the waterway.

The city was also only the second in the UK – after Newcastle – to convert some of its ageing, dilapidated railway lines into light rail routes, with trams running onto streets in the city centre. The system has been highly successful since opening in 1992. Planned extensions into Rochdale and Oldham town centres have been scrapped because of the Tif bid’s failure. But work on converting old railway lines to Rochdale and Droylsden into tram routes begins this year.

There remain many in the city who believe the Tif money would have done little to accelerate these improvements.

Graham Stringer, the MP for Manchester Blackley, and several other local MPs said before the vote that the benefits of the investments were so thinly spread they would make no real difference.

They also argued that the area’s road congestion was reducing without congestion charging.

Others who regret the bid’s failure accept that they will now have to return to working at more mundane, lower-cost solutions, such as arguing for better bus lanes and improved park-and-ride facilities.

“We feel that some of the initiatives are capable of being brought forward even in a non Tif-funded environment,” Mr Threapleton says.

“Yes, it will require funds.

But it doesn’t necessarily need the same level of funding that was envisaged in the Tif.”

A530

A534 100

Crewe

A41

A485 Wrexham

Failure of reform package leaves challenges to tackle TRANSPORT

Gross value added by region

Lancaster A683

A41

A50 50 Stoke-on-Trent Ordnance Survey mapping © Crown copyright AM97/07

1997 2000

04 06

09

Sources: ONS; Berr; FT; Acadametrics

4

FINANCIAL TIMES THURSDAY MARCH 12 2009

★

Doing Business in Manchester & North­West England

International status is about much more than football SPORT

William Hall on the successful legacy of the Commonwealth Games in 2002 A century ago Manchester was best known as the capital of the world’s cotton textile trade. Today, it is best known as the home of Manchester United, one of the world’s most successful football clubs.

Manchester may lag well cities such as New York, Madrid and Munich in terms of its economic and business performance. But when it comes to sport it is hard to underestimate the importance of its football teams, which include the Abu Dhabi-owned Manchester City, in promoting the city’s name globally.

It has been estimated that Manchester United, owned by the US Glazer family since 2003, has more than 330m fans worldwide, of whom half are in Asia. The club maintains separate websites for fans in China, Korea and Japan, and has recently begun offering Asian fans the chance to go on a virtual reality tour of its Old Trafford “Theatre of Dreams” stadium.

However, there is a lot more to Manchester than football. It is home to the British Cycling Federation and Manchester’s velodrome trained the winners of eight gold medals in last year’s Olympics. It is one of the country’s top boxing centres, producing Amir Khan and Ricky Hatton, and in rugby union, rugby league and athletics, has three of the UK’s top teams in Sale Sharks, Wigan Warriors and Sale Harriers respectively.

Old Trafford’s Lancashire

Booting up: Dave Whelan in his Blackburn Rovers days County Cricket Club is smarting because it has been dropped as a venue for this year’s cricket test match test series. But the city has several big venues, such as the City of Manchester stadium and the MEN Arena, which regularly host a variety of international sporting events unrelated to football.

In 2008 Manchester hosted six international sporting

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events ranging from the final of soccer’s Uefa Cup to world squash and swimming championships. This year it will be hosting several international championships in sports such as cycling, swimming, water polo and netball as well as the Paralympic world cup.

Last year was Manchester’s best year for sport since it hosted the Commonwealth

Games in 2002, and it was crowned the “Best sports city in the world” by SportsBusiness magazine, beating short-listed cities such as Melbourne, Berlin, Moscow and New York.

Eamonn O’Rourke, head of sports and leisure at Manchester city council, stresses that the build-up in Manchester’s international sporting reputation is no accident.

The legacy of East Manchester’s SportsCity complex, the site of the 2002 Commonwealth Games, has been fully exploited so that the complex now handles m ore than 400 sporting events a year attended by 4.5m people.

“One of the biggest legacies from the games is that we identified the need for an annual sports development budget,” says Mr O’Rourke.

Prior to that Manchester had tried to attract big sporting events on an opportunistic

basis. Its £1.6m annual budget is used to attract events that are strategically important and utilise Manchester’s sporting legacy.

The reverberations of the region’s growing importance in the international sports world go well beyond the increasing number of trophies in club sports cabinets.

It has also fed through to the development of a growing number of sport-related businesses ranging from sporting goods manufacturers, such as Stockport’s Umbro (now part of Nike) and Bolton’s Reebok (now owned by Adidas), to Fred Done’s Warrington betting operations.

Dave Whelan, the former Blackburn Rovers footballer who set up Wigan’s JJB sports retailing chain, is the best-known of a number of local sporting heroes who have moved into business.

Others include former England rugby captains Fran Cotton and Steve Smith,

Cultural mix adds to appeal for tourists VISITOR ECONOMY

Day­trippers to Greater Manchester have been rising steadily, writes William Hall

A

t first sight Manchester is not the UK’s most obvious tourist and cultural hotspot. Its reputation as the UK’s wettest city is more than a mite unfair – average rainfall is below the national average, and well below that of Glasgow and Cardiff. But it lacks much of the traditional physical tourist infrastructure, such as elegant city parks, river frontage and eyecatching buildings, which boost the attractiveness of rivals such as Liverpool and London.

Nevertheless, Manchester remains the third most popular tourist destination in the UK (after London and Edinburgh) according to the latest International Passenger Survey. In 2007 it enjoyed a 6 per cent growth in international visitors, to 971,000, which compares with 571,000, 304,000 and 278,000 for rivals Liverpool, Leeds and Newcastle.

Visitors to Greater Manchester, the vast majority of which are daytrippers, have been rising steadily since 2000 and now top 100m – with an estimated economic impact of £5.6bn, according to Visit Manchester, the local tourist board. Touristrelated employment has risen by more than fifth to 79,411 over the last seven years.

Manchester was recently voted the third-best conference destination in the world by Conference & Incentive Travel – Europe magazine, after London and Barcelona but ahead of Las Vegas, Berlin and Dubai. Lonely Planet magazine has named it one of the top 10 shortbreak destinations, saying it has “enough weatherproof entertainment to rival London or Glasgow at any time of year”.

Greater Manchester has a

number of tourist and cultural attractions of which the most visited are the Lowry theatre and arts complex, the Museum of Science and Industry and Manchester art gallery. It also has a couple of “iconic” new museums – the Imperial War Museum North and Urbis.

But none of these venues has the pulling power of London attractions such as the Tate Modern, or regional art galleries like Tate Liverpool or Glasgow’s Kelvingrove when it comes to visitor numbers.

Manchester’s appeal is far more to do with the diversity of cultural offering ranging from Sir Mark Elder, who has revived the fortunes of Manchester’s Hallé orchestra, to pop singers such as Morrissey, and rock bands such as the Smiths, the Buzzcocks and Oasis.

Manchester has a lot more to offer than just the backdrop for ITV’s Coronation Street soap opera. Some of the UK’s best comedians, such as Peter Kay, honed their skills on its comedy club circuit. The recent Oscar for Danny Boyle, director of Slumdog Millionaire, and the news that local rock band Elbow had beaten the likes of Coldplay, Radiohead and Take That, to win the best British group in the latest Brit awards, underline the wide diversity of Manchester’s current cultural offerings.

Manchester also benefits from having some of the biggest venues outside London ranging from the 2,400 seat Bridgewater Hall, which hosts the Hallé and the BBC Philharmonic orchestras, to the 21,000 seat MEN Arena, Europe’s biggest and busiest indoor arena. It still lacks a modern opera house, but the city council is working on that and hoping to persuade London’s Royal Opera House to open a northern outpost.

“Manchester was one of the first cities in the world to grasp the impact culture, and particularly popular culture, could have on the image and brand of a city,” says Vaughan Allen, chief executive of Urbis, the new urban museum in Manchester’s city centre.

“It’s been more successful than

William Hall on how a more varied diet of research has brought benefits There was uproar in the north-west’s scientific community when the UK government announced, in March 2000, that it was going to build its £300m third-generation Diamond synchrotron radiation source (SRS) machine at the Rutherford Appleton Laboratory in Oxfordshire, rather than on the site of its existing machine at Daresbury in Cheshire.

Daresbury’s SRS machine, which produced beams of light so intense that they

could reveal the structure of atoms and molecules, was the first of its kind in the world. During nearly 30 years it had pioneered cutting-edge research in physics, chemistry and material sciences which had led to scientific breakthroughs in areas such as cleaner fuel, safer aircraft and new medicines.

It was the north-west’s highest-profile science research project, and its closure, completed in August last year, highlighted the growing scientific research gap between the north of England and the south-east.

Nine years after the closure announcement, Daresbury’s scientific and technical staff have been cut by nearly a third, but it is growing once again on

the loan transfer of David Beckham to AC Milan.

“While Manchester is not the UK’s financial capital, it is the sports capital,” says Robin Wight, head of HSBC’s global sports group in the north of England.

“London-centric companies that ignore Manchester and the north-west as its hub do so at their peril.”

“The 2002 Commonwealth Games was a real turning point for British sport in proving to the world that Manchester could host such a high-profile sporting event and maximise the economic benefits associated with it,” says Peter Heginbotham, president of the Greater Manchester Chamber of Commerce and senior partner at law firm Davis Blank Furniss Solicitors.

“It really put us on the map and left us with a sporting legacy that no doubt paved the way for London’s Olympic bid.”

Region fired up by nuclear resurgence ENERGY

William Hall on a chance to build on the legacies of Dalton and Joule

Joint venture: Guy Garvey of home­grown band Elbow, in concert at the Manchester Apollo last year

The city council is hoping to persuade London’s Royal Opera House to open a northern outpost

its competitors in providing that open space for creativity to continue to thrive. The official endorsement and financing of new ventures such as the Manchester International Festival (MIF) and Urbis – events and places that deliberately break moulds and set themselves apart – shows a certain bravery”, says Mr Allen.

The festival, which began in 2007, takes place every second year and will run from July 2-19, 2009. It specialises in new works from across the performing arts, visual arts and popular culture.

The first festival included 25 world premieres including Monkey: Journey to the West, an opera performed in Mandarin with music composed by Damon Albarn. It went on to play to sell-out audiences in Paris and London’s Royal

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Opera House, and provided the theme for the BBC’s coverage of the 2008 Beijing Olympics.

“The most obvious way we differ from Edinburgh and Glastonbury is that everything we present is produced by the festival and our partners,” says Alex Poots, MIF’s director. “It does effectively set a limit on the number of shows we feature, but we think that focus is a positive thing.”

The first festival attracted more than 200,000 visitors to the city with an estimated economic impact of £28.8m and Mr Poots is planning to build on that this year with a festival whose highlights include Prima Donna, Rufus Wainwright’s opera debut, and a bespoke environment designed by world-famous architect Zaha Hadid for a performance of JS Bach’s solo works.

Radiating optimism after closure blow PROFILE DARESBURY CAMPUS

who founded the Cotton Traders sport clothing mail order business, and Chubby Chandler, a former PGA European golf professional, whose International Sports Management group manages some of the world’s top golfers and cricketers.

Maurice Watkins, Manchester United’s long-time lawyer and senior partner of solicitors Brabners Chaffe Street, praises the city council’s strategy of raising the city’s profile by attracting international sporting events to the city.

It has stimulated demand for specialist sport-related legal and financial services from players and clubs a long way from Manchester.

Brabners Chaffe Street, for example, which advises more than half of the UK’s Premier League clubs, was appointed recently by Major League Soccer (MLS), the US professional soccer league, and LA Galaxy, to advise on

the back of a much more varied diet of scientific research. It has been designated as one of the government’s two new international science and innovation campuses (the other is a much larger facility at Harwell in Oxfordshire).

The Daresbury campus is a partnership between the Northwest Regional Development Agency (NWDA), the local council, and the universities of Manchester, Liverpool and Lancaster. It aims to be a focal point for scientific, academic and business collaboration, helping the UK to be more successful in commercialising its world-class scientific research.

The famous Daresbury Laboratory, and its 368

staff, have been joined by a new Cockroft Institute, which includes the National Centre for Accelerator Science, and two new Science and Technology Gateway Centres for computational science and engineering and detector systems.

The third part of the new Daresbury Science and Innovation Campus is the Daresbury Innovation Centre, which was opened in April 2005. Some 85 high-technology companies have already set up business in the innovation centre and their revenues are growing at an average of more than 60 per cent a year, according to the NWDA. BioEden, a biotech company founded by David James, a Chester dentist, is

typical of the companies that have moved into Daresbury’s Innovation Centre.

It is pioneering the collection and storage of stem cells formed from children’s milk teeth on behalf of families that want

It aims to be a focal point for scientific, academic and business collaboration to have access at a later stage in life to a “repair kit” for future ailments.

BioEden, which employs close to a dozen staff and has a sister operation in the US, was attracted to

Daresbury because of its laboratory facilities and access to a network of scientific support such as John Hunt, head of Liverpool University hospital’s human tissue engineering laboratory.

Another big plus is Daresbury’s communications links – it is less than 20 minutes from Manchester airport and under two hours from London by train.

After less than four years the Daresbury Innovation Centre is nearly full and a £25m plan to more than double the size of the facilities with a second innovation centre was announced last year. It is expected to go ahead despite the recent withdrawal of St Modwen, its private sector partner.

Energy is one of the northwest’s big growth industries.

It contributes around £5bn to the local economy, employs 50,000 people, and is set to play a dominant role in the renaissance of the UK’s nuclear power sector.

The vast majority of the UK’s nuclear research capability is located in the northwest and Manchester, in particular. John Dalton, who presented his atomic theory to the Manchester Literary and Philosophical Society just over 200 years ago, was one of the founding fathers of the Manchester Mechanics Institute (now part of Manchester University). James Joule, one of his students, developed the first laws of thermodynamics that led to an international unit of energy, the joule, being named after him.

Manchester’s leadership in nuclear research took off in 1907, when New Zealand’s Ernest Rutherford was appointed professor of physics at Manchester University. He discovered how to split the atom, and his assistant, Hans Geiger, invented the first “geiger counter” – which measured radioactivity.

The recently established Dalton Nuclear Institute and the Joule Centre for Energy Research & Development underscore Manchester’s determination to strengthen its traditional pre-eminence in all aspects of nuclear research and wider energy issues.

Admittedly, there is a big gap to fill. In the 1970s the UK was spending about £500m a year on nuclear research and development, and this has fallen away to nearly nothing as nuclear power fell out of fashion, says Paul Howarth, the Dalton Institute’s executive director.

Now government money is flowing back into nuclear research and Manchester is the primary beneficiary. A key driver behind the increased investment is the belated awareness that the north-west needs to retain and modernise its nuclear-related skill base, dating back to its earlier dominant role in the growth of the UK’s civil nuclear programme, if it is to benefit from the renewed global interest in nuclear power.

The world’s first commercial nuclear power generation plant was built at Calder Hall in Cumbria, and specialist facilities, such as Capenhurst (near Chester) and Springfields (near Preston), still employ close to 2,000 staff producing fuel for nuclear plants in the UK and abroad.

While roughly half of the 25,000 people employed in the north-west’s nuclear industry are located around Sellafield, some 125 miles north of Manchester, both Springfields and Capenhurst are only 40 miles away from Manchester, and many of the

companies servicing the region’s nuclear industry are clustered around Risley and Birchwood, just 14 miles west of Manchester.

Best known of the local companies that have grown up as a result of the northwest’s strong tradition in nuclear power is Knutsfordbased Amec Nuclear. It has been involved from the beginning of nuclear power generation almost 60 years ago and operates the Niras radiochemistry laboratories.

The company’s long involvement with Sellafield helps explain why it was picked as one of three partners (the others are URS Washington and Areva) that won the contract to decommission the giant Sellafield site. This accounts for around 60 per cent of the National Decommissioning Authority’s annual nuclear clean-up budget.

Manchester is in an “excellent position” to facilitate the development of the nuclear industry, says Jennifer Hazlehurst, a member of Deloitte’s nuclear leadership team. She cites the benefits of having substantial nuclear sites and expertise on Manchester’s doorstep, backed up by substantial investment in nuclear education and research to help train the next generation of nuclear industry professionals.

The renaissance of the north-west’s nuclear power

There is growing interest in developing the region’s renewable energy resources industry has overshadowed the growing interest in developing the region’s renewable energy resources.

The scale of the potential industry, in terms of size of projects and numbers of companies involved, is much smaller than the nuclear power industry, but a number of Manchester companies are developing interesting technologies, notes Deloitte’s Ms Hazlehurst.

Two of the best known are Salford’s Ener-G, which provides renewable and energy efficient power generation systems, and Peel Energy, which operates out of property developer John Whittaker’s Peel Group headquarters at Manchester’s Trafford Centre.

Ener-G is pioneering gasification technology, offering a clean, environmentally friendly method of converting waste into green energy.

Peel, by contrast, owns and operates wind farms generating 75MW of renewable energy, including Scout Moor – the biggest wind farm in England on the moors above Manchester.

The company is also working on developing energy projects involving more than 3GW of power from a variety of mainly renewable sources.

These include a potential Mersey tidal barrage, an energy-from-waste project at Ince in Cheshire and a coalfired power station in Scotland.