Business Insight - The Times

Business Insight Tuesday September 27 2011

The Darwinian power of regeneration

Page two

The Network

Freeserve founder Ajaz Ahmed on the power of the North

Tuesday September 27 2011 | the times

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Business Insight

Welcome

Bridging the economic divide Welcome to our latest edition of Business Insight, in which we take a detailed look at the regeneration of the North and explore some of the innovative and transformative projects put in place to bridge the economic divide with the South.

For too long, the North has been perceived as a sleeping giant of untapped potential cut adrift from London, but the stage is now set for genuine growth. From infrastructure to regenerated city centres, from expanding airports to improved transport links, from world-class universities to innovation clusters, the North has all the raw materials in place to make tangible progress.

Our latest edition brings together some of the region’s biggest hitters to offer their insight into what lies ahead and what opportunities will shape our future. We will be meeting Freeserve founder Ajaz Ahmed as he talks about the opportunities and business culture of the North, and his role in forever changing the game for internet users across the country.

Progress being made at a breathless pace Luke Manning at large From the BBC’s move to Salford, to Liverpool’s branding campaign, the North is making huge strides

W

hen the DirectorGeneral of the BBC, Mark Thompson, recently referred to the moving of BBC production and commissioning teams to Salford as “one of the most important things happening in broadcasting in the world”, it was no wonder that media focus turned once again to this tremendous initiative. The timing could not be better for this month’s edition of Business Insight, which is looking at the regeneration of the North and its impact on the economies and communities across the UK. The BBC’s move to Salford Quays touches on virtually every aspect of the debate and is a bellwether for seeing how achievable the task ahead is and where the true potential for success lies.

Make no mistake about it; the BBC’s move is bold and necessary. By relocating BBC Radio 5 live, CBeebies and BBC Sport to MediaCityUK, along with shows such as BBC Breakfast, this move is a profound one.

Elsewhere in this issue, Freeserve founder Ajaz Ahmed puts forward a compelling and passionate case for the North and how the regeneration of city centres such as Sheffield and Liverpool, combined with the vibrant economies of Leeds and Manchester, has built a platform for developing the “strong local economic and cultural growth” about which Thompson talks with equal conviction.

Ahmed suggests that the next steps are not further physical regeneration, but job creation and “positive discrimination” to promote development outside of London, and again the BBC move has these at the heart of its raison d’être.

As Thompson said in a recent address to North West business leaders, “BBC North itself means many hundreds of jobs, and if it lives up to its potential, it could mean thousands.

“By moving production and commissioning teams to Salford, the BBC is building on the rich heritage of northern creative industries to help develop it as one of the most significant creative clusters in the UK.”

With Juergen Maier of Siemens and Lawrence Tomlinson of the LNT Group also giving their views on the current state of play of the original northern cluster – manufacturing – in this issue, there is change in the air.

Take the emerging bioscience scene in York, the Advanced Manufacturing Research Centre with Boeing in Yorkshire and Humberside and the region’s success in video gaming – with the BBC’s move now having the capacity to do the same for the creative sector.

Our next issue of Business Insight will focus on the Digital North – MediaCityUK and the creative and digital industries – showcasing what has become a hugely important evolution for the region.

The recent BBC report, Helping drive growth in the UK creative economy, said the corporation delivers £2 of economic benefit for every £1 of licence fee it receives, and a study by the Northwest Regional Development Agency (NWDA) has stated that the BBC relocation has the potential to create 10,000 jobs and to add £170 million to the regional economy.

“Its apprenticeship scheme underlines its long-term commitment to employment and training across the region and aims to give talented people from a diverse range of backgrounds the skills and knowledge to benefit from the new creative cluster,” the NWDA report added.

Apprenticeships are hugely important in the transfer of knowledge and skills in any economy. This edition of Business Insight takes a look at how the development of young people boosts the economy and explores what needs to be done in attracting and developing the next-generation workforce.

Why regeneration is Picture courtesy of Bridgewater Hall Manchester

Inside ...

Regeneration How entrepreneurs on both sides of the Pennines see the future of the North Pages 4-5 Employment Tapping the potential of the young Page 6 Cover Story Ajaz Ahmed on the power of enterprise Pages 8-9

First Person John Ashcroft

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he danger, when we think of regeneration, is to see it as a phase. It is not a phase, it is a continuum, a constant process of Darwinian evolution and adaptation. Regeneration is a slow and steady process, but also a “RAPID” movement in which businesses and economies React, Adapt, Plan, Invest and Develop.

The problem with the French, as George W Bush might have said, is that they don’t have a word for renaissance – or, if they do, it represents a bygone era, a phase long discontinued. Regeneration is a constant, ongoing process. It is what we do to survive.

At present, businesses and economies in Manchester and the North West are having to react and adapt to an economic outlook which offers low growth

and a higher level of inflation. One in which domestic incomes finances are being squeezed by higher food, energy and utility prices, putting real incomes under pressure for the foreseeable future.

A government policy aimed at rebalancing the economy, involving the march of the makers, rebuilding the workshop of the world, is a novel trope. The desire to rebalance the economy and an external deficit, which have been out of synch since the Treaty of Versailles and beyond, is misguided.

The problem is compounded by a monetary policy which undermines the exchange rate, leads to a depreciation of sterling and generates domestic price inflation. The private sector has to accept the challenge of policy priorities misplaced.

Nevertheless, across the North West, examples of regeneration apply. Blackpool Pleasure Beach continues to invest heavily in new initiatives to stimulate traffic at the award-winning site. Nickelodeon Land is now open and SpongeBob’s Splash Bash is there to welcome all.

In Liverpool, the huge investments in the waterfront continue with the opening of the new Museum of Liverpool. This is the largest new national museum to be opened in the UK for more than a century.

Across the road, the Liverpool One shopping centre is a new development with more than 160 high street stores assisting the regeneration programme for the city.

The Atlantic Gateway is a framework for collaboration between the Manchester and Liverpool city regions. The challenge is for it to become one of Europe’s leading low-carbon economic growth areas, second only to London.

The finishing touches are being made to the future new home of Salford rugby league club. Salford City Council formed a joint venture company with Peel Holdings to develop the £16 million stadium, seating 20,000 spectators.

It is in Manchester that the best examples of regeneration can be found, setting an example for both the North West and the UK as a whole. Plans

the times | Tuesday September 27 2011

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Business Insight

The spectacular evening skyline of Liverpool seen from across the River Mersey Courtesy of Liverpool Vision/McCoy Wynne Of course it is not just Manchester that is striving to reposition the North as part of the overall regeneration project.

Economic development agency Liverpool Vision is launching a new city branding campaign entitled It’s Liverpool as part of the cooperation between public and private sector partners to better promote the city.

That promoting our cities is crucial to attracting investment was once again seen this month as Prime Minister David Cameron gave his personal backing to efforts to secure major investment

by Siemens. The engineering giant has earmarked Alexandra Dock in Hull as the preferred bidder for a new wind turbine plant, and development discussions are underway.

All of these major moves will change the perception of the region, as will the extensive plans across the North to focus on development of the retail scene, commercial property and business conference facilities. Every facet has an important role to play in the regeneration of the North, and we have looked at them all in this issue.

Professional Viewpoint

Promoting our cities is crucial to attracting investment

more than a phase for integration of the city transport network continue, with an extension of the modern and impressive tram system across the city and into the travel-towork areas.

In new industries, the digital, media and creative sectors are well blessed, with MediaCityUK in Salford and Trafford, the Sharp Project in east Manchester and the Hive and Corridor projects in the city centre.

Incubators thrive in developments within the university, including the Manchester University Innovation Centre (UMIC) and Manchester Science Park.

The Nobel Prize for Physics in 2010 was awarded to the university’s Andre Geim and Konstantin Novoselov for the groundbreaking development of graphene. The challenge now is to grapple with graphene and develop marketable products capitalising on the inherent strengths of the product.

Manchester has developed as a modern service sector economy with a very strong business, professional and financial services sector. The members’

organisation for this important sector in the city, pro.manchester, represents the largest advisory group in the North West. This month, we launched our SME (small and medium enterprises) club, a free advisory service for businesses in Greater Manchester and beyond. Why? Because Manchester is a great community, and we all want businesses in our city to survive and thrive as part of the regeneration process.

John Ashcroft is chief executive of pro.manchester, a director of Marketing Manchester and sits on the council of the Greater Manchester Chamber of Commerce.

He is also a member of the Association of Greater Manchester Authorities business leadership council, and a visiting professor at Manchester Metropolitan University Business School. Educated at the London School of Economics and London Business School, he completed a PhD in economics at Manchester Metropolitan University in 1996.

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Tuesday September 27 2011 | the times

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Business Insight

Regeneration

East meets West:

The Government is not creating an environment which allows businesses to flourish, according to leading entrepreneur Lawrence Tomlinson, writes Reg Weymouth

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hen it c o m e s to Yorkshire’s most prominent entrepreneurs, few have more influence in the region than Lawrence Tomlinson, founder of the LNT Group.

With a string of core businesses in his conglomerate, including LNT Construction, Ideal Care Homes, Haigh Mechanical and Electrical, CoolBlue Software, Ginetta Cars and the Repton-based Zytek Engineering, Tomlinson has an estimated wealth of £500 million and in April 2011 was ranked as the 151st richest person in the UK in the annual Sunday Times Rich List.

Having started his career designing components for crankshafts and turbochargers with diesel-engine manufacturer Cummins, at age 23 Tomlinson took over the care homes business run by his parents and added a construction arm to develop purpose-built homes, along with an IT arm to develop bespoke software for the sector. In 2005, he acquired the British sports car manufacturers Ginetta Cars and in 2007 sold the original Orchard Care Home operation to a management buyout team for £175 million.

The LNT Group now spans the care homes, cars and chemical sectors, and during his 25-year career Tomlinson has developed persuasive and strident views on the role that engineering and manufacturing has to play in regenerating the North.

“Rather than spending money on new roads and trains, we should be focusing on creating businesses that in turn create wealth,” he says. “We need to back the mediumsized businesses that can create jobs and develop those that create products that can be exported or sold in the UK. For that we need capital and to reduce the personal risk in taking those steps.”

Describing Yorkshire as a “hotbed of entrepreneurial talent” and praising the impact that “some really good people coming out of university” have had on his business, it is not people or innovation that form barriers for Tomlinson, but the environment which the government is creating to allow businesses to flourish.

“Top-rate tax is not a simple 50 per cent figure, because if you own a business you’ve got 10 per cent to add on top for national insurance and 12 per cent for employers’ national insurance. I don’t mind paying my bit, but we’re at a tipping point.

People are thinking ‘I need to personally put my house on the line to borrow money for the business and I only get to keep 28 per cent of the profits even if I do. We’re doing all right anyway, so let’s keep just doing all right.’ The government needs to create an environment that creates grants for expanding businesses.”

It is an issue that has frustrated the growth of Ginetta Cars. Having developed the technology to build an electric vehicle, Tomlinson applied for a £1.8 million grant from the then Labour government to build ten prototypes. He was turned down and now finds himself up against the US firms Tesla and Fisker, businesses benefiting from $500 million of government loans to assist their research and development.

“I’m going to get a bloody nose if I go up against a government-backed electrical car in the US, and that imbalance effectively kills the whole thing off. We’ve got the technology and the car but have no way of rolling it out. Organisations have got to be able to get debt and working capital into the business or they will grow at a much slower pace.”

Passionate and eloquent, Tomlinson’s strong work ethic and unblinking focus show all the customary hallmarks of any successful entrepreneur. Despite 80 per cent of the demand for his products now coming from the likes of South America, Japan and Europe (compared with 20 per cent a few years back), he is quick to point out the importance of local business in the North.

“Research and development, and investment, is crucial for engineering and manufacturing in the region. We need to be doing everything better in niche areas because we’re not in a position to compete with China in manufacturing flat-screen televisions.

“We use local suppliers where we can,” Tomlinson says, “even though it costs us a little more, because in the long run if we don’t support the local engineering businesses they won’t be there any more. All that skill and expertise is gone forever. I’m not a ‘little Englander’, and I know the importance of dealing with our trading partners, but we’ve also got to look inwards and help each other.”

Nothing has been truer as the recession has taken hold and the austerity measures have started to bite.

“I’ve told everyone in my business that we’ve got to work harder for less; it’s a pretty flat and tough market here in the UK,” Tomlinson says. “Yet the recession is forcing businesses to also look outside of the country for exports, and this can only be a good thing.

“I am not convinced that we have demonstrated that we have a great deal of resilience during recent times. I like to be optimistic and am not usually regarded as a harbinger of doom, but the recession does not seem to have an obvious end in sight and will not have until we get back to producing things and generating wealth and momentum within the economy.

“Personally, I have never worked as hard as I am currently doing to drive our business forward – but a lot of people are effectively having to tread water due to the lack of available investment capital in the economy.

Tomlinson remains upbeat, despite the difficult economic climate. “The North

Lawrence Tomlinson: Ranked by the 2011 Sunday Times Rich List as the sixth-wealthiest person in Yorkshire

People don’t invest in the North as such, they invest in the product

remains a hotbed of opportunity,” he says.

“Renewable energy is a great opportunity as an emergent industry where the skills in this region could be capitalised on. We cannot just rely on service industries and property-based bubble valuations which promote people spending money that they have not really earned. We need to get back to producing good engineers, scientists and inventors who generate fantastic opportunities to create wealth. If we do not capitalise on the skills of the people who have served apprenticeships, we will have lost these skills forever.

Is there a North/South media divide?

He is not convinced. “If we do something spectacular in Leeds there are sufficient media and internet channels available to ensure that this can create interest on both a national and global scale. The real issue is ensuring that we do not hide our northern lights under a bushel and become increasingly proud and proactive in promoting our innovations and successes in the region.”

What could be described as northern pragmatism emerges when Tomlinson is asked for three bits of advice he would give anyone in their career. “Success does not come without hard work,” he says. “Do not wait for the big idea – do something today.

And do not make a list bigger than it needs to be – if you have only got two bits of advice, do not artificially generate a third!”

Despite his vision for the future being one of “massive opportunity in the lowcarbon and renewable sectors”, coupled with a focus on advanced technology industries and an increase in tourism,

Tomlinson also offers a glimpse back into the past.

“I wonder how long it will be before we start reopening the pits and taking advantage of the natural resources in the area? I don’t know what the price of a barrel of oil was when Mrs T closed all the pits, but it’s a certainly a lot more now. If we can come up with a good way of creating clean energy from coal then it still has considerable uses.”

With his businesses bridging the engineering skills gap through apprenticetype schemes in which new entrants are paired with the older generation to exploit their expertise, there is a feeling that Tomlinson is keen to use traditional methods in his progressive businesses.

His organisations are built on a strong work ethic and a mantra of no excuses and no place to hide.

“In engineering and manufacturing, if you’ve got a good product and do a great job, then it doesn’t matter where you are based,” he concludes, setting out his manifesto for the regeneration of the North.

“People and businesses don’t invest in the North as such, they invest in the product and the organisation. The people up here are fantastic and are a great asset in creating strong, visible and straightforward management teams. We’re just as capable of making any product as good as anyone in the world, now we’ve got to knuckle down, be more industrious per head of the population and make things that people in the world want.”

It doesn’t get any simpler, or more compelling, than that.

the times | Tuesday September 27 2011

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Business Insight

Two tales of entrepreneurship from opposite sides of the Pennines

The UK now has an opportunity to put high-tech, advanced manufacturing back at the heart of British life

Juergen Maier is a passionate advocate of the North West but believes that the often poor perception of the engineering and manufacturing sectors needs to be overcome

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uergen Maier heads Siemens Industry Sector, which provides manufacturing and engineering technologies to industrial customers across the UK. If any one person has a finger on the pulse of what is happening in UK manufacturing today, it could well be Maier.

“Manufacturing is at the heart of the UK’s economic recovery,” he says, “but investment and a shift in its image are needed to shore up its continued growth.”

Manufacturing output grew by 3.6 per cent in 2010 compared to 2009, and 2010 into early 2011 was the strongest year for the sector for 16 years.

It is with this background that Maier calls upon government and industry to come together and support the “muchneeded investment in R&D (research and development), machinery and skills” for the manufacturing sector to ensure it continues its important role in supporting the overall recovery of the UK economy.

Manufacturing contributes around 11 per cent of UK gross domestic product

(GDP) and employs around three million people, producing 55 per cent of all exports. The UK is the sixth-largest manufacturer in the world by output, so manufacturing is still critically influential for the economy.

“The UK now has an opportunity to put high-tech, advanced manufacturing right back at the heart of British life,” says Maier, “ensuring more jobs and growth from industries such as aerospace, hightech engineering and low-carbon technology. However, to allow us to do this, we need investment.

“We not only need to invest in human capital to tackle the engineering skills challenge, but we also need to invest in R&D, plant, machinery and automation. The figures speak for them-

selves: of the 300,000 graduates in the UK each year, only 24,000 are from engineering disciplines and, of those, only 13,000 are home students. The industry clearly needs more than this, especially given the age profile of our UK engineering workforce”.

Maier also has concerns about the numbers in engineering vocational training. “The manufacturing sector will need 235,000 at apprentice/technician level over the next ten years,” he says. “It is encouraging that the government has acknowledged this skills gap and has pledged investment in apprenticeships and vocational routes, but unfortunately we have a 20-year gap of investment to fill.

“We need to overcome the often poor perception of engineering and manufacturing, and ease the complexity of routes into apprenticeships as well. By doing so, we may be able to encourage more of the new lifeblood of the industry to join us.

“Investment levels in UK manufacturing capital equipment have been – and, according to the forecast, look set to continue – well below the levels of 2007, despite the continued rise in manufacturing output.”

Maier draws a comparison between the UK situation and that in his native Germany. “Investment levels in the UK reduced by 8.8 per cent in 2010,” he says, “despite output rising by 3.6 per cent; in Germany, manufacturing output grew by 4.5 per cent, yet investment rose by 9.4 per cent.

“The government is responding to this challenge by pledging more investment and focus on R&D both for products and manufacturing-related services and around high-tech manufacturing-related services and processes, specifically the proposed technology innovation centres.

However, we are in catch-up mode on this, particularly when compared to Germany, where similar institutes have a combined budget 300 times that of the UK. “Availability of finance is another key challenge, as investment in start-ups is crucial to ensure the future of the industry, especially low-carbon technologies. Given these areas have high start-up costs and the risk is quite high, it is unlikely private sector banks will be the only and right vehicle to lend cash.

Maier describes the government’s proposed Green Investment Bank as “a great idea”, but has concerns that it will only offer limited start-up capital. “Initiatives such as Siemens Financial Services and the Carbon Trust provide UK businesses with green equipment finance worth up to £550 million, which goes some way to bridge the gap.

However, we need a banking system that better supports asset-

Manufacturing is at the heart of the UK’s economic recovery intensive industries and manufacturing.

My view is we need a strong public sector bank to drive this, as per the German model.

“We also won’t find enough entrepreneurs to create the required SMEs (small and medium enterprises) to drive innovation with the current punitive UK personal tax environment for income tax and pensions. This is a sensitive topic and is seen as supporting fat cats when everyone is cutting back. However, the reality is that there are relatively few entrepreneurs around who will take on large risks to form new ventures and SMEs, and hence they will be looking for the best possible rewards – which, in my view, they deserve. And if that is better done in Poland or even Germany than here, then that is simply a harsh reality”.

As for the manufacturers, Maier believes they must also play a part in terms of investment. “For growth to be sustainable, he says, “the UK must address the levels of investment in plant, machinery and automation. At Siemens, we invest around one billion euros per year in our own R&D for the automation hardware and software we produce and use. We encourage others to do the same across the industry.”

Asked about the importance of manufacturing in the region, he responds with “Totally! Manufacturing as a percentage of GDP has always been greater in the North than the national average, which is obvious as this is where the Industrial Revolution happened. The great thing is that 100 years later we still generate significant innovation and have great skills in the areas where those revolutions happened and we need to build on those. Examples are steel-making and now more generally advanced materials in Sheffield, or aerospace in the North West.

“The North fared relatively well in the last recession due to not having an overreliance on banking and financial services.

The key for the current difficult market conditions is to keep our nerve and invest in manufacturing for the long term.”

Maier – like Lawrence Tomlinson across the Pennines – remains optimistic. “We do have a real chance of renaissance across manufacturing and engineering, not least because of the opportunities afforded by low-carbon technologies such as renewable energy and electric vehicles. With continued partnership between manufacturers and the government to invest in the skills, the R&D and the assets we need, the future of manufacturing looks bright.”

Tuesday September 27 2011 | the times

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Business Insight

Employment Youthful businesses making ‘a huge difference’ to economy Second Person David Beavis

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n Britain, there are enough unemployed young people to fill every football stadium in the Premier League, with more than 200,000 left queuing outside. Over the last quarter alone, unemployment has risen sharply, with young people hit hardest and those out of work for more than a year increasing by nearly 20 per cent.

Here in the North, it is appalling that around one in five of those aged between 16 and 24 is struggling to find a job. This untapped potential is a tragedy not only for young people, but also for the economy. Alarmingly, a recent report found that youth unemployment in the North East alone could cost the taxpayer up to £7.8 million a week in benefit payments and lost productivity.

The UK’s rapidly increasing youth unemployment levels will also have a huge knock-on effect, leaving local businesses and industry without a skilled workforce.

Given the huge pressure on the public purse, it is more important than ever to tackle this issue. Youth unemployment is like a very expensive dripping tap, costing millions of pounds

each week. And just like a dripping tap, if it is not fixed, it is likely to get much worse.

It is crucial that government, businesses and charities engage and work together to support these young people by alleviating the endemic problem of long-term joblessness.

Too often stereotyped as “lazy” or “no-hopers”, in truth there is a deep underlying determination to find jobs – but thousands lack the skills, confidence and opportunities to do so.

Many have struggled at school or have grown up without a role model.

Thousands are also growing up in workless households or in communities where few people have jobs, impacting on perceptions of work and the work ethic. Some even feel it is “normal” not to go to work or to earn a steady wage.

Often, these young people end up on the downward spiral towards long-term unemployment, drug and alcohol addictions and poverty, struggling to see anything positive in their lives, creating the barriers that prevent many from finding a job.

It is possible to re-engage young people and tap into this potential.

Young entrepreneurs, in particular, are crucial in the bottom-up approach to economic growth, galvanising start-ups and employment across the region.

Many young people wish to start in business, but don’t know how to. From

Richard Branson to Michelle Mone, Britain’s most successful entrepreneurs started their first businesses in their early years. We must invest in and support this young talent now – or risk losing some of the most inspiring entrepreneurs of the future.

There are young entrepreneurs who have set up small firms in poor areas, creating jobs where previously there were none. Small, youthful businesses may not be making big headlines, but collectively they make a huge difference to the health of our economy.

Together, they help to regenerate deprived areas, injecting new life and creating better local economies for future generations.

Take Michael, 26, from the North East. He was devastated to be made redundant from his job as a plasterer, as he has a young family to support.

Forced to sign up for Jobseeker’s Allowance, he found it tough raising his two children on a limited budget. Michael was unemployed for over a year, during which time he applied for – and failed to get – numerous jobs.

The Prince’s Trust scheme, supported by the European Regional Development Fund (ERDF), provided him with the skills he needed to start his own business, along with a long-term business mentor to guide him.

Michael’s business is now up and running, only 12 months after he faced

long-term unemployment, and he has work lined up until Christmas and beyond. Not only has he created a job for himself, he also plans to take on staff which will further stimulate economic growth in his local area.

The ERDF Competitiveness Programme 2007–13 for North East England is managed by One North East on behalf of the European Commission, national government and regional partners. It focuses on the promotion of science technology and innovation in businesses and institutions across the region.

The Prince’s Trust helps to change young lives and gives practical and

financial support, developing key workplace skills such as confidence and motivation. Those it works with are long-term unemployed or have been in trouble with the law. The charity has helped more than 650,000 young people since 1976.

Only by working with industry and the public and private sectors can we raise the aspirations of these young people. And for the economy, there is the bonus of boosting activity in the small business sector while at the same time reducing the cost – in benefits – to the tax payer.

By enabling this sector today, we are investing in the economy of tomorrow.

Professional Viewpoint

Reducing Costs of Intellectual Property Intellectual property protects next generation products, for which higher profit margins can be obtained.

However, the cost of obtaining and enforcing intellectual property is an often cited reason for not taking full advantage of the intellectual property system.

Nevertheless, in relative terms, the cost of intellectual property has been decreasing steadily as a result of globalisation of intellectual property systems and use of the internet.

20 years ago, protecting a trade mark in Europe meant filing individual national trade marks in France, Germany, Ireland, Italy, Spain and elsewhere.

Now, the same protection can be obtained in a single registered Community trade mark.

The cost of an international trade mark registration designating the United States, EU and China, is now typically less than the cost of a US national trade mark. The international trade mark system is fast replacing individual national trade marks.

The position is similar for Registered Community designs, which also cover the whole of the

European Union and international registered designs which cover 59 territories.

There is a similar position concerning patents. A European patent granted in France, Germany, the United Kingdom, Switzerland and Lichtenstein, now costs around twice the cost of an identical UK national patent.

For a limited duration (usually 30 months), an international patent application covers 144 states for a similar cost to filing a European patent application. The cost of an international patent application on a per country basis is now less than £100.

There are several ways in which small companies can obtain registered rights, without using professional advisors. Many Trade Mark Offices now have online filing facilities such as the UK Intellectual Property Office (www.ipo.gov.uk), the Office for the Harmonization in the Internal Market (http://oami.europa. eu), and the World Intellectual Property Office (www.wipo.int).

Using these online facilities, an increasing number of companies are registering their own trade marks. Online filing facilities

are also available for registered designs in the UK, Europe and internationally.

Of course, filing your own trade marks and designs online, does not necessarily mean that you will obtain the best protection, and that is where we come in.

Chartered Patent Attorneys and Registered Trade Mark Attorneys are trained and examined to achieve the best scope of protection and enforceability of intellectual property rights.

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Tuesday September 27 2011 | the times

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Business Insight

Cover story: Ajaz Ahmed

From Dixons via dot-com

Ajaz Ahmed surfed the wave of the dotcom boom and bust by founding Freeserve, the UK’s first free internet provider. He tells Luke Manning how the North is perfectly positioned to ride the current stormy waters

M

ention the word Yorkshire and people worldwide will often have a strong opinion on a place that has produced a string of iconic authors, scientists, musicians, politicians, inventors, sportsmen and women, poets, actors and even saints over the generations. From Harold Wilson and Guy Fawkes to the Brontë sisters and Pulp, from Dame Judi Dench and Alan Bennett to Brian Clough and William Wilberforce, it is a land of legend and deep character.

In among the latest crop of high achievers is Ajaz Ahmed, a quiet and unassuming figure whose rise from obscurity has been remarkable but who has undeniably shaped the way our nation uses the internet.

Rewind 15 years and Ahmed was a store manager in Leeds in the Dixons Group, having left school two decades before with no qualifications. Born in Lahore in 1964, he arrived in Huddersfield aged three, when his father found work in the local textile mills.

“Having failed everything at school, I was forced to abandon any plans I had for further education, and found a job when I was 16 working for Dixons as a junior salesperson for £30 per week,” Ahmed says in his warm, affable Yorkshire accent.

His story follows a familiar theme among the region’s most successful entrepreneurs. Yorkshire-born Robert Braithwaite, founder of the luxury motor yacht manufacturer Sunseeker, left school at 14 before borrowing £5,000 to build his own boat. He has now amassed a personal fortune of £130 million.

The brothers Eddie and Malcolm Healey remain arguably the highest-profile businessmen in Yorkshire and the Humber region. They left school at an early age and went into painting and decorating with no qualifications, before deciding to stop when the fumes became too much for them.

Malcolm Healey started Humber Kitchens and acquired the Hygena name in 1981, before selling to MFI six years later for £200 million. He went on to set up Mill’s Pride, an Ohio-based kitchen manufacturer, making a further £800 million in the process.

Eddie Healey turned a derelict site outside Sheffield into the successful Meadowhall shopping centre, which he sold for £1.17 billion in 1999.

Adversity can so often be a potent driving force for success.

“I enjoyed selling technology and always found I did well by focusing on the product, understanding the product and observing the customers,” says Ahmed.

What followed was a rapid progression through the ranks of Dixons, first becoming an assistant manager and eventually, in Manchester, a full store manager of the chain’s largest northern England shop.

Yet it was an internal memo announcing Dixons’ imminent acquisition of four PC World stores in London that was the moment which changed his life forever.

Ahmed wasted no time in applying to join the management team for a new store in Leeds - where, once established, he was ideally placed to spot the seismic changes in the industry.

“I had heard about this thing called the internet, thought ‘I want to go on it’ and asked my staff how to do it. Nobody could tell me. Eventually one of my technical team suggested I phone an internet service provider (ISP) called Demon, who told me I needed a browser to access the necessary information, and to ‘FTP it’ from their site. I gave up and eventually got a CD from a PC magazine cover from another ISP called CompuServe.”

The customer service he received during the experience proved another pivotal moment for Ahmed.

“When I first got on to the internet, my reaction was ‘Wow, this is amazing’.

I could see straightaway that everyone would want to get on the internet in the future, and it was completely obvious to me that it was going to be a big thing. I realised that if I had trouble getting on the internet then clearly our customers would, too.”

He immediately thought that if Dixons could also become an ISP, then they could do what none of the competition was doing and talk to customers about the internet when they purchased their computers.

Dixons already had the largest call centre in Europe, in Doncaster, which handled all software and PC enquiries, and the company advertised in national newspapers every day. It meant that the additional costs to the business for both advertising and technical support would be minimal.

The case was compelling, but when Ahmed presented the proposition to the managing director of PC World, he wasn’t interested and turned it down.

“The thing that made me carry on was an article I read in Vanity Fair about the new establishment,” says Ahmed, telling the story of how his managing director informed him he “had something better planned” with regards to the internet, when in reality he had nothing in the pipeline.

“The old establishment were the oil barons and steel magnates, but the new establishment were those who controlled content and media, people like Bill Gates, Rupert Murdoch, Ted Turner and Steve Jobs. The author said that these were the people who did the obvious before it became obvious to anyone else. I thought ‘he’s absolutely right’. Just because the

What the North has got to do now is get ‘out there’ and sell itself.

It’s exactly the same as any business – people only buy things if they are of benefit to them

managing director didn’t understand what I was talking about doesn’t mean it isn’t a good idea.”

Ahmed persevered with his idea and was eventually granted a meeting with the group’s chief executive officer. This time the response was very different: having been told “let’s do it”, the ball started rolling quickly and Ahmed and his team partnered the Leeds-based technology business Planet Online, started by local entrepreneur Peter Wilkinson.

Next came a moment of luck and timing. Originally, Dixons planned to press ahead with a monthly £10 service as had everybody else, but two months before the launch BT Click was announced – a pay-as-you-go service that charged a local call rate with an extra 1p a minute to surf the web. Ahmed acted decisively.

“I said to Peter, ‘Who’s going to pay £10 a month for our service if they can pay as they go with somebody else?’ To which he replied ‘Let me think about’, and then came back with the idea of making the service free, while building revenues from a share of the standard telephone charges.”

The rest is history. Renamed Freeserve, the business launched on September 22, 1998, and became the largest ISP within two months.

There were a million subscribers just a few months later and by the summer of 1999 Freeserve had become Britain’s first dot-com company to float on the stock market. The following year, it passed the two million subscriber mark, compared with BT’s 400,000.

Freeserve subsequently entered the FTSE 100 and Dixons sold the business to Wanadoo a few years later for £1.6 billion. It lives on as Orange Broadband.

“I could never have launched Freeserve on my own, as it required the resources of Dixons to do it and meant that there were a lot of things I didn’t need to worry about – such as money, or getting paid. I remember we originally borrowed offices at Planet Online and, as we expanded, we found our own office in Leeds to move into. I didn’t even ask what the rent was, just called someone at Dixons and said ‘We’ve found and office and we like it’.

It meant we could just focus on running Freeserve.”

Ahmed was business development director at the time of the sale and it provided a perfect opportunity for him to leave corporate life and cut his entrepreneurial teeth.

Outside of the corporate bubble and following his instincts, Ahmed found life in the world of start-ups an entirely different experience.

“When it’s your own business it’s a different reality,” he says. “It simply doesn’t happen the same way.”

Having both succeeded and failed in projects since the Freeserve adventure, Ahmed has used this valuable learning experience to develop a mantra of keeping ideas simple. He has also witnessed first-hand the negative effects pressure can have on people and the dangers of getting involved as an investor without influence. He now adopts a hands-on approach with all of his projects.

“If you rely on other people too much, it’s like standing on the sidelines watching. You’re just an investor. If you can get involved and change things it makes a big, big difference,” he says, ruefully.

His latest project, Legal 365, avoids such shortfalls and is one in which he is actively involved.

the times | Tuesday September 27 2011

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Business Insight

to the Yorkshire Mafia

If you rely on other people too much, it’s like standing on the sidelines watching.

You’re just an investor.

“The legal industry is currently a protected one with only qualified solicitors being able to invest in, or own, a law firm.

This is about to change,” Ahmed says, referring to the introduction of alternative business structures (ABSs) early next year.

“People can now do things in a different way and we’ve looked at our proposition from the customer experience backwards. We thought to ourselves, ‘How can we make this more approachable, less intimidating, simpler and more affordable?’, and our web-based project is a result of that thinking – a place to buy fixed-rate legal services aimed at the consumer and small business market.”

With Legal 365 also set to open a chain of high street “walk-in’” stores in city centres, it will be a fiercely competitive environment among the big retail brands.

The competition should drive both customer service and value.

Competition remains the fuel of business and nothing could be truer in the North, a region that has unimaginable potential for growth but also some profound problems as the divide with the South appears to edge wider each year.

It is an issue that drives Ahmed relentlessly, reflected in his recent roles on the board of the Yorkshire Forward regional development agency (RDA), the governing council of the University of Huddersfield and now the advisory board of the business school there.

“Northern people are very enterprising,” he says. “There are some great business people and great businesses up here.

We’ve got large ports on either side in Hull and Liverpool, vibrant economies in Leeds and Manchester and plenty of opportunities. But we’ve also got economies that are reliant on the public sector as well and if budgets get cut back then it causes problems.”

Ahmed has a palpable pride in the North and great respect for the RDAs which have done a “good job in helping local economies”, underpinned with a firm belief that the next step for the region is to “sell itself more”.

“The physical regeneration part of the remit has been done and now it is about business and job creation,” he says.

“If you go to Sheffield city centre you could be in any international city, it’s beautiful. It changes the perception of the city instantly and gives you a platform on which to build.

When steel was still a big industry it was a completely different place, and when steel started to decline Sheffield was in a bad way.

“What the North has got to do now is get ‘out there’ and sell itself. It’s exactly the same as any business – people only buy

things if they are of benefit to them. If I was a businessman in China, India or Russia and wanting to locate my business in the UK, the question I would ask would be ‘Why the North instead of the South?’”

The ingredients for growth are already in place, with world-class universities, airports, transport, access, a diverse and skilled population, cheaper development costs and an unbridled work ethic. All of which drives innovation.

“The University of Manchester has a list of all the innovations that have come out of there and the top two on that list are inventing the computer and splitting the atom,” Ahmed says. “I didn’t need to read number three.”

Clusters of excellence are forming all over the region, be it bioscience in York, legal centres in Leeds and Manchester, innovation and technology and the sciences in the North East, advanced engineering in South Yorkshire or renewable energy across the region. The BBC North initiative in Manchester should have a similar impact when it comes to establishing a creative cluster.

The question now is how to scale local expertise with genuine global ambition. As with everything, this can often start close to home, and a prime example is another initiative with which Ahmed is involved, the Yorkshire Mafia.

Starting out as a simple networking event over drinks in a bar in Leeds, it has spread to other cities across the North and held its first conference this year, with Ahmed appearing on a “billion dollar panel”. With over 6,000 members and 1,000 attending the conference, the Yorkshire Mafia shows how quickly initiatives can grow if exposed to the right environment.

It also offers a microcosm of the economic regeneration of the North itself, emphasising the importance of the different regions coming together as a whole.

“I’ve worked in Manchester and I’ve worked in Leeds and with the Pennines in between them there’s always going to be a gap and a rivalry,” says Ahmed as he prepares to leave.

“That’s got to be healthy and we must channel the passion and the competition, but we must also remember there is benefit in doing business between the regions for one common goal – the North.”

And it is this spirit and unity that will win the race eventually.

The opportunities for the North are there.

Now is the time to make good on them.

Ajaz Ahmed: ‘Northern people are very enterprising’

Rise of an internet giant High street chain Dixons announced the launch of Freeserve in 1998 and revolutionised the internet service provider (ISP) business model by offering a service that required no subscription, had no monthly commitments and was absolutely free.

Run from an office loaned by technology partner Planet Online, Freeserve was the UK’s largest ISP within two months, had a million subscribers within six months and was floated on the stock market within a year. It reached two million subscribers another year on and was valued at £9 billion while still making a loss. Freeserve was unique among European ISPs in that its active users were far greater than those of the incumbent telephone provider BT.

At its £9 billion peak, Freeserve was valued at more than Dixons itself. It was eventually sold to France Telecom-owned company Wanadoo in 2000 for £1.65 billion. Freeserve was also among the first UK ISPs to trial the emerging ADSL broadband service.

Despite “extensive evaluation” in 2003 that found “a huge strength of feeling for the Freeserve branding in the UK”, the new owners changed its name to Wanadoo plc in 2004, then changed it again in 2006 when it formed part of Orange in the UK. The name can still be seen in Orange Broadband’s free web-based mail programme fsmail.net - with the fs standing for Freeserve.

Professional Viewpoint

It’s not easy being successful online We live in a world where the need to focus on digital marketing is an ever-increasing priority for every business owner and marketing manager.

Every business needs an online presence – this is what we learn from industry publications, those waxing lyrical about the new age of information and from our peers.

Hastily commissioning a website and setting up accounts across various social media sites without direction will only get you so far.

There are examples littered everywhere of unsuccessful digital marketing strategies undertaken without any expert help and knowledge.

They generally combine uninformed decision making, wasted resources and a resounding lack of success.

By establishing a well-researched strategy that considers factors such as user flow and your conversion objectives you can avoid a lot of the pitfalls of failed campaigns. Seeking professional advice should be your first port of call.

The Yorkshire Mafia is a great example. Snapshot Media has worked with them since the business network’s inception. What started as a fledgling LinkedIn group a little over a year ago has now spread its wings to encompass 8,500 members, a regional business conference and what can only be described as a cult

following in the world of business leaders.

Key to this success has been careful digital strategy planning, listening to users’ needs and putting these revelations into practice in a 360-degree web, email and mobile approach to communication.

Clever online marketing and presence establishment doesn’t necessarily have to cost a lot, it just needs to be put in place by people who understand the medium as well as the needs of your target market.

Snapshot Media are a digital marketing agency based in Leeds with vast experience in helping businesses attract increased revenues and market penetration through intelligent digital strategy implementation.

Our door’s always open and the coffee’s always on us.

Lawrence Dudley, Creative Director Snapshot Media T: 01133 226477 / 01904 236363 M: 07885493842 W: snapshotmedia.co.uk A: Studio One, 46 The Calls, Leeds, LS2 7EY

Tuesday September 27 2011 | the times

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Business Insight

Conferences & Events

From Peterloo to political conferences

“

Manchester is the conference capital of Britain.” You might think that is quite a claim, but the words were spoken by Hazel Blears MP, following the city’s hosting of the Labour Party Annual Conference in 2010. Not a surprising stance, given that her Salford and Eccles constituency is just a stone’s throw across the River Irwell from the conference quarter in question. But even leaving aside local loyalties, Manchester does have an enviable track record for the delivery of its business tourism product.

That record follows over a decade of investment in the sector by Manchester City Council, by Manchester Central – the city’s flagship conference venue, and

by Marketing Manchester – the agency responsible for promoting the city on the national and international stage.

Their focus has been very much on rebuilding and rebranding the area known today as Petersfield. As with many parts of the city, there are historical links to the modern-day activity taking place.

St Peter’s Field, as the area was known in the 1800s, has always been the city’s primary meeting point. It was here in 1819 that a gathering of around 70,000 people demanding reform to parliamentary representation resulted in the infamous Peterloo Massacre.

Today, Petersfield is home to not only Manchester Central and the Bridgewater Hall, but also to over 850 four- and

five-star bedrooms in the form of the Hilton Manchester in Deansgate and the Midland and Radisson Edwardian hotels.

There are 2,500 hotel beds within a fiveminute walk of the historic quarter.

It is the concentration of these facilities in a relatively compact area that has made Manchester such an appealing option to conference and event organisers.

Manchester Central is, without doubt, the jewel in the city’s crown. Refurbished to the tune of £30 million, it has helped to secure bigger and higher profile conferences and exhibitions that, in turn, attract more business.

Most important of all, it has planted Manchester on the highly coveted politi-

Manchester Central: the city’s flagship conference venue

Manchester does not consider London its primary competitor Bridgewater Hall Manchester

Understanding the power of face-to-face contact To succeed in today’s corporate market, venues needs innovation, imagination and some strong client relationships, says Liz Taylor

W

hile the virtual meeting is becoming increasingly popular, it still holds true that you cannot beat face-toface contact for creating business opportunities and sparking exciting discussion. However, in today’s financial climate, when both time and money are tight, it is more important than ever to make the benefits of any investment both obvious and attractive.

It is a fallacy to think that business people haven’t always been concerned about the best use of time and money, but in 2011 it is also about making that prudence visible.

When I first started out as an events organiser 25 years ago, the main venues for business events were hotels. Ten years on and the number of possible venues had mushroomed. Suddenly we could hold events in stately homes, museums and art galleries, as well as purpose-built conference and event facilities.

For one client, we transformed a railway arch in Manchester into a stun-

ning setting for an awards dinner. At the time, the idea seemed completely off the wall, but it worked and the result was a fabulous event that people talked about for years afterwards.

The natural beauty of a venue such as Tatton Park is perhaps easier for a client to grasp, but it comes with its own challenges nonetheless.

As winner of Cheshire’s Large Visitor Attraction of the Year in both 2009 and 2010, Tatton Park is undoubtedly one of the region’s most impressive settings. You cannot erect marquees in the grounds of the Tudor Old Hall, which Taylor Lynn Corporation has done in the past, but you can still use other spaces around the lake that look on to acres of beautiful landscaped gardens.

Unfortunately, walking across fields is not everyone’s idea of fun, but you can work that to your advantage. For example, we have used carriages pulled by farm tractors to take guests from the main car park to the marquee, and such things always get the conversation going.

There was a time when you could create the wow factor simply by using a new venue. However, as the recession bites, there are fewer new premises on the market. It is exciting as event organiser, because clients are becoming more interested in my company’s creative use of space and styling. But it means that venues need to up their game, too.

Building good relationships helps to develop a better understanding of what event companies are looking for as well as trust in the delivery on both sides.

Essentials include quality service, good transport links and suitable space offering the latest technology – which is why established Manchester hotels such as the Lowry Hotel, Great John Street, the Midland and the Hilton Deansgate will always remain popular. After that, flexibility in pricing and logistics – such as access times and freedom to dress a room – will give a venue the competitive edge.

Liz Taylor, owner of Taylor Lynn Corporation, has been organising highprofile corporate events for 25 years. www.tlc-ltd.co.uk

Liz Taylor has been organising events for quarter of a century

the times | Tuesday September 27 2011

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Business Insight

cal party conference circuit. Labour was the first to decamp, holding its spring conference here in March 2004. Since then, the city has hosted three Labour Party annual conferences (in 2006, 2008 and 2010), along with the party’s leadership election of 2007. In 2009, the Conservative Party held its first conference in Manchester for over 100 years, and will return next month for the 2011 event.

These events are worth a significant amount. The Labour conference in 2008 brought with it a £15 million boost to the city/region economy, and by 2010 this

was worth an additional £500,000. The Conservative presence in 2009 brought £16 million of business, and the 2011 event is set to break the economic impact record. To play host to the two parties on alternate years has meant a steady and much-valued financial boost at the end of each summer.

But it isn’t just the political parties that Manchester has to thank. The 2007 annual convention of the Society of American Travel Writers, and the fouryear deal to host the prestigious Soccerex European Forum from 2010 to 2013, have also helped to put Manchester on the conference map.

The national and international connectivity afforded to delegates is another of the city’s trump cards. Manchester Airport has no rival outside of London in terms of route network, capacity and facilities. The transformation of the West Coast main line service by Virgin Trains – with the two hour, seven minute journey being made every 20 minutes at peak times – has brought Manchester closer to the capital than ever before.

That said, Manchester does not consider London its primary competitor, being well enough established on the European scene to pitch itself against many of the Continent’s established conference cities. There are also more than enough unique selling points for the Manchester marketers to highlight as a means of securing new business.

The industrial heritage and sports pedigree for which Manchester is best known around the world has been put to work. Demand for the hire of venues

such as Manchester United’s Theatre of Dreams and Manchester City’s recently renamed Etihad Stadium is impressive. Equally, the neo-gothic Manchester Town Hall and the award-winning Museum of Science and Industry are two of the city’s business tourism bighitters.

Like many cities, Manchester also has an established Conference Ambassador Programme – a network of academics and business figures who help to attract their industry’s events to the city.

And with the largest student population in Europe studying at four universities across the city/region, it is no surprise that Manchester has more than its share of lecturers, doctors and professors willing to step forward and help with promotion.

It is this combination of product, infrastructure and sheer enthusiasm on all sides that has made business tourism in Manchester a £573 million a year business.

Manchester’s profile shows no signs of fading. In 2012, the remaining BBC departments earmarked for MediaCityUK will arrive at Salford Quays, while the National Football Museum will reopen in the city’s Urbis building following its move from Preston. Both look set to attract business tourism events from their respective fields and Manchester will no doubt be more than happy to accommodate.

For more information about conferences in Manchester: www.visitmanchester.com/conference

A Central role Angie Robinson joined Manchester Central as chief executive in September 2011.

She was previously CEO of Greater Manchester Chamber of Commerce – and, more recently, of the Manchester inward investment agency MIDAS. “I have been on the board at Manchester Central for six years,” Robinson says, “and it has always been one of my favourite board positions because the business itself is so fascinating – I can’t think of any other that has the same diversity and dynamism about it.

“The fact that this is such a well-run business is also a big part of the appeal. My predecessor, Lesley Tomlinson, has bequeathed me a fantastic team of people and has teed-up some great opportunities for me to get my teeth into – there are plenty of those on the horizon.”

Robinson also points out that, as the city’s largest venue, Manchester Central plays a very significant role in the local economy. In 2010,

the venue generated £70 million in economic impact through events such as the CIPD (Chartered Institute of Personnel and Development), Soccerex and the political conferences. In recognition of this, in April 2011 Manchester Central was placed in the silver category for business tourism in the Enjoy England Tourism Awards for excellence.

“Manchester Central is a fantastic and extremely successful venue,” Robinson says, “and I plan to build on that. It is already on such a roll, I just cannot wait to get on with pushing it even further, and ensuring it remains best in class in what is an increasingly competitive market.”

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Business Insight

Tuesday September 27 2011 | the times

the times | Tuesday September 27 2011

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Business Insight

Advertisement Feature

Good value in property

W

hen it comes to the property sector, as in most other areas of the country, the picture in the North East is mixed.

Things may not be what they were before 2007, but there is still a reasonable appetite for property, especially residential, and – according to the Gordon Brown Law Firm – there are reasons why it is not all gloom as we head towards 2012.

The Newcastle-based partnership is one of the leading commercial and residential property law firms in the North East, and recently celebrated 30 years in business.

In spite of the economic slowdown, demand for commercial property among seasoned investors has held up, particularly towards the lower end of the market, and there is good value to be found.

“It’s been a tough few years in the commercial property sector,” says senior partner Gordon Brown, “there’s no doubt about that. Generally, things remain relatively subdued, but there are still signs that there is yet life in the market.

“The general picture is mixed, and we’re not seeing too many new starts

taking place, but developments like Baltic and Quorum business parks, planned and started before the credit crunch, are completing.

“In general, the office sector in and around Newcastle is seeing the best results since the recession began. The service sector in the North East has a big role to play in the future of the regional economy, so that’s very encouraging. The industrial sector has also seen reasonable activity. Whatever the circumstances or the ’product‘, quality and value will always be in demand, and property is no different – all that differs is the price attainable.

Rates in the North East have been “extremely competitive”, Brown says, and he believes that, with some “excellent” deals available, the signs are good for new or expanding businesses and for individuals in search of property as an investment.

“In recent months,” he says, “we’ve helped many businesses, including a significant number of SMEs (small and medium enterprises), to take advantage of the value in the market by investing in key sites and properties around the region. The good news for us is that people always need commercial property and need to manage their existing property interests, and

we expect demand to grow steadily in the medium- to long-term.”

The residential conveyancing team at the Gordon Brown Law Firm – now the largest in the North East – has also been busy. It deals with homes all around England and Wales, and has enjoyed a strong demand for its services on the back of new business with financial advisors, national house builders and estate agents. The firm’s memberships of the Conveyancing Association and the Equity Release Solicitors Alliance have seen professionals from around the country keen to introduce work.

“Encouragingly, things have been busy over the summer,” says Kathryn Taylor, head of residential conveyancing at the firm. “If we look at June [2011], which was very busy for us, we our new file-opening figures were treble those for June 2009 and almost double last June’s figures.

“Our new-build team in particular is going great guns. We’re assisting clients through the Government’s ‘First Buy’ scheme, which is having an impact on helping first-time buyers get on the property ladder.”

Looking specifically at the North East region, a recent survey by the Royal Institution of Chartered Survey-

(L to r) Ian Lawson, Kathryn Taylor, Gordon Brown, Jonathon Stokes and Moya Mason – the partners at Gordon Brown Law team. ors showed a rise in house sales and enquiries on the back of strong buyer demand, which triggered a rise in new stock.

“Certainly fears over job security and limited mortgage availability have slowed growth in recent years,” Taylor

says, “but it does appear that the local market in the North East has proved more resilient than some other regions, which have been hit by bigger fluctuations in property values.”

For more information, visit www.gblf.co.uk

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Tuesday September 27 2011 | the times

14

Business Insight

Professional Viewpoint:

North quick to rebase and face reality David Fox comments: Realism is the predominant characteristic of the retail property letting market throughout the north of England and Scotland.

Landlords have accepted the new reality of the marketplace and rental contour maps have been re-drawn. Although some indices have been showing a rebasing of rents with decreases of around 15%, in some areas the softening has been far more profound. That is not to say, however, that all the news is bad.

There is still demand for shopping space throughout the regions. Prime pitches and the best shopping centres attract occupiers while food store and value-orientated operators continue to be significant presences in the market. You only have to look at the ongoing strength of the Trafford Centre in Manchester and other high quality shopping pitches to see that retailers have not written-off everything north of Watford.

However, landlords realise that they may just have one shot at landing a retailer as occupiers have very set ideas of what deal they want and where they want to be. Retailers are taking a very selective approach.

Their choice sometimes comes down to which town they opt for rather than which pitch they take in the same location. It requires a fresh perspective to be successful in the current market and clearly substantial quantities of space will stay unlet for a long period of time.

However, facing up to the reality of the rebased market must be the first step towards progress and there is now certainly greater transparency in the northern, Midlands and Scottish retail property markets.

UK property: an alternative safe haven?

James Watson comments: The proliferation of ‘Cash-for-Gold’ stores on the High Street draws a neat parallel with the current focus of retail property investors. While the “jewellery recyclers” may not be the answer to the High Street’s problems, prime retail property certainly appears to be offering salvation to investors looking for a safe haven for their cash.

Whilst the lower-yielding annuity funds are cash-positive, many of the retail funds have been once again hit by redemptions from private investors who are concerned about the prospects for growth in commercial property. As a consequence, institutional property investors are “going for gold”: lowering their requirements for returns and making a bee-line for super-prime property let on long leases to strong covenants.

This type of asset provides lower but more secure returns.

Supply remains tight The supply of prime properties that fit the required profile remains tight, whilst there continues to be a surplus of secondary stock. This situation is set to continue through to the end of the year as more product comes onto the market. The NAMA disposals coming out of Ireland will play a key role in this.

The yield gap between prime (holding fast) and secondary (moving out) will continue to widen with secondary yields returning to more traditional and attractive levels. While institutional investors may stick to the shelter of super-prime, this yield gap should encourage more experienced investors to partake in some good old fashioned property speculation when secondary properties start to look irresistible.

Secondary: proceed with caution The secondary market is not for the faint hearted. Buying in this area of the market requires a forensic approach and deep market knowledge at present. While it may be tempting to just “buy yield”, there is still some mispricing in the market and questions as to whether some yields are sustainable. Buyers have to really know what they are doing and have a firm grasp of the occupational side of the equation.

Only time will tell whether the investors entering the secondary property today have got their timing right.

Outlook The inherent danger in the current investment market is that because interest rates are low, an investment may look “good value” simply because of the implied return against the cost of money. However, investors need to look beyond the yield. Property may be attractive because it offers the “least worst” return compared with other investment media, but investors must also focus on property fundamentals if they are going to buy well in the coming months.

Access to thorough knowledge of the occupational market is essential and also an understanding of what is really “prime”.

There is a thirst for yield at present but the days of the 15% IRR investments are long gone. The more astute investors are lowering their target returns and looking to long-dated assets with secure income.

Returns can still be attractive, there are clear opportunities in the market and property investment can still perform a role as an effective hedge against inflation. However, in retail property investment you disregard what is happening in the occupational market at your peril.

David Fox is Briant Champion Long’s Partner in charge of Retail Agency in the North, Midlands & Scotland 020 7434 7103 dfox@bclretail.co.uk

James Watson is a partner in Briant Champion Long’s Retail Property Investment Team 020 7434 7134 jwatson@bclretail.co.uk Briant Champion Long is a leading UK retail property consultancy whose agency, investment, and professional teams advise on high street shops, shopping centres, superstores and leisure property. bclretail.co.uk

the times | Tuesday September 27 2011

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Business Insight

Retail Property

Riots and recession highlight the need for leadership in town centres

The mood at the annual conference and exhibition of the British Council of Shopping Centres was mixed

Troubled times have emphasised the need for town centres to be managed more like shopping complexes, with the onus on the Government to make a ‘real difference’ to retail, finds Georgina Stey

U

K retail has been propelled to the top of the news agenda during the past few months.

Falling consumer spending has led to highprofile casualties including T J Hughes, Jane Norman and Habitat, while the riots in August and the appointment of retail guru Mary Portas to lead a high street review inspired widespread debate on retail and its role in town centres.

The mood at the annual conference and exhibition of the British Council of Shopping Centres (BCSC) was therefore mixed, but there was a clear dedication to pursuing new opportunities for the industry, which provides 7.5 million jobs in the UK. The event, held in Manchester in mid-September, attracted over 2,600

retail property owners, developers, investors, retailers and a multitude of agents – all eager to discuss the challenges facing the industry and to get back into action after the property world’s notoriously long summer break.

The big issue was the role of retail property in town centres, demonstrating the impact that Portas has had on the sector. The BCSC’s own research reveals that the increase in empty shops seen since the recession is here to stay, with one in ten shops expected to remain vacant across the UK post-2014, in comparison to between 6 per cent and 7 per cent before 2007.

Michael Green, chief executive at the BCSC, said the report highlighted the need for leadership in town centres to ensure that they are managed coherently, in the same way as traditional shopping centres. Rather than seeing multiple retailing by big brands as the problem – something

What frightens me is how long it takes to develop town centre regeneration

Sir Richard Lambert often criticised for the decline of the high street – Green argued that Portas and her review needed to look at the big picture: “In order to attract customers, and ultimately drive sales, town centres need to be viewed in their entirety, managed and marketed well to secure investment from a range of national brands and independent businesses.”

The onus was also put on Government to do more to help the sector. Speaking at the opening day of the event, Sir Richard Lambert, former director-general of the Confederation of British Industry, called on the Chancellor, George Osborne, to take steps to make a “real difference” to the pro-growth agenda by freeing-up access to credit for businesses. “Growth will only be assured,” Sir Richard said, “once credit starts to flow properly through to our entrepreneurs and risk-takers” Concerns were also raised over changes, currently going through Whitehall, to the planning regime. Out-of-town centres such as Meadowhall in Sheffield and the Trafford Centre in Manchester have been blamed for reducing investment in town centres, and there were calls for the Government to strengthen its promotion of in-town development as part of the new National Planning Policy Framework, which is currently out for consultation.

Ian Anderson, senior director for planning at property services firm CB Richard Ellis, asked for the wording on a town-centres-first approach to planning policy to be bolstered, in order to defend the principle from out-of-town interests and to avoid the spectre of planning becoming a matter for the courts, where the guidance is ambiguous.

Tuesday September 27 2011 | the times

16

Business Insight

Retail Property From page 15 The current draft National Planning Policy Framework only calls for a towncentre approach “where practical”, something which the BCSC has consistently asked to be strengthened.

The retail property industry had enjoyed a considerable boom prior to the onset of the recession, producing a string of glitzy modern shopping centres including Westfield London and Highcross in Leicester. The last few years, however, have been tough on a sector heavily reliant on consumer spending, and 2011 is seeing only three new centres built, including Sovereign Land’s Trinity Walk in Wakefield and Standard Life Investments’ Parkway in Newbury, due to open on October 27.

The third centre is the 1.9 million square foot behemoth built by Australian developer Westfield at the Olympic Park in Stratford This opened on September 13, and is evidence of the desire among retailers to move to bigger, centrally located shopping and leisure destinations designed exclusively for modern retail, something which traditional high streets have often failed to match.

In 2012, only one new retail development is set to open, and the lack of new modern floorspace is forcing retailers to focus on how and where to operate stores. Thomas Meager, director of property at Primark, admitted that the opening of Westfield Stratford has already had an impact on its store in nearby Leytonstone, and that in the future the company might close down smaller stores in order

to prioritise resources on those providing the best environment from visitors.

Marcus Kilby, managing director at retail agency Lunson Mitchenall, said that a polarisation was becoming apparent – but, with the right kind of investment and management, towns can still perform. “We are going to see smaller towns with more convenience stores and a few restaurants,” he said, “but there needs to be an understanding of these towns and what they can do for the community.

“You can still bring the community together in a different format – it doesn’t have to mean shops.”

There was a repeat of the BCSC’s call for a developer-led Tax Increment Financing (TIF) model to unlock retail development. In September, a group of top retail developers wrote to the Deputy Prime Minister, Nick Clegg, calling for him to support the model. This would allow projected increases in business rates created by new development to be used to secure private sector investment in public infrastructure.

“What frightens me is how long it takes to develop town centre regeneration – 13 years on average,” said Mike McGuinness, development director at Hammerson. “We have to bring the average timescale down.

“It is really important that local authority representatives have the same view and you work together, rather than everybody being suspicious of each other.

If there is one thing the public sector can do, it’s supporting the process of TIF. The risk is entirely with the developer.”

Serious content at the conference and exhibition, therefore, but some light relief was provided by a healthy dose of entertainment from the numerous parties and drinks events held throughout Manchester. These included a lavish cocktail evening held on the 23rd floor of the Hilton hotel, and an exclusive event hosted by

Land Securities, the largest UK commercial property company.

There was also celebrity endorsement, when the 15-times darts world champion, Phil Taylor, helped to promote the Realis Estates 650,000 square foot City Sentral regeneration project in Stoke-on-Trent, the city where Taylor has lived his entire life.

Duncan Mathieson of Realis Estates shows plans for Stoke-on-Trent regeneration to darts legend Phil Taylor

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the times | Tuesday September 27 2011

17

Business Insight

Professional Viewpoint:

Creativity is key when designing for retail led regeneration Whilst developers struggle with the fall in commercial property values and rising borrowing costs, the public faces the continuing decline of ageing town centres and loss of jobs. However, whilst the knee jerk reaction is to curb spending, the economy needs longer term, sustainable regeneration to drag it out of the doldrums and therein lies the conundrum.

Much like the developer driven housing that lies empty across swathes of the UK, because of low affordability, traditional shopping centres and retail parks are not the immediate solution. We need to be smarter and clearer if we are to avoid replicating the same offer in different locations. Smarter about the mix of brands, food and beverage offers and the appropriate integration of housing into holistic mixed-use developments. Clearer about the experience we are trying to create.

Successful retail is driven by footfall. People vote with their feet and if we and our clients do not provide retail destinations they want, we won’t succeed. There is a perverse benefit to recessions in that often weaker retailers fail, leaving space for other, more innovative retail offers to emerge, a kind of retail regeneration in its own right. Our role is to ensure the retail destinations we design are flexible enough to accommodate this evolution.

We need to build upon the cultural heritage and urban grain that exists within our towns and cities, most notably within the rich context of Northern towns and celebrate it more in our developments. People are generally passionate about their home towns and communities, and perhaps this will be a benefit of the localism agenda – giving the consumer greater influence over which retailers they find on their high streets and the quality of public realm, thus ensuring they support them more fully. It is often our role as the architect, to listen to and understand what the public wants and ensure the places we design, reflect desire and respond to need and give them destinations that exceed their own expectations.

Over the last 20 years 3DReid’s retail division has increasingly been asked by clients to look at ways to renew their existing assets - to breathe new life into them - refreshing, revitalising and renewing that all important retail experience, whether a retail park, high street or shopping centre.

The following projects illustrate our involvement in the region, where retail is a key catalyst to longer term regeneration.

At Trinity Square in the town centre of Gateshead, we are delivering a new Tesco Extra foodstore of 150,000 sq ft, a further 200,000 sq ft of other retail, 700 units of student accommodation – all taken by the University of Northumberland – and additional office space and a hotel.

This is all on the site of an infamous and much derided multi-storey car park. This allows us to link the wealth of recent investment in cultural facilities with the basic need for a financially sustainable town centre offer. The impact of this development on the local economy, both to jobs, income and sustainable community development cannot be under estimated.

In Lancaster, we have had the opportunity to be involved in the redevelopment a defunct Brewery site into a rich mix of cultural, residential and retail offers, by integrating new development with the current urban grain and historic buildings. This development supports the existing town centre and provides a stronger link to existing facilities and extends the experience to the canal, where the public realm can be improved and create some exciting open spaces.

Retailers also have a wider influence over regeneration. The major food retailers all have funded and delivered significant mixed-use developments, providing and managing additional uses including social housing, student accommodation and secondary retail, doctor’s surgeries and even

schools, in schemes that 3DReid’s been fortunate to be involved in. The financial muscle, deep understanding of the planning challenges and their awareness of what consumers, and therefore communities, need means these major retailers are perfectly placed to operate as funders and developers in their own right to kick start regeneration projects.

There is a much deeper understanding among the large retailers of how they can apply this knowledge to new developments.

Taking this strategic involvement to another level is The Co-operative Group, whose head office building we are currently erecting on site in Manchester City Centre. The Co-operative is an excellent example of not just a food operator, but a holistic service provider that offers cradle to grave services for many communities across the North of England and countrywide. The Co-operative recently announced the launch of their 20 acre NOMA master plan in Manchester, which promises to deliver 4m sq ft of new or refurbished space to the city centre. A truly mixed use development much of this will be commercially focused, but there lies an excellent opportunity to provide a more vibrant retail offer, building upon local influences and trends, which moves away from our normal understanding of typical anchors and fashion driven shopping centres. It is the role of The Co-operative Group as land owner, master planner and strategic development partner that will ensure their vision and continued integration with the history of Manchester will be the key to the success of these ambitious plans.

The Co-operative Group’s legacy is ingrained in Manchester’s history and future and the relationship they enjoy with the forward thinking Manchester City Council is one that is rarely enjoyed by other retailers and Councils. With additional confusion over the benefits and challenges of the proposed National Planning Policy Framework, the opposing drivers between the public and private sectors have the power to make or break this improved optimism we’ve seen over the last six months in retail development.

The challenge moving forward as we feel another round of nervousness approaching is not to hunker down and hope it all blows over, but to see the bigger picture and work together with communities, planning departments and developers to create longer term, sustainable town centres that have the flexibility to accommodate an ever shifting demand.

3DReid works across a range of sectors for public and private clients, including retail-led regeneration projects in Gateshead, Lancaster, Birmingham and London.

Mark Anders is Group Director and Head of Retail at 3DReid.

3DReid is the lead designer of The Co-operative Group’s new head office building in Manchester; the National Indoor Sports Arena and Velodrome in Glasgow and the new Gibraltar Airport.

To find out more about our work, please visit www.3DReid.com.

Tuesday September 27 2011 | the times

18

Business Insight

Investment

Northern private equity bares its teeth The investment strongholds of the North are emerging from a challenging few years

F

or mid-market private equity firms operating from the northern investment strongholds of Manchester and Leeds, the last few years have been challenging.

The high-return glory years prior to the recession unravelled with the fall of Lehman Brothers, heralding 18 months of the toughest dealmaking conditions that the young regional buyout markets had seen.

Valuations for all but the strongest businesses decreased, as acquirers began to factor in uncertainty of company earnings as a result of weak economic growth prospects, while owners were unwilling to lower their pre-credit crunch price expectations. Processes paused and, as a result, deal flow dried up.

Many northern-based private equity houses also became more cautious, focusing on shoring up their portfolio companies’ market positions and waiting for the sales of buyout targets’ to improve.

Since early 2010, the recovery in sponsor-backed transactions in the North has been steady, with business performance having improved, according to the industry’s “cautiously optimistic” protagonists – but this has played out in the face of increased competition from all sides.

“Northern private equity sponsors have seen large corporates targeting the strongest mid-market businesses on their patch,” says John Hughes, the Manchester-based head of private equity at KPMG. “Many de-leveraged their balance sheets to free up cash for acquisitions during the recession, tempted by favourable market valuations and companies’ latent earning potential.

“International businesses, in particular, have been taking advantage of the weakened sterling to diversify their geographical reach and product offering.”

London-based sponsors, too, have continued to source investment opportunities in the northern regions, creating an even bigger headache for local dealmakers. “Firms from the capital have always walked the Manchester and Leeds beats to source leads,” says Hughes, “but when there are fewer deals to be done, this inevitably puts pressure on regional investors.”

Figures for the regions provide a mixed picture. The North West market performed strongly in 2010, increasing

total buyout value to £1.5 billion from £270 million in 2009, while Yorkshire saw sponsor-backed transactions totalling £1.8 billion, up from £200 million last year, according to data from the Centre for Management Buy-out Research (CMBOR).

In contrast, CMBOR recorded a total buyout value for Yorkshire of just £12.6 million in the first half of 2011. The picture in the North West was more positive, with separate data from Experian noting that venture capital-funded deals increased by 6 per cent to 34 deals in the first half of 2011, with the value of these transactions having grown by an overwhelming 460 per cent.

Despite the impact of heightened competition, private equity in the North is as strong as it has been since the onset of the downturn, and deals are there to be done, according to Hughes – whose firm has advised on some of the key private equity transactions in the North this year, including the Merrill Lynch’ sale of Integrated Dental Holdings and the management buyout of MoneyPlus Group by Palatine Private Equity.

“Processes are undoubtedly taking longer than they did in the bull market, with further layers of due diligence being added to processes, but there is appetite for private equity investment and quality assets are available,” Hughes says.

“The private equity community in the North has as good a pedigree as any in the world, and the buyout markets in Leeds and Manchester, in particular, operate a level of protectionism which has contributed to their stable performance in comparison to other areas.”

Mark Bolshaw, head of UK regions at Lloyds Bank Corporate Markets Acquisition Finance, a leading leverage debt provider with offices in Leeds and Manchester, agrees that the northern private equity community is working to sustain its own market. “In difficult economic times such as these, dealmakers will try and keep opportunities on patch,” he says.

“Sponsors have also become more focused on self-origination to combat market conditions. While this trend was emerging prior to the downturn, firms are increasingly developing off-market opportunities by building long-term relationships with management teams months or often years prior to any processes taking place. In these cases, regional investors’ proximity to, and indepth understanding of, the marketplace provides a clear advantage over their national counterparts.”

Processes are undoubtedly taking longer than they did in the bull market

John Hughes of KPMG

Martin Draper of LDC

Private equity firms with established northern operations have faired relatively well in recent years, given their reputation for deliverability. However, their pitch to management teams has been refocused on the value-added guidance that they can provide in combating weak domestic conditions and unlocking long-term value.

Mid-market sponsor LDC operates 11 offices across the UK, including in Leeds and Manchester. As a captive investor, it has significantly increased its support to companies during the downturn – supplying over £200 million of development capital to businesses nationally each year since the recession began.

Its recent northern transactions include investments in Macclesfieldbased musicMagpie, a buyer and seller of pre-played CDs, DVDs and games, Manchester-based international marketing business WRG, and Bradford-based Driver Hire, a franchised provider of temporary and permanent personnel to the logistics and distribution industries.

“Pricing is naturally a key consideration for management teams and vendors,” says says Martin Draper, head of the North and Midlands regions at LDC. “However, in a low-growth economy, companies are increasingly seeking investment partners that have the existing infrastructure and resources to directly support expansion.

“This is where private equity can win out over trade in the North, by focusing on unlocking value, often via transformational change. This may be through follow-on capital to support strategic acquisitions, growing sales in overseas markets via international networks, or the provision of specialist teams to implement operational improvement programmes to drive efficiencies.”

Given the changing priorities of management teams in the post-recessionary environment, Draper believes the firm’s investment model positions it to drive

deal flow in the regions. “Our approach is squarely focused on delivering long-term value and business growth through, for example, our office in the Far East, our dedicated Value Enhancement Group and our network of leading non-executive candidates.

It is therefore highly relevant in the current market.”

Leveraged finance is also available in the regions, according to Bolshaw, whose team’s approach to lending has not changed as a result of the downturn.

“Appetite amongst some banks to fund buyouts in the North remains high,” he says. “However, with some vendors unwilling to exit companies at what they perceived to be the bottom of the market, there has been limited supply of investment opportunities in recent years.

“Leveraged debt remains a viable source of funding for private equitybacked deals and growth strategies, and our approach to financing these before, during and now after the recession has not changed.”

While competition from both trade buyers and national private equity firms remains fierce, and while economic pressures relating to the UK gross domestic product growth and Eurozone debt are at the forefront of many investors’ minds, conditions are in place for the northern private equity markets to stabilise and, later, to return to sustained growth. “Regional sponsors with plenty of dry powder are returning to the market to fund buyouts,” Hughes says,“while companies which have been strengthening their balance sheets during the downturn are now making their cases for investment.

“The aims of private equity houses and management teams in the regions are gradually converging, which will create a stable outlook for private equity in Yorkshire and the North West, despite trade competition.”

the times | Tuesday September 27 2011

19

Business Insight • Commercial Property Agency

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