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September 2015
Foreign direct investment in the wider UK
Insight Flagging up the Future Discovering Britain beyond London
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2 | Insight | internationalinsight.co.uk
September 2015
Welcome to Insight A recent EY survey revealed that the UK has retained its position as the number one destination for foreign direct investment (FDI) in Europe. The largest investor was the US, which accounted for 36% of all the UK’s FDI projects. The majority of new projects funded by foreign investment
were in London but there is more to the UK than London. In this, the first issue of Insight in The Wall Street Journal, we look to the Midlands, the North of England and Scotland to learn about the opportunities for US investors in the northern powerhouses of Manchester
and Liverpool. We will hear from Birmingham, the UK’s second largest city, as well as venturing beyond Hadrian’s Wall to Scotland and discover that there’s more to Edinburgh and Stirling than castles – and why Glasgow is a go-to destination for US companies looking for a home in the UK.
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hese are anemic times for foreign direct investment (FDI) in the European Union. The 28-nation trading bloc last year suffered a near 16% annual decline to $211 billion in inward FDI flows – aka inward investment. This estimate from the Organization for Economic Cooperation and Development (OECD) was less than a third of the 2007 peak. The United Kingdom bucked this trend to remain Europe’s top inward investment location, attracting $72 billion (+52% vs 2013). Among developed nations, the UK was second only to the US, which pulled in around $98 billion (-58% vs 2013). Helped by rising reinvested earnings and cross-border mergers and acquisitions (M&As), the UK’s FDI stock – the total value of FDI vested in a country at a point in time – ticked up slightly to almost $1.7 trillion. It was the fourth successive year of growth from the $1 billion recorded in 2010. For perspective, the inward FDI stocks of Germany and France at $984 billion (2014) and $783 billion (2013) respectively. Germany is Europe’s manufacturing powerhouse. Yet the UK secured 164 manufacturing FDI projects in 2014 to Germany’s 131, global consultants EY report in their 2015 UK Attractiveness Survey. This reflected strong growth in the UK’s automotive, food, and machinery and equipment sectors. It also won more software and financial services FDI projects, 35% of all EU headquarters moves, and led Europe on research and development projects. Overall, the UK recorded 887 inward investment projects in 2014 – the most in more than a decade, and 11% more than in 2013. Its 20.4% market share of European FDI projects was the highest since 2009 as it pulled away further from Germany – the EU’s second most attractive destination for inward FDI. Some 36% of all such projects locating in the UK were from the US, the largest source. The UK’s market share of 29% of US inward investments in the EU was the highest. American companies that have recently bought into the UK story include, among others, Grand Heritage Hotel Group (Annapolis, MD), which is co-developing a $640 million tourism facility in Derbyshire, England; and supercomputer maker Cray Inc (Seattle, WA) which is locating its European HQ in Bristol, England. The UK is encouraging more US technology companies to build international headquarters there, and has set up HQ-UK, a public-private program, to do just that. (techcityuk.com/ hquk) “The UK’s inward investment performance has been outstanding and continues to improve,” said Simon Moore, International Director for the Confederation of British Industry (CBI), a leading independent employers’ organization. Its members include UK subsidiaries of many American inward investors.
Matt Kieffer
by Robert Stokes
Big ticket for US investors
and the opportunity to use and operate them in future, represent huge potential sources of future economic activity and dynamism that FDI can play a key role in, EY suggested. Greater decentralization of decisionmaking to economic regions and cities looks set to accelerate infrastructure improvements. The UK’s Office for National Statistics estimates that the economy grew 3% in 2014, which would be the strongest growth since 2006. The central bank, The Bank of England, forecasts economic growth of 2.8% in 2015, a rate to turn most EU nations green with envy. The UK population grew by 6.4 people per 1,000 in 2014, faster than in Germany or France, to reach 64.8 million. This is equivalent to the populations of California and Texas combined, and accounts for 12.7% of the EU’s population. That said, many inward investors to the UK view ‘the domestic market’ as being the 508-million population EU, to which the UK is the gateway. They also get better access to dozens of economies with which the EU has free trade agreements (FTAs), stressed Simon Evenett, professor of International Trade and Economic Development at the University of St. Gallen, Switzerland.
The UK was ranked just behind the US for ease of doing business in a World Bank 2015 report Britain is bucking the trend for FDI in Europe with a market share for American business opportunities that is impressive and growing
Simon Moore, International Director CBI, says that the UK’s inward investment performance is outstanding
“When I talk to global companies that have invested here, their feedback on what makes it attractive tends to be pretty similar,” Moore added. For one thing, he explained, the UK government has pledged, and continues to deliver, cuts in the headline rate of corporation tax (CT) on business profits. At 20%, this is the lowest among the G20 nations, and a timetable to reduce it further helps companies to plan.
Important changes have also been made to the Controlled Foreign Companies anti-tax avoidance regulations so that, in some circumstances, it has become more attractive to set up a UK holding company. “Added to the natural advantages the UK has in its time-zone centrality, its place in Europe, its world-beating universities and the international reputation of our major cities – this is a potent mix which adds up to a worldleading business environment,” Moore said. The UK ranked eighth and just behind the US among 189 nations for ease of doing business in the World Bank’s ‘Doing Business 2015’ report. In the EU, it was behind only Denmark. A familiar range of public sector, fiscal and other incentives limited by EU rules may be offered to inward
investors on a case-by-case basis by the government’s UK Trade & Investment (ukti.com) wing and allied public agencies in the UK’s economic regions. However, economic studies tend to suggest that financial incentives are at best marginal and at worst a waste of taxpayers’ money in influencing inward investment decisions. Businesses’ main considerations are the quality of infrastructure and the labor force, the accessibility of the location, and the size and growth of the domestic market. The UK scores well on most key criteria. Admittedly, its ageing road and rail infrastructure, its need for more and affordable housing and its mediumterm security of energy supply, are sometimes perceived as weaknesses. However, the huge investment needed to upgrade and renew these factors,
Evenett, a noted researcher and author on world trade agreements, added: “The EU is seeking to negotiate more FTAs with large markets such as the US, so this benefit will grow over time.” For the same reasons, Europe could also be the UK’s Achilles heel when it comes to FDI. The country is negotiating over its net payments to the EU budget and what flexibility it can get to deviate from EU-wide rules, notably on welfare payments to some immigrants and asylum seekers. If talks do not produce a deal that UK prime minster David Cameron can sell to his governing Conservative Party’s ‘euro-sceptic’ wing, a national referendum on continued EU membership will very likely be held by 2017. “The majority of CBI members believe our economic future is best served by continued membership of a reformed EU,” Moore said. “We need Europe to turbo-charge its single market in services and digital, and sign more trade deals like the (proposed) Transatlantic Trade & Investment Partnership (TTIP) with the US, but to pull back from other areas of regulation where decisions are better made at national level.”
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September 2015
Stirling is a vibrant city set within a world-class historic environment
No Scottish city is better placed in terms of accessibility for the strategic location of new businesses
Punching above its weight O by Frank Simpson
nce the capital of Scotland, back in the days of when James VI was crowned King there in 1567, Stirling may now be a relatively small city in comparison to its usurper Edinburgh but it is hell bent on punching way above its population weight (circa 90,000) in terms of business. It has unashamedly built on its heritage – the Great Hall within its famous castle, the medieval church of the Holy Rude where Sunday services are still held – and combined this with the renowned canny Scottish approach to commerce. “We have a unique offer,” says Stirling Council Chief Executive Stewart Carruth. “We are a vibrant and dynamic city set within a world-class historic environment, delivering a diverse and modern economy.” It is a scenario that has not gone unnoticed by one major US conglomerate – International Financial Data Services (IFDS). A joint venture between affiliates of Boston-based State Street Corporation, the world’s leading provider of services to institutional investors, and DST Systems Inc., a Kansas City, Missouri-based leading provider of shareholder accounting services and proprietary systems, IFDS chose Stirling as the base for its UK platform administration centre. The company has just announced that it is boosting its local workforce
The city holds an ace card in that it lies at the heart of Scotland
there from 500 to 600, reinforcing its decision to select the city as a commercial base in the first instance. Stirling may be one of the smaller cities in the Scottish Cities Alliance, but it has made a virtue of its size, manifested in its location, accessibility and connectivity, and it has responsibility for international investment promotion for the Alliance. The city then, like most others in the UK, is currently actively – and successfully – seeking to tick all the boxes to give it an advantage for foreign investment. Its highly-motivated and resolute city administration team has recently announced a masterplan involving $460 million of investment to turn Stirling into “an economic and cultural powerhouse.” The primary objective is to provide the infrastructure needed to become a global digital hub, followed by a knowledge hub, both of which will help underpin the city’s growth in its increasingly buoyant financial sector along with its mature tourism and food and drink sectors. Johanna Boyd, Leader of Stirling Council, says they are building on the city’s unique assets to create a place of enterprise and opportunity for all. “We are already renowned for our heritage, landscape, unrivalled transport links and talented workforce,” she says. “We want to be the destination of choice; a world leader in business and a hive of creativity, community and enterprise.” Stirling also holds an ace card in terms of geography and global reach. Lying at the heart of Scotland, half of the country’s population is within an hour’s drive of the city. Within 45 minutes are two major international airports reaching more than 150 destinations. No Scottish city is better placed in terms of accessibility as a prime business location. Eight of the UK’s top 100 univer-
sities are under an hour away. The city also benefits from a high level of entrepreneurial activity with around 100 more businesses per 10,000 of the population, significantly higher than the Scottish average. Then, of course, there is the not inconsiderable cost advantage over its closest competition down the road. In terms of leasing office space alone, the past two years has seen Stirling achieve a rental of $17.70 per square foot as compared to Glasgow at $22.30 and Edinburgh at $26. And Stirling has the advantage of being a university city with a significant talent pool to support business. The University of Stirling is a research intensive institution founded by Royal Charter in 1967. It is ranked among the top 50 universities in the world that
are under 50 years old. Students come from more than 100 countries and it offers degree courses overseas in Singapore and Vietnam. Also making a significant contribution to the local workforce is the Forth Valley College with 14,500 students, which has won a major national award for its innovation in employer engagement. Both institutions are known as centres of excellence for digital and technology skills. The university also now finds itself playing a dual role in the city – not only providing a steady flow of graduates for local companies but also a home for cutting-edge enterprises through its Stirling University Innovation Park found in the shadow of the Wallace Monument (the William Wallace of more recent Braveheart film fame).
Here is a facility that has been playing a key role in the regeneration of both the national and local economy by providing the opportunity for companies to locate on the university campus and take full advantage of its intellectual assets. Some 50 tenants currently range from leaders in biosciences and chemical engineering to healthcare and business services. “Businesses basing themselves in Stirling will find everything they need to thrive at every stage of their journey,” insists Stuart Oliver, Stirling’s Economic Development Manager. “We may not be the capital any longer but we intend to play an increasingly key role in the Scottish economy today.” All in all then, Stirling is a city with a rich historical past and a potentially dynamic future.
Digital pioneers making waves in America Stirling’s fledgling digital sector has already had an impact on the global marketplace even before plans for the city’s digital hub have come to fruition. One of a cluster of innovative companies already in the sector in the city, Dogfi.sh, a mobile communications specialist, has already made waves in the US and is currently working on a top secret project in New York. Dogfi.sh (the “sh” is the domain for St. Helena) has also been called in to establish a mobile digital interface for Merlin Entertainment theme parks, second only to Disney on the global stage. None of this is surprising from the company, one of whose founders, Paul Burrowes, started working in the field of mobile communications five years before the iPhone was launched and went on to develop the first satnav for skiers to let them
know where they are on piste. His partner and company co-founder Ross Tuffee started his working life with Ernst & Young and brings many years of working in the corporates to the Dogfi.sh table. It was this background that made the company eschew the highly competitive and volatile field of personal apps for the corporate sector where there is an ever increasing need for mobile interface applications. Starting out working for Tui Travel Ross Tuffee says Dogfi. sh opted for Stirling because of location and graduates
and the 150 brands associated with the leisure, travel and tourism industry, Dogfi.sh then moved into utilities, working for Network Rail (the organization responsible for the UK’s railway infrastructure) because of its need to communicate with a dispersed and mobilized workforce. In recent times, the company has moved into the healthcare market, working for Healthcare England. One of the end products here is a sugar app designed to let people know the equivalent amount of sugar cube content in what they are eating and drinking, an ever increasing concern in the health sector world-wide. “We opt for being based in Stirling because of its accessibility in terms of location and the fact that there is a pool of skilled graduates available,” says Ross Tuffee. “And with the city’s plan to build a global digital hub here, things can only get better.”
4 | Insight | internationalinsight.co.uk
September 2015
Winning teams scent success Leading edge
Some of the prime players in the US have established themselves in Manchester and are harnessing the city’s expertise in R&D and digital technology
❚ Manchester is the birthplace of the Industrial Revolution, the splitting of the atom and the isolation of the world’s thinnest and strongest material – graphene ❚ There is access to 20 million consumers and 60% of the UK’s business base within two hours’ drive ❚ Manchester airport handles more than 22 million passengers and serves over 200 destinations with non-stop flights to New York, Philadelphia, Washington DC, Chicago, Miami, Atlanta, Orlando, Las Vegas and, from summer 2016, Boston and Los Angeles. ❚ London can be reached within two hours by three trains every hour ❚ Manchester has a metropolitan population of 2.7 million of which more than 1.8 million are of working age. It is the largest travel to work conurbation in the UK outside London, with 7.2 million people living within 50 miles of the city ❚ It is home to more than 2,000 foreign owned companies ❚ The Greater Manchester economy generates a GVA of $86 billion annually ❚ Manchester’s universities are home to 106,000 students and produce 35,000 graduates per year. ❚ There are 22 universities within an hour of Manchester and 515,000 students. ❚ The city is home to the UK’s largest academic campus and the largest clinical academic campus in Europe.
Manchester City soccer club is a franchise holder of New York City FC and itself is heavily funded by Abu Dhabi.
by Mike Cowley
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HE USA’s fifth largest bank, BNY Mellon, is about to celebrate 10 years in Manchester, a decade that has reinforced the wisdom of its decision. It now finds itself at the heart of the fastest-growing major city in the UK outside of London; itself the country that leads the G7 in terms of economic growth. Steve Hayes-Allen, head of the site that houses more than 1,200 employees in one of six Global Delivery Centers, says the original reasons to move to the north of England’s leading city were because of its “excellent transport and business infrastructure and a wide and deep pool of talent.” The bank has even more reason to be pleased with its decision now because of the major advances Manchester has made since its arrival. Today Manchester is the UK’s fastest growing creative, digital and tech hub and the city which led the industrial revolution is now a leader in the digital one. Nor is BNY Mellon the only US company to establish itself in the city. Manchester’s legacy of innovation has attracted some of America’s leading companies and it is now home to Google, Microsoft, Kellogg’s, Intel, Cisco and IBM which has its R&D center in the city Having achieved its place in history at the forefront of the industrial revolution – whose spin off led to the
early economic success of the US – Manchester gave the world its first stored-program computer and then split the atom. Today, it is home to graphene, the wonder material that has been the focus of substantial investment from US companies who have been quick to realize its world-wide potential. The city houses the UK’s National Graphene Institute, a $93m state-ofthe-art research facility, and two more centers of excellence – the Graphene Engineering Innovation Centre and the Sir Henry Royce Advanced Materials Institute – are on the way. These centers will help to accelerate taking graphene and 2D materials products to the marketplace and will cement Manchester’s position as the home of graphene. The UK government has noticed the city’s potential and is now looking to Manchester, along with other major northern cities, to lead the country out of austerity. David Cameron’s government has invested significant political capital in Manchester in particular as the flagship of what is known as the Northern Powerhouse initiative. This
will form the central plank in a bid to rebalance the economy, moving away from overheated London where prohibitive property prices alone – Manchester’s are a quarter of those in the capital – are having a potentially negative effect on inward investment. Typically, salaries and operating costs are also 40% lower in Manchester than the UK’s capital. In what is a major departure in the most centralized country in Europe, the UK Government has elected to devolve power to Manchester in the form of transport and skills. It has even handed over control of the $10 billion healthcare budget, providing the city with the platform to integrate primary and social care for its metropolitan population of 2.7 million, something that London has wanted but not so far achieved, and in doing so creating a potentially vast market for health innovation. This is just a small part of the recent story of a city that has reinvented itself through building on its history of science and innovation prestige, a legacy that has been recognized with the title of European City of Science 2016.
The UK government is looking to Manchester, along with other cities, to lead the country out of austerity
Like Boston and San Francisco, this success has been achieved in part by its being a renowned university city, with the world famous University of Manchester having produced 25 Nobel Prize winners. Home to 106,000 students, its four world-class universities are responsible for creating some of the UK’s top tech developers, many working in the city’s collaborative creative and digital hubs, creating the next wave of innovation. All of this growth is underpinned by the largest financial and professional services community in the UK outside of London. Apart from BNY Mellon, which handles trillions of dollars in investment through Manchester, the Bank of America Merrill Lynch can also be found just a short drive down the road in Chester. Then of course you can’t forget the cultural dimension of Manchester. The city that gave the world The Smiths, The Hollies and Oasis on the music front is also home to the world famous Halle
Orchestra. Nor can you mention Manchester without referring to soccer. It has two of the world’s biggest brands – Manchester United and Manchester City. The latter is the subject of heavy investment from Abu Dhabi in both the club and the city, who are also now behind New York City FC. This goes some way toward explaining why Manchester made its way on to the New York Times Top 52 places to visit in the world in 2015 and why it’s consistently rated as “Europe’s Most Competitive Business Location” by KPMG in its Competitive Alternatives report. “All this has made Manchester an incredibly interesting investment opportunity for US companies,” says Tim Newns, chief executive of MIDAS, Manchester ’s inward investment agency. “When former Prime Minister Benjamin Disraeli said: ‘What Manchester does today, the rest of the world does tomorrow,’ it was true then, and increasingly is true today.” Tim Newns of MIDAS highlights Manchester’s attractions as an investment opportunity for US companies
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September 2015
Darren Hartley
by Mike Cowley
I
t was the Scottish National Party’s failed attempt to persuade their electorate to leave the United Kingdom that effectively opened the Pandora’s box of devolution for the rest of the country. At the same time, it succeeded in taking the spotlight off London and helped to reinforce a view, already held by some US investors, that there are some serious options opening up as viable commercial destinations in the UK. A jittery coalition government faced with the potential break-up of the UK issued a series of last minute promises to increase Scotland’s ability to control its own economic destiny which not only effectively bolstered the “No” vote’s case to win the day but enhanced the business appeal of Edinburgh and Glasgow for foreign direct investment. However, the problem was that not only were the Scottish voters listening but so were those in the rest of the UK, particularly outside London, which benefits from its close proximity to the seat of government. The cry emanating from there though has not been for independence – although the Welsh nationalists and even the oddball Cornish version would disagree – but for decentralization or, as it has become better known, localism. All this was hardly surprising in a country which shares equal billing with Romania and Albania as having the most centralized form of government in the Western World. Not that the move to localism is new. Under Prime MinisterTony Blair there was devolution for Scotland, Wales, Northern Ireland – and London. For the rest of England there were attempts to establish economic development bodies in each of nine administrative regions. However, when the electorate in the north east of England rejected a regional assembly, these hit the buffers. Significant top down control followed, further alienating local authorities because of the damaging effect on their economies, so creating a climate of mistrust when the coalition took power. Chancellor George Osborne gauged the mood of the country correctly by announcing a Northern Powerhouse initiative to devolve more powers to what is seen as the engine room of the UK, unleashing the economic potential of core cities such as Manchester, Liverpool and Leeds. With this happening, few doubt that they will now be able to compete with London, where properties are on average four times more expensive
Developments at Salford Quays in Greater Manchester typify the way that the Northern Powerhouse is demonstrating that London is no longer the sole destination for investors
Capital ideas no longer enough for the 21st century economy The move to localism is not new - but there is a heightened drive to unleash the economic potential of core cities and devolve more power to them and the cost of living is at least 40% higher than the rest of the UK. The Northern Powerhouse arrived in the wake of the Localism Act, with key rights and powers for local communities; and City Deals agreed with more than 30 core and key cities around economic development; and a move from the top down, one size fits all dictates of central government. However, there remains a concern
over “interference” – the Localism Act also contains more than 100 new powers for central government to veto local decisions – but after 80 years of centralization it is obviously difficult to let go of the reins entirely. Seen by some as a political ploy, the Northern Powerhouse is more a realization that the good times would not return until there was a move back to the city states that had powered the
Decentralization – a work in progress Whereas decentralization is still a work in progress, there are a number of confirmed promises on the table including critically important devolvement of some fiscal powers Scotland has received a pledge from Prime Minister David Cameron “that it will have the strongest devolved government anywhere in the world with important powers over taxation”. These will include setting income tax rates and bands and controlling a proportion of Value Added Tax (VAT) raised in Scotland. Whereas Wales will not have the same fiscal powers as Scotland, it will be given decisions over some energy projects, transport and fracking. In Northern Ireland, there is little or no change on offer due to the
Chancellor of the Exchequer George Osborne admits that the old model of running everything from London is broken
continuing instability caused by the warring political factions. Chancellor George Osborne has stressed that the government will deliver the devolution to Scotland and Wales it promised. But he added that he intends to go much further and “deliver radical devolution to the great cities of England” and give them the “levers to grow their local economy”. That will see English cities get powers over housing, transport,
planning and policing, though this is conditional on them having an elected mayor. Greater Manchester, which has been in the vanguard of the Northern Powerhouse movement, is seen by the government as the blueprint for large cities. Manchester has been given unprecedented control over its $15.4 billion healthcare budget, something that even London has yet to achieve. Under its new city deal, it will also receive powers over devolved business support budgets and decisions over how government funding should be spent locally. Chancellor Osborne admits that the “old model” of running everything from London is “broken” and had unbalanced the economy. “This is not good for our prosperity,” he insists.
UK economy in its heyday at the time of the Industrial Revolution. The municipal authorities were, in fact, dominant through the 19th and the early part of the 20th century, effectively controlling their own purse strings. Sidney and Beatrice Webb writing in the 1920s insisted ‘the characteristic English preference for local over central administration has hitherto always proved too strong to be overcome’. That was not to remain the case some two decades later. It was the Welfare State, unveiled in the 1940s, which proved the catalyst for the move to centralization as it demanded an even-handed approach for all. This saw public services and welfare benefits delivered centrally, with the National Health Service paid for out of general taxation. All this worked reasonably well until London became the over dominant force. The London “bubble” as it became known increasingly unbalanced the UK economy. Though
politicians are elected to parliament from across the country, it is claimed that they simply forget their roots when they are absorbed into the diaspora of the capital. All of this has caused a sense of disillusionment with politics in the rest of the country. Then came the crash of 2008, when the City of London had its fingers badly burned and the realization that if financial services were vulnerable, there was a pressing need to rebalance the economy. The fact that some of the world’s most successful and enduring economies had been built on city states – the USA and Germany being two – was not lost on the government when the need to balance the books at a time of austerity became the order of the day. Decentralization then has not only opened the door for the UK’s cities to prosper but in turn it has also enabled them to come out of the shadow of London in terms of attracting inward investment.
There are complaints that politicians forget their roots when they become absorbed into the diaspora of London
6 | Insight | internationalinsight.co.uk
September 2015
Cities such as Glasgow, Liverpool and Manchester were once powerhouses of Britain’s economy. There is sound evidence that they again can and will be
Inspiration from the past drives new ambitions I by Magnus Linklater
n 1809 the American consul in Liverpool sent back a report to his government on the state of the wheat trade with Britain. Imports of grain and flour from the plains of Kansas and the Dakotas, he wrote, had grown so fast through this northern port that prices had begun to tumble. Nevertheless, he added, there was reason to believe “in the permanency of this seemingly inexhaustible granary.” Liverpool, he concluded, was its principal point of access. For most American traders of the 19th century, the great western seaports of Britain were far more familiar than London. It was on the docksides of Glasgow, Liverpool and Belfast that they unloaded their cargoes of grain, cotton and tobacco; from there they imported the machinery, textiles, iron and steel, the products of Britain’s industrial revolution; and it was out of these ports that the sailing packets, carrying millions of emigrants into the United States, tended to embark. Two hundred years ago, the powerhouse of Britain was in the north. Glasgow was known as “the second city of empire.” The ship canal that linked Liverpool to Manchester opened up the mills and foundries of its industrial heartland. Great cities like Leeds, Newcastle and Birmingham in England, Glasgow and Dundee in Scotland, saw their populations expand as exports grew. The historian Niall Ferguson has calculated that at the height of Queen Victoria’s reign, in 1860, Britain owned roughly a third of the world’s entire merchant tonnage. “At no other time in history has one power so completely dominated the world’s oceans as Britain did in the mid-nineteenth century,” he wrote. And most of that sailed from its northern ports. Political power was exercised as much in the great city chambers of the regions as it was in London. Joseph Chamberlain, Mayor of Birmingham in the 1870s, built a power base second only to that of the Prime Minister, regarding his move to take up ministerial office as a potentially backward step. That power, and the wealth that flowed from it can be seen to this day in the grand marble staircases and oak-lined corridors of city chambers in places like Glasgow and Newcastle. It took a hundred years for the balance to shift. Towards the latter half of the 20th century, London and the south-east of England became the focus not just of political influence
but financial dominance. As the heavy industries of shipping and manufacturing went into decline, so London gained from the growth of banking, investment, international business – and political power. Air travel took over from the sea, with traditional seaports losing out to east coast container terminals; export deals were hammered out in the boardrooms of the City rather than the factories of the north; it was to London that immigrants turned, whether they were West Indian bus-drivers or Russian oligarchs.
Two hundred years ago Britain’s powerhouse was in the north The north-south divide By the turn of the century, the gap between north and south was widening to such an extent that one survey showed households in the south-east of England were nearly twice as likely to have wealth in excess of $1.54 million than those in the north of Britain. London also seemed more resilient than elsewhere. After the banking collapse of 2008 the capital bounced back quicker than elsewhere, with its economy growing by nearly 12.5% – twice as fast as the rest of the UK. Complaints that investment was being sucked into the wealthy south-east at the expense of the rest of the country fell mostly on deaf ears. That trend is now being challenged. A new “northern powerhouse” is taking shape and it is changing the face of Britain. The cities of the north – in England and Scotland – are rediscovering something of the individual character that once made them great, and are insisting on taking control of their own fortunes. They are winning back power from London, and making decisions that reflect their own ambitions, rather than awaiting regulations from Westminster. And they are doing so with the positive encouragement of ministers in London, rather than in the teeth of their resistance. The government has launched a City Deal investment program which gives British cities and their surrounding area the power to take charge and responsibility for decisions that affect economic development; to introduce their own policies for helping busi-
nesses to grow; and to decide how public money should be spent. The initial deals it announced involved Birmingham, Bristol, Manchester, Leeds, Liverpool, Nottingham, Newcastle and Sheffield. Glasgow has now been added to the list. One estimate suggests that this new alliance of northern cities has the capacity to create 175,000 jobs and 37,000 new apprenticeships over the next 20 years. In Scotland, a Scottish Cities Alliance was established in December 2011 as a partnership between the Scottish government and the cities of Aberdeen, Dundee, Edinburgh, Glasgow, Inverness, Perth and Stirling. Its stated aim was to maximize investment, stimulate economic activity and create jobs, and it claims to offer $15.4 billion worth of investment opportunities. Earlier this year, George Osborne, Chancellor of the Exchequer in Prime Minister David Cameron’s government, took matters a step further, when he announced that Greater Manchester in the north of England – with a population of 2.7 million – was to be the focus of what he himself labelled a “northern powerhouse,” bringing a range of city services under the control of a new directly elected mayor, with planning powers to aid its already impressive expansion. It gives Manchester the kind of status that would be immediately recognizable in many US cities but which in Britain is relatively new. Leeds is to be the next city with an elected mayor. Joined-up thinking Momentum would be gained, he argued, “by joining our northern cities together – not physically, or into some artificial political construct – but by providing the modern transport connections they need; by backing their science and universities; by backing their creative clusters; and giving them the local power and control that a powerhouse economy needs.” The cities of the north are more than ready to take advantage. This is a development that owes as much to political reality as to economics. Fifteen years ago, the people of Scotland voted overwhelmingly for devolution – the transfer of powers over such things as health, education, transport and planning – to a parliament in Edinburgh rather than London. Over that time its has thrived, with Edinburgh, its capital, becoming the second wealthiest financial center in Britain, and Glasgow winning the coveted title
of City of Culture in 2000 and hosting the Commonwealth Games in 2014. Most surveys have indicated that the Scots want more power rather than less, and though, last year, they voted in a national referendum to stay in the United Kingdom rather than opt for independence, the General Election of May this year saw a landslide victory for the Scottish National Party, which took all but three of the Scottish seats at Westminster. The party is pledged to seek further tax powers for Scotland and reserves the right to hold another referendum on indepen-
dence if and when it judges that the people want it. Watching intently, cities in the north of England like Newcastle, Liverpool and Leeds have also seen the opportunity to expand. Liverpool, emulating Glasgow, won the City of Culture honor in 2008, transforming its previous image as a city in decline, engendering a multi-million dollar investment program which has transformed its dockside and transport infrastructure and began to reverse its population decline. Sir Howard Bernstein, Manches-
Liverpool in the 19th century was a much more important port of access for US trade than London
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September 2015
Liverpool’s harbour was once a vibrant passenger and trade hub for the USA
it as “a new cultural institution, the like of which doesn’t really exist anywhere else in the world, never mind the country.” Newcastle, once a somewhat rundown city in the north east, known for its high levels of deprivation, has created over the past 20 years a cultural center which boasts one of Europe’s biggest contemporary arts spaces – the Baltic; a concert hall which now draws world-class orchestras as well as rock groups; and a riverside cultural development which draws young people every weekend from across Europe. Given that Newcastle, facing east, sees itself as a gateway to trade with Europe, while enjoying close links with Manchester and Liverpool facing the west and America, this kind of profile is invaluable. For US firms, who see Britain not just as an investment center itself but as a platform for trading with Europe, the connections across the whole of the north of England are invaluable. Culture of change Meanwhile, alert to the power of a strong cultural image, Dundee, on the east coast of Scotland, is investing more than $123 million in a state of the art outpost of the Victoria and Albert Museum in London, designed by the Japanese architect Kengo Kuma. In pursuit of strategies like these, city bosses like Sir Richard Leese are becoming power-brokers in their own right. Writing recently in The Guardian newspaper, the distinguished columnist Simon Jenkins named eight Labour politicians who, in his view, were more powerful figures than any of the candidates currently bidding for the leadership of the UK Labour party; five of them were from northern cities. They have seen the potential in linking private enterprise with an equally enterprising public sector, and harnessing the energy of both. In a seminal report on the power inherent in Britain’s cities, called No Stone Unturned, Michael Heseltine, a former minister in Margaret Thatcher’s government, set out a strategy he believed would be to the benefit, not just of individual towns and cities, but to the national economy as well.
Sir Howard Bernstein in Manchester welcomes giving cities more devolved powers
ter’s Chief Executive, commenting on the lessons of Scottish devolution, says that cities in the north have learned from it. He welcomed the socalled Greater Manchester Agreement, announced last year, which gives the city more powers over public services that had previously been in the hands of central government. He would like to see this go even further, with some UK taxes devolved to the regions. “Manchester, has been in the forefront of moves towards increased devolution to our cities,” he said, “and it’s essential there be no respite in this momentum. The benefits for our people are huge.” He can point to a $1.54 billion city center development, which will give Manchester a facility even London cannot equal. It will include an arts institution known as The Factory, which will act as conference center, opera house, and the biggest nightclub in Europe. Announcing it, the city’s council leader Sir Richard Leese, described
He had seen how a city like Liverpool, torn apart by riots in 1981, had fallen victim to extreme left-wing politics, and how it had gradually reinvented itself by wresting back power and taking control of its own commercial future. He saw lessons that others could adopt and in typically punchy style, he set them out: “There is opportunity [here] on a grand scale. Huge infrastructure demands and hungry institutional funds – link them. Excellence in industry, commerce, academia – extend it. England’s cities pulsing with energy – unleash it. Every one of us needs to rise to the challenge.” Those lessons are being learned – and they are of deep significance to the United States, whether as an importer of UK goods, or an exporter from the US. UK trade in goods and services to the US now amounts to $207 billion, and shows a steady 3% increase year on year. Around 17% of all British exports go to the US and both countries are each other’s largest foreign investors, supporting approximately one million jobs on either side of the Atlantic. Meanwhile, US exports to the UK of goods and services combined are estimated to be worth about $110 billion last year. The major categories, which include aerospace, building products, cyber security and medical equipment, all have strong representation in the north of England and in Scotland. It is revealing that some of the top UK companies, such as BAE, GKN, RollsRoyce, and the Drax power station, list major branches across the north, while Drax and Rolls-Royce in particular are based there. This, then, is the northern powerhouse that is emerging in Britain, and which is changing the way that it does business. For US exporters, getting in on the ground floor of a development that is just beginning to take shape, offers real potential for growth. It may not quite emulate the days when cotton and tobacco were king, and American wheat barons sent their steamships across the Atlantic to trade with Liverpool and Glasgow, but it has the same ring of entrepreneurial endeavor about it. Britain these days is more than just London. It is time for US business to look north as well.
Dundee takes cue from Europe to spark city’s growth Can a single building transform the fortunes of a city? Bilbao, in northern Spain, would argue that it can. The fabulous Guggenheim Museum, designed by the American architect Frank Gehry, put Bilbao in the international spotlight, and transformed a fading industrial city into a tourist magnet. Today, 18 years on from its foundation, it continues to energize the city. Now Dundee, 60 miles to the north of Edinburgh on the Scottish east coast, and another city with an industrial past, is bidding to do the same. It has commissioned a futuristic building which is to be the northern outpost of London’s celebrated Victoria and Albert Museum (V&A), and has been designed by the Japanese architect, Kengo Kuma. Already it has attracted criticism, because its projected cost has swelled from an initial estimate of $69 million to more than $123 million. Originally planned to jut out into the sea, it has been brought back on land. The foundations have been laid and it is aimed for completion in 2018. There are several differences between it and the Bilbao project. The V&A is not investing itself in the project, so the risk is entirely Dundee’s. But on the plus side, the city is already engaged in an ambitious regeneration strategy which will run alongside it. Its two universities are at the forefront of scientific research, principally in the life sciences, where Dundee is a world leader. It is the center of the booming video games industry – the highly successful Grand Theft Auto series, now in its fifth incarnation, was invented there. It has already made a major investment in cultural
Dundee has taken inspiration from Bilbao in Spain to build a futuristic outpost of London’s celebrated Victoria and Albert Museum
expansion, by funding the Dundee Contemporary Arts Center, one of the biggest art spaces in Scotland. It has a thriving theatre, a youthful population – and a savvy and energetic city leadership. Mike Galloway, director of development in Dundee, says the V&A building will be the “spark” that creates a city boom. “We have a budget of just over $123 million. Even since we started, we have knocked off a lot of the construction risks which would be factored into a project like this. That’s the way I intend to continue: to manage risk. I aim to bring it in under $123 million. Is it going to be built? Of course it is.” Envisaged as a museum of design, it will stage exhibitions of work, borrowing heavily from the parent museum in London. It will operate on a
unique business model. Staff will be employed by Design Dundee Limited, the company originally established to deliver the project whose board members include senior representatives of the city council, Dundee’s two universities, Scottish Enterprise and the V&A itself. Once operational, the museum will require subsidies of $5.37 million a year. The council has already approved $767,000 annually for the first ten years of the museum’s life, and the other public bodies and universities are expected to follow suit. In a previous era, the city depended on its staple industries of jam, jute and journalism. The first two of these have gone. Now, it seems, culture is to take their place.
8 | Insight | internationalinsight.co.uk
Ambitious plans backed by $15.4bn worth of propositions are seeing Scotland’s cities collaborate to attract investment from around the world
September 2015
Vibrant new investments see cities raise their game
by Clare Ross
S
cotland has long enjoyed a strong business partnership with the US, from the times of the Scots-American philanthropist Andrew Carnegie right through to the modern day business landscape. On a recent trade mission to New York, First Minister of Scotland Nicola Sturgeon made a big impression, meeting key US businesspeople and appearing on popular TV and radio shows including a hugely successful stint on the Daily Show with Jon Stewart as well as announcing US company Spire’s new European HQ would be in Scotland’s largest city, Glasgow. The Scottish Cities Alliance, which is the unique collaboration of Scotland’s seven cities and the Scottish government working together to promote the country’s great economic potential, joined the First Minister at an EY Business Breakfast in Manhattan during her visit, in order to showcase the billions of dollars worth of propositions in the Scottish Cities Alliance’s Investment Prospectus. The Alliance is attracting investment, stimulating economic activity and creating business growth across the seven Scottish cities. The vast breadth of opportunity available highlights Scotland’s cities – Aberdeen, Dundee, Edinburgh, Glasgow, Inverness, Perth and Stirling – as modern places in which to invest and do business. By utilizing the strengths of the cities in partnership with the Scottish government, the Alliance engages with investors around the world to attract investment. First Minister Nicola Sturgeon said: “The recent EY Attractiveness Survey, named Scotland as the most attractive place in the UK to invest outside London. We are keen to build on that track record and we’ve got the people, the natural resources, the research base and the international reputation to achieve greater success in the future. Investment is a key priority and strong, successful cities are vitally important. “In June 2015 the Deputy First Minister announced the first investment success from the Alliance’s $15.4 billon Investment Prospectus, the $46 million Mill Quarter project in Perth City Centre. “This success clearly demonstrates the benefits of cities and government working in partnership. “As a partner in the Alliance, the Scottish Government is working with our cities to promote Scotland’s unique investment opportunities nationally and internationally.” By working together, the Alliance partners are able to share knowledge and create projects which offer great investment potential across the business spectrum. The Scottish Cities Alliance’s online Investment Prospectus contains opportunities across all of Scotland’s cities. Here are just a few examples of the range of investment opportunities on offer.
The world-renowned V&A Museum of Design will be opening in Dundee in 2018 as part of a $1.54 billion redevelopment of the city’s historic Waterfront district which will unlock investment opportunities
Dundee The City of Dundee is undergoing a $1.54 billion redevelopment of its historical waterfront, which is unlocking major investment opportunities. The world-renowned V&A Museum of Design will be opening in Dundee in 2018 and is at the heart of Dundee Waterfront. A vast area of the city is being transformed, with a new railway station, port and marina developments, housing, leisure and business propositions. All the infrastructure works have been completed and the latest phase is focusing on building and investment opportunities.
Scotland’s First Minister Nicola Sturgeon is very positive about the work of the Alliance
There are a number of sites available for investment within the Central Waterfront. Dundee Waterfront is a strategic, focused and forward looking 30-year project (2001-2031) that is propelling the city to international acclaim. There are a range of flexible investment opportunities at the site, which is already receiving worldwide media attention. Edinburgh Scotland’s capital, Edinburgh, continues to be an attractive destination for
international investment. Edinburgh has the highest educated workforce of any UK city, which attracts high value jobs complemented by an award winning quality of life. The growth of Edinburgh’s knowledge and tourism economy has lead to a number of prime development opportunities across the city. This includes the development of the Edinburgh BioQuarter, which is a key site for the UK’s life sciences sector, and the continuing international investment in hotel and leisure due to the city’s reputation of having one of the highest hotel occupancy rates in Europe (2014). Aberdeen Aberdeen has drive and ambition with an enviable position as a global energy hub. The city is an internationally recognized business center with globally competitive industries, excellent academic and research capabilities and a highly skilled workforce. The city has a portfolio of major projects designed to achieve its ambition. The new Aberdeen Exhibition and Conference Centre will be a key element of the business infrastructure that promotes Aberdeen as a World Energy City and the Energy Capital of Europe. This $508 million mixed use development will see a number of commercial and business investment opportunities. Glasgow A $385 million project just north of Glasgow city center is one of the key infrastructure projects within its $1.54 billion City Deal. Sighthill is the largest of eight Transformational Regeneration Areas in Glasgow. The masterplan features 50 hectares of mixed use land which will include approximately 650 new homes, 500 student accommodation places, a new campus school, commercial and community facilities and new infrastructure.
This major regeneration project offers significant investment opportunities across residential, student accommodation and commercial and community. Glasgow City Council is actively seeking a Joint Venture partner. Stirling Sitting in the heart of Scotland, Stirling is the ideal business location with excellent road and rail links, it is within 45 minutes of Glasgow and Edinburgh airports and has 55% of the population of Scotland living within an hour’s drive. This proud city has great ambitions, as revealed by Stirling Council’s bold $458 million plan to reposition the city as an economic and cultural powerhouse. This state-of-the-art blueprint embraces the city’s heritage with plans for a new city parkland in the shadow of the historic Stirling Castle which will act as a new gateway to the city. Inverness Capital of the Scottish Highlands and located close to the world-famous Loch Ness, Inverness has seen its life sciences sector flourish in recent years. Inverness Campus – a new multimillion dollar business and learning hub – aims to capitalize on its life sciences work with plots in the park ready for investment and a purpose-built life sciences building available for tenants. Significant areas of development land are designated as part of a life sciences enterprise area, meaning incentives are available for businesses in that sector. The campus is also home to Scotland’s newest university and offers opportunities for collaboration with academic research. Perth Home to the famous Gleneagles resort, the historic city of Perth is located in the heart of Scotland. With
some of Scotland’s most spectacular scenery, Perth is at the gateway to the Scottish Highlands but still in close proximity to more than half of Scotland’s population. At the nexus of Scotland’s road, rail and air transport networks, and with projected population growth of 24% by 2030, access to Scotland’s top educational facilities, highly competitive land and property prices and an unsurpassed quality of life, Perth city region provides the perfect location for investors, developers and business. And with tourism generating an economic impact of over $690 million annually, the region is one of Scotland’s strongest options for tourism business investment opportunities. Chair of the Scottish Cities Alliance, Councilor Andrew Burns, said: “The Alliance has a range of investor opportunities across the country’s seven cities, with more than 40 development opportunities across residential, hotel and leisure and office and industrial sectors, all of which are featured in the online Investment Prospectus. “Scotland offers huge potential to international investors and the Alliance has great ambitions for Scotland’s city economies which are high quality locations in which to do business. Our recent successful visit to New York sparked a great deal of interest in the Alliance and we hope that that is the first of many business links between the USA and in particular, New York City, and Scotland’s cities.” To view the Scottish Cities Alliance’s Investment Prospectus, detailing the potential investment across the seven cities including the propositions above, visit scottishcities.org/prospectus To learn more about any of the above propositions, contact the Scottish Cities Alliance, tel +44 141 2229737 or email info@scottishcities.org.uk
internationalinsight.co.uk | Insight | 9
September 2015
by Valerie Darroch
F
or centuries unicorns have exerted a strong fascination for people who attribute magical powers to the mythical beast but today the most avid ‘unicorn’ hunters are shrewd technology investors who have the digital powerhouse of Edinburgh firmly in their sights. ‘Unicorns’ are start-ups that have achieved a valuation of $1 billion or more and according to technology advisers GP Bullhound, of the 13 companies in Europe that achieved unicorn status last year, Edinburghbased travel search engine Skyscanner and online fantasy sports company FanDuel were the only two to have emerged from Scotland. Both companies have their Scottish operations in Quartermile, a city center development that has a Silicon Valley vibe and an international workforce that includes computing and engineering graduates from the city’s three world-class universities. Skyscanner and FanDuel are both private equity backed businesses with ambitious growth plans. They are among the best-known of Edinburgh’s hi-tech companies but they are by no means isolated examples of entrepreneurial success as Scotland’s capital is a major hi-tech start-up hub. However, their unicorn status has elevated them on the world stage, despite the fact that as Skyscanner Chief Executive Gareth Williams says, becoming a unicorn is not an end in itself. The unicorn is the animal emblem for Scotland and has been a Scottish heraldic symbol since the 12th century. The success of today’s Scottish ‘unicorns’ is emblematic of a new age of digital enlightenment for Edinburgh in particular. The city was at the heart of the 18th century Scottish Enlightenment which was characterized by a flowering of creativity across many disciplines including philosophy, the arts and science, led by some of the world’s greatest thinkers including Adam Smith, the ‘father of capitalism’ and philosopher David Hume. The intellectual might of the city’s universities today is globally recognized. The QS World University Rankings, which compares 800 institutions on academic and employer reputation and other key factors has ranked The University of Edinburgh third in the UK after Cambridge and Oxford in 2014. The University of Edinburgh’s School of Informatics is particularly highly-regarded for research and commercialization – in the decade to 2010 it created 244 spinouts, more than its closest UK rival, Cambridge University. Edinburgh Research and Innovation (ERI) data show that investment in university-founded companies hit a record $363 million in the past year. Skyscanner’s Williams says: “Our growth can in part be attributed to the world-class computer science depart-
Pressing all the right buttons
There has been an explosion of hi-tech and digital activity in Edinburgh – and locating in the city is an increasingly attractive proposition for US companies ment at The University of Edinburgh which produces really excellent graduates.” Skyscanner employs more than 700 people worldwide, including 50 nationalities across nine global offices, including offices in both Edinburgh and Glasgow. The information and communications technology (ICT) and digital technology sectors deliver an estimated $4.6 billion to the Scottish economy and employ 17,000 professionals based in Edinburgh. Edinburgh’s emergence as a hi-tech hub has been supported by rising numbers of academic spinouts as well as start-ups emerging from Codebase, the UK’s largest technology incubaGareth Williams of Skyscanner pays tribute to innovation of city’s academic institutions
tor and one of the fastest-growing in Europe. It houses 60 companies who benefit from strategic financial advice and support as well as affordable high quality business accommodation. Williams says: “Edinburgh’s story over the past 10 years has been an explosion of software and internet companies from more than 80 startups in the Codebase incubator to $1 billion companies like Skyscanner and FanDuel. It’s incredibly valuable to have because technologists can learn from each other. People who work in the sector in Edinburgh have a choice of companies to work for which adds to the city’s attractiveness as there is a very mobile global technology workforce.” In the early days of Skyscanner Williams was based in London and was nervous about moving to Edinburgh. “Within three months I really appreciated the benefits such as easy access to mountains and beaches as well as all the attractions you seek in a city. I am very happy to raise my family here as well as grow my business.” Skyscan-
Core strength underpins new technology With a population of nearly half a million, Edinburgh combines a vibrant modern economy with core strengths in the technology and financial services sectors, with a picturesque setting and rich historic and architectural legacy that earned Scotland’s capital city status as a UNESCO World Heritage site. It has three world-class universities with a strong track record for research innovation and spinouts and a supportive busi-
ness network that includes Codebase, the UK’s largest technology incubator. It has the busiest airport in Scotland, serving 120 destinations including daily flights to US cities. The city’s digital technology sector is growing rapidly and employs 17,000 people working for global corporations such as Amazon and Microsoft as well as highly successful Scottish technology companies that include Skyscanner and FanDuel.
Edinburgh’s vigorous digital economy is complemented by a rich historial legacy
Edinburgh’s Quartermile, close to The University of Edinburgh’s School of Infomatics, has become a technology hub that includes Skyscanner and FanDuel
ner is a global player with more than 40 million unique monthly visitors to its website, more than 35 million app downloads and services available in over 30 languages, generating revenues of $143 million last year. Williams says: “Locating in Edinburgh also provides an opportunity for US companies to understand European markets. It is a very credible base from which to establish a European presence.” Numerous US corporations have already established bases in Edinburgh including Amazon, which set up its first development center outside North America in the city, as well as Microsoft, Oracle and Dell. US financial companies include State Street which is part of a thriving Scottish finance sector spanning banking, insurance and asset management, underpinned by a strong network of professional services firms. Nigel Eccles, co-founder and CEO of FanDuel, the largest daily online fantasy sports company, recently raised $275 million in funding and is now valued at a reported $1.3 billion. FanDuel has successfully tapped into a growing passion for fantasy sports, with 41 million fantasy sports players in the United States alone. It is big business, with big wins on games spanning NFL, NBA as well as college football and basketball – its entire customer base (to date) and more than half its employees are in the United States. FanDuel has 386 employees – 241 in the US and 145 in Edinburgh – mainly in product engineering. Regular direct US flights from Edinburgh, Scotland’s largest airport, help FanDuel operate as a transatlantic business. Eccles says: “When we moved our headquarters to New York we wanted to keep the engineering team in one location and felt we could build a better engineering base in Scotland. We’ve got a phenomenal team across Edinburgh and the United States. Our
Nigel Eccles, of FanDuel moved HQ to New York but kept engineering base in Edinburgh
mindset is to hire the best people: the difference between the best person and the average person is 10 times. We look to hire the best and there is so much high quality engineering talent emerging from some of the best computing science universities in the world in Scotland.” The tech sector also spans established successful businesses such as Craneware, a medical billing and revenue software solutions business whose products are used by one in four US hospitals. Craneware has 200 employees worldwide, of whom around 100 are based in Edinburgh. Craneware Chief Executive Keith Neilson says: “Vibrant companies are continuing to set up and grow in Edinburgh and there are good potential inward investment opportunities. It’s a great place to live and work and to start up companies.” Neilson says Edinburgh has an economical cost base with commercial rents on a par with US cities outside of cities such as New York and good transport links. “We have 16,000 square feet with a rooftop garden with amazing views over Edinburgh. There are eight flights a day to the US, between Edinburgh and Glasgow airports. I can leave Edinburgh at 9am and be in Manhattan for lunch.”
For further information contact Investor Support at The City of Edinburgh Council. investinedinburgh.com
10 | Insight | internationalinsight.co.uk
September 2015
Glasgow on a green light for international development
The enterprising business skills and quality of life in Glasgow make it attractive to companies looking for a European base
With its wide range of skills, high educational standards and a long history of commerce, the city is attracting global business interest by Valerie Darroch
G
iant pink billboards in Scotland’s largest city boldly declare ‘People Make Glasgow’, flagging up the selfconfidence of a city which has made a successful transition from former industrial powerhouse to a diverse modern economy which is attracting a new influx of ambitious global companies. One of the newest arrivals is Spire Global, a US satellite-powered data company which has established a European headquarters in Skypark business park. Spire sets its recruitment bar exceedingly high – targeting only the top 1% of the global talent pool – and the caliber of recruit in Glasgow was a major attraction, according to Chris Wake, Spire’s Head of Business Operations. Spire, headquartered in San Francisco, designs and manufactures powerful mini space satellites which can cover more data points on the earth than normal satellites, providing detailed timely updates on weather patterns to governments, meteorologists and businesses. Spire was introduced to Glasgow via business partner Clyde Space, a home-grown start-up that supplies small spacecraft and is now Spire’s Skypark neighbor. Spire, which also has a base in Singapore, assesses three critical factors for locations: availability of risk capital; human talent; infrastructure (including digital and physical infrastructure and business partners) and human talent. Glasgow scored well, particularly on talent, says Wake: “We’re incredibly pleased with our hiring success. Glasgow has really great candidates and there is all of Europe to pull from.” Wake is not alone in recognizing the importance of a vibrant business eco-system. Calum Paterson, Managing Partner of Glasgow-headquartered Scottish Equity Partners (SEP), says Scotland’s biggest city has much to offer in terms of available finance, business acumen, entrepreneurial Calum Paterson, of SEP says that Glasgow has much to offer in terms of finance and business acumen
talent and quality of life to Scottish businesses with global ambitions as well as global businesses seeking a European base. Paterson has led SEP from start-up in 2000 to Europe’s leading venture capital investor with a portfolio of 35 high-growth companies. He is also non-executive director of portfolio company Skyscanner, the world’s fastest-growing travel search company and a Scottish ‘unicorn’ start-up with a $1 billion plus valuation. SEP has offices in Glasgow and London and a remit to invest across the UK and beyond. In the past year it made investments totaling $15.5 million and its portfolio companies generated $1.3 million in revenues. “Scotland benefits from having a venture capital investor that is not just big in Scottish terms but prominent at a European level. Scotland is a great place to build a business from and a great place to live and work,” Paterson says. The talent pool has benefited SEP and its portfolio companies. “Glasgow has a very high quality of talent, exceptional universities and significant expertise in micro-electronics and life sciences as well as a good business support network. Lots of Scots have worked in the States and bring back that experience and international perspective.” Dynamic transatlantic partnerships can result in long-term investment. One example is SAS, a US-headquartered global leader in business analytics, software and services which has a thriving research and development operation in Glasgow headed by David Carrick, Managing Director, SAS R&D Scotland. The Glasgow operation was set up following the 2010 acquisition by SAS of Memex, a Scottish company formerly headed by Carrick which became a world leader in intelligence management solutions for law enforcement and national security. SAS, whose global headquarters is in North Carolina has more than 13,000 employees, including 140 in Glasgow. Carrick says SAS was impressed with the city’s graduates. “The talent in the software development industry in Glasgow is excellent with great universities. Students here mature quickly and you can grow and retain really good teams.” When US executives visit Glasgow for the first time, Carrick says what surprises them most is that they are
Invest Glasgow’s Anne Murray points to the city’s rich artistic and cultural life
in a metropolitan city yet just half an hour’s drive to spectacular countryside. “We took US visitors to Loch Lomond and they could not believe what we have on our doorstep,” Carrick comments. Anne Murray, Head of Invest Glasgow (Glasgow City Council’s inward investment arm), says Glasgow is a good foothold in Europe for US businesses, with no language barriers, good transport links, a competitive cost base and a well-educated workforce: more than 40% of adults are qualified to degree level. “Glasgow has a rich artistic and cultural life – we have one of the best civic art collections in Europe and impressive Victorian and Art Nouveau architecture. We also have three international airports within an hour’s drive with direct flights to the US and other global business destinations, and direct rail connections to London,” says Murray.
The city’s diverse economy includes creative industries, renewable energy and low-carbon and financial and business services. The International Financial Services District (IFSD) includes long-term tenants JP Morgan and Morgan Stanley, both of which have more than 1,000 employees. JP Morgan established a European Technology Centre in Glasgow 15 years ago and plans to add 500 new jobs. BNP Paribas, Santander and Arthur J Gallagher also have substantial Glasgow operations. “In a 45 minute drive you have access to a workforce of 1.2 million and in an hour you can access 2 million so it is easy to recruit and retain good people,” says Murray. She adds that labor costs can be 33% lower than in London. Property also represents good value, with Grade A and Grade B commercial property up to 75% cheaper than in London and a good development pipeline. Glasgow is also strong in scientific research and development – particularly in life sciences. It forms part of a BioCorridor with companies including pharma giant GlaxoSmithKline linking to hospitals for research into fields such as stratified or personalized medicine. The city’s 130,000 students include
specialists in the fast-growing field of photonics. That proved a major attraction for Fraunhofer Gesellschaft, Europe’s largest provider of applied research and development services which established Fraunhofer UK Research and the Fraunhofer Centre for Applied Photonics (CAP) in Glasgow in 2012. It has 21 staff and 13 PhD students and plans further expansion. Simon Andrews, Executive Director of Fraunhofer UK Research Ltd said: “The location is ideal, partnering with the excellent applied science and engineering of the University of Strathclyde, state of the art facilities in the Technology and Innovation Centre, excellent communications links with the rest of the UK, and access to a highly skilled and educated workforce.” However, it’s not all high-brow business activity: Glasgow’s status as the second biggest and most successful UK shopping center outside London has attracted major US retailers including Forever 21, Hollister and American Apparel to the fashion-conscious city. Glasgow ranked as the top Scottish city in the Mercer 2015 global Quality of Living survey and Invest Glasgow’s Murray said international newcomers are struck by the warmth of the Glasgow welcome – affirming that essentially, ‘People Make Glasgow.’
Diverse economy and strong skills base Glasgow is Scotland’s largest city with a population of nearly 600,000, a well-educated and skilled workforce and a diverse economy fuelled by strength in growth sectors including: low carbon industries; life sciences; engineering, design and manufacturing; financial and business services; tourism and events; higher and further education; creative industries and retail. It is home to 18,000 companies, generating a collective annual
turnover of $47.9 million. Numerous global corporations have operations in Glasgow, including JP Morgan, Morgan Stanley, Arthur J Gallagher and SAS who have recruited graduates from world-class universities in the city. Glasgow has attracted more than $12.2 billion in capital investment since 2011 in support infrastructure, including Grade A commercial property, providing a springboard for significant inward and foreign investment.
Invest for success in Scotland’s cities Scottish Cities Alliance is a unique collaboration of Scotland’s seven cities and the Scottish Government working together to create the conditions for economic growth. With a newly-launched $15.4 billion Investment Prospectus promoting the huge potential across the seven city regions – Aberdeen, Dundee, Edinburgh, Glasgow, Inverness, Perth and Stirling - the Alliance aims to attract external investment, stimulate economic activity and create new jobs and business opportunities, through investment in infrastructure. This comprehensive investment prospectus is split into sections allowing prospective investors to go straight to their area of interest and expertise whether that is Hotel and Leisure, Industrial, Office, Residential or Mixed Use, highlighting the great range of investor, developer and occupier opportunities spread across the Scottish cities. To view the prospectus visit www.scottishcities.org/prospectus
scottishcitiesalliance Aberdeen • Dundee • Edinburgh • Glasgow • Inverness • Perth • Stirling
Telephone: +44 141 222 9737 Email: info@scottishcities.org.uk Visit: www.scottishcities.org Follow us on Twitter: @scottishcities Join us on LinkedIn: www.linkedin.com/in/scottishcities
BIRMINGHAM, UK. BRIMMING WITH CONFIDENCE
Exciting times are ahead for Birmingham the UK’s second largest city, situated in the Midlands region and the heart of the country. Birmingham was recently declared the world’s No.1 Destination of the Future for foreign investors and is set to overtake London this year as the UK’s most attractive city for property investment. US investment is also at an all-time high with 250 investments and 14,000 jobs created here over the past 20 years. The city stands strong as a fast growing knowledge economy, producing 25,000 graduates each year from five major universities, two of which host global Top 100 business schools. In recent years Birmingham has seen nearly $40billion invested into infrastructure with its international airport being extended and a new high-speed rail route being developed between Birmingham, London and Europe. Talented professionals, companies & investors are all choosing Birmingham and HSBC relocating its global corporate and retail banking headquarters to the city is further evidence of this. The region is brimming with energy and fresh ideas something every pioneering business needs. Want to find out more? www.businessbirmingham.com/morebirmingham
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