Profile of Birminghams Financial Services Sector

Profile of Birminghams
Financial Services Sector

Profile of Birminghams Financial Services Sector








1,900+
firms in the financial
services sector




20,800+
employed in the
sector




9%
employment growth
between 2005 and
2010
The Financial Services Sector
Introduction
This profile is one of a suite of seven covering key High Growth Sectors in
Birmingham. The profiles were compiled in 2011 and go beyond analysis of the
available datasets, to enable us to understand how the sectors support the local
economy now, and how we can develop their potential for the future. This has
been achieved by integrating data analysis with intelligence from sector experts
drawn from businesses, research institutions and networks.
Each of the profiles presents statistical
information, along with case studies, an
analysis of the sector today, and future
challenges and opportunities.
The seven sectors are:
Business and Professional Services
Financial Services
Creative, Media and Digital
Medical Technology
Transport Technologies
Low Carbon
Advanced Manufacturing

Sector overview
The UK has long been recognised as a global financial centre. While the City of
London and the wider South East
undoubtedly lead the way in terms of
their significance on the international
stage, the financial services sector is
nevertheless an important element of
other regional and city economies in
the country, such as Birmingham.
Indeed, Birmingham has a long and
great tradition of financial services
activity. The sector grew up in the
18th century alongside the development of the city as a major commercial hub. The
UKs first known building society was formed in Birmingham and the Midland Bank
was founded in the city in 1836. It remained one of the largest high street banks in
Britain until its acquisition (one of the largest of its kind at the time) by HSBC in
1992. Birmingham had its own stock exchange as early as 1845. In that year, the
Major sub-sectors
Banking and Building Societies
Financial planners and advisors
Insurance companies and brokers
Fund management and investment
firms

Profile of Birminghams Financial Services Sector
















Birmingham was an obvious
choice for establishing a client
service centre in the UK, and
we were delighted with the
welcome and assistance we
received from the city
following our decision to
locate here.
Paul Hutchins,
Deutsche Bank
World Class Service from Birmingham
Deutsche Bank was founded in 1870 in Berlin, and had
opened its first UK branch in London by 1873. Today, it is
one of the leading global investment banks with more than
100,000 employees in 74 countries, generating a net income
of 2.3bn in 2010.
In 2007 Deutsche Bank opened offices in Birminghams city centre. The offices are
part of a global network of support and processing services for the banks
operations and were established with the specific purpose of adding value to the
bank. There is a strong focus on client service within the centre to ensure a
provision that is timely, accurate, rich in quality and efficient.
Together with premises in Dublin, the services that Birmingham provides to
Deutsche Bank extend across Europe and beyond, linking up with other service
centres in Florida, India and the Philippines. Since establishing the office,
Birmingham has grown by 300 employees per year on average, and expects that
growth to continue this year. As of the beginning of 2011, the Service Centre in
Birmingham employed 930, located in offices on Broad Street.
With a maturing financial services sector, Birmingham and the Midlands
have a wealth of high calibre, talented individuals both in terms of
graduates and those with extensive experience, valuable resources we
consider critical to our future success. Add to that the highly convenient
transport links that we need as an international business, and we have
the perfect environment to provide a service that is world class.
Managing Director, Paul Hutchins
city was home to 19 stock-broking
firms. The exchange was
subsequently absorbed by the
London Stock Exchange in the
1970s.
While internationally prestigious, the
financial services sector is also a
crucial element of the countrys
economy. The size of the sector
varies according to precise
definition, but it is estimated to employ between one and two million people in the
UK. Politically and strategically, the sector is also very important. Not only has the
sector traditionally been a jewel in the crown of Britains commercial activity
internationally, it is also a major contributor to the Exchequer.
Inevitably, the credit crunch and the resulting recession have been turbulent events
for the financial services sector across the world, and especially for its banks. In
early 2011, the climate appeared to be a more settled one, with major businesses
returning to profit and fewer fears of financial institutions (and nations) at risk of
defaulting on their debts. But these are still uncertain times. The global economic
recovery remains relatively weak, banks still appear cautious to lend to businesses,
and political debate over sector regulation continues.
Brindley Place

Profile of Birminghams Financial Services Sector
The business base
2010 data shows the following metrics for the financial services sector in
Birmingham:
The sector comprises 1,951 firms, a five per cent increase on 2005 figures,
and represents three per cent of all Birmingham businesses
The vast majority of firms are very small in size; just two per cent employ
more than 50 people each (four per cent in the UK sector)
The sector employs just under 21,000 people, a growth of nine per cent over
the past five years, and represents four per cent of the city workforce
Gross Value Added in the sector amounts to just over 1bn.
Although they are small in number, the largest firms account for a significant
proportion of employees in the sector: the ten largest firms employ 35 per cent of
the sectors workforce between them. These companies tend to be the large banks
and major insurance companies (see below).










A role for financial services beyond the City of London
There are good reasons for businesses to locate in Birmingham. The city has fast
links to London (90 minutes by rail) and its own international airport, providing a
base for firms seeking to service the City of London and global markets. There is also
plenty of high grade office space in the city centre.
Furthermore, the city and the wider region it serves also provide strong retail and
commercial finance opportunities in their own right. The city is the centre of a region
comprising more than 5 million people, nearly half of whom live in the major
Birmingham/Solihull/Black Country conurbation.
The citys universities help to provide a high quality workforce. Aston University and
the University of Birmingham in particular are recognised for their business and
management courses. For business leaders, there are many opportunities for
networking within the sector, and beyond. Birmingham Forward, for example,
promotes the city and the needs of its businesses, and includes sector businesses
such as venture capital companies and financial advisors. Professional bodies, such as
the British Insurance Brokers Association, are also active in the city.








1bn+
contribution to the
citys economy




57
firms have their
headquarters in
Birmingham




4%
of firms are foreign-
owned






Lloyds Banking Group PLC 1,732
The Royal Bank of Scotland Group PLC 1,322
HSBC Holdings PLC 1,211
Wesleyan Assurance Society 820
Barclays PLC 596
Zurich Financial Services Ag 454
Marsh & McLennan Companies Inc. 336
Axa 297
Guk Broking Services Ltd 226

Ten firms account for 35% of the sectors workforce
Deutsche Bank 930


Profile of Birminghams Financial Services Sector





















Addressing the local equity gap: Investbx
Investbx is the countrys first regional investment exchange. Established in
Birmingham in 2007, the onset of the credit crunch quickly changed its business
priorities away from share trading and towards helping to address the equity gap
the funding gap facing many small businesses between the levels of finance
available from business angels and that offered by venture capital (typically up to
2m). While the equity gap has been an established business funding issue for
many years across the UK, the problem was exacerbated by the economic
downturn and the reluctance of banks to offer businesses (especially new
enterprises) alternative finance in the form of loans.
Investbx now helps to bridge the funding gap through equity and debt solutions. It
is able to introduce local and regional businesses to its investor network and help
them to raise equity finance. Since J anuary 2010, it has also operated a Business
Loan Fund unique in the UK to provide loans of between 100,000 and 1m for
small and medium sized companies, often at critical times in their growth and
development. The 10m investment pot behind the fund has been provided by
Birmingham City Council.
Birminghams business finance opportunities
Birmingham is one of the most significant centres for business investment and
financing outside of London. This reflects the volume of funds available for
investment in the region, and the commercial opportunities to invest in.
Birmingham is also large enough to be able to service finance and investment
deals with specialist, locally-based professional advice in areas such as law and
accountancy.
Early stage investment (up to 1-2m) is available from local Birmingham venture
capital firms such as Midven, and WM Enterprise, which manages the Mercia
Technology Seed Fund. Both of these companies focus on technology businesses
and SMEs, the technology focus in part being an indication of the commercial
potential of the citys universities, such as Aston and the University of
Birmingham. Investbx offers other equity and debt financing options (see
below). Larger deals are made possible through major corporate finance
advisory firms based in the city, such as Clearwater Corporate Finance and
Rothschild.
Given the underlying economic conditions, there has been limited appetite for
high risk investment in the recent past. But with returns on investment being so
low in other areas, and a sense that the bottom of the recession has been
reached, the local venture capital market is quite upbeat about future prospects.

Profile of Birminghams Financial Services Sector
The feelings Mutual: Wesleyan Assurance Society
Wesleyan Assurance Society is an established part of Birminghams financial
services landscape. Founded in Birmingham in 1841, the Society grew in step
with the citys rapid rise as a major commercial centre. While its original focus
was on the provision of life assurance to the burgeoning manufacturing classes,
the Society has developed over time to become a market-leading financial
institution, with a particular focus on servicing professionals, primarily doctors,
dentists, lawyers and teachers. The Society also includes a banking arm and a
General Insurance business.
In recent years Wesleyan has been
successful, both in terms of financial
returns and sector awards. The Society
has in excess of 4.4bn of funds under
management and in 2010 achieved a
13.7% gross investment return on its
main with profits fund, one of the best in
the industry. Last year, Wesleyan was
named UK Life Insurer of the Year at the
British Insurance Awards for the second time in three years, having been a finalist
for five consecutive years.
Wesleyan was founded as a mutual society and remains so to this day, 170
years later. With no shareholders, it is responsible only to its customers who
share the benefits of good business performance.
A thriving hub for the insurance industry
Birmingham is a major centre for the UK insurance industry. All of the industrys
major companies, national brokers and networks are represented in the city, such
as Zurich, Aviva, Marsh and Blue Fin. There is also a strong sense of community
which reflects the industrys long standing association with Birmingham. For
historical reasons linked to Birminghams development as a major manufacturing
centre, the local insurance market has a strong focus on commercial insurance
packages (professional indemnity, engineering insurance and other specialisms),
but it also offers a wide range of products to other markets.
In recent years the performance of the insurance market in Birmingham has
mirrored that of the country and beyond. With the onset of the recession,
premiums from clients have reduced as their businesses have shrunk. The industry
has also been hit by a series of large claims, for example from large scale flood
damage in the UK. This has driven the industry to consolidate its position through
mergers and a drive for improved operational efficiency. The advent of direct
insurers has been an increasing trend within the sector, in part to improve
efficiency and reduce client premiums. Direct Line, one of the largest direct
insurance companies, has a large operation in Birmingham.
The labour pool for the insurance industry in Birmingham is regarded as good by
employers. The industry is recognised for its focus on qualifications and clear career
paths. Recent candidates have been particularly good for underwriting and broking.




















Wesleyan is absolute proof
that strong and successful
financial service companies
can locate in Birmingham
and operate at a national
level. The rail network link
to London is fast and
efficient so that we have
easy access to the City
when necessary.
Craig Errington,
Chief Executive
Wesleyan

Profile of Birminghams Financial Services Sector
Business location
The largest financial services cluster is around Birminghams city centre and on its
western edge. This area includes the Colmore Business District and the
Brindleyplace development in the centre of the city, and the commercial area
towards Edgbaston, heading out towards the M5 motorway. The central cluster
accounts for the majority of the major financial services firms and its largest
employers. Smaller clusters of micro businesses can be seen in other parts of the
city in district level commercial areas, in particular to the north in Sutton Coldfield.
Colmore Business District: Birminghams commercial heart
Colmore Business District sits at the very centre of Birmingham, close to the
mainline railway stations, with their frequent connections to Birmingham
International Airport and London, and the citys major retail and entertainment
areas.
The district provides an interesting
architectural mix of grand Victorian
buildings and ultra-modern offices. It is
home to around 500 businesses, many of
whom are in the financial services sector.


Profile of Birminghams Financial Services Sector
Future opportunities
While the future looks more positive for the sector compared to the last few years,
rapid growth and expansion is not expected. Regulation remains a potential
challenge for many of the businesses in the sector. The supervisory structure of the
insurance industry is set to change. It is still unclear how banking regulation may
evolve as a result of the credit crunch, but too restrictive an environment could
drive important elements of the sector offshore, or lead to diverging business
models (for example, high street banking becoming more separate from the more
risky types of investment banking). However, Birmingham is well-placed to take
advantage of any upturn in financial services activity:
Efficiency, rather than business or employment growth, is likely to be the
focus for the sectors firms as they attempt to re-establish their margins and
profitability. The outsourcing of support services and back office functions
from the expensive City of London may benefit Birmingham as a location
Birminghams financial services sector is mature and well-established,
attracting major banks and insurance companies to the city, and especially its
commercial heart.
The sector is of a sufficient size to secure other professional support services,
such as legal and accountancy firms, and generate and sustain a skilled pool
of labour.

Further Information

Reporting and analysis by Consulting Inplace. Unless otherwise specified, the
statistical data in this profile relates to 2010 figures, based on a bespoke sector
definition determined by Birmingham City Council for the purposes of this research.
Data comes from TBR and may therefore differ from ONS and other business
datasets.

Copies of all seven High Growth Sector profiles can be downloaded from:
www.birmingham.gov.uk/birminghameconomy

Further information about this profile can be obtained from:

Economic Strategy
Birmingham City Council
PO Box 14439
Birmingham B2 2J E

T +44 (0) 121 464 2114
E birminghameconomy@birmingham.gov.uk

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

T +44 (0) 121 202 5022
E invest@marketingbirmingham.com
W www.businessbirmingham.com