THE British government's attempt to economically "level up" regions outside London is getting help from an unlikely quarter: Wall Street.
Firms such as Citigroup, Bank of America and Bank of New York (BNY) Mellon are hiring hundreds more staff outside the UK's financial hub as they target cheaper costs and skilled graduates.
Goldman Sachs Group recently signed a lease on premises in Birmingham's Paradise development that could house as many as 1,000 staff. West Midlands Mayor Andy Street describes the move as "the royal seal of approval" for England's second city. Manchester, Chester and Glasgow are among the other cities welcoming more finance jobs.
Analysts say a number of factors are encouraging banks away from London. Property prices are pushing residents out of the capital. Brexit makes it harder for firms to use European bases as operational support for London, forcing them to build capabilities within the UK. Growing numbers of students at British universities have deepened local pools of talent.
"We've been able to find very good people here, to the surprise of many I think, especially in the engineering area where we've found it very challenging in London, Dallas and New York," Gurjit Jagpal, Goldman Sachs managing director and head of the Birmingham office, said in an interview. "Post-pandemic the trend you're seeing is we are having to go to places where talent wants to be."
It's a move that echoes the US, where Goldman Sachs is growing in Salt Lake City and Dallas, which is now the bank's second largest office in the US. The firm plans to occupy a new office tower in Dallas that would hold thousands of employees, Bloomberg News reported in June.
In the English cathedral city of Chester, Bank of America has increased its headcount by 25 per cent to 1,300 in the past two years. The firm opened there in 2010, knowing there was talent after running the MBNA credit card business locally. Today, employees work on markets and banking operations, technology including cyber security, and finance, and the firm is seeking to recruit 100 more. Over the past five years the firm has also seen headcount surge 50 per cent in its office in Camberley, Surrey, and 20 per cent in Bromley, a town on London's outskirts.
After Brexit and Covid-19, "businesses thought, 'right, we've got to look at how we deploy our resources,'" said Miles Celic, chief executive officer of TheCityUK, which represents financial and professional services firms. "London is a shop window to the world but these places also have great pools of talent, high living standards and are typically cheaper."
Clearly, a Wall Street bank can't solve all a city's problems. Birmingham's unemployment rate is among the worst in the country. And the shift outside London underscores the post-Brexit decline of front-line banking business, such as trading and deal making, according to Charlie Parker, managing director at boutique investment manager Albemarle Street Partners. "In terms of building front office services for clients in the UK, banks are missing in action," he said.
But there are still hopes that the trend will help to energise the regions. The Centre for Cities think-tank estimates that Manchester's GDP is £15 billion (S$24.3 billion) lower than its potential each year, compared with similar cities in countries such as France and Germany. Birmingham is £11 billion behind and Glasgow lags by £7 billion, according to its research.
"Having some of these high productivity, high output companies move outside of London is really good news in terms of increasing the size of the pie," said Valentine Quinio, senior analyst at the Centre for Cities. For every 10 new jobs in a highly skilled exports sector, including financial services, 17 more jobs were created in the local services industry between 1995 and 2015, according to data from the think-tank.
It also helps create a business ecosystem that attracts even more jobs. London's private sector is a far bigger slice of its economy than in the rest of the UK, and the public sector can crowd out other local jobs markets, said Tony Travers, a professor at the London School of Economics. What other cities "really need is a much larger private sector, creating greater chances of entrepreneurial activity and networking, and in the longer term a greater chance of new businesses," he said.
BNY Mellon is growing fast in the northern city of Manchester. The firm opened here in 2005 with 50 employees, and staff numbers climbed 7 per cent in the past two years to 1,700. Employees work in areas including operations and technology, finance and investment management. Staff numbers remained broadly unchanged in London at just under 3,000 during the same period, according to Janet Johnstone, chief administrative officer for Europe, the Middle East and Africa.
"As we've really liked what we've seen, we've shifted roles from London," she said, adding that Manchester alumni have gone on to become some of the bank's most senior figures in the US.
Citi has been operating in Belfast since 2005. As of September, more than 300 staff have joined the bank's Northern Ireland office this year and the company is seeking 400 more. Its current headcount is 3,700, compared with 10,000 in London. "We've got more professional lawyers in Belfast than we do in London," said James Bardrick, the firm's UK country officer. "There's nothing to suggest that the organic rates of growth that we've seen recently won't continue."
Finance jobs advertised in Birmingham surged by 40 per cent in the first half of 2022 compared with the same period the year previously, according to data from the recruitment company Michael Page.
HSBC Holdings also has a base in the city, and Deutsche Bank operates a foreign-exchange and rates sales desk here. In Reading, a town about 50 miles west of London, advertised finance roles soared by 54 per cent, in Glasgow by 39 per cent and in Leeds by 45 per cent. London saw a smaller uplift of 29 per cent, though the number of openings is far higher than elsewhere in the UK.
The number of financial services jobs in Manchester, Bournemouth and Belfast grew steadily between 2018 and 2021, according to the Office for National Statistics, even while jobs in London stayed largely static.
Local politicians are trying to keep this momentum going. Street, the Conservative mayor of the West Midlands, has visited Chicago, Toronto and India this year to drum up business, he said in an interview. "It's like the royal seal of approval," Street said of Goldman Sachs's arrival. "If it's good enough for them, it's good enough for anybody."
JPMorgan Chase has shown what a dedicated base outside London looks like. About 4,800 staff work in 32 acres around a country house in Bournemouth, a small city on the southwest coast. Global teams including technology and operations, compliance, human resources and risk reporting and audit are all based here. Staff support the processing of around £240 billion-worth of sterling and euro payments each day, and about US$1.2 trillion of US dollar payments.
Inside the steel-and-glass offices, staff with headsets man a 24/7 command centre for Europe, the Middle East and Africa where they mitigate the effect of hurricanes, power cuts, apps going down or interruptions to the bank's traders. A large screen features notes on a warning for tropical storm Howard and security developments in Sri Lanka and Taiwan. Nearby is a darkened "war room" for more sensitive discussions.
"It's a very minor version of the Nasa command-and-control room," said Sarah Arnold, Bournemouth global incident command centre lead. "The end game is not just to resolve an incident in 90 minutes but to resolve and communicate any incident to the client before they even see it."
JPMorgan's presence helped encourage firms like Barclays' wealth arm to do business in the city, according to Tobias Ellwood, member of Parliament for Bournemouth East. He's been trying to persuade Apple and Channel 4 to set up business here to take advantage of local tech graduates. "It fits in with the life pattern of employees," he said. "You work in the City but when you want to settle down with kids you can move to Bournemouth."
Despite the kudos for cities that manage to attract global firms, the tax benefits can be limited. Most tax revenue locally goes to the central government, though staff are above average earners and support "small businesses in our city centre, thanks to things like the lunch trade," Mayor Street said.
In Birmingham, Goldman Sachs welcomed its first cohort of analysts, as junior staff are known, this year with some employees commuting in from Derby and Rugby, several towns away. Some 80 per cent of staff come from the UK, with half of those from the West Midlands.
Office chief Jagpal is hoping that the pull of local grammar schools, and the housing market, will keep attracting more staff.
"You could buy a two-bedroom apartment within five minutes walk from the office for £250,000," he said. "How do you do that in London?" BLOOMBERG