London’s financial districts provide financial services firms with an ecosystem like no other, but could this now be under threat?
Editor's Note: This post is part of a series on the state of the financial services industry.
Over the weekend it was widely reported that Brexit could mean the end of the city’s financial district as we know it. Whispers by top industry representatives even warned that banks could start leaving London before Christmas as the industry struggles to adjust to the uncertainty surrounding Brexit more than any other sector of the economy, both in the degree of its effect and implications. London has long been seen as the epicentre of the financial market in Europe. But rising real estate costs have led companies to move outside the Capital. With the recent Brexit vote causing many firms to have their hands ‘quivering over the relocate button’, is it likely that this spread will continue to secondary cities like Birmingham? Or will companies establish a stronger presence in Mainland Europe?
Many industries have already taken the leap outside of London or, for now, just speculated the idea of a possible move. In government a number of people, including Andy Burnham MP have suggested during the renovation of the Palace of Westminster, that parliament should move out of London, to the North to save money and ‘de-centralise’ government. In media, the BBC has finally made its much talked about move to Salford, with other well-known broadcasters set to follow in their footsteps. As for financial services, well, they’re even further ahead of the rest and a number of large firms have had offices outside of London for years.
With real estate costs soaring in London, financial services firms are looking to secondary cities to house some (or most) of their staff. For this industry there will always be the need to have part of the business, perhaps their headquarters, close to the Square Mile. But for the growing fintech side of their firm, momentum is picking up and more are choosing a base outside of the Capital.
JP Morgan and Liverpool Victoria (LV) have successful campuses in Bournemouth and, thanks to reasonable transport links to London, these companies have given Bournemouth an incredible boost by investing in the area, where staff have the added luxury of living by the sea. Then there’s the planned train line, HS2, which has the prospect of unlocking the business potential of key cities across the country such as Birmingham and Manchester. Along with improved transportation links and the obvious real estate savings, are there other benefits or reasons behind re-locating their business?
Canary Wharf Effect…The Canary Wharf that we know today was borne out of the idea of former chairman of Credit Suisse First Boston to convert the district into a back office, and for years it continued to bring firms out of expensive city locations. Having developed over the last 25 years, Canary Wharf could be seen as a victim of its own success. The area has started to lose major financial corporation departments from its portfolio due to its popularity, the Jubilee Line’s excellent transportation connections and, therefore, rising costs. In 2007, the HSBC building sold for a record £1.1 billion and now the company plans on moving about 1,000 jobs to the booming area of Birmingham.
In order to maintain their competitive edge in the ‘war on talent’ it’s important that companies provide the right offering within their work environment for staff. Aon’s is just one of a number of financial services firms that provide staff with a variety of spaces that cater to these needs. Image © Gensler
The War on Talent…With the ‘war on talent’ under full swing, perhaps attracting staff involves investing in amenities such as a subsidised café, larger gym complex or rooms for power-napping, but in a location where you get more for your money. Having a more effective and productive workforce can only feed back into the firm through profitability and happier staff. Also, more companies are starting to question whether the latest generation currently leaving University really want to be based in London, given high rents and rising living expenses.
Brexit is coming…The Bank of England Deputy Governor recently announced that “London’s Financial Services firms would rather head across the Atlantic to New York than relocate across the Channel if forced to leave London” in light of the recent vote to leave the EU and the potential difficulties that lie ahead. So looking ahead to the future, will the current trend of moving to secondary cities continue or will there be a need to move to a city within the EU instead? With Paris and Frankfurt currently fighting to steal London's banking crown post-Brexit, will London continue to be Europe’s Financial Services hub or will it lose this status? Secondary cities have started to make their mark, but could other cities, such as Leeds, Newcastle and Bristol, start to compete for business?
Financial Services Firms’ Dilemma: Stay or Go? Will Financial Services firms start to move to neighbouring cities across Europe or will they choose to relocate closer to home?
The rise of separate, larger campuses in areas such as Birmingham, Bournemouth and Manchester is a notable trend. Whereas flexible space isn’t always an option in central London, secondary cities often have an abundance of potential workspaces that can ebb and flow with a changing number of employees.
Perhaps a campus with parking (a luxury in London), good transport links, landscaping and a well-designed workplace can be enough to pull some London-based teams into these cities alongside creating local jobs, but in order for this to happen vital conversations about building stock and infrastructure need to start now. A number of changes will continue to occur as the UK gets ready for ‘Brexit’. With the Houses of Parliament due for refurbishment and a temporary relocation, if any, is yet to be decided. So while the government makes a decision on their own move, they also have the greater decision on negotiating terms over the UK’s exit from the EU very soon, of which I’m sure financial services firms will be eagerly awaiting their response.
Regardless of the uncertainties around location, workplace satisfaction for staff should, hopefully, be at the forefront of these critical decisions.
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Rosie is the regional leader for the financial services practice area in EMEA and has a strong conceptual background working directly with clients to develop ideas into the technical solutions needed to achieve the project’s vision. An interior designer in Gensler’s London office, Rosie specialise in workplace and office design, focusing in particular on the financial services, professional services and media sectors. Contact her at rosie_richardson@gensler.com. |