the pro.manchester financial and professional services sector review september 2013

pro manchester

Financial and Professional Services Sector

Annual Review

September 2013

·

Thursday, 5 September 13

pro manchester financial and professional services review September 2013·

The financial and professional services sector review 2013 ...

Key Drivers of Growth in the City Region The business, financial and professional services sector is one of the key drivers of growth in Greater Manchester. The total number of jobs in the sector is estimated to increase from 200,000 at the start of the last decade to just over 300,000 by 2020.

Employment in the financial and professional services sector has also increased steadily. An increase from 95,000 in 2000 to around 160,000 also by 2020. The business, financial and professional services sector accounts for over 20% of employment and almost 30% of GVA in the city region.

So what are the major challenges. Accounting firms are doing wellAccounting firms are doing well. facing the challenge of reform and some consolidation in the mid tier sector. The mergers of BDO and PKF and the acquisition of the assets of RSM Tenon by Baker Tilly a measure of the change. Despite some short term challenges, prospects for Manchester and the sector appear strong.

The legal sector faces the biggest challenge,The legal sector faces the biggest challenge, with evidence of over capacity and the lack of differentiation amongst some firms. The rapid expansion in the number of firms since 2005 has only partially addressed since the 2008 slowdown.

A report from The Association of Business Recovery Professionals (R3) suggests 30% of UK law firms are at risk of failing within the next twelve months, despite the signs of recovery. A crackdown on no-win, no-fee whiplash claims has pushed hundreds of law firms to the brink of financial meltdown according to a recent report from CreditWatch.

Is it really so bad? Performance improvement and cost reduction have been the dominant themes for legal firms. The ratio of non fee earners has fallen and support services have been maximised to generate greater efficiency. Greater use of IT and back office efficiency still offer potential saving. Challenge of new technology marketing including internet and social media options are prevalent.

The economy is set to recover with significant expansion in domestic and commercial property markets over the next eighteen months. Corporate finance market is also set for significant recovery. We think some challenges remain but the outlook will change for the better much sooner than anticipated.

Banking sector faces many key challenges ...The Banking sector faces many key challenges not least the Co-operative bank restructuring. plus The RBS (Project Rainbow) Group still faces an uncertain future, following the collapse of the Santander deal.

Despite the demands of Basle II, Basel III, Global SIFI regulation, Cocos and collapsible bonds, we are more optimistic about the UK regulatory environment under the Mark Carney regime.

The recent statement in Nottingham, suggesting cash restraints will be lifted once Banks meet the 7% Capital ratio is evidence of a pragmatic approach to the sector.

Private Equity and Wealth Asset Management Private equity and wealth asset management are two of the strongest sectors in the region and leaders in the respective field outside of London. MPEG, the Manchester Private Equity Group leads the way in mid tier private equity.

Inward investment and near shoring Inward investment and near shoring offer attractive opportunities in the FPS sector. Initiatives instigated by MIDAS have included successes such as RBS Global Banking Services, the Bank of New York Mellon, WorldPay and Aegis.

Summary The business, financial and professional services sector is one of the key drivers of growth in Greater Manchester. The total number of jobs in the sector is estimated to increase from 200,000 at the start of the last decade to just over 300,000 by 2020.

Despite the short term challenges, the Financial and Professional Services sector in Greater Manchester is well placed to continue to be one of the key drivers of growth in the City Region.

... drivers of growth in Greater Manchester.

“Despite the short term challenges, the Financial and Professional Services sector in Greater Manchester is well placed to continue to be one of the key drivers of growth in the City Region.”John Ashcroft



Dr John Ashcroft Chief Executive of pro.manchester, Chief Economist at the Greater Manchester Chamber of Commerce, a Director of Marketing Manchester, and a member of the (AGMA) Greater Manchester Business Leadership Council,

He is the senior economics advisor to Duff & Phelps and author of The Saturday Economist.com a weekly round up of news on economics and events in the UK economy.

John is a visiting Professor at MMU Business School, specializing in Economics, Social Media, Corporate Strategy, Business and Financial Modeling and an occasional lecturer at Manchester and Salford Business Schools.

Educated at the London School of Economics, London Business School and with a PhD in Economics from Manchester Metropolitan University, John is a fellow of the Royal Society of Arts, a companion of the British Institute of Management and a member of the Society of Business Economists.

About the authorAbout pro.manchesterpro.manchester is the members organisation which represents the financial and professional services sector in Greater Manchester. Established in the 1980s, pro.manchester includes over three hundred member organisations and organises over one hundred events each calendar year for over 6000 delegates.

Key events include the Young Professionals MIM awards, the Annual Business Conference and the Annual Dinner.

If you are working in the financial and professional services sector in Greater Manchester, you have to be a member of pro.manchester.

Contact Information John Ashcroft [email protected] 12SpinningfieldsManchester M3 3BZ


mailto:[email protected]

mailto:[email protected]

pro manchester financial and professional services review September 2013

1,200

1,225

1,250

1,275

1,300

1,325

1,350

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Total employment in Greater Manchester

Total employment is forecast to rise from 1.27 million at the end of 2012 to a level of 1,350 by the end of 2020.

An increase of 80,000 jobs overall, a 6% increase in the total ratio.

000

© Oxford Economics 2012 Greater Manchester Forecasting Model

·



150

175

200

225

250

275

300

325

350

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Employment in business, financial and professional services

The business, financial and professional services sector is one of the key drivers of growth in Greater Manchester.

The total number of jobs in the sector is estimated to increase from 200,000 at the start of the last decade to just over 300,000 by 2020.

000


·



75

100

125

150

175

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Employment in financial and professional services

Employment in the financial and professional services sector has also increased steadily.

An increase from 95,000 in 2000 to around 160,000 by 2020.

000


·

On current trends we consider the forecasts included in the Greater Manchester Forecasting Model are reasonable, assuming a reversion to a modest trend rate of growth for the UK economy.



24%

1%

14%

21%

18%

5%

8%

6%1%Share of Total Employment in 2015

Key Points Construction 6%Manufacturing 8%Distribution 23% Business Financial & Professional 21%Creative, Digital, Sports, Tourism 14%Public Sector, Health, Education 24%


·

HealthEducation

Public Sector

BusinessFinancial

Professional

Creative, DigitalSports, Tourism

Wholesale,Retail

Manufa

cturin

g

Con

stru

ctio

n

Transport, Storage



19.6%

0.5%

12.5%

28.2%

13.0%

5.4%

11.0%

6.8%3.1%Share of Total GVA 2015

Key Points Construction 7%Manufacturing 11%Distribution 18% Business Financial & Professional 28%Creative, Digital, Sports, Tourism 13%Public Sector, Health, Education 20%


·

HealthEducation

Public Sector

BusinessFinancial

ProfessionalServices

Creative, DigitalSports, Tourism

Wholesale,Retail

Manufa

cturin

g

Con

stru

ctio

n

Transport, Storage


pro manchester


Annual Review

September 2013

·

Key challenges for the sector



Accounting firms are performing well ....

·

Accountancy firms doing well ...

In general the accountancy firms are doing pretty well. Firms were better prepared for the economic set back in 2008, having learnt lessons from the dot com boom and subsequent setback in 2001.

Challenge of reform ...

The challenge to the hegemony of the big four remains an ever present challenge. The threat of compulsory audit rotation and or redistribution amongst the mid tier firms remains on the agenda.

There appears to be little appetite for this change amongst key corporates despite the obvious appeal to the “mid tier firms” including Grant Thornton, BDO and Baker Tilly.

Redistribution or rotation does not present a threat to the sector overall but there could be some implication for staffing issues amongst firms if rotation does take place.

Rationalisation and consolidation ...

Further rationalisation or consolidation is anticipated amongst mid tier firms.

The BDO acquisition of PKF is expected to lay the trail for others to follow. The Baker Tilly acquisition of RSM Tenon, was long anticipated after the dramatic expansion and float of RSM Tenon.

Separation of consultancy ....

In general, accountancy firms have been seeking to extend the amount of consultancy work undertaken, in addition to the relatively narrow margin audit work.

Deloitte, KPMG and Ernst & Young all made significant increases to their consultancy incomes in the past year or so. E&Y made the biggest strides, posting a 20% increase in consultancy fees to £370m.

KPMG remains by far the biggest player with consultancy fees of £859m, representing a 10% increase on the previous year. KPMG's consultancy practice dwarfs that of its audit & accounting and tax services, which produced incomes of £456m and £392m, respectively.

Tax and tax avoidance issues

The political pressure on tax and tax avoidance is a risk to major firms, placing pressure on credibi l ity, creativity and reputations, i f inappropriate advice is exposed.

Mid tier firms also thriving ...

Mid tier firms are also doing well, with Mazars and Grant Thornton doing particularly well. BDO will benefit from the RSM Tenon acquisition.

Grant Thornton have benefitted from the Growth Accelerator Programme and are also bidding for international development contracts with UKTI.

Many of the mid tiers have focussed or specialised in niche areas including charities or the academic sector.

Prospects appear strong ...

Training and trainee acquisition is experiencing the biggest uptake for years.

Apprenticeships boost is good news for school leavers but may have negative implications for graduate intake in the near term.

The possible development of multi disciplinary partnerships, [ability to undertake wills and probates] may boost prospects for accountants but add to the complicated threat agenda for the legal sector.

The economic recovery and the the activity in the corporate finance and commercial property markets will also boost prospects over the next few years.

No great challenges to the Manchester Outlook.



Auditors seek to extend consultancy roles

·

PRESSURE on profit and fees in audit and compliance work is leading firms to reposition themselves as broader advisory businesses.

According to the Accountancy Age Top 50 +50, firms have continued to become more consulting-based in their approach to clients, with three out of the four largest firms reporting double-digit growth.

Deloitte, KPMG and Ernst & Young all made significant increases to their consultancy incomes in the past year. E&Y made the biggest strides, posting a 20% increase in consultancy fees to £370m.

While the firm remains the third-largest auditor in the UK based on income, Richard Fleming, KPMG's UK head of advisory, concedes it is very hard for the largest firms to "have a strategy to gain market share".

"Audit is a very mature market," Fleming explains. "To really add value to clients, you need to have skills that are C-suite. You want to be a trusted business advisor."

It is not only the Big Four that are beefing up their consultancy work. Of the 23 other firms providing data, 12 reported increases, compared to six that posted a decline in income and five that remained flat.

Menzies, ranked 23rd, has been busy growing its consu l tancy pract ice through strateg ic partnerships and acquisition, although this has yet to come through in the firm's figures, which showed a 5.4% decline.

During 2012, Menzies announced a joint venture with Insight Management & Systems Consultant to develop and grow specialist systems consultancy and recently merged with TAL-London, originally the London operation of Target Consulting Group.

"Consultancy is something we are spending a lot of time on," says Menzies' managing partner Julie Adams. "HR consultancy has been good for us. We have got an excellent HR department, so why not spin that out to clients?"

Although firms ranked 51 to 100 did not provide a breakdown in overall fee income, their smaller size has not prevented them from targeting consulting work as a way to grow their practices.

Bobby Lane, partner at Shelley Stock Hutter, which appears in the list for the first time at number 78, says the firm's outsourcing practice has been growing at a rate of about 25% to 30% a year.

According to Lane, the demands of clients are changing. "They need someone to deal with issues around financing, challenges around working capital and access to finance. We have gone from compliance role to being an expert that can offer a broader range of services," he says.

Lane adds that providing "added value services" will generate traditional compliance work for firms. But accountants are hardly the first profession to broaden the scope of their offering to win more business. Insurance companies and brokers have already moved in this direction with Aon, the world's largest insurance broker, providing human capital consulting services through its Aon Hewitt division.

A move towards consultancy work will also see firms compete with the likes of Mercer and Towers Watson. However, Lane is confident that accountants "are best placed to talk about the business" given their existing knowledge of their clients' financials through the provision of audit work. August 2012


http://www.accountancyage.com/aa/analysis/2198351/consultancy-the-top-50-50#

http://www.accountancyage.com/aa/analysis/2198351/consultancy-the-top-50-50#


Baker Tilly completes RSM Tenon acquisition

·

BAKER T ILLY has comple ted the acquisition of RSM Tenon's trading operations.

The acquired firm will continue to trade under its own name "for a short period of time" until it operates under the single Baker Tilly brand.

The jobs and employment rights of RSM Tenon's 2,300 partners and staff, across its 35 offices, will be unaffected.

Laurence Longe, Baker Tilly's national managing partner, said, "This merger is an excellent outcome for the clients, partners and staff of both firms. Bringing the professional skills, strengths and expertise of Baker Tilly and RSM Tenon together as one firm will significantly enhance our offering to the market and provide further opportunities for growth both nationally and internationally."

RSM Tenon's parent company entered administration on 22 August with practitioners Matt Smith, Nick Edwards and Clare Boardman of Deloitte appointed as joint administrators. On appointment they immediately sold the trading entities to Baker Tilly in a pre-pack deal.

The sale was dependent on the shareholders of Baker Tilly, largely composed of the partners, voting for its approval. Accountancy Age understands this vote took place on Friday.

At the time of the pre-pack sale announcement, a statement from Baker Tilly said it has acquired the trading operations "free from the burden of the group's [RSM Tenon's] historic debt obligations" in order to create an "enlarged and financially strong Baker Tilly group".

"This transaction allows for the ongoing success of RSM's Tenon's profitable trading businesses, free from the burden of the group's historic debt obligations, as part of an enlarged and financially strong Baker Tilly group. We believe that this is an excellent outcome for RSM Tenon's clients and employees," it said.

Following the discovery of accounting irregularities in 2011, RSM Tenon management restructured the business and engaged in a cost cutting exercise. However, RSM announced that its sole lender Lloyds Bank would not renegotiate banking covenants earlier this year, largely because the firm had changed so dramatically in the course of the year.

RSM Tenon announced in June that it was in merger discussions with Baker Tilly. However, Baker Tilly said in August it would not make an offer for RSM Tenon's parent company which held all the debt. Baker Tilly subsequently bought the trading entities, which were not in administration and were free from debt, from the Deloitte administrators.

UK Fee Income £ m 2012

PwC 2,461 1

Deloitte 2,098 2

KPMG 1,707 3

Ernst & Young 1,465 4

Grant Thornton 387 5

BDO *** 282 6

RSM Tenon ** 234 7

Smith Williamson 179 8

Baker Tilly ** 171 9

Moore Stephens 138 10

Mazars 114 11

PKF *** 103 12

Haines Watts 62 13

Begbies Traynor 62 14

Crown, Clarke, W 59 15

Saffrey Champness 56 16

UHY Hacker Young 49 17

Kingston Smith 41 18

MHA Macintyre Hudson 35 19

Wilkins Kennedy 30 20

How the top 20 looked last year


http://www.deloitte.com/view/en_GB/uk/index.htm

http://www.deloitte.com/view/en_GB/uk/index.htm

http://www.bakertilly.co.uk/Pages/Home.aspx

http://www.bakertilly.co.uk/Pages/Home.aspx


BDO and PKF complete merger deal

·

THE MERGER between BDO and PKF has been completed, creating a firm with nearly £400m in revenues.

Plans to merge the two firms were announced at the end of last year, and now completed sees BDO operate out of 24 offices with 300 partners.

Simon Michaels, managing partner of BDO LLP, said: "It's time for people to think again about BDO. Merging with a firm of the quality and size of PKF has created one of the strongest firms focused on the mid-market, with the breadth and depth to work with ambitious businesses that want exceptional service and access to impressive UK and worldwide networks.

"We've got talented people, an ambition to grow from this position of strength and firm financial foundations. We're proud to be at the forefront of the change in the market and, with the Competition Commission reporting back on its remedies to the FTSE 350 audit market, we will also be looking for opportunities to work with more FTSE-listed businesses than ever before."

Speaking to Accountancy Age in December 2012 after the firm announced a 12% dip in profits, Michaels said that the firm would continue to invest for the long-term, even if that impacted on short-term profits.

"People are looking to join us as they see us investing and going places. I don't think we'll have an issue retaining and winning talent."

Further consolidation expected ...

In a recent Accountancy Age poll 85% expected furtherconsolidation in the mid tier section.

UK Fee Income £ m 2012

PwC 2,461 1

Deloitte 2,098 2

KPMG 1,707 3

Ernst & Young 1,465 4

Grant Thornton 387 5

BDO 282 6

RSM Tenon 234 7

Smith Williamson 179 8

Baker Tilly 171 9

Moore Stephens 138 10

Mazars 114 11

PKF 103 12

Haines Watts 62 13

Begbies Traynor 62 14

Crown, Clarke, W 59 15

Saffrey Champness 56 16

UHY Hacker Young 49 17

Kingston Smith 41 18

MHA Macintyre Hudson 35 19

Wilkins Kennedy 30 20



Legal Sector facing the greatest challenge ...

·

The legal sector faces a number of key challenges manifest in part by the collapse of Halliwells in 2010 and Cobbetts earlier this year.

Consolidation in the sector is significant. Fentons, with offices in Manchester, Failsworth and in London, is to be acquired by Australian consolidator Slater & Gordon.

Mills & Reeve acquired George Davies. Gateley acquired part of the Halliwell business and DWF picked up a large part of Cobbetts.

Further consolidation is expected and further defaults are a possibility as banks reassess risk.

A report from The Association of Business Recovery Professionals (R3) suggests 30% of UK law firms are at risk of failing within the next twelve months, despite the signs of recovery.

A crackdown on no-win, no-fee whiplash claims has pushed hundreds of law firms to the brink of financial meltdown according to a recent report from CreditWatch.

The claims from R3 and CreditWatch may be somewhat exaggerated but significant issues are evident. The major problems can be identified as :

Overcapacity

Overcapacity, a radical expansion in the number of lawyers and legal firms in the UK from 2005 onwards has led to overcapacity in the sector, a problem only partially addressed to date.

Lack of Differentiation

Lack of differentiation amongst key firms has led to an inability to create competitive advantage with a unique identity or selling point.

The Legal Services Act

Affectionately known as ‘Tesco Law’ enables Alternative Business Structures (ABS). Legal services are easier to access, allowing non-lawyers to invest in and own legal businesses.

Legal Aid Whiplash

A crackdown on no-win, no-fee whiplash claims has pushed hundreds of law firms to the brink of financial meltdown according to a recent report in The Times.

Nearly 900 solicitors’ firms have a one-in-four chance of failing because of government reforms to personal accident claims, cuts to legal aid and the lingering effects of the financial crisis.

Nearly 500 have zero or even negative net worth according to a report from Creditwatch.

New Players

Including “bucket shops” to deal with high volume, low law, conveyancing and PPI claims as examples.

Online aggregators to acquire leads for personal injury, PPI mis selling, wills and probate.

Market Slow down

The recession clearly impacted on the housing market with a significant fall in conveyancing volumes. With some recovery in prospect, volumes are still down by 50% from peak.

Commercial Property

Similarly impacted by the slow down, deal teams have been frustrated by the lack of action.

Corporate Finance Activity

Has been much subdued over the last four years with a fall in the number of deal volumes limited.

Regulation - COLP, COFA and Jackson

Compliance Officers for Legal Practice (COLPs) and Compliance Officers for Finance and Administration (COFAs) play a key role in the SRA (Solicitors Regulatory Authority) regime.

Jackson review of civil litigation costs LSC Legal Service Commission - pressure on price models.

lawyers feel the pain of whiplash crackdown



Legal Sector ... not all doom and gloom

·

Performance improvement and cost reduction have been the dominant themes for legal firms.

The ratio of non fee earners has fallen and support services have been maximised to generate greater efficiency.

Greater use of IT and back office efficiency still offer potential saving.

Challenge of new technology marketing including internet and social media options are prevalent.

The economy is set to recover with significant expansion in domestic and commercial property markets over the next eighteen months.

Corporate finance market also set for significant recovery.

The potential to develop near shoring options amongst UK top 50 offers opportunity for job creation in the sector in Greater Manchester.

Still lots of potential for near shoring ...

8,000

8,500

9,000

9,500

10,000

10,500

11,000

2001 2003 2005 2007 2009 2011 2013

800

900

1,000

1,100

1,200

1,300

2001 2003 2005 2007 2009 2011 2013

Chart 1: Law firms in the UK Chart 2: Law firms in the NW

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

1,700,000

1,800,000

1,900,000

2008 2009 2010 2011 2012 2013

Chart 4 GM Top 20 turnover

The number of law firms in the UK and the North West increased significantly from 2007. Although the number of firms peaked in 2009, current levels remain ahead of the average in the early 2000s. Charts 1 & 2.

Turnover amongst the top legal firms in Greater Manchester continues to rise despite the set back of Halliwells in 2010. Chart 4. The number of jobs is resilient despite the challenges. Chart 3

10,000

11,000

12,000

13,000

14,000

15,000

16,000

2008 2009 2010 2011 2012

Chart 3 GM Top 20 - total employment

86% are 1 - 4 partner firms



Sector ReviewThe banking sector continues to face many challenges including regulation, new technologies and a challenging political environment.

In Manchester, the headlines have been afforded to the Co-operative bank following the reassessment of the Britannia portfolio amongst many other issues.

For RBS, the uncertainty over the future of RBS (project Rainbow) continues, following the collapse of the deal with Santander.

For the moment this can only be considered as an opportunity rather than a challenge to the banking life within the city itself.

Santander have embarked on a significant expansion programme following the switch to organic growth as they plan significant branch extension across the North West.

The Irish banks are “back in town” following their abrupt departure post 2008 with Allied Irish now back in pro.manchester membership.

Handelsbanken are embarking on an expansion programme revealing plans last year to double the size of the Manchester headquarters at Manchester Airport to over 14,000 sq ft. doubling the workforce to 120 in the process.

Bank of New York Mellon and RBS Global Banking Services, are exemplars of the MIDAS success for inward investment in the sector.

New Technology New technology, especially in relation to online banking, will place great pressure on bank retail networks.

Direct payment networks, including Google Wallet, iZettle and Ixaris will challenge existing player options such as Barclays PingIt.

Regulators The Prudential Regulation Authority (PRA) will ensure the stability of financial services firms and be part of the Bank of England. The Financial Conduct Authority (FCA) is now the City's behavioural watchdog. The Bank of England has gained direct supervision for the whole of the banking system through the Financial Policy Committee (FPC), which can instruct the two new regulators.

THE AUDITORS of the Co-op Bank have confirmed the lender will be unable to continue as a going concern if it fails to secure an emergency injection of capital.

In notes to the bank’s interim accounts, in which it announced a pre-tax loss of £709m for the first half of 2013, auditors KPMG warned of "significant doubt" over its ability to remain a going concern if it is unable to agree a £1.5bn rescue plan with its bondholders.

Parent company the Co-Operative Group is planning to launch a £1bn exchange offer later this year, which will require bondholders to contribute £500m as their holdings are converted into shares in the bank, which will list on the stock market. A further £500m is expected to be funded through the sale of the Co-op's insurance business.

However, KPMG said there are "mater ia l uncertainties" that the rescue plan will go through.

The bank suffered a £496m impairment charge on its loans, largely stemming from its takeover of Britannia Building Society in 2009. It was also hit with a £148.4m write-down on IT assets.

Banking sector faces many key challenges ...

KPMG warns of Co-op Bank’s going concern status

“Despite the demands of Basle II, Basel III, Global SIFI regulation, Cocos and collapsible bonds, we are more optimistic about the UK regulatory environment under the Mark Carney regime”.

The recent statement in Nottingham, suggesting cash restraints will be lifted once Banks meet the 7% Capital ratio is evidence of a pragmatic approach to the sector.

The mis selling of PPI insurance and swaps may becreating a penalty overhang for the banks but it opensup an opportunity for legal firms - Berg & Co andspecialist financial firm Seneca.



Private banking and wealth asset management

·

Manchester has a strong position ...

Manchester has a strong position in private banking and wealth asset management with a significant client base in the North West.

The sector faces the challenges of the Regulation and the Retail Distribution Review specifically, together with the issues created by new technology.

However, the challenges are national challenges and the city is well placed to benefit from the changing pattern of wealth asset management.

Improved client service

In the private banking and wealth management industry, the focus and activity is shifting towards improved client service and delivering real added value.

New competitors are challenging the dominance of established firms, and the impact of new regulat ions and more demanding cl ient expectations are forcing private banks and wealth managers to change the way they operate.

Current issues ...

Private banks and wealth managers are facing increased pressures on costs, tougher regulatory demands and the requirement for greater transparency.

The industry has historically underinvested in the back and middle office, and businesses are at different stages of their operational evolution.

Many continue to run out dated systems and manual processes. Technology budgets are being directed to better support client relationship managers and the front-end client experience.

Shortage of talent ...

The shortage of talent is one of the biggest barriers to future growth. Top quality people are becoming more valuable, more difficult to source and more expensive to train.

Links between performance and pay are becoming critical. New strategies, incentives and support are needed to attract and reta in qual ified professionals.

More “self” management

Clients of wealth managers are more active in managing their own financial affairs and they are paying increased attention to reputation, regulatory compliance and risk management.

New online players are emerging such as Nutmeg.

Business Risk Management

Businesses risk management systems and processes are being upgraded to provide integrated approaches to better align risk and value.

Global strategy ...

The global wealth management industry is now at the forefront of regulatory change. Cross-border standards, customer protection and transparency are anticipated to impact the front-end client experience and increase costs.

New online players are emerging such as nutmeg.

Acknowledgement PwC Wealth Management and Nutmeg.com

Major Manchester PlayersABN AMRO EquilibriumAdam Bank InvestecBarclays Wealth Mutual Financial Brewin Dolphin QuilterBrown Shipley RothschildsCoutts & Co W H IrelandCredit Suisse Xentum

No great challenges to the Manchester Outlook.



Corporate finance, private equity and venture capital

·

Manchester maintains the reputation as the largest mid tier private equity group in Europe. MPEG the Greater Manchester Private Equity Group.

Private Equity ECI PartnersEndless LLPEquistone EV Group Gresham Private Equity Infinity Isis Lloyds development Capital Maven Capital Partners NorthedgeNVMPalatine Private EquityPheonix Private EquityYFM Private Equity Zeus Capital

Venture Capital 350 Investment PartnersA2eAccelerisAquarius EquityAXM Venture CapitalB7 VentureSeneca Valco

New Players Business Growth FundNorth West Business Finance / Fund Managers

Corporate Finance Altium ClearwaterCole AssociatesConvex Capital Dow Schofield Watts DTE Corporate FinanceRickett Mitchell Watts Commercial Financ e

Specialist advisersAnsarada Bovill Corpfin

Business AngelsAtherton Clarke / VCBeer & PartnersEnvestors

Restructuring Begbies TraynorDuff & PhelpsFocus Insolvency Group

Asset Based Lending Bibby Financial Bridgebank CapitalBridging FinanceBurdalePNC Business Credit

The Business Growth Fund BGF was established in 2011 to help Britain’s growing smaller and medium sized businesses.

Backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS and Standard Chartered – BGF is an independent company with up to £2.5bn with which to make long-term equity investments.

The North West Fund Managers Six fund managers manage specific aspects of the North West fund :Venture Capital - Enterprise VenturesDevelopment Loans - FW Capital Mezzanine Finance - Enterprise VenturesBio Medical - Spark ImpactDigital & Creative - AXM Venture Capital Energy & Environmental - 350 Investment Partners

“Major challenges in the sector include a slow corporate finance market, over capacity in the mid tier private equity market, a shortage of deal flow, limited deal gearing in a restricted bank market, extended time to completion and greater legislative over view”.

Nevertheless, the spate of recent deals and fund successes in raising new monies is a tribute to risk appetite amongst investors and the prospects for the future” JKA

lots of capacity - chasing opportunity.



MIDAS - inward investment and near shoring present real opportunities ...

·

Active pipeline ...There are currently 69 FPS projects in the pipeline from a variety of sub-sectors – Legal services features heavily followed by Banking and Insurance.

The majority of enquiries range from between 20-50 jobs with a select amount going into the hundreds.

They are all at various stages and Manchester still faces competition from several other UK locations. In terms of the overall strategy for the sector, a few points to note include:

Manchester in strong position ... Manchester is in a very strong position for higher value financial services relocations, with options of combining more complex and back and middle office functions for investment banks and large insurance companies.

MIDAS is in regular and frequent dialogue with the main financial institutions both in the UK and Internationally. Part of the challenge is relocation out of London is more likely to follow earlier investment. It is more likely banks will move staff into existing hubs eg (Deutsche – Birmingham / JP Morgan – Bournemouth) as opposed to new green field sites.

Whilst maintaining contact with such firms, MIDAS also have a strong focus on key account management, targeting those FS institutions that haven’t yet explored an on shoring strategy.

High end specialized IT projectsMIDAS also targets, higher end specialized IT projects, support ing sophist icated f inancial inst i tut ions (Big Data/Analyt ics/Informatics/Telemetrics)

FinTech is also a growing sector for MIDAS“We are looking to develop and are well positioned to do so given our expertise in ICT and FS”. The types of companies in this space include Peer to Peer Lenders, Consultancies providing ICT support to banks/FS companies on technology infrastructure, mobile banking/app development etc.

Additional regulation offers opportunities ... Opportunit ies arising from new regulations particularly in the banking sector, where cost implications are likely to have a significant bearing on operational location strategy. i.e. separation of retail -business banking and Basel lll / Dodd Frank. Legal Sector Options and near shoring ...MIDAS is actively engaged in the legal sector and near shoring opportunities. Andrew Toolan, Business Development Manager adds “I have already contacted the 100 largest UK-based law firms and we have ongoing dialogue with a number of firms including some magic/silver circle firms.”

“It also includes conversations with Manchester based firms that are either headquartered or have significant operations in London but have the potential to move paralegal/back office roles”. MIDAS successes in the sector In 2012-2013 - Financial & Professional Services accounted for 15% of MIDAS success projects.

“Business Services” (which includes contact centres/outsourcing/shared services) accounted for 11%.

For the same period the success breakdown (by jobs created) for FPS was 19% and Business Services 12%

Major recent successes JobsBNY Mellon 169RBS 460Worldpay 250Aegis 710Money and Credit Group 70Browne Jacobson 60Sainsbury’s shared service centre 20580 ICT roles and 125 Finance Roles Bank of East Asia 13

Acknowledgement MIDAS team and Andrew Toolan.




·


pro manchester


Annual Review

September 2013

·
