Yes, this magazine is entering its second decade this year. And, to celebrate the fact, over the next few pages we will be looking back to see how far the region has developed and revealing the results of our tenth birthday survey of Insider readers. For starters, Peter Baber looks at how the region has fared economically.
The West Yorkshire Society of Chartered Accountants, that august body, has decided to forego its annual dinner this year. According to a spokesperson from the society, fears of a downturn meant that many formerly stalwart supporters of the event “felt it was difficult to be seen to be signing off significant entertaining expenditure”.
It seems appropriate that if there are cuts to be made, they should first go on an event that is
largely for the accountancy industry’s benefit. But could this minor incident be a bellwether of worse to come?
Iain Moffatt, newly appointed managing partner at the Leeds office of KPMG, thinks it is interesting how this level of uncertainty was evident ten years ago when a magazine called Yorkshire Business Insider first started appearing in the morning post.
“By the end of 1998,” he says, “most businesses were starting to see modest contractions, and were wondering just how long this period would last. Would it be one year or two years? They didn’t know.”
But like many other professionals in the region, he thinks the level of uncertainty, like the previous one – fairly minor, as it turned out – is just “a feature of the current market”. To dwell on it too long, he says, would undermine the achievements in Yorkshire over the past ten years.
“We have certainly mirrored the growth that has occurred across the UK, and possibly more than that, too,” he says.
Geoff Taylor, Moffatt’s counterpart at Deloitte, agrees with Moffatt’s claim that you can see just what has been achieved by looking at Leeds’s changing skyline. “I still identify Leeds as having aboveaverage potential for growth,” he says.
Neil McLean, managing partner of DLA Piper’s Leeds office, is equally upbeat, and not just about Leeds either. “Last year we generated £65m in fees from Yorkshire offices,” he says. “That’s an increase of approximately 120 per cent since 1998. Yorkshire is a flagship region in the UK.”
As for which companies have shown the way forward, the verdict is fairly unanimous: Morrisons
for one, particularly in the year that the man behind much of its success retired. “The Safeway takeover was the defining moment of the past decade,” says David Forbes, director of NM Rothschild in Leeds. “It may have taken Sir Ken seven years to do something that should have taken two and a half, but he proved he had the balls to do it, and Morrisons is now breaking into the number four position among British food retailers.”
Like many other advisers in the region, Forbes is happy to name Persimmon, too, as a true performer, despite the housebuilder’s recent troubles.
He insists, for example, the jury is still out on whether one of the decade’s other mega-mergers – Halifax with the Bank of Scotland – will go down as a success. There have been successful mergers of a bank and a building society in the past, he says, such as Barclays and the Woolwich. “But in all the successful examples it was a dominant bank taking over the building society, not the other way around.”
Many others including Moffatt, however, are prepared to give HBOS the benefit of the doubt, and put its troubles, including its botched rights issue, down to the current conditions of the market.
That is partly because of the overwhelming success of the sector in which HBOS operates. “In 1998 in our office we probably had a couple of specialists looking at the sector as part of their workload,” says Taylor. “Today our financial services team has two partners and 40 staff working for it. It’s all a natural progression from the likes of Aviva moving to York, and GE coming to Leeds. It breeds success.”
So successful that he is even a little concerned that for the first time in its history the Leeds economy may have one dominant industry, with financial services accounting for 35 per cent of GDP.
“It’s especially a worry when so much of the growth has been processing jobs,” he says. “Processing depends on volume of work, and if, in the current climate, that starts to slow down, it’s perfectly possible that some of those employers may start to say: ‘Do I need as many people?’”
It’s not all about processing, of course. One other huge growth area within the sector has been what Taylor calls the “buyout economy”.
According to the Centre for Management Buy-out Research, sponsored by Deloitte and Barclays, the value of management buyouts (MBOs) and management buy-ins (MBIs) in Yorkshire went up from about £900m in 1998 to £3.7bn in 2007.
“The size of deals and the volume of business has really dong up,” says Taylor.
That in turn has spawned a productive advisory industry. Dave Irwin, from BTG McInnesCorporateFinance, one of the industry’s successes, says: “The quality and depth of professional services here rivals any centre outside London, which is reflected by the fact that most deals involving Yorkshire businesses are managed, advised and funded here.”
But is the march, particularly of private equity-backed MBOs, necessarily such a good thing? Taylor thinks it is. “Ten years ago when companies were planning succession many were still only looking from within the family,” he says. “Thanks to private equity, that has changed, and that’s good for the economy – the biggest sector for MBOs has been in manufacturing. This is management striking out and saying they can do better than previous family owners.”
Forbes isn’t so sure, saying private equity companies necessarily bring in a new level of management – management that, thanks to the cyclical trends of the private equity industry, isn’t always based in Yorkshire. He highlights Sir Graham Hall’s soonerthan- expected departure as chairman of a Bridgepoint-owned Leeds Bradford Airport. Hall, as thoroughbred a Yorkshire businessman as could be, refered to differences in management styles when he stepped down earlier this year.
The move of control of plcs away from Yorkshire – Asda being taken over by Wal- Mart is an obvious example – hasn’t gone un-noticed by Ron McMillan, managing partner ofPricewaterhouseCoopers in the north. “The growth in AIM companies bodes well for main market listings in due course,” he says. “But the number of companies in the region with a listing on the main market is shrinking year-on-year and I expect this to continue.”
But he and Taylor agree it is fortuitous that while the management of the company may have moved outside, the main base of employment has not. So what of the future? “We need to look at where we invest,” says Moffatt. “It’s about finding the right businesses and creating an environment that encourages investment.”
That is what Yorkshire Science, a Yorkshire Forward-backed organisation that is tasked with promoting innovation in the region, is hoping to do. Reza Zadeh, who combines running it with being Yorkshire Forward’s European director of innovation, says it’s too early to say what effect the organisation is having, partly because every other regional development agency is also tasked with promoting innovation. But he is pleased to see surveys that indicate that between 1996 and 2007 on a league table of how innovative European regions are, Yorkshire rose from 99 to 75.
Hardly massive, but a start. He adds that there has been much more collaboration between business and the universities over the past decade. “The ‘blue sky’ research of the 1960s and 1970s has gone,” he says. “It’s more about what we are going to do with the research.”
He also thinks that if we want to see how innovation is taking shape, we need to widen our focus in terms of industry sectors and the size of the business. A good example, he says, is the GHD hair straightener – the company is also one of the fastest growing in the region. “It’s not splitting the atom,” he says, “but that’s a product that will make a real contribution.”
On a region-wide level, companies don’t seem to be turning off the investment taps. The latest regional survey by Yorkshire Forward indicates, that, while confidence has taken a knock, businesses still expect to invest more in product development and buildings in the next year. And 55 per cent expect staff numbers to remain the same.
They aren’t cutting back in other areas either. The accountants may not be holding their dinner, but Daniel Gill, owner of Dine Catering in Leeds, says he is having a near record year. Growing his catering company in the past decade has sometimes been hard, he says, partly because of “naïve” assumptions about how quickly Yorkshire businesses would be prepared to fork out £85 a head for a do. But clearly many of them do. “People will talk up a recession,” he says, “We’re not seeing one.”
(All survey results from Insider readers in August 2008)
