Manchester & North-West EnglandDOING BUSINESS INFINANCIAL TIMES SPECIAL REPORT | Thursday March 12 2009

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Self­belief helps regionpunch above its weight

Manchester, to para-phrase John Lewis,the UK departmentstore group, is never

knowingly undersold. From theswagger of its football teams,United, the European and WorldClub champions and City, theworld’s richest club, to that ofbands such as Oasis and TheStone Roses, there are few on theplanet that have not heard of thiscity of 3m in northern England.

Manchester and its hinterlandhave punched above their weightsince they burst on to the scenein the 18th century as the cradleof the industrial revolution. On aplain, at the foot of the Penninehills it was blessed with few nat-ural advantages. Cut off from thesea, its business communityeventually risked much to builda canal to bring the water – andglobalisation – to it.

That same iron self-beliefturned a failed Olympic Gamesbid into a phenomenally success-ful Commonwealth Games in2002. It has something else incommon with John Lewis, whichshares profits with employees – aconviction that all are born equal.

The ornate lobby of the impos-ing town hall holds the busts offamous scientists, engineers andrabble-rousing free trade cam-paigners rather than the usualcollection of gentry.

Nearby is a statue of a US pres-ident – Abraham Lincoln – but itis there to celebrate not him but

the tens of thousands of millworkers who suffered hungerduring the American civil war tosupport a boycott of the slave-picked cotton of the south.

The historian AJP Taylor said:“Manchester is the only Englishcity which can look London inthe face, not merely as a regionalcapital but as a rival version ofhow men should live in a com-munity.”

Remade since an IRA bombwrecked the city centre in 1996,the fierce rivalry with London,Liverpool and Leeds that spurredit on is increasingly forgotten asthe city feels more at ease withitself.

Graeme Whittaker, managingpartner of Grant Thornton, theaccountants, in the north, hasjust returned from a year work-ing in the capital. “I find Man-chester more cosmopolitan thanLondon,” he says. “With the

mayor there now it is all aboutbeing a Londoner. Here peoplejust take you as you are. It is anincredibly vibrant city.”

As in London, the streets ofManchester may be paved withgold. Colin Sinclair, chief execu-tive of Midas, the inward invest-ment agency, is typical of thosenow shaping its future. He beganhis career running nightclubs indisused warehouses. TomBloxham, the founder of UrbanSplash, which made city centreliving hip again in Britain’s pro-vincial cities, began selling post-ers in the city as a student. CarolAinscow, a property developer,helped create its famous night-life, developing a gay area alongits disused canals.

Sir Howard Bernstein, Man-chester City Council chief execu-tive, began his career as a clerk.Sir Richard Leese, the councilleader, was a teacher.

John Whittaker, the founder ofPeel Holdings, which has had ahuge impact as owner of the ShipCanal and the Trafford Centreshopping mall, and is developingMediaCityUK, a new home forthe BBC, grew up in the deprivedex-cotton belt of Lancashire.

Yet south of Manchester,Cheshire is home to some of thewealthiest enclaves in the coun-try, though you might not noticein some towns. Martin Kirby,north-west managing director ofTenon, an accountancy firm,says: “There are a lot of greatentrepreneurs here. But whenyou have earned it you don’tflaunt it. There’s a north-southdivide about that.”

Mr Sinclair says that while therecession had slowed decisionsby some companies there is stillinterest in investing. “We havegot a full pipeline,” he says.Greater Manchester alreadyhosts 1,200 foreign companies,accounting for half of gross valueadded, he says.

Bank of New York Mellon,which moved to Manchester in2005, has 1,000 employees there,almost all hired locally andtrained inhouse. Jackie Williams,the Londoner who relocated tomanage the move, says thatalthough there was some initialscepticism about the move, it hasshaved a third off costs. “We aredelighted we did it. I did notexpect to to get such good qual-ity people,” she says.

Manchester is also improvingits highbrow cultural offering. Itis already home to the HalléOrchestra and Salford’s Lowrycentre, while the ManchesterInternational Festival is growing

Remade since the IRAbomb 13 years ago,Manchester feels moreat ease with itself, saysAndrew Bounds

Inside this issueProperty The market haswithstood the downturn well,writes Daniel Thomas,partly because of itsattraction to a relativelydiverse set of occupiersPage 2

Professional servicesAfter rapid growth inrecent years, somefirms in thesector arefeeling theheat,writesAndrewBoundsPage 2

Transport The rejection ina referendum of a package ofreforms leaves the challenges offunding for public transport andtackling congestion unresolved,writes Robert Wright Page 3

VisitoreconomyCulturaldiversityis a bigpart ofManches­ter’s appeal,writesWilliamHallPage 4

Still waters run deep: the Lowry footbridge and Manchester Ship Canal AlamyContinued on Page 2

2 ★ FINANCIAL TIMES THURSDAY MARCH 12 2009

Doing Business in Manchester & North­West England

Region punchesabove its weight

fast. The council hopes topersuade the Royal OperaHouse to establish a north-ern base in the city.

However, weaknessesremain. Mark Blakemore,Manchester office managingpartner of Baker Tilly, says:“We have lots of entrepre-neurs but very few plcs thatare headquartered here.”That makes the region vul-nerable during the recessionas companies cut costs. Italso makes it hard to attracttop earners.

The north-west’s produc-tivity, employment levelsand educational attainmentare all below the nationalaverage. While tens of thou-sands now live in Manches-ter city centre, a buildingbinge means prices in someareas are among the biggestfallers in the country. Rede-velopment projects outsidethe centre, in Rochdale andStockport, have been shelvedor cut back as buildersstruggle to raise finance.

East Manchester, whichlost almost half its jobsbetween 1975-85, is provinghard to turn round. It is stillone of the most deprivedareas in the UK, in sight ofthe glittering skyscrapers ofthe new city centre.

Hope now lies with theAbu Dhabi royal family,which bought ManchesterCity last year. City play atEastlands, and the councilbelieves the billionaires ofthe United Arab Emirateshave big plans for the area.

“They have made it clearthey were not just investingin Manchester City butthe city of Manchester,” says

Sir Howard, a City fan.The double act of Sir

Howard and Sir Richard –and Graham Stringer beforehim – is given much creditfor fostering the city’s rein-vention after the 1980s man-ufacturing slump and theIRA bomb. “They are veryentrepreneurial,” says onebusiness figure.

The city itself is staunchlyLabour but never suc-cumbed to the anti-businessstance of many left-wingurban councils in the 1980s.It has also worked effec-tively with the other ninecouncils that make upGreater Manchester – Bol-ton, Bury, Oldham, Roch-dale, Salford, Stockport,Thameside, Trafford andWigan, some of which arerun by the Conservatives orthe Liberal Democrats.

Rare for the UK, the 10take some executive deci-sions as a group and haveagreed to abide by voteswhere at least seven agree.

However, they did splitover plans to introduce acongestion charge. In returnfor the levy, the first bigscheme in the UK, the gov-ernment would have fundedbig public transportimprovements. To break thedeadlock, a referendum washeld, which rejected the plancomprehensively.

Despite the fierce cam-paign, council leaders insistit is business as usual. Thatmeans working together totry to achieve another first –to win greater powers fromWhitehall in the Aprilbudget, that would put it ontrack to emulate London’spolitical, if not economic,clout.

Continued from Page 1

Plenty of changes in store

When the Co-operativeInsurance Services’headquarters building waserected in 1962 it was theUK’s tallest office blockoutside London, a symbol ofManchester’s claim to rivalthe capital as a centre ofcommerce.

The recent property boomhas left the 387ft CIS Towerdwarfed by skyscrapersthroughout the UK’sprovincial cities, just as thecountry’s largest mutualbusiness itself becameovershadowed.

Peter Marks, chiefexecutive of theCo-operative Group, recallsthat Co-operative food shopshad a market share of 25per cent when he joined in1967, almost what themighty Tesco now enjoys.The Co-op share inFebruary this year was 5.8

per cent. “We were the firstinto supermarket retailingbut because we werefragmented and inefficientwe allowed the bigsupermarkets to come in.”

Since the firstco-operative was founded inRochdale, GreaterManchester, in 1844,hundreds had sprung up, allwith local managers andways of doing things. MrMarks says that while thedemocratic roots of themovement remained vital,its decisionmakers realisedin the 21st century thatcentralisation and efficiencywere the keys to success.

“What is the difference toa customer between a co-opin Leeds and London?” heasks.

Even the 32-strong board,which includes many localelected representatives, isset to be slimmed down.

Mr Marks says the bigchange came in 2007 whenthe Co-operative Groupmerged with the smallerUnited Co-operatives, strongin Yorkshire and thenorth-west.

It saved the movement£70m in running costs and

also gave it the financialstrength to raise £1.6bn tobuy Somerfield, the sixthbiggest retailer. Thecombined group will havealmost 10 per cent of thefood retail market, close toMorrisons, the fourthbiggest chain.

Mr Marks, who ranUnited, says: “There isnothing wrong with themodel. People are searchingfor an alternative tocapitalism. Here we are.”

Through Co-operativeFinancial Services, thegroup is also combiningwith the Britannia BuildingSociety, the second-largestmutual lender, which willtransform it into amortgage powerhouse.

It is now investingmillions refitting 700 storesand reinforcing a consistentidentity. It also hopes tocross-sell more products toits 3m members. Thebusiness spans financialservices, pharmacies, travelagencies, funeral parlours,legal services and farms.

The more members spend,the greater share of theprofits they receive. It iswhat Mr Marks calls “profitwith a purpose”.

Turnover rose in the yearto July 26 by a third from£2.99bn to £4.02bn. Pre-taxprofits increased from£84.8m to £102.9m andmembers received £94.7m individends. Its financialservices business, includinga bank that refuses toinvest in arms companiesand other “unethical”businesses, remains themost profitable arm. It isthe only retail bank inEngland headquarteredoutside London and its headoffice employs 4,000 people,

making the Co-op a hugecontributor to Manchester’seconomy.

In keeping with themovement’s resurgence,even the tower has had amakeover. Its mosaic tileswere falling off so in 2005 itwas clad with more than7,000 solar panels to becomethe UK’s largest solar powerstation. It generates enoughenergy each year to brew90m cups of tea.

This year, after months ofdeliberation, the groupannounced plans to build anew headquarters inManchester rather thanleave the city – welcomenews as construction grindsto a halt elsewhere in thearea.

“It is great to be in thenorth-west because this iswhere our history began,”says Mr Marks. “It needs tobe a building that is iconicand sends a message aboutwho we are and what weare. This is an exciting timefor the Co-op.”

PROFILECO­OPERATIVE GROUP

Andrew Bounds onthe movement thatpractises ‘profitwith a purpose’

Dealmaking slows but a wealth of opportunities remain

Manchester’s community of pro-fessional advisers has growneven faster than the rest of itseconomy in the past 15 years.There was a time when manybusiness owners would cross thePennines to Leeds for funding oradvice, where big building socie-ties had spawned a large sector.Not any more.

“We went through the lastrecession [1990-2] in awe of Leedsand Bradford who came throughit quite strong,” says MichaelShaw, managing partner of Man-chester-based Cobbetts, the lawfirm. “With typical Mancunianpragmatism we decided to build a

financial services sector here.”There has been wealth in the

area since the 18th century cot-ton barons made their first for-tunes and built their mansions inleafy Cheshire to the south. NMRothschild, the merchant bank,began its life in the city. WHIreland, the stockbroker that hasjust merged with Blue Oar,remains headquartered there andBrewin Dolphin has long had abig presence.

Andrew Houston, regionaldirector of Barclays Wealth, says:“It isn’t just United and City thathold wealth in Manchester – thecity and its catchment areasinclude some of the most affluentcommunities in the country.”

Frenetic dealmaking over thepast few years has led to growthand attracted top-quality staffhappy to find challenging workoutside the London hothouse.

Simon Woolley, Manchester

office managing partner at DLAPiper, the law firm, cites the saleof the Littlewoods departmentstore and mail order group foralmost £1bn in 2002 as a turningpoint. “That broke the glass ceil-ing. There’s not much we can’tdo here now.”

But the market slowed in 2008,according to Pro.Manchester,which represents the financialand professional services sector.There were 154 transactions,worth more than £6bn in total – athird down on 2007. This placedthe city second only to London.

A cluster of private equityfirms such as Isis, Midas, ZeusPrivate Equity and Aquarius con-tinue to look for opportunities toinvest, drawing on wealthy entre-preneurs as well as institutions.Investment banks such as Altiumand NM Rothschild are on handto advise.

Ray Stenton, co-director of

LDC, the private equity arm ofLloyds Banking Group, for thenorth-west, points out the marketis alive for smaller deals. “Lastyear the north-west was the onlyregion outside the south-east toshow a rise in the number of

deals in the £5m to £50m range –typically involving small andmedium-sized companies.

“Bank funding for this size ofdeal is easier to arrange than it isfor larger leveraged buy-outs, sowe’re confident this trend willcontinue,” says Mr Stenton

Graeme Whittaker, managingpartner of Grant Thornton in thenorth, says there is a lot of “preg-nant demand” but the economyhas declined so fast that peopleare confused as to how to valuebusinesses. “I would not adviseanyone to sell unless they haveto,” he says.

Paul Lupton, Deloitte’s head ofcorporate finance for the north,says his team is busier than ever.“The deals are smaller, and willtake more work to get over thefinishing line, but they are outthere.”

Insolvency practitioners canhardly recruit fast enough tomeet demand. Begbies Traynor,the UK’s largest independentinsolvency practitioner, is basedin Manchester and has found itstraightforward to raise freshcash from investors.

Simon Allport, of Ernst &Young, notes that the liquidation

of big national businesses suchas Zavvi, the DVD and musicretailer, has been handled fromManchester. Mr Allport has alsobeen dealing with London Scot-tish Bank, a Manchester-basedsub-prime lender, which was thefirst UK bank to be allowed tofail during the credit crunch.

Architects have also grownfast. BDP’s Manchester studiowas one of three offices world-wide shortlisted for an environ-mental award at Mipim, the prop-erty industry gathering inCannes.

Other areas of professionalservices are feeling the heat.There have been redundanciesamong those reliant on propertyand corporate finance.

Cobbetts, Grant Thornton andseveral other firms have laid offstaff. Royal Bank of Scotland,which employs more than 3,000in the region, is also likely to

make redundancies. TroubledAllied Irish Bank and AIG havebig operations in the region too.

Halliwells, the law firm thathas posted a decade of double-digit growth in a bid to become anational force, has also had itsproblems. The firm, which has£25m of debt, has made around 40redundancies in recent monthsas it copes with the recession.

There are limits to Manches-ter’s ambition. Tenon, a fast-growing professional servicesfirm, has set up a £20m fund toinvest in distressed businesses,to be run out of Manchester.While several local entrepreneursare chipping in, cash was raisednationally.

“I did about 35 presentations.Around 30 were in Londonbecause that is where the moneyis,” says Bolton-based MatthewBowker, who is running theTenon Capital Management fund.

PROFESSIONAL SERVICES

Andrew Bounds on asector where someare feeling the heat

There have beenredundancies amongthe firms that relyon property andcorporate finance

Diverse clientbase lifts hopesfor soft landing

Mancunian devel-opers were asquick to buildnew offices dur-

ing the last years of theproperty boom as any in theUK but so far the breadth ofoccupier demand has left thecity office market compara-tively sound.

Last year saw near recordoffices take-up of 1.1m sq ft,from 932,700 sq ft in 2007according to Knight Frank,an impressive performancegiven the onset of the eco-nomic recession. The periodalso saw an increase inprime rents of 18 per cent.

However, this year wouldappear more difficult. Evenwith last year’s occupancylevel, the availability of“ready-to-occupy” space inManchester rose by 37 percent during 2008 to stand at1.8m sq ft, according to CBRichard Ellis.

And, while London officedemand is more of astraightforward function ofthe health of the financial

system, there will inevitablybe ripple effects in citiessuch as Manchester as busi-nesses consolidate andreduce headcount.

So far, however, the mar-ket has withstood the down-turn well, partly because ofits attraction to a relativelydiverse set of occupiers,from law and accountancyfirms to the public sector.

Michael Hawkins, partnerof consultancy WHR, saysthere is more than 150,000 sqft of office space in solici-tor’s hands at the moment,

showing that demand is stillstrong. “Manchester hasshown deep resilience givena broad economy that isunusual compared withother cities,” he adds.

Last year benefited fromthe maturing of Manches-ter’s largest office scheme,Allied London’s Spinning-fields development, whichcompleted a number of largelettings including Bank of

New York Mellon, PinsentMasons, Baker Tilly, GeneralMedical Council and BDOStoy Hayward.

The latter few, in particu-lar, show why many agentsare hopeful of a softer land-ing during the propertydownturn, given the relativeresilience of the professionalservices sector.

The largest requirementsfor new offices are from lawfirms Hill Dickinson andBeachcroft. There are alsopotential moves by account-ancy firms such as PwC,PKF and Watson Wyatt.

Meanwhile, the othermajor office relocation – theshort-term move of Manches-ter City Council while itsnew headquarters is built –shows the sort of reliancethat the office market has onlocal and central govern-ment requirements.

The council has nowdecided on a move to Spin-ningfields, but agents arehopeful that central govern-ment will still move depart-ments over the next fewyears in what is seen as thetail end of the Michael Lyonsreview into public sectoroffice occupation.

Last year, for example,many of the other key let-tings were public sector orcharity driven: Argent’s 3

Piccadilly Place letting tothe Insolvency Service; TheExchange to social carecharity Turning Point andthe Parliamentary and Men-tal Health Ombudsman; andThe Hive, a joint venturebetween the council andArgent, to the Arts Council.

To this should be addedthe move by the BBC to PeelHoldings and Central SalfordURC’s MediaCityUK, whichis hoped to bring furtherbenefits as associated com-panies move nearer theirmeal ticket.

Rents are predicted tostand firm for these reasons,and because they never sawthe same sort of inflation assome areas. Office rents inthe city centre have been rel-atively static at £28.50 per sq

ft, although rents of morethan £30 per sq ft wereachieved on smaller lettings.

But rents are not expectedto grow as demand inevita-bly slows. Expansion is nolonger the main driver oftake-up, and instead leaseexpiries and breaks arelikely to become moreimportant. Companies canstrike very attractive dealson rents and fit-out costs.

Manchester office agentsalready point to increasinglygenerous incentives beingoffered by competing land-lords in order to secureincome during the recession.

John Ogden, a director ofCBRE, says: “In 2009, weexpect rents to remainbetween £25-£30 per sq ft butexpect there to be significant

pressure on incentives.”The central Manchester

market has about 500,000 sqft of vacant new-build officesand the same again is duefor completion or beingbuilt. There are reports thatCarlyle Group and OrchardStreet are offering severalyears rent-free on 15-yearleases at Piccadilly Placeand the Belvedere officedevelopments. Ask is stilllooking for lettings at the180,000 sq ft One First Street.

The next few years will bemore challenging, as wit-nessed already by a slow-down in pre-letting activity.Newer developments maystruggle to be let, but thegood news is that the longerterm picture appears posi-tive given the stop on build-

ing work. Agents even pre-dict a shortage of new officesfrom 2011.

Mike Ingall, chief execu-tive of Allied London, sees apositive medium-term pic-ture for the office market –particularly given leaseexpiries in 2010 and 2011 –but admits that he will notdevelop any new buildingsuntil the economy stabilises.

Development has fallensharply, with nine newstarts recorded by the newDrivers Jonas cranes survey,compared with 19 develop-ments in 2008 and 32 in 2007.

The public sector, as part-ner or occupier, is involvedin five of these, again reflect-ing a key strength of the citycentre in its public sectordemand.

Sir Howard Bernstein,chief executive of Manches-ter council, says it willredouble its efforts to workwith the private sector oncreating places for people tolive, work and invest.

“The economic downturnis affecting our partnershipsand employers, especiallythe property sector and it ismore important than ever towork together . . . so we areprepared for when we comeout of the downturn to makethe most of the opportuni-ties.

“It is at these times thatreal leadership is required,demonstrating that, whilethe vision we have for ourcity may now be a littledelayed in its execution, weare still on course.”

PROPERTY

So far the markethas withstood thedownturn well, saysDaniel Thomas

Letting things settle: Mike Ingall of Allied London, developer of Spinningfields, is waiting for the economy to stabilise

Agents point togenerous incentivesbeing offered byrival landlords tosecure income

ContributorsAndrew BoundsNorthern Correspondent

Daniel ThomasProperty Correspondent

Robert WrightTransport Correspondent

William HallFT contributor

Andrew BaxterCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details,contact: Jim Swarbrick on:Phone +44 (0)161 834 9381Fax +44 (0)161 832 9248E­mail jim.swarbrick@ft.comor your usual FinancialTimes representative

Sunny side up: the CIS Tower

FINANCIAL TIMES THURSDAY MARCH 12 2009 ★ 3

Doing Business in Manchester & North­West England

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New model facestest in recession

The Manchester region’seconomy has shiftedfrom one based on manu-facturing to services dur-

ing a sometimes painful 20-yeartransformation. This new modelis about to be tested as recessionbites.

Law firms and banks arealready shedding jobs. The YangSing Oriental, a luxury hotel inChinatown that sought to cash inon business high-rollers, shutthis month just eight monthsafter opening.

The downturn comes just asthe economy is under the micro-scope as a series of seven reportsforming the Manchester Inde-pendent Economic Review is pre-pared.

“Manchester city region hasnegotiated the change to aknowledge-rich economy broadlysuccessfully,” says a recent MIERreport by Manchester Universityon skills. However, it has yet toreach “tipping point” where itadds ever-more high-skilled jobs,it says.

While it outperforms many pro-vincial cities, the gap between itand London and Bristol is aswide as ever. Closing that gaphas been the holy grail ofregional policymakers.

The city region generates halfthe north-west’s total gross valueadded, a measure of wealth crea-tion, and with a GVA output ofan estimated £54bn in 2007 it isthe largest city-regional economyoutside London.

GVA has remained at around12 to 13 per cent lower than theUK average over the past decade– equivalent to an estimated out-put gap of £13bn per year. How-ever, when London is excluded itmeasures up fairly well againstthe UK average.

Growth areas include aviation,creative, media and information

technology, professional services,life sciences and advanced manu-facturing. Yet 15 per cent of theworkforce has no qualificationsand unemployment, now morethan 6 per cent, is rising faster inthe north-west than anywhereelse in the county.

“A lot of the new jobs were justfinancial services factory jobs,”says one business figure. Theyare often first to go when bankscut back.

A new skills commission,chaired by Mike Blackburn, headof BT in the region, is starting totrack where Mancunians go aftergraduation. “The question is howcan we attract people fromOxford and from Harvard andInsead?” he asks.

Steven Broomhead, chief exec-utive of the North-West Regional

Development Agency, says itstask now is to support businessesthrough the recession. “We talkof R for recovery rather thanrecession,” he says.

For example, it is to fund train-ing for some of the more than10,000 car workers in the regionwhile they are on short weeksawaiting an upturn in the mar-ket.

There are bright spots. Mac-clesfield, home of pharmaceuticalcompany Astra Zeneca, is amongareas of South Manchester andCheshire on a par with the south-east but many research-intensiveand headquarters operationshave been heading south foryears. There is just one FTSE 100company, United Utilities, head-quartered in the region.

The public sector should pro-vide a cushion during recession,says Prof David Leece, of Man-chester Metropolitan University.“What was seen as a weaknesscould now be a strength,” he

says, with 300,000 public sectorjobs accounting for almost halfthe workforce.

The region has a strong healthcluster, attracting bodies such asthe British Medical Associationand the National Institute forHealth and Clinical Excellence.

Companies depending on gov-ernment contracts are alsoexpected to help fight throughrecession. BAE Systems has a bigregional presence, from airresearch at Warton in Lancashireto submarines at Barrow in Cum-bria, and is cranking up ammuni-tion production at RadwayGreen.

Dave Allanson, north-westdirector at Lloyds TSB CorporateMarkets, points to privately-heldgroups doing well even in toughsectors such as retail, citing Mat-alan and JD Sports.

The BBC’s move to the £500mMediaCityUK complex at SalfordQuays in 2011 is also likely toenergise the region. Bryan Gray,chairman of Peel Media, thesite’s developer, says the top-class facilities and BBC brandwill pull in companies fromaround the world.

The University of Salford inJanuary became the secondanchor tenant at MediaCityUK.Start-ups such as 2ergo, a mobiletelephone applications company,are already moving in to thecomplex.

The universities, which with100,000 students form the UK’sbiggest higher education cluster,are also aiming to expand theirreach and power a stalled prop-erty market. Manchester Metro-politan is seeking to build a £70mcampus in Hulme, a deprivedinner city area.

John Brooks, vice-chancellor,says it is focusing on producing“work-ready” graduates. Applica-tions have increased 10 per centrecently with an emphasis onprofessional and vocationalcourses, he says.

Angie Robinson, chief execu-tive of the Manchester chamberof commerce, says the region’sentrepreneurial spirit will pull itthrough: “We are at war but weknow how to fight.”

ECONOMY

Andrew Bounds onthe constant quest toclose the gap betweenthe region and London

The BBC’s move tothe MediaCityUKcomplex at SalfordQuays is also likely toenergise the region

Failure of reform packageleaves challenges to tackle

Greater Manchester’s trans-port system looks very dif-ferent depending on theobserver’s vantage point.From the other side of thePennines, the picture looksrosy. Business leaders inLeeds and Sheffield can onlyenvy Manchester’s airport,the UK’s busiest outsidesouth-east England, its threefast trains an hour to Lon-don and its growing tramnetwork.

From within Manchester,however, the view isobscured by the failure in areferendum last year of aseries of transport reformsthat were intended to reducecongestion and raise fundsfor substantial furtherimprovements.

The plans – known as thetransport innovation fund(Tif) bid – were controversialbecause they called for theintroduction of a congestion-charging scheme withingreater Manchester toreduce congestion and fundsome of the improvements.The proposals were resound-ingly rejected in all 10 bor-oughs polled.

The area’s business com-munity divided over the pro-posals. Some, such as PeelHoldings, owner of the Man-chester Ship Canal, wereconcerned the congestioncharge would discourageinvestment in the chargingarea or push logistics busi-nesses elsewhere. Others,such as Town Centre Securi-ties, a property developer,welcomed the potential forthe package of measures toregenerate inner-city areas.

It is unclear how the citywill now tackle the chal-lenges of funding publictransport developments andtackling congestion withoutthe Tif package. Sir RichardLease, leader of ManchesterCity Council, said after theresult that there would be a“period of reflection” todecide on the way forward.

Mark Threapleton, manag-ing director of Stagecoach

Manchester, the region’s sec-ond-biggest bus operator andthe operator of the Metrolinktram system, says the Tif bidwould have provided oppor-tunities to improve manyaspects of Manchester’stransport.

“It would have allowed thecompletion of the Metrolinknetwork, together withinvestment in buses andinvestment in rail toincrease the capacity of therail network,” says MrThreapleton, who is alsochairman of the greaterManchester bus operators’association.

The priority now is to dealwith long-standing problemssuch as the poor co-ordina-tion between different bor-oughs that often preventstransport services fromworking as smoothly andreliably as they could.

“It’s an issue that needs tobe resolved,” Mr Threaple-ton says. “Bus services don’trecognise district bounda-ries.”

Whatever the confusionabout the future direction ofits transport policy, itremains easy to understandwhy other English regionsare jealous of the quality ofManchester’s current trans-

port provision. Since Decem-ber 2008, Manchester andBirmingham have both beenlinked three times an hourin each direction with Lon-don, thanks to the £9bnupgrade of the London-Glas-gow west coast main line.

Manchester’s best journeytimes to London are nowunder two hours. It isEurope’s highest-frequencylong-distance service and israpidly eroding air’s market

share on the route. In 2004,before improvements on theroute started, rail had only30 per cent of the split withair on journeys to London,against 70 per cent now andthe 85 per cent VirginTrains, main operator on theroute, thinks is achievable.

There are concerns thatBritish Airways is no longerserving as many long-dis-tance destinations as beforedirectly from Manchester,

but the airport remains amajor gateway for the wholenorth of England. Some 35mpassengers travel annuallyfrom the area around Leeds-Bradford Airport, the othermajor gateway in northernEngland, to fly from Man-chester.

In freight transport, Man-chester’s heavy industryenjoys the unique advantagefor an inland British city ofaccess to sea-going ships viathe Manchester Ship Canal.Peel Holdings also hopes toencourage container traffic –normally manufactured orsemi-finished goods – on tothe waterway.

The city was also only thesecond in the UK – afterNewcastle – to convert someof its ageing, dilapidatedrailway lines into light railroutes, with trams runningonto streets in the city cen-tre. The system has beenhighly successful since open-ing in 1992. Planned exten-sions into Rochdale and Old-ham town centres have beenscrapped because of the Tifbid’s failure. But work onconverting old railway linesto Rochdale and Droylsdeninto tram routes begins thisyear.

There remain many in thecity who believe the Tifmoney would have done lit-tle to accelerate theseimprovements. GrahamStringer, the MP for Man-chester Blackley, and severalother local MPs said beforethe vote that the benefits ofthe investments were sothinly spread they wouldmake no real difference.They also argued that thearea’s road congestion wasreducing without congestioncharging.

Others who regret thebid’s failure accept that theywill now have to return toworking at more mundane,lower-cost solutions, such asarguing for better bus lanesand improved park-and-ridefacilities.

“We feel that some of theinitiatives are capable ofbeing brought forward evenin a non Tif-funded environ-ment,” Mr Threapleton says.“Yes, it will require funds.But it doesn’t necessarilyneed the same level of fund-ing that was envisaged inthe Tif.”

TRANSPORT

Robert Wright onthe outstandingissues of fundingand congestion

Best journey timesto London by railare under twohours, eroding air’smarket share

Ticket to ride: the tram system has been a big success

4 ★ FINANCIAL TIMES THURSDAY MARCH 12 2009

Doing Business in Manchester & North­West England

Radiating optimism after closure blow

There was uproar in thenorth-west’s scientificcommunity when the UKgovernment announced, inMarch 2000, that it wasgoing to build its £300mthird-generation Diamondsynchrotron radiationsource (SRS) machine at theRutherford AppletonLaboratory in Oxfordshire,rather than on the site ofits existing machine atDaresbury in Cheshire.

Daresbury’s SRS machine,which produced beams oflight so intense that they

could reveal the structureof atoms and molecules,was the first of its kind inthe world. During nearly 30years it had pioneeredcutting-edge research inphysics, chemistry andmaterial sciences which hadled to scientificbreakthroughs in areassuch as cleaner fuel, saferaircraft and new medicines.

It was the north-west’shighest-profile scienceresearch project, and itsclosure, completed inAugust last year,highlighted the growingscientific research gapbetween the north ofEngland and the south-east.

Nine years after theclosure announcement,Daresbury’s scientific andtechnical staff have beencut by nearly a third, but itis growing once again on

the back of a much morevaried diet of scientificresearch. It has beendesignated as one of thegovernment’s two newinternational science andinnovation campuses (theother is a much largerfacility at Harwell inOxfordshire).

The Daresbury campus isa partnership between theNorthwest RegionalDevelopment Agency(NWDA), the local council,and the universities ofManchester, Liverpool andLancaster. It aims to be afocal point for scientific,academic and businesscollaboration, helping theUK to be more successful incommercialising itsworld-class scientificresearch.

The famous DaresburyLaboratory, and its 368

staff, have been joined by anew Cockroft Institute,which includes the NationalCentre for AcceleratorScience, and two newScience and TechnologyGateway Centres forcomputational science andengineering and detectorsystems.

The third part of the newDaresbury Science andInnovation Campus is theDaresbury InnovationCentre, which was openedin April 2005. Some 85high-technology companieshave already set upbusiness in the innovationcentre and their revenuesare growing at an averageof more than 60 per cent ayear, according to theNWDA.

BioEden, a biotechcompany founded by DavidJames, a Chester dentist, is

typical of the companiesthat have moved intoDaresbury’s InnovationCentre.

It is pioneering thecollection and storage ofstem cells formed fromchildren’s milk teeth onbehalf of families that want

to have access at a laterstage in life to a “repairkit” for future ailments.

BioEden, which employsclose to a dozen staff andhas a sister operation in theUS, was attracted to

Daresbury because of itslaboratory facilities andaccess to a network ofscientific support such asJohn Hunt, head ofLiverpool Universityhospital’s human tissueengineering laboratory.Another big plus isDaresbury’scommunications links – it isless than 20 minutes fromManchester airport andunder two hours fromLondon by train.

After less than four yearsthe Daresbury InnovationCentre is nearly full and a£25m plan to more thandouble the size of thefacilities with a secondinnovation centre wasannounced last year. It isexpected to go aheaddespite the recentwithdrawal of St Modwen,its private sector partner.

Region firedup by nuclearresurgence

Energy is one of the north-west’s big growth industries.It contributes around £5bnto the local economy,employs 50,000 people, and isset to play a dominant rolein the renaissance of theUK’s nuclear power sector.

The vast majority of theUK’s nuclear research capa-bility is located in the north-west and Manchester, in par-ticular. John Dalton, whopresented his atomic theoryto the Manchester Literaryand Philosophical Societyjust over 200 years ago, wasone of the founding fathersof the Manchester MechanicsInstitute (now part of Man-chester University). JamesJoule, one of his students,developed the first laws ofthermodynamics that led toan international unit ofenergy, the joule, beingnamed after him.

Manchester’s leadership innuclear research took off in1907, when New Zealand’sErnest Rutherford wasappointed professor of phys-ics at Manchester Univer-sity. He discovered how tosplit the atom, and hisassistant, Hans Geiger,invented the first “geigercounter” – which measuredradioactivity.

The recently establishedDalton Nuclear Institute andthe Joule Centre for EnergyResearch & Developmentunderscore Manchester’sdetermination to strengthenits traditional pre-eminencein all aspects of nuclearresearch and wider energyissues.

Admittedly, there is a biggap to fill. In the 1970s theUK was spending about£500m a year on nuclearresearch and development,and this has fallen away tonearly nothing as nuclearpower fell out of fashion,says Paul Howarth, the Dal-ton Institute’s executivedirector.

Now government money isflowing back into nuclearresearch and Manchester isthe primary beneficiary. Akey driver behind theincreased investment is thebelated awareness that thenorth-west needs to retainand modernise its nuclear-re-lated skill base, dating backto its earlier dominant rolein the growth of the UK’scivil nuclear programme, ifit is to benefit from therenewed global interest innuclear power.

The world’s first commer-cial nuclear power genera-tion plant was built at Cal-der Hall in Cumbria, andspecialist facilities, such asCapenhurst (near Chester)and Springfields (near Pres-ton), still employ close to2,000 staff producing fuel fornuclear plants in the UK andabroad.

While roughly half of the25,000 people employed inthe north-west’s nuclearindustry are located aroundSellafield, some 125 milesnorth of Manchester, bothSpringfields and Capenhurstare only 40 miles away fromManchester, and many of the

companies servicing theregion’s nuclear industry areclustered around Risley andBirchwood, just 14 mileswest of Manchester.

Best known of the localcompanies that have grownup as a result of the north-west’s strong tradition innuclear power is Knutsford-based Amec Nuclear. It hasbeen involved from thebeginning of nuclear powergeneration almost 60 yearsago and operates the Nirasradiochemistry laboratories.

The company’s longinvolvement with Sellafieldhelps explain why it waspicked as one of three part-ners (the others are URSWashington and Areva) thatwon the contract to decom-mission the giant Sellafieldsite. This accounts foraround 60 per cent of theNational DecommissioningAuthority’s annual nuclearclean-up budget.

Manchester is in an “excel-lent position” to facilitatethe development of thenuclear industry, says Jenni-fer Hazlehurst, a member ofDeloitte’s nuclear leadershipteam. She cites the benefitsof having substantialnuclear sites and expertiseon Manchester’s doorstep,backed up by substantialinvestment in nuclear educa-tion and research to helptrain the next generation ofnuclear industry profession-als.

The renaissance of thenorth-west’s nuclear power

industry has overshadowedthe growing interest indeveloping the region’srenewable energy resources.The scale of the potentialindustry, in terms of size ofprojects and numbers ofcompanies involved, is muchsmaller than the nuclearpower industry, but anumber of Manchester com-panies are developing inter-esting technologies, notesDeloitte’s Ms Hazlehurst.

Two of the best known areSalford’s Ener-G, which pro-vides renewable and energyefficient power generationsystems, and Peel Energy,which operates out of prop-erty developer John Whit-taker’s Peel Group headquar-ters at Manchester’s TraffordCentre.

Ener-G is pioneering gasi-fication technology, offeringa clean, environmentallyfriendly method of convert-ing waste into green energy.

Peel, by contrast, ownsand operates wind farmsgenerating 75MW of renewa-ble energy, including ScoutMoor – the biggest windfarm in England on themoors above Manchester.

The company is also work-ing on developing energyprojects involving more than3GW of power from a varietyof mainly renewable sources.These include a potentialMersey tidal barrage, anenergy-from-waste project atInce in Cheshire and a coal-fired power station in Scot-land.

International status is about much more than football

A century ago Manchesterwas best known as the capi-tal of the world’s cotton tex-tile trade. Today, it is bestknown as the home of Man-chester United, one of theworld’s most successful foot-ball clubs.

Manchester may lag wellcities such as New York,Madrid and Munich in termsof its economic and businessperformance. But when itcomes to sport it is hard tounderestimate the impor-tance of its football teams,which include the AbuDhabi-owned ManchesterCity, in promoting the city’sname globally.

It has been estimated thatManchester United, ownedby the US Glazer familysince 2003, has more than330m fans worldwide, ofwhom half are in Asia. Theclub maintains separatewebsites for fans in China,Korea and Japan, and hasrecently begun offeringAsian fans the chance to goon a virtual reality tour ofits Old Trafford “Theatre ofDreams” stadium.

However, there is a lotmore to Manchester thanfootball. It is home to theBritish Cycling Federationand Manchester’s velodrometrained the winners of eightgold medals in last year’sOlympics. It is one of thecountry’s top boxing centres,producing Amir Khan andRicky Hatton, and in rugbyunion, rugby league and ath-letics, has three of the UK’stop teams in Sale Sharks,Wigan Warriors and SaleHarriers respectively.

Old Trafford’s Lancashire

County Cricket Club issmarting because it has beendropped as a venue for thisyear’s cricket test match testseries. But the city has sev-eral big venues, such as theCity of Manchester stadiumand the MEN Arena, whichregularly host a variety ofinternational sporting eventsunrelated to football.

In 2008 Manchester hostedsix international sporting

events ranging from thefinal of soccer’s Uefa Cup toworld squash and swimmingchampionships. This year itwill be hosting several inter-national championships insports such as cycling, swim-ming, water polo and netballas well as the Paralympicworld cup.

Last year was Manches-ter’s best year for sport sinceit hosted the Commonwealth

Games in 2002, and it wascrowned the “Best sportscity in the world” by Sports-Business magazine, beatingshort-listed cities such asMelbourne, Berlin, Moscowand New York.

Eamonn O’Rourke, head ofsports and leisure at Man-chester city council, stressesthat the build-up in Man-chester’s international sport-ing reputation is no acci-dent.

The legacy of East Man-chester’s SportsCity com-plex, the site of the 2002Commonwealth Games, hasbeen fully exploited so thatthe complex now handlesmore than 400 sportingevents a year attended by4.5m people.

“One of the biggest lega-cies from the games is thatwe identified the need for anannual sports developmentbudget,” says Mr O’Rourke.Prior to that Manchester hadtried to attract big sportingevents on an opportunistic

basis. Its £1.6m annualbudget is used to attractevents that are strategicallyimportant and utilise Man-chester’s sporting legacy.

The reverberations of theregion’s growing importancein the international sportsworld go well beyond theincreasing number of tro-phies in club sports cabinets.It has also fed through to thedevelopment of a growingnumber of sport-related busi-nesses ranging from sportinggoods manufacturers, suchas Stockport’s Umbro (nowpart of Nike) and Bolton’sReebok (now owned by Adi-das), to Fred Done’s War-rington betting operations.

Dave Whelan, the formerBlackburn Rovers footballerwho set up Wigan’s JJBsports retailing chain, is thebest-known of a number oflocal sporting heroes whohave moved into business.Others include former Eng-land rugby captains FranCotton and Steve Smith,

SPORT

William Hall onthe successfullegacy of theCommonwealthGames in 2002

Culturalmix addsto appealfor tourists

At first sight Manchester isnot the UK’s most obvioustourist and culturalhotspot. Its reputation as

the UK’s wettest city is more thana mite unfair – average rainfall isbelow the national average, andwell below that of Glasgow andCardiff. But it lacks much of thetraditional physical tourist infra-structure, such as elegant cityparks, river frontage and eyecatch-ing buildings, which boost theattractiveness of rivals such as Liv-erpool and London.

Nevertheless, Manchesterremains the third most populartourist destination in the UK (afterLondon and Edinburgh) accordingto the latest International Passen-ger Survey. In 2007 it enjoyed a 6per cent growth in internationalvisitors, to 971,000, which compareswith 571,000, 304,000 and 278,000 forrivals Liverpool, Leeds and New-castle.

Visitors to Greater Manchester,the vast majority of which are day-trippers, have been rising steadilysince 2000 and now top 100m – withan estimated economic impact of£5.6bn, according to Visit Manches-ter, the local tourist board. Tourist-related employment has risen bymore than fifth to 79,411 over thelast seven years.

Manchester was recently votedthe third-best conference destina-tion in the world by Conference &Incentive Travel – Europe maga-zine, after London and Barcelonabut ahead of Las Vegas, Berlin andDubai. Lonely Planet magazine hasnamed it one of the top 10 short-break destinations, saying it has“enough weatherproof entertain-ment to rival London or Glasgowat any time of year”.

Greater Manchester has a

number of tourist and culturalattractions of which the most vis-ited are the Lowry theatre and artscomplex, the Museum of Scienceand Industry and Manchester artgallery. It also has a couple of“iconic” new museums – the Impe-rial War Museum North and Urbis.

But none of these venues has thepulling power of London attrac-tions such as the Tate Modern, orregional art galleries like Tate Liv-erpool or Glasgow’s Kelvingrovewhen it comes to visitor numbers.

Manchester’s appeal is far moreto do with the diversity of culturaloffering ranging from Sir MarkElder, who has revived the for-tunes of Manchester’s Hallé orches-tra, to pop singers such as Morris-sey, and rock bands such as theSmiths, the Buzzcocks and Oasis.

Manchester has a lot more tooffer than just the backdrop forITV’s Coronation Street soapopera. Some of the UK’s best come-dians, such as Peter Kay, honedtheir skills on its comedy club cir-cuit. The recent Oscar for DannyBoyle, director of Slumdog Million-aire, and the news that local rockband Elbow had beaten the likes ofColdplay, Radiohead and TakeThat, to win the best British groupin the latest Brit awards, underlinethe wide diversity of Manchester’scurrent cultural offerings.

Manchester also benefits fromhaving some of the biggest venuesoutside London ranging from the2,400 seat Bridgewater Hall, whichhosts the Hallé and the BBC Phil-harmonic orchestras, to the 21,000seat MEN Arena, Europe’s biggestand busiest indoor arena. It stilllacks a modern opera house, butthe city council is working on thatand hoping to persuade London’sRoyal Opera House to open anorthern outpost.

“Manchester was one of the firstcities in the world to grasp theimpact culture, and particularlypopular culture, could have on theimage and brand of a city,” saysVaughan Allen, chief executive ofUrbis, the new urban museum inManchester’s city centre.

“It’s been more successful than

its competitors in providing thatopen space for creativity to con-tinue to thrive. The officialendorsement and financing of newventures such as the ManchesterInternational Festival (MIF) andUrbis – events and places thatdeliberately break moulds and setthemselves apart – shows a certainbravery”, says Mr Allen.

The festival, which began in2007, takes place every second yearand will run from July 2-19, 2009. Itspecialises in new works fromacross the performing arts, visualarts and popular culture.

The first festival included 25world premieres including Monkey:Journey to the West, an opera per-formed in Mandarin with musiccomposed by Damon Albarn. Itwent on to play to sell-out audi-ences in Paris and London’s Royal

Opera House, and provided thetheme for the BBC’s coverage ofthe 2008 Beijing Olympics.

“The most obvious way we differfrom Edinburgh and Glastonburyis that everything we present isproduced by the festival and ourpartners,” says Alex Poots, MIF’sdirector. “It does effectively set alimit on the number of shows wefeature, but we think that focus isa positive thing.”

The first festival attracted morethan 200,000 visitors to the citywith an estimated economic impactof £28.8m and Mr Poots is planningto build on that this year with afestival whose highlights includePrima Donna, Rufus Wainwright’sopera debut, and a bespoke envi-ronment designed by world-famousarchitect Zaha Hadid for a perform-ance of JS Bach’s solo works.

VISITOR ECONOMY

Day­trippers to GreaterManchester have beenrising steadily,writes William Hall

Joint venture: Guy Garvey of home­grown band Elbow, in concert at the Manchester Apollo last year Getty

The city council ishoping to persuadeLondon’s Royal OperaHouse to open anorthern outpost

ENERGY

William Hall on achance to build onthe legacies ofDalton and Joule

PROFILEDARESBURY CAMPUS

William Hall onhow a more varieddiet of research hasbrought benefits

It aims to be a focalpoint for scientific,academic andbusinesscollaboration

There is growinginterest indeveloping theregion’s renewableenergy resources

who founded the CottonTraders sport clothing mailorder business, and ChubbyChandler, a former PGAEuropean golf professional,whose International SportsManagement group managessome of the world’s top golf-ers and cricketers.

Maurice Watkins, Man-chester United’s long-timelawyer and senior partner ofsolicitors Brabners ChaffeStreet, praises the city coun-cil’s strategy of raising thecity’s profile by attractinginternational sporting eventsto the city.

It has stimulated demandfor specialist sport-relatedlegal and financial servicesfrom players and clubs along way from Manchester.

Brabners Chaffe Street, forexample, which advisesmore than half of the UK’sPremier League clubs, wasappointed recently by MajorLeague Soccer (MLS), the USprofessional soccer league,and LA Galaxy, to advise on

the loan transfer of DavidBeckham to AC Milan.

“While Manchester is notthe UK’s financial capital, itis the sports capital,” saysRobin Wight, head ofHSBC’s global sports groupin the north of England.“London-centric companiesthat ignore Manchester andthe north-west as its hub doso at their peril.”

“The 2002 CommonwealthGames was a real turningpoint for British sport inproving to the world thatManchester could host sucha high-profile sporting eventand maximise the economicbenefits associated with it,”says Peter Heginbotham,president of the GreaterManchester Chamber ofCommerce and senior part-ner at law firm Davis BlankFurniss Solicitors.

“It really put us on themap and left us with a sport-ing legacy that no doubtpaved the way for London’sOlympic bid.”

Booting up: Dave Whelan in his Blackburn Rovers days Getty