What does the future look like for Manchester businesses?
Business Leader recently took a day out in Manchester and hosted a debate with senior leaders from multiple sectors to look at the challenges and opportunities facing the city.
Manchester represents the largest UK city region economy outside London, with an economy worth £62.8bn (GVA). In recent years there has also been a shift in emphasis from leaders in the region from creating an economy that measures success on how many jobs it is creating to one that is focusing not just on volume but also on the quality of jobs, with the average wage for a role in the city now exceeding the national average.
The city still lags London and Bristol in what it creates per head for the national coffers, but its progress has been startling, its public and private collaborations admirable, and its future bright.
What are the challenges businesses face in Manchester?
Neil Douglas is Senior Business Development Manager at Sync, a £100m plus turnover IT solutions Company and Apple Authorised Reseller. It’s been in the city for thirty years and, akin to one of the key national challenges, he says that businesses around UK are struggling to find and attract top talent in a highly competitive market.
He comments: “One of the key challenges Manchester businesses face is being able to recruit the talent that needed for various roles. It’s a candidate driven climate and we are working with more organisations to offer staff their choice of device to incentivise and attract the best candidates.”
Jo Sellick is the Managing Director of Sellick Partnership, a recruitment business that was born in the city.
Elaborating on Neil’s point about recruitment challenges, he said: “In the last six to nine months, I have described the current recruitment process as being like the Wild West. The process doesn’t really start until your prospective candidate who you want to hire has resigned.
“You might go through three interviews with the person you want to hire and then, when they resign their employer thinks, ‘oh I don’t want to lose this person’ and they come back with a counteroffer with more money or additional perks and then you’re into the process of the candidate being pulled from left to right. This is creating wage inflation and adding time to the recruitment process.”
Jo says that he expects this to continue for another six months but for the market to calm down in the fourth quarter of the year and for the market to become more employer driven.
He’s also uncertain that working from home will retain its glow: “If I’m working in sales and I’m in my twenties, I am not sure I would want to work from home five days a week. I would want to be working in the office at least two or three days each week, making connections and learning.”
Christina Melling is the Founder of Stipendium, a prop-tech start-up. On the challenges she is facing as a business in the city, she says: “I think it’s hard for tech start-ups to really stand out now. I think Manchester is incredible for turning start-ups into challengers and challengers into industry leaders.
“It has been reported that we have a £5bn technology ecosystem here with 10,000 digital and tech businesses. Manchester’s tech industry is growing at six times the rate of the UK economy, which is massive, and it employs 100,000 people in the tech sector, which is a fifth of Manchester’s population.
“My concern, however, is that within the context of all this growth, is this driving too much competition in terms of the investment and the loan opportunities that are exclusive to Manchester now? I am currently self-funded, but we’ll be looking for funding opportunities very soon to expand, grow and scale.
“As much as Manchester is the place to start a tech business, there also seems to be huge competition for funding.”
There has never been so much funding available but….
Ben Davies, who is a Director at Praetura – a funder that only invests in Manchester companies – says that the city is seriously evolving when it comes to its funding ecosystem.
He says: “From a global tech standpoint, Manchester has only just started because it wasn’t on the radar ten years ago. The number of equity deals being closed is doubling each year. In 2012, it was 155 and in the last year it was 320. The ecosystem is also evolving in the sense that the idea of the founder flywheel is happening where exited founders are going around again and starting their next business in the city.”
On the competitiveness of attracting funding, Ben also says: “Yes, it is competitive but if you go and talk to somebody in Liverpool or Leeds, they’ll say the same thing. A challenge for us is that you can work remotely in the city for a London company but in the long-run London is more scared of us than we are of them. Manchester has a cheaper cost of living and I suspect London businesses will start to want those remote staff to come into the office more.”
Ben also says there needs to be a shift in mindset when it comes to funding growth in Manchester: “We’re the only Northern focused VC fund. This is insane when you think that we produce 16% of the UK GDP from a technology point of view, but we only see 13% of the investment. You’re 75% more likely to raise money if you’re in the South East compared to here. This needs to change. Manchester only receives seven pence of every pound invested in the UK, so there is a funding gap and Praetura is trying to bridge this, but we can’t do it on our own.”
Carla Yearsley, who is Regional Development Director at Lloyds Bank, says that one of the challenges her customers and businesses face is finding opportunities to connect with other companies.
She explains: “We go out to our customers each quarter and survey them. One of the questions we asked was what support they feel they need to help their business in the current climate in order to grow.
“The three key findings were being able to attract funding, guidance and support about making their business more sustainable and opportunities to meet and network with other business leaders, founders and mentors. Worryingly though, we also found out through the research that North West productivity sits at 9.6%, which is lower than the national average.”
Regarding productivity, Kate Palmer, who is a HR & consultancy Director at Peninsula, believes that encouraging more office working can play a part in solving this puzzle.
She says: “I am an advocate for office working. I think from a collaborative point of view, certainly in the role I do, it’s difficult to do that at home. There is a place for hybrid working but I think it’s difficult to have permanent home working and progress your career. I know that is hard for some people to hear but I believe it to be the case.”
One organisation that has been instrumental in Manchester’s development over the last several years has been the We Love MCR Charity. Ged Carter from the organisation, says believes that going forward, hybrid working will be good for the city.
He explains: “Firstly, the social deal that this generation has is broken. When you were younger you would work in a job, and you could easily afford to buy a property. Secondly, I feel that changes to working patterns will be a stimulus to solving productivity problems and we’ll look back in ten years and realise this.”
What are inward investment levels looking like in the city?
The marker of a city’s success is also how much inward investment it is attracting. Deborah Walker, Head of Inward Investment at Manchester’s Inward Investment Agency (MIDAS), says they are seeing more UK investors looking to invest in the city.
She explains: “In the last couple of years, it hasn’t just been foreign direct investment coming into the city but also UK investors looking to spread their geographical footprint and spread their risk. These companies were looking at what their office use is going to be like and where they are going to attract talent from. As a result, we have seen lots of firms with London headquarters wanting a second office and choosing Manchester.
“Manchester also ended last year performing higher than any other year since 2018 and we have seen a boom in investment with 56 live projects and 5,091 jobs created against a target of 2,000 jobs.”
How does Manchester compare with other regional cities?
When it comes to how Manchester compares to other UK cities, Deborah says: “Manchester has moved up the value chain and changed from being a back-office destination and become a place that is home to significant research and design and innovation-led companies.
“The type of jobs and companies we are working with has also changed. It’s become more about businesses with strong green credentials and ones we consider good employers. Our metrics have changed from just creating jobs and projects to creating higher value roles and not just building factories and call centres.
“Last year 68% of all the roles that we advertised were salaried over £35,000, which is above the national average.”
Deborah says that Manchester will continue to remain a key business destination in the UK and people are choosing the city due to its talent and mature public and private relationship.
She explains: “Businesses are coming to the city because of the talent that is available here, both coming out of our great universities but also talent that is coming here. Collaboration and our ecosystem are also a big attraction and there are very few markets like ours.
“We also have a very invested combined authority and strong political leadership that not only has the autonomy to deliver big projects but is actually doing it.”
Ben Davies agrees that the city’s stability has been key.
He says: “I’m not joking when I say that Manchester is the capital of England because London is another country. Stability has been key to its growth and Manchester had the same chief executive and leader of the Council for 20 years. This is unheard of and unprecedented.
“We’re seeing a masterplan being delivered that was on somebody’s desk twenty years ago and I have not seen this anywhere else in the UK. Leadership is absolutely committed to making the city an attractive place to invest in arts, sport, leisure and business.”
Jason McKnight – a Director at RECOM Solutions Ltd – agrees that from a commercial property perspective, city planning has been executed well.
He says: “We’ve had 20 years of strategic growth within the city, and it has been carried out in such an impressive manner and it has really helped the city grow. As a city, we currently have just under 3.6 million square foot of commercial office space available that will last us around three years. 30% of this is already pre-let and the type of businesses coming in are technology and innovation-led companies.
“There is also a good mix of grade A, B and C available. We’re seeing start-ups, scale-ups and corporates all taking space. The market is buoyant, which also suggests that not all companies are looking to employ remote working.”
Manchester property by numbers
McKnight went on to provide an overview of Manchester property by numbers:
- Q1 2022 supply currently sites at 3,591,069 sq/ft, of which, 827k is grade A supply. Based on the previous five-year uptake, there is currently 2.8 years of supply available. This does not include new stock coming to market.
- Q1 2022 is down 12% against 2021 in terms of uptake. What is interesting here though is that we have had 70 individual transactions, which is the highest since 2018. Clearly demonstrates smaller uptakes are ongoing.
- Prime rent currently sits at £38.20per sq/ft. This remains unchanged since Q4 of 2021. £40 per sq/ft is expected to be hit in 2022.
- Q1 uptake was 207,000 sq/ft with an average uptake of 2954 sq/ft.
- ROKU were the biggest standalone uptake in 2021 – taking 115,000 sq/ft in circle square. This shows how TMT (Tech, media and telecoms) are presently dominating the Manchester market.
- TMT had 29% of 2021’s uptake.
- We have 1,340,000 sq/ft of commercial space under construction, with a projection of 743,665 sq/ft due to complete in 2022, of this, 402,900 sq/ft is pre-let to TMT businesses.