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Why are companies leaving Liverpool?
To retain its young people and thrive, the city and its wider region need to create interesting, well paid jobs. But the private sector isn’t buying what Liverpool is selling.
“It’s like that Franz Kafka parable of bureaucracy,” says Jon Egan of Liverpool’s economic performance. Egan knows his stuff: he worked as a campaign strategist for Tony Blair in the nineties and was appointed by Steve Rotheram in 2017 in communications. “Where a plague strikes and wipes out a town, but a corporation — from its detached position up in an ivory tower — continues to function, unaware of the destruction below. Liverpool is a bit like that.”
It’s one of the more creatively slanderous ways of describing the failings of the city’s public sector for sure. But although Egan isn’t a businessman himself, his views are broadly representative of many working in the private sector. Most of them won’t say it publicly for fear of losing future contracts (“everyone is absolutely paranoid about falling out of favour,” says one source in development) but eight spoke to The Post for this piece and gave their thoughts on why Liverpool’s economy struggles to keep pace with its traditional rivals.
You often see these folks hastily dismissed in Liverpool: corporate suits who fetishise big glass buildings. But in the past few years several major companies have left the city region: Castore, Redx, Biofortuna, Ideal Modular Homes mostly relocating to Sheffield, Tratos expanding in Wales, Birkenhead’s Nuclear AMRC research centre decamping to Warrington and so on. Coupled with a relative lack of inward investment (Liverpool ranked 17th out of UK cities for foreign direct investment last year according to accountancy firm EY, despite having the eighth largest population) a worrying picture emerges.
There are various reasons this is concerning, but for most of us it comes down to one: jobs. The number of businesses in the city region is healthy enough, around 75,000 in total with stable start-up rates over five years, but the fear in the private sector is that Liverpool still isn’t getting the highest quality jobs. This means talented young people who might wish to stay have to leave in search of opportunity. In simple terms, Liverpool shouldn't be functioning like a parent tearfully waving its children off to the big city. As one well-placed source puts it: “we get the Amazon warehouse jobs, Manchester get the Amazon programmers.”
The vast majority of people we spoke to for this story told us that the local authorities should be doing more to attract and retain businesses. Take pharmaceutical firm Redx as a case study. Back in 2016 they were growing fast and needed an appropriate site to match their ambitions. They were operating out of the dilapidated Duncan building at the Royal Liverpool University Hospital, but that was like running a Michelin star dining experience out of a taqueria. One source says that the company “absolutely pleaded with the local authorities,” to help find a suitable location to no avail.
Egan was present at many of the crisis talks held for Redx alongside the likes of Joe Anderson and regeneration expert Max Steinberg. He concurs with the source’s version of events. “I was saying to them repeatedly that they’re gonna walk,” he says. “We’ve got all of this infrastructure and we’re going to lose it because they can’t build a bloody building.” Redx chief executive Neil Murray said back then that attempts to identify an “alternative” had failed and so they moved to Cheshire. “They should have been the poster child for a world class bio-cluster in Liverpool,” Egan adds.
Castore makes a more recent example. Founded by scouse Beahon brothers Philip and Thomas in 2015 Castore has since become one of the biggest sportswear brands around. Within less than four years of starting up they had announced a sponsorship with Sir Andy Murray (see photo of Murray — flanked on either side by a Beahon — wearing the grin of a man who knows he’ll never want for premium Liverpool-made cotton wristbands again). A great British business success story indeed, and a Liverpudlian one at that.
Well, it should have been anyway. Last year Phil and Tom flew the coop, taking 200 plus jobs to Manchester. The reason cited was a lack of suitable office space. According to a source in the private sector, it was “obvious they were going places, but they were never contacted by the council.” Had the council “really got their claws into them” the source thinks it would have played out differently. The pair told Business Live that Liverpool would remain as their “spiritual home,” but apparitions don’t tend to make large-scale employers.
“We’re delighted to welcome them to Manchester,” said Tim Newms of MIDAS — Greater Manchester’s highly-lauded inward investment agency — at the time of the coup, with the diplomatic-but-smug candour of a football manager announcing the signing of his rival's star player.
Who better to turn to for answers than Colin Sinclair, the former CEO of MIDAS between 2005 and 2010 when Manchester’s regeneration turbo-charged and the city brought in huge companies like Bank of New York? “Greater Manchester invested significant long-term resources creating one of the strongest inward investment teams in the UK,” Sinclair tells The Post. At one point they were even ranked first in the world by IBM for foreign investment. Liverpool, plainly, did not do this. “It’s a competitive field and Liverpool simply doesn’t compete,” he says.
Sinclair now works for Sciontec — the Knowledge Quarter’s development arm — in Liverpool and is painted by some as a pied piper in a shirt and blazer. His remit is bringing in science, innovation and technology businesses and he is described by one source as “a shining light in the darkness”. Sciontec recently nabbed financial technology firm Cashplus: potentially Liverpool’s biggest ever deal in this sector according to Sinclair.
Cashplus will be setting up at The Spine in Paddington Village which already hosts many of the city’s galacticos: Unilever, Sequirus, the Pandemic Institute, the Royal College of Physicians etc. In terms of quality office space though, Paddington Village is like a gleaming futuristic citadel amidst a sprawling mediaeval swamp. Analysis of the ‘Big Nine’ (the biggest regional office markets outside of London) by Avision Young last year showed that grade-A office space in the city region had fallen to a quarter of its 2014 level. Swift improvement hardly seems feasible when this is the type of space required by the biggest fish in the corporate pond.
This lack of high quality offices is at the heart of Liverpool’s inward investment problems. One source describes the “doom cycle” the city has become locked in. Rents in Liverpool are the lowest of any of the ‘Big Nine’, which sounds like a great thing; lower rent should attract lots of firms to town. But, it creates a problem when it comes to building new office space, because construction costs are basically the same as everywhere else. This means developers see little value in building, which in turn perpetuates the lack of space and means the city often doesn’t feature on shortlists when companies are looking to expand in the North, despite the tempting rents. The only way to break the loop is by addressing the supply side. “It can only be solved through public sector intervention,” says a source high up in development.
This could be investment, loans, grant applications or even just good strategy. With Spinningfields — Manchester’s glass-panelled business boomtown — the local authorities battled landowners who wanted to build residential flats, insisting that office space would pay dividends in the long run. It now hosts many of the biggest companies in the north of England, including Barclays, HSBC and Deloitte. It employs more than 20,000 people in total.
Manchester barely has to flutter its eyelashes at the moment to pull in investment, so perhaps this is an unfair comparison. But other cities and regions are also moving ahead. The North East is dominating wind turbines. Sheffield has got McClaren, Boeing and Rolls Royce in recent years, as well as luring Ideal Modular away from Liverpool. Southampton is forging ahead with another cruise terminal and Hull is cracking on with its first, which will take a chunk of the Northern market. Belfast has a radically expanding stable of film studios. Beyond the Knowledge Quarter and Sinclair’s magic flute, what does Liverpool have? An existential crisis over whether it should block the arrival of a Hooters?
Maybe that’s a bit unfair. Despite Redx and Biofortuna, Sinclair tells me “we’re not seeing any mass exodus in health, life sciences or tech.” And there is a general sense that Steve Rotheram has implemented some sort of strategy, with key designated growth areas such as green energy and biotech targeted to try and bring in jobs. The automotive industry is also doing well, with Ford recently investing £230 million in its Halewood factory although “that’s largely because it doesn’t need to engage with the civic authorities,” according to a source who has worked with multiple large firms in Liverpool.
But even within these targeted areas opportunities are being missed. Whilst the West Midlands, North East and South West have been working on crucial gigafactory plans (these are battery-building behemoths for electric cars dreamed up by Elon Musk) which will create thousands of jobs, Liverpool is again on its heels. Rotheram did appear in The Independent expressing hope that Liverpool might be beneficiaries of some Muskian magic confetti, but Place North West reported that no plans were actually in place (“a search of Liverpool City Region paperwork revealed nothing”).
Perhaps Rotheram was too busy chasing a mirage — sorry barrage — across the Mersey. The metro mayor’s barrage (or floating lagoon) is a tidal energy scheme that would sit in the river or further out in the Liverpool Bay and create emissions-free energy for one million homes for 120 years. The necessary outlay is the stumbling block: £6 billion.
Government funding seems unlikely, and — according to a private sector source — the project would require “a global coalition of major pension funds willing to put staggering amounts forward on a 100 year pay back,” given the enormous risk and scale of the engineering challenges. Given that Wales, Cornwall and Scotland all have live tidal energy projects already it begs the question whether a slightly more attainable pet project would be more appropriate.
Rotheram, says Egan, “understood the scale of the challenges when he took the role on.” Ultimately, however, he says that the metro mayor has been battling against deep-rooted issues, namely a “disconnect between the public and private sectors,” and an “inability to sell themselves”.
What is Liverpool’s pitch? Every year the world’s property businesses gather in Cannes at MIPIM, which is like a massive and very glitzy corporate car boot sale for cities to present their wares to the world. “It’s the ultimate shop window for investors,” someone who has been many times tells The Post. Barcelona, they explain, has a simple three-point pitch: digital, pharma, port-centric manufacturing. It’s Powerpoint-friendly stuff a potted plant could understand. On the contrary, Liverpool changes on a whim every year. “No one can work out what we’re trying to be.”
Then there’s the self-delusion. The failed Channel Four bid in 2018 is case-in-point. At the time Joe Anderson wasn’t happy, blaming Liverpool’s lack of connectedness as the reason: “I am very frustrated, Birmingham, Leeds and Manchester will also get HS2 and we are losing out for the sake of an 18-mile link to Crewe,” he said. A well-placed media source told a different story. “Every other city put forward a detailed and thought-out economic case. Liverpool was a joke. It was essentially: ‘gis Channel Four mate’”. A spokesperson for the city council disagrees, saying a “compelling and exciting proposal” was made to get Liverpool within the final few contenders, but “only one city can win”.
“We walk around with our chest puffed out playing bullshit bingo with the words ‘world class’, even bloody Barcelona don’t use them,” the source who attends MIPIM continues. To some ends, this is semantics. Brand Liverpool wouldn’t be the first to indulge in ormantened language for marketing purposes. But it does expose a lack of self-awareness. And a degree of awareness about your actual strengths and weaknesses goes a long way.
Back in the nineties, Mark Leonard — the brain behind the Tony Blair ‘Cool Britannia’ phenomena (think Noel Gallagher sniffing lines in the Downing Street toilets) — saw untapped potential in Liverpool. In Britain™: Renewing our Identity he notes that Britain ought to market itself as a world leader in computer games as “half of Japanese computer games are designed within 30 miles of Liverpool.”
Leonard saw a possible narrative: something of substance to sell. Liverpool has an abundance of exciting interactive entertainment companies, such as Firesprite, Lucid Games, Milky Tea and Ripstone. Sony Interactive Entertainment now employs approximately 750 people in the city (having bought out Firesprite), the majority of whom are housed in the former Liverpool Echo building on Old Hall Street. But given the amount of exposure they get you’d think they were being hidden in a secret bunker under the Irish sea.
Two decades after Leonard’s suggestion, gaming is reduced to a paltry single mention in Liverpool’s draft cultural strategy (as Liverpolitan points out). When I reach out to one figure in Liverpool’s gaming industry a suitably techy metaphor comes back: “We have been screaming at them for over two decades but they refuse to remove their noise-cancelling headphones.” A spokesperson for the city region contested this, pointing at £300,000 funding for games testing company Universally Speaking, the Gather programme which has supported 153 digital and tech companies and the recent “tech accelerator” project to help start-ups.
But the perspective of the games industry is that it isn’t enough. They believe that given the quality of the industry the region is sitting on they should be shouting from the rooftops about it, yet Liverpool has never overtly promoted itself as an important city for gaming (which has been transformative for cities such as Malmo and Montreal).
Instead, Liverpool is doubling down on film studios, which hoover up plenty of page space in the cultural strategy document. The delayed Capital & Centric project to turn the seat of Liverpool’s old business paterfamilias, the Littlewoods building, into studio space is at the heart of this. However, since the project was announced film studios are springing up all over the UK with Belfast, for example, pushing ahead with large-scale projects. Britain is on course to have more studio space than Los Angeles within two years: any competitive advantage for Liverpool is surely waning.
Nonetheless, Liverpool shall be the “Hollywood of the North,” state the headlines, bold as brass. “What a load of shite,” one source says. They believe Capital & Centric will make a good job of the Littlewoods project but the idea that it alone is enough to dominate the industry is “pure fantasy”.
What the gaming example tells us is that the talent is there. Why wouldn’t it be? Microsoft was set up by four nerds in a garage in Seattle. The fact they came from Seattle doesn’t necessarily tell you anything about the city itself. It was — from Seattle’s perspective — merely a fortunate mixture of genes and geography. “There’s nothing innately wrong with entrepreneurship in Liverpool,” says one source within the private sector. “We’ve got entrepreneurial fizz to give us a chance to find that golden ticket but when it does come along we have to be able to keep it.”
The frustration, they believe, is being unable to publicly voice concern, instead having to operate as a kind of angry corporate shadow guild. The source points to a dinner he attended in Edinburgh almost a decade ago, in which one private sector leader after another stood up and “tore shreds” out of the Lord Mayor for the city’s failings around a tram network project. “They were all brutal, elegant and well-stated,” says the source. “That simply wouldn’t happen in Liverpool.”
According to Philip Blond — who grew up in Liverpool and was credited by The Daily Telegraph in 2010 as a “driving force” behind David Cameron’s policy agenda — it isn’t too late to fix. “Liverpool has drifted too far from the centres of relative power and become marginalised,” he explains. He believes it should view Warrington and Manchester as its wider economic area in order to make progress through collaboration. “Companies need to be surrounded by successful companies to survive,” he says. “In Liverpool they’re isolated, so they leave.”
Which brings us back to the start: jobs. While Mark Basnett of Growth Platform — a company that helps grow businesses in the city region — makes the fair point that “comings and goings” are a natural part of any business ecosystem, a look at the student numbers underlines the issue. In 2016 the Centre for Cities think tank published a study analysing the beneficiaries of the “brain drain” phenomena, where educated young people leave an area in search of opportunities. London (naturally) attracted the most graduates: 38% from the Russell Group universities who received first class or upper second class degrees. But Manchester got 3.2%, Birmingham 2.3%, Leeds 2.0% and so on. Liverpool received 0.5%.
Graduate retention tells a similar tale. The Office of National Statistics data shows that in 2020, despite a net gain of 4,669 19-year-olds in Liverpool (students), there was a net loss of 1,757 22-year-olds (graduates). Almost a third of those leaving went to London or Manchester.
It’s not too late to change this. The Knowledge Quarter has bucked the trend and gained national recognition, but as of yet it is the outlier. Perhaps whoever ends up in charge of Liverpool next should install a 10ft wall display in their office, constructed in the style of those cheesy-but-affirmative “Live Laugh Love” mantras that loom over modern domestic scenes, simply reading: “JOBS JOBS JOBS”.
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