The enterprising county of Yorkshire

The gutsy get-up-and-go spirit of Yorkshire and the Humber is helping to see the region through recessionary gloom. GB reports on the attractions of the area for the growing business.

If you want to know what Yorkshire’s like as a place to do business, ask a southerner.

Jess Thompson moved to the North ‘on a whim’ in 2002: Ilkley, West Yorkshire, to be precise. It was here that she and her partner Paul started baby swimming course operator Water Babies, which is now a £10 million turnover brand with 29 franchisees across the UK, Ireland and Australia.

‘I’ve always said it was intrinsic to our success that we started [in Yorkshire],’ says Thompson. ‘At the time, baby swimming was well-known in the South East but not anywhere else. The community embraced it very quickly and we went from zero to 100 clients in a month.’

Though Thompson now runs the franchise network from a head office in Devon, where she moved to be nearer her family, she says Yorkshire is ‘definitely’ an easier place to do business. ‘On every level, from the banks to the local Business Link, everyone we dealt with was incredibly helpful and efficient,’ she observes. ‘The only drawback was that we were homesick.’

Local pride

Yorkshire excites stronger feelings of loyalty and identity than most other English counties. Peter Garnham, MD of early-stage investor YFM Venture Finance, points out one reason why – ‘there are more acres in Yorkshire than there are words in the Bible’ – though he is quick to add that he has never verified the adage. It’s not all about size, however: Yorkshire is blessed with a regional centre, Leeds, that is roughly equidistant from outlying conurbations, and motorway and rail links mean that the whole region is not only easy to get to, but easy to get around – a stark contrast with, say, the South West.

Garnham adds that, historically, Yorkshire has been split between the industrial south and west and the agricultural north. Even now, the former area is more urbanised, though a business’s choice of location will depend on demographics – Thompson talks of the affluent ‘golden triangle’ formed by the cities of York, Leeds and Harrogate.

Corporate hub

For Julian Parker, co-founder of computer forensics company Data Genetics International (DGI), there were other considerations in selecting a base. The London-based business, which was acquired last year by US firm Stroz Friedberg, opened its second office in Leeds, because of both the city’s accessibility and the prevalence of law firms there, which are among DGI’s core clients.

Parker explains, ‘If you sit in London, there is a concentration of law firms and corporates there, but you might not get to the law firms and corporates in Leeds, Manchester or Birmingham because you are not on their patch and they don’t know about you.’

He adds that the region is big enough to offer a decent flow of work, but sufficiently small and close-knit that it is easier to spread the word about what you are doing.

‘If you send out a press release in London, no-one cares,’ Parker states. ‘In Leeds, the local paper will probably pick it up and put it somewhere, and someone will call you and say, “Ooh, I saw you in the paper.”’

It’s a point echoed by Water Babies’ Thompson, who says that on a publicity photoshoot in Yorkshire, 120 parents turned up with their children, while franchisees in other parts of the country would be lucky to pull in 50.

Yorkshire is weathering the credit crisis better than other regions, according to YFM’s Garnham. Though the grants and finance available to businesses there are ‘not a reason to move’, they are helpful.

‘We manage two [venture capital] funds that are designed to help stimulate businesses within previously disadvantaged areas of the region, South Yorkshire in particular – which was heavily dependent on paternalistic employers in the steel and mining industries,’ says Garnham, who adds that the area is well supplied with targeted venture capital finance, especially at amounts below £500,000.

In December, the regional development agency (RDA) Yorkshire Forward set aside £9.7 million for businesses in Yorkshire and the Humber, to be invested through YFM-managed funds Partnership Investment Finance and South Yorkshire Investment Fund. That was only a stopgap: a new pot of an anticipated £120 million is to be launched this year to help small and medium-sized businesses struggling to secure finance from beleaguered banks. In the 2008/09 financial year, Yorkshire Forward received 13 per cent of the national budget for England’s RDAs, some £303 million – a larger share than any other region except London and the North West – and that’s before factoring in the European funding it also enjoys.

The need for speed

In addition to this direct investment in companies, Yorkshire Forward also plans to spend more than £90 million, in partnership with local authorities, to roll out “super-fast broadband” across South Yorkshire, covering Barnsley, Doncaster, Rotherham and Sheffield.

Colin Liversedge is MD of York-based Visual Retailing, which supplies merchandising software to the fashion industry. He says a similar broadband scheme in North Yorkshire last year, NYnet, was a godsend for the fast-growing company.

‘We were considering relocating outside the region because other parts of the UK were ahead of us in terms of broadband access,’ says Liversedge. ‘The broadband initiative has saved us £15,000 to £20,000 and now we don’t need to move elsewhere.’

Liversedge adds that NYnet has enabled Visual Retailing’s sales team to demonstrate its products from their desks to companies in India and Brazil. ‘That was something we couldn’t do before,’ he enthuses.

Trouble looming

For all the bullishness from Yorkshire businesses, there are problems brewing in the economy. The recession has had a particularly severe impact on the region’s manufacturing sector, with 16,000 factory jobs lost over the past 15 months. Last year, Yorkshire and the Humber grew 0.2 per cent, compared with a UK average of 0.7 per cent, while estimates for this year are for a shrinkage of 4.0 per cent versus a 3.7 per cent national average.

‘The broadband initiative has saved us £15,000 to £20,000′

Such numbers are alarming, but they’re not necessarily bad news for businesses looking to relocate or expand. Sheffield, for example, ran a campaign late last year urging companies based in the South East to move to the city, which ‘offers average salary costs 30 per cent lower than London, more Grade A office space than in any other city centre and the best incentives for business relocation anywhere in the UK’. Parker of Stroz Friedberg points out that when he moved to Leeds, serviced offices in the centre of the city were very affordable due to overdevelopment – the same goes, of course, for house prices.

Theresa Lindsay, assistant director of marketing at Yorkshire Forward, puts a positive spin on this. ‘There are two reasons why companies might move to the area – either to build market presence or because they are seeking efficiencies,’ she argues. ‘I think in the current climate many “second cities”, like Leeds, are getting the opportunity to grow because they are less expensive.’

Going green

Lindsay adds that healthcare and environmental technologies are both strong growth areas. Yorkshire and the Humber is the ‘only region’ with a fixed target for the reduction of carbon dioxide emissions, which it plans to cut by 25 per cent by 2016. The lion’s share of the UK’s wind farms are based in the region, and North Yorkshire-based power supplier Drax is investing £18 million in a biomass project.

YFM’s Garnham says the region is becoming more attractive to ‘mobile businesses’ – those with low capital spend and infrastructure requirements, which are highly flexible in their choice of location.

‘Mobile businesses are essentially driven by good people, and good people tend to have a choice about where to live,’ he explains. ‘That means quality of life is the biggest driver for inward investment – in other words, it’s about where the CEO fancies living as much as anything else.’

According to Garnham, there’s a new focus on quality of life in the region, tying in with a drive to attract more tourists. Having a base in the South is not a prerequisite for doing business internationally, he claims: ‘We’ve invested in a number of technology companies whose first step is to the US.’

From steel to silicon

One such ambitious technology company (though not a YFM investment) is OCF, whose turnover has doubled to £11.1 million over the past two years. The Sheffield-based business specialises in building supercomputers for universities and other clients needing vast computing power to conduct research or design work.

‘Sheffield was devastated by the decline of the coal and steel industries,’ says MD Julian Fielden. ‘Consequently, it received a lot of European funding which has really refreshed the area. But the one thing [heavy industry] did leave behind was a ready-made platform in terms of power supplies for data centres.’

Fielden is now contemplating extending his business by offering to provide supercomputer-level services over the internet via so-called cloud computing.

It would allow OCF to sell its services to companies that lack the space and facilities to run energy-hungry supercomputers by themselves.

With its investment in broadband and the heavy-duty power lines left over from its industrial past, Yorkshire is an ideal location for such an enterprise. London, by contrast, lacks space for new buildings, and installing suitable power supplies and cooling facilities is problematic. ‘Have I ever thought about relocating to another region? No – and that’s not due to laziness,’ Fielden remarks. ‘There’s a heck of a lot going for businesses in general here and computer businesses in particular.’

See also: Yorkshire calling – why UK dealmakers are heading north

Nick Britton

Lexus Ernser

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...