Birmingham’s bid to host a prestigious Treasury-backed bank has been rejected on the grounds that its financial services sector is too small – even though it has more workers in this field than any English city outside London.
MPs have condemned the competition to host the £3 billion Green Investment Bank as a ‘farce’, after Ministers simply named London and Edinburgh as the winners.
Business Secretary Vince Cable encouraged towns and cities across the country to submit bids to become the home of the bank, after plans for the institution were announced in the Budget last March.
It will employ up to 70 people and invest in businesses in the “green economy”, such as those developing environmentally-friendly technology, which currently find it difficult to raise finance.
Birmingham’s bid involved the creation of a 26-page colour brochure, with introductions from city council leader Mike Whitby and Andy Street, Chairman of Greater Birmingham and Solihull Local Enterprise Partnership.
But although Birmingham made the shortlist of six leading bids, its proposal was rejected after a panel appointed by Dr Cable ruled that its financial services skill base was “very weak”.
A report published by the Department for Business, Innovation and Skills to accompany the decision explained: “The biggest recruitment challenge the Green Investment Bank will face is in recruiting specialist financial services staff, particularly appropriate front office staff.
“The pool of people working in this area is very limited and is almost exclusively working and operating in London.”
But in January, David Cameron highlighted the size of Birmingham’s financial services sector in the House of Commons, telling MPs: “It is important to remember that the financial services industry is not just the City of London; it employs 100,000 people in Birmingham and more than 100,000 people in Scotland.”
A report by CityUK, the business organisation representing the finance and banking industries, found that 26,500 people are employed in finance and banking in Birmingham. While this dwarfed by the figure for London, where 335,500 people work in the financial sector, it is higher than in any other English city, and third in the UK behind Edinburgh, where 35,900 people are employed in the sector.
The Department for Business report conceded that Birmingham’s local economy would benefit more than that of any other city from hosting the new bank.
It said: “In relation to effects on the labour market, Birmingham is likely to experience the greatest positive impact as a result of hosting the Green Investment Bank though some impact could also be experienced in Peterborough and Manchester.”
Despite this, Dr Cable has announced that headquarters of the Green Investment Bank will be located in Edinburgh, with the Green Investment Bank main transaction team based in London, which means the bank simply goes to the capital cities of England and Scotland.
He said: “Harnessing the strengths of Edinburgh and London will support the Green Investment Bank’s ambition to become a world leader. Edinburgh has a thriving green sector and respected expertise in areas such as asset management. London, as the world’s leading financial centre, will ensure that the Green Investment Bank’s transaction team can hit the ground running.
“This decision will allow the Green Investment Bank to operate effectively and achieve its mission of mobilising the additional investment needed to accelerate the UK’s transition to a green economy.”
Birmingham MP Steve McCabe (Lab Selly Oak) said: “The result of this competition reveals a number of things. It shows just how superficial some of the announcements and promises of the government have been.
“The fact that they have a competition and then just place it in London shows that their talk about rebalancing the economy doesn’t really amount to much.
“It is an insult to suggest we wouldn’t have enough competent staff to run it.”
A spokesman for Birmingham Chamber of Commerce said: “What is important is that businesses in the West Midlands are able to gain access to funding from the bank.
“We don’t expect the bank’s location to be a barrier to that.”