Regional Market Spotlight: The East Midlands

Brokers in the East Midlands have had a tough few years. Businesses and traditional industries have slowly died and insurers have moved out of the region’s towns and cities, leaving brokers with bloody battles to fight for the remaining premium in the region, and little choice but to look further afield.

In the past, the East Midlands had a healthy local insurance market. But over time, it has stuttered as the region’s traditional trades have fallen victim to advanced technology and the changing economy.

Birmingham has become the unofficial centre for the East Midlands as many insurers have closed down their operations in Leicester and Nottingham, taking them west to Birmingham. But brokers claim that this disappearing act is not a huge concern, as they have become accustomed to dealing with insurers outside the region. Hence,

face-to-face trading, usually the touchstone of any local market, is rare in the region. Brokers admit that they miss dealing with insurers in this way, but it is just another fact of life in the East Midlands that has become familiar.

Stuart Randall, managing director of Leicester based broker Brett & Randall and broking group Brokerbility, has seen rapid change in the East Midlands. “Leicester and Nottingham were the two big centres of insurance years ago, and Leicester had all the major insurers represented,” he says. “Now this has polarised between the two and we are serviced out of other centres, mostly Birmingham.”

Andy Jenkins, operational director at Nottingham broker Russell Scanlan, adds: “The vast majority of our insurers are in Birmingham. We would rather they were here, but if they are not what can we do about it? When we go to Birmingham we make a day of it and see as many underwriters as we can.”

The loss of insurers has had a knock-on effect for the amount of skilled insurance workers in the region. Lynne Griffith, client manager for Aon commercial insurance division in Leicester, says: “There has been a really big contraction of the number of people that work in insurance. In the last five years the number of brokers has shrunk. A lot are being bought up and forming parts of larger groups. There has been a change in local industry and brokers have had to look a bit further afield for clients over the past 15 years.”

But ever adaptable, brokers in the East Midlands are keen to look elsewhere in the UK for their bread and butter. The region has its own airport and excellent rail and road links, meaning brokers are rarely more than two hours from clients around the UK.

Leicester broker Berkeley Burke opened an office in Luton earlier this year following a well documented legal case with consolidator Oval after poaching four of its staff, also based in Luton.

Berkeley Burke managing director Andy Bedford says the new office was already “very very successful” and is now contemplating further growth. The £35m GWP broker also has a London base, and Bedford makes little distinction between the two. “The region’s gateway to London is the Midland main line,” he said. “Construction is one of the highest profile things we do and we are insuring the St Pancras Hotel project and the White City shopping centre in Shepherd’s Bush.”

“Ten years ago all the insurers were here, now there are just one or two, and we are just used to dealing with them remotely.

Andy Bedford, Berkeley Burke

He adds: “We do use the local markets when we can. Ten years ago all the insurers were here, now there are just one or two, and we are just used to dealing with them remotely.”

It’s the same story in Nottingham. Steve Exwood, director of local broker Wilson Organisation, says: “Probably 50% of our income comes from outside the East Midlands area, and is spread geographically across the UK. It is like having two trading platforms.”

Randall thinks that brokers in the region still have a place, but understands why many look for business elsewhere. “Almost all our business has come from outside the region,” he admits. “But much of the run of the mill SME stuff still comes from within the East Midlands. The region has suffered through a decline in manufacturers and the consequence of that is a lot of the premiums have been driven out of the industry completely. Brokers in the region are chasing an ever decreasing pile of premium.”

The difficulties of achieving organic growth have inevitably led to consolidation. As Randall says: “A lot of consolidation has taken place in the area. In a way, the consolidation of brokers has helped their survival because there is more change.”

Consolidators such as Oval and Towergate have made an impact in the region in recent years. Oval swooped for Leicester brokers Bland Bankart and Williams & Williams in 2004 and 2005 respectively, and Towergate captured TF Bell Group in February this year, less than three years after announcing it was opening an office in Nottingham headed by two former Bland Bankart employees.

Many brokers in the region have also joined networks and alliances, seeking the security of scale. Leicester brokers Martin Bown & Co and Berkeley Burke are member of the Willis Commercial Network. Brokerbility, which now consists of 12 brokers in the region, started in the East Midlands before gradually expanding to several other regions around the UK.

The Wilson Organisation’s Exwood says the broker has remained independent, choosing instead to capitalise on the opportunities provide by the consolidation of its rivals. “You have got staff moving around the place. It is a massive market opportunity because consolidation takes away the local link.”

Norwich Union is one of the few insurers that has retained a presence in Leicester and Nottingham, with the insurer’s Leicester office set to remain despite its swingeing staff cuts.

Roy Stirzaker, Norwich Union’s head of trading (intermediary business) for the Midlands, believes that independent brokers still have a role to play. “[East Midlands] has some great brokers, some lively independent brokers.”

The region has not seen many new entrants or start-ups enter the market, perhaps because of the scarcity of staff. It’s a quiet market, but like any, it has its stars.”

Vital Statistics

he East Midlands is England's fourth largest region and is regarded as a prime base from where businesses can service the rest of the UK. The region covers an area of 15,607sq km and consists of six counties Derbyshire, Leicestershire, Lincolnshire, Nottinghamshire, Northamptonshire, and Rutland. According to the East Midlands Regional Development Agency (RDA), the regional economy is worth around 70bn pounds, of which about a third is in the public sector. The main population centres are: Nottingham, Leicester, Derby, Lincoln, Northampton and Mansfield.
A recent report by the Office for National Statistics revealed that the East Midlands is set to become Englands fastest growing region, with its population estimated to rise to 4.8 million by 2016 around 500,000 people , or 11% more than in 2006.
Currently, there are around 260,000 registered businesses, which are mainly small and medium sized enterprises. The manufacturing industry represents 23% of the regions output, and the regions most dominant sectors call for low-skilled workers.
Almost half the population and 45% of the regions businesses are based in the economic core of the East Midlands, comprising Nottingham, Derby and Leicester, and their surrounding areas.
However, as the third most rural region in England, a diverse range of challenges also face the more remote rural and coastal areas of the East Midlands. Although the economy has high employment and relatively high levels of economic growth, according to the RDA it performs less well than the UK average on productivity. As a result of the regions traditional strengths in manufacturing, it is also facing particular issues in relation to globalisation.
The region boasts eight universities and is home to some major companies including Rolls-Royce.