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www.badenochandclark.com Market Insight Investment Management 2015 Quarter 1

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www.badenochandclark.com

Market InsightInvestment Management

2015 Quarter 1

04 Industry Overview

06 Operations

08 Technology & Data Management

10 Sales & Distribution

12 Compliance

14 Finance

16 Risk

18 Legal

20 Marketing & Communications

22 HR

ContentsInvestment Management

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Guy EmmersonOperations Director, Badenoch & Clark

Industry overview

We have provided specific detail on our specialist verticals, highlighting some of the trends and challenges of Q1, as well as the outlook for 2015 based on the numerous conversations our consultants have had with both candidates and clients over the

past few months.

As always, we welcome your thoughts and feedback and wish you all the best for Q2.

Many firms came into 2015 with a renewed sense of optimism but, while performances in Q1 have arguably exceeded expectations

across the board, the market continues to operate with a sense of caution, seemingly fuelled by the belief that it could all change at

any minute. The experience of the first few months of the year always has a big impact on industry outlook and below we look at some of

the major topics that have featured in conversations with our clients and candidates across the Investment Management sector.

AIFMDFirms across the UK will have filed under AIFMD for the first time in January, and the impact of this will be felt across both business process and technology. Firms will want to ensure that they are in a position to provide the right data, in the right way, when this comes round again.

BonusesQ1 has seen compensation reviews take place across the country, and the overall feedback has been positive from both candidates and clients. Clients have been happy with the pool from which they have been able to pay out, with many firms showing an increase year on year. Candidates are feeling fairly treated and appreciative of the continuing change in bonus landscape. However, the overall consensus is that this will not necessarily have a positive impact on retention, as candidates still seek moves to increase their base or to capitalise on improving market conditions.

External Influences Oil prices, political volatility (particularly in Eastern Europe), housing prices and the upcoming election could all influence market performance over the course of 2015, however there is no solid consensus as to the sort of impact these factors will have. Q1 saw several firms performing far better than expected, particularly within the emerging markets, driving further belief that 2015 will build on the positive gains made last year.

Product OfferingFirms are continuing to invest in new products as part of a broader investment strategy, as well as marketing, sales and distribution. With customers increasingly looking for balanced and responsible investment portfolios, firms are responding with greater diversity in their offering and the associated risk levels.

DigitalIt has long been the case that the Wealth and Asset Management industry has found itself behind the curve in terms of new, digital technology and its ability to engage with an evolving client base. As customer expectations change, firms must adopt and adapt to new ways of thinking if they are to retain business and attract customers in the future

Data It is impossible to avoid this four letter word at the moment. From a recruiter’s perspective, it is fascinating to see so many different firms at such different stages of their Data strategy - the rise of the CDO, outsourced managed services, centralised data solutions and fully engaged data governance. Data has remained the focal point of Q1 and looks set to dominate 2015 overall.

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Operations

While confidence in the markets has returned, regulatory changes and an increasingly demanding customer base means firms have had to adopt more holistic investment strategies and a broader product range, which has impacted Operations.

The need to effectively balance risk and return means candidates with broad and relatively complex product exposure are in high demand and short supply. Exposure to LDI investment strategies and derivatives have proven particularly popular in Q1.

While major drivers within this space remain automation, streamlining and cost reduction, firms may find themselves having to spend money to ensure they have the skill sets required to deliver this.

Market Challenges Both candidates and clients felt that bonuses paid and received were fair and competitive, which means attracting talent has proven increasingly challenging. While there was a slow start to the year within Operations, momentum picked up towards the end of Q1 with mid-level Client Reporting and Performance roles in high demand.

However, companies have perhaps been a little guilty of expecting paper-perfect candidates to make a ‘sideways’ move without offering enough career progression, increased product/business exposure or genuine financial incentive for them to do so. If you want a Performance candidate capable of covering reporting, analysis and attribution (which many of our clients do) then you need to ensure that you offer potential staff at least two of the above, and that you make this clear during a well structured and engaging interview process.

The senior end of the market has been a little quiet, with only a handful of roles coming out; most of those at a compensation level that candidates felt fell below expectations.

Outlook for 2015While we anticipate a gradual increase in volume over the next few months, we believe the busiest period in Operations will be the end of the year. Although firms are broadening product ranges and have plans for various launches, there remains a focus on cost reduction and saving which means a delayed impact on recruitment as firms look to work at full efficiency with their current head count and remain relatively optimistic about their own retention.

Candidates looking to move this year would do well to broaden and strengthen their product

knowledge, to ensure they are seen as increasingly versatile to a potential employer.

The need to effectively balance risk and return means candidates with broad and relatively

complex product exposure are in high demand and short supply.

A busy year as expected with project deliverables and an increasingly demanding client base, regulatory changes and increased complexity in our product range.

Streamlining processes, increased automation and efficiency (found this to be true for the Operations space for a large number of firms), tightening budgets on resourcing and an overall reduction in the bottom line.

Client Reporting Manager for a large Global Investment Management firm

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Technology & Data Management

Data Management remains high on the agenda across the buy side. Throughout Q1 we found ourselves discussing various aspects of a firm’s data strategy, with an incredible spectrum in terms of relative ‘maturity’ levels, which in turn is driving recruitment needs and challenges across Change Management and IT, as well as within more operational Data Management.

RegulationAs firms respond to increased internal and external reporting requirements stemming from regulations including AIFMD, Solvency II, EMIR and MiFID II, both contract and permanent staff are finding no shortage of opportunity. The need for increased transparency and a “show me, don’t tell me” approach to data continues to be a major driver in the data management space. One recurring challenge amongst our clients is deciding how best to collect the data from disparate sources. We are seeing a number of projects addressing this issue, particularly the decommissioning of legacy systems and aggregation of data from multiple back end sources.

One challenge cited by a couple of firms centres around a lack of clarity, benchmarks or minimum expectation with regards to certain reporting requirements. There is belief that existing guidelines are open to interpretation which can result in a degree of wastage. While optimists will say that the more transparent a company becomes through this, the more attractive it becomes to potential investors, others will bemoan the opportunity cost in a time when budgets are still scrutinised.

Data GovernanceWhile certainly a growth area, many firms argue that this is still not being taken as seriously as it needs to be. The increased investment in this space stems from understanding the competitive advantage that a good data governance strategy provides, aside from the reduction in operational risk associated with meeting regulatory requirements.

We have witnessed an increase in the number of Data Governance Committees and Steering groups comprising senior representatives from across the business, demonstrating increased ownership and the shift away from data being the sole responsibility of the IT department. This movement needs candidates who are experienced in driving forwards change not only at a structural level but at a cultural level too, in order to establish responsibility across the business for ownership of data.

IBOR

Certainly not a new concept, one of the most talked about concepts of

2014 has remained prominent in Q1, with several firms defining what an

IBOR actually looks like for them and what they need to do to implement it. Although there remains a lack of

consensus over what IBOR actually is or should be, the consistent impact across our clients is investment in

the necessary technologies in order to create consistent, clean and up to date data across the enterprise

– a single version of the truth.

Outlook for 2015 Unsurprisingly, we anticipate that activity across Data Management will remain high throughout 2015. We expect a continued increase in demand for Data Governance candidates, especially strategic, forward thinking individuals with strong communication skills, capable of challenging existing processes and driving change across the business.

Business/Data Analysts will continue to be sought after, however there is an increased expectation on candidates to have a broader understanding and interest in the business. Technical candidates with strong data mapping and modelling skills are also expected to show good front to back knowledge, and clients have to be patient in what is a candidate short market.

System Implementations and integrations: With a number of large projects now underway or in the pipeline, we expect to see a busy 2015 in this space, certainly when compared with previous years. Even those not looking to introduce new vendor based systems seem to be hiring staff to work on end user experience and customisation. Charles River, Simcorp and Markit EDM look likely to be popular.

Information Security and Technology Risk is one to watch in 2015, as firms across the city respond to increased regulation and cyber threats through the addition of strong risk generalists to work across Infrastructure, Applications and Data. We expect to see increased demand for strong Technology Risk candidates from any corner of the Financial Services landscape.

Digital: Although yet to see this really take off across the buy side, increased pressure from an advanced customer base (and often workforce) means that this area is one to watch for the latter parts of the year.

One challenge cited by a couple of firms centres around a lack of clarity, benchmarks or minimum

expectation with regards to certain reporting requirements.

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Sales & Distribution

Major DriversWith many firms focussing on the front office, investing in new products and bringing on new clients, it is only natural that we have seen the market focus largely on client services, oversight and relationship management positions throughout Q1.

Maintaining high service levels and strong customer relations is essential in today’s competitive market and Investment Management firms have sought to ensure appropriate headcount in these areas. One major challenge is finding candidates with the specific technical and regional knowledge across Europe and the UK, not to mention specific language skills such as French & German, to ensure the client base is well supported.

The RFP space has been much quieter in Q1, with a greater percentage of roles at the more junior end. Continued budgetary pressures mean that clients have opted to hire at the junior end of the market and invest in training and developing them. Many clients with a more rigid idea about what they are looking for are struggling to find the perfect candidate at what they deem to be an acceptable financial cost.

Outlook for 2015

We anticipate a continued focus on Client Services, Oversight and Relationship Management positions

with a quarter on quarter increase in volume as recent Front Office hires bed themselves in.

After a slow start to the year, we expect to see increased activity within the RFP space as bonus

payments are collected.

Hiring levels have remained consistent year on year with companies focusing on delicate, organic growth and many experiencing delays in headcount approval for any anticipated project plans.

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Compliance

The buy-side’s best defence is speed and process, securing and on boarding candidates well before the 4-6 week timeframe of the larger Investment Banks

Outlook for 2015

New hiring will be weighted heavily towards replenishment as opposed to newly created roles. With the increase and pace of changing legislation, Heads of Compliance will continue to seek additional budget and resource for additional interim or permanent hires. With a number of asset managers changing their front office trading platforms, we predict there will be a migration of permanent employees moving into the contract space, as this continues to be a lucrative alternative, with projects pipelined long term which will require compliance professionals with specific coding experience.

Q2 is traditionally the busiest time of the year by quantity of roles released, however it is widely recognised that this is traditionally the result of dissatisfaction with bonus payments. With a more positive feeling towards compensation reported this year, we anticipate more balanced hiring levels over the course of the year.

Major Drivers

With publication of the findings of the FCA’s thematic review of asset management firms in relation to the regulatory risk of market abuse, we have already seen a number of our clients releasing related new roles into the market. Our clients are seeking to hire experienced trade monitoring and surveillance professionals who have prior exposure in the asset management space, either in a traditional asset manager or alternatives firm.

With a limited pool of candidates within this space, the early signs are that firms are having to be more flexible around sector experience, and are looking to attract from the investment banking sector.

With professionals being able to command higher compensation levels in the investment banking space, attracting the right calibre of candidates has proven a challenge, with hiring managers seeking additional sign off in order to be competitive with the banking sector.

In core compliance specialisms, contractors have been able to transition between working with Banks and with Asset Managers more than ever before; however, with the larger banks offering the most lucrative daily rates many of our asset management clients have struggled to sign off the levels of budget necessary to secure the strongest candidates. The buy-side’s best defence in this space is speed and process, securing and on boarding candidates well before the 4-6 week timeframe of the larger, more bureaucratic Investment Banks.

Compensation & Employee Engagement

Bonus levels awarded for 2014 have either been in line with, or have exceeded expectations as a large number of firms have seen increased fund performances. We have seen an increase in the level of compliance professionals who are keen to move to smaller or boutique firms and perform roles that enable them to gain exposure to a wider range of responsibilities.

As the larger firms tend to have specific and focussed compliance functions and disciplines such as Trade Monitoring, Investment Guideline Monitoring, Marketing & Distribution, candidates are feeling that their career development and opportunities to acquire further regulatory knowledge outside of the larger firms is limited, with few firms promoting internal mobility.

Employers are informing us that salary demands and expectations from candidates in the market are unrealistically high; in particular from compliance professionals with 1 – 4 years’ experience.

One hiring manager commented that “Compliance professionals at this level have cottoned onto the fact that there is a real vacuum of talent and demand is high. Between 2008 & 2013, there have been consistent freezes on hiring, and under investment in bringing in graduates for development. As a result there is a real void with demand outstripping supply, and as a result we have seen very high levels of salary demands which are not in line with skill sets.”

We predict that firms will continue to face challenges in hiring marketing & distribution compliance professionals. With a small pool of candidates experienced in reviewing and signing off marketing material and financial promotions, and limited compensation improvements offered to entice them, poor fluidity in this area of the market will persist.

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Finance

Major Drivers

Q1 has seen a schematic shift in financial regulation from the restoration and correction of balance sheets to the creation of jobs within the regulatory space. This has led to a positive transformation from proposition of new regulations to implementing those established over recent years, which in turn has triggered an influx of newly-created Regulatory Reporting and Regulatory Accounting roles.

In turn, candidates with a desirable background within regulation are seeking opportunities that offer consultation in policy decisions and broad involvement in projects. Firms that are able to offer this can distinguish themselves in a crowded market place.

As global investment in Real Estate continues to increase this year after positive returns in 2014, so too has demand from our Real Estate Investment Management clients. Growth is currently centralised in commercial, European Real Estate, as a cautious approach to investment is still being adopted by investors.

Opportunities across both commercial and support functions are plentiful, and candidates with both experience and passion for property investment management are highly sought after. Accountants with Real Estate experience are becoming increasingly aware of the demand for their skill set and we have seen a slight increase in salaries offered to these candidates (circa 6%).

Outlook for 2015

There will be a need to adopt a strategic approach to managing regulatory requirements on an on-going and evolving basis that will impact hiring within Finance departments. The main challenge this brings to our clients is finding candidates who possess a deep understanding of how evolving regulatory change will affect their role and their company’s position. The market has become increasingly candidate led, and with budgets still constricted, being able to attract and retain the talent needed to navigate the landscape has never been more difficult.

There is demand for newly-qualified accountants with

foundation training from the ‘Big 4’. Candidates with this

background are required in the regulatory space,

as well as across multiple disciplines. Typically, newly

qualified candidates will have an appetite to be involved in client facing activities,

strategic decision making and, due to the high demand for their skill set, a competitive

base salary. Candidates who possess a recent ACA

qualification will demand in excess of £45,000.

Throughout 2015, several initiatives will combine to make data and reporting once again critical for Investment Management institutions.

Opportunities across both commercial and support

functions are plentiful

Accountants with Real Estate experience have seen a slight

increase in salaries offered (circa 6%)

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Risk

Moving With the Market

Certain areas in this Risk market are experiencing a severe candidate shortage, causing an increase in daily rates for candidates and hugely competitive recruitment processes. Wholesale Credit, Ops Risk (3rd Line of defense -Internal Audit) and Quantitative specialists are in particularly high demand and clients will need to either show great flexibility when hiring, or be able to move incredibly quickly to avoid disappointment.

Organisations Recruit People, not Robots

Although we are seeing several niche roles that require specific skills, clients still want to hire someone that fits the culture of the immediate team and the broader organisation. It is vital that good communication lines exist between the hiring manager and the agencies, as this will enable a more effective search in terms of balancing hard to find technical skills with the equally important company fit.

Candidates Need to be Enticed

In current conditions, with candidates hard to come by, it is important that companies are prepared to promote the benefits of their organisation and entice candidates to join them. This is not purely a case of remuneration. While higher salaries and better bonus potential might encourage some candidates to move into a similar role, opportunities to grow and develop their skill set can prove equally effective. We have seen people move, as an example, from Audit to Operational Risk, and quickly become an integral part of the team.

Outlook for 2015

We expect to see continued levels of high demand across the Risk and Audit markets, with an anticipated growth in Operational Risk teams to meet new regulatory requirements as mentioned earlier. This will also impact demand for 3rd Line of Defence professionals. Quantitative risk, as well as wholesale credit risk professionals coming to the market will find no shortage of opportunities on both a temporary or permanent basis.

The ever-changing regulatory landscape mean there has been a continuous demand for regulatory risk and control professionals to help set up, re-design and roll out frameworks and policies that ensure banks do not fall foul of regulations. With new budgets now released, we expect to see an increase of about 30% across Risk and Control departments.

We expect to see continued levels of high demand across the Risk and Audit markets, with an anticipated growth in Operational Risk teams to meet new regulatory requirements.

We have seen people move, as an example, from Audit to Operational

Risk, and quickly become an integral part of the team.

While higher salaries and better bonus potential might encourage some candidates

to move into a similar role

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Legal

Market Analysis

Having seen a positive sentiment return to the UK economy over the latter part of 2014, 2015 has started with mixed feelings, ranging from the EY Item Club predicting that the UK is likely to suffer a slump in growth (anticipating 2.4%, well below the 3.1% growth expected), through to the British Chamber of Commerce suggesting that the UK will exceed its growth expectations. It is highly likely that the economy will remain subdued as a result of the looming General Election, speculation about a referendum on the UK exiting the EU, and the impact of the ongoing crisis in the Eurozone. The Organisation for Economic Co-operation and Development is expecting The Bank of England’s Monetary Policy Committee to raise interest rates in “mid-2015”. This has created a fear of the impact that a rise in interest rates will have on individuals and SMEs.

Hiring Activity

Following a particularly busy end to 2014, 2015 started with strong market confidence. Both January and February proved much quieter than we had initially expected although it transpired to be the ‘calm before the storm’. March has seen a large number of new roles arising across the market, within asset management, investment banking, alternative finance, the insurance market, general commercial, corporate, general banking and trade finance, litigation, commodities, funds and regulatory across a number of PQE levels.

Pay Rates / Salaries

It continues to be difficult to clearly denote ‘market rate’ as salaries wildly differ across institutions and many longer term employees have yet to be aligned to their more recently hired peers. As with previous quarters, we have seen a slow and continued rise in base salaries being offered across the market as organisations look to incentivise candidates to join their teams and as a response to the increased base salaries being offered within the leading City law firms. On the interim side, rates have remained steady across the quarter with niche roles continuing to offer day rates at £850+ but with c5 PQE lawyers remaining at the £600 - £750 level.

Challenges & Outlook

We continue to see candidates involved in multiple processes, or receiving multiple offers, with organisations able to run recruitment campaigns in a matter of weeks. The ability to move quickly is often proving a deciding factor in securing the best talent.

A large number of the new roles arising have been signed off as ‘new head-count’ (rather than attrition) and this is a trend we have seen to continue throughout the last 6 months.

Badenoch & Clark is fortunate to have a dedicated headhunting unit attached to the legal financial services team and, as the level

of activity increases, access to passive job seekers and the ability to utilise this function on contingent as well as search assignments, is increasingly important. It is highly likely that Quarter 2 will be full of activity, especially as bonuses will have been banked and many candidates will look to make a swift move following on from this.

The resulting ‘attrition’ hires, combined with continued investment and expansion, should ensure a busy job market in the months to

come for legal professionals.

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Market DriversFollowing several years of reduced and limited budgets, Marketing & Communications is a now a major growth market across the Financial Services sector. In the last 6 months there has been a significant increase in job volumes demonstrating that companies are proactively looking to bring in new business through their marketing and sales strategies, reflecting a renewed sense of optimism in the market conditions and outlook. This relatively quick resurgence in the Marketing & Communications market has, however, led to a candidate shortage, with organisations competing to attract (and retain) the best talent available on both a contract and permanent basis.

Skill Sets in DemandSeveral clients are undertaking projects to review their internal communications in the first 6 months of 2015 (particularly their intranet), leading to positions with a more internal journalistic feel. Alongside the increase in demand for candidates developing the infrastructure and oversight of Marketing & Communications, the need for quality content remains vital and as such, we have seen a significant demand for strong and experienced professionals from creative backgrounds such as freelance/financial journalist and copywriters. Prior experience within the financial services remains important, as a clear understanding of the sector and products means shorter bedding in periods for new starters, which in turn allows companies to quickly pursue their growth agendas.

Recruitment ChallengesCandidates have found their negotiating position strengthened by the increasing market demand, enabling many to justify increased salaries/rates or more ‘enticing’ job titles. With bonuses still in a ‘recovery’ stage, we have found many candidates prepared to capitalise on market conditions and make good long term career moves at the expense of their bonus.

With candidates in demand and able to consider multiple options, clients will have to adapt in a number of ways when recruiting. Hiring managers will need to remain up to date with salary and rate levels, to ensure that their expectations are inline with market conditions. They will need to adapt their recruitment processes in order to keep pace with the competition and ensure that candidates have a smooth, positive and speedy experience during the process. The ability to make quick decisions can prove the difference between securing and losing your chosen candidate.

Outlook for 2015A number of our clients predict that their teams will grow by approximately 33% over the course of the year, with the majority of new possibilities being for Writers (especially those with RFP exposure). More jobs does not equate to more candidates however, so we expect salaries and rates to increase throughout the year along with demand. This is likely to cause frustrations for companies that don’t get their recruitment process spot on.

Marketing & Communications

Firms see investment in the right talent as absolutely critical, and have therefore shown far greater flexibility towards contract/interim options in particular. With clients often

prepared to review candidates on a 1 month notice period, those coming to market will not have had such a broad range of

options available to them in a long time.

A number of our clients predict that their teams will grow by approximately

over the course of the year

33%With candidates in demand and able to consider multiple options, clients will have to adapt in a number of ways when recruiting.

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HR

Market Drivers HR functions within the Financial Services had a quiet start to 2015, with many Investment Banks and larger Asset Management firms putting a freeze on hiring until final budgets and bonuses had been agreed and announced.

With what investment available seemingly directed elsewhere and work loads increasing, the roles that were released tended to focus on the more ‘junior’ side. We saw high demand for Generalists and Administrators, particularly to focus on bonuses and salary reviews, although clients showed a strong preference for those with broader HR exposure, therefore enabling them to utilise new hires across the HR function as business demands dictate.

CandidatesQ1 saw many HR professionals putting fresh challenges and cultural changes ahead of compensation in their list of priorities. For many, a change of scenery and the chance to broaden their own experience in another company are serving as the key motivators. This includes candidates considering roles across different industry sectors outside of Banking & Financial Services.

HR Managers confirmed that multiple Investment Banks would hold off on hiring until the General Election is completed, in

anticipation of any tax increases that might impact hiring activity for the rest of the financial year. Aside from more ‘junior’ hires, there has been demand for candidates with strong Data Analysis skills, primarily to support projects

focused around head count planning and analysis.

Outlook for 2015

We expect the market to pick up in terms of both interim and perm assignments in Q2/Q3, once bonuses have been announced and paid. With increased confidence in market conditions, HR

professionals are ready to look externally, which in turn should create more ‘attrition’ hires.

As the above plays out, we expect to see those with hard to find skills or experience within a particular specialist area benefit from an increase in salary/rates, as companies look to attract and retain top

talent in a shrinking candidate pool.

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© Badenoch & Clark 2014. All rights reserved. The information contained in this publication is intended for general purposes or guidance only. It does not purport to constitute professional advice. Badenoch & Clark accepts no liability for the accuracy of the contents or any opinions expressed herein.

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