From metropolis to Milton Keynes: Santander move shows small town appeal

The centre of gravity of one of the UK’s largest banks is shifting 50 miles north-west from central London to a former car park in the once-unfashionable town of Milton Keynes.

By the time it opens in 2023, Santander’s new £150m, 44,000 square metre head office will be the first sight greeting visitors when they exit Milton Keynes railway station. 

The project, complete with a 200m rooftop running track, was initially planned as a hub for the bank’s IT and technology workers, but in March the Spanish company announced it would become its UK headquarters, while it will cut space at its current base near Euston station.

The shift highlights a potential opportunity for regional towns and cities to attract more financial services businesses as groups reassess their operations for a post-Covid-19 world and more employees prioritise affordable properties and outside space. But with the industry’s largest employers under pressure to cut costs, some towns, particularly those with existing back-office operations, are also losing out.

“As an inward investment destination, [Milton Keynes] is a more rounded proposition than London,” claimed Peter Marland, a transplant from north-west England who now leads Milton Keynes council. “I spend a lot of time telling people it’s not a shitty concrete place, it’s genuinely green, it’s a nice place. These businesses invest here for a reason . . . it’s a nice place not just to have an office but for staff to live.”

The largest of the “new towns” conceived in the 1960s, Milton Keynes was consciously situated roughly equidistant between London, Birmingham, Oxford and Cambridge. The strategic location has already made the town, which has a population of 265,000, popular as a logistics hub, but Santander UK deputy chief executive Tony Prestedge said it was also key to its appeal to financial services.

“The choice was not primarily driven by cost, it was primarily about access to talent and the working environment,” Prestedge said. He described the area between Cambridge and Oxford as “the most vibrant” environment for digital talent in the country, and said the company would benefit from fast travel links to older sites in London, Leicester and Bradford.

Santander has had offices in Milton Keynes since it took over Alliance & Leicester in 2008. Other financial services firms with a substantial presence include Grant Thornton, KPMG and PwC, and it is also attracting start-ups such as Allica Bank, which will base about 60 per cent of its staff in the town when it moves into a larger office in September. 

Several of the companies have contributed funding to MK:U, a university being developed by Cranfield University with a focus on producing more technology graduates.

A university would help address what Marland said were among the town’s barriers to attracting more businesses — a lack of appeal to younger workers and providing quality education to locals rather than relying on middle-aged arrivals.

“There’s still a concern around a two-speed city — if you were born and brought up in Milton Keynes your skills base tends to be lower than the people who we import . . . People tend to arrive when they’re 35 and about to start a family, middle managers upwards.”

Another challenge compared with towns further north, if not London, is affordability. Detached properties in Milton Keynes sold for an average of £464,000 over the past 12 months, according to Rightmove. “It’s still relatively affordable for the south-east, but it is not cheap,” Marland added.

Milton Keynes is not alone in attracting banks to smaller cities and towns. Tim Coates, co-founder of Oxbury Bank, said the two-and-a-half-year-old company chose Chester in north-west England for its headquarters because “it’s got the right kind of talent pools, plus it’s got a lot to say about what we stand for as a new bank serving non-metropolitan, non-urban parts of the economy”.

Less than 10 minutes walk away from Oxbury’s base in a former steam mill, however, the fate of another larger building highlights a countervailing pressure. Lloyds Banking Group is selling an office that once housed about 1,100 staff, after merging its Chester operations with the local MBNA credit card business it bought in 2017.

Bank profitability was under pressure even before the pandemic, and all the UK’s largest banks have said they will review their property footprints to reduce costs. Lloyds is targeting a 20 per cent reduction by the end of 2023. 

When Santander announced Milton Keynes would become its new headquarters, it also revealed it would shut offices in Newcastle, Manchester and Bootle, and reduce its operations in Leicester and Teesside.

Prestedge said that about 40 per cent of Santander’s desk capacity went unused before the pandemic, and said the “rationalisation” was a response to staff surveys that showed the majority would not want to return to offices five days a week.

However, he stressed: “We will still be investing in those towns, but to create sites more fit for purpose for the work practices of today.”

Henri Murison, director of the Northern Powerhouse Partnership lobby group, said banks “have a responsibility to make sure the way they leave a place is responsible”, particularly less affluent areas. “Leaving a place like Bootle and closing the doors of a major office is a big deal . . . What do they do to make sure they don’t leave a negative legacy?”

He added, though, that “relocation and office moves are only part of the story” in terms of the impact financial companies have outside of London. 

“It’s about how interested they are in regional economies . . . to what extent are they interested in [small businesses] and not just entirely vanilla lending. They are more important to the economy than they are as direct employers — so I won’t beat up on someone just because of the number of bricks they have.”