Spotlight on the UK's banking sector

Contents

• Key Points
• London’s banking sector fuels office market resurgence
• The rise of regional banking hubs in the UK
• Overseas banks – expanding beyond London
• The talent engine powering the UK’s regional banking growth
• London vs UK regions – banking salary comparison (2025)
• Banking sector drives demand for large pre-let office space
• The rise of challenger banks in regional cities

Key Points

• Major banks are accelerating their return-to-office strategies, driving strong demand for high-quality office space in central London. However, whilst the sector has been traditionally concentrated in London, it is now embracing regional UK cities as key hubs for operations, technology, and innovation. Over 1.1 million sq ft is currently sought, with most institutions expanding rather than downsizing. The focus is on Grade A, sustainable buildings that support collaboration, ESG goals, and talent attraction. This shift signals renewed confidence in London’s role as a global financial hub and highlights the importance of future-ready, flexible work environments.

• Over the past five years, the banking sector has seen significant growth across regional UK cities, reflecting a broader shift in how and where financial services are delivered. The sector is embracing regional cities as key hubs for operations, technology, and innovation. In fact, 2024 marked a record year, with the highest take-up by both square footage and number of deals since 2018, totalling 719,000 sq ft across 19 regional banking transactions. With 1.8 million sq ft of lease events expected over the next five years and return-to-office mandates gaining momentum, we anticipate continued growth in take-up within this sector.

• Challenger banks, such as Starling, Monzo, Atom, and Tandem, are expanding into UK regional cities to benefit from lower costs, skilled talent, and innovation hubs. Cities like Manchester, Leeds, Birmingham, and Cardiff offer digital infrastructure, government support, and diverse customer bases, enabling sustainable growth beyond London’s high operational expenses.

• By expanding beyond London, challenger banks can diversify their operations and reduce their reliance on the capital. Monzo, for example, which began in London, has expanded its offices to cities like Manchester and Bristol, which allows it to reach new customers while tapping into regional tech ecosystems. This diversification helps challenger banks manage risk and grow their customer base across the country.

• The average percentage difference in banking salaries between London and the six major UK regional cities is 33%. However, while London leads in pay, regional banking centres are gaining traction, offering competitive packages and lifestyle benefits that appeal to a growing segment of the workforce.

• The banking sector has pre-let over 1 million sq ft of office space in UK regional cities over the past decade, favouring collaborative, campus-style buildings. With 1.8 million sq ft of lease expiries due by 2030 – and return-to-office mandates reinforcing the need for high-quality, future-proofed workspace – could major banks once again lead a new wave of regional pre-let activity?

London’s banking sector fuels office market resurgence

A notable shift is underway in the banking sector as major institutions double down on return-to-office strategies, reversing the remote work trends that defined the pandemic era. This renewed focus on physical presence is translating into a surge in office demand, particularly for high-quality, future-ready space in central London.

With over 1.1 million sq ft of active banking sector requirements currently in the market, the momentum is clear. What’s striking is that the majority of these occupiers are not downsizing – they’re expanding. This is being driven by a combination of increased in-office attendance, headcount growth, and the limitations of legacy office stock. Most of the banks currently seeking space have been in their existing buildings for over 15 years, signalling a broader wave of relocations and upgrades.

Recent transactions underscore this trend. JP Morgan’s lease of 148,000 sq ft at One Cabot Square and State Street’s acquisition of 100 New Bridge Street (194,000 sq ft) reflect a growing appetite for large, high-spec spaces. HSBC is in talks to lease as much as 180,000 sq ft of offices close to its soon-to-be vacated headquarters in London’s Canary Wharf, signalling a new phase of expansion following an earlier downsizing prompted by the shift to hybrid working.

The flight to quality remains a defining feature of this market. In the past 18 months, 99% of banking sector acquisitions have been in Grade A buildings, with 80% located in newly developed or comprehensively refurbished stock. This reflects a clear preference for environments that support collaboration, ESG goals, and talent attraction.

Looking ahead, demand is expected to remain strong over the next few years, particularly for buildings that offer flexibility, sustainability, and top-tier amenities. As return-to-office mandates become more entrenched, banks will continue to seek out space that enhances culture, productivity, and long-term growth. Landlords with best-in-class offerings, especially those able to deliver modern, tech-enabled environments in prime locations, are well-positioned to capitalise on this next wave of demand. For London, the banking sector’s resurgence is not just a return to form; it’s a signal of renewed confidence in the city’s role as a global financial powerhouse.

The rise of regional banking hubs in the UK

The UK banking sector is a major economic contributor, employing over 2.2 million people, with two-thirds of these jobs located outside London.

With 321 banks and assets totalling £10.34 trillion, the sector plays a vital role in ensuring financial stability and supporting regional economies through highly skilled, well-paid jobs.

A clear sign of this regional shift came in May 2024, when the Bank of England (BoE) announced a major expansion of its Leeds office, committing to base at least 500 staff in the city by 2027, up from just 70 currently. This move reflects the BoE’s long-term strategy to decentralise operations, improve public engagement, and tap into wider talent pools across the UK. It also reinforces Leeds’ growing status as a national financial centre.

In recent years, the sector has experienced significant growth in regional UK cities, reflecting a broader shift in how and where financial services are delivered. Major firms are setting up new offices and innovation hubs, relocating teams, and expanding leadership roles in thriving financial centres across the country. In 2024, the sector recorded its highest take-up by sq ft and by number of deals since 2018, totalling 719,000 sq ft, with 19 regional banking deals.

Traditionally concentrated in London, the sector is now embracing cities such as Manchester, Birmingham, Glasgow, Leeds, Edinburgh, and Bristol as key hubs for operations, technology, and innovation. This shift is driven by evolving workplace dynamics, talent strategies, and the need to reduce costs and diversify geographically.

Banks are increasingly choosing regional cities not for call centres, but for technology and innovation hubs. The rise of AI and digital banking has reduced the need for traditional customer service centres, fuelling demand for premium office space that fosters collaboration and attracts tech talent. 87% of the space taken over the last five years has been for Grade A or prime office space, reflecting the need to attract and retain talent.

With less reliance on a single headquarters, banks are rethinking their real estate strategies and investing in locations that offer access to skilled talent, modern infrastructure, and lower operational costs.

Cities outside London have responded by strengthening their appeal by offering strong university partnerships, growing tech ecosystems, and competitive business environments.

Glasgow has emerged as a standout example, with Barclays opening a £500 million campus in 2023 that now houses over 5,000 employees across risk, operations, and digital engineering. JP Morgan followed suit, opening a 270,000 sq ft technology hub in 2024 to support over 2,000 staff in cybersecurity and software development.

Birmingham has also seen major investment, with HSBC’s UK ring-fenced bank headquarters now employing over 2,500 people. Deutsche Bank and Goldman Sachs have also scaled up in the city, with Goldman Sachs committing £4 billion to a partnership with Legal & General for housing and regeneration.

Wellington Place in Leeds has become a strategic location for Lloyds Banking Group, which has grown its presence in fraud detection, analytics, and customer experience, supported by local universities. The BoE’s expansion further cements Leeds’ role as a key player in the UK’s financial future.

As banks modernise and distribute their operations, regional cities are no longer peripheral; they are central to the sector’s future. Their combination of skilled talent, modern office space, and thriving innovation ecosystems makes them natural partners in the evolution of UK financial services. What began as an exploratory trend has now become a strategic shift, signalling a long-term rebalancing of the UK’s banking geography.

Overseas banks – expanding beyond London

While London remains a global financial centre, overseas banks are increasingly expanding into UK regional cities. This shift, which gained momentum post-Brexit and during the pandemic, is driven by cost efficiency, access to talent, and a desire for operational resilience.

Cities such as Manchester, Birmingham, and Glasgow offer lower costs, strong infrastructure, and access to skilled graduates, in turn making them attractive alternatives to the capital. Government support through the ’Levelling Up’ agenda and decentralisation of regulatory bodies has further encouraged this trend.

Goldman Sachs opened a major technology and engineering hub in Birmingham in 2021. The move reflects a broader strategy to diversify operations and tap into the city’s growing tech ecosystem and university talent.

BNP Paribas officially expanded its presence in Glasgow by opening new offices at 177 Bothwell Street in 2022. This move marked a significant investment in the region, reinforcing the bank’s long-standing commitment to Scotland, where it has operated for over 40 years. The new office spans 20,600 sq ft and accommodates around 300 employees from BNP Paribas’s Securities Services and Real Estate divisions. It’s also the first UK location where both banking and real estate teams share a collaborative workspace, enhancing client service and internal synergy.

BNY Mellon has established a significant presence in Manchester, leveraging the city’s strong financial services talent and infrastructure. The Manchester office plays a key role in the bank’s UK operations, supporting global asset servicing and technology functions.

As overseas banks continue to diversify their UK footprint, regional cities are emerging as vital hubs for innovation, resilience, and long-term growth.

The talent engine powering the UK’s regional banking growth

A new wave of growth is emerging from the country’s regional cities, where access to top-tier talent, academic excellence, and innovation ecosystems are reshaping the future of banking.

Cities such as Manchester, Leeds, Edinburgh, Birmingham, Cardiff, and Glasgow are home to some of the UK’s most respected universities, producing thousands of graduates each year in finance, economics, and data science. For example, The University of Manchester, The University of Leeds, and The University of Edinburgh are among the UK’s top 20 institutions for finance and business education. These graduates are not only highly skilled but also increasingly sought after by banks looking to build capabilities in digital banking, risk management, operations, and software development.

Universities are playing a pivotal role in this transformation. In the Midlands, The University of Birmingham’s Money, Banking and Finance BSc equips students with a deep understanding of financial systems and monetary policy. In the north, The University of Leeds offers a Banking and Finance BSc that combines academia with strong industry ties. Meanwhile, Cardiff University’s BSc Econ in Banking and Finance blends economic theory with practical training, ensuring graduates are ready to meet the evolving demands of the sector.

As banks adapt to the post-pandemic landscape, many are decentralising from London in favour of regional hubs. This move is driven not just by the appeal of lower operational costs and modern office space, but by a strategic desire to tap into diverse, highly skilled workforces and foster innovation. Regional cities offer a compelling mix of affordability, infrastructure, and access to talent, making them ideal locations for banks looking to future-proof their operations.

This decentralisation is being reinforced by deepening partnerships between banks and universities. Barclays, for example, has established strong ties with The University of Glasgow, The University of Edinburgh, and The University of Strathclyde. Its Glasgow campus, one of the largest outside London, serves as a hub for research, internships, and talent development in areas like fintech, cybersecurity, and data science.

HSBC is collaborating with The University of Birmingham on AI and data science initiatives, while Lloyds Banking Group is working with The University of Bristol on cybersecurity and digital finance.

The impact of these collaborations is tangible. In 2024 alone, over 5,000 students across the Big Six cities participated in financial services internships or placements, with many transitioning into full-time roles. This synergy between academia and industry is helping to shape a new generation of banking professionals who are equipped for a digital-first future, and it is also helping banks stay ahead in areas such as AI, ESG, and digital finance.

This harmony between academia and industry is creating a new generation of banking professionals, and it’s a model that’s proving successful, one that’s likely to expand as banks continue to invest in regional talent pipelines.

With continued investment in infrastructure, education, and innovation, the UK’s regional cities are no longer just supporting the financial sector – they are actively redefining it. As the industry becomes more decentralised, data-driven, and digitally enabled, these cities are emerging as the new centres of gravity for UK banking. The future of finance may still include London, but it will increasingly be shaped by the talent, ideas, and energy coming from across the country.

London vs UK regions – banking salary comparison (2025)

London continues to dominate the UK’s banking landscape when it comes to pay, with median salaries ranging from £70,000 to £85,000 depending on role and experience. Its position as a global financial powerhouse – home to major international banks, investment firms, and fintech giants – underpins these figures and reinforces its appeal to top-tier talent.

However, regional cities are increasingly making their mark. While salaries outside the capital are lower, they come with compelling advantages. Median pay in Manchester sits between £50,000 and £60,000, followed by Leeds (£48,000–£58,000), Birmingham (£47,000–£55,000), Bristol (£48,000–£56,000), Edinburgh (£46,000–£54,000), and Glasgow (£45,000–£52,000). Though these figures trail London, they’re offset by significantly lower living costs, shorter commutes, and a growing number of high-quality roles.

A key trend shaping the market is the migration of talent from London to regional hubs. Professionals are increasingly prioritising work-life balance, affordability, and career progression – factors that regional cities are well-positioned to offer. At the same time, financial institutions and challenger banks are expanding their footprint beyond the capital, drawn by lower overheads and access to skilled local talent. This shift is helping to fuel salary growth in cities with strong fintech, data science, and digital banking ecosystems.

While London remains the benchmark for banking pay, the gap is narrowing. Regional centres are evolving into credible alternatives, offering competitive packages and lifestyle benefits that resonate with a new generation of finance professionals. The momentum is clear: banking talent is becoming more distributed across the UK, and regional cities are becoming important hubs for financial careers.

Banking sector drives demand for large pre-let office space

The banking sector ranks second only to public services, education, and health in terms of the volume of pre-let office space in the UK regional cities over the past decade, highlighting its significant footprint in the commercial property market. Over this period, banks have pre-let more than 1 million sq ft, often favouring campus-style buildings that foster collaboration across teams and departments.

Notable deals include Barclays’ landmark 470,000 sq ft pre-let at Buchanan Wharf in Glasgow in 2018 – the largest on record since data collection began – underscoring the sector’s dominance in regional office markets. Another major transaction followed in 2019, when JP Morgan Chase secured 273,000 sq ft at One Central, also in Glasgow.

Looking ahead, the sector faces 1.8 million sq ft of lease expiries over the next five years. Combined with return-to-office mandates and increasing space requirements for bank staff, could the banking sector, given its history of large-scale pre-lets, once again be the catalyst for renewed momentum in regional office development?

The rise of challenger banks in regional cities

Challenger banks have been rapidly expanding into the UK’s regional cities in recent years, taking advantage of the many benefits these locations offer.

These digital-first banks, such as Starling Bank, Monzo, Atom Bank, and Tandem Bank, are using regional cities to scale their operations in a more cost-effective and sustainable way.

Several UK regional cities have successfully attracted challenger banks due to their unique advantages. Manchester has become a hub for banks like Starling Bank and Monzo thanks to its strong digital infrastructure and talent pool. Leeds has seen a 25% increase in financial services employment over the past five years, offering a skilled workforce and lower operational costs. Birmingham provides excellent connectivity and a growing financial sector. Bristol, known for its innovation and tech scene, is also an attractive location for digital-first banks.

One of the biggest reasons for this shift is the lower operational costs that regional cities provide compared to London. Starling Bank, for instance, opened an operations centre in Manchester in 2022. This allowed it to benefit from Manchester’s lower rent and operational expenses, freeing up resources to focus on expanding its customer support, technology, and development. By avoiding the high real estate prices of London, challenger banks can reinvest the savings into scaling more rapidly. In addition to cost savings, regional cities provide a wealth of talent, especially in fintech, software development, and data science.

Many regional cities have become hubs for innovation, making them ideal places for challenger banks to establish a presence. Leeds is a perfect example, with a strong and growing fintech community. It has attracted several fintech firms, including Tandem Bank, benefiting from the city’s collaborative environment and its proximity to talent.

The city’s growing status as a fintech hub also encourages partnerships and collaborations, further fuelling the growth of challenger banks in the region. Challenger banks also benefit from establishing a regional presence by broadening their customer base.

These banks often target areas that may have been underserved by traditional high-street banks. For instance, Starling Bank expanded its services in Birmingham, offering a digital-first banking option to customers in the Midlands. This approach allows challenger banks to build a diverse and loyal customer base across multiple regions, not just in London. Additionally, local governments and development agencies in regional cities offer incentives to attract businesses, such as tax breaks, subsidies, and access to funding, making it even more appealing for challenger banks to set up shop in these areas.

Cardiff is a prime example of a city that has become an attractive base for a number of challenger banks, due to such local government support as well as enabling them to tap into the city’s growing tech ecosystem and the local talent pool from universities.

By expanding beyond London, challenger banks can diversify their operations and reduce their reliance on the capital. Monzo, for example, which began in London, has expanded its offices to cities like Manchester and Bristol, which allows it to reach new customers while tapping into regional tech ecosystems. This diversification helps challenger banks manage risk and grow their customer base across the country.

According to Statista’s Consumer Insights, the share of UK bank account holders using smartphones for banking reached 73% in 2024, helping app-based banks like Monzo and Starling grow and stay relevant. These challenger banks typically occupy smaller office spaces than traditional banks, averaging around 10,000 sq ft (traditional banks average 53,000 sq ft), as they operate more like start-ups/scale-ups.

There are now multiple challenger banks that have achieved unicorn status, meaning they are privately held companies valued at $1 billion or more. As they continue to grow and mature, we expect their footprint within regional cities to expand. Notably, these banks have yet to establish a firm presence in Scotland, raising the question: will 2025 be the year challenger banks arrive north of the border? 

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