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ABI ‘crippled’ by £4.5m City rent

The Association of British Insurers is being “crippled” by high rents at its City offices at the same time as making senior staff redundant, Money Marketing understands.

The ABI agreed a fixed 25-year lease agreement in 1989, the market peak for City rents, to let 51-55 Gresham Street in London until 24 March 2016.

The trade body believed it could make money from sub-letting parts of the 84,000 square foot building but City rents collapsed soon after the deal was agreed.

Knight Frank data shows the average City rent was £65 per square foot in 1989 but dropped as low as £32.50 in 1993 before rebounding to £60 today.

Documents published by commercial letting agents Jones Lang LaSalle in 2009 shows the total rent for Gresham Street is £4.5m a year. 

The ABI does not publish accounts but it is understood the building has been fully let to minimise the costs, including the old staff tea room.

The trade body is expected to either renegotiate a lower rent ahead of the lease coming to an end, or move premises.

In October the organisation axed 16 roles as part of a restructure, resulting in senior directors Maggie Craig, Stephen Gay and Nick Starling leaving.

A former senior ABI staff member says: “It is letting floors well below the master rent. If there is a 5 per cent cut in fees in real terms then it means a 10 to 15 per cent cut in salaries, hence the redundancy programmes. Everyone knows it was a very foolish decision taken a number of years ago.”

Another source close says it is well known within the ABI that the City rent is “crippling” the organisation.

Facts & Figures managing director Simon Webster says: “Many organisations locked themselves into long-term rents, but clearly this was not a good decision by the ABI.”

The ABI declined to comment.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Does anyone know how much the FCA pays in rent for its hugely expensive offices at Canary Wharf and why it needs to house any more than a fifth of its workforce there in the first place?

  2. I have little sympathy for trade bodies who demand flash offices in one of the most expensive districts in the world and then whine when things don’t work out how they expected.

    There are low cost offices in many of our regional cities with a much higher quality of life for staff. Perhaps the money saved on rents could actually be used for something useful. Most of the ABI’s members seem to be located elsewhere, like Edinburgh, Bristol, York, Norwich etc.

    The ABI look like all the muppets I know who drive flash Audi’s on expensive HP contracts but can’t afford to take their kids on holiday. Now they are locked into financial ruin and can’t get out.

    You’d have thought a financial services trade body would understand the risks.

    It’s all about priorities.

  3. Why is the ABI based in the most expensive part of the country in the first place, when a large number of the big insurers are in Scotland? And none of them are based in London that I can think of off-hand.

  4. @Julian

    Several years ago when the FSA was new I was at an event at No 25. Whilst walking along a corridor I had a small notebook into which I was making jottings (before smartphones!).

    When asked what I was doing I replied that I was counting the waste paper baskets.

    I explained:

    A waste paper basket takes up approximately one square foot of space. At that time I knew that the rental was £57 per square foot. I calculated than on just part of one floor alone they paid rent for waste paper baskets equivalent to about 2 years rent on my office at the time.

    I estimated that extrapolating this is was probable that the total rental for bins over the whole building would be about 34 years of rent for my office. (Well I found it interesting!)

    And of course Soren is right. There are plenty of locations outside London which are perfectly suitable at a fraction of the cost. Anyway for the good the ABI do they may as well rent a shed in Oswaldtwistle. As far as some of the other fat cats are concerned I would have thought the Scilly Isles appropriate.

  5. @Soren

    Dead right Soren – two cars on the drive and eat beans every night !!!

    The muppets you refer to are not exclusively at the ABI etc. There are a good few advisers I have come accross with plenty to say just like that !!!

  6. Hi Harry I think you get a LOL for that, I do the same kind benign calculations as you, hahahaha of course I am sure you realise that these people do not run a business the same as we do, we account for every penny were it comes from and were it go’s; the main problem for us is were it comes from we have to work damn hard for it, where as they don’t; which makes them expert at spending other peoples money and living a lifestyle they have become accustomed to.
    The other point is if they don’t spend their budget they lose it ! so there is no incentive to save, probably why the waste of these quango’s are huge (take the marketing cost for the MAS as a good one) also nice to hold a bit back for a nice Xmas bonus

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