British American Business 2008 | Practical Advice | Relocation

London isn’t the only hotspot for businesses in the UK

Down time is really bad news for businesses. And this is especially true if you’re trying to get to grips with an unfamiliar national or international marketplace, as well as a new environment for your business. But by contrast, getting yourself ahead of the game always creates huge dividends and allows you to leapfrog over slower and less business-savvy competitors.

In 2008, this looks like being particularly true because it has already turned into an unpredictable year for businesses in the US which, by extension, affects British, European and world markets too. So if you’re considering a business venture in Britain or using it as a beach head into Europe, it will be increasingly important to understand the important do’s and don’ts you need to be aware of. This article is therefore aimed at highlighting some of the key issues that can help CEOs and executives “hit the ground running”.

Where To Go?

Choosing the best location for an overseas business venture into the UK or Europe is not necessarily all that easy. The UK may not be a big country, but when it comes to what a particular town, city or area can offer it’s very diverse. And if you are using the UK as a springboard into Europe, these differences are magnified several fold.

The property maxim of focusing on “location, location, location” has been trotted out for donkey’s years. It’s true, of course, that the City of London has always been, and remains, a Mecca for financial services organizations. But many IT-based companies are now eschewing “The City “ in favour of less expensive locations – often those offering fast motorway corridors to airports and customers. Many US-based organizations have now come to realize that “the grass is often greener” in a wide variety of attractive – and less expensive – UK or European towns and cities.

The advice here is to do your homework and get professional and independent advice on the best location for your particular business needs. If you have any niggling doubts then an independent feasibility study can be a very good idea. It will help ensure your plans are subjected to careful scrutiny and on the ground testing – or to put it another way, it’s a reality check. My company, Business Moves Advisory Centre, regularly carries out a wide variety of relocation reviews, both nationally and internationally, and we don’t fall into the trap of automatically assuming your thoughts, ideas and plans will necessarily work.

Take the case of Daimler Chrysler, which needed to relocate 2,000 office staff to another site in order to expand its workshop areas. The managing director had a particular location in mind, but the finance director suggested a second, and the HR director yet a third. So we were brought in to evaluate which option would be the most viable and the least costly and disruptive. We thoroughly researched all three and recommended the third – which saved what would have been gargantuan expenditures if either of the other two options had gone ahead.

Real Estate Costs

Office rents in London are expensive. In early 2008 rents in the City of London run at between $120 and $134 per sq ft, in the West End they are at $220, Midtown at $110-120, and Docklands and South Bank at $90. But, as I said earlier, London isn’t the only hot spot for businesses in the UK.

A number of towns and cities, like Reading, Milton Keynes, Leeds, Manchester, Birmingham and Bristol, claim they can be equally attractive for incoming organizations – and if rents and occupation costs are an issue for your business they will probably have a point. Prime rents (per sq ft) outside of London are definitely lower, with Birmingham at $66, Bristol at $55, Leeds at $55 and Manchester at $68.

Deals are available, of course, and we regularly negotiate much better terms than those suggested by the landlords’ agents. Agents prefer to keep the quoted headline rent intact so these reductions generally take the form of a substantial rent-free period – or sometimes even a reverse premium where the landlord/developer pays the tenants a lump sum up front. And with the general slackening-off of demand for commercial property that began late 2007, rents are under pressure, creating an increasingly attractive scenario for incoming organizations.

London KO’s Competitors

Deals are often available on rents

Research shows that, despite the higher costs of running a business in the UK, the inherent prestige and “comfort blanket” of being in a business cluster of like organizations is often attractive. A Cushman & Wakefield survey in October 2007 shows London retaining its pole position as the best location for business, with Paris ranked second, Frankfurt third, Barcelona fourth and Amsterdam fifth. London was ranked top in six out of the 12 business needs criteria used to evaluate the merits of each city – with no other location achieving more than one top spot. To quote James Young of Cushman & Wakefield: “From year to year, London is consolidating its position as part of an elite group of global cities.” And with the Olympic Games on the horizon in 2012, London seems to be sitting pretty.

Accessibility

Roads

Britain has increasingly congested towns and cities and this inevitably clogs up roads. The Mayor of London, Ken Livingstone, has tried to alleviate this congestion by introducing, and then extending, a central London congestion charge (and other towns and cities are now considering following suit). Congestion charging has helped central London businesses, but those needing to drive anywhere close to the M25 (London’s outer ring road) face delays on the roads every single day.

Outside of London’s metropolitan area, the picture is much better of course – however most of the thruways are increasingly experiencing bottle necks and the inevitable delays. This is despite $23bn being spent on roads since 1997 – compared to roughly 10% of this figure ($2.32bn) being spent on railways during the same period.

Trains

Business travel by train and by the ubiquitous London “tube “system is quite effective – if a little crowded during peak times. Passenger travel by train is increasing year on year and the wise CEO investing into Britain will make sure that the office is situated close to a train and/or, in London, a tube connection.

Flights

Britain has a number of strategically-situated airports around the country which serve most of the major cities and towns. The south east of England alone can claim at least seven airports offering international flights and nationally there are daily scheduled flights to the US from eight British airports. And as all of these airports have good thruway and train connections, the US investor is spoilt for choice and can safely assume all main cities and towns being considered as their new base can offer multi-access options.

The Daddy of all the UK airports is of course Heathrow, where British Airways has just moved into the new Terminal 5. This massive building, exclusive to BA and with 110 stands, cost $8.6bn to build, will handle 30 million passengers each year, and process 12,000 bags each hour. With this massive increase in passenger numbers prudent travellers will probable opt to travel to Heathrow by public transport rather than sit in traffic, twiddling their fingers and worrying if they will catch their flight.

Recruiting

Labor markets vary around the country. Inevitably the London market is the most problematic – both in terms of the costs and the turnover of staff. In the London area, office managers earn on average between $48k to 62k per annum (compared to $44k to $58k in the south east) whilst marketing managers earn between $66k to $86k in London (compared to $64k to £$78k in the south east). Salaries compared to London are lower, but business hot spots (such as Reading and Milton Keynes) are inevitably higher than less successful and commercially active locations.

Predictably, staff turnover rates in London are also higher, although this of course depends on the attractiveness of the salary levels and the working environment. Recruiting and retaining staff is most problematic in call center environments, where turnover rates can be well over 30%. The wise US investor will seek advice on the best location in which to set up business and recruit high-quality staff to help the business venture fly.

Conclusion

In summary, any organization thinking of setting up business in Britain or in Europe should:

• Check out the locations that will maximize your commercial advantages;
• Be open minded and take professional advice;
• Play the field – there are deals to be done;
• Understand the local labor market you will need to operate in;
• Ensure good accessibility to and from your chosen business location.

Good hunting!

For more information, contact:
Stuart Mitchell MCIM MIHT MTPS,
Senior Partner,
Business Moves Advisory Centre
Tel: +44(0) 1903 202754
Mobile: +44 (0) 7765 242816
Website: www.business-moves.com

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