UK: Relocation - Going the distance for quality of life.

UK: Relocation - Going the distance for quality of life. - When the British Council needed to reduce costs it decided it could no longer afford London rents, but the benefits of moving to Manchester have not only been financial, as revealed in the first

by Malcolm Brown.
Last Updated: 31 Aug 2010

When the British Council needed to reduce costs it decided it could no longer afford London rents, but the benefits of moving to Manchester have not only been financial, as revealed in the first of three articles on relocation.

The British Council's annual report says that the relocation of its UK operations to Manchester last March was achieved "precisely to plan". That is perhaps bending the truth to some extent. The move was planned with extraordinary precision, but someone somewhere forgot to calculate what would happen if 30 pantechnicons bearing all the worldly goods of the 350 relocating staff were to arrive at their destination simultaneously.

The London office closed on the Friday and the Manchester office was to open on the following Monday. "By late afternoon on Saturday," says Dr Robert Taylor, the council's assistant-director general, "we realised that the one thing we hadn't planned was getting the stuff off the pantechnicons and into the offices. Everywhere was blocked. You couldn't move for crates. There was a time when it looked as though it was all going to come to an awful, grinding halt."

In the event, Taylor and his colleagues rolled their sleeves up and set to work as unpaid assistants to the removal men. "The team worked right through the night, so when people arrived at 8am on Monday morning it was all there waiting for them."

Moving the council's UK operations to Manchester was a matter of economics. The council had two main offices in London: its headquarters at Spring Gardens, just off the Mall, and a big block near Oxford Street. The lease for the latter was running out and the landlords said they did not want to offer it for renewal, so the council had to decide where to go next.

Central London office space at that time - in the late 1980s before the recession - was going for about £45 a square foot. Outside London the same space cost only a third as much.

The differential was crucial, says Taylor, because of the strongly competitive element that was emerging in the council's operations. "A lot of people see us as an organisation which is funded by the Government, but in fact the grant-in-aid from the Government is only about a quarter of our income. The other three-quarters comes from contracts which we win from the Overseas Development Administration (ODA), the World Bank, the United Nations and the EEC. It can be anything from developing primary health care in India to training accountants in Romania."

Six or seven years ago the council more or less had a monopoly on ODA work. "But with the change in emphasis in government to prove that it's getting value for money it was decided that the work the ODA does, along with all the other aspects of government, should go out to competitive tender. That looming on the horizon made us very much aware that we needed to reduce costs and look at the value for money we were providing in a way which we hadn't before." The end result was the council could no longer afford London rents.

The decision to relocate was finally taken in 1989 but that was after more than 12 months' research had been carried out into more than 200 sites. The short list was eventually narrowed down to Glasgow, Leeds, Bradford and Manchester. "It wasn't an easy choice," says Taylor. "It was very, very close."

There were four basic criteria: good international communications (through Manchester Airport); good communications with London (Manchester is only two-and-a-half hours away by train); easy access to universities, polytechnics and training colleges; and quality of life.

When the council finally plumped for Manchester it expected about 150 of its London staff to go. In the end 350 did. "It was a tremendous achievement," says Taylor. An important contributory factor, he concedes, was the recession. "People realised that they couldn't easily leave the council and get another job."

But the attractions of Manchester itself were important, too. The council paid for potential movers to spend a couple of nights in a Manchester hotel and have a look at the city and the things that were of importance to them like housing areas and schools.

"A lot of people said, 'Oh God, I'm not going to go to Manchester, but if somebody's going to pay for a weekend of course we'll go on it' ... and it's amazing how many came back saying, 'It's not what I thought it was going to be like at all. It could be quite nice up there.'"

In most relocation exercises today one of the big problem would be persuading people to try and sell their properties in a housing market that is more or less non-existent.

"We were lucky," explains Taylor. "Because of our link with the Government we follow civil service regulations, so we were able to offer them a fair amount of help. We offered the same package as a civil service relocation involves, which is basically a guaranteed price on the house. They get the money up front when they move, before the house is sold."

The vendor gets a guaranteed price while the relocation agency - in this case it was Lloyds Bank's Black Horse - takes over the property and sells it. "That meant they moved to Manchester with cash in their hands."

Taylor believes that the move to Manchester has been valuable for the council and for Manchester itself. "Going to Manchester has meant two changes. First, we actually became part of a region in Britain. The universities in that whole area see us as being involved directly with them, having not just a working relationship but an intimate relationship.

"Secondly, moving to Manchester means that we're not just another office block but part of the Manchester community. For example, as soon as Manchester won the Olympics bid I created a special post of sports officer for the Olympics whose job was to contribute towards the bid."

Since the decision to relocate was taken the commercial property market has undergone a complete change. London is now awash with unused offices, going at a fraction of their previous rental. Even taking that into consideration, the council is still saving £1.6 million a year in rent.

But does Taylor think the British Council would have relocated if it had been able to see into the future? "I don't know. There's no doubt that a lot of staff would say it's quite clear that if the council were going to take the decision now it wouldn't move away from London. I think we would. I still think we would take that decision.

With hindsight there's no doubt that having a headquarters outside London in the North West has made a difference to us and a difference to our relations, the way we operate, the way we're thinking."

Companies relocate for many different reasons - to cut costs, because of staff shortages, or sometimes simply for a better environment. Management consultants KPMG Peat Marwick came across an interesting case a few years ago.

The company, a large industrial concern, shared a site with another firm, in a different industry, which was paying wages significantly higher than the average for the client company's industry. "Our client felt that their wages were always going to be locked into the higher wage rate of this other industry," says Jim McCredie, a principal consultant with KPMG, "and that was going to adversely affect them for the foreseeable future."

Relocation to a separate site was the only lasting solution to the problem.

Lots of factors have to be taken into account when drawing up a short list of possible relocation sites.

KPMG's checklist would include: availability - what existing premises are available?; incentives - what is on offer in assisted areas or enterprise zones?; costs - local rents, rates and building costs; communications - how good are the links to customers and suppliers?; wages - what are the local levels?; labour - what scope is there for recruiting locally?; travel costs - if the new site is not too far from the old, what would be the cost for existing staff who may choose to commute?; incentives - what are the attractions for those who may wish to move with the job?

Relocating can be particularly expensive for "people" businesses concerned to hold on to good staff. They often have to provide a list of incentives - removal expenses, disturbance payments, and reimbursement of all the professional costs, like estate agent fees. This, says McCredie, can cost anything from £10,000 to £30,000 per person.

Companies which are thinking of relocating should be wary of what appear to be good short-term deals, says lawyer Michael Boswell, a partner in the property department at London solicitors Gordon Dadds.

Although landlords, outgoing tenants or foreclosing banks can offer significant incentives, any company taking up a lease should appreciate that the reason large cash offers or rent holidays are on offer is precisely because the people making the offer want to relieve themselves of the obligation they have taken on. "In the case of the landlord, he will want to ensure in years to come - when the present recession is over - that he will have a good, solid covenant prepared to support him in his old age.

"There is a great temptation with so many special deals around to grab while the going is good, says Michael Boswell.

"But the reason that deals are available is because business is so bad. You need to consider whether your own business, in its current state, will be able to support not only the immediately ensuing years, while your cash incentive lasts, but also thereafter when rents begin to rise again."

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