Relocation - A new survey reveals that a higher number of businesses is on the move again after a recessionary lull. This time round, the main motive for relocating is business expansion.
During the late 1980s, when rental levels in London were soaring, office space was short and companies were in expansive mood, everyone arrived at the same conclusion. They decided they should move their businesses. Some core staff were to be kept in London, of course, but the money-saving opportunities presented by cheaper workplaces in other parts of the country were too good to miss.
Fleet Street was disbanded as newspaper proprietors moved to cheaper premises in less expensive areas of the capital. Huge branches of the civil service were to be uprooted and replanted in cities and towns with which, hitherto, they had had no link. Banks and the financial services sector decided to shunt clerical staff all over the country. And an army of relocation agencies grew up to advise on the expensive and worrisome business of which destination to choose.
Then, just as everybody threw themselves headlong into their plans for relocation, the London office market collapsed. Rents were suddenly falling; smart, empty offices available to let in the choicest areas were two-a-penny; the gap between rents in London and the rest of the country lessened; and the financial pressure to move out of London was relieved.
Many companies were already committed, so their planned moves went ahead. Others retrenched in the face of recession and abandoned any hopes of new premises. But some decided to press on anyway, because their moves were deemed an integral part of reorganising the business.
As the property market recovers and the economy improves, however, there are clear signs that an increasing number of businesses have itchy feet again. One of the most dramatic conclusions of a survey on relocation conducted for Black Horse Agencies by City Research Associates is the high number of companies planning to move premises, not just from London, but from towns and cities throughout Britain. And John Major will be delighted to learn that the predominant motive behind any planned move is business expansion.
The survey is based on a computer analysis of more than 500 detailed questionnaires on relocation. The questionnaires were filled in by top executives in 40 cities selected from Management Today's database. More than 40% of the respondents were either managing directors, chairmen or chief executives; a further 36% of them were directors of their companies; and the average turnover of companies taking part in the survey was £26 million. No fewer than 22% of the executives say that their company is either very likely or quite likely to relocate within the next five years.
'This is a remarkably high figure,' says John Carolan, managing director of Black Horse Relocation. 'And it substantiates our own view that we could be moving towards a boom in relocations.' Carolan points out that motives for relocation have changed within the past few years. 'Expansion is cited as the main reason for future relocation by 34% of executives, whereas surveys conducted during the recession showed that reducing costs and restructuring were the main drivers in relocation,' he says. 'For example, in a survey of decentralisation from central London conducted by Jones Lang Wootton at the beginning of 1993, the main reason for moving was financial cost savings.'
In fact, the Black Horse survey shows that expansion is now more than twice as important as restructuring or reorganising when it comes to relocation motives for businesses. 'This is a sure sign that the economy is on the way up and is in general a positive piece of news for business,' comments Carolan.
The company executives placed Bristol firmly at the top of their list of desirable locations, with Edinburgh, Nottingham and Norwich close on its tail. It is pure coincidence, insists Black Horse, that its parent company, Lloyds Bank, chose to move its UK Retail Banking headquarters from London to Bristol in 1988. The move, involving 1,400 jobs, was completed last year and appears to have been financially driven. 'At the time, costs in London were rising. Costs of space were high too, and, with a London allowance of around £3,000 per person, staff were also more expensive,' says Hugh Stebbing, head of central property services for Lloyds.
Stebbing took his family with him to Bristol and says he has not looked back. 'Although many are resistant to change, I'm sure that most people who moved here would admit that the quality of life is better than in London.'
Bristol was chosen from a list of 79 towns and cities approximately 100 miles from London. The distance was sufficient to ensure substantially lower rents, but not excessive should a quick journey to London be necessary. Stebbing says: 'The list was refined to 32 and then down to three: Peterborough, Cardiff and Bristol.' The company settled on Bristol after considering the office space, the transport facilities and, perhaps most important of all, the lifestyle it offered employees. 'There might be good business reasons to choose certain locations,' says Stebbing. 'But if the quality of life factors are not strong enough for people and their families, then they will not be carried with you. And you need to carry the goodwill with you to make sure everyone settles in.'
In the case of Lloyds, every attempt was made to ensure goodwill. A relocation centre was opened in London before the move, so that employees and their families could find out about Bristol. Information was provided on schools, sports facilities, estate agents and the houses they were selling. 'You have to invest time and effort so that people get a feel for the place,' says Stebbing.
The ease with which a company can sell any new location to employees will undoubtedly influence its decision to move there. But equally important, according to the Black Horse survey, is the quality of the potential employees at the new location.
Asked which three business factors they regarded as most important when considering relocation to another city, 57% of the executives cited the workforce and, in particular, its quality.
'Quality of workforce is the most important business factor,' says City Research Associates. 'Larger companies with turnovers of over £5 million and more than 100 employees were likely to rate this factor more highly than the smaller companies were.'
Certainly, the decision by the Inland Revenue to move up to 2,000 jobs from London to Nottingham, the third most desirable location on the Black Horse list of 40, was made after labour considerations. 'We reviewed the situation in London, and in particular the problems we were having with recruiting and training the correct quality of staff,' says Neil Munro, the Revenue's Nottingham project director. 'The Inland Revenue does not have an especially appealing image from a recruitment point of view; we found ourselves in competition with the financial services industry for labour, and we even lost some of our best staff to financial services.'
So far, the Revenue has moved about 1,000 jobs to Nottingham, housing the employees in temporary accommodation on short leases; 550 staff have made the journey from London and the balance has been made up by the local workforce. 'There are another 800 jobs scheduled to come here and some of them will go to local people,' says Munro, who professes himself delighted with the local workforce. His aim is to move everyone into a new building next March. It is designed by Michael Hopkins, the architect behind the new Glyndebourne Opera House and the Bicentenary Stand at Lords.
After the quality of the workforce, the critical business factor in determining the suitability of a town or city as a new base for any company was judged to be the 'road transport network'. More than 40% of respondents cited road transport as the most important business factor; 36% picked overheads or rates; and 26% chose the 'overall business environment'. Unsurprisingly perhaps, given the levelling out of rents across the country since the late 1980s, property costs ranked sixth in importance at 21%.
But considerable importance was placed on issues that had little to do with business: those matters which concerned not only the executive but his or her family as well. As one would fully expect from a survey which asked business people to choose the three most important personal factors taken into account when relocating a company, almost a third (32%) decided it was the people; the general cost of living or the property/rental costs (30%); the crime rate (29%); access to the countryside (27%); or the quality of schools (26%).
Neil Munro moved with his family from leafy Chiswick in London to Nottingham in order to supervise the Revenue's relocation. And while he admits he misses the choice of restaurants and theatres, the overall package is better, he says. 'In most things concerned with the quality of life, Nottingham scores much more highly.'
The same could be said of Edinburgh so it is hardly surprising that it comes second to Bristol as the most desirable location. Only this summer, journalists were marvelling at how smoothly the state visit to Edinburgh of King Harald of Norway and his wife Queen Sonja progressed, 'unlike state visits to London, when foreign rulers can become embarrassingly embroiled in traffic jams', as one commentator put it.
Paul Lewis, international business manager of Lothian and Edinburgh Enterprise, is quick to seize on the Scottish capital's scenic attractions and lack of traffic. But he points out that the city has yet more to offer still. 'A recent independent survey carried out by economists in Cambridge looked at the growth prospects of 32 European cities,' he says. 'Out of the cities included from the UK, Edinburgh ranked top.'
Lewis believes there are sound business reasons for moving to Edinburgh. 'It is a capital city after all, and has many of the benefits of being a capital city. On the other hand, Edinburgh does not suffer the downside of congestion and overpopulation.'
The commercial and legal infrastructure is sound; international links are strong, with consular offices for many countries and a regional office representing the European Commission; American and Japanese schools exist. And the city's buoyancy is amply demonstrated by the number of construction projects: Standard Life is building a 300,000-sq.ft building; Scottish Equitable a 300,000-sq.ft office block; and Scottish Widows has just submitted a planning application for its own huge development project.
'We think there is an upturn in demand for properties within Edinburgh and the surrounding area. Last year, there was a record number of overseas projects located in Scotland. And any pick-up in the US economy is reflected here.' While Edinburgh basks in its results there are those towns and cities which, unfortunately, do not emerge in quite such a favourable light from the survey. A high proportion (40%) of executives in Doncaster, for example, said that they were likely to relocate within the next five years; Dudley was not very far behind in its apparent lack of popularity (33%); Wales suffered too with 25% of those surveyed in Newport and 22% in Cardiff saying they were likely to move to a different location within the next five years.
Norman Bridge, investment manager at the economic development unit of Doncaster borough council, is unimpressed with the survey results. He says companies have moved into, rather than away from, Doncaster, a town hit harder than most by the closure of British Coal's pits and rationalisation in British Rail. 'There used to be about 20,000 miners living and working in and around Doncaster,' says Bridge. 'Now it's nearer 1,500. Firms are moving here but sometimes you feel you are running simply to keep still.' Successes in Doncaster, where the level of unemployment runs at 13.5%, include BMW, which has opened its UK car distribution facility in the town.
But not even Doncaster's lacklustre performance in the survey compares with Bradford, the town to which the executives who were invited to comment said they would least like to relocate. Bradford proved marginally less popular than Sunderland and Wigan, but none of these towns fared well.
'Bradford is an incredibly friendly place which has much to offer but it does suffer from an image problem,' admits Mark Rudd of Bradford's Chamber of Commerce. 'And once people have an image in their minds, it's quite a task to persuade them to forget it.'
Every persuasive attempt is being made, however, and with some degree of success, says Michael Cowlam of the borough council. 'There certainly was a time when people had a negative perception of Bradford,' he says. 'That has changed now to be slightly more positive. But sadly not yet as positive as Bristol or Edinburgh.'
Andrew Yates is a journalist on The Times.
THE MOST DESIRABLE LOCATIONS
Percentage of executives
naming city as first, second
or third relocation choice
Source: City Research Associates.
THE MOST IMPORTANT BUSINESS FACTORS
(Base: 536) %
Quality of workforce 57
Transport network - road 44
Overheads - eg, rates 36
Overall business environment 26
Quantity of potential local clients 23
Property/rental costs 21
Local economic conditions 21
Competitive wage rates 20
Source: City Research Associates.
THE MOST IMPORTANT PERSONAL FACTORS
(Base: 536) %
The people 32
General cost of living 30
Property/rental costs 30
Crime rate 29
Access to countryside 27
Quality of schools 26
Source: City Research Associates.