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 which can help CEO’s and executives “hit
the ground running”.
Where To Go
Choosing the best location for an overseas business venture
into Britain or Europe is not necessarily all that easy. Britain
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 Britain 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
and in Britain it has been boosted by a popular TV series
of the same name. It’s true of course that the City
of London has always been, and remains, a Mecca for financial
services organisations. But many IT based companies are now
eschewing “The City“ in favour of less expensive
locations – often those offering fast motorway (thruway)
corridors to airports and customers. Many US based organisations
have now come to realise “the grass is often greener”
in a wide variety of attractive – and less expensive
– British 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 who needed to relocate
2,000 office staff to another site in order to expand their
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 £60 and £67
per sq ft, in the West End they are at £110, Midtown
at £55-60, and Docklands and South Bank at £45.
But as we have 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
organisations 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 £33, Bristol at £27.50, Leeds at £27.50
and Manchester at £34.
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 which began in late 2007 rents are under pressure,
creating an increasingly attractive scenario for incoming
organisations.
London KO’s Competitors
Research shows that, despite the higher costs of running a
business in Britain the inherent prestige and “comfort
blanket” of being in a business cluster of like organisations
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 twelve 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 existing Mayor of London, Ken
Livingston, has tried to ameliorate 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
for those needing to drive anywhere close to the M25 (London’s
outer ring road) face delays on the roads every single day.
If Henry (“any color you like as long as it’s
black”) Ford was reincarnated he would certainly be
amazed at the extent of our modern day love affair with the
car.
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 £11.5bn.being spent on roads
since 1997 – compared to roughly 10% of this figure
(£1.16bn) being spent on railways during the same period.
Accessibility (Trains)
Business travel by train (and by the ubiquitous London “tube
“system) is, by comparison, quite effective - if more
than 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.
Accessibility (Flights etc)
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 long distance flights to all main destinations from
eight British airports. And as all of these airports have
good thruway and train connections the investor is spoilt
for choice and can safely assume that 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. Here
British Airways has just moved into the new Terminal 5, opened
by the Queen. This massive building, exclusive to BA and with
110 stands, cost £4.3bn to build, will handle 30m 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, looking at the exhaust
pipe of the car in front and worrying if they will catch their
flights.
Recruiting
Labour 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 £24k to 31k per annum
(compared to £22k to £29k in the south east) whilst
Marketing Managers earn between £33k to 43k in London
(compared to £32k to £39k in the south east).
Overall average salaries in central London are roughly 7.3%
higher than those in the south east. Salaries elsewhere in
the country are certainly 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,
though this of course depends on the attractiveness of the
salary levels and the working environment. Recruiting and
retaining staff is most problematic in Call Centre environments
where turnover rates can be well over 30%.
The wise investor will seek advice on the best location in
which to set up business and recruit high quality staff to
help the business venture take off and fly.
Overall Conclusions
In summary, any organisation thinking of setting up business
in Britain or in Europe should:
- Check out the locations that will maximise your commercial
advantage
- Be open minded and take professional advice
- Play the field – there are deals to be done
- Understand the local labour market you will need to operate
in
- Ensure good accessibility to/from your chosen business
location
Good hunting!
Stuart Mitchell
Senior Partner
Business Moves Advisory Centre
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