Whether you’re expanding or relocating, identifying the best place to base your company is a significant challenge – and a crucial one to get right. Growing Business identifies the key factors you should be considering when deciding on where in Britain to locate your firm.
Having enjoyed two years of rapid growth since launching in 2006, the founders of Intelligent Waste Management Solutions (IWMS) faced a problem. With one living in London and the other settled 70 miles outside the capital in Northamptonshire, the business was operating from two headquarters. Fine when there were just a handful of employees, but with 20 staff on the payroll and turnover rising, the founders decided a single base was needed. “We had to choose either London or Northampton,” says Philip Mossop, co-founder and development director.
Economic activity
Unsurprisingly, when you look at economic activity across the UK regions, London and the South East sit at the top of the league table. For instance, according to the government’s preferred measure of economic performance, Gross Value Add (GVA), the capital and south eastern counties between them account for one third of the UK total. From there, the figures decline through the Midlands, Scotland and the North East and West, with Wales and Northern Ireland (NI) propping up the rest. London’s GVA amounted to £27,000 per head of population against £15,000 in NI.
But that isn’t the only measure of economic activity. A recent survey by research company KDB charted entrepreneurial activity across the regions, using the number of shareholding directors within postcode areas as the yardstick, with Birmingham emerging as the most entrepreneurial city in the UK. In fairness to the second city’s larger neighbour 100 miles south, London was split into its constituent postcodes, which all featured in the top 10. Meanwhile Brighton, Bristol, Nottingham and Tunbridge Wells were also among the front runners.
The cluster effect
But what do these bald statistics mean for companies deciding on a location? Clearly, if a business is not only based in an area, but also selling into it, a strong economy is good news. However, you have to take into account local factors. For instance, the type of industry that a particular town, city or region attracts can be hugely important when deciding if your own company will find a market there.
“We often see businesses move to areas where similar types of companies have already established themselves. For instance, recently we’ve seen financial services companies moving to the west country,” says KDB’s chief analyst Matthew Boot.
This is called the ‘cluster effect’ and it can define the economy of an area. Witness the ThamesValley, celebrated for its concentration of IT firms, or Oxford and Cambridge areas, where technology companies are gathered in abundance. There are financial services clusters in London, Leeds, Edinburgh and Western England, while the imminent arrival of the BBC in Manchester seems bound to enhance its reputation as a media centre second only to London.
Recruitment
Moving to an area rich in, say, IT or financial services, may mean stiff competition, but it also has some definite advantages, not least in terms of finding the right staff. “If a small business moves to an area where a certain type of industry is based, it becomes much easier to find skilled workers,” says Boot.
David Baggaley, marketing manager of Leeds City Council Business and Enterprise Department agrees, but with an important caveat. “If a particular market is saturated, companies will look elsewhere,” he says. “If not, you can benefit from the fact that there is a talent pool and that you don’t have to start training people from scratch.”
Of course, as companies arrive and sweep up skilled staff, the laws of supply and demand kick in. Stuart Mitchell, a partner in relocation consultancy Business Moves, says the result is higher costs. “If you go to somewhere like Reading, there are a lot of skilled IT people, but they expect to be paid well,” he explains.
So how do you know if a particular location has the skills you need at a price you can afford? “Websites such as Nomiss.com provide you with a huge amount of information,” says Mitchell. Local agencies can also help, but they will, of course, be partial to their own areas.
Customers
Industry clusters also create a customer base. For instance, if you make auto components, it helps to have your factory reasonably close to major car makers. If you supply video editing equipment, then having a media hotspot on your doorstep could be a distinct advantage.
Certainly, the proximity of customers was very much on the mind of IT company Bluefish when it located in Reading, stronghold of the British computer industry. As chief operating officer Lyndon Knight explains, the M4 corridor provided a rich vein of potential business. “Since the area is full of other technology companies, most of the decision makers can be found on our doorstep,” he says. “There are a number of service providers and technical organisations in the area, which means our main and prospective customer base extends all the way from central London to Slough and Swindon. Reading is beautifully placed in the middle,” he says.
A central location can be a key benefit, whether in the ThamesValley or in the heart of the country. For instance, companies based in Birmingham are well placed to serve not only their own highly populace region, but also the cities of the North, the South East and West. That was the thinking that lay behind data warehousing company Biolap’s move from London to Telford in the West Midlands.
“Although the South East represents a disproportionally large segment of the economy, we thought it better to be centrally located to be able to support all our clients wherever they are based,” says chief executive Theunis Viljoen.
Transport
It’s very often the presence of good road and rail links that define whether or not a particular location will work as a business base. For instance, Rosie Hayward, managing director of the Groovy Food company, was anxious to remain in Devon when she started her business, but she had to look long and hard at the local infrastructure before taking that decision. “A key factor was the proximity of the M5,” she says. “If we’d been further away from the motorway, I don’t think we could have run the business.”
Richie Jones, founder of Bristol based digital marketing agency Yucca, is equally emphatic about the importance of good transport. While the company has secured a number of major clients – including P&O and Ocean in the South of England – it is also competing to win work from businesses in London. It’s the train that takes the strain. “We have an excellent rail link to London,” says Jones, “which is very important. Once on the train I can work, using 3G to connect with the office, so the time isn’t lost,” he says.
While the big conurbations are obviously well served by motorways and main-line rail links, and arguably those in the centre of the country are best placed to transport goods or deliver services to all regions, be aware that infrastructure maps can hide a multitude of sins. “Some regions have real congestion problems at peak times,” says Mitchell.
The extent to which those congestion problems hit drivers is illustrated by the latest Journey Times survey from Trafficmaster, a division of the RAC. When measured by the number of congestion alerts issued by Traffic Master, the western sector of the M25 (Junction 10 to 21) topped the league with 161,000. But don’t assume the South East has a monopoly on road rage. While the lower reaches of the M1 were badly affected as well, the East and West Midlands also made it into the top five (M1 and M6 respectively) as did West Yorkshire (M62, M63 and M1).
If somewhere a little off the beaten track is viable when you’re considering other factors, don’t automatically be put off if its transport links seem to be dwarfed by the likes of Birmingham. It might warrant further investigation.