Regional cities can save companies 40% in costs over London
24 Mar, 2010, UK
An analysis by Cushman & Wakefield of cost savings companies can achieve by relocating from London to regional UK cities has concluded that Belfast and Cardiff provide the best value with cost savings over 10 years in excess of 40%.
As companies remain under pressure to deliver shareholder value and drive down costs, greater emphasis is being placed on cutting both real estate and employment costs with relocation to an alternative location outside of central London now an option for many companies.
In its ‘Business Briefing: cost implications of headquarters relocating out of London’, Cushman & Wakefield takes into account not just relative property occupancy costs but also employment costs and capital expenditure costs relating to a relocation. For the analysis, the corporate is assumed to be a central London occupier with a 50,000 sq ft building employing 500 people. It is seeking a regional city location of the same size with the same headcount.
C&W has analysed 14 locations outside of London. Considering property costs alone and despite the significant rental falls in London, the capital remains far and away the most expensive UK location. On average property costs elsewhere in the UK are 52% that of London. Belfast is the best value UK location with property costs only 35% of London’s with Edinburgh the most expensive with property costs at 66% of London’s.
Labour costs however are the main cost component for most organisations and potential savings here remain a key driver for relocating along with property costs. Although London has significantly higher wages than elsewhere in the UK, the differential is not as marked as it is for property. The gap between an average manager’s salary in London and the next most expensive cities, Southampton and Reading, is around 18% , while in Cardiff and Belfast, the cities with the lowest average wage figures, the figures are 40% and 45% respectively.
With the ongoing costs of running a business over 10 years and the cost of relocation, the company moving to Belfast would save £140.9m over ten years in NPV. This falls to £74.2m were it to relocate only as far as Reading.
Ben Cullen, head of Cushman & Wakefield’s national office agency team, said: “Despite the fall in occupational costs in central London, we are seeing a growing number of London-based corporate occupiers considering relocating some of their business functions to regional locations that can provide lower labour and occupational costs. We expect that this trend will continue as businesses maintain a tight rein on costs through a slow economic recovery."