Follow the government to the regions

A report on civil service relocations, released to coincide with yesterday’s Budget, recommended that 15,000 government jobs are moved outside London during the next five years. Some rather timely research from Cushman & Wakefield says that companies can save up to 40% in costs over 10 years by moving out of the capital to the UK’s regional cities.

“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,” Cushman & Wakefield says.

On average, commercial property costs elsewhere in the UK are just 52% of the London level, the research finds. Belfast is the best-value UK location with property costs only 35% of those in London, while Edinburgh is the most expensive of the 14 cities examined, with property costs at 66% of the London level.

The prospect of saving on labour costs is also a key driver for relocation, as these costs form the main component for most organisations. However, Cushman & Wakefield points out that the differential in wages between London and the regions 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 in the study – Southampton and Reading – is around 18%, while for Cardiff and Belfast, the cities with the lowest average wage figures, the figures are 40% and 45% respectively, it notes.

The company in the analysis is assumed to be a central London occupier with a 50,000 sq ft building employing 500 people, and seeking a similarly sized building with the same headcount in a regional city.

“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,” the report says.