Businesses consider relocation to reduce costs

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Wales has lowest costs, London has highest business ‘birth rate’.

More than a third – 34% – of UK small business owners would consider moving their company in order to reduce costs, according to a new study by Make It Cheaper and the Centre for Economic and Business Research (Cebr).

Make It Cheaper – a company which helps business cut costs on energy, insurance and telecoms – and the Cebr have mapped the burden of costs on small firms, identifying the most and least expensive regions to do business and tracking business start up rates throughout the country.

The findings, based on the SME Business Cost Index have released that some of the most entrepreneurial hotspots in the UK aren’t always the areas with the lowers costs. Meanwhile, the number of new businesses being founded in the UK has declined in recent years.

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Jonathan Elliott, managing director of Make It Cheaper, said: “It is a sign of the significant costs pressures SMEs are under that relocation is on the table for many.

“Small business owners have fought tooth and nail through recession – cutting costs where they can and even raiding personal finances – to try to stay afloat.”

The study is based on independent research among owners and managing directors of 750 UK small businesses.
Findings have shown that Wales has the most affordable business rates in mainland UK, with – unsurprising for many – London being the most expensive.

The North East, Yorkshire and The Humber specifically, were the second and third most affordable areas in the UK for small businesses. London however has 16% highest costs that the national average, based on the SME Business Cost Index.

However labour and commercial rents are typically 40% higher in the capital than the average in most other areas in the UK.

With a view to new businesses, many entrepreneurs still head to London to make their break, while Wales – with the lowest business overheads – has the fewest number of new businesses opening.

Currently, figures show that an average of 10 new businesses are set up each year for every 100 that already exist. According to the research, this has been on a downward trend since 2005, falling from an average of 13 new businesses opening each year for every hundred.

Only the North East and Scotland saw business birth rates increase during the pre-recession period between 2005 and 2007.

The capital has the highest business birth rate at 12 new businesses per hundred opening each year, while the North East and Yorkshire and The Humber have been driving projects forward with an average business birth rate of 10 new business per year, per hundred.

However, Elliot voiced a word of warning to entrepreneurs or businesses looking to make a move to save money. “SMEs considering relocation must take into account the significant disturbance to the business of such a major step, and decide whether it is really worth the trouble.”

“Business owners must ensure they have exhausted every avenue of cost reduction, particularly large fixed costs such as energy and insurance, before even thinking about moving,” Elliot added.

 

 

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