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Should businesses stay in the north or relocate to London?

ByDave Stopher

Jun 3, 2019 #property

Earlier this year, Sunderland was named the third best city in the UK to start a business, with its high startup survival rate and low costs proving particularly attractive for new companies. In fact, the north as a whole has increasingly enticed entrepreneurs, and many have avoided Londonthe UK’s traditional business hubentirely.

The North East has become particularly popular, seeing a 14% rise in its business population in 2018, while London’s grew by just 3%. This shift also coincided with a spate of high-profile London-based companies relocating up north, including the BBC, HSBC, and KMPG. Yet, London undoubtedly remains a promising prospect for entrepreneurs and was recently named the best city in the world for businesses to invest in.

With that in mind, should northern startups try to have the best of both words and relocate to London once they’ve established themselves up north?

The case for staying up north

Companies need to be near their customers

When choosing a business location, companies should always try to be near their customer or client base. Consequently, many northern-based enterprises often decide to stay where they are. After all, if a business’s target market is located entirely in the north, why uproot yourself to a city where it’s harder to reach them?

Considering that 95% of people believe that face-to-face meetings are imperative for long-term business relationships, there’s huge value in being based close to your customers. Relocating down south could put these relationships in jeopardy, and encourage any company’s target market to seek more convenient competitors instead.

Businesses are more likely to survive in the north

Another reason businesses may want to stay up north is the higher startup success rate. The most recent figures from the Office of National Statistics show that London has both the UK’s highest business death rate at 14.2% and the lowest five-year startup survival rate at just 39.3%. This unfavourable climate is largely down to the sheer number of entrepreneurs attempting to make it in the capital.

Conversely, northern cities are becoming increasingly viable places for businesses to survive. The North East and North West have lower business death rates than London, while Northern cities like Sunderland, Sheffield, and Leeds also boast stronger survival rates than businesses in the capital.

It is much less expensive up north

One of the main criticisms of London is its high cost of doing business, which has led it to be ranked amongst the thirty most expensive cities in the world. This has a drastic impact on entrepreneurs’ decision to set up shop in the capital. Not only do employees expect higher salaries to meet the increased living costs, but London also has the most expensive office rent in Europe.

In comparison, doing business in the north is much more cost-effective, which helps explain its recent rise of startups. This is also grabbing the attention of larger corporations like luxury fashion retailer Burberry, which relocated 300 jobs from its London offices to Leeds in 2017. This move is expected to save the company around £100m, and the savings could well encourage other major corporations to follow suit.

The case for relocating to London

There is an abundance of talent in the city

A major reason for businesses choose to relocate to London is its large population of qualified workers, thanks to a constant influx of skilled workers from both inside and outside the UK. It was rated Europe’s top destination for international tech talent in 2018, attracting a greater number of skilled employees than any other city in the continent. Meanwhile, another poll saw 89% of global institutional investors claim that London has the best financial services talent pool in Europe.

In addition, around a quarter of all UK graduates secure a job in London within six months of leaving university, with 52% of these graduating from an Oxbridge institution. This isn’t to do a disservice to the talent in the north of the country, but on numbers alone, it pales in comparison to London’s amount of viable candidates, in any sector.

Businesses won’t find anywhere better to network

As the country’s capital, and by far the biggest city in the United Kingdom, London also offers unparalleled opportunities for networking, which allows companies to make the most of the city’s greater visibility and valuable insight. One third of all companies in the UK are based in London or the South East, offering huge potential for companies to connect. In fact, there are 1,563 businesses per 10,000 residents in the capital, almost double the rate of those in the North East.

With so many like-minded professionals concentrated in one area, there are a lot more opportunities for networking in London than anywhere else in the UK. Add in the city’s strong transport infrastructure, abundance of coworking spaces and networking events, and it’s clear why it is the ideal location to connect with useful contacts.

London businesses receive substantial support

All startups require financial backing to get started and stay afloat, and businesses in London have access to more than their fair share. In fact, research by funding database PitchBook found that London’s tech companies obtained £1.8bn in venture capital funding in 2018, almost double the amount of the second-placed city, Berlin. This is just one example of the masses of investment London-based businesses receive every year.

While companies located in the north do benefit from many of the funding programmes aimed at UK startups, as well as those specifically targeted at northern businesses (such as the £120m North East Fund), London enterprises receive a lot more support. In fact, research from the British Business Bank found that London SMEs attracted more funding than those in every other region combined. Such a huge disparity helps explain why so many entrepreneurs choose to head to the capital.

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