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September 30, 2011

More than third of small firms consider relocating to cut costs

More than a third of small firms would consider relocating their business to cut costs, new research has found.

The study by Make It Cheaper and the Centre for Economic and Business Research, which identified the cheapest and priciest regions in the UK to run a business, found that Wales had the lowest business costs while London had the highest, with commercial property prices in the capital around 40 per cent higher than the rest of the country.

However, the results, based on a survey of 750 business owners, indicated that London was still the favoured place to set up a new venture despite the high costs. The capital had the highest rate of entrepreneurial activity with 12 new businesses set up each year for every 100 firms already in existence, compared with the UK average of 10 per 100.

Paul Bagust, associate director of professional groups at the Royal Institute of Chartered Surveyors (RICS), said that business owners moving to a cheaper location “wouldn’t necessarily save money”.

“Changing premises is expensive, and even if you move to a cheaper area with lower business rates, people often overlook other overheads like rent, service charges and insurance,” he said.

“Factors like footfall and competition are also important – the rent or rates might be less but if you’re a retailer for instance, does the area attract enough shoppers?”

Small firms leasing their premises should always attempt to negotiate with their landlord before moving, he added.

“It’s still an occupiers’ market in most areas so negotiate hard to get better terms – aim for break clauses, a shorter lease or a rent free period. Or could you share the space with another like-minded business to bring down costs?”

Before looking to move, business owners unhappy about their business rate banding could appeal by appointing a rating specialist to assess their case, Bagust said.

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