Special Report on Company Relocation: Mercury's flight from London was 'expensive but worth it': Changing workplace affects people as well as business. Martin Whitfield examines how one firm coped with their move

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MERCURY set out with the object of transferring 160 finance department jobs from central London to Milton Keynes two years ago. It now employs 410 people in its billing and finance building in the city.

Geoff Harman, personnel manager, says the move was a success: 'All the benefits that we identified have been accrued.'

The decision to move was mainly in response to Mercury's rapid expansion. Finance and accounts staff were becoming increasingly important as the number of customers grew, but were spread around several very expensive central London office blocks.

Relocation would enable the company to centralise the finance department, reap cheaper office costs - less than 25 per cent of the highest London rates - and be able to reduce the need to pay capital city salaries.

Mr Harman admits that the process itself was expensive, with about 60 key workers having to be tempted to move by guaranteed house prices, paid moving expenses and consolidated London salaries.

Relocation costs are difficult to generalise because each case is different, but relocation staff employed by Milton Keynes marketing estimate about pounds 12,000 per person - more if housing guarantees are included.

Mercury was lucky to have started its relocation before the collapse in house prices, which has made moving an extremely costly decision. Mr Harman said house price guarantees would be much more selectively used in future but were offered to all staff earning more than pounds 20,000 in the move to Milton Keynes.

Despite the cost, there is little doubt that vital staff have to be persuaded to be moved. 'It would have been much more difficult to meet our customers' needs if the 350 new recruits did not have the experience of the 60 people who moved to draw on,' said Mr Harman. The alternative would have been extensive secondments from London or long training courses for selected staff from Milton Keynes.

A total of 69 finance staff were identified as not wanting to leave London. In general, they were young people who wanted to stay with the 'buzz' of the capital city. All were offered redeployment within the company.

The remainder - roughly half men and half women - agreed to move with Mercury using the services of Black Horse Relocation.

Mr Harman himself was one of those moved and says that his initial attitude was typical of the staff. 'I had the stereotyped image of the concrete cows and red balloons. The biggest concern, however, was for my wife, Hilary.'

With a young baby, Mrs Harman quickly found a group of other mothers and settled relatively easily. 'She has built up a bigger network of friends in two years than she had before. Now the thought of going back and commuting five days a week - I could not do it,' he says.

Mercury invested in improvements to its finance building which was the old headquarters of Telephone Rentals. It has also acquired another site in Milton Keynes where about 300 people work. There is room for further expansion.

Mr Harman calculates that overall staff costs, including salaries, pensions and national insurance, are up to 20 per cent lower than London levels. The company is gradually phasing out the differential between local recruits and those transferred. Under a performance appraisal system, a local recruit with good personal achievement is likely to receive a percentage increase, while a transfer may be given an unconsolidated lump sum bonus.

'Staff turnover tends to be less here. We are not spending so much on recruitment and training costs and it improves the relationship with the customer,' said Mr Harman.