Special Report on Company Relocation: Slump weakens the urge to move: Despite the lure of the provinces, the fall in London rents means firms are not so anxious to leave the capital

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The Independent Online
RUEFUL smiles will be playing across faces in Cardiff, Leeds and Glasgow at the furious row over suggestions that civil servants may be moved to the blighted Canary Wharf office complex. Provincial centres have soaked up a tidal wave of relocations over the last few years, many of them government workers. By comparison, the short hop from Westminster to London's Docklands by a couple of thousand people is small beer.

That is not how workers in the departments of Environment and Transport see things, of course. They fear extra time travelling to the office and the prospect of poor local facilities when they get there. But the real anger probably stems from feeling like pawns in a game over which they have little control. This game has been going on for some time. About 12,000 government posts have already been uprooted from familiar pastures around London and scattered across the UK. Another 20,000 will follow over the next couple of years and double that number can expect a move in the 1990s.

But the arguments for moving have been backed up by economics. London rents were soaring ahead of those in the provinces, while staff were proving harder to get - and keep - during the boom. Now the arguments look less convincing, and moves to Docklands are seen as a political gesture rather than a drive for cost-saving.

That is not entirely true. Canary Wharf would be a bargain at rents around half those the Government would pay to rehouse people decanted from crumbling blocks along Marsham Street - a saving of around pounds 6m a year. The hold-up appears to be deciding whether to go for even cheaper Docklands space. So why are private sector companies not rushing to follow suit - if not to Docklands, then out of London altogether? At first sight it appears they are. A record 36 firms fled central London last year, taking almost 14,000 jobs, according to Jones Lang Wootton Research. But moves like this have been overtaken by events. They were set up when London office rents were soaring as much as 30 per cent a year and skilled staff were hard to attract.

Today the pressure to move has eased. Rents have halved in a little over three years and staff are more nervous about switching jobs as the shadow of unemployment grows. Another 25 moves were planned this year, but four of those are aimed at Canary Wharf and may yet collapse. Only two are pencilled in for 1993, although National Westminster Bank, Eagle Star and British Gas have added their names to the list for future relocations. Anyone would relish a shift to modern premises in pleasant surroundings, so it is understandable that when the property developer Markheath polled the capital's top businesses, 145 of them said they aimed to move in the next three years; good news if you have a 600,000 sq ft business park in Stevenage to promote.

But such ambitions must be weighed against the almost impossible task of getting rid of existing buildings nowadays. Millions of square feet of new space is almost unlettable, so there is little hope for palming off second-hand offices. The prospect of paying for two lots of buildings is a powerful incentive to stay put - as certain of Canary Wharf's intended tenants are beginning to discover.

Staff face a similar burden. Since the property market collapsed, many have been unable to sell their homes. Relocation specialists ease this problem by taking over housing - but companies still have to foot the bill for any shortfall in the selling price. Michael Strong of the property consultants Richard Ellis estimates that such expenses mean it can cost between pounds 25,000 and pounds 40,000 to move someone out of the South-east to a centre such as Bristol. That seemed justifiable during the boom, when rents were one-fifth of those in central London. Today it would have to be set against annual savings of only pounds 6,000 per head.

Cost savings are not always as clear cut, however. Nationwide Building Society is abandoning its London HQ after only 18 months and shifting 90 jobs to Wiltshire. It says relocation makes sense even if the London building remains unlet. It has an existing administrative centre in Swindon, so the move will be more a rationalisation of resources rather than additional spending.

This drive towards operational efficiency will be more urgent as the recession bites, but moves could involve much shorter hops. Over the last decade almost half of all big relocations out of central London went no further than the suburbs, according to JLW Research. Most of the rest were hardly more adventurous. John Carolan of Black Horse Relocation, which claims around 30 per cent of the market, says 60 per cent of the companies his firm handled remained within the region. During the 1980s only 12 per cent reached the provinces, according to JLW.

The pendulum swung sharply from 1990 as the Government began massive staff relocations to cities such as Leeds, Edinburgh, Cardiff and Merseyside. It is likely to return as the number of moves falls away. Relocating within London costs an average of just over pounds 4 per square foot of office space for each worker, says JLW. A long-distance move to a city such as Sheffield or Bristol, involving additional payments for laying-off old staff, recruiting new ones and paying relocation packages for those who move, comes to pounds 150 a square foot.

A certain amount of self-interest underlies this message. JLW is trying to persuade the Government to take more than 500,000 sq ft at Harbour Exchange on the Isle of Dogs - and until recently was doing the same job on Canary Wharf.

It may not take much persuasion. The Department of Health recently took over a large office block in south-east London at a rent not much more than it would have paid in the big provincial cities, some of which are now beginning to wonder if they will see the promised number of jobs coming their way.

The Department of Social Security move to Leeds is already rumoured to have slid 500 posts short of the 2,000 target, while a Ministry of Defence move northwards has been cancelled.

As the economy revives, so will the urge to move, but even in the slump some relocation will continue. Rising expectations among skilled staff demand better lifestyle and working conditions. That could mean a shift to a business park away from traffic congestion and nearer better homes on the fringe of town or merely to a better building. Many factories, warehouses and office blocks are fit for the scrapyard - and that includes some built within the last 20 years.

(Photograph omitted)

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