More than a third (34%) of UK small business owners would consider moving their company in order to reduce costs, according to a study by Make It Cheaper and the Centre for Economic and Business Research (Cebr).
Based on the findings, Make It Cheaper has teamed up with the Cebr to map the cost burden 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 (based on ONS price indices and Cebr price indices for rents), reveal the UK’s entrepreneurial hotspots do not necessarily correspond with regions of lowest cost, and show the national business birth rate in decline over recent years.
Jonathan Elliott, managing director of Make It Cheaper, said: “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.
“It is a sign of the significant costs pressures SMEs are under relocation is on the table for many.”
The study is based on independent research among owners and managing directors of 750 UK small businesses commissioned by business saving advisor Make It Cheaper, supported by macroeconomic modeling by Cebr.
Wales was found to have business costs 4% lower than the national average, followed closely by the North East (3.8% lower) and then Yorkshire & The Humber (3.5% lower).
At the other end of the scale, it requires more investment to operate an SME in London than anywhere else in the country with business costs 16% higher than the national average. This is, perhaps, not surprising with labour and commercial rents around 40% higher in the Capital than the UK average, said researchers.
In contrast, in the North East and Yorkshire & The Humber regions, labour and land costs are around 10% and 15% less than national average respectively.
UK entrepreneurial hotspots
Despite having the highest business costs in the country, entrepreneurs are still flocking to London to start up while relatively low cost Wales has among the fewest new businesses opening.
The national average business birth rate is 10.2%, which means around 10 new businesses are set-up every year for every hundred that already exist.
According to the research, this has been on a downward trend since 2005, falling from 13.0% to 10.2% between 2005 and 2009. Only the North East and Scotland saw business birth rates increase during the pre-recession period (2005 to 2007).
The Capital has the highest business birth rate at 12.6%, followed by the North East and Yorkshire & The Humber at 10.4% and 10.2% respectively.
Meanwhile, Wales suffers from among the lowest entrepreneurial activity across the UK, with a business birth rate of just 9.1%.
Elliott said: “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.”
For further information, advice and tools for small businesses to help manage overheads from Make It Cheaper, please go to www.businessfit.makeitcheaper.com.