B2B International
B2B International

October 5, 2006

B2B International carries out all studies to find out how people buy paper clips through to how they choose equipment or plant costing millions of pounds. Contrast two situations. The decision to choose a supplier of a paper clip is made by one person, quickly and with very little consideration. On the other hand the decision to choose a new location for your business has massive implications for your staff, it costs a great deal of money and it is a protracted process from start to finish.

In the last year, B2B International has worked on inward investment programs for Scottish Enterprise, The Mersey Partnership, Creative Cumbria and the South East England Development Agency.

From these many studies we have learned that there a fundamental issues that drive a decision to locate a business in a region. For example, people’s awareness of and their attitudes to a region is critical to their likelihood of relocating to that region. This makes complete sense. You wouldn’t dream of moving your business or part of it to a region that for some reason you think is the pits. Perceptions about a region may be wrong; they may be misplaced (and they often are), but they have a big impact on the likelihood of investing.

This brings us to the question, what is it, beyond perceptions, that drives the decision to locate in a region?

Firstly, and it is an obvious point, the region has to have suitable and available sites and properties to accommodate the new business. If you haven’t got the product, you can’t offer it for sale!

Next there has to be an appropriate infrastructure for the business that is relocating. The headquarters of a major bank requires a different type of infrastructure to a car assembly plant or a call centre. That said, all businesses expect a vibrancy and vitality in a region of their choice. And this poses a problem for redevelopment areas which are run down and must, as a prerequisite, revitalize their city centers, in order to attract inward investment.

Every region has a comparative advantage and this varies from region to region. The comparative advantage may be lower rent and rates, it could be cheaper labour, it could be ready access to customers. Drawn by these advantages, and in Darwinian fashion, investment will flow in and will survive if it is suited to the local conditions. The trickle will eventually become a flow and clusters will grow of businesses that sit happily in the region.

Beyond the two basic requirements of available sites and comparative advantage, there will be many other drivers that influence the location of businesses. Some companies need to be within earshot of universities, others value access to airports, or golf courses or the countryside.

But perhaps the greatest driver of all that draws businesses to regions is the attitude of that region to attracting industry. A highly focused inward investment team that cuts bureaucracy and red tape will succeed. It won’t be done overnight. Glasgow and Manchester have taken 20 years, each with infrastructure investments of over £500 million. Their recipe for successful inward investment is that of a good northern stew – careful preparation, the best ingredients and considerable time on the stove to produce a taste that makes you want more.