The UK’s Most Lucrative Locations, Pound for Pound

Bolstered by its powerful currency, the UK offers a sterling business climate, but savvy U.S. companies are sidestepping the expenses of London for cheaper locations.

London is the kingpin of the UK’s business economy, with more than half of all inward foreign direct investment pouring into the English capital in 2007, according to Ernst & Young’s European Investment Monitor, an online tracker of European inward investment. But with London’s exorbitant rental rates for office space and generally high operating costs, many companies are moving west into Wales, across the sea to Northern Ireland, and even north to the upper stretches of England.

Closing Sales in Wales

From its mountainous expanses in the north to its young, booming capital of Cardiff in the south, Wales attracts nearly 10% of the UK’s foreign investment despite being home to less than 5% of the total population. Accessibility to land, workforce, and government officials make Wales a viable option for relocating or expanding companies.

The Name Game: UK Edition

The United Kingdom comprises four constituent nations—England, Wales, Scotland, and Northern Ireland—plus numerous worldwide territories, including Bermuda, Gibraltar, and the British Virgin Islands. Great Britain encompasses England, Wales, and Scotland, which all share the same land mass. As such, Welsh and Scottish people can be considered British, but they are not English. The British Isles is often used to describe Great Britain and the nearby island of Northern Ireland and Ireland, but many Irish reject this nomenclature. Ireland is an independent republic, not a part of the UK.

In April, U.S. online powerhouse Amazon opened its new logistics and distribution center in Swansea, the second largest city in Wales. The 800,000-square-foot facility is located on 33 acres near Swansea’s seaport, and will create 1,000 new jobs this year, with an additional 1,700 full- and part-time positions to be filled over the next five years. This facility will be Amazon’s fourth and largest in the UK, with others located in Glenrothes and Gourock in Scotland and Milton Keynes in southern England.

While Wales is a geographically small country, its size can be a big advantage to businesses looking to relocate quickly. Ian Williams, director of International Business Wales (IBW), notes “incredibly fast links to decisions makers” as a huge factor for companies considering Wales. “Our ministers are available and ready and waiting to make decisions, which can be an enormous advantage to companies not wanting to get held up in a huge bureaucracy,” says Williams.

Regarding the Amazon deal, First Minister for Wales Rhodri Morgan says, “The speed of delivery of this project has been exceptional, taking just 16 months from initial approaches between Amazon and the Assembly Government to the opening of this mega-facility.”

“We feel that the site’s great location, coupled with the ability to draw from a pool of strong local talent, will make this an extremely effective and efficient operation,” says Allan Lyall, Amazon’s vice president of European operations.

While Swansea currently is undergoing a £1 billion facelift of its city center, Wales’ largest city, Cardiff, is busy luring foreign businesses thanks to its redeveloped bay front and significantly lower operating and living costs than London.

Sustainable energy is one targeted sector for Wales that has seen growth in the past year and a half. Californian solar panel firm G24 Innovations (G24i) recently invested $55 million for its European headquarters in Cardiff. “Renewable technology is a very new market in the UK, so cluster movement was not a driver for the move to Wales,” says G24i President Clemens Betzel. Instead, proximity to London, which is two hours away by train, drew Betzel to Cardiff, as did the mechanical engineering talent around Cardiff University.

IBW and the Welsh Assembly were able to quickly reach an agreement with G24i, sparking a trend of fast deal making that is becoming a hallmark of Welsh business practice. “We were looking for a world headquarters in Europe,” says G24i’s sustainability programs manager, Eliot Abel. “For us, having agencies like International Business Wales supporting us as we move forward, and the backing of a country that has green credentials and a real commitment to sustainable energy, as well as access to the strong, skilled workforce that exists in Wales, were important issues.”

“There are sectors where we feel we have very real competitive advantages,” says Williams. “Tourism, creative industries, financial services, bioscience, energy, and sustainability—as illustrated by G24i’s arrival here—are all strong areas with masses of potential for investment.”

Belfast on the Fast Track

Across the Irish Sea from north Wales sits Belfast, Northern Ireland’s capital and cultural core. U.S. businesses have steadily been choosing this Celtic city for their European bases, which has led to the first U.S.-Northern Ireland Investment Conference, held in May in Belfast. The summit enabled about fifty U.S. CEOs to network and learn about the advantages of Northern Ireland’s prime business market. In fact, Belfast is second only to London in attracting foreign investment projects, according to foreign investment authority OCO Consulting. In the past five years, 51 U.S. companies have relocated to Northern Ireland, resulting in more than $1 billion in investment and creating more than 5,000 jobs, according to the country’s development agency, Invest Northern Ireland (INI). “Corporate operating costs in Northern Ireland are about 30% less than Dublin and 40% less than London,” says Gary Hanley, senior vice president of INI, “which makes for a compelling solution for Canadian and U.S. companies.”

OCO Consulting also has identified Northern Ireland as the top European country for software development and technology support operations. In February, the Boston-based Center for Integration of Medicine and Innovative Technology (CIMIT) joined into a collaborative venture with Northern Ireland’s Sensor Technologies and Devices (ST+D) to develop a wireless health monitoring system. The companies’ investment is worth over £400,000, in addition to over £130,000 in fu
nds from INI and £1 million in venture funds. Partners HealthCare, a member of CIMIT and a major U.S. healthcare system, signed a memorandum of understanding encouraging the project’s development.

“Through financial assistance packages, we help Canadian and U.S. companies to relocate here, put together business plans, recruit staff, make contact with banks and property agents, and access infrastructure needed to set up quickly,” says Hanley.

The Original York

The northern English regions of Yorkshire and Humber are also attracting U.S. interest. Florida-based StarCompliance Software will soon expand its European headquarters in Yorkshire. The company invested $4 million in a software development center at the University of York in 2006, and plans to invest a further $1.5 million per year to focus more on sales and marketing. “As a global firm, we could have chosen to locate anywhere, but we found Yorkshire and Humber is so much cheaper than London, for example,” says Martin Mannion, chief executive of StarCompliance. “It also has great rail and road links to client destinations, such as London and Edinburgh, and airports that are within easy reach.”

More than 20 U.S. companies, such as Boeing and Black & Decker, currently operate in Yorkshire.