In light of Prime Minister Teresa May’s insistence that ‘Brexit means Brexit’ and her subsequent announcement that the UK will be leaving the single market, many predict that businesses will withdraw from UK markets. However, the Cities of Influence report conducted by Colliers International conveys a very different, and far more positive, outlook.
The study released this week ranks twenty economic cities in terms of talent, location and cost. These factors have been characterised based on the size of economic output; the capacity of the workforce; the skill-set of the emerging talent pool; the cost and affordability of the city as a place to live; the cost of running a business and finally the risk associated with the market.
The study sees London and Paris hold the top two spots, primarily due to their size. Paris leads when it comes to output and latent workforce skills, primarily as a result of higher levels of short-term unemployment than those available in London. However, in terms of the final results, London comes out on top, partly due to the more relaxed labour laws in the UK and the subsequent appeal of London-based business operations.
Following Paris are Manchester, Stockholm and Dublin in third, fourth and fifth place respectively. The dramatic improvement in Manchester’s rating from sixth to third place is due to the combinations of high scores for its strong latent talent, high affordability and low cost. Dublin sees good results for similar reasons. Strong English language skills are a massive advantage over other European cities (interestingly, Dublin has a higher English language proficiency than multi-cultural London, second only to Manchester) as are the more liberal labour laws.
Predictably, Southern Europe sees less positive results. Madrid and Barcelona both have a strong affordability factor as well as high emerging talent pools but they suffer from high market risk factor. This year has seen Madrid move from third to eighth place and Barcelona from seventh to sixteenth.
Perhaps the most surprising result comes from Berlin. Despite the growing technology industry and the positive growth of media and telecoms operators in the city, Berlin scored poorly due to an overdependence on the public sector. Germany’s fifth largest city, Frankfurt, suffers from a lack of capacity and being expensive compared with other European cities.
The bottom ranking markets are Budapest, Milan and Brussels. The latter two cities are both mired by high operational costs and growing market risk as well as the intensive labour regulations seen in Brussels. The Budapest score is hindered by high country risk, limited economic output and restricted capacity for emerging talent.
Damian Harrington, Director Head of EMEA Research at Colliers International, says; “with the recent announcement that the UK will be seeking a clean exit from the EU single market, and the upcoming elections in the Netherlands, France and Germany, there is clearly a lot of country risk impacting both the UK and the European Union.”
In the period of uncertainty that these political movements will generate, many businesses could be looking to other European cities for better operational conditions. Damian Harrington predicts that business owners will have specific preferences and priorities. He says; “occupiers driven by cost may see the southern European and CEE markets as more attractive than their northern and western counterparts. Alternatively, occupiers focused on a digitally sophisticated workforce will be more tempted by Stockholm and Prague than Barcelona or Brussels.”
What has become apparent in the results of the study is that London does not seem to have been affected by continual speculation around Brexit negotiations. Damian Harrington says “London may be one of the most expensive cities from a real estate standpoint but when taking all factors into consideration, it is superior to all other major European cities in this study. Recent announcements at the end of 2016 by global tech giants including Apple, Google, Facebook and IBM re-affirmed their commitment to the future of the London and UK economies.”
With President Trump’s latest immigration policy making headlines, London could see an even greater number of businesses seeking to operate from the UK. As Damian concludes, “the ability to hold on to its workforce and continue developing its talent base, will be critical to ensure the UK’s capital remains a primary attractor of corporate activity”.