Brexit — looking forward to the big move?
Brexit — looking forward to the big move?
Article 50 was invoked on 29 March, and Brexit has begun. So has the process, for some financial services firms with extensive operations in London, of preparing to think seriously about moving some functions to existing or new offices on the European mainland. The extent to which this office relocation will be deemed necessary will depend largely on how the Brexit negotiations go and what the new relationship between the United Kingdom and the European Union will mean for the passporting rights that currently allow London-based firms to carry out business across the rest of the EU.
Savills has just produced a report reminding us that it is not just the cost of leasing office space in relocation centres that needs to be taken into account but also the cost of residential accommodation for employees who are relocated from one country to another. Companies that relocate employees all the time around the world are used to this but Brexit may bring some newbies into the relocation game. Remember, recruit and retain.
The European Cities report, which looks at real estate across 12 cities in Europe from the perspective of business occupation, shows that residential rents per person are on average five times higher than the cost of leasing office space across the cities monitored. What seems cheaper at first sight may not end up cheaper. An employee happy to be relocated may become discontented.
Savills suggests that understanding the quality, availability and competition for both workspace and housing is critical in the race to attract talent. The firm measured the rental cost of homes as well as the rents, property-related taxes and service charges associated with the workspace that a group of seven key employees occupy across the 12 cities in its report. The staff group monitored consists of one expat CEO, one expat director, one local director and four local administrative staff. (The same group of seven people is used for each city to allow the data to be comparable. The averages given span both the financial and tech sectors).
|Rank Dec-16||City||Annual residential cost per employee (€)||Annual workspace cost per employee (€)||Annual combined cost per employee (€)|
London and Paris are the most expensive cities in Europe in which to locate the executive unit, costing businesses an average of €85,000 and €72,000 per worker per year, respectively, for accommodation. No surprise there. Most of the cost is for residential property; 72 percent and 84 percent, respectively. No surprise there, either.
The next tier of cities — Milan, Dublin, Amsterdam, Moscow and Brussels — has accommodation costs that are nearly half the price of the top-tier cities. However, Savills notes that in Amsterdam and Dublin the cost of residential accommodation compared to workspace is relatively high. The annual workplace costs per employee for both cities could be considered extremely attractive at the relatively low rate of circa €6,000 per year, the firm says, although the residential costs, of €37,250 and €39,201, respectively, constitute around 85 percent of the combined cost per employee.
Yolande Barnes, head of Savills World Research, comments: “Both Dublin and Amsterdam are small but high-profile cities with established global business centres offering a high quality of living and lots of ‘City Buzz’. They are very attractive to the European and global workforce. Although workplace costs are favourable in these cities, the cost of homes in them will mean that employers are likely to feel pressure in the form of wage demands or any housing allowances.”
Savills suggests that high residential rents could cause cities with the right vibe, good jobs and low housing costs to become increasingly attractive on a global stage. It is the cities themselves that will attract young, skilled and valuable global workforces, much more than the organisations within them. Cities such as Berlin and Stockholm are already attracting global talent due to their exceptional urban environments, Savills says, and they are particularly appealing to companies looking for highly cost-effective employee workspace and a high-quality workforce.
“Importantly, cities like Warsaw and Berlin offer cheaper housing markets and are therefore particularly attractive to young people with limited equity seeking to put down roots and form families in stable communities,” says Barnes. “Due to the very high cost of accommodation in the mega-cities of London and Paris, it is ever more difficult for young workers there to buy into the housing market.”
For the admittedly small group of internationally-mobile employees, it is not just about whether their employer needs to move them from an office in one country to an office in another country. It is also about whether they want to go to that country, and their motives for making the move. Some would see it as an opportunity; others would need incentives and persuasion. Brexit just got more complicated.