Other firms don’t need particular skills – or maybe willing to train unskilled staff. Firms doing light assembly work often locate where there is a ready supply of cheap (often female) labour. Many of these have set up where traditional industries, such as mining, have closed. Areas with high unemployment have lower wage rates – the competition for jobs keeps wage rates down. At the north of Celynen Colliery in Wales, Aiwa employs 1,000 people making videos and in the Rhondda Valley – the heart of the old Welsh mining industry – Taxdata employs 250 people making CD packaging. In the Dearne Valley in South Yorkshire, at a former colliery, over 2,000 people work for Ventura – part of the Next group companies. Ventura is a call centre and mail-handling company which handles over seven million customer accounts for various clients such as Cellnet and the Cooperative bank.
Call centres employ operators equipped with a computer and telephone whose task is to answer telephone enquiries or telephone existing or potential customers to generate more sales for companies. Today approximately 150,000 people in the UK work in call centres. Most of these are located in parts of the country where wage rates are lower. However, in some places, such as Tyneside, Leeds and Glasgow, where many call centres have been set up, competition for experienced is now increasing and pay rates are rising. So the pool of skilled labour in the area is affecting the cost for firms.
The cost of labour will always be more important to businesses that are more labour intensive than those which are capital intensive. A labour intensive is one which needs a higher number of staff – such as call centres or schools and colleges. A capital intensive business is one where machines or technology do most of the work – as in a modern electricity generating plant. Here the cost of labour is less important in the choice of location.
The Cost of Premises
The cost of premises is determined by the forces of demand and supply. The greater the demand for premises – and the fewer there are available – the higher the cost. For that purpose, premises in city centres – especially in London – are much more expensive than the cost of premises in the suburbs or in the regions. For example, the lease of a large store (60,000 square feet) in Oxford Street, London, was on sale for £12,000,000 in 1997! This is because Oxford Street is a prime site – in a town a large high street store would be less but not cheap. In 1997, Mark & Spencer bought 19 high street stores from Littlewoods for £192,500,000, paying ‘over the odds’ for the stores it wanted. They were actually valued at around £80,000,000. Premises on major town centre shopping routes are always more expensive than on secondary ‘side’ streets – simply because shoppers stay on the high street. Areas of high employment with a surplus of skilled labour – Newbury, in Berkshire, is a typical example – are more expensive places to locate than areas where unemployment is high and the area depressed, as in some parts of the north east. The result is that companies that have no reason to locate in London or the south east will move to other towns and cities. Those businesses which aren’t dependant on passing trade will locate outside town and city centres in cheaper areas or on industrial estates.
Within Britain, many local authorities offer ‘packages’ to encourage businesses to locate in their area. They may offer financial assistance for large firms and reduced rents for small enterprises. Specialist rental and leasing companies will offer attractive packages enabling businesses to locate easily in special workspace sites, office complexes, business or retail centres. Some centres are ‘managed’ with a central reception area, business services and shared meeting rooms. Retail units may be available on short-term license agreements, payable weekly. All these attract organizations to locate where costs will be lowest and where, hopefully, they will be able to expand their business without substantially increasing their costs.
Financial Help from the Government
If you live in London, south-east, or the east of England (e.g. Norwich), then you live in an officially prosperous area. If you live anywhere else, the situation is different, although in Scotland, Northern-Ireland, the West-Midlands and the south-west, prosperity rose above the UK average between 1986 and 1996. However the north-east, north-west, Yorkshire and Humberside, the East-Midlands and Wales all declined below the national average.
The European Union and the government are concerned about such inequalities. They would like all regions to be equally prosperous. For some time in the UK there have been assisted areas. These are areas of Britain where regional aid may be given under European Community law. Regional Selective Assistance (RSA) is the main form of such an aid in Britain. This is a discretionary grant awarded to support a project which will stimulate employment opportunities, increase regional competitiveness and improve prosperity. Between 1985 and 1988, the scheme created 100,000 jobs, reducing employment by 0.5 per cent in the Assisted Areas, at a cost of £130,000,000 a year.
In 1998 the European guidelines on regional aid changed and all member states were asked to propose new Assisted Areas to operate from 1st January 2000. In July 1999 the Department of Trade and Industry put forward the new proposals which included the following.
- Tier One (maximum) assistance for Cornwall, Merseyside, South-Yorkshire and West-Wales and the Valleys. Here grants of up to 40 per cent of the project cost will be available. The government has also proposed that Northern Ireland be treated as an exceptional case for assistance.
- Tier Two assistance for areas most in need of employment creation, investment and regeneration. For these areas a 20 per cent assistance grant will be available. This includes the Highlands and Islands and various areas in England, Wales and Scotland. Rather than designate towns or cities the government has used ‘ward boundaries’ (which denote voting areas).
- Tier Three assistance for Enterprise Grant Areas where assistance will be available to businesses employing up to 250 people. The aim is to encourage the development of small businesses as these are seen as vital for improving employment and prosperity long term.
Once the new Assisted Areas have been agreed by the European Commission, they will remain in force from 1st January 2000 to 31st December 2006.
Transport Links for Suppliers and Distribution
