London and Suffolk

THE SUFFOLK SMALL BUSINESS PROJECT

Home or away? What is the impact of London on Suffolk small business?

Introduction.

The exact nature of the relationship between the Suffolk small business community and the London market is an issue that can be quite controversial at times. The situation is heightened as people take sides on the issue. There are those who see the London economy as a parasite that draws key resources away from Suffolk, and which leaves Suffolk as an economic backwater. On the other hand, there are those who see the London market as an opportunity in which they would like to participate. The purpose of this piece is to examine a number of models that describe the relationship between the Suffolk small business community and the London market. We shall also examine the evidence that is used to support those models.

There are three generic models that are used to describe the nature of the relationship between the Suffolk small business community and the London market - London as a source of opportunity, mass exodus to London, and dormitory Suffolk. We shall examine each of thee models in turn before looking at how the future could develop for the relationship between London and Suffolk.

London As A Source Of Opportunity.

In this model, improved road and rail links to London would give Suffolk businesses easier access to the London market. In this respect, business would come from London to Suffolk. It would do so for two key reasons:

1. The lower cost of property in Suffolk - and the ancillary on-costs - leads to lower overheads, which enables Suffolk businesses to offer work at a cost advantage to London businesses.

2. The labour market in Suffolk is not as tight as the labour market in London. This acts to lower staff costs and, more importantly, prevents disruptions to work patterns caused by a shortage of labour.

This model can be characterised by work flowing out of London to Suffolk, thus boosting the turnover and profitability of the Suffolk economy. This boost, in turn, will have a “Multiplier Effect” to act as an exogenous stimulus to the Suffolk economy.

There is evidence to suggest that this model does have a good basis in fact. Our small business survey found that 14.5% of Suffolk small businesses worked exclusively in the London area. One in seven businesses is a substantial proportion, which helps to further the argument that the London economy is important to Suffolk small business. A further 14% of respondents indicated that the transport links to London were a major hindrance to doing business in Suffolk, and 6.3% put improved transport links to London at the top of their wish list of things that could be done to improve the lot of small business in Suffolk.

We take the view that there are grounds to believe that London is a source of opportunity for Suffolk small business. The city is only an hour away by train, or just over that by car, and increasing numbers of Suffolk small businesses are using those links to sell into the London market.

Mass Exodus To London.

In a small country like the UK, it is impossible for any region to be isolated from the rest of the country. If improved transport links allow Suffolk small businesses to sell into the London market, it is also true that the same links would allow easier access to London businesses to sell into the Suffolk market. In this respect, Suffolk small businesses would be crowded out of the “home market” by “imports” from the London economy.

There is some evidence to support this model, but not at the level of the micro-business. A general absence of indigenous larger businesses means that large contracts tend to be given to businesses based outside of Suffolk because the local businesses are unable to handle larger contracts. There is also evidence to suggest that the key decision makers for the larger projects are based outside of the county, and the appointment of contracts locally does not influence the decisions that are reached when appointing contractors.

We did, however, detect a ground-swell of opinion concerning the appointment of public sector contracts. 10% of our respondents felt that the local public bodies were not sympathetic to local small businesses when awarding contracts, and felt that smaller contracts ought to be lodged locally on a preferential basis. In the service sector, there was strong evidence to suggest that there is a view prevailing amongst local small businesses that the Public Sector uses their “pet consultants” to the detriment of local consultancies. This view could be unfair and untrue, but many small businesses seem to believe that it is so.

Despite this, we are of a view that this model is more of a possibility than a reality. There doesn’t appear to be a clear body of evidence supporting the view that the London market is crowding out Suffolk small business. However, this situation may change in the years to come, and we cannot discount the possibility of it happening in the future.

Dormitory Suffolk.

This model is a little more complicated than the first two. In this model, the business people living in London relocate to Suffolk for lifestyle reasons (Suffolk is a great place to live), but continue to operate their businesses and work from a London location. In this model, the Suffolk small business community acts as a facilitator for as London dormitory.

Those relocating in Suffolk can do so in one of two ways. First, they can settle permanently in Suffolk and commute to work in London. The advantages of this is that housing is so much cheaper in Suffolk when compared to London, that those moving to the county can either downsize their mortgage commitments whilst maintaining their housing assets; or they can upscale their housing assets whilst maintaining their mortgage commitments. Second, those living in London can remortgage their London properties and use the equity released to buy a weekend/ holiday home in Suffolk.

This is a scenario that the Countryside Agency, in particular, warns us of. Locally, fears of it are expressed by such organisations as Suffolk ACRE (a local non-profit agency whose constituency is the rural economy in Suffolk). There is ample evidence to support this model. Numbers of commuters continue to rise, even as the nature of commuting is changing (more people working from home part-time, flexible working hours in London, and less reliance on a centralized London office). The rural population in Suffolk is becoming increasingly suburban, to the detriment of the Country Dweller lifestyle tribe. There is also the growth of the London weekend community on the Suffolk coast.

Harder evidence to support the model comes from the Centre for Business Research at Cambridge University. Their studies found that 55.3% of small businesses are located in a specific location because of the proximity of the founders home, that 69% of small businesses in East Anglia located there because of the attractive living environment for directors and staff, and that the founders of small businesses are likely to have moved into Suffolk in order to start up their businesses.

These results are further supported by our own Small Business Survey. When asked: “What is great about doing business in Suffolk?”, 45.4% said that it was a great location in which to do business. This focus on lifestyle rather than business opportunities in the response is quite telling. It would indicate that business owners do place their standard of living above the commercial opportunities from running their own business - another conclusion drawn from our survey.

The Future.

We are of the opinion that the relationship between the Suffolk small business community and the London market is likely to be of central importance in the years to 2020. We have outlined three distinct models that describe this relationship, all of which have a chance, to a greater or lesser extent, of operating in the future.

In many ways, we feel that the influence of London is likely to be the most important demographic factor influencing the development of Suffolk in the next few years. Is it possible that Suffolk will become a lifestyle playground for those people who are trying to get away from London? Or will Suffolk develop as part of the outer London economy? Yet again, will Suffolk develop as an indigenous economy with London as the senior partners in a relationship of equals?

The answers to these questions lie at the heart of the scenario process that we are undertaking.

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