UK needs to invest in talent and innovation space to stem regional brain drain

02 November 2017

According to Savills latest Skills, Talent and Labour Mobility Report, a key concern for UK regional cities is the ‘brain drain’ of graduate talent from regional universities to central London. The firm says that more must be invested in developing talent pools and ensuring the right type of commercial space is available across the country in order to encourage business and innovation growth in these locations.

Figures from the Higher Education Statistics Agency (HESA) indicate that London retains as many as 77% of its graduates, followed by 51% in Manchester and 49% in Birmingham, whilst universities in the south east such as Reading, Oxford and Cambridge total less than 20%. As a result, several universities are now looking to commercialise research and provide funding in order to try and keep graduates within these regional cities and towns. Examples of this include, Oxford University Innovation and Cambridge Enterprise, which now provide financial support to new businesses to facilitate growth.

In conjunction with this, developers need to ensure that the appropriate sort of space is being provided to develop talent. Savills research shows that Scotland is the most successful at providing a platform for business growth, with more incubators and accelerators per 1,000 new businesses than any other UK region, including London.

Jon Gardiner, national head of office agency at Savills, comments: “In order to retain home-grown companies who are looking to scale up, regional cities must increase accelerator provision. What’s more, part of the reason for the shortfall in floor space is that high-growth companies are offered favourable rents and are not moved on to conventional office space quickly enough. If existing start-ups were offered subsidised rents in the first and second years, leading to more longer term commercial terms in subsequent years, this would free up more space for newcomers.”

Furthermore, mobility of labour is also a major market constraint within the UK. Compared with other European countries, workers are considerably less footloose, which is partly due to increasing house price disparities between London and the regions. According to Nationwide, the first time buyer house price to earnings ratio in London now stands at 10.2, almost twice the national average. This is why firms such as Burberry plan to relocate its finance, HR, IT and procurement functions to Leeds, where the ratio is just 3.7.

Mike Barnes, research analyst at Savills, adds: “With significantly higher living costs for workers relocating to the capital, the northshoring argument is becoming increasingly compelling. This is why investing in infrastructure projects in the regional cities, from HS2 to local bus routes, will help better retain and attract employees in these locations. For this reason, we expect the net inflow of graduates to London to ease off as workers take advantage of this as well as the higher living standards that are achievable by working and living in the regions.”

From an employers perspective, the British Council for Offices (BCO) estimates that staff costs account for around 55% of total business costs, in comparison to property costs, which amount to just 15%. Therefore businesses are likely to save circa £20,000 per employee per year by moving back office functions to regional cities.

Gardiner adds: “Whilst we don’t expect to see a swathe of central London occupiers upping sticks, we do expect to see more organisations splitting operations across lower cost locations as they become increasingly cost conscious.”

 
 

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Key Contacts

Jonathan Gardiner

Jonathan Gardiner

Head of
National Office Agency

Savills Margaret Street

+44 (0) 20 7409 8828

 

Mike Barnes

Mike Barnes

Research Analyst
Commercial Research

Savills Margaret Street

+44(0) 203 107 5459