Sunday, July 21, 2024

Why is Corporate Relocation So Popular? It’s All About Profitability

In recent years, there has been a major rise in demand for corporate relocation services. Companies formed in affluent but expensive nations, such as the USA and Britain, are moving their business HQs abroad in their droves.

They are driven by one thing (the thing most-all private sector businesses a driven by): profitability. Being based within famously expensive Western capitals of commerce presents a multitude of benefits, but these benefits are often outweighed by the sheer cost of doing business.

Many companies originally from these countries are drawn elsewhere, with popular placements being Hong-Kong, Canada and the UAE. So what profitability benefits are pulling away so many major companies and small businesses alike? Is this something you should consider for your business?

Reduced Cost of Taxation

Business tax rates in the UK are not considered to be the highest in the world, although through a combination of corporation, income and dividend taxes, they are nowhere near one of the cheapest globally either.

This leads many businesses to establish corporate relocation projects, moving to countries considered to be tax havens, where they are legally capable of cutting down on state payments while operating at the same level. This is especially tempting for businesses that operate online, where relocation will not result in a reduction in output, or when moving to a country like Canada where the markets are just as strong, if not stronger.

Cheaper Operation Costs

The UK isn’t just expensive in terms of taxation; it’s also sky high for operation costs such as rent, utilities, resources and basic costs of living. London is ranked as the third most expensive city to do business in the world, and many other hubs of British commerce suffer from similar problems.

Other cities and hubs of commerce around the world, however, offer very different costs. Belfast, for example, is considered one of the world’s cheapest cities to operate within. Other contenders include Mumbai, Kiev and Johannesburg, and these are just the tip of the iceberg.  

With costs undercutting the UK by considerable margins, it’s small wonder that businesses see the benefit in investing in corporate relocation and establishing themselves elsewhere in the world.

Less money spent on basic operating costs means more profits to be made.

Lower Salary Demands

The average person in the UK commands a salary of £27,000, with those considered to be skilled workers racking up considerably more than that. The average wage in the UK is high, but so is the cost of living. However, in other countries, where cost of living is much lower, salaries are too. With a drop in cost, though, you might be forgiven for thinking you’re giving up a level of skill and ability as well, but that all depends on where you base yourself.

For example, in the Polish city of Krakow, tech companies will find software engineers more than capable of matching the skills of their British colleagues, complete with degrees from prestigious Polish universities. However, their average salary is £17,000, compared to £34,000 for a British-based software developer.

Keep costs down, keep quality up and be as profitable as possible by taking advantage of corporate relocation and moving your company overseas to somewhere with qualified but cheaper labour.

Increased Market Penetration

Corporate relocation isn’t all about pushing expenditure down; it can also be about driving profits up. Depending on your industry, you may be facing fierce competition in your current location, with upwards of thousands of businesses all vying for the same customers. Remaining where you are can be very limiting, but the world is a big place with ample opportunities for expansion.

Relocation may be carried out to access large, better or less-saturated markets. Moving to a country where your business is in demand will allow you to increase profits at a lower ratio of investment and marketing costs.

Better Investment Opportunities

Continuing on our theme of increasing profitability through growth, not reduction in costs, businesses are also tempted away from their homelands by the promise of better investment opportunities overseas.

Many cities around the world create a culture of industry, becoming capitals of certain sectors. For example, Silicon Valley is known for its affinity for tech, while Zurich is famed for its relationship with finance. Notoriety attracts investors looking for a certain type of business and, as a result, if you slot nicely into their intended sector, you’re far more likely to come away with the cash you need.

It’s a smart business move and one that makes a lot of sense. Looking for growth? Go where the best opportunities are.

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