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Surveyed Execs: London Europe's Best Business City, but Euro Exclusion Could Change Picture

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

LONDON — The more European site-selection rankings change, the more they stay the same. That, at least ostensibly, is the most conspicuous finding from European Cities Monitor 2002, Cushman & Wakefield Healey & Baker's  latest annual survey ranking Europe's top metros for business location.

In the overall rankings for "the best cities to locate a business today," for example, London was ranked No. 1 by European executives for the 13th straight year. Similarly, the cities ranked Nos. 2 through 6 - Paris; Frankfurt, Germany; Brussels, Belgium; Amsterdam, the Netherlands; and Barcelona, Spain, respectively - finished in exactly the same slots as in last year's study (see accompanying top 10 chart).

But those unchanged outcomes mask other findings that clearly indicate significant changes rumbling under the site-selection surface. Those more mutable results include:

• London's remaining outside the euro zone has hurt its financial stature. Though London was ranked No. 1 as a financial center (one of the study's 12 indices), 49 percent of executives said that London's firm fealty to the pound "had had" either a "quite negative" or "very negative" impact on its financial standing.
• Moreover, that damage will escalate, at least if London remains outside the euro zone: Seventy-three percent of executives said that London's euro exclusion would have a "quite negative" or "very negative" impact on the city's financial stature "over the next five years." And that trend held true among UK respondents - 66 percent of Brits agreed that London's continued use of the pound would hurt its financial status. "Our survey clearly shows that London's position will be harmed in the medium term if the UK fails to drop the pound and switch to the euro," said David Hutchings, who heads Cushman & Wakefield Healey & Baker's European Research Group.
• Sept. 11th's impact has hopped the pond. Almost half of surveyed firms have revised their real estate strategies in response to last year's terrorist attacks.
• As with their U.S. corporate counterparts, European firms are now looking at labor as the critical factor. For the first time since European Cities Monitor 2002 was initiated in 1990, "availability of qualified labor" ranked as the "most important location factor," displacing "easy access to markets and customers," ranked No. 1 in the previous 12 studies (see accompanying chart).

Here's a more in-depth look at the 2002's study's findings.

Top Location Factors, Top Future Sites

Where the numbers came from: The study results, Hutchings explained, are based on telephone interviews with "senior managers or board directors with responsibility for location" at 506 Europe-based firms from nine nations. The interview sample was "systematically selected from Europe's 15,000 largest companies," he said. The 30 ranked cities "were those we perceived to have the strongest business representation," according to the research team.

Top location factors: With 59 percent ranking it as an "absolutely essential" consideration, labor availability narrowly edged out market access, with 57 percent, as the top location factor. Labor's rise underscores "that even in today's electronic age, people skills matter most," said Cushman & Wakefield Healey & Baker's Martin Newman, who compiled the report. At the same time, he added, "Information-technology advances in part account for easy market access having less importance."

The rest of the top five location factors were, respectively, transport links with other cities and international locations (46 percent), telecom quality (46 percent) and business climate (34 percent). (See accompanying chart.)

 In contrast, the three lowest-ranked location factors were "freedom from pollution" (12 percent); "quality of life for employees (18 percent), and "languages spoken" (20 percent). Researchers noted, however, that quality of life's score was 20 percent higher than 2001's tally.

Site selection in the future tense: Central Europe's burgeoning importance was underscored by the study's look at the cities in which companies were most likely to open a new office, manufacturing, sales or distribution facility "over the next five years."

Ranked only No. 27 overall, Warsaw, Poland, finished No. 1 in future-tense site selection. And the rest of the top five future locations included, in order, Budapest, Hungary; Prague, Czech Republic; and Moscow - the latter tied with London for fourth place.

"Central Europe is the key target for future expansion of European companies," Hutchings said.

"This stands against the backdrop of many of the countries in the region on the likely brink of joining the European Union."

Prague Makes Biggest Move Up, Manchester Takes Biggest Tumble

Biggest overall ranking jumps: Notwithstanding the enduring constancy in the overall rankings' top tier, the 2002 study did reveal some significant ranking shifts. Milan, Italy, for example, moved into the overall top 10 for the first time, ranking No. 8 after 2001's No. 11 finish.

Other major upward movers in the overall rankings included Düsseldorf, Germany, up four slots to No. 13; and Rome, up three spots to No. 22. But Prague scored the biggest overall jump, moving up five spots to No. 16.

Biggest overall ranking drops: Zurich, Switzerland, took the biggest dip in 2002's overall top 10, dropping three spots to No. 10. Manchester, England, though, took the most precipitous plunge, falling five places to No. 19. Other significant drops included Geneva, Switzerland, which fell three spots to No. 15, and Budapest, Hungary, which plunged three places to No. 25.

9/11's Aftermath

Sept. 11's impact: Forty-six percent of firms reported that "the threat of terrorism prompted a review or location strategy." Two changes were by far the most frequent: "reviewing contingency plans," reported by 35 percent of companies, and "adding more security features," reported by 34 percent.

In addition, more than one-fourth of firms had reviewed locational policies. Areas that were part of that assessment included reviewing dispersal of locations (7 percent); reviewing property types (7 percent); reviewing locations within cities (5 percent); looking at lower-profile locations (4 percent); and reviewing cities in which locations are based (3 percent).

Looking beyond Europe: "European companies seem much more expansionist than a year ago," the study noted. Some 3.5 percent of respondents named Shanghai as the most likely area for a new company presence "in five years time."

Respectively rounding out the top five non-European cites for future site selection were Sao Paulo, Brazil (3.4 percent); Beijing (3 percent); New York (2.8 percent) and Buenos Aires, Argentina (2.2 percent).