Businesses continuously relocate for three main reasons: improved access to markets, lower costs and better skills.
There are many factors that need to be looked at in comparing locations. Some of the main ones are labour (costs, availability, productivity and skills), the infrastructure (communication, transport….), the legal, political and regulatory environment, the size of the domestic market and investment incentives.
Current technology allows firms to separate part of their business (e.g. IT, intellectual property or back-office processing) and evaluate the benefits of moving just that process, for which some regions may give specific advantages e.g. lower taxation.
EU Cohesion Policy, which aims to develop regions, may influence decisions on where a business relocates. More direct is State aid and Member States have well established structures to attract businesses for relocation, particularly to poorer regions. Against this, the European Commission, which controls State aid, wants it to be temporary and generally reducing, plus the accepted view has been that getting businesses to stay in an area long-term only works where the attractiveness of the region is sufficient without temporary benefits.
Increasing globalisation, weak demand and excess capacity in the EU from the economic crisis is pushing companies to look at relocation to stay competitive. However, overall productivity performance is key for relocation and staying for the longer term.
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