Business failure – a matter of geography?

For many businesses, the key to success is to go where the custom is. A major company operating across the UK might ensure it has more offices, factories or stores in places where local economic performance is better; where unemployment is lower and wages higher to ensure the spending power of potential customers is more than elsewhere.

Similarly, some companies may seek to establish themselves in places where the employee skills are more readily available.

And the reverse may also be true: a company may shut its operations in areas where economic circumstances are less favourable.

But such an approach may be harder for some small businesses, which might chiefly or exclusively serve their immediate area, town, city or region. Their focus will mean they could thrive or fail depending on the fortunes of the local economy.

A clue as to which places may see thriving businesses and where there may be a widespread need for bankruptcy advice may have been provided by policy research body the Centre for Cities.

Its Cities Outlook 2012 has forecasted that the relative gaps between the performances of cities will grow, with some enjoying growth even with a possible new recession in prospect.

The report highlights cities with strong private sectors, highly skilled workforces and large knowledge economies as performing better than others since the 2008-09 recession began. A second group – with fewer skilled workers and a greater reliance on public sector jobs – has fared much worse and is likely to go on doing so. The former group includes cities like Cambridge, Edinburgh and London, while the second comprises places such as Hull, Doncaster and Newport.

In the near future, cities at the heart of innovative new technologies and with high levels of education are tipped to do well, with Aberdeen and Milton Keynes among those expected to thrive. Elsewhere, a declining local economy may send many local firms into bankruptcy as their customer base endures rising unemployment.

Of course, much may change if the right action is taken by those who can. For instance, another recent Centre for Cities publication suggested Preston may help drive growth in Lancashire if its city centre is made more attractive and accessible.

But where cities fail to develop in a way that boosts their local economies, many small firms could be the innocent victims of decline.