America, the land of opportunity, is the focus of our latest dynamic markets profile as we discover post-recession hot spots springing up across the southern states.
The recession shook the south-eastern states of America hard. But as the area now finds its feet it’s clear that these states’ revitalised approaches to business are harbingers of how the US will change in the coming decades.
The appeal of the Sunbelt states has drawn migration since the 1950s. Air conditioning made the warm weather bearable for individuals, while flexible labour made the area appealing for businesses. Aerospace and defence manufacturing headed west to California, oil development expanded in the southern states of Louisiana, Texas and Oklahoma, while tourism proved the draw for Florida. Business boomed.
Until 2008, when everything stopped.
Unemployment soared, property prices crashed and migration was predicted to finally dry up. Except that it didn’t. Census analysis shows that migration south actually increased – since 2000 most of the fastest-growing metropolitan areas are located in the Sunbelt states, and now these states are finding business models that offer renewed growth.
Florida – gateway to Latin America
“The state of Florida is just about to overtake New York for the third-largest state population,” says Gregg Rusk, Audit Partner at Grant Thornton’s International Business Centre in Florida.
‘Florida’s geographical position makes it a natural gateway to Latin America’
“Every year more people are coming from north-east states such as New York and New Jersey, and cities such as Philadelphia, but we’re also getting the population growth from Latin America and that is expected to continue.”
Florida’s geographical position makes it a natural gateway to Latin America, and as such it is at the epicentre of how America will develop in the coming decades. With 65% of the population in Miami foreign-born, it provides a glimpse of the future – it is estimated that 30% of the US population will be Latino by 2050.
“There are more than 1,000 Latin American headquarters for US companies in Florida,” says Rusk. “Bilingual and trilingual individuals are readily available, and of course they all have significant relationships with the country where they were born.”
For the northerners coming to the area it is the weather that is the draw, and a high percentage are retirees. “Around 25% of our population are senior citizens and that means that there are a significant amount of hospitals and medical businesses in the area.” Property is recovering from the recession and tourism is strong, as is technology.
Atlanta – gateway for the US
Further north, Atlanta’s gateway status has been with it for some time. Originally called Terminus because of the railroad that terminated from the west, its connections are still key to its existence, although now it is those offered by its vast airport. As a consequence there are numerous international brands headquartered here, but the entrepreneurial element is strong, says Dexter Manning, Audit Partner at Grant Thornton’s office in Atlanta.
“I think the secret to Atlanta is its spirit of welcoming people that are not afraid of trying something new, and that’s very evident when we look at the number of technology start-ups in Atlanta, and in particular the number of medical device companies.”
But the strongest business area of all is franchising, so much so that Atlanta leads the rest of the country.
“For the past 20 years I’ve been on the board of directors of the South East Franchise Forum and we’ve seen tremendous growth. There’s growth in employment, new products and services and it’s really exciting because the model really transcends the type of business or the industry. It’s also international and we’ve completed a number of market entry projects for companies wishing to move into Europe, China and the Middle East.”
There are other good reasons for companies to consider Atlanta positively too – a cost of living that’s lower than the national average, relatively cheap housing, nice weather and the entrepreneurial environment.
“Atlanta’s always been a welcoming city when it comes to business,” says Manning. “The state legislature looks for opportunities to allow growth for business. Georgia is now one of the top four states for movie development and that’s due in a large part to the incentives that are available.”
North Carolina – business innovation and incentives
Nearby North Carolina suffered like the rest of the south-east in the recession, but has recast its manufacturing heritage, embracing service industries such as finance, as well as using services to add value to its manufacturing. In many ways the state is a case study of how best to respond to the global changes. A McKinsey report found that every dollar of manufacturing output required 19 cents of services such as logistics and advertising, and that product innovation was the key to unlocking additional demand.
‘Robotics is increasing efficiency, reducing costs and enhancing quality’
“Robotics is a major trend,” says Mike Desmond, Audit Partner at Grant Thornton’s office in Charlotte. “The ability to increase efficiency and standardisation through the use of robotics is reducing costs and enhancing quality.”
In this respect, the state is well placed to take advantage of the emerging trend for ‘reshoring’: instead of looking for cheap labour abroad, companies are investing in a local presence and using automation to provide efficiency.
Vital to this, and to innovation, is the supply of a skilled workforce. “We’ve got a manufacturing workforce that has responded to the challenge of the recession, as well as a very rich university system that provides the technical background and engineering skills necessary to be successful in manufacturing,” says Desmond.
The state is taking steps to encourage business: corporate taxes are due to be cut to 3% by 2017 and personal tax rates have been cut to a flat rate of 5.8%.
Like the states of Georgia and Florida, North Carolina is known as a good place to do business – a reputation that all the states are working hard to keep.
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Image: Rama Knight