Conference Agenda

While the literature on firms is plentiful, little is known about their distribution across space and how the spatial equilibrium of firms changes in response to climate shocks. In this paper, we provide a unique account of the spatial distribution of corporate organisations in the UK, and analyse how firms' location choices are affected by floods and agglomeration economies. We combine various data sources to obtain a panel of business premises at the geo-coordinates level overlayed with flood maps and firm ownership structure. This allows us to first shed light on the spatial organisational structure of firms within the UK, a topic never studied before. We then investigate the effect of floods on firms' location and find three main results. Firstly, business premises affected by a flood are more likely to relocate after being flooded. This effect decreases with the number of floods, a sign of location-stickiness arising from financial constraints or adaptation. Secondly, organisations owning flooded premises internalise the risk of flooding when making subsequent location decisions and relocate to safer areas. Thirdly, we find that agglomeration economies drive the patterns of business location. Agglomeration economies increase location-stickiness, with organisations being less likely to move when flooded in regions that have higher employment, turnover or business density. But once the firm decides to relocate, conversely, they are more likely to move to regions with higher aggregate productivity. Taken together, these results show that climate change affects the spatial equilibrium of firms, which is important to understand when designing policies.