News
January 2000
Telecoms market opens up as new services roll out
British Telecommunications (BT) has been set a July 2001 deadline by telecommunications watchdog Oftel to open its local network up to competitors offering new high-speed digital services. Unbundling the local loop, the final copper connection between exchanges and homes and offices, will allow other companies to install their own equipment in or near BT’s exchanges. Services such as fast, unmetered ‘always on’ Internet connection will be delivered up to 40 times faster than is currently possible and the cost of voice calls may fall substantially, with companies offering voice links at little or no cost in combination with advanced data services. BT, which is already deploying ADSL, its own fast Internet access technology, has agreed to work closely with Oftel to implement the plan.
In other telecoms developments, electronics giants Siemens of Germany and NEC Corporation of Japan have announced they will establish a joint venture for the widely anticipated third generation of mobile communications - the Universal Mobile Telecommunications System, or UMTS - at Reading in South East England. Called Mobisphere and employing up to 80 people, the company will develop UMTS radio products using the two leading UMTS technologies, Frequency Division Duplex (FDD) and Time Division Duplex (TDD).
Meanwhile US-based MCI WorldCom is to open a new $14 million telecoms switching centre at the Pentagon business complex in Glasgow, Scotland as part of its $320 million investment in building a UK fibre optics network. The engineering centre is due to open in March. And computer group Compaq of the US and London-based Cable and Wireless are teaming up with plans to invest some $500 million over the next five years in a new global venture that will provide e-commerce services to small and medium-sized companies. The services will be provided from 20 data centres that Cable and Wireless is building in locations around the world, and will include Internet access, web site hosting, application software, electronic procurement, unified messaging, remotely managed computer network services and Internet telephony.
Five-year rates review welcomed as ‘fair’
The government has capped business rate increases next year at 12.5 per cent, with phasing over the following four years, in the latest five-year business rates review due to come into effect on 1 April 2000. According to local government minister Hilary Armstrong, new business rates bills will be about 41.6p per pound sterling of rentable value, down from 48.9p per pound this year. Small businesses will be given additional protection with a transitional relief scheme, which will see first-year rate rises capped at 5 per cent, rising to 7.5 per cent in each of the following four years.
All businesses in the UK pay a uniform business rate based on the rentable value of the property they occupy, and this is revised every five years to take account of movements in the property market. The latest revaluation, based on rental values as at 1 April 1998, will see rates fall in some areas, though many will be revised upwards on account of the significant rent rises that have come as a consequence of the UK’s increased economic prosperity over the past five years. The last revaluation, in 1995, was based on rates current in April 1993, at which time the UK property market was mired in recession.
The transitional scheme will ease the burden on occupiers facing sharp increases in their rateable value, and has been welcomed by private sector businesses that praised the government for lending a sympathetic ear to their concerns. It will be particularly important for occupiers of large office buildings in the City of London and Docklands, where rents have doubled over the five-year period. "Overall, it is fair to those facing an upward revision in rates," commented Stephen Tutcher, a partner at property consulting firm Gerald Eve.
Rents show steady growth
Meanwhile, rents are still rising in both the office and industrial sectors, according to the latest quarterly report from property consultant Healey & Baker, which forecasts rental growth of 4-5 per cent over the coming year. Demand in the office sector is strong, with London and the South East, particularly the Thames Valley, seeing the highest levels of demand. This has pushed interest out into other areas, leading to new development along motorway arteries such as the M3 to the south of London and the A1/M1 and the M25 to the north. Speculative development in central London is on the increase and older space has been coming onto the market, but demand for high-quality accommodation still outstrips supply. Nonetheless, Healey and Baker predicts steady growth in rentals rather than a bidding war.
In the provinces demand is still strong, particularly in business parks. Hot spots have emerged, for various different reasons: in Edinburgh and Cardiff, for example, on account of the new Scottish and Welsh national assemblies; in the North East and East Midlands, where assisted area status has attracted cost-conscious operators such as call centres; and Cambridge and the Thames Valley where clusters of, respectively, biotech/pharmaceutical and telecoms/software companies have fuelled interest.
In the industrial sector, rentals grew at an annualised rate of 10 per cent in the third quarter of 1999. Demand is strongest in the South East, the West Midlands and parts of Wales and the East of England, and new development is expected along the M4 and M40 motorway corridors from London to the west. All this is good news for those investing in property: Healey & Baker forecasts total returns on good quality properties of between 12 and 14 per cent in 2000, outperforming the gilts market and possibly also equities.
Spotlight turns on public transport
The government has published a wide-ranging Transport Bill, which advances its goal of establishing a better, safer and more integrated public transport system in the UK. Among the measures included are the establishment of the Strategic Rail Authority, which has been operating in shadow form since April 1999, to oversee rail regulation; a requirement for local authorities to prepare five-year plans to improve their local transport networks; new powers for local authorities to improve bus services and to introduce road charging; and provision for a public-private partnership for air traffic services, which will separate service provision from safety regulation. "The centrepiece of this Bill is better public transport," said Deputy Prime Minister John Prescott. "[It] contains radical measures designed to deliver the safe, modern and high quality transport system this country needs and deserves. It is the most comprehensive piece of transport legislation in 30 years."
Meanwhile, the newly published Bulletin of Transport Statistics: Great Britain 1999 shows that rail passenger journeys increased by 8 per cent in 1998-99 to a total of 1.9 billion journeys. Rail freight moved (expressed in tonne/kilometres) grew by 2 per cent in the second quarter of 1999, compared with the same period in 1998. Domestic air travel rose 4 per cent in 1998-99, while the mileage operated by long-distance coach and bus companies grew by 6 per cent.
A separate report, Transport Statistics for London 1999, focuses on public transport in the capital. The report estimates that in autumn 1998, 1.1 million people entered central London on a typical workday, up 3 per cent from the previous year. About 83 per cent of them used public transport, and passenger journeys on London Underground increased to over 860 million in 1998/99, six per cent higher than the previous peak a decade earlier.
On the roads, the average daily vehicle flow on Greater London’s main roads increased by less than 2 per cent between 1991 and 1998, to 29,100 vehicles a day, of which 80 per cent were passenger cars. In central London, congestion means that the average travel speed during the day, at both peak and off-peak times, is just 10mph. In outer London, the average speed is 18mph at peak times and 23mph off-peak. In central London, 78 per cent of people travelled to work by public transport in 1998, compared with 18 per cent in outer London and 13 per cent in the UK as a whole. The average travel time to work (in 1997), however, was 55 minutes, more than twice the UK average of 25 minutes. The average resident of Greater London, calculates the report, travels 5,000 miles a year, or just under 100 miles a week.
London tops Fortune’s list once again
London has been named top European business city for the second year running by Fortune, the US business magazine, in its annual Best Cities for Business survey. The survey was undertaken by Arthur Andersen, which used three different methods of research. First surveying executives worldwide, then economic development organisations in 160 cities across Europe and finally conducting independent research. Stephen O’Brien, chief executive of London First Centre, the capital’s inward investment agency, commented: "Companies locate [in London] to benefit from its unrivalled strength as a world financial centre, its advanced communications and its vast pool of specialist expertise." Amsterdam, the Dutch capital, ranked second in the survey, while Budapest, Hungary was placed third.
Venture backing yields high returns from high technology
Venture capital-backed high technology investments in the UK produce an average return on investment of 23 per cent per annum and a return multiple of almost three times, according to the first survey by the British Venture Capital Association (BVCA) to measure the performance of such companies. Early-stage investments produced the best internal rates of return at 28.3 per cent per annum and a return multiple of 3.6 times, although each stage of investment showed an average return multiple of at least two times.
The communications sector was the most successful, with an overall return of 38.3 per cent, while the IT sector showed the most consistent performance, with a multiple of at least 3.5 times in all stages. The average time an investment was held until exit was 4.6 years, with early stage the shortest exit time (3.6 years) and expansion the longest (5 years). The companies surveyed created average employee growth of 30 jobs per company, with more than 40 jobs per company in the early stages.
"These are outstanding returns. 1998/99 saw more funds raised for this particular sector then ever before. Therefore we believe these returns look set to continue," said Edmund Truell, chairman of the BVCA Investor Relations Committee.
British workers are happy in their jobs
The overwhelming majority of British workers are satisfied with their jobs, work hard and believe they are well managed, according to the latest British Social Attitudes survey. Some 79 per cent of respondents said they were fairly satisfied or very satisfied with their jobs. Managers were rated as quite good or very good by 77.6 per cent of employees, while 86 per cent of managers considered industrial relations to be quite or very good. Just over a quarter of respondents said they were in a trade union, though most were passive rather than active members. Eighty-nine per cent said they would seek work at once if they were made unemployed, although only 18 per cent had actually been unemployed in the past five years.
However, many workers would like more pay and many said they worried about their pensions. Some 41.4 per cent said they would like to work fewer hours, though 49.2 per cent said they carried on working when necessary even if their private lives were affected. The median working time was 37 hours a week. Nearly half said the reason they worked was to pay for essentials such as food and housing. Only 4.5 per cent claimed to work in order to further their careers and just 2 per cent did it to be with other people. On the other hand, a fairly substantial 10 per cent said that the main reason they worked was because they enjoyed it.
UK companies prove tempting targets
UK firms continue to appeal to overseas investors from both Europe and North America, with a spate of new acquisition and take-over deals announced in the last month. For instance, PubliCARD Inc, a smart card specialist based in Fairfield, Connecticut, has acquired Absec of Bangor, Northern Ireland for around $10 million. Absec designs and manufactures chip-based cost recovery and cashless payment and control systems for education, health, catering and office applications worldwide. Similarly, MUSE Technologies, an advanced visualisation and collaboration software developer based in Albuquerque, New Mexico, has bought Virtual Presence of Sale, North West England in a deal worth $1.9 million. Virtual Presence is a leading provider of interactive visualisation solutions for European companies in the defence, medical and manufacturing industries.
Carbon fibre manufacturer Zoltek Companies Inc of St. Louis, Missouri has acquired UK firm SP Systems, based on the Isle of Wight, Southern England, for an undisclosed sum. Zoltek plans to expand SP Systems’ production of advanced composite materials, both in the UK and at a new plant in Spain. Meanwhile Toronto-based Patheon Inc, a leading outsourcer of drug manufacturing and development services, has purchased a manufacturing plant in Swindon, South West England from Hoechst Marion Roussel, the pharmaceutical arm of Hoechst AG of Frankfurt. The purchase secures the jobs of the 400 workers at the facility. And in a very different field, Sifo Group of Stockholm has acquired the UK firm Romeike Group in a $175 million deal, to create the world’s largest media and marketing monitoring company. Sifo will invest in new technology and marketing capability at London-based Romeike and will expand the range of services it offers.
Europe comes to Peterborough
Peterborough, in the East of England, is to host the EuroConnect business forum on 24-25 February 2000. Organised by Greater Peterborough Investment Agency under the auspices of the European Union’s Interprise programme, which assists small and medium-size companies in developing trade links, the event is aimed at stimulating business opportunities between British host companies and an expected 200 visitors from 14 European countries. EuroConnect will be opened by trade minister Richard Caborn, and local and European parliamentarians will also be attending.
The UK host companies are involved in three main industrial sectors: agriculture and food manufacture, environmental management and pollution control, and town planning and sustainable development. They have produced catalogues detailing their products and services, with the information also available on the Internet - together with French and German translations and background information about Peterborough and the surrounding area. Access it at www.peterborough.net/euroconnect
It’s hot in Notts
A burst of development activity promises to raise the investment profile of Nottinghamshire, a former mining area in the East Midlands region. The East Midlands Development Agency, for instance, is spending $2.7 million to develop a derelict landfill site at Fulwood Park, Huthwaite into a new business park which will offer fast motorway access and a range of light industrial, manufacturing and distribution units. Work is due to begin on building service roads and installing water, power and communications services. The agency is also engaged in new road-building at a $1.1 million redevelopment of the former Manton Colliery site, where it is hoped an area the size of 80 football pitches will eventually house businesses employing over 1,000 people.
More advanced is Edwinstowe House, the former local headquarters of British Coal, which has been transformed into a Business Innovation Centre. Work is almost complete on the building, which offers 40 managed workspaces for new and start-up companies, along with larger units ranging in size from 1,000 sq ft to 6,000 sq ft, an e-commerce support centre, conferencing facilities and a restaurant. The development will be holding an open day for interested investors on 13 January 2000.
One of Nottinghamshire’s three enterprise zones, Sherwood Park, is being expanded (again by the East Midlands Development Agency) from 120 to 140 acres to meet growing demand. Additional land has been acquired from US investor Kodak, and 80 per cent of the site is committed for development. It is expected that the expansion will generate up to 2,500 new jobs. One new arrival is Japanese automotive supplier Tsubakimoto UK, which is spending more than $3.2 million to build new office and warehouse units at Sherwood Park, having outgrown its existing premises at Bingham, east of Nottingham. The company specialises in roller chains, but is planning to expand its operations to produce timing systems for car engines.
Another enterprise zone, Manton Wood, located just outside the town of Worksop in the north of the county, will have created 700 jobs by the time it reaches full capacity. The zone is filling up rapidly, with UK chemical company Courtaulds, French chocolate manufacturer OCG Cacao and Spanish bus seat manufacturer Esteban UK among those locating there. In the city of Nottingham itself, US drug company MicroDose Technologies has formed a joint venture with UK drug delivery company Quadrant Healthcare. The new company will combine MicroDose’s inhaler technology with Quadrant’s formulation and particle engineering expertise to develop inhalers that deliver peptides and proteins to the lungs.
More news about business opportunities in Nottinghamshire and in the East Midlands region as a whole can be found on the web site of East Midlands Observatory, an umbrella group of regional businesses and organisations. The site can be found at www.eastmidlandsobservatory.org.uk.
Around the regions
- International Rectifier Corporation, based in Los Angeles, has officially opened a 90,000 sq ft assembly plant in Swansea, South West Wales, which will produce electronic motion and power control modules for use in industrial, automotive and consumer appliance markets. The plant will create 500 jobs over the next five years. Nearby, at Merthyr Tydfil, Milan-based SOTEN is to establish a manufacturing and R&D facility for its shrink-film packaging products. The $4 million plant will serve the food and technical packaging industries in the UK and Northern Europe and will create 47 jobs.
- Construction has begun of a new $24 million Eurofreight rail terminal at Wentloog in South Wales. The terminal, due to open in October 2000 and operated by rail company Freightliner, will give businesses in the area a direct link to the European rail network, eliminating the need for 40,000 truck journeys each year. The project is being undertaken as a public/private partnership involving companies Freightliner, Railtrack and Euroclad together with the National Assembly for Wales, the Welsh Development Agency and Cardiff City Council.
- Three developers have been shortlisted to partner Northern Ireland’s Industrial Development Board (IDB) in the development of Ballyhenry International Business Park at Newtownabbey in the province. They are Akeler Developments, part of the New York-listed Security Capital Group; Prologis Kingspark Developments, part of the US-based Prologis Trust; and a joint venture between Irish company Dunloe Ewart plc and UK counterpart MEPC plc. The IDB is to promote the new business park as a prime location for inward investment.
- TK-ECC, a subsidiary of Takata Corporation of Tokyo, is investing $19 million to enhance production at its seat belt manufacturing plant at Dundonald, Northern Ireland. The company manufactures seat belt systems for car companies across Europe, including Toyota, Honda, Rover and Vauxhall.
- North Lincolnshire Council reported a successful AgriNord event, which is aimed at small and medium-sized food processing businesses in the north-east of England and potential partners from the European mainland. The fifth in a series, AgriNord ’99 was held on 18-19 November and brought together 40 local companies with 20 from Europe, including companies from Denmark, France, Estonia and Poland. More than 300 meetings took place during the two days of the event and substantial new business secured.
- In the meantime, North Lincolnshire Council has secured European funding to assist companies located on the Midland Road and South Park industrial estates in the town of Scunthorpe. The money will be spent on environmental and infrastructural improvements, and on providing a business support service. Another Scunthorpe business park, the Lysaghts Enterprise Park, has changed its name to Normanby Enterprise Park as it launches a marketing drive aimed at attracting overseas investors.
- The first dedicated call training school in the Midlands has opened in Telford, a popular investment destination. Telford College of Arts and Technology has invested some $272,000 in developing the facility, which has been designed in partnership with locally-based call centre operators and the Telford Development Agency.
- Aerpac of the Netherlands has invested $4.8 million to expand its wind turbine blade manufacturing facilities at Kirkcaldy in Scotland, and was planning to double its workforce to 200 by the end of 1999. The company’s new 33,000 sq ft building is being used to manufacture 88ft glass-fibre blades, the largest ever produced in the UK.
- BAA plc, the world’s largest commercial operator of airports and owner of seven UK airports including Heathrow and Gatwick, is to establish a $3.2 million service centre at Hillington Industrial estate in Renfrewshire, Scotland. The centre will provide a full range of accounting services for the company’s airports and will employ around 120 people.
- Leamington Spa, in Warwickshire, West Midlands is hoping to attract investors with a new $64 million business park development. The 34-acre Spa Park Business Estate will offer a range of premises from 10,000 sq ft up to 250,000 sq ft, designed to fit the users’ requirements and offered on flexible lease terms.
- Halton Borough Council, in Widnes, North West England, has added a number of new and refurbished office and industrial premises to its property portfolio. These include 13 refurbished industrial units on the Astmoor Industrial Estate in Runcorn, where developer the Easter Group has spent nearly $1 million on improvements. Units range in size from 750 sq ft to 50,000 sq ft and are available with flexible leases. Three new office buildings, offering accommodation of 6,000 sq ft, 8,000 sq ft and 10,000 sq ft respectively, have come on stream at Wellfield, a new business park with particularly good motorway links. For details, contact econ.dev@halton-borough.gov.uk
- The Department of Trade and Industry’s Design Policy Unit has launched a new web site that highlights the UK’s world-leading design industry. The site gives sources of government advice available to the industry as well as direct links to industry associations and federations. Access it at www.dti.gov.uk/design
- OM Group, a European company that operates the Swedish stock exchange and the Pulpex derivatives market, is to start trading electricity futures in the UK from May 2000, ahead of electricity trading reforms scheduled for October. Early in 1999, OM launched UKPX, the UK’s first power exchange.
- The UK’s exports of goods grew by nearly nine per cent in the three months to September 1999, from $63.2 billion to $68.8 billion, the fastest rate of growth for 20 years, reports the Department of Trade and Industry. Exports to France grew by more than eight per cent, to $515 million, and to Germany by more than 11 per cent, to $858 million. The overall rate of growth to EU countries accelerated by nine per cent, while exports to North America surged ahead by nearly 15 per cent, to a total of $1,086 billion.