News

 

June 2000

LSE and Frankfurt plan pan-European stock exchange

The London Stock Exchange (LSE), Europe’s biggest, is to merge with Frankfurt’s Deutsche Börse to create a European mega-bourse, subject to approval by stock market members. The new exchange, to be known as iX, will also include a tie-up with the US NASDAQ high- technology stock market, to be based in Frankfurt. iX itself will be based in London but will use the Deutsche Börse’s state-of-the-art Xetra electronic trading system. It will be headed by Deutsche Börse’s chief executive Werner Seifert and its chairman will be Don Cruickshank, the recently appointed chairman of the LSE.

It was expected initially that UK and German stocks would be quoted in their respective domestic currencies but once the merger was complete (and this could take up to a year), UK stocks could also be quoted in euros, broadening their appeal to European investors. However, the UK is not yet a member of the European single currency and disquiet among LSE shareholders means that further negotiations are necessary before euro trading becomes a reality.

The proposed merger comes after two years of on-off discussions, and against a background of intensifying European competition. The Paris, Brussels and Amsterdam exchanges recently merged to form a single exchange, christened Euronext. iX has invited other exchanges to join the London-Frankfurt alliance, and talks are already being held with exchanges in Madrid and Milan. However, before the merger can go ahead, 75 per cent of LSE shareholders need to approve it.

 

Internet companies lead rush for London property

Availability of office space in central London fell by 25 per cent over the first quarter of the year, to stand at 8.1 million sq ft, according to the latest quarterly report from property research company DTZ. This constituted a ratio to stock of 4.2 per cent - the lowest level since 1988. The fall was caused by a sharp increase in take-up, especially of newly marketed space. Take-up rose 25 per cent in the City and grew strongly in Docklands and in fringe areas, although it remained stable in the West End. Investment activity remained strong, with transactions totalling $1.6 billion over the three-month period. A significant proportion of this was due to purchases for development.

Much of the new demand has come from internet and e-commerce companies, drawn to London on account of its telecommunications infrastructure and plethora of service companies, according to DTZ. As well as creating demand in central London, the internet boom has invigorated peripheral areas such as Clerkenwell, where start-up companies have been attracted by cheaper space. The capital is well provided with the broadband communications networks that such companies require. London is also a hotbed for software developers and incubator companies and for venture capitalists.

DTZ says the new media sector in London is developing in a similar way to the longer- established industry in New York, with increasing cross-fertilisation between internet-oriented IT and the media industry. Internet companies tend to expand rapidly, and so value flexibility and speed when looking for premises. They are impatient of long leases, and London landlords are not yet as flexible as their counterparts in the US have learned to become. However, demand is still growing and DTZ is confident that internet companies will continue to influence the property market, irrespective of what happens in the current dotcom shakeout.

 

Continued expansion for IT and e-business providers

Continuing development in the IT and e-business industries centres on London but there is plenty of activity in other parts of the UK as well. Diamond Technology Partners, Inc, for example, a Chicago-based e-business services company, has acquired London-based e-business consulting company Momentus Group for $10 million. The acquisition will drive Diamond Technology’s expansion into the European e-business market. Boston-based e-business consultancy Extraprise has acquired two London service companies in a $30 million deal that will launch its own European operations. Pointer Consulting is a customer relationship management (CRM) consultancy that specialises in technology for corporate marketing, sales, service and support. The second company, Bridgewater, is a growth management consultancy.

Just outside London, in Berkshire, South East England, Houston-based Bindview Corporation has established a new office. Bindview is a supplier of IT risk management solutions, specialising in network operating systems, business applications and e-services, and the new office is part of a global expansion programme. And in Manchester, North West England, Greenleaf Technologies Corp of Austin, Texas, a provider of encryption software for DVD and CD-ROM platforms, has announced a UK joint venture company with Vector OEM Content, an interactive software content distributor. The new company, Greenleaf Europe, will sell Greenleaf’s encryption technology exclusively in Europe.

 

Broadband communications set for July launch

Activity also continues apace in the telecommunications industry, following last month’s auction of radio spectrum for the new generation of mobile telephone services, which are scheduled to begin operation in 2002. The auction saw Canadian Group TIW win Licence A, reserved for new entrants to the UK market, with a bid of about $7 billion, while One-2-One, owned by Deutsche Telekom of Germany, won Licence D with a bid of $6.4 billion. The other three licences were won by British Telecommunications (BT), Orange and Vodafone Airtouch.

BTopenworld, the internet division of BT, is set to launch its first broadband internet access service in July in 27 towns and cities across the UK. Broadband connections give much faster access to the internet and make it easier to transmit audio and video material. They use asymmetrical digital subscriber line (ADSL) technology to send data down existing telephone lines at speeds up to ten times faster than existing connections. ADSL avoids the need to install new cable infrastructure and provides users with an ‘always on’ connection.

BT is developing two internet portals as part of the service, one for business and one for consumers. It plans to charge home and single-user small businesses $65 a month for the service, plus a connection fee of $240, while the monthly cost for small businesses with up to four computers connected will be $150, plus $390 for connection. The service will cover 75 per cent of the UK’s population within two years and will also be rolled out in Europe. BT has signed agreements with PC manufacturers Apple, IBM, Hewlett-Packard and Intel to provide broadband-equipped PCs that have BTopenworld software already installed.

Another leading UK telecoms firm, Marconi, has confirmed plans to create 2,200 new high- technology jobs in the West Midlands as it rapidly expands its production of internet switches and routers. The expansion centres on a new factory on a 120-acre site at Anstey in Coventry, where a large part of its existing 16,000-strong UK workforce is concentrated. Priority development projects will include software to carry voice traffic over the internet and routing products for high-bandwidth optical fibre cables.

In recent years Marconi has transformed itself from a sprawling conglomerate largely concerned with the defence industry to a leading information and IT specialist. It is positioning itself to compete with communications giants such as Lucent, Nortel and Cisco, and is reported to be planning a multi-billion dollar acquisition later this year, probably in Europe. One potential target is rumoured to be the information and communications network division of German industrial giant Siemens, which has a substantial presence in the key US market.

Meanwhile, California-based 3Com Corporation has announced plans to build a European Voice Integration Centre at its research and development facility in Edinburgh, Scotland. The $10 million centre will help 3Com accelerate development of its Local Area Network (LAN) telephony systems, which allow voice and data traffic to be delivered over the same computer infrastructure.

Mockingbird Networks of Cupertino, California has opened a sales office in Frimley, South East England. The company is a world leader in carrier-class Internet Protocol (IP) voice service platforms, and will use the new office to service Europe, the Middle East and Africa. Silicon Wave, a chip developer also based in California, has opened its first European sales office at Bridport, South West England. Silicon Wave produces radio frequency (RF) systems-on-chip for use in wireless and broadband communication systems, cellular phones, laptop computers and consumer electronics products.

Sony of Japan is to licence software developed by Symbian, the software spin-off of UK handheld computing group Psion, to develop mobile phones with high-speed internet access. The announcement is a breakthrough for Symbian, which is competing with Palm and Microsoft of the US to develop an industry-standard system for mobile communications. Sony said it would use the Symbian software together with semiconductor technology from Texas Instruments of the US.

 

Financial services companies target UK market

There’s also plenty going on in the financial services industry, with a number of new acquisitions and initiatives announced last month. The Winterthur Group, for example, the life insurance arm of Swiss banking group Credit Suisse, has acquired Colonial UK, the UK subsidiary of the Australian Colonial Group, for $480 million. Winterthur will use the life and pensions operation of the company to expand its operations in the UK life insurance market.

Alexander Forbes, the global financial and risk services organisation headquartered in South Africa, has bought Johnstone Douglas, based in Croydon, South East England for $67 million. Through its software division CTC, Johnstone Douglas, a specialist in employee benefits and financial planning, has developed an internet-enabled e-stockholder system that allows the pensions industry to interface directly with providers, employers, scheme members and intermediaries.

Knight Securities, a subsidiary of New Jersey-based Knight/Trimark, is to lease 68,000 sq ft of empty trading floor space in the London Stock Exchange in the City of London. The company, a market maker in US equity securities, will employ 200 people by the end of the year as it expands into the European market. Chicago-based investment information company Morningstar also plans to open a European headquarters in London, to be called Morningstar Europe. The company will provide financial information, analysis and investment guidance and will set up consumer-oriented financial web sites across Europe.

Meanwhile, in Scotland, global financial services company Morgan Stanley Dean Witter & Co has opened its new Lanarkshire Operations Centre at Cumbernauld. The centre will provide full support for the company’s UK credit card customers. It will initially employ 230 staff, rising to 1,000 over the next five years.

 

Venture capital backing reaches record levels

The British Venture Capital Association (BVCA) reports record levels of investment by UK venture capital companies in 1999, with almost $12 billion being shared out among 1,358 companies worldwide. Investment in start-ups, early stage and high-technology companies was also at record levels. Worldwide, investment was up 60 per cent from 1998, while within the UK itself it increased 63 per cent to $9.25 billion, double the amount invested in 1997.

Investment in UK start-ups rose by 15 per cent and in early stage companies by 24 per cent, to $192 million and $329 million respectively. The average size of investment for both types of company was over $1.5 million. Nearly half the companies backed were in the expansion stage, looking for funds for working capital, acquisitions or plant. The amount invested in management buy-outs more than doubled, due to a few exceptionally large deals, to $6.42 billion.

High-technology companies received the lion’s share. A record $1.62 billion was invested in 473 companies, accounting for 43 per cent of all companies backed. Computer-related, mainly software companies, received half of the total. Nearly four times as many internet companies were backed as in 1998, and they received more than seven times as much investment. Eighty-six per cent of all high-tech companies backed were at the start-up, early or expansion stage of development. Other areas that soaked up large amounts of venture capital included biotechnology, support services, health, leisure and restaurants, pubs and breweries.

By region, London saw investment rise 148 per cent over 1998 to reach all-time record levels. Other big winners were Northern Ireland, up 106 per cent; the West Midlands, (101 per cent); North West and Merseyside, (88 per cent); the North East, (44 per cent); the South East, (36 per cent); Yorkshire and Humber, (26 per cent); and Eastern England, (20 per cent). Investment in Wales rocketed by 875 per cent, although this was due to one exceptionally large deal. For the third year running, overseas investors were the most important supporters of UK venture capital funds, accounting for 69 per cent of funds raised. Overseas pension funds, particularly from the US, were the biggest investors.

 

Car makers pledge commitment to the future

Contrary to recent publicity, German car manufacturer BMW intends to continue manufacturing cars in the UK following the sale of its troubled Rover subsidiary to the Phoenix consortium. It plans to produce at least 200,000 cars a year at its Rover plant in Oxford, South East England, where a new Mini will go into production in the autumn. Test production has already begun of the vehicle, which is to be developed as part of a range designed to serve as an ‘entry level’ to the BMW range.

In late May BMW sold its Land Rover four-wheel-drive vehicle subsidiary to Ford of the US, in a deal worth $2.7 billion. This came soon after Ford’s announcement that it was to stop manufacturing cars at its 70-year-old Dagenham plant in east London, due to over-capacity in the highly competitive European car market. However, to compensate for this, Ford pledged to boost diesel engine production at Dagenham and to invest a total of $4.5 billion in the UK over the next three years. The company has plans to launch nine new models a year over the next five years. With Land Rover, Jaguar and Aston Martin, Ford’s UK workforce will be its largest in Europe even after the Dagenham closure.

General Motors meanwhile has announced plans to invest around $302 million in its UK manufacturing facilities. Investments include $51 million at the company’s Vauxhall Vectra car plant at Luton, South East England and $208 million at its sister plant IBC Vehicles, which will produce medium-size vans for Vauxhall, Renault and Opel. In addition, GM will invest $43 million at its plant in Ellesmere Port, North West England, which will take over production of the company’s 4x4 off-road Frontera vehicle from IBC Vehicles.

Components suppliers too are committing to a future in the UK, with a cluster of new announcements in the West Midlands, a traditional car manufacturing region. Preferred Technical Group (PTG) of the US has moved to a new 80,000 sq ft headquarters at Witton in Birmingham, where it will take on 150 new staff. The group, owned by Dana Corporation, manufactures coupled hoses for the UK and European markets.

German car parts manufacturer VDO Mannesmann plans to create 60 jobs when it opens its new production, assembly and warehouse facilities at the Birmingham International Park 2000, at Solihull. And at nearby Telford, Ogihara Europe, the European subsidiary of Ogihara Corporation of Japan, has opened a new engineering and production facility within its existing site [see picture]. The $16 million expansion will enlarge the company’s turn-key press and assembly tooling capabilities, and will employ 50 skilled staff by the end of the year.

The new $16 million engineering and production facility for Ogihara Corporation of Japan in Telford

 

Work permit rules relaxed to plug IT skills gap

The government is to relax rules on work permits for key workers in the rapidly expanding IT industry. It proposes to give multinational companies the power to certify staff for UK work permits, allowing them to carry out the usual government checks themselves. Officials would then rubber-stamp the applications. The move will allow companies in to bring in overseas workers quickly to fill key positions, and is expected to apply particularly to specialists such as software engineers, programmers and network specialists from India, Asia and Eastern Europe. Investment bank Merrill Lynch and technology hardware manufacturer Intel are among companies that have expressed support for a pilot project in the autumn.

Other proposals include ‘season ticket’ permits for regular short-term workers and a plan to allow outstanding individuals to apply for permits on their own behalf rather than through a company. It will also be made easier for high-level university students to switch from temporary student visas to full employment visas. Maximum permit periods will be extended from four to five years, and the processing time for renewals is to be cut from three months to one week. Governments in the US, Ireland, Germany and Australia have made similar moves recently, underlining the global nature of the demand for skilled IT workers.

 

Overseas companies win Queen’s Awards

A number of UK-based companies owned by overseas concerns have won the prestigious Queen’s Award for Enterprise 2000, in the International Trade category. The awards are made for outstanding achievement in international trade, leading to substantial growth in overseas earnings and commercial success, sustained over not less than three years.

Two of the winners were Polycarb of Doncaster, Northern England, owned by Patram Industries of Israel, and Komatsu UK, based in Chester-le-Street, North East England and part of Komatsu Ltd of Japan. Others were European-based: Abercrombie & Kent Europe, based in Burford, South East England (Abercrombie & Kent Group Holdings of Luxembourg); Alcatel Submarine Networks, based in London (Alcatel of France); Mannesmann Rexroth of Rexroth in Scotland (owned by Mannesman AG of Germany); Matra BAe Dynamics of Stevenage, South East England (50 per cent owned by Aerospatiale Matra of France); and Oxford Magnet Technology, based in Witney, South East England (Siemens AG of Germany).

Eleven companies owned or part-owned by US concerns were also winners. They included Jaguar Cars of Coventry, West Midlands (owned by Ford); Pfizer, based in Sandwich, South East England (owned by Pfizer Inc); and International Television Enterprises of London (50 per cent owned by HBO). Other winners were Targus Europe (owned by Targus Group International); Silberline (Silberline Inc); Tripos Receptor Research (Tripos Inc); Motorola GSM Systems Division (Motorola); Micromass (Walters Corporation); Clear Channel International (Clear Channel Comms Inc); Case UK (CNH); and Netcom Consultants (Xsource Corporation).

Six overseas-owned enterprises won awards in the Innovation category. They were Hydra- Tight, based in the West Midlands and owned by Dover Corporation of the US; Micromass UK, Manchester (Walters Corporation, US); Eli Lilley and Co, South East England (Eli Lilley, US); Nortel Networks, Northern Ireland (Nortel Networks, Canada); TNT UK, West Midlands (TNT Post Group, the Netherlands); and Alcatel Submarine Networks, London (Alcatel of France).

 

More freight hits the road

Freight moved by heavy goods vehicles declined by 1.8 per cent in 1999, from 152 billion tonne kilometres in 1998 to 149 billion tonne kilometres, according to the Department of the Environment, Transport and the Regions (DETR). Tonnes lifted fell by 3.9 per cent, from 1,630 million tonnes to 1,567 million. However, between 1980 and 1999 tonne kilometres grew by 66 per cent, equivalent to an annual rate of 2.7 per cent. Total tonnage grew by 19 per cent over the same period.

The average length of haul also continues to increase: it was 95km in 1999, compared with 93km in 1998 and 68km in 1980. During 1999, the number of road goods vehicles travelling to mainland Europe grew by 189,000, from just over 2 million to nearly 2.25 million. Unaccompanied trailers accounted for 35 per cent of all vehicle traffic.

 

Brighton is best for business

Want a good place to do business but also fancy spending a little time on the beach? You could do worse than head for Brighton, which has come out top in a Dun & Bradstreet survey of the UK’s most profitable towns and cities. The trendy seaside resort on the South Coast of England had the highest concentration of successful businesses of 162 towns and cities surveyed, with 92.3 per cent of its large businesses reporting a profit.

The town has benefited from the growth in the UK’s financial services industry, and is the location for American Express’s European operating headquarters. It also has a high concentration of young media and IT professionals, drawn by its bohemian image. It has quick and easy transport links to London, continental Europe and Gatwick airport, and has relatively cheap labour and accommodation costs.

The survey showed that towns in the south of England were more likely to have high levels of profitability, particularly where the local economy was dominated by service industries. The highest-ranking northern town on the list was Macclesfield, Cheshire, a prosperous market town in the Manchester commuter belt, while the fishing port of Grimsby, North East England came in 14th. Neither, however, can offer the vibrancy of Brighton - nor can they hope to compete with its famous pier, let alone its nudist beach.

 

Around the regions

• US and Canadian companies have accounted for $7.5 billion of investment in Wales since 1983, according to new figures from the Welsh Development Agency (WDA). Currently there are 169 North American companies operating in Wales, employing 31,600 people. Major companies with a presence include GE, NTL, Nortel and International Rectifier. Ford has invested some $1.35 billion over 17 years at its Bridgend and Swansea plants. Silicon supplier Dow Corning has just completed a $300 million expansion of its UK manufacturing site at Barry in South Wales; the plant employs 850 people.
• emda, the East Midlands Development Agency, has celebrated its first birthday. In its first 12 months of existence, the agency helped attract 18 inward investment projects from the US, Europe and Asia Pacific, securing a total of 3,170 jobs - twice its first-year target. Companies setting up operations in the region included Dynex Power of Canada, Power Europe of the US and Japanese bearing manufacturer NSK. The agency has now set out a three-year business plan aimed at boosting prosperity through a programme of development and overseas marketing. For more information, visit www.emda.org.uk
• The new National Fluid Power Centre has opened at North Nottinghamshire College in Worksop, East Midlands. The centre offers world-class training facilities to engineering companies worldwide, specialising in hydraulics, pneumatics and electronic control. Its trainers work on-site but are also prepared to travel anywhere in the world to conduct courses.
• Volunteer Energy, a division of Gaz de France, one of Europe’s leading energy companies, is to double the size of its UK operations, based in Telford, West Midlands. The company, which provides energy services and advises on energy procurement and management, will recruit an extra 30 staff this year. It has taken 8,500 sq ft of office space in the town’s Telford Plaza development to accommodate them.
• Rotherham Industrial Development Office (RiDO), the investment agency for the North of England town of Rotherham, has celebrated its fifth anniversary. Since it was set up in the spring of 1995, RiDO has helped 169 companies either to move into the area or to expand, and has overseen the creation of nearly 8,700 jobs. Total inward investment for the period has been some $254 million. The agency’s latest initiative is an English-Urdu newsletter targeting the area’s large Asian population. The newsletter details progress on the $65 million, 2,000-job New York Riverside regeneration project. The Riverside scheme has already attracted Japanese auto parts manufacturer Toyoda Gosei, which has built a $48 million factory eventually employing 400 people in the town.
• The Wirral, a region of North West England, strengthened its ties with the US recently when a delegation from Midland, Texas made a five-day fact-finding visit. The delegation signed a Sister City Proclamation with the town of Wallasey, toured nearby Liverpool and visited local businesses, including Vauxhall Motors, part of General Motors. Midland-based company Tomcat, which supplies rigs to the entertainment industry, located its UK subsidiary in the Wirral two years ago. Local company Rocket Newmedia, based in Birkenhead, has produced a multimedia presentation that details the Wirral’s attractions for potential inward investors, using its own Presentation Maker multimedia management system. Contact: +44 (0)151-647 2055.
• Swedish telecoms giant Ericsson is to create 500 new jobs at its site at Scunthorpe, Yorkshire & the Humber. The company has also taken an additional 83,000 sq ft site at the town’s Normanby Enterprise Park, where it will employ 60 people. The local North Lincolnshire Council meanwhile has formed an Electronics Focus Group for electronics companies in the area. The group will be looking at issues such as innovation, training and links to academic institutions. Contact Richard Bray on +44 (0)1724-297331.
• Cleveland, Ohio-based welding manufacturer Lincoln Electric Holdings has acquired London-based industrial multinational Charter for $753 million. Charter has two core businesses: Howden, which manufactures air and gas handling equipment worldwide, and ESAB, which produces welding and cutting systems.
• Channel Master Holdings, Inc, a North Carolina manufacturer of satellite antennas and hardware, has acquired Cambridge Industries of the UK for about $35 million. Cambridge Industries, based in Reading, South East England, is a leading manufacturer of low-noise block converters (LNBs) for the consumer satellite communications markets. It was the first to launch the Universal LNB in Europe and today is the leading supplier to the Astra marketplace in Europe.
• Clothing retailer Gap Inc, headquartered in San Francisco, is to build a national distribution centre at Rugby, West Midlands to serve its network of stores in the UK. Work on the 650,000 sq ft facility is scheduled for completion late next year. When fully operational, it will employ around 500 people.
• Genzyme General, a Massachusetts-based developer of therapeutic and diagnostic products, is to build an additional $19 million manufacturing plant at its existing facility in Haverhill, Suffolk, Eastern England. The new plant will produce sevelamer, the bulk drug form of the company’s Remegel capsules, which help alleviate kidney disease. The drug was formally launched on the UK market in March.
• Barclays Bank expects UK interest rates to rise a further 0.5 per cent in the short term, to peak at 6.5 per cent this year. In its monthly International Financial Outlook, Barclays says the UK economy is still booming, with strong growth in domestic demand and a labour market operating at close to full capacity.
• Home and commercial appliances manufacturer Maytag of Newton, Ohio, has bought Trembath Appliance Imports, its UK distributor, and will now sell its products direct in the UK. Trembath, based in Epsom, South East England, has a workforce of 65.
• Swedish company Svedala, which supplies equipment and services to 7the construction and mineral processing industries, has bought the bulk materials handling division of Strachan & Henshaw, part of the Weir Group, for around $4 million. Based in Bristol, South West England, Strachan & Henshaw manufactures bulk handling equipment for ports, terminals and mines.
• Knorr-Bremse, a German supplier of rail braking systems and commercial vehicle air brakes, has bought Westinghouse Brakes from London-based Invensys for about $104 million. Based in Chippenham, South West England, Westinghouse Brakes supplies metro and passenger rail brake systems to the UK and Asian markets and freight rail brakes to Australia and New Zealand.
• Emirates, the Middle East airline, has chosen a 14,000 sq ft office suite in Wilmslow, South Manchester to house its new UK reservation call centre. The centre will initially employ 40 people but is destined to expand to deal with overflow calls from other Emirates call centres in Europe.
• Lease Plan, the vehicle leasing and fleet management arm of Dutch banking group ABN AMRO, has bought Dial Group, the contract hire and fleet management subsidiary of Barclays Bank, for $412 million. Based in London, the Dial Group operates a fleet of 115,000 vehicles across Europe, half of them in the UK.
• ARRK Formation, the British subsidiary of the Japanese ARRK group, has bought the rapid product development (RPD) service provider Styles RPD. Based in Teesside, North East England, the company uses aluminium moulding tools to produce prototype samples for the automotive industries.
• French manufacturing group Saint-Gobain has acquired the pipeline manufacturing business of Biwater, an engineering company specialising in solutions to the global water industry. Biwater is based in Dorking, South East England.

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