News

 

August 2000

Inward investment reaches highest ever levels

Levels of investment in the UK by overseas companies are at record levels, according to new figures released by Invest.UK, formerly the Invest in Britain Bureau. In the year to 31 March 2000, a total of 757 inward investment projects from 30 different countries created 52,783 new jobs, an all-time record. The stock of inward investment rose by 23 per cent to reach nearly $380 billion. By market, the US remained the leading inward investor, accounting for 48 per cent of all projects, followed by Germany (8 per cent), Japan (7.7 per cent), Canada (6 per cent) and France (6 per cent).

Investment was particularly strong in knowledge-based industries such as computer software, the internet, telecoms and e-business. Taken together, these formed the largest category of foreign direct investment, with 205 projects, some 27 per cent of the total. The UK is seen by companies around the world as a leader in the telecoms industry, while its pharmaceutical and biotechnology sectors also enjoy an extremely high reputation.

Trade and industry secretary Stephen Byers said of the results: "These figures show that the UK is an excellent place to do business. We have the skills, business environment and sound economic base that are essential to attract overseas investors. This country is in a unique position - it is a gateway between the US and Europe." Foreign office minister John Battle added: "Our continuing strong performance demonstrates the confidence that Britain's economic and business environment enjoys throughout the world. This is a tribute to the British people's creativity and inventiveness, and the agility and adaptability of our workforce."

The figures came hot on the heels of a speech by prime minister Tony Blair to the Global Borrowers and Investors Forum Conference, in which he said that his government wanted to make the UK "the number one place in Europe for business". Stressing the importance of attracting business and investment, he said: "We believe Britain can become the European hub of the emerging global economy. In Europe, a bridge to America, attracting investment from both and from around the world. In effect, Europe's corporate headquarters."

The UK is already Europe's top destination for overseas investment. It attracts more than 25 per of all investment into the European Union, including over 40 per cent of US and Japanese investment. Foreign multinationals now employ more than two million workers in the UK, and enjoy some of the highest productivity rates in Europe. According to the National Institute of Economic and Social Research, productivity in US-owned manufacturing firms is a quarter to a third higher than in comparable British firms. This generally leads to a knock-on improvement in productivity among local suppliers and distributors, boosting the economy as a whole.

 

Ten-year plan promises huge boost for transport

The government has unveiled a $270 billion ten-year plan to overhaul the UK's transport infrastructure as part of its comprehensive spending review. Transport 2010 - The Ten-Year Plan is intended to deliver the integrated transport system the government promised at the last election. Deputy prime minister John Prescott announced that the massive sum - the biggest transport investment since the Victorian era - would be split three ways between roads, railways and local transport.

The plan will reduce road congestion by building 100 new bypasses and providing 360 miles of trunk road and motorway widening, increasing road safety and reducing emissions, and will improve the rail network by updating track, signalling and rolling stock. It will also see up to 25 new light rail projects undertaken in major cities, such as Leeds, Liverpool, Newcastle, Nottingham, Bristol and Portsmouth. London Transport will get $37.5 billion, an increase of 15 per cent. Three-quarters of the funding for the scheme will come from the public purse, with the rest being made up from private partnerships.

The railways will receive a $90 billion cash injection, more than double the capital investment made over the past decade. The heavily regulated private sector will meet half the bill. As well as improving track and signalling, freight capacity will be increased by diverting freight traffic away from bottlenecks on the passenger network. New sections of track will be built and disused sections will be reopened, in the biggest expansion of the rail network since the 1960s. The government plans to deliver at least 75 per cent more rail freight movements, saving 1 billion lorry kilometres per year. At present, although traffic has grown 22 per cent since 1997, rail carries just 6-7 per cent of the total freight moved in the UK. Over the next decade, however, this share is expected to rise to 10 per cent.

Roads will be upgraded, with up to 100 new bypasses and 360 miles of road widening schemes, although no major new roads will be built. Work on a list of 40 government-approved road schemes is to be accelerated, and new ones added in a bid to make better use of existing road space. Improvements to public transport will aim to lure more people off the roads, reducing congestion. There will be an increase in spending on maintenance to clear the current backlog and measures will be taken to speed up planning procedures. The government has ruled out the idea of introducing motorway tolls, for the next ten years at least, except on the privately funded Birmingham Northern Relief Road, which bypasses the M6. Public reaction to this scheme will help determine future policy on pay-roads.

The UK's network of inland waterways will also have a role to play. A new government initiative, Waterways for Tomorrow, sets out a new policy for restoring and developing canals, rivers and waterside land, for both leisure and industrial use. The government will continue to encourage freight carriers to use the canals in preference to the road system by extending its Freight Facilities Grants scheme.

 

Spending review gives more power to the regions

The comprehensive spending review also included big increases in spending on housing and regional development, especially in depressed areas of the country. Regeneration budgets are to grow an average 15 per cent a year, and local authorities in deprived areas will share an extra $150 million in 2001-02, rising to $600 million in 2003-04. Regeneration efforts will concentrate on brownfield sites. The government's welfare-to-work New Deal programme is to become permanent and will cover all the long-term employed. The programme has already proved particularly successful at getting unemployed 18- to 24-year-olds back into work.

Regional development agencies (RDAs) in England will receive an extra $750 million a year, an increase of 40 per cent over the next three years. They will also be given much greater flexibility in the way the money is spent. Wales and Scotland too have received significant spending increases. The National Assembly in Wales will be given access to European development aid worth $1.8 billion, which will help to boost its budget by 5.4 per cent annually over the next three years, to $14.7 billion in 2003-04. The Scottish parliament will see an annual 4.4 per cent budget increase over the same period, to $27.6 billion.

The chancellor's ambitious spending plans have been welcomed by business groups such as the Confederation of British Industry, which praised his emphasis on infrastructure spending and regional development as measures likely to boost business competitiveness.

 

Science gets more funding too

The comprehensive spending review also sees some $1.5 billion earmarked for infrastructure spending on scientific research in the UK's universities. The government is to enter into a two-year public-private partnership with the Wellcome Trust, the world's richest charity, to equip laboratories, refurbish old buildings and construct new ones. The plan, which increases the government's capital spending on science by more than 50 per cent, follows a $1.12 billion, three-year deal with the Wellcome Trust that covered the last spending review for the period 2001-02. Under the new deal, the government will spend an extra $488 million in 2002-03 and $675 million in 2003-04, to cover all the sciences. The Wellcome Trust will contribute $338 million specifically to fund biomedical research.

Taking into account the infrastructure fund, the government's annual spending on science will rise 7 per cent, from $2.4 billion his year to $2.8 billion in 2003-04. Researchers expressed themselves "delighted" at the budget increase.

In another example of public-private co-operation, Samco International, a Japanese manufacturer of production equipment for semiconductors and electronic materials, has set up its first European R&D centre at Cambridge University, in Eastern England. The company's laboratory will house six researchers who will work on developing ferro-electric thin film technology for mobile phones. Over in Oxford in South East England, meanwhile, the university city has acquired its second science park with the opening of Begbroke Science Park, five miles north of the city centre. The facility will concentrate on materials science and technology, and will complement the work of the original Oxford Science Park, founded 10 years ago in a joint venture between Magdalen College and financial institution Prudential.

Cambridge is also to be the base for the first United Nations institute to be launched in the UK for 50 years. The World Conservation Monitoring Centre, a 21-year-old charity that collects information on endangered species, will become part of the UN environment programme. Its location in Cambridge reflects the UK's international reputation in conservation. The centre, which will advise governments and the UN, also provides information to companies in industries such as oil, mining and tourism. Multinationals such as Rio Tinto and BP Amoco use it to assess the environmental impact of proposed projects, while in turn providing the centre with information and funding. The UK's other UN institute is the International Maritime Organisation.

In a separate initiative, the government has allocated a further $4 million of funding to companies engaged in R&D projects under the Europe-wide EUREKA initiative, a programme aimed at promoting collaborative research and improving European competitiveness in advanced technology. Eight projects will benefit from the funding, including the Nirat project, which is developing drugs to combat arthritis; a table-top X-ray instrument to help in forensic analysis and the detection of pollution; and a software package to help search and analyse large databases.

 

Swiss blue chips move to London

SWX, the Swiss stock exchange, is to move its trading of shares in blue chip Swiss companies to London; the first time a European national exchange has moved blue chip trading to another country. The exchange will link up with Tradepoint, a UK electronic marketplace, to form a new exchange called Virt-x, which will offer pan-European trading facilities. Virt-x, to be regulated by the UK's Financial Services Authority, will be backed by the same consortium of 11 investment banks and fund managers (including Morgan Stanley, UBS Warburg and Dresdner Kleinwort Benson) that controls Tradepoint. SWX will take a 38 per cent stake in the new exchange, equal to that of the consortium.

Virt-x, which will be fully operational by the first quarter of 2001, will offer a full clearing, settlement and central counterparty infrastructure. It will be competing with the two other new pan-European exchanges: iX, the proposed merger between London and Frankfurt, and Euronext, the alliance between Paris, Amsterdam and Brussels. It is small in comparison, with Tradepoint accounting for just 1 per cent of the UK market at present, but its speed of execution may give it an advantage over its rivals.

 

Hi-tech venture capital fund sets European example

The UK is to set up a venture capital fund for investment in high-technology businesses, the first of its kind in Europe. The fund will not allocate money directly to start-ups but instead will channel cash to venture capital funds investing in such companies. The fund, which will be targeted at all kinds of high-tech ventures and not just internet start-ups, will be managed by a private sector company and will aim to attract a total $150 million in funding from a variety of sources, including the European Investment Bank. The UK is also planning to set up a series of smaller regional venture capital funds to allocate investments of up to $750,000 in small companies.

The move is being closely watched by other countries in the European Union keen to set up their own funds, although the initiative was almost strangled at birth by the EU's competition commission, which wanted to investigate it as part of a Europe-wide squeeze on state aid to industry. The UK government helped persuade the commission that such a probe would send out the wrong signal to investors across Europe. The EU's go-ahead for the scheme is being hailed as a personal victory for UK chancellor Gordon Brown.

 

Workplace co-operation brings due rewards

The chief executive of a FTSE 100 company in the UK earns on average $965,000 a year, according to a survey by remuneration advisers Monks Partnership. The average base salary last year for a CEO was $735,000, with the rest made up in bonuses. There are however wide variations, says the company. The highest paid CEO last year was the chairman of media and leisure group Granada, who earned $1.53 million, even without bonuses. The chief executive of technology firm Baltimore Technologies, on the other hand, had to make do on a base salary of $180,000.

Not on the same level as the CEO, but still highly sought after, is the skilled engineering worker. The engineering industry is reporting a shortage of skilled workers and companies are offering annual pay rises of up to 16 per cent to attract and retain skilled staff. A report from employment research body Incomes Data Services shows that employers are now paying key craft workers a basic rate of more than $450 a week. Pay is also being widely linked to the acquisition of extra skills.

Research by the Trades Union Congress meanwhile shows that although the number of ballots taken on industrial action in UK workplaces doubled last year, the UK still has one of the lowest strike rates of any OECD country. Only a third of industrial ballots developed into strike action, with the rest being resolved by negotiation. "This survey shows that unions can win for their members without taking industrial action. It shows unions are acting responsibly where employers bargain responsibly," said John Monks, the TUC's general secretary.

 

Vocational education aims to bolster skills base

Shortages of skilled workers are to be addressed by government plans to launch vocational GCSE (General Certificate of Secondary Education) courses in UK schools. The courses, for 14- to 16-year-olds, will focus on subjects such as manufacturing, engineering, business and information technology. Other options will include healthcare, retailing, art and design, leisure and tourism. The vocational GCSEs are part of a package to be introduced in 2002 that will also include vocational A-Levels (for 16- to 18-year-olds) and two-year foundation degrees. The package is intended to create a vocational 'ladder' alongside traditional academic qualifications in schools and universities and will replace the existing foundation and GNVQ qualifications.

Another government training initiative comes in the form of a plan floated by education secretary David Blunkett to allow state secondary schools to specialise in teaching manufacturing and engineering. The schools would form a new strand in the development of specialist schools supported by business backing, which by 2006 are expected to account for around 1,000 secondary schools in the UK, one third of the total. Such schools would prepare pupils for a career in the more traditional industries. The government will be looking for industrial partners to take the idea forward. In the meantime, the government has also announced a tough new inspection regime for all post-16 training and education.

 

Looking for a des res in town? Try the gherkin

A new survey by DTZ Research - its Central London Office Rent Zone Map - gives a snapshot of office property rental prices across Central London. Unsurprisingly, perhaps, the swankiest addresses still carry the highest prices. Basing its research on prime new accommodation with facilities including air conditioning and raised floors as a minimum, the company found that the areas of Mayfair and St James's contain the most expensive office accommodation, with prices on average above $90 per square foot.

In Knightsbridge and Piccadilly and in the City, the main financial district, the average is $75-$90/sq ft, while offices in prime media areas such as Soho and Covent Garden carry rents of around $67-$75/sq ft. Paying out $52-$67/sq ft would get you space in Paddington, Holborn, in the areas north of Oxford Street and on the South Bank, while $45-$52/sq ft would get you set up in Kensington, Chelsea, Marylebone, Clerkenwell or Westminster. Moving further out of the centre pays dividends: offices can be had in areas such as King's Cross and St Pancras for $37-$45 and in Docklands for $30-$37/sq ft. If you can do without the bright lights altogether, office property can easily be found outside the central areas at less than $30/sq ft.

There may well soon be a fresh supply of office space to rent. The Corporation of London has given the go-ahead for the construction of a 41-storey tower in the City of London that is expected to trigger a wave of high-rise construction across the capital. The proposed new building, designed by Sir Norman Foster and nicknamed 'the erotic gherkin', is to be built on the site of the former Baltic Exchange, subject to final approval from environment secretary John Prescott. It will provide accommodation for Swiss reinsurance company Swiss Re. Other new office skyscrapers have been proposed for London Bridge, Southwark and Paddington.

Meanwhile in Canary Wharf, the 85-acre business district built on the site of former docklands in the east of the capital, developers have unveiled a final development phase which consists of a further 3.5 million sq ft of space. This includes a 1 million sq ft tower of which 700,000 sq ft has been let to international law firm Clifford Chance, with an option to lease the rest. Canary Wharf is now expected to achieve full occupancy within 18 months, far sooner than expected. Happy developers say that demand has been driven by the rapid pace of merger and expansion among multinational corporations.

 

High-tech US firms just keep on coming

The continuing flow of US high-tech investors pouring into the UK shows no sign of slowing down. New arrivals include VenturCom Inc, a software provider based in Cambridge, Massachusetts, which has opened a UK office in Worthing on the South Coast of England. The company specialises in the enhancement of Windows-based systems, scaling them across enterprises from the factory floor to corporate level. Meanwhile Exult Inc of Irvine, California, a provider of web-enabled human resources services for Global 500 companies, has opened a new client service centre in Glasgow, Scotland. The centre, which will create up to 150 new jobs over the next four years, will be responsible for payroll processing, benefits administration, training and IT support.

Commerce service provider Digital River of Minneapolis has opened an e-business service division in Maidenhead in South East England. The new division will be responsible for sales and development of business-to-business e-commerce services for manufacturers, distributors and retailers. And Artesia Technologies, a Washington DC-based provider of digital asset management software solutions, has opened a European headquarters at Borehamwood, Eastern England. Artesia set up the base in partnership with Protégé Virtual Management Solutions, a company which specialises in the accelerated development of European operations for US internet companies.

 

US investment boosts Northern Ireland

US investment is also an essential ingredient in the success of Northern Ireland. North American corporations, many of them in the new knowledge-led industries, have invested a total of $2.25 billion over the past decade, according to Sir Reg Empey, Northern Ireland minister for enterprise, trade and investment.

Addressing the Northern Ireland American Business Council recently, Sir Reg said: "US and Canadian corporations are helping to reshape Northern Ireland into a technologically advanced economy and are demonstrating their tremendous confidence in the vigour, skills and motivation of our people. In the past six months, we have seen a series of investments totalling almost $300 million and promising over 1,500 new jobs by established world-class businesses such as Bombardier Aerospace, Nortel Networks and Schrader Electronics, and by new companies of the calibre of Solectron Corporation, Pivotal Corporation and OutSource Laboratories."

He added: "Overall, North America is the second most important export market for [Northern Irish] companies, taking manufactured goods worth over $1 billion - almost half Northern Ireland's exports - in 1998/99. Between 1997/98 and 1998/99, exports to the US and Canada rose by a thoroughly impressive 35 per cent."

The latest US arrival in the province is US technology company Xilinx Inc, which has signed a strategic agreement with Integrated Silicon Systems (ISS) of Belfast (a spin-out company from Queen's University, Belfast) for the development of semiconductor intellectual property. And the Americans are not alone: German company DCW Software of Mannheim has recently established a new product development centre in Belfast to work on a range of business management products. The centre, the company's first outside Germany, will provide at least 12 new jobs.

 

UK now minting euro coinage

The UK may not yet have joined the euro, but the European single currency has been welcomed by the Birmingham Mint, a West Midlands company which has just won a $45 million contract to manufacture euro coins ahead of their introduction in participating states on 1 January 2002. The company gained the contract after a legal tussle with a German company, when German courts ruled that the German finance ministry had breached European Union regulations in awarding the contract to a local firm without first advertising it in the European Journal, the EU's official publication for public sector tenders. The contract will guarantee 130 jobs at the privately-owned company.

 

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