News

 

September 2000

Go-ahead for assisted areas map unlocks funding

The UK government has finally gained approval from the European Commission for its assisted areas map, following the resolution of lengthy negotiations, which have delayed its introduction since January. The map determines the areas of the UK eligible for regional investment grants for industry and covers an estimated 16.5 million people on the Great Britain mainland, together with the whole of Northern Ireland. EC approval means that more than $200 million in provisional grant offers can now be honoured, bringing new investment of more than $1.5 billion and supporting some 23,000 jobs around the UK. During the map’s seven-year lifetime, total expenditure on regional industrial assistance is expected to total up to $180 million a year in England alone. Grants are intended to attract inward investment, create new jobs and sustain and encourage business growth.

Four areas of the UK qualify for Tier One assistance for the first time: Cornwall, Merseyside, South Yorkshire and West Wales and the Valleys. Investment projects in Tier One areas qualify for the highest levels of assistance as well as for European Structural Funds. The EC has also approved a special status for Northern Ireland, which allows the maximum level of grant aid throughout the province. New Tier Two areas include parts of Brighton, Luton, North Staffordshire, Manchester, Lancaster and the Scottish Borders. Companies investing in these areas can apply for grant assistance with ceilings ranging from 10 to 20 per cent. Companies in Tier Three areas can apply for investment support under the government’s Enterprise Grant Scheme.

The new map has been welcomed by regional development and inward investment agencies. In the North West of England, for example, 45 per cent of the population now lives in areas eligible for grant assistance, while in Scotland 48 per cent of the population is covered. The figure for the UK as a whole is 28.7 per cent.

Meanwhile, another tranche of funding is to come from the government’s Single Regeneration Budget (SRB), which this year has been increased 15 per cent to $1.8 billion. Of this, $450 million will go to 46 regeneration schemes in London, while the remainder will be shared between 143 schemes in deprived areas of England. The biggest single award - $120 million - will go towards regenerating the economy of the former South Yorkshire coalfields, including the towns of Barnsley, Doncaster and Rotherham. Some $258 million will be shared between 35 coastal areas and further funds will aid urban regeneration in cities such as Hull, Birmingham and Liverpool. The community-led SRB initiative is expected to lever some $2.9 billion in further funding from the private sector and $3.75 billion in other public sector and European funding.

One project to benefit from both SRB and European Objective 2 funding is the Coalfield Alliance, an initiative under way in the former coalfields of north Derbyshire and north Nottinghamshire in the East Midlands. A five-year programme will pump around $150 million into the local economy, bringing jobs and investments to one of the region’s most deprived areas. Industrial and business units will be established with the aim of creating more than 10,000 jobs, a regeneration zone will be developed on the site of the former Markham colliery in Derbyshire and a ‘technology corridor’ set up between the towns of Ollerton and Sutton in Ashfield.

The new map can be viewed by clicking on Grants or using the navigation bar at the bottom of any page on this site.

Two-way traffic as FDI grows again

Foreign direct investment (FDI) by the US into the UK totalled more than $213 billion in 1999, according to the US Bureau of Economic Analysis. This represented 41.6 per cent of all US investment into the EU during the year, a small increase of 0.6 per cent over 1998, but still double the total of any of the UK’s European competitors.

New figures from business information company Dun & Bradstreet show that in the past two years the number of foreign-owned companies in the UK has increased by 23.5 per cent, with more than a quarter of the 28,777 total being offshoots of US firms. Another quarter are owned by Dutch companies and a third by French firms. Last year the number of foreign-owned firms grew by 11.5 per cent, from 25,802 to 28,777.

Meanwhile overseas acquisitions by UK firms reached a record $190 billion in the second quarter of 2000, according to the Office for National Statistics. The total was exaggerated by Vodafone’s take-over of German telecommunications firm Mannesmann but, even excluding this, expenditure on acquisitions grew by more than $18 billion, almost double that of the first quarter. Acquisitions of UK companies by overseas companies rose from $7 billion in the first quarter to $20.25 billion in the second.

 

E-signature ruling marks legal milestone

The UK has become one of the first countries in the world to pass a law making an electronic signature legally admissible as evidence in court in the same way as a hand-written signature. Section 7 of the Electronic Communications Act 2000 will safeguard both consumers and businesses in the fast-expanding e-business sector. Both parties will be assured that electronic signatures can be submitted as evidence in the case of a dispute. The legal milestone marks progress towards the government’s avowed intent of making the UK the best place in the world for e-business.

 

New funding promises boost for science

Trade and industry secretary Stephen Byers has unveiled a Science and Innovation White Paper aimed at keeping the UK at the forefront of world science and creating a scientific ‘brain gain’. Its proposals include closer links between universities, business and industry and a greater exploitation of science to create wealth and innovation. It builds on a $1.5 billion package of infrastructure investment announced in July.

Key proposals include a $6 million annual fund which will boost salaries for top scientists, helping to attract the best academics to the UK; extra funding for science and enterprise centres to teach graduates business skills; an annual $75 million Regional Innovation Fund to encourage clusters of science-related projects; and the introduction of a Small Business Research Initiative to encourage more small hi-tech start-ups. In addition there will be $375 million to boost research into genomics, e-science, nanotechnology, quantum engineering and bio-engineering; and a range of measures, including a $210 million Higher Education Fund, to create better links between universities and business and industry.

 

Call centres set to continue expansion

The number of full-time jobs in call centres in the UK is set to jump by nearly 60 per cent to 665,000 over the next eight years, according to analyst Business Strategies. However, this projection included a degree of uncertainty about how use of the internet for retailing, banking and other services is likely to develop. Most call centre companies interviewed had an internet strategy in place, but many admitted they were uncertain about the likely take-up by consumers.

Another study has identified the most efficient locations for call centres of different types. Mitial Research, which estimates there will be 3,800 full-size call centres in the UK by 2002, ranked locations according to labour cost and availability, transportation, call centre concentration, property availability and support services. For large call centres with 500-plus employees, it put Belfast, Northern Ireland and the Dearne Valley, South Yorkshire equal first as the most efficient locations. Sheffield (South Yorkshire), Middlesbrough/Stockton-on-Tees (North East) and Stoke-on-Trent (West Midlands) also scored highly. The North East was the most efficient region, with three separate locations featuring in the top ten.

For call centres with fewer than 200 employees, the survey identified ten rural and small towns as good places to locate. Top choice was Bangor, North Wales, followed by Ayrshire and Highlands and Islands in Scotland. Customer contact centres, a new type of call centre requiring more contact with customers and skills such as e-mail and web proficiency, will develop largely in metropolitan areas, particularly in the South East, predicts Mitial. Their initial development will be governed by skills availability, mirroring the development of traditional call centres a few years ago.

 

Freight traffic up as canals make a comeback

The total number of goods vehicles travelling from the UK to mainland Europe rose by 10,700 from 593,200 in the fourth quarter of 1999 to 603,900 in the first quarter of 2000, according to the latest statistical survey from the Department of the Environment, Transport and the Regions (DETR). The number of powered vehicles and the number of unaccompanied trailers crossing to Europe both rose by 2 per cent. The total number of goods vehicles making the journey rose 16 per cent over the same quarter last year, with powered vehicles increasing by 14 per cent and unaccompanied trailers by 18 per cent. In 1999, UK-registered vehicles carried 7.5 million tonnes of goods out of the UK, the same as in 1998, and 8.4 million tonnes into the UK, an increase of 4 per cent.

On the railways, two new franchise deals have been announced by the shadow Strategic Rail Authority that will secure investment for passenger services in the Midlands and South East England. A company called M40 will operate the new Chiltern Trains franchise, investing up to $555 million in co-operation with track operator Railtrack, while Midland Mainline will invest $357 million after negotiating an extension of its franchise from 10 to 12 years. The new services will feature greater integration with other modes of transport, such as park and ride schemes and links to the London Underground network.

Shipping operator P&O is to buy and redevelop the 750-acre Shellhaven oil refinery site at Stanford-le-Hope on the Essex bank of the River Thames, Eastern England, at a cost of around $112.5 million. The company plans to build a container port on the site, which has 2.5 miles of working waterfront, and to sell on part of the land for industrial and warehousing purposes.

British Waterways (BW), meanwhile, has launched plans for the UK’s first new canal in more than 100 years. The project, which revives an 1810 proposal for a 17-mile stretch of canal from the River Ouse at Bedford, Eastern England to the Grand Union Canal at Milton Keynes, will cost $105 million to build and will open up East Anglia to waterborne freight and to leisure craft. The move comes at a time when the UK’s 2,000-mile canal network is enjoying a renaissance, with BW currently spending $1.5 million a week on 200 miles of restoration projects and tackling a $107 million backlog of repairs. The work is partly funded by government grant, but BW is also raising revenue from businesses such as transporting water and running telecoms cables under towpaths.

 

Honda makes long-term commitment to UK car industry

Honda has announced an expansion programme of its UK operations that will see it exporting cars from the UK back to Japan. The Japanese car giant is building a $675 million assembly line at its Swindon site in South West England that will raise production from an annual 100,000 cars at present to 250,000 by 2002. Much of the increased capacity will be used to assemble export models, and some 10,000 Civic models will be earmarked for Japan. Others will go to North America, although the majority will be destined for European markets.

The move comes despite continuing concern in some quarters over the strength of the pound, and is being hailed as an endorsement of the UK’s economy even though the country is not yet a member of the euro, the European single currency. Honda itself said: "This is a long-term commitment. You cannot chop and change on the back of short-term currency fluctuations. You have to take the long-term view and what is working against you today may work for you in a couple of years."

Meanwhile Aston Martin, the prestige car maker owned by the Ford Motor Co, has submitted plans for a dedicated research and engineering centre along with a new vehicle assembly facility at Gaydon in the West Midlands. This year, for the first time its history, the company has produced more than 1,000 new luxury cars at its two UK production centres. Another Japanese company, Hitachi Cable, has begun operations at its UK subsidiary at Ebbw Vale, South Wales. The factory, purchased from TRW, will produce power steering hoses, brake hoses and other automotive components.

 

Property bonanza means companies are spoiled for choice

Companies looking for premises in the UK will find no shortage of options, with a stream of new property coming onto the market around the country. In Rotherham, South Yorkshire, for example, a new business centre is due to open in the autumn. The $3.6 million Century Business Centre at Manvers will provide 66 units for small and start-up businesses, ranging in size from 160 sq ft to 490 sq ft and suitable for either manufacturing or service activities. Elsewhere in the city, at the 1,200-acre New York Riverside development, IMEX Properties Ltd, the UK’s largest provider of managed workspace for SMEs, has opened a further 10 industrial units in its Templeborough Enterprise Park.

At Halton in North West England the first building has been completed at Daresbury Park, a new 222-acre business park. A further 13,125 sq ft of space is being built speculatively at the site, with a completion date set for September. Further space is available at Astmoor Industrial Estate in Runcorn in Halton borough, where developer the Easter Group is offering a range of new industrial units ranging in size from 750 sq ft to 50,000 sq ft with flexible leases. Easter also has land available at Astmoor for design-and-build units from 10,000 sq ft, on either a freehold or leasehold basis.

Also in North West England, the Wirral International Business Park on Merseyside is cementing its reputation as one of the region’s premier business locations, with a number of new units for sale or to let. Apex Court is a speculative development completed in August, which offers nine new industrial units, ranging in size from 4,520 sq ft to 15,900 sq ft. Another development, Centuria, consists of two new production/warehouse buildings with a total of more than 60,000 sq ft of space, available in units of 16,000 sq ft or 32,000 sq ft.

Manton Wood enterprise zone at Worksop, East Midlands, reports it is now almost full, with only three plots (of 2, 4.2 and 6 acres) remaining. The former British Coal regeneration site has already created 1,000 new jobs. Occupants include French-owned OCG Cacao, which employs 50 people in making chocolate, and multinational food giant Hazelwood Foods, which has invested $21 million in a manufacturing plant.

ProLogis Developments, a US-owned property and development company, is to work in partnership with the Industrial Development Board, Northern Ireland’s inward investment agency, to create an international business park at Ballyhenry in Newtownabbey, Northern Ireland. The 147-acre site will offer world-class facilities and ProLogis will target its existing US customer base as prospective tenants. The first are expected to arrive next year.

Locate in Kent, a South East inward investment agency, has launched a campaign to promote more than 5,600 acres of business parks and strategic sites across the county. Its new Strategic Sites brochure brings together information on 26 development sites and some 128,000 sq ft of speculative space, together with details of commercial property companies. In 1999-2000 Locate in Kent handled more than 600 inquiries from potential investors. Since April 2000, it has attracted 400 jobs to the area.

Finally, in London, development plans for part of the Old Spitalfields Market site, on the fringe of the City, have been approved by Tower Hamlets council. Construction can now begin on 635,000 sq ft of office space, together with a covered retail market and a public square.

 

London office space in short supply

Availability of office space in the Central London office market stood at 5.7 million sq ft at the end of June, a ratio to stock of 2.9 per cent and the lowest level since 1988, says property analyst DTZ Research. A sharp increase in take-up, from 5.6 million sq ft in the first quarter to 6.8 million in the second, saw availability fall by more than 25 per cent. Take-up doubled in the WC1 and WC2 areas (known as Mid-Town) while in the fringes and Docklands sub-markets it grew by 20 per cent and in the City by 14 per cent. Speculative development activity remains low, with only 3.6 million sq ft under construction, and rental growth continues to be strong.

In a separate report, however, DTZ predicts that current pre-letting and merger and acquisition activity is likely to see substantial amounts of office space come onto the market in the next three years. Pre-letting (where a company undertakes to take space in a building before construction commences) reached a peak in the late 1990s. Of pre-lettings since 1997, DTZ estimates that around 5 million sq ft of office space will return to the market in the period 2000-03 as companies move into new premises and relinquish their existing buildings. Many pre-lets involve banks and other financial institutions and some 75 per cent of the released space will be in the City.

M&A activity, particularly amongst banks post-deregulation, has seen growing demand for larger premises. A decade ago, for example, a typical dealing floor was around 10,000 sq ft in size, now requirements are for dealing floors of 50,000 sq ft and above. There have been a number of major mergers and acquisitions over the past year that are beginning to have an effect on the property market, among them the take-over of NatWest, which holds significant amounts of property in central London, by the Royal Bank of Scotland. M&A activity is likely to add 1.3 million of surplus office space to the market over the next three to four years, estimates DTZ.

 

Wanted: city centre bunker with own power supply

Meanwhile DTZ Research has identified a new type of property that is starting to have an impact on the market. Co-location centres - also known as carrier hotels, internet hotels, data centres, server farms or web hosting centres - are a by-product of the internet boom. They house the large stacks of computer equipment that give companies access to data communication networks - and allow them to have a web presence - in a secure, failsafe environment.

At present in Europe they are still largely confined to large cities, and London has emerged as a leading centre, ahead of Amsterdam, Frankfurt and Paris. The London Internet Exchange (LINX) is a major hub, and has been supplemented by six additional sites in Docklands and the City of London. Companies involved in the UK market include Global Switch, a UK start-up operating from a 250,000 sq ft converted printing works in London; Telecity, which has facilities in London and Manchester as well as in Europe; KPNQwest, a broadband ISP which is rolling out a network of 18 ‘cyber-centres’ across Europe; and UUNet, a subsidiary of US web hoster Worldcom. Operators such as Dell, Compaq, IBM and Intel are also moving into web hosting.

The value of the London co-location market is currently estimated at around $450-$600 million, and is projected to rise to more than $1 billion by the end of 2001. Pricing for the rental of co-location space, including racks and suites, is around $60 per sq ft per month in London, compared with around $75 per month in cities such as Frankfurt and Madrid. Operators have however shown themselves willing to pay premium rates in order to accelerate their speed to market, especially in London, where the concentration of fibre networks offers a distinct business advantage.

Single-floor warehousing has emerged as the favourite type of building for conversion to co-location - although the ‘ideal’, it is said, would be a military bunker located in a city centre. In future, too, co-location developers will need to consider installing their own power supplies. Web hosting centres require huge amounts of electricity to run, much of it for cooling equipment, and recent experience in Silicon Valley in California has shown that public electricity grids may just not be able to cope when numbers of co-location centres are clustered close together.

 

Telford scores a hat-trick

Telford, the West Midlands investment hotspot, has welcomed three announcements of fresh investment. Hager Electro GmbH, a German manufacturer of electrical products, has expanded the operations of its UK subsidiary, based in the town. Hager Ltd has opened a new 35,000 sq ft UK customer service centre and warehouse facility, and is also expanding its production capacity with a 30,000 sq ft extension to its factory at Hortonwood. The expansion will see it take on a further 42 assembly operators by the end of the year.

Another German company, Denios AG, has set up a 37,500 sq ft production facility and UK headquarters at Newport, just outside the town. The company is a European market leader in environmental spillage production equipment and the plant will manufacture containers and equipment for the storage of chemicals and other hazardous substances. It will employ 10 people by the end of the year, rising to 60 in the next three years. Meanwhile Seiko Epson Corporation has opened a new Customer Interaction Centre in Telford to provide support for Epson (UK) Ltd customers using the company’s printers, scanners, projectors and digital cameras. The centre, which opens in September, will initially employ 20 people but this will increase to 80 by the end of the year.

 

Around the regions

• Italian scooter manufacturer Italjet Moto has set up a UK distribution centre in Rotherham, South Yorkshire, initially employing 10 people. Japanese automotive component supplier Toyoda Gosei, part of the Toyota group, is gearing up for full production in December at its $48 million plant at the city’s Centurion Business Park; by 2004 it will employ 400 people in making rubber weather seals for cars.
• Vehicle component supplier SPX Contech, based in Michigan, is to establish a European headquarters at Welshpool, Powys in Wales as part of a $30 million investment. The company will build a 135,000 sq ft die-cast factory that will begin production of aluminium steering and power train components by the second quarter of 2001. It will take on 180 staff.
• In south Wales, Quasar Chemicals of Neath has been acquired by Irish water management company Chemsprec Ireland. Quasar manufactures chemicals for water treatment and janitorial applications and currently employs 29 people. Another 10 will be taken on when the company is expanded later this year.
• London Manston airport in Thanet, Kent, a new airport servicing the South East region, made a good start to its passenger services by agreeing a fly/cruise contract with US company Renaissance Cruises. The company operated return flights over the summer between New York’s JFK airport and Manston, where travellers were transferred direct to its cruise ship waiting at Dover. Renaissance Cruises is already planning to expand the service next year.
• Elsewhere in Thanet, a new $45 million access road to Ramsgate New Port has opened. The 2.2 kilometre road diverts traffic from the town of Ramsgate via an 800-metre tunnel cut through cliffs.
• Unilever is to consolidate its European IT infrastructure services into a single IT management centre at Port Sunlight, Wirral in North West England. The move, involving an initial investment of $97.5 million, will support all the company’s European operations.
• Canadian Pizza, a wholly-owned subsidiary of the Dublin-based Greencore Group, has made the largest ever single capital investment in the UK’s chilled pizza sector. The company is to invest nearly $20 million in a new pizza topping factory alongside its existing crust bakery at Deeside, North Wales, creating 230 new jobs.
• Mahindra & Mahindra Ltd, based in Mumbai and one of India’s top ten conglomerates, has set up a UK subsidiary, Mahindra Intertrade (UK) Ltd, based in London. The Mahindra group dominates the utility vehicle and tractor markets in India, and has a strong presence in the US. Its tractor division is currently the third-largest producer in the world, with aspirations to take over the top spot by 2005. The new office will help spearhead its drive into Western markets.
• California-based data availability company Veritas Software Corporation is to invest a further $400 million in the UK over the next five years. It plans to build a European headquarters at Reading, South East England and a research and development centre at Watford, Eastern England. In the process it will create some 2,000 new jobs.
• ADC Telecommunications of Minnesota, a supplier of software and solutions for broadband communications networks, has opened a new manufacturing facility at Glenrothes in Scotland. The new 60,000 sq ft plant employs 80 people, but ADC has already begun expanding it to 350,000 sq ft. The expanded plant, due for completion in 2001, will employ 600 people and will take the company’s investment to around $87 million.
• Also in Glenrothes, US electronics designer and manufacturer Galcon is expanding its European operations with a further $2.1 million investment in its development and manufacturing facility, which services customers both in Europe and globally. Development work is under way on a new facility that will treble floor space to 75,000 sq ft, while the company plans to double its workforce from 50 to 100.
• German company Phoenix Medical Supplies has chosen Runcorn, North West England, as its UK headquarters, acquiring 117,000 sq ft of industrial space at Whitehouse Industrial Estate. The company, which supplies medical products for the retail and wholesale sectors, has a network of 15 distribution centres in the UK. Around 30 staff will be based at the new HQ.
• American company RSL Communications, based in New York and Bermuda, is to move its operations to London, attracted by the expanding European telecommunications market. The company offers a range of voice, data and value-added product solutions to small and medium businesses and residential customers.
• Israeli company Ericom Software Inc, based in Tel Aviv, has opened a UK office in Droitwich, West Midlands. The company offers software solutions for corporate connectivity, e-business, web-enabling and wireless business-to-business communications.
• Fellow Israeli company Maximal Innovation Intelligence has opened its first European office in Farnham, South East England. The company, which develops business intelligence software solutions, has already established partnerships with a number of UK companies.
• Another e-business company, Global Logistics Technologies Inc (G-Log) of the US, has opened a European head office at nearby Fleet, South East England. G-Log, founded last year, develops Internet-powered software for logistics and transportation companies.
• Italian publisher and internet portal Seat Pagine Gialle has agreed to buy TDL Infomedia, publisher of Thomson Local Directories in the UK, for $465 million plus the assumption of the company’s debts. Seat PG is the European leader in telephone-related publishing and the sixth-largest in the world, with an annual turnover of $867.5 million. TDL Infomedia is the second-largest publisher of directories in the UK, with a 16 per cent market share.
• Watts Blake Bearne & Co, a subsidiary of Belgian firm Sibelco, has acquired the minerals and chemicals business of London-based building materials company HMC for $124.5 million. HMC owns mineral reserves around the UK and supplies the construction and glass industries.
• Cargill Inc of Wayzata, Minneapolis, America’s third-largest food company, is to buy UK property group Dencora plc, based in Beccles, Eastern England. Cargill’s broad portfolio of products and services includes agriculture, food processing and industrial and financial trading, and in the year to 31 May 2000 the company reported net earnings of $480 million.
• German biotech company Evotec BioSystems of Hamburg has acquired its UK rival Oxford Asymmetry, based in Abingdon, South East England, for $475 million. Oxford Asymmetry provides a range of chemical services for the pharmaceutical and agrochemical sectors. It employs more than 250 staff, of whom more than 40 per cent are qualified to PhD level.
• Italian high-technology group Finmeccanica, based in Rome, is to take a 50 per cent stake in a new helicopter joint venture with UK company GKN, based in Redditch in the West Midlands. The new company, to be called Agusta Westland, will bring together Finmeccanica’s Agusta helicopter business and GKN’s Westland Helicopters, based in Yeovil, South West England.
• Schlumberger Test & Transactions, part of New York-based Schlumberger Ltd, has acquired Data Marine Systems of Aberdeen, Scotland, for an undisclosed sum. Data Marine is a supplier of telecommunications equipment for transmitting data from remote locations, and will fit into Schlumberger’s global network of suppliers.
• Cityvox.com, a Paris-based multilingual European internet guide, has opened an office in Piccadilly, central London. It will produce a combination tourist guide, events magazine and local newspaper, together with useful address that can be downloaded to mobile phones or palmtop computers.
• Although the growth of domestic demand in the UK economy has slowed from 1999, it retains considerable momentum, says Barclays UK in its monthly International Financial Outlook. GDP rose by an above-trend 0.9 per cent in the second quarter of 2000. Retail sales rose by just 0.3 per cent but jumped 0.7 per cent in June, and mortgage lending is still growing strongly. The low level of inflation makes an early increase in interest rates unlikely, says the bank, but base rates could still rise to 6.5 per cent over the coming year.

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