News

 

December 2000

Brown’s pre-Budget proposals are welcomed by business

Chancellor of the Exchequer Gordon Brown unveiled a package of measures in his pre-Budget report on 9 November, ahead of his main Budget announcement in March, in which he stated his intentions to maintain the UK’s economic stability and further enhance its business environment. Steering a prudent and realistic path, he said, was the priority, and he wanted to "build economic strength by investing and through tax incentives encouraging a new generation of entrepreneurs". Long-term prosperity, he believed, could be attained by reaching American levels of productivity growth. The International Monetary Fund recently praised the UK’s labour market as "exemplary", especially in comparison with other European countries, but warned that more needed to be done to improve productivity.

The UK’s economy is forecast to grow by 3 per cent this year (including growth of 1.25 per cent in manufacturing) and exports by 8 per cent. Living standards have risen, with consumer demand growing by 3.5 per cent and unemployment at its lowest level since 1979. Business investment has grown by 1.5 per cent and now accounts for 14.5 per cent of the economy, a bigger share than in the US. The Treasury’s forecast for 2001 is that overall growth will be between 2.25 and 2.75 per cent while business investment growth will reach 2 per cent. Manufacturing will grow by between 2 and 2.25 per cent and exports by between 7 and 7.5 per cent, while inflation will be kept to the target of 2.5 per cent.

Having previously cut corporation tax from 33 per cent to 30 per cent, the lowest level in any major country, the chancellor promised consultations on three new measures to attract multinational companies to the UK: from April 2001 abolishing withholding tax on interest payments and royalties between companies in the UK; cutting tax on sales of company shareholdings; and introducing tax relief for intellectual property, goodwill and intangible assets. Relief on capital gains tax is to be extended to non-trading companies.

For small businesses he proposed to simplify the system of value added tax (VAT), allowing companies to file annually rather than quarterly and to pay VAT when they have received payment from customers rather than when they invoice. Incentives such as tax credits were promised for manufacturing. To encourage the booming e-business sector, he proposed to expand tax relief on share options, including National Insurance liabilities. Under the Enterprise Management Incentive scheme, the 15-person limit on share ownership schemes for key employees is to be abolished and the ceiling on option schemes raised from $140,000 to $3.5 million per company.

To help nurture economic regeneration in the regions, Brown proposed giving Regional Development Authorities (RDAs) greater control over the way money is invested to meet local needs. A package of tax incentives was also proposed to help encourage business investment, including exemption from stamp duty on properties in disadvantaged areas, tax allowances for the conversion of residential property and accelerated tax relief for cleaning up contaminated land.

In addition, Brown froze excise duties on all fuels until April 2002, cut excise duty on low-sulphur content petrol, cut excise duty on cars under 1500cc and promised rebates on truck licences (see below).

The proposals were largely welcomed by business organisations. "I don’t think there is any bad news for corporates. There are a lot of what sound like small things that are going to be useful," said Bill Dodwell, a tax partner at professional services firm Arthur Andersen. Stephen Alambritis, parliamentary officer of the Federation of Small Businesses, said: "These measures will reduce tax headaches for millions of small enterprises and encourage them to grow." And Graham Hall, chairman of RDA Yorkshire Forward, said: "The commitment to greater freedom and flexibility in how we spend our money gives the Regional Development Agencies a clear vote of confidence from the government."

 

Business investment grows as financial services boom in Scotland

Business investment in the UK rose by 0.7 per cent in the third quarter of 2000, according to government figures. The rise was led by strong growth in investment in service industries, particularly telecoms infrastructure and IT, and defied predictions of a fall caused by weakening corporate profitability. IT spending slowed in the first quarter, most likely due to the effect of fixing the millennium bug, but has now risen again, running at 3.8 per cent for the quarter. Business investment as a whole has risen by a third in real terms since spring 1997, although manufacturing investment is still lagging behind, having fallen 11 per cent in the third quarter of 2000 compared with the same period two years previously.

Meanwhile, a new report highlights the importance of the financial sector to the economy of Scotland. The study, by the Fraser of Allander Institute at Strathclyde University, shows that financial services, such as banking, insurance and fund management, contribute almost 7 per cent of the country’s total output and are worth around $23.8 billion a year. The sector grew on average 5.4 per cent a year between 1995 and 1999, with only the electronics and chemicals sectors showing faster growth.

Financial services are now more important to the Scottish economy than most manufacturing sectors. The sector employs 91,000 people directly and supports a further 89,000 jobs across the economy. In its three biggest segments- banking, life assurance and fund management - respectively 58 per cent, 64 per cent and 74 per cent of total spending went directly into the Scottish economy, compared with an average of 58 per cent in manufacturing.

 

Big funding boosts for science and education

Scientific research is to receive a large boost in funding, with $353 million of government money allocated to science over the next three years. The money is to be spent by the relevant Research Councils on three key areas: genomics, especially research into the role of genes in disease such as cancer, which will receive $154 million; e-science, to develop scientific computing power to allow researchers worldwide to share huge amounts of data ($137 million); and the development of basic technologies, such as quantum computing, bio-engineering, photonics and nanotechnology ($62 million). The new programmes, which are part of a package that will see an increase in scientific funding of more than $1 billion over three years, were unveiled by trade and industry secretary Stephen Byers.

On a regional level, North East England RDA One NorthEast has announced $560,000 of funding for an advanced centre of excellence in nanotechnology, to be based in Newcastle upon Tyne but with sub-centres throughout the region. A number of local universities and development bodies are backing the project, which will incorporate an electronics clean room and is intended to provide world-class facilities for prototype fabrication, small series production and skills training.

The private sector too is investing heavily in UK science. The Wellcome Trust, the world’s richest medical charity, which spends $2.1 million a day, is to almost double its spending to more than $4.2 billion over the next five years. Some 85 per cent of this is earmarked for the UK. In particular Wellcome will fund research in the biomedical sciences, training more researchers, building more laboratories and putting more emphasis on clinical research. It will also attempt to stimulate public debate on the social and ethical implications of research.

Meanwhile, government investment in universities is also set to rise by $1 billion over the next three years, the biggest public investment in higher education for a decade. Education minister David Blunkett promised vice-chancellors at English universities that funding in 2003-04 would be $9 billion, an increase in real terms of 10 per cent, maintaining recent increases and reversing a historic decline in the amount of investment per student. The money will be used to fund an expansion of the number of young people going into higher education: the government wants to raise the proportion from 43 per cent at present to 50 per cent by 2004. New degrees will be largely vocational and will be aimed at those who want to study part-time while at work.

The government is also to invest an extra $840 million to increase the numbers of young people in vocational education and to improve the skills level of the workforce. A new body, the Learning and Skills Council (LSC), will control post-16 training education and training for six million people. It will have 47 local arms around the country and will co-ordinate funding in sixth-form colleges, further education centres and in the workplace. The new organisation will replace the existing Training and Enterprise Councils.

 

Automotive engineers reach for the sky in NASA link-up

Engineering companies from the UK motor sport industry are to link up with US space agency Nasa in a technology exchange initiative supported by the Department of Trade and Industry (DTI). Technicians will get together at a week-long meeting to be held in March 2001 at Nasa’s Johnson Space Centre near Houston and the Glenn Research Centre in Cleveland, Ohio. The motor sport industry employs an estimated 100,000 staff in the UK and has an estimated turnover of nearly $5.6 billion. The DTI sees is as a flagship industrial sector and is underwriting the technology exchange mission to the tune of $700,000.

The motor sport companies, mostly involved in Formula One racing, are keen to gain access to Nasa technologies. In return, Nasa wants to find out more about how the industry develops and deploys new materials, IT resources and prototyping. The delegation will represent up to 30 companies and will include engineering consultancy groups such as Lola, dominant on the IndyCar racing scene, and Prodrive, which runs Subaru’s champion rally team.

On a more down-to-earth level, Visteon Corporation of Dearborn, Michigan, the world’s second largest automotive component manufacturer, is to establish its UK headquarters on a 14-acre site at Basildon in Essex, Eastern England. A new 60,000 sq ft building will also house a technical site and the company will employ 400 people. Swiss-based Saia-Burgess Electronics Group, which produces motors, sensors and switches for self-levelling headlights and car air-conditioning systems, has expanded its technical centre at the Bermuda Park Innovation Centre at Nuneaton in the West Midlands.

At Welshpool, Mid-Wales, US company SPX Contech is building a $27 million automotive die-casting facility. The 125,000 sq ft plant will create 180 jobs at the Buttington Cross Enterprise Park. And Tenneco Automotive of the US, a leading producer of ride control and exhaust centres, has formed a strategic alliance with automotive manufacturer Futaba Industrial of Japan that includes the establishment of a joint venture in Burnley, North West England. The new company, Futaba-Tenneco UL Ltd, will take over Tenneco’s existing factory and will manufacture emission control components and other products for the auto market.

 

North Americans lead the rush to next-generation technology

The surge of investment in the UK’s booming internet and IT sector shows no sign of abating. Leading the charge this month is Canadian network equipment maker Nortel Networks, which is to invest $100 million and create up to 1,300 jobs as it expands to meet growing demand for internet access. It plans to create 700 jobs at its plant at New Southgate, north London and 600 at Harlow in Essex, Eastern England. The new jobs are mostly in R&D for the next generation of optical and wireless internet communication systems, and are in addition to the 5,000 jobs already created by Nortel in the UK over the past 12 months.

New players continue to arrive, mainly from the US. In London, General Bandwidth, a voice-over-broadband gateway manufacturer based in Austin, Texas, has opened an office to serve the European, African and Middle East (EMEA) markets, as has NetGenesis Corp, a developer of web analytic systems for customer relationship management based in Cambridge, Massachusetts. Managed Objects of McLean, Virginia, a developer of infrastructure management software, has established its European headquarters in the capital, while Globix Corporation of New York, which specialises in internet data services, high-speed internet access and streaming media solutions for business, is in the process of setting up a London internet data centre.

Other London newcomers include internet infrastructure software company Anystream of Sterling, Virginia, which has opened a sales and service office to lead its expansion into Europe, and POPcast Communications Corp, a provider of personal broadcasting services and broadband technologies.

Turnstone Systems of Santa Clara, California, which supplies loop management products, has set up a UK subsidiary, Turnstone International (UK) in Reading, South East England. Also in South East England, e-business consulting company Netigy of San Jose, California has located its European headquarters at Chertsey, while next-generation broadband developer RiverDelta Networks of Tewksbury, Massachusetts has set up its own European office at Odiham. domainLogix of Austin, Texas, a consulting company to the semiconductor industry, has chosen Cambridge, Eastern England for its European base. And US giant IBM has bought a minority stake in Scottish optical electronics company Kymata, which is based at Livingston near Edinburgh. The companies will jointly develop chips for the next generation of optical communications networks.

 

London confirms its leading role

London is leading the hi-tech boom. The capital’s inward investment agency London First Centre reports that investment from overseas companies in the high technology and telecoms sectors is at record levels. Some 75 per cent of the foreign-owned companies which have set up operations in the UK capital in the past six months are in the knowledge-based industries, an increase of 25 per cent over the past two years. In addition to the companies mentioned above, the capital has recently welcomed e-business solution provider Etensity of the US, Australia’s leading online wine retailer Wineplanet and German digital media company I-D Media.

London was voted leading European centre for internet-related businesses and services by 39 per cent of European executives surveyed by property consultancy Healey & Baker for its annual European Cities Monitor study, published in October. It was well ahead of second-placed Frankfurt, with 7 per cent, and Paris with 5 per cent, and overall was voted the best European city for business for the 11^th year running.

It has also come out top, for the third consecutive year, in Fortune magazine’s annual Best Cities for Business Survey, conducted by Arthur Andersen. More than 65 per cent of Fortune Global 500 companies are represented in London, more than any other European capital, and 130 of those have based their European headquarters in the city. Frankfurt came second in the Fortune rankings, followed by Helsinki, Amsterdam and Dublin.

 

London is the place to be for overseas firms

Office space in London is in high demand, with availability falling and rents rising. At the end of September, according to DTZ Research, availability in central London was 4.1 million sq ft, a ratio to stock of just over 2 per cent and the lowest level since 1987. Availability fell by 40 per cent in the third quarter, and take-up in the first nine months of 2000 was nearly as great as for the whole of 1999. Rentals grew strongly in both the West End and the City. Speculative development has increased, but supply is still limited.

London’s business community remains cosmopolitan. Another survey by DTZ Research, investigating the nationalities of tenants renting office accommodation in the capital between 1985 and 2000, identified organisations from 54 different countries. In central London, more than a third of all office space was occupied during the period by companies from outside the UK, with 20 per cent originating from the US, 10 per cent from Europe and 6 per cent from a range of other countries, from Argentina to the United Arab Emirates. Foreign companies are distributed throughout the capital, but the most successful area in attracting them in recent years is the Docklands business district in east London, which is now home to a number of big names in the financial world, including Credit Suisse First Boston and Morgan Stanley.

Morgan Stanley Dean Witter has recently announced it is to take a further 512,000 sq ft of Docklands office space to add to the 1 million sq ft it already occupies, with a 25-year lease on a 13-story tower at Canary Wharf South. Credit Suisse First Boston is to lease a further 500,000 sq ft at Canary Wharf, occupying the whole of 5 Canada Square, a speculative development already under construction. This will bring the investment bank’s office space in the Canary Wharf development to a total of 1.8 million sq ft.

 

New premises come on stream

Despite the high demand for office space, new accommodation is constantly coming on to the market. At London Bridge, near the City, for example, plans have been unveiled for a 1,280 ft office tower block. The London Bridge Tower, designed by Renzo Piano, could be completed by the end of 2005.

There is also plenty of new space, of various types, coming on stream outside the capital. In the South West, for instance, Plymouth International Business Park is shaping up as a key inward investment destination. The $140 million development on an 81.5 acre site, when complete, will offer up to 980,000 sq ft of space for office, light manufacturing and R&D use and will create up to 4,000 jobs. Companies to have invested recently in Plymouth include JDS Uniphase and Sentinel Polyeofilms of the US, Kawasaki and Toshiba of Japan and call centre operators Orange and ONdigital. At Aberporth in Wales, an outline planning application has been put forward by the Defence Evaluation and Research Agency to redevelop an airfield site it owns as a business park. If it goes ahead, the scheme will have its own airport facilities.

In Manchester, North West England, work is under way on a $9.8 million high-technology business centre scheme at Salford Quays. The Lowry Centre Development Company’s building will provide 59,200 sq ft of office space and will be wired for broadband internet access. In North Lincolnshire, in Yorkshire and Humber, two speculative new industrial units are under construction at Sawcliffe Industry Park. The units, one of 40,000 sq ft and one of 60,000 sq ft, will be ready for occupation by the end of the year. In Eastern England, a new business park has opened at Peterborough. The Minerva Business Park at Lynch Wood has already welcomed tenants to the first of seven units ranging in size from 2,200 sq ft upwards.

 

Northern Ireland attracts new investment

Northern Ireland is proving itself to be an investment hotspot, with a rash of new investment in November. Leading the way are hi-tech and IT companies, demonstrating that London is not having things all its own way. Mindready Solutions Inc of Montreal, Canada, for example, which produces complex embedded systems, has acquired Yelo, a test engineering company based in Carrickfergus. Fujitsu Telecommunications (Europe) Ltd has opened a new engineering centre in Belfast, the province’s capital. The 80,000 sq ft facility will develop products for broadband internet communications networks. [see pic]

Fujitsu Telecommunications (Europe) Ltd has opened a new engineering centre in Belfast

International electronics firm AVX has announced a $76 million expansion of its plant at Coleraine. It will take on a further 125 staff in engineering and manufacturing jobs as it expands its production of products for the mobile communications, automotive and consumer electronics markets in Europe and the Far East. Humax Electronics of South Korea is spending $3 million to expand its operation in Newtonards, which makes set-top boxes for digital radio and television.

Halifax Group, one of Europe’s biggest banks, is to set up an e-commerce centre in Belfast as part of a $63 million call centre, taking on 100 software and IT graduates. And Moy Park, part of the Chicago-based OSI group, is to invest $20 million in its three poultry-based food processing plants at Craigavon, Moira and Dungannon to improve efficiency and strengthen competitiveness.

 

Manchester’s new ring road set to stimulate economy

The last section of the M60, the Manchester ring road, opened at the end of October, completing a seven-year project that cost a total of $350 million. The four-lane, ten-mile stretch is the final link in the north-western city’s 35-mile orbital motorway, and is planned to free up local roads and boost economic activity by connecting the east side of the city to the motorway network. The M60 is planned to carry about 160,000 vehicles a day. It has more junctions than London’s M25 and is expected to carry more vehicles making shorter journeys.

The number of road goods vehicles travelling to mainland Europe rose from 603,900 in the first quarter of 2000 to 616,000 in the second, an increase of 9 per cent on the same quarter of 1999, according to figures from the Department of the Environment, Transport and the Regions (DETR). The number of powered vehicles rose by 2 per cent and the number of unaccompanied trailers making the crossing rose by 3 per cent. Their numbers were, respectively, 10 per cent and 8 per cent higher than in the corresponding quarter of last year.

The volume of freight moved by waterborne transport increased by 3 per cent in 1999, to 58.7 billion tonne-kilometres. The DETR figures include port, coastal and inland waterway movements. Petroleum products accounted for 83 per cent of the total. Scotland dominated as the area for goods moved coastwise, with 66 per cent of the total originating there. Of all modes of transport in the UK, waterborne freight accounted for 7 per cent of all goods lifted and 22 per cent of all goods moved.

Meanwhile, Chancellor Brown’s pre-budget report contained good news for UK road hauliers, who are to receive refunds of between $210 and $6,300 per truck on their vehicle excise duty (VED) disks. The move is the first step in a major reform of taxation of the road haulage industry, planned for the next Budget in March. Restructuring will cut more than 130 different tax classes down to just seven bands and will reduce the overall tax burden on hauliers by more than 50 per cent.

 

Happy Holidays

Invest in the UK wishes all visitors to the web site the Compliments of the Season and a Prosperous Year in 2001.

 

Around the regions

Specialist training Centre of Excellence in Bradford, West Yorkshire

• French-owned stationery and office products supplier Lyreco is building a $39 million office and distribution centre at Telford in the West Midlands. The 630,000 sq ft building, big enough to house 11 jumbo jets, is going up on 35 acres of reclaimed brownfield land at Donnington Campus. The new centre will employ 400 people by 2005; Lyreco’s existing headquarters in Telford already employs that number.
• Also in Telford, Carl Leipold Metallwarenfabrik of Germany is tripling the size of its UK investment, relocating to a 43,000 sq ft factory unit and increasing the size of its workforce from 28 to 40. The company makes precision-tuned parts for the electrical, sanitary and telecommunications industries.
• The Thanet Campus of Canterbury Christ Church University College welcomed its first students in October. The college, in Kent, South East England, offers a range of vocational courses aimed at teaching business skills, including marketing, manufacturing and multimedia.
• Qualitek International Inc of the US, which supplies soldering materials to the electronics and semiconductor industries, has established its new European headquarters at the Apex Court development on the Wirral International Business Park in Wirral, North West England. The company will initially employ 40 people.
• Graveley Packing, the UK subsidiary of the European filling and packing group Budelpack International, has started work on a major expansion scheme at its site in March, Cambridgeshire, in Eastern England. An investment of nearly $6 million in a new 110,000 sq ft facility will see the company double its factory floor space, in a bid to become the UK’s leading co-packer in the consumer goods sector.
• German call centre operator Telegate is to open a new facility in Dumfries, Scotland, employing 125 people. The centre, at Crichton Business Park, will provide directory services for customers of major telephone providers, including BT and leading mobile operators.
• Test Advantage of Tempe, Arizona is to open a semiconductor test centre in Livingston, Scotland which will employ up to 15 engineers. The centre will offer testing facilities to companies and will provide educational resources to the Institute of System Level Integration.
• A new specialist training Centre of Excellence has opened in Bradford, West Yorkshire. The $1.4 million Electronics Yorkshire facility was conceived by a consortium of electronics companies and developed in collaboration with local colleges and training organisations and Bradford Council. It offers a wide range of services, including technical consultation, practical assistance and training to international standards. [see pic]
• The Welsh Development Agency and Cardiff City Council have set up a property and investment website – Cardiff Portfolio – for companies interested in businesses opportunities in the Welsh capital. The site can be found at: www.cardiff-portfolio.co.uk
• A new customer contact centre in West Wales has been described by Jeff Joerres, chief executive of worldwide employment services company Manpower Inc, as a model for creating hi-tech jobs in rural areas. The Cyber Bay hi-tech e-business park at Pembroke Dock is backed by a number of partners, including Manpower, the Welsh Development Agency and the local council, and is aimed primarily at internet-based businesses, with the aim of creating up to 1,100 jobs. Early clients include ONdigital, the digital TV and interactive services company.
• GFInet Inc, a hybrid voice and on-line brokerage based in New York, has acquired London-based technology company Fenics, which is a leading provider of FX option analytics. GFInet will combine Fenics’ analytics with an on-line FX options trading platform, due to be launched early next year. The platform will offer traders easy one-stop pricing, trading and trade reporting.
• California-based Inhale Therapeutic Systems, developer of the powder-technology Inhance drug delivery system, has acquired Quadrant Healthcare, a biotechnology company based in Nottingham in the East Midlands, for around $60 million. Quadrant is working on technologies to enhance the delivery of drugs orally and via inhalers and injections.
• German pharmaceuticals group Merck has acquired Biovation, a biotechnology company based in Aberdeen, Scotland. Biovation’s specialises in developing safer bio-therapeutic drugs by eliminating immunogenicity in antibodies and other proteins.
• IT services corporation TietoEnator, based in Finland, has acquired the energy division of UK systems integration and service company Anite Business Systems and has opened a new office in Maidenhead, South East England to service its European customers in the oil and gas markets. The centre will report to TietoEnator’s oil and gas headquarters in Stavanger, Norway.
• Greencore Group of Dublin, Ireland has acquired convenience food manufacturer Hazlewood Foods for $361 million. Hazlewood, based in Derby in the East Midlands, manufactures a range of foods, including pizzas, sandwiches, quiche, chilled sauces and bakery products.

• The government has introduced new legislation allowing companies to communicate information electronically with their members and shareholders, rather than having to rely on paperwork sent through the post. Companies are now able to register electronically at Companies House, give shareholders access to company reports through websites and allow them to cast votes via e-mail.

To find out about business exhibitions and events happening around the United Kingdom click on the Events button.