News

 

January 2001

FDI grows as UK records lowest inflation in Europe

The stock of foreign direct investment (FDI) in the UK rose by 21 per cent in 1999, from $263.8 billion to $318.4 billion, according to the National Statistics Office. Outward investment rose by 46 per cent over the same period, from $406.1 billion at the end of 1998 to $592.6 billion at the end of 1999. The US remained the biggest inward investor in the UK, accounting for 40 per cent, or $126.1 billion, of the total. Canadian firms nearly doubled their investment stock over the period, from $5.2 billion to $9.4 billion. Some 44 per cent of the total stock of outward investment from the UK - $259.6 billion - went into the US. There was also a sharp rise in the levels going into the Irish Republic, from $10.5 billion to $38.1 billion.

Meanwhile, figures published by the European Commission reveal the UK as the lowest-inflation country in Europe in the year to November. The EC’s harmonised index, used to make comparisons across Europe, show that inflation in the UK held steady at 1 per cent in November, down from 1.3 per cent a year ago and 1.6 per cent when the euro was launched in January 1999. The UK has benefited from a strong currency, which has helped keep down import costs and soften the effect of oil price rises, and from the Bank of England’s prudent raising of interest rates from 5 to 6 per cent in response to rising wages and house prices.

Inflation in the euro zone, on the other hand, climbed to a six-year high of 2.9 per cent in November, up from 2.7 per cent in October and 1.5 per cent in November 1999. When the euro was launched, the average inflation rate in the 11 member countries was 0.8 per cent. Ireland was the worst performer, with an inflation rate of 6 per cent, although Germany suffered the biggest relative deterioration, with inflation running at 2.6 per cent in November 2000 compared with 1 per cent in November 1999.

Higher interest rates are likely to remain in the UK at least until the spring, possibly edging up to 6.5 per cent, according to Barclays’ latest monthly International Financial Outlook. However, a rise is looking less likely and rates may even fall if the labour market stops tightening and credit growth slows, says the report. The bank predicts that economic growth will slow slightly in 2001 and will remain close to 2.5 per cent in 2002. Inflation is expected to run a little below 2.5 per cent during 2001 before edging up slightly.

 

Knowledge-based industries provide engine for economic growth

Knowledge-based industries are driving economic growth in Northern Ireland, according to the annual report of the Industrial Development Board, the province’s development agency. In the year to 31 March 2000, 80 per cent (5,700) of new jobs created in Northern Ireland were in the high-tech manufacturing and knowledge-based sectors. While knowledge-based companies in software, telecommunications, network services and e-business accounted for a whopping 92 per cent of all projected employment in new inward investment projects. In all, 13 new inward investment projects, 20 expansions by externally owned firms and 19 projects by indigenous firms created a grand total of 7,145 new jobs in the province, the highest total ever, over the course of the year. There was 36 per cent growth in employment in tradable service sectors, such as software and network services, while employment in telecoms, electronics and other high-tech manufacturing sectors rose by 12 per cent.

There was more good news at the end of November when US start-up company Avalanche Technology announced it was to establish a $12 million IT outsourcing operation in Belfast. The internet-focused company will create 136 jobs, mostly for software graduates and systems designers, in its first year, and plans to increase its workforce to 480 by the end of 2005. It has received venture capital backing from 3i.

Northern Ireland is not the only part of the UK to benefit from the boom in the knowledge-based economy - in fact the whole country is buzzing with new investment. In the biggest deal this month Wanadoo, the internet arm of France Telecom, has bought the UK’s biggest internet service provider, Freeserve, in a deal worth $2.3 billion. Freeserve, based in Leeds, Yorkshire and Humber, was 80 per cent owned by electrical retailer Dixons and has about two million subscribers in the UK.

London-based Marconi Mobile and LG Electronics of Korea have formed a strategic partnership to jointly develop and market a 3G mobile - or next-generation mobile internet - system for the global market. The companies have entered into cross-licensing agreements for the asynchronous IMT-2000 system and will sell the system under their own brand names while sharing intellectual property rights. Samsung Electronics, also of Korea, is to invest a further $4.3 million in its UK operations at Wynyard Park in North East England. The investment will include an expansion of the company’s PC monitor production facility and construction of a new flat-screen monitoring plant. Samsung will also move its printed circuit board finishing line and goods warehouse to Wynyard from another site nearby.

Crown Castle International, based in Houston, Texas, is to lease up to 4,000 exchange sites throughout the UK from British Telecommunications (BT), through its UK subsidiary, Crown Castle UK. The company will invest approximately $325 million over the next two years in developing the sites for deployment of 3G wireless services, using BT’s high-capacity fibre network.

A number of US companies have opened new European offices in London and the South East. In the capital, new arrivals include Quantum Bridge Communications of Andover, Massachusetts, a provider of network optical access systems; Wireless Knowledge of San Diego, California, which offers mobile business solutions; Freshwater Software of Boulder, Colorado which provides monitoring and management solutions for e-businesses; and Now! Securities, a subsidiary of GroupNow! Inc, a financial services company based in Fort Lauderdale, Florida. Now! Securities will provide advisory services for companies seeking to expand through private placement, merger or IPO. Wayport, a network provider based in Austin, Texas, has opened its new European headquarters near Heathrow Airport just outside London, and online marketing platform provider Responsys.com of Palo Alto, California, has established a base at nearby Richmond, Surrey.

To encourage innovation, the government has launched an intellectual property website that advises businesses how to make the most of their ideas and how to protect themselves from counterfeiters. The site, at www.intellectual-property.gov.uk, offers information on trademarks, copyright, patents and designs and contains links to other IP-related websites. The portal is hosted by the Patent Office, part of the Department of Trade and Industry.

And a major high-tech business networking event, Interprise 2001, is due to take place in County Durham, North East England in March 2001. The partnering event will bring together companies from a wide variety of technology sectors in the UK, Europe and North America. By the end of November 2000 more than 170 companies and organisations had signed up to the event, including the US state of Indiana, which has been recognised as an ‘international associate partner’ and is planning to bring a number of delegates. To find out more, visit the organisers’ website at www.interprise2001.com

 

Broadcasters to get new regulator

The government has proposed the creation of a ‘super regulator’ for the communications industry, which would provide a "modern and intelligent" framework for television broadcasting. The new regulator - Ofcom - would, says the government, provide a level playing field for all broadcasters, including the state-funded British Broadcasting Corporation (BBC). It would lay down minimum requirements for content, including news programming, and stipulate rules on advertising and sponsorship.

A second tier of regulation would regulate the responsibilities for public service broadcasting on the existing terrestrial channels, while a third tier would give broadcasters a remit for self-regulation. The proposals, which also include a relaxation of ownership restrictions on commercial channels and could pave the way for a single ITV (Independent Television) company, have been broadly welcomed by the industry.

 

Demand for property remains strong

Demand for prime UK office space remains strong, particularly in central London and the Thames Valley, according to the latest quarterly report from property consultants Healey & Baker. Supply is low and rents are rising, although in real terms they remain relatively low - 50 per cent below their 1989 peak in London and 37 per cent in the Thames Valley. Rents in the City and West End of London rose 16 per cent in the year to September, and Healey & Baker thinks there is room for them to rise further, pointing to a shortage of supply and a growing demand for pre-lets. Demand is being driven largely by technology firms, especially in the Thames Valley, where take-up is at its most buoyant for a decade. Outside the South East, demand is also high in Cambridge, with its clusters of high-tech firms, and in Manchester and Birmingham. In Scotland, both Edinburgh and Glasgow have seen strong growth, with supply failing to meet demand.

Technology also drove demand in the industrial sector in the third quarter, with a new factor being ISP and telecom companies looking for space, often large units, for conversion. Demand was again strongest in the South East, although cost-sensitivity was an issue for many occupiers, and there was brisk demand in areas such as the North and the Midlands. Industrial rents rose most sharply over the year in Yorkshire and Humberside, by just under 10 per cent, followed by Scotland, the North and the North West.

Another property specialist, DTZ Research, meanwhile points out that one reason for rising rents is that developers have been slow to respond to growing demand, leading to a shortage of available space. It examines the current situation in the UK’s nine main regional office markets outside London and the South East - Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester, Newcastle and Nottingham - in a new report entitled RORe (UK Regional Offices Research).

It found that availability in the nine regional markets fell on average by 10 per cent in the six months to the end of September, to stand at 8.6 million sq ft. There was wide variation, however: in Bristol availability fell by 20 per cent while in Birmingham it actually rose by 8 per cent. Take-up rose slightly, but again there were wide regional variations, with take-up growth of 56 per cent in Manchester but less than 1 per cent in Cardiff. Rents for prime office space grew by 25 per cent in Edinburgh, but not at all in Cardiff, Glasgow or Newcastle. The average was 6 per cent. During the six-month period there was also a reported $644 million of office purchases for investment purposes, an increase of one third over the previous comparable period. Between them, Manchester and Glasgow accounted for half of all regional investment over the period. For more information, visit: www.dtz.com

 

Ports in the spotlight

The government has launched a policy paper, Modern Ports, focusing on the UK’s ports, which between them handle more than 90 per cent by volume of the country’s international trade. Shipping minister Keith Hill stressed the government’s commitment to creating successful, safe and sustainable ports, integrated into the UK’s overall transport system in line with its Transport 2010 ten-year transport plan. Objectives set out in the paper included the harmonisation of regulation, the promotion of agreed national standards and good practice for port management and operation, the promotion of skills training and a balanced and sustainable development policy.

Meanwhile a new statistical report from the Department of Transport, the Environment and the Regions, Focus on Ports, offers a snapshot of the UK’s ports industry. For example, the total freight traffic handled by ports has risen by 71 per cent since 1965, and by 33 per cent since 1980. The top four ports - London, Grimsby & Immingham, Tees & Hartlepool and Forth - are among the top ten largest ports in Northern Europe. Crude oil accounted for a fifth of all port traffic in 1965, but in 1999 accounted for one third. However, coal tonnages have halved over the same period, and 90 per cent of all coal handled is now imported. Sullom Voe, a terminal opened in the Shetland Isles in 1978 to handle North Sea oil, accounts for 20 per cent of all the UK’s crude oil traffic. The largest container port is Felixstowe in Eastern England, whose share of container traffic rose from 34 per cent in 1988 to 41 per cent in 1999. The total tonnage of containers carried increased by 81 per cent over that period. Ro-ro traffic has grown by 51 per cent since 1991 and accounted for 14 per cent of all UK port freight traffic in 1999, with the biggest ro-ro port being Dover.

The Bristol Port Company, based in Bristol, South West England, has received a government freight facilities grant (FFG) of $21.8 million, the largest such grant to date. FFGs are designed to encourage businesses to use rail and water links to carry freight rather than roads. The company will use the money to refurbish a section of the disused Portishead branch line and provide a rail link to the Royal Portbury Dock, where it will build a coal terminal and a general cargo terminal. It estimates that the rail link, which will carry goods such as cars, coal, plasterboard and paper, will save about one million heavy goods vehicles journeys every year.

In Yorkshire and Humber, meanwhile, the new roll-on roll-off Humber Sea Terminal at North Killingholme has been officially opened. The 275-acre complex contains over 82,000 sq ft of modern warehousing, together with 64,000 sq ft of storage space in refurbished wartime fuel tanks.

 

Docklands greets prestigious new developments

London City Airport, in the Docklands business district of the UK capital, has announced plans for expansion. It will build out into the surrounding dock area, increasing its aircraft parking space from ten stands to 15 and building a holding point for outgoing planes to increase its runway capacity. The $28 million project will commence in autumn 2001, with completion scheduled for 2003. Passenger facilities at the 13-year-old airport will also be expanded. A $160 million project to extend the Docklands Light Railway to the airport should be complete by 2004. Trains will run every ten minutes from Bank via Canary Wharf and Canning Town, and the trip between the City of London and the airport should take only 20 minutes.

Also in Docklands, the $1.4 billion ExCeL events venue has opened for business at the Royal Dock. Boasting a sophisticated IT and communications infrastructure designed and installed by technology firm EDS, the building claims to be the events industry’s first ‘smart venue’. It also offers an array of catering and entertainment facilities, including pubs, restaurants and even a nightclub. ExCeL staged its first event - Automotex - in November 2000 and has 150 separate events scheduled for its first year, when it expects to handle two million visitors.

 

More call for call centres

The UK’s call centre industry, already the strongest in Europe, has been bolstered by three major new developments in different corners of the country and in different sectors. The biggest is Thomson Travel Group (TTG)’s new direct sales call centre at Glasgow in Scotland, which will create up to 1,000 new jobs over the next three years. The new building, at Cardonald Park, was officially opened in December. TTG, previously owned by the Thomson Corporation of the US, was acquired in August 2000 by Preussag AG of Germany and is now the largest travel group in Europe. The new call centre is part of its strategy to build a direct sales and e-commerce presence. It will operate in conjunction with the company’s network of 800 high street Lunn Poly Holiday Shops.

Conduit plc of Ireland, Europe’s leading provider of directory enquiry services, is to open a 450-seat call centre in the Welsh capital Cardiff. The call centre, the company’s first in the UK, is due to open in January and to reach its full working capacity within 18 months, creating a total of 1,400 new jobs. It will help the company expand its enquiry services to the UK, Ireland, Sweden, Switzerland and Austria.

And in North East England, US corporation Sitel is to open a customer communications centre in Newcastle, creating 600 new jobs. The company, based in Baltimore, Maryland, specialises in electronic customer relationship management (eCRM) solutions for corporations in the financial services, telecoms, technology and utility sectors. It operates from more than 17,000 workstations in 75 countries and offers services in more than 25 languages.

 

Pharmaceuticals researchers seek to build partnerships

Two Japanese companies, Daiwa Pharmaceutical Co and Alex & Associates, have established a joint venture company in Cambridge, Eastern England. The company, DHD (Europe), will import raw materials for functional foods and complementary and alternative medicine products from Japan, and process and repack them in the UK. It will also seek to build up long-term collaborative R&D partnerships in the functional food/complementary medicine field, particularly where biotechnology is involved.

In the North East of England, Seitai Ken, Japan’s Foundation for Life Sciences Research, has signed a pioneering research agreement with the University of Newcastle and the Newcastle upon Tyne Hospitals NHS Trust. Two Japanese researchers will establish a laboratory in the Department of Clinical Biochemistry at the university’s medical faculty, with the aim of developing collaboration between the UK institutions and the Japanese pharmaceuticals industry. Dr Yasuhiko Hatori and Dr Emiko Hayama will work with local researchers to develop research projects in pharmacokinetics and pharmacodynamics.

Meanwhile, in the veterinary sector, the veterinary business unit of Akzo Nobel of the Netherlands, based in Arnhem, has acquired the R&D facilities of UK company Aventis, based at Milton Keynes, South East England, for around $10 million.

 

Cornwall goes green

The rugged and remote county of Cornwall, in the far South West of England, is leading the way in environmentally-friendly forms of energy and technology. The Gaia Renewable Energy Centre at Delabole, for example, will be a big tourist attraction when it opens in July 2001 but is also being designed to serve companies looking for environmental advice. Built on the site of the UK’s first wind farm, the centre, whose name is taken from the Greek goddess of the Earth, is expected to attract around 100,000 visitors in its first year. It will offer seminars and exhibitions about renewable energy and efficiency, and local companies will be able to use internet access, videoconferencing and publishing and printing facilities.

Elsewhere in Cornwall, the Eden Project, funded by the Millennium Commission, is already drawing large crowds. The project consists of a series of large greenhouses, currently under construction, and is designed to teach visitors about sustainability.

And at Camborne, the South West of England Regional Development Agency has embarked on a $5.6 million business park scheme that is at the leading edge of sustainability. The park, under construction on derelict land and scheduled for completion within a year, will offer low rents to attract companies to the area. It will have a ‘grey water’ system using rainwater and 40 boreholes that will draw up geothermal energy for heating. High-frequency ballast lighting, which uses less energy than conventional lighting systems, will also be installed.

 

Around the regions

• Japanese roller chain manufacturer Tsubakimoto Chain has officially opened a $3.2 million UK headquarters building at Sherwood Business Park in Nottingham in the East Midlands. The new office and warehouse facilities are designed to house the company’s expanding sales operation. [see picture]



(Left to right) president of Tsubakimoto Europe BV, Mr Mimoto; MD of Tsubakimoto UK Ltd, Bart Mellink, general manager of the automotive department Tsubakimoto Chain Co, Mr Eiraku; emda chairman, Derek Mapp; executive managing director of Tsubakimoto Japan, Mr Hirayama

• On:Line Finance Holdings, an online hire purchase credit company majority owned by GMAC, the finance arm of General Motors, is to build a new UK headquarters at Treforest, near Cardiff in Wales. The 13,500 sq ft building will cost $10 million and will create around 400 jobs. The company, launched in 1996 to offer credit services to car dealers, was the first in Europe to offer loans via the internet.
• German supermarket giant Lidl UK GmbH is to create around 160 new jobs at its new distribution centre at Manor Park, Runcorn in North West England. The company, one of Europe’s largest food retailers with 4,000 stores in 11 countries, has 250 supermarket outlets across the UK. The distribution centre, strategically sited for access to the motorway network, is part of the company’s plan for further expansion in the UK.
• Three high-specification industrial units with a combined floorspace of 100,000 sq ft are available to let on a brownfield site at Dowlais in Wales. The factory units, built by the Welsh Development Agency with support from the European Regional Development Fund, are in an Objective 1 area and form part of the East Merthyr Reclamation Project, one of the biggest schemes of its kind in Europe. The units, of 50,000 sq ft, 35,000 sq ft and 15,000 sq ft, are being marketed by Cardiff agents GVA Grimley.
• Plans to build two extensions to the Midland Metro tram network in the West Midlands have taken a step forward with the government’s provisional acceptance of a cost appraisal of the $231 million scheme. The two lines, if built, would extend the current Line 1, which runs between Birmingham and Wolverhampton, into Birmingham city centre and to the town of Dudley.
• British Airways and travel operator Thomas Cook, acquired in December by German company C&N Touristic for around $825 million, are to merge their UK tour operating businesses in a 50:50 joint venture. The new business, which will serve an estimated 400,000 holidaymakers annually, will begin operations in the spring, pending EU approval. C&N Touristic is the second largest travel firm in Europe and is jointly owned by German airline Lufthansa and retail group Karstadt Quelle AG.
• Finning International Inc, the Canada-based distributor of Caterpillar construction equipment, has acquired equipment hire group Hewden Stuart, based in Glasgow, Scotland, for about $515 million. Hewden Stuart has 370 locations around the UK and employs more than 4,000 people. It hires tools and lifting equipment to a variety of industry sectors.
• Austrian group Andritz AG has acquired the Universal Milling Technology (UMT) subsidiary of Tate and Lyle for an undisclosed sum. UMT, based in Hull, Yorkshire and Humber, makes milling equipment for the animal feed industry and employs 300 people.
• Ineos of Belgium is to buy Chlor-Chemicals, Klea and Crossfield, three industrial chemical units of Imperial Chemical Industries (ICI), for $470 million. The three units generated sales of just over $1 billion in 1999, with operating profits of around $4.3 million.

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