News
April 2001
Brown produces balanced budget
It was a case of ‘steady as she goes’ when Chancellor Gordon Brown announced his spring budget on 7th March. There were no dramatic changes to the tax regime, although Mr Brown did introduce a number of measures that will help to improve the business environment. He also introduced a $1.4 billion regeneration package for city and rural areas, which included 150 per cent tax relief for cleaning up land and urban regeneration areas and exemption from stamp duty on property transactions in certain disadvantaged areas. In addition, he relaxed personal income tax bands and extended personal exemption from capital gains tax to $10,500 per annum.
Corporate tax rates remain unchanged, though Mr Brown cut VAT for companies with a turnover of up to $75,600 and simplified the process for small and medium enterprises with a turnover of up to $840,000. Tax credits for research and development spending, introduced last year for small companies, will be extended across the board, although the exact mechanism and rate of credit are yet to be decided. This will benefit companies in high-tech industries and in sectors such as pharmaceuticals and bio-sciences. Changes will also be made to the rules governing intangible assets such as intellectual property and goodwill, allowing them to be treated as income rather than capital and therefore qualifying for greater income tax relief.
Smaller companies will be able to make greater use of share option schemes to attract and retain staff. The value of share options that can be granted under the Enterprise Management Incentive scheme, introduced last year, will be doubled from $2.1 million to $4.2 million and the 15-employee cap on the number of participants will be abolished, with companies now able to offer share options to all their employees if they wish.
There was good news for road hauliers. Mr Brown froze duties on all road fuels, with a 2p per litre reduction in duty on ultra-low sulphur and unleaded petrol. There was also a 3p per litre reduction on low-sulphur diesel, while duty on road fuel gases will be frozen until 2004. There will be a 50 per cent reduction in lorry vehicle excise duty (VED) and VED will be abolished for tractors.
Other measures announced in the budget included abolition of the minimum funding requirement for pension funds, which should encourage investment in companies, and training incentives to encourage the "hard to employ" back into the workforce. Tax relief for the burgeoning British film industry, which has recently produced hits such as Billy Elliott and Chocolat, has been extended until 2005.
Britain remains a low-tax country in comparison with most of Europe and business leaders in general welcomed the budget. The technology sector was pleased by the proposals for tax relief on the creation of software, databases and other forms of intellectual property. Digby Jones, director general of the Confederation of British Industry, said the chancellor had avoided "electoral temptation" and produced a balanced budget. And Anthony Goldstone, president of the British Chambers of Commerce, said that the budget appeared "a radical and responsible package, with most of the measures bringing particular benefits to small firms".
Byers reassures business over minimum wage increase
As part of the Budget package, trade and industry secretary Stephen Byers announced that the national minimum wage would rise by 40p (about 56 cents) an hour, from £3.70 ($5.18) to £4.10 ($5.74) an hour. The increase, effective from October, is the second since the introduction of the minimum wage two years ago, and some business leaders expressed concern that the 10.8 per cent increase would have a knock-on effect, with more highly-paid workers demanding pay increases. This, they claimed, would put pressure on small businesses, particularly in sectors such as textiles, retail, leisure, hairdressing, business services and social care. However, Mr Byers reassured them by promising a more modest 10p (14 cents) rise in 2002. The current increase, he said, was "bold enough to make a difference, prudent enough not to cost jobs".
Optimism surrounds economic prospects
The UK is set to maintain its position as European leader in attracting inward investment in the years 2001-2005 and worldwide will be second only to the US, according to a new report from the Economist Intelligence Unit (EIU). The report, World Investment Prospects, predicts that the UK will attract 9 per cent of all world foreign direct investment (FDI) flows over the period, with investment beginning to grow again in 2002 after a global slowdown in 2001. Four other European Union countries - Germany, France, the Netherlands and Belgium - will be in the world’s top ten, says the EIU, but with considerably smaller shares of FDI than the UK’s.
Meanwhile business expectations in the UK remain positive and orders and output, both domestic and for export, have strengthened, according to Barclays’ monthly International Financial Outlook. "There is a degree of momentum in the UK economy going forward," said the bank. "There was a market pick-up in consumer confidence in January from an already high level and retail sales were strong." The Bank of England cut interest rates by 0.25 per cent in February, from 6 per cent to 5.75 per cent, because of downside risks posed by the US slowdown and by a fall in underlying inflation.
Although the picture is generally rosy, some parts of the UK are doing better than others, according to the latest figures on regional GDP from the Office of National Statistics. Annual economic growth for the UK as a whole was 3.8 per cent in 1999, with the South East having the highest growth rate, at 5.1 per cent, and the North East the lowest, at 2.3 per cent. Although GDP per head was for the first time above $14,000 in all regions, there were marked regional disparities. GDP per head in London, for example, was 30 per cent higher than the UK average but in Northern Ireland and the North East it was 23 per cent lower.
"These figures show why it is so important to have an active regional industrial strategy," said trade and industry secretary Stephen Byers. "The challenge for government is to put in place the measures that will allow every region to prosper. This means that we must give particular attention and support to the needs of weaker regions. This must involve allowing more strategic decisions to be taken at regional level."
Oil platform contract pumps new life into North East
International oil group Shell has placed a $420 million order with UK engineering company Amec for the design and construction of the production facilities on board a 300,000-tonne floating oil platform. The award, the biggest ever made to a UK offshore sector company, has been hailed as recognition for the expertise gained by shipyards on the rivers Tyne and Tees in North East England in supplying the UK’s North Sea oil sector.
The contract will inject $140 million of work into the UK supply chain and create up to 4,000 jobs in the engineering sector in the North East, with 1,000 split between Amec’s yards at Hartlepool and Wallsend on the Tyne and a further 1,100 distributed amongst local subcontractors, including 750 at Heerema’s Hartlepool yard. There will be vacancies for specialist mechanical and electrical engineers, as well as for platers, pipefitters, welders, electricians and instrument technicians. A further 1,600 jobs will be created for UK contractors and suppliers, together with 300 London-based positions in engineering and project management.
The platform, destined for the Bonga offshore oilfield in Nigeria, is currently being built by Samsung in South Korea. It will be floated round the world to the Tyne in August 2002 for installation work to begin on the 17,000-tonne topside. It will then sail to Nigeria in November 2003, where it will be moored in 3,000 ft of water. It will handle oil and gas pumped from under the seabed, offloading the oil into tankers and pumping the gas ashore via a pipeline.
The deal was unveiled by prime minister Tony Blair, on a visit to Amec’s yard in Wallsend. "This contract confirms Britain as a world leader in the offshore production industry," he said. This will be the third floating platform completed by the Wallsend yard and Amec hopes that the contract will help it win further orders for offshore fields in West Africa. Tyne and Tees shipyards have played a crucial role over the past 20 years in the North Sea oil and gas industry, supplying more than 80 per cent of the processing, utilities and accommodation modules operating in the sector.
UK auto industry is rolling along nicely
British-based car manufacturers unveiled a record number of new models at the Salon International de l’Automobile, the international car show held in Geneva in late February. Ford subsidiary Jaguar created the biggest stir with the launch of its X-Type, representing the biggest single model programme the company has ever launched. It expects the X-type to boost its annual production capacity from 50,000 to 200,000 cars within four to five years. Another Ford subsidiary, luxury car-maker Aston Martin, showed its highly advanced Vanquish model for the first time. The first two years’ production run of the car, amounting to 550 vehicles, was sold out before the show.
Also on show in Switzerland were BMW’s new Mini, which will be built in Oxford in South East England and will go on sale in July, with an annual production capacity of 100,000 vehicles; Honda’s next-generation Civic, to be built at Swindon; and an estate version of MG Rover’s flagship Rover 75, which will pave the way for an extension of the company’s range in the summer.
Overall, the car industry in the UK looks in pretty good shape. Although production fell last year by 8.8 per cent to 1.63 million units, Professor Garel Rhys, head of the centre for automotive industry research at Cardiff University Business School in Wales, predicted that in 2002 new model launches could lift combined output above 2 million units - or 4 per cent of the global market - for the first time. "I cannot think of another period where the motor industry in Britain has embarked on such a launch programme," said Prof. Rhys. The Society of Motor Manufacturers and Traders concurred, predicting that demand would increase this year. It blamed last year’s downturn on a combination of adverse currency factors, plant restructuring and disruption caused by new model launches.
The mood of optimism was reinforced by Toyota’s announcement in March that it is to more than double engine production at its Deeside plant in North Wales. Output will grow from 180,000 engines a year to 400,000 by 2003, and the workforce will expand from 350 to 600. The plant will become the major engine production centre for Toyota’s expanding European operation and will export petrol engine components to other plants in South Africa and Latin America. A new diesel engine line will also become operational from 2003.
Italian tyre manufacturer Pirelli is to resume operations at its 72-year-old plant in Burton-on Trent in Staffordshire, West Midlands, seven years after mothballing the plant. Tyres will begin rolling out of the plant again in May, with the help of the new Mirs (modular integrated robotised system) manufacturing technology, which cuts the number of processes needed to make a tyre from 14 to three and takes up a fraction of the space of a conventional tyre plant. The highly automated process slashes energy use by 35 per cent and unit costs by 25 per cent.
Elsewhere Contex, a subsidiary of Transpo Electronics Inc of Orlando, Florida, a leading electronic automotive components manufacturer, has acquired HTA Industries (formerly Lucas Stability) of Antrim, Northern Ireland in a $7.5 million deal. The investment will safeguard 103 existing jobs and create 84 new ones.
Government puts faith in next-wave technologies
E-minister Patricia Hewitt has unveiled a $98 million government investment package in electronic technologies, aimed at keeping the UK at the forefront of the high-tech revolution. The four-year package includes $28 million for pioneering work in next-wave ‘intelligent products’; $42 million for transforming business practices through the use of technology; and $28 million to fund a national scientific computing grid. "The internet as we know it today is only the start of the revolution in information communications technology," said the minister. "[This investment will] ensure that UK business and scientists can be in the lead for the next generation of electronic networks."
The first slice of the money will fund a centre where researchers, manufacturers and marketing specialists will work on intelligent products that bring desktop computing power to bear on everyday appliances. The market for next-wave ‘thinking machines’ - such as washing machines which read clothing labels before selecting a programme, internet fridges which order groceries direct from the supermarket and home diagnostic devices which can communicate directly with doctors’ surgeries - could be worth up to $1 trillion per year by 2005, according to the government. Bids will be invited from UK universities to host the interdisciplinary centre, and it is expected that industry will match the government’s $28 million funding.
The second slice will help fund the expansion of the government’s ‘UK Online for Business’ initiative. A countrywide network of advisers will help companies move beyond simply having a web presence and trading online, instead transforming their interactions with partners, suppliers and customers through the use of information and communications technology. The third tranche will fund a collaboration between universities, business and government to develop a high-speed super-computer grid. The network will enable UK scientists working in areas such as the human genome project, particle physics and environmental sciences to analyse and share huge amounts of data on a global basis, on a scale previously only seen in Pentagon systems.
In a separate announcement, Ms Hewitt revealed the government’s conclusions on the question of patents aimed at protecting computer programs and methods of trading on the internet. Following consultations with industry experts, the government believes that there should be no significant change to the patentability of software and that business methods should remain unpatentable. However, it also concluded that patent law, which is harmonised across the European Union, is not clear enough and that urgent, concerted action is needed to clarify it.
"Our key principle is that patents should be for technological innovations, so a program for a new machine tool should be patentable but a non-technological innovation, such as grammar-checking software for a word processor, should not be," explained the minister. The conclusions can be viewed in detail on the Patent Office’s website (www.patent.gov.uk).
Corporate community role in the spotlight
A new government initiative, unveiled by minister for corporate responsibility Kim Howells, aims to encourage more businesses to play a positive role in local communities. A study - Business and society: developing corporate social responsibility in the UK - underlines the fact that a caring attitude can be good for business. Research shows that when price and quality are equal, 81 per cent of consumers are more likely to buy products associated with a good cause. Similarly, 73 per cent of workers surveyed said that they would be more loyal to an employer that supports the local community.
Government plans to foster corporate social responsibility (CSR) include using the Small Business Service to help companies evaluate their performance and share good practice; providing pension fund managers with guidance on international development and sustainable development; and encouraging the creation of more ‘social enterprises’, businesses designed specifically to meet the needs of deprived areas. A new website (www.societyandbusiness.gov.uk) has been launched to provide a forum on the issue of CSR.
The government is pursuing its own brand of CSR with a new scheme to wire up 12,000 homes to computers in some of the poorest areas in the country. In a $14 million social experiment, broadband and narrowband access to satellite links, digital television and the internet will be provided for free. Training will be provided, together with a website for data on learning and jobs, and ministers will monitor the impact in the wired-up communities on educational achievement, skills and unemployment. Communities selected for the project include areas of inner-city Liverpool, London and Manchester and rural parts of Suffolk and Cumbria.
Initiatives aim to encourage entrepreneurs
Two new initiatives have been launched in Wales to foster entrepreneurial activity and SME business development. In West Wales and the Valleys, an ‘Enterprise Factory’ has been set up by the Welsh Development Agency and other agencies, using $1.2 million of European Objective One funding. The venture is intended to give potential entrepreneurs the opportunity to test new business ideas in a safe environment, and is expected to help the development of some 600 businesses over the next three years. The ‘factory’ will talent-spot potential entrepreneurs who are keen to set up in business but who may not have a fully developed business plan. It will introduce them to a range of ideas for high-value new ventures and provide support to put the business idea into practice for a limited period. If the idea proves to be effective, the entrepreneur will be encouraged to move ahead independently.
In North West Wales, a $12.6 million scheme supported by Objective One funding has been launched by a group of local agencies to enhance support for micro, small and medium-sized (SME) businesses. Business Connect Plus will build on existing support programmes for SMEs by making services more accessible through a range of programmes tailored to local needs. Initiatives include more frontline staff available to give advice, increased access to information through additional business centre points and through the internet, longer opening hours and more business support events and workshops.
Meanwhile Yorkshire Forward, the RDA for Yorkshire and Humber, has launched a Young People’s Enterprise Forum aimed at the region’s 1.9 million 5-30-year-olds. The forum, sponsored by gas pipeline company Transco, brings together nineteen organisations with the aim of encouraging young people to be more enterprising and even to start their own businesses. At the same time, Yorkshire Forward has launched a comprehensive training manual, Get into Enterprise, and is funding ten ‘master trainers’ who will instruct a region-wide network of teachers and support workers - up to 300 in the first year - in stimulating entrepreneurship in their students.
Northern RDAs join forces to target US
Three regional development agencies (RDAs) in the North of England have joined forces to target US investors. Yorkshire Forward, One NorthEast and the Northwest Development Agency have combined their US operations to form the new North of England Inward Investment Agency, which will showcase the benefits of the region as a whole. US investment is essential to the UK, with North American investors accounting for 40 per cent of the country’s total inward investment. In Yorkshire and Humber the figure climbs to 52 per cent.
The area covered by the new agency extends over 15,000 sq miles (twice the size of Maine) and is home to a highly skilled workforce of 6.6 million. It has 22 universities, from which 100,000 students graduate each year. It also has particular strengths in the chemical, software, life science and call centre markets and is the UK’s most productive region for the automotive industry, which employs nearly 118,000 people locally.
British architects build on a quality reputation
The UK’s architects enjoyed a purple patch in the late 1990s, with a spectacular boom in overseas interest and a major boost from National Lottery funding which paid for Millennium-related projects, according to a new government report. The industry had estimated revenues of $2.4 billion in 1998, with a workforce of 24,000, while exports hit a record high of $95 million in 1999. In 2000 there were around 3,800 British architects working abroad, 80 per cent more than in 1998. The industry was buoyed by a number of flagship projects in the US, the Far East and Europe, including the new Reichstag parliament building in Berlin designed by Foster and Partners.
Outside Europe, British architectural practices have significant markets in many parts of the world, including the US, Japan, Hong Kong, Malaysia and South Korea. According to the government’s new Creative Industries Mapping Document, which attempts to evaluate the economic contribution of 13 creative industries, UK architects are "well known for the aesthetic quality and forward-looking nature of their design".
Green light for Docklands developments
The government has given the go-ahead for a new international railway station at Stratford in east London. The multi-million dollar development will form a strategic interchange for both international and domestic passenger services, linking the Channel Tunnel Rail Link (CTRL) - which is to be built between the Channel Tunnel and London’s King’s Cross station - with the existing Central and Jubilee London Underground lines, the Docklands Light Railway, the North London Line and the Great Eastern Railway. Approval has also been given for a twin-track connection at St Pancras station between the CTRL and the North London Line, which will link services to the national rail network via the West Coast Main Line.
Another project to get the green light is a massive mixed-use development at Peruvian Wharf, on the River Thames in London’s Docklands. Developer Capital & Provident has gained planning permission for seven new buildings, which will house a 180-bedroom hotel, shops and 1 million sq ft of office space on the site of a former Tate & Lyle sugar packing base. The project, which extends the Docklands development corridor eastwards, could create up to 1,500 new jobs. Rents will be highly competitive, starting at just $25 per sq ft, says the developer, and terms will be flexible, with a variety of deals on offer to potential occupants, including outright sale.
Air operator ScotAirways is to increase its daily flights between Dundee Airport and London City Airport from four to six. Dundee is one of several technology hotspots in Scotland, with particular strengths in the computer software and communications sectors. Passenger levels at the city’s airport grew sharply last year, with the figure for December one-third higher than in the corresponding month in 1999.
Bright outlook for the middling wealthy
Although rates of growth are slowing slightly, there are more well-off individuals in the UK today than ever before. A study by think-tank the Future Foundation shows that the proportion of the population enjoying $70,000 or more of liquid assets - the ‘middling wealthy’ - is set to rise from 6 per cent today to 8 per cent by 2005. At the same time the proportion of those with more than $28,000 will rise from 12 per cent to 17 per cent. The figures represent market growth of one third, compared with 50 per cent for the years 1995-2000. The Future Foundation defines ‘liquid wealth’ as assets such as shares and savings but excludes pensions, property and life assurance.
Banks and building societies are falling over themselves for a share of the ‘mass affluent’ market. The report, commissioned by a division of bank Abbey National, shows that a typical member of this privileged group is a married man in late middle age, with no children living at home, who has inherited property and made windfall profits from privatisations and building society conversions in the 1980s and 1990s. He is likely to be retired and to hold conservative social views.
However, a growing number of young professionals also fall into the category. This group contains more women, has more progressive social views and is more supportive of company regulation and of environmentalism. In general, says the report, the mass affluent are more than twice as likely as their less well-off peers to do voluntary work, although they do not visit friends or invite others to their homes as often. They go out more, work less and - surely unsurprisingly - tend to be happier than average.
Around the regions
Arizona-based Insight Enterprises, Inc. ranked by Fortune Magazine as one of the 100 fastest-growing companies in the United States, has chosen Sheffield for its new US$96 million European headquarters. More than 1700 high-quality jobs are to be created by the leading American computer direct marketer, more than one-third of which will be in the booming industry of software engineering. For more details of what Sheffield can offer inward investors visit www.makeitinsheffield.com
IT Alliance of Dublin, Ireland has established a software development and testing facility in Belfast, Northern Ireland, and plans to employ nearly 50 people over the next three years. "This investment is a further boost to Northern Ireland’s fast developing software sector, which will offer excellent employment opportunities, mostly for software and electronics graduates, in the key knowledge-led areas of software development, programme support, testing and localisation of products," said Bruce Robinson, permanent secretary at the Department of Enterprise, Trade and Investment. "It also underlines the growing international recognition of Northern Ireland as a European centre for the development of software for a very wide range of applications."
Meanwhile Sensormatic Electronics Corporation, an electronic security solutions provider based in Boca Raton, Florida, has acquired Controlled Electronic Management (CEM) Systems, an electronic security company based in Belfast. CEM Systems expects to increase its workforce significantly over the next few years.
Mitsubishi-Tokyo Pharmaceuticals Inc of Japan is planning to set up a European subsidiary in London. The new company, to be called MTP (Europe) will concentrate on the development of Novastan, an anti-coagulant agent for the treatment of thrombosis.
Swiss pharmaceuticals group Novartis Pharma has officially opened a $70 million centre for respiratory research at Horsham in South East England. The centre will bring together 180 international scientists to investigate new treatments for ailments such as asthma and pulmonary disease. It is claimed to be the largest single-site facility for research of this kind anywhere in the world.
Bystronic AG of Switzerland, one of Europe’s leading machinery and equipment manufacturers for the flat glass market, has set up its UK headquarters in Telford in the West Midlands. Its new subsidiary Bystronic Lenhardt UK, which has taken 2,500 sq ft of office space, will provide support and services for the company’s UK customers and will serve as a central training base.
Excell Multimedia, a subsidiary of Excell Global Services Inc of Phoenix, Arizona, is to build a new state-of-the-art customer relations call centre in Irvine in Scotland. The $3.6 million development will create 200 new jobs.
US-owned gourmet cookware company Meyer Prestige Ltd is expanding its operation on the Wirral, North West England with a move to a new site on the Wirral International Business Park at Bromborough. Meyer sells over 1,000 lines of cookware and household goods in more than 30 countries and employs more than 3,000 people worldwide. The new 170,000 sq ft facility, incorporating a factory and a headquarters unit, will be completed later this year.
Meyer’s move means that its existing premises at Twelve Quays, a 2.65-acre waterfront development at Morpeth Wharf in Birkenhead, are now on the market. The unit, built just four years ago, offers 71,000 sq ft of floorspace. It is one of many premises that can be found on a new website launched by Wirral Direct, the local inward investment agency. As well as details of property to let or buy, the site - at www.wirraldirect.co.uk - contains information on industrial and commercial opportunities, transport and infrastructure services and the quality of life in this peninsula location.
A new development scheduled for completion by spring next year will create eight new industrial workshop units and provide up to 60 new jobs in Hull, Yorkshire and Humber. The Ropery Street redevelopment project, in an established industrial area just one mile from the city centre, is being supported by a $350,000 investment from government regeneration agency English Partnerships. The new units will be offered with flexible lease terms.
At nearby Scunthorpe, construction has been completed of a low-cost managed workspace facility at South Park Industrial Estate. The Newdown Road facility includes a training room which can be used by occupiers. Work has also begun on a managed IT workspace facility at the town’s Normanby Enterprise Park. The building will be completed by early autumn, with lettings being taken from spring next year.
EngNet, a South African internet company, has opened a UK base in York, Northern England. The company operates an online directory, buyer’s guide and portal for the engineering industry.
Pivotal, a supplier of XML-based demand chain networks headquartered in Vancouver, British Columbia, has opened an office in Luton, Eastern England, as part of its European expansion strategy.
Semiconductor manufacturer Atmel Corporation of San Jose, California has opened a new facility at East Kilbride in Scotland, where it will produce integrated circuits for smart cards, for use in applications such as mobile phones and secure internet access. The Maxwell Building facility includes a 3,700 sq ft clean room for wafer testing and is expected to create up to 60 new jobs.
Phase three of the new Thanet Campus, part of Canterbury Christ Church University College in Kent, South East England, is due to be completed in December 2001 and will include a 36, 350 sq ft Innovation Centre that will target small and medium-sized enterprises (SMEs) in the region. Built by Thanet District Council, with the help of government and European funding, the $4.2 million centre will have a range of managed incubator and development workspaces for high-growth, knowledge-driven businesses. It is aiming for full occupancy by April 2004.
In Thanet as a whole, there was more than 4.3 million sq ft of floorspace available to businesses at the end of 2000. Development land accounted for 92 per cent of the total, with most of this being in the area’s three main business parks, Manston Park, Eurokent and Thanet Reach.
Baltimore Technologies, the Irish security software group, has acquired Chubb Information Security (CIS), a security services business devolved from UK company Williams, in a deal worth several million dollars. CIS, which specialises in the protection of data transferred over computer networks and the internet, will continue to be marketed under the Chubb brand under a licence agreement.
US credit card specialist MBNA has acquired the credit card operation of UK bank Abbey National in an outsourcing deal that breaks new ground in the UK. Abbey will sell cards produced by MBNA but branded with the Abbey logo, in return for a commission on each sale. It is the first large UK bank to outsource its credit card operation in this way, although the practice is widespread in the US. MBNA is already the fifth-largest card issuer in the UK and the deal will give it an extra 500,000 card accounts, although no staff will be transferred. The 150 employees of Abbey’s card division will be found new jobs within the group.
The government has pledged $70 million of National Lottery funding to research into renewable energy sources, bring its total commitment to green energy development to $350 million over the next three years. The new funding, announced by energy minister Peter Hain, will provide support for offshore wind, energy crops, small-scale biomass and combined heat and power (CHP) schemes. The government is keen to establish the UK as a credible player in the solar energy market, alongside Germany and Japan.