News
July 2001
Brown puts productivity and enterprise at heart of his agenda
With the Labour government safely returned for another parliamentary term at the general election held on 7th June, Chancellor Gordon Brown moved quickly to set out his plans for business over the next five years. He outlined measures to put competition, productivity and enterprise at the heart of his second-term agenda. A package of more than 20 measures promised to take ministers out of merger decisions, crack down on anti-competitive behaviour and price-fixing, reform insolvency law and make the planning system more business-friendly. Other proposals included the reduction and simplification of capital gains tax, the reduction of corporation tax and payroll burdens on small businesses and a long-term review of the retail financial services industry. Investment will be encouraged in the regions and a spirit of entrepreneurship fostered in schools.
Enterprise for all, said Mr Brown, "cannot be built on inadequate investment, low skills, boardroom complacency, workplace resistance to change or … cartels and restrictive practices," as he set out his plan to raise UK productivity to US levels. Historically, US productivity has been greater than that of the UK for more than a century, although between 1973 and 1996 the average annual UK productivity growth rate was 2.2 per cent, compared with 1 per cent in the US.
One of the main planks of the new policy is a US-style crackdown on cartels and an expansion of the powers of the Office of Fair Trading, giving the UK the toughest anti-competition regime in Europe. Company directors involved in illegal price-fixing now face the prospect of going to jail, in addition to the company itself incurring heavy fines. Lawyers working in this area believe the new measures will transform the degree of seriousness with which industry treats competition issues. "It’s a dramatic change - a major, major policy shift, not just for the UK but for Europe," said a spokesperson for law firm Freshfields. The move has been welcomed by competition authorities and consumer groups, although reaction from business organisations such as the CBI (Confederation of British Industry) has been more muted.
The capital gains tax (CGT) regime has been substantially liberalised. From April 2002, the effective rate of CGT on business assets will fall to a maximum of 10 per cent after two years. At present the rate tapers from a maximum of 40 per cent to 10 per cent after four years. Last April the Treasury widened the definition of business assets to include employee shareholdings in quoted trading companies, and it will consider broadening further the range of investors benefiting from the most favourable CGT conditions.
Help was announced for small businesses, including a proposal to extend the scope of the 10 per cent rate of corporation tax applied to very small companies and a plan for a flat rate of value added tax (VAT) for companies with an annual turnover of less than $140,000. The Treasury is also to scrap automatic fines for the late payment of VAT, as part of an effort to change the perception of tax authorities as "interfering and threatening".
The review of the financial services sector is to be led by Ron Sandler, former head of the Lloyd’s insurance market, and will focus on the life assurance market, which was badly tarnished by the mis-selling of pensions in the early 1990s. In schools and in further education, Financial Services Authority Sir Howard Davies will conduct a review that will examine attitudes among students and teachers to business, enterprise and the economy. The study will include levels of financial literacy, the scale and effectiveness of existing business-oriented activities and the outputs that the government should aim for. Sir Howard will report on specific, costed recommendations by January.
VC funds promised for regional development
Mr Brown has confirmed plans to boost development in the English regions by giving businesses access to local venture capital funds worth a total of $1.4 billion. He first announced the scheme a year ago but a disagreement with the European Union over its structure delayed its implementation; this has now been resolved. The Treasury will provide $112 million of seed funding, backed by up to $84 million from the European Investment Bank, and the funds will operate through the Regional Development Agencies (RDAs). A further venture capital fund, using $56 million of government money and involving the private sector and charities, will target community development in areas of high unemployment.
Several RDAs are already forging ahead with ambitious development plans. Yorkshire Forward, for example, intends to create 150,000 new jobs and double the rate of business start-ups in the Yorkshire and Humber region, and has identified a number of key industries at which to target future investment. It believes food and drink (including agriculture), digital industries such as electronics and multimedia, advanced engineering and metals, chemicals and bioscience clusters all have the potential to create tens of thousands of jobs. Its approach to clusters will build on existing strengths in the region, including advance metals technology in South Yorkshire, digital industries in West Yorkshire and chemicals on the Humber. The research strengths of the region’s ten universities will be used to exploit opportunities in the rapidly expanding bioscience sector.
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The East Midlands Development Agency (emda) has published the final version of its Urban Action Plan, which it hopes will make it one of the top 20 regions in Europe. The plan contains more than 70 specific proposals. Within the region, a new business park has opened at Bolsover in Derbyshire, on the site of a former colliery tip. The $2.4 million Bolsover Gateway project has been funded by emda together with a wide range of other development bodies. |
 Nottingham-based designer, Liz Lemon with council officials at the official unveiling of gates to Bolsover Gateway Business Park |
Elsewhere in the East Midlands, more than 1,500 new jobs are expected in Nottinghamshire following a series of property deals at the emda-owned Sherwood Park Enterprise Zone. New tenants such as utility company Powergen, which is building a 51,000 sq ft call centre, will join companies such as Prolog, Boots and Tsubakimoto at the site, which has excellent transportation links and a central location. More than 90 per cent of Sherwood Park is now committed for development, with only three plots (of between 1.6 and 6.7 acres) still available.
London leads Europe for e-business investment
London is the top location in Europe for e-business, according to a recent report from property consultants Healey & Baker. The company surveyed 201 specialist e-business companies in nine countries for its first European e-Locations Monitor report and found they ranked the UK capital first in 11 out of 14 key criteria for deciding where to locate an e-business. These factors included proximity to academic and research centres, reliability of electricity supply, staffing skills, international transport links and flexible employment conditions.
London’s rating overall was more than two-and-a-half times better than its nearest competitor, Paris Central, and three times higher than next-placed Dublin and Amsterdam. Most of the respondents predicted that London would maintain its leading position in e-logistics, finance, design and software over the next five years.
E-business is not the only sector in which London can count itself world-class. A recent Ernst & Young European Investment Monitor report confirmed that the city had maintained its position as Europe’s leading destination for inward investment, last year winning twice as much investment as Paris, again its nearest competitor. North American companies accounted for 58 per cent of this investment, with 23 per cent coming from Europe and 19 per cent from the Asia-Pacific region.
Sony makes capital choice for global operation
In recent announcements, giant Japanese corporation Sony has revealed its intention to consolidate its four global financial operations into one, based in London. The company’s aim is to integrate its foreign exchange and money transactions globally, with a few exceptions such as mainland China. The operation will be up and running within a year, under the banner Sony Global Treasury Services (GTS).
According to a Sony spokesperson: "The decision to establish GTS in London was based on London’s pre-eminence as a financial centre and an assessment of various factors, including human resources, infrastructure, language considerations and time zones. The human resources, facilities and expertise of our longstanding European finance subsidiary, Sony Europe Finance, were also a key consideration.
Financial printer and customised communications company RR Donnelly Financial, a subsidiary of RR Donnelly & Sons of Chicago, has also chosen London as its international headquarters. It has opened a new full-service document management base, which will serve as its composition and production hub for the European region. The centre will have its own web presses and will be open 24 hours a day, seven days a week. Facilities for clients include soundproof conference rooms with a capacity of more than 150, a lounge and bar, relaxation rooms equipped with beds and showers and 24-hour onsite catering and concierge services.
"Since we first came to London in 1986, we have seen 15 years of consistent growth," said John Swindell, the company’s vice-president for international sales. "The new headquarters has been purposely built to answer all our clients’ needs - from on-site typesetting and multilingual translations to world-class meeting room accommodation and direct links to [our] global print and distribution network."
And design firm Plex of Germany has become the 500th international company to locate in London with the help of London First Centre, the capital’s own inward investment agency. Maxi Jahn, head of Plex, said: "Our clients are start-ups with global ambitions from the international arena. Through local recruitment, Plex London can draw on a diverse pool of multilingual design talent."
Leeds growth driven by financial services
London isn’t having it all its own way, however, particularly in financial services. Leeds in Yorkshire, Northern England, once an industrial and manufacturing powerhouse, has seen the number of people employed in this sector climb steadily from 66,000 to 105,000 over the past decade. The Leeds Development Agency predicts the total will reach 146,000 by 2010, with financial services employers enjoying buoyant conditions. John Richardson, chairman of Leeds Financial Services Initiative, a public/private sector partnership, said: "Leeds is a broad-based centre that is robust enough to sustain the momentum. We see ourselves as the second most important centre after London."
The growth in financial services has been the main driver of the local economy, particularly in terms of property investment. Around 40 per cent of all property development in Leeds between 1991 and 2000 was new office space, accounting for a combined value of $2.8 billion. A further $4.2 billion in all sectors was planned or under construction, including major investments in transport such as a $700 million supertram network and a $224 million modernisation of the city’s railway station.
High-tech investors keep faith in UK economy
Although the global slowdown in the IT and telecommunications sectors has seen a reduction in inward investment, a large number of high-technology companies are continuing to put their faith in the UK economy. US company Virata, of Santa Clara, California, for example, has opened a new centre at Cambridge, Eastern England, which comprises its European headquarters together with its largest engineering facility worldwide. Virata provides communications software and semiconductors to manufacturers of DSL, wireless and other broadband networking equipment.
Word Wide Packets, based in Spokane, Washington, has opened a European sales office in Fleet in Hampshire, South East England. The company specialises in optical network enhancement equipment and is targeting communication infrastructure providers in the entertainment, e-commerce and education sectors. Also in South East England, at Camberley, Surrey, Cyclone Commerce of Scottsdale, Arizona has opened a European office that will promote its trading community management solutions, while San Diego-based McQuerterGroup, an integrated PR, advertising and marketing company specialising in global IT, telecoms and internet clients, has opened a European office in the Thames Valley. As part of a co-location and cross-staffing agreement, it will be represented in Europe by Companycare, a UK PR agency that specialises in the telecoms sector. The arrangement is expected to benefit both companies.
In South West England, GNP Computers of Monrovia, California, a provider of engineering, manufacturing and systems integration services for the teledatacom industry, has opened an office in Swindon. The centre will handle sales, technical support and account management services for the company’s European customers.
Northern Ireland continues to attract high-tech investment. IT training and consulting group Sureskills, of Dublin, Eire is to open a UK office in the provincial capital Belfast as part of a multi-million pound expansion plan. The operation will be divided into two main divisions: training and development, which will concentrate on high-end training, and consultancy, which will offer outsourcing in areas such as messaging operating systems, platform migration and systems integration.
In Londonderry, German company InVision Software AG is to establish a software development facility in a $580,000 investment that will create 30 new jobs. The company is a specialist in workforce management solutions aimed at the call centre and service sectors. Since its foundation in 1995 has captured 25 per cent of the call centre market in Germany.
Meanwhile Nortel Networks, the Newtownabbey subsidiary of the Canadian-owned global telecoms corporation, has been chosen as Northern Ireland Exporter of the Year. "Increased sales to over $1.4 billion and a trebling in exports over the past three years to highly competitive markets in North America, Asia-Pacific and Europe made this excellent company an obvious choice for the independent judging panel," said Sir Reg Empey, Northern Ireland’s Minister for Enterprise, Trade and Investment. The company is also a recent winner of the prestigious UK Award for Business Excellence.
Property slowdown may lead to fall in rents
The global slowdown has led to a fall in demand for commercial property for the first time since 1998, according to a half-yearly survey by the CBI and property advisers GVA Grimley. Demand for industrial space in particular has been hit and the survey predicts that demand across the board will continue to wane for the next six months. Just 12 per cent of companies surveyed had bought or rented more space in the previous six months, compared with 27 per cent in the previous six months. Over the coming half-year only 6 per cent expected to increase their property holdings, compared with 31 per cent last November. Demand is expected to weaken for offices, factories and warehouses, with only retail premises showing an increase in activity.
Stuart Morley, head of research at GVA Grimley, predicted a sharp fall in the growth in office rents in central London, from 25 per cent a year six months ago to 8 to 10 per cent in a year’s time. He said that rents in the West End had levelled off at around $112 per sq ft per annum, while office space in the City was still rising slightly at $84-$91 per sq ft.
However, with current vacancy rates in the City at historic lows of 2 to 3 per cent, predictions like these will do little to dampen the enthusiasm of planners. Vacancy levels in the Square Mile are now lower than in the West End, reversing a traditional trend. According to property advisers DTZ Debenham Tie Leung, occupiers are currently seeking 5.2 million sq ft of space, with particularly strong demand from professional firms servicing the banking and finance industries. The Corporation of London is seeking sites in the north-east quarter of the City capable of accommodating occupiers needing up to 1 million sq ft of space.
The Corporation is currently helping 14 key occupiers with their search for space, most of which require more than 400,000 sq ft of space and several 750,000 sq ft or more. According to the Corporation’s chief planning officer, Peter Rees, the City of London is like a vegetable garden. "We need to grow buildings that are used and recycled on a regular basis by the financial services industry," he said.
Outside London, the effects of the slowdown have yet to filter through and the supply of prime office space remains tight, according to DTZ. In a survey covering ten major regional centres (Belfast, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Manchester, Newcastle and Nottingham), it says that total availability fell by 7 per cent over the six months to the end of March 2001, to stand at 8.7 million sq ft. However, there were marked regional differences reflecting local conditions: in Cardiff, for example, availability rose by nearly two thirds while in Newcastle it fell by the same proportion.
Take-up over the six months was 4.3 million sq ft, a decline of 15 per cent on the previous two quarters. Again there were marked variations. In Birmingham take-up more than doubled, while in Edinburgh it was up less than 3 per cent. Bristol and Cardiff also saw rises but in the other six centres take-up fell. The corporate and financial sectors maintained their 40 per cent proportion of satisfied take-up, with IT companies accounting for a further 20 per cent. Rents grew over the previous 12 months by an average of 8 per cent, with Edinburgh seeing a rise of 16 per cent but Newcastle recording no increase at all.
US auto corporations invest in the future
Jaguar Cars, a subsidiary of Ford, has officially opened a new manufacturing plant at Halewood, North West England, where it will produce the new Jaguar X-type model. The plant represents an investment of $423 million and has created 500 new jobs, bringing the total workforce at the base to 3,500. The X-Type, a compact sports saloon, was developed at Jaguar’s design and engineering centre at Coventry, in the West Midlands. "This is a great British success story. There is a bright future ahead," said Wolfgang Reitzle, chairman of Jaguar and vice-president of Ford’s Premier Automotive Group.
In Coventry itself, Visteon Corporation of Dearborn, Michigan, a provider of technology solutions to the automotive industry, is expanding its operation at Binley. A new 75,000 sq ft facility adjacent to the current site will house up to 100 employees, including business and engineering teams, and will include workshop space for systems development. Visteon began its Binley operation in 1998 with just 25 employees but has grown steadily since then.
Port traffic shows steady growth
The volume of freight traffic passing through UK ports rose 2 per cent from 1999 to 2000, by 11.5 million tonnes (Mt) to 577.1 Mt, according to statistics from the Department of the Environment, Transport and the Regions (DETR). Inwards traffic rose to 318.2 MT while outwards traffic grew to 258.9 Mt. The UK’s 52 major ports accounted for 97 per cent of the total. Grimsby and Immingham overtook London to become the UK’s leading port, with 52.2 Mt, followed by Tees and Hartlepool with 51.5 Mt. London was in third place with 47.9 Mt and was followed by Forth (41.2 Mt), Sullom Voe (38.2 Mt), Southampton (36.8 Mt), Milford Haven (33.8 Mt), Liverpool (30.4 Mt), Felixstowe (29.7 Mt) and Orkneys (22.8 Mt).
The Tyne and Wear Passenger Transport Authority, in North East England, has approved plans for a new $140 million road tunnel under the River Tyne. A process of competitive tendering will see private consortia bidding for the financing, design, construction and operation of the tunnel, with a decision on the winner expected in December 2003. The successful bidder will receive income from tolls, which the authority hopes will be set at between $1.50 and $2.15 per car.
Passenger traffic at the recently opened Manston Airport in Kent, just south of London, is set to rise by 50 per cent to 20,000 this year, with the resumption over the summer of a fly-cruise service operated by Renaissance Cruises out of New York’s JFK airport. Passengers are transferred to the nearby port of Dover. In the West Midlands, the UK’s biggest independent helicopter firm Helicentre has opened a new base at Coventry airport, investing $1.4 million in the project.
Universities forge business links with SMEs
A tripartite initiative between the National Assembly for Wales, the Welsh Development Agency (WDA) and the Higher Education Council has seen the launch of a Centres of Excellence Programme aimed at building links between Welsh universities and small and medium-sized enterprises (SMEs) in the principality. The $5 million programme aims to boost businesses by giving them access to industrially relevant research and world-class expertise, enabling them to develop new products and sharpen their competitive edge.
After a rigorous selection procedure, twenty research groups have been given ‘Centre of Excellence’ status, which recognises that they possess world-class facilities and have demonstrated an exceptional track record of collaboration with industry. The centres represent nine different institutions and cover a range of disciplines, including IT and computing science, advanced materials, product design and manufacturing, environmental and biological sciences and medical technologies. "Wales has a wealth of world-class expertise in science, engineering and technology that can help individual companies to develop and improve their products and processes in order to become more successful," said Sir David Rowe-Beddoe, chairman of the WDA.
In a similar initiative, a $4.2 million innovation centre is set to open in January 2002 as part of the third-phase development of Canterbury Christ Church University College’s Thanet Campus in Kent, South East England. The centre is intended to foster technology transfer and entrepreneurship among SMEs in the region and will support a range of businesses, including start-ups in managed incubator workspaces. Businesses will also have access to experienced mentors, training, R&D facilities and IT networks.
New venture is a breeze for Danish investors
Danish wind turbine manufacturer Vestas is planning to build the UK’s first large-scale wind turbine manufacturing plant, on a former RAF air base in North West Scotland. The $13 million plant will be built at Campbeltown on the Mull of Kintyre, an area that currently suffers from high rates of unemployment, and will be funded largely by regional development agency Highlands and Islands Enterprise (HIE).
The UK government is particularly keen to increase the development of wind farms, both on- and off-shore, having identified wind power as the biggest potential contributor to its target of generating 10 per cent of electricity from renewable energy by 2010. At present only 2.8 per cent comes from renewable sources. The plant will employ about 100 workers. Vestas will lease it from HIE but will spend $3.9 million to equip the plant. One of its biggest customers will be utility company Scottish Power, which itself owns wind farms with a generating capacity of 100MW and plans to build a further 500MW.
Around the regions
A new website detailing development opportunities in Lincolnshire, in the East Midlands, has been launched. The site - at lincolnshiredevelopment.org.uk - outlines the grants, services and assistance available and includes a property search function that lists a full range of office, industrial and retail accommodation in the county. At present the site carries details of some 40 strategic development sites which already have planning consent, ranging in size from 6 acres to 165 acres.
US-owned gourmet cookware company Meyer Prestige has invested $7.7 million to develop a 190,000 sq ft factory on an eight-acre site on the Wirral International Business Park in Bromborough, North West England.
At the nearby Plantation Business Park a number of new buildings, with a total 48,705 sq ft of space, are nearing completion. Three units - of 10,100 sq ft, 12,670 sq ft and 25, 905 sq ft - are available, on either freehold or leasehold terms. An additional 12.5-acre site offers design-and-build possibilities at Ferry View, in unit sizes up to 300,000 sq ft, while a number of existing units are also available at business parks in the area.
Elsewhere on the Wirral, Swedish company Jacobi Carbons has expanded its business with a move to a new 23,000 sq ft unit in Birkenhead. The company, which set up its Wirral operation in 1996, specialises in activated adsorption facilities and has a number of other facilities worldwide.
German plastics company Renolit has bought Ultraflex Plastics Ltd of Lancaster, North West England. The UK company, based on the Lune Industrial Estate, manufactures and converts plastic sheet products. Following the acquisition, it expects to see its current workforce of 20 double and its annual sales rise from $7-$10 million to $17-$18 million.
Another German plastics manufacturer, Rehau, has announced plans to expand its UK subsidiary, Blaenau Plastics of Gwynedd in Wales. A $12 million plan involves the addition of 35 new jobs to the 300-strong workforce and the construction of a 500,000 sq ft warehouse as a national distribution centre for plastic components and window profiles.
Neways International UK, a subsidiary of US company Neways International of Salem, Utah, has opened a new 34,000 sq ft facility in Kimbolton, Eastern England, where it will manufacture and distribute its range of health and personal care products. The new centre brings the company’s entire UK operations under one roof, including administration, call centre operations and warehousing, and will act as the hub for its planned expansion into Europe. Neways’ range of 250 products contains ‘safe’ ingredients and is based on a blend of modern biochemistry and ancient Chinese, Tibetan and Ayurvedic formulas.
Daw Technologies Inc of Utah, which specialises in clean room and mini-environment systems, has opened a regional office in London. It will focus primarily on the design and installation of ultra-clean manufacturing facilities for the pharmaceutical and healthcare industries.
RJM Corporation, based in Norwalk, Connecticut has opened an international office in Winchester, South East England. The company provides engineering and scientific consultancy services to tackle energy and emission problems, and the new office will market its NOx emission-control technologies for fossil fuel-fired boilers to the European and Asia-Pacific markets.
The town of Scunthorpe, Yorkshire and Humber, has gained Tier 3 status, which allows small and medium-sized enterprises based locally to apply for the government-administered Enterprise Grant. This discretionary grant is designed to support projects with a maximum capital investment of $700,000, with funding allocated on the basis of the project’s quality, its needs and its location. Up to 15 per cent of gross capital costs may be supported, to a maximum of $105,000.
Brunswick Corporation of Lake Forest, Illinois has acquired Sealine International, a luxury cruiser and motor yacht builder based at Kidderminster in the West Midlands, for around $68 million. Acquisition of the premium-brand company will provide a springboard for Brunswick’s expansion into the European market.
Browallia, a Swedish investment company, has purchased London-based investment bank Union for around $36 million. Better known as Union Discount, the UK bank was founded in 1885 and was for many years a leading bill broker in the City of London.