News
August 2001
Inward investment reaches new high
Inward investment levels in the UK in 2000-2001 rose to record levels for the fourth successive year, despite the country remaining outside the European single currency, the euro. Government investment agency Invest UK, delivering its Annual Review of Operations 2001, said that the number of new projects rose by 15 per cent to 869 in the year to March while the number of new jobs created grew by 35 per cent to 71,488. The total investment stock rose by 36 per cent to $477 billion.
William Pedder, chief executive of Invest UK, [see picture] reported that inward investment activity surged in the second and third quarters of last year, but contracted in the final quarter as economic growth slowed in the US. The US accounts for about half of all inward investment. The slowdown has continued into the first quarter of this year, particularly in the telecommunications sector, but Mr Pedder said he was confident that growth in that sector would resume - especially in the light of increasing investment interest from China and India.
The rise in investment levels demonstrated international confidence in the UK economy, said Trade and Industry Secretary Patricia Hewitt and Foreign Secretary Jack Straw. "The headline figure of 869 inward investment projects highlights the UK as Europe’s top investment location," said Ms Hewitt. "The nature of UK investment projects is changing to favour high-quality, value-added and technology-driven projects in the IT, communications, biotech and R&D sectors. Projects like these offer the best possible opportunities for our workforce, our economy and our future."
Locate in Scotland (LiS), the investment agency for Scotland, announced its own set of figures. Despite strong competition and a difficult economic climate, investment in the region held up well in 2000-2001. A record 102 business location decisions were secured, involving planned investment of $2.5 billion and 14,346 planned new jobs.
Nissan Sunderland tops Europe productivity league
Nissan’s car plant at Sunderland, North East England is the most productive in Europe by a wide margin, according to the World Markets Research Centre’s annual report on the European car industry. Output at the plant rose by 7 per cent last year to reach 101 cars per employee per year, close to Sunderland’s own record of 105 cars per employee in 1998, and way ahead of the European average of 52.6 cars per employee. In second place was Toyota’s plant at Burnaston in Derbyshire, East Midlands, with 86 cars per employee per year. It was followed by Ford and GM plants in Germany (81) and a clutch of GM, Ford, Renault and Volkswagen plants in Spain and Belgium on 77. The worst performer was Volkswagen’s Passat facility at Emden, Germany, which produced just 27 cars per employee in 2000.
Productivity at the UK’s third Japanese-owned plant, Honda’s facility at Swindon, South West England, dropped from 83 to 55 cars per employee and its ranking slipped from 2nd to 26th. However, this reflected a thorough restructuring of the model range combined with falling sales. Nissan, on the other hand, is planning to further increase productivity with the launch of new models over the next two years that will bring annual output to 120 cars per employee.
BMW meanwhile has launched its new version of the ever-popular Mini. The company’s Swindon plant is producing body panels for the revamped version of the sporty small car, while assembly is taking place at nearby Oxford. The new car will go on sale in Europe in September and in the US and Japan next year. Another big auto investor, Ford, is to build a new diesel engine production centre at its plant in Dagenham, east London. The high-tech centre will cost around $500 million and will help boost engine production to one million units a year.
And in Formula One motor racing, an area in which British expertise is particularly strong, a $112 million plan has been unveiled to turn the 800-acre Silverstone racing centre in Northamptonshire, in the Midlands, into a technical, education and training centre for the motorsport industry. The plan was announced by Sir Jackie Stewart, the former champion driver and president of the British Racing Drivers Club, which owns Silverstone and is one of three business partners backing the plan. The other two are Formula One promoter Bernie Ecclestone and Octagon Motorsports, a subsidiary of the US-owned Interpublic Group. The British motorsport industry, concentrated in southern and eastern England, employs 125,000 people in 5,000 companies and generates an estimated $7 billion a year, 70 per cent of it from exports.
Minimum wage increased but executive incentives double
The national minimum wage for young people aged between 18 and 21 is to be increased from £3.20 ($4.50) to £3.50 ($4.90) an hour from 1 October, Trade and Industry Secretary Patricia Hewitt has announced. This will give 140,000 young people across the UK a 9 per cent pay rise, adding £10.50 ($14.70) to their pay packets for a 35-hour week. The rate will rise again to £3.60 ($5.00 - the current adult minimum wage) from October 2002.
At the same time, the government is to change regulations relating to the annual paid leave entitlement for employees, to bring UK legislation into line with the European Union Working Time Directive, which governs employment law. Employment Relations Minister Alan Johnson has announced the scrapping of the 13-week qualifying payment currently in place before workers are entitled to paid leave. It will be replaced by a new system of accrual over the first year of employment, rounded up to the nearest day, meaning that after one month’s employment, full-time staff will be entitled to two days of paid leave.
At the top end of the salary scale, the need to attract and retain top talent led last year to a doubling of the maximum awards for UK executives on performance-related share schemes, according to a study by payment consultancy Mies, on behalf of the National Association of Payment Funds. The study indicated that UK companies are increasingly adopting the generous remuneration packages common in the US.
The average award in shares for a FTSE 350 executive meeting all the performance criteria on an options scheme or Long Term Incentive Plan (LTIP) in 2000 was twice the value of his or her salary - double the average in 1999. The trend appears to have continued into 2001, with option schemes setting awards of three times salary. Of the 115 new remuneration schemes introduced in 2000, the majority were option plans. LTIPs, under which executives receive free shares, accounted for a further 30 per cent. The survey showed that 60 per cent of companies introducing new option schemes set a limit of twice the executive’s salary or more.
Awards encourage scientific innovation
Seven innovative projects have been selected under the government’s Foresight LINK Awards programme to share $16.8 million of funding, as part of a drive to maintain the UK’s position at the forefront of developing technologies. The scheme aims to bring together industry and science to explore new markets and opportunities with the potential to boost the economy. Among the projects selected, and announced by Science and Innovation Minister Lord Sainsbury, is an initiative led by Smith & Nephew Group Research Centre in York, Yorkshire and Humber to develop new ways of growing human tissue. Such tissue can be implanted into the body where it integrates more effectively than artificial implants and leads to a more natural recovery. Applications include the growth of knee cartilage to treat people with sports injuries.
Other awards include £2.4 million to a project led by Leicester, East Midlands-based Alstom Power UK Ltd to reduce pollution from power plants by removing carbon dioxide emissions; $3.9 million to a project co-ordinated by IMPACT Faraday Partnership in Reading, South East England, that will carry out research into nano-sized particles for use in healthcare, industrial and household products; and $2 million to a project to develop new technology for the inter-working of mobile phones and broadcast networks. The latter will be co-ordinated by the Mobile Virtual Centre of Excellence in Basingstoke, South East England, and will involve leading industry players.
Lord Sainsbury also announced the first seven winners of a five-year, $2.8 million scheme to attract and retain the best scientific talent in the UK. Leading scientists across a range of disciplines, including chemical engineering, biology and biosciences, computer science and geography and the environment, will receive research grants of between $63,000 and $105,000 apiece. The awards are funded jointly by the Department of Trade and Industry and the Wolfson Foundation and are administered by the Royal Society. A further 30 awards will be made during the course of this year and around 35 in the second year of the scheme.
Medical sector welcomes injection of capital
A number of new developments this month underline the importance of the health sector in the UK’s knowledge-based economy. A new medical school, which will provide training for 600 student doctors a year while serving as a major new centre for healthcare research, is to open in York, a northern city that already has a strong reputation in medical research and teaching. The new school - a joint venture between the universities of York and Hull, in partnership with the National Health Service - will be known as the Hull York Medical School.
York University has one of the largest groups of health service researchers in the world, with particular specialisms in cancer research, neurosciences and tissue repair. New health- and bioscience-related capital developments worth $63 million are currently under way on its campus, while a Guardian newspaper survey recently put the quality of teaching at York on a par with that of Cambridge. Hull has the largest postgraduate school of medicine in England, with particular strengths in clinical medicine and hospital facilities. The first new students are likely to arrive in 2003.
Meanwhile Philips Electronics, based in Eindhoven, The Netherlands, is to buy the Medical Systems business of London-based Marconi for $1.1 billion. The acquisition will make Philips the world’s second largest maker of medical diagnostic imaging equipment and will enable Philips Medical Systems to become a leader in high-tech computed tomography (CT) business. Philips will retain Marconi’s medical equipment business but plans to sell the healthcare products division, which is one of the largest distributors of radiology imaging supplies in the US.
Pharmaceutical publisher Adis International, previously based in Auckland, New Zealand, has established its global headquarters in a purpose-built 21,000 sq ft building at Chowley Oak Business Park in Tattenhall, Cheshire, North West England. The company, established in the 1960s to provide drug information to doctors in New Zealand and Australia, now specialises in healthcare communications, publishing medical information journals and providing database solutions for the pharmaceutical industry.
In the retail sector, UK conglomerate Kingfisher (which also owns Woolworths) has sold its Superdrug chain of pharmacy shops to Dutch health and beauty group Kruidvat Beheer for $395 million. Superdrug, the UK’s second largest health and beauty retailer, reported a profit of $49 million on turnover of $1,269 million in the year to 3 February 2001. Kruidvat operates drugstores and perfume stores in the Netherlands, France, Belgium, Poland, Hungary and the Czech Republic.
Business school breakthrough for science park
A ground-breaking business school venture is to be established by two of the world’s top universities at Adastral Park, British Telecommunications’ technology complex at Martlesham, near Ipswich in Eastern England. The project is the latest to be undertaken by CMI, a joint venture between the Judge Institute at Cambridge University and the Sloan School of Management at Massachusetts Institute of Technology (MIT). Chancellor Gordon Brown has backed CMI with $95 million of public funding to help foster an entrepreneurial culture in the UK. The news follows the announcement last year by University College that it was to set up a research centre at the park (formerly known as BT Laboratories) - the first time a UK university had located a research facility within an industrial park.
Students at the new school will include top executives, who will take courses alongside high-tech companies, research teams and a spin-off incubator. Benefits of the venture will flow to BTexact Technologies and to other companies on the park, such as telecoms equipment supplier Marconi and fibre-optic cable-maker Corning. "The mixture is absolutely unique - probably anywhere in the world," said Stewart Davies, chief executive of BTexact Technologies.
Wireless internet licences up for grabs
E-commerce minister Douglas Alexander has outlined the bidding process for the 26 remaining licences for broadband fixed wireless access in England, Wales and Scotland. The licences, which will enable holders to deliver internet and multimedia services over the airwaves, will be available from September. The new services will provide competition to fibre optic, cable links, DSL phone lines and satellites, but will also integrate with these existing technologies to help roll out broadband access across the UK.
Companies will be able to bid for licences at the reserve price set in an auction last November, when the first 16 licences were allocated. If a licence attracts more than one bidder, it will go to auction. The process will continue until all licences are sold or until the government reviews bidding after a 12-month period. Draft regulations will be published shortly. Regions where licences remain available include most of Southern England outside the Greater London area, East Anglia, the East Midlands and Wales.
Hewitt offers RDAs incentive to deliver
Patricia Hewitt, the new Trade and Industry Secretary, has underlined the government’s intention to give the Regional Development Agencies (RDAs) more freedom in the way they use the money allocated to them. In return the government is to set a framework of performance targets which, from April 2002, will determine the allocation of extra resources. Specific milestones will be set on business performance, with RDAs asked to support the creation and attraction of an agreed number of new businesses to their areas; job creation; education and skills training; and the recycling of brownfield land. It is expected that the actual targets will be announced in the autumn.
"[The RDAs’] top priority must be providing strategic leadership to promote economic development, enterprise and investment in their regions," said Ms Hewitt, calling on RDA chairmen to become "champions of delivery". Agencies that achieve their targets will be rewarded from a new $50 million pot of government money. It has already been announced that the collective budget of the RDAs will be boosted by $700 million to $2.4 billion by 2003-2004.
Regional development offers opportunities countrywide
Regional development nationwide has received a boost with the announcement of numerous new property schemes around the country. The North West Development Agency, for example, has allocated $88 million of EU Objective One funding to seven strategic areas on Merseyside, around the city of Liverpool. They include the Atlantic Gateway of north Liverpool/Bootle, Eastern Approaches/Edge Lane Corridor, Gillmoss/Kirkby, Huyton/Prescott, Speke/Halewood, South Helens corridor and Wirral waterfront. Developments likely to benefit include Wirral International Business Park, Knowsley industrial park and various sites at St Helens.
In nearby Runcorn & Widnes, a new master plan for the Daresbury Park development at Halton envisages the creation of 1.6 million sq ft of office space and 12,000 new jobs over the next 15 years, involving total investment of more than $300 million. Two speculative developments are already being progressed, with construction work under way on a 55,000 sq ft building and planning permission being sought for two further units of 30,000 and 40,000 sq ft. Work has begun on the second phase of the Priory Court office development in Runcorn, with two new buildings of 6,000 sq ft and 8,000 sq ft due for completion by November. And a new business and technology centre has opened at The Heath in Runcorn, as part of a North West science base clustering programme. The complex, previously owned by ICI, has been redeveloped as a business centre with 22,000 sq ft of fully-serviced office accommodation and 80,000 sq ft of laboratory space. Facilities include a conference centre and a 120-seat lecture theatre, together with shops, a 400-cover restaurant and a cyber-café.
In York, an extension has opened to York Science Park’s Innovation Centre, the first facility in the Yorkshire and Humber region to offer laboratories on a speculative basis. The new building adds an extra 10,635 sq ft of space to the centre (which has been in operation since 1995), bringing the total of office and lab space for small and start-up businesses to more than 30,000 sq ft. Seven companies are already signed up as tenants, including Aoraki Corporation of New Zealand. In the centre of York, a 140,000 sq ft manufacturing facility is available on an island site at Clifton Moor. Developed just over ten years ago for a supplier of printed packaging to the food industry, the eight-acre site contains a 62,000 sq ft factory, 19,000 sq ft of offices and nearly 20,000 sq ft of laboratories, together with warehousing, HGV access and parking. Out of town, work is almost complete on Triune Court, a high-spec office development at Monk’s Cross. Four buildings on a two-acre landscaped site offer a variety of office units of between 2,430 sq ft and 32,400 sq ft, on 15-year leases. Features include broadband fibre-optic cabling, an air-cooling system and raised floors.
In Rotherham, also in Yorkshire and Humber, RiDO (the Rotherham Industrial Development Office) has been celebrating successful developments such as Toyoda Gosei’s new car component factory, Boeing’s Aerospace Manufacturing Research Centre (established in partnership with Sheffield University) and Magna, a $64 million Science Adventure Centre that opened in April in Templeborough. The Magna building is a former steelworks that once contained the world’s largest electric-arc melting furnace, and the development has already proved a hit with visitors and with corporate events organisers. New plans for the area include the development of Manvers West, a 279-acre site suitable for business, residential and leisure use that comprises six separate sites, including a lake. It is part of the Dearne Valley Strategic Economic Zone, a major plank in an EU Objective One programme to regenerate this former industrial region of South Yorkshire.
In the West Midlands, developer ProLogis is to build a 540,000 sq ft speculative phase at its distribution park at Coventry, after the majority of the 600,000 sq ft first phase was taken by logistics specialist Exel - the UK’s biggest ever letting for a speculative scheme. Exel will carry out distribution for food retailer Safeway and Japanese tyre manufacturer Bridgestone from the site. The second phase will provide two rail-connected buildings of 350,000 sq ft and 190,000 sq ft, to be let at around $7.60 per sq ft. There will also be around 75, 000 sq ft of offices.
Also in Coventry, work has started on a new R&D facility for automotive components supplier Visteon at Binley Business Park. The 20,000 sq ft building will allow the world’s second largest components manufacturer to better serve its many automotive clients in the Coventry area. A three-acre site is to be developed at Coventry University Technology Park, with three buildings providing flexible space for research and development, together with support office space. There are also plans afoot to expand Coventry Airport with the construction of a new passenger terminal and a ‘cargo village’, which will transform the facility into a regional air hub. A new link-up between the Coventry Centre for Investment and commercial property database PropRT should help potential investors to identify property in the region that suits their needs: the website www.proprt.co.uk contains details of 125 agents promoting 5,000 properties throughout the Midlands and the North West.
In the East Midlands, a former factory site at Langley mill in Derbyshire is destined to become the @ccess 26 M1 Industry and Business Centre as part of a $35 million redevelopment scheme backed by emda, the East Midlands Development Agency. emda is also supporting a speculative industrial scheme by developers Bolsover Properties on a former colliery site at Hucknall.
And in South Wales, the Welsh Development Agency (WDA) has bought four dockland sites from Associated British Ports for a total of $21 million. The sites, at Cardiff, Barry, Port Talbot and Swansea, total 72 acres and will be used for a series of brownfield regeneration projects, including the Barry Waterfront project and the Port Tawe Innovation Village. In the north of the principality, work has begun on demolishing factory buildings on the former Hotpoint site at Llandudno Junction in Conwy. The WDA plans to develop the 18-acre site, which is strategically located alongside the A55 Expressway, for commercial and industrial use. It hopes the project will create up to 400 jobs.
Hi-spec high-rise offers a room with a view
Outsourcing specialist Mapeley is looking for a tenant for the largest single block of office space available in London’s prestigious West End. The landmark Euston Tower, on Euston Road NW1, is one of the capital’s tallest buildings and offers 155,000 sq ft of space on 14 floors. Mapeley has spent about $140 per sq ft on a thorough renovation of the building, and letting agent DTZ is looking for prospective occupiers at $72 per sq ft. The building was formerly occupied by the Inland Revenue, but was acquired last year by Mapeley as part of a portfolio of 723 Inland Revenue properties. "The Euston Tower refurbishment has created space that will meet the needs of the most demanding of occupiers," said Mapeley CEO Robin Priest. "We feel such high-quality product will be welcomed, given the undersupply in the West End market."
Around the regions
German-owned engineering polymers specialist Ticona UK has expanded its operations in Telford in the West Midlands, relocating all of its finance, administration, marketing, sales and development activities to the town.
A new survey examining pay and conditions in companies across the Telford & Wrekin area should provide useful pointers for potential inward investors. Three bodies - Telford Development Agency, Telford & Wrekin Council and the Employment Service - jointly gathered information from 120 companies about salary ranges in 29 different job categories, including managers, administration staff, call centre operatives and assembly workers. Data was also gathered on bonus schemes and benefits such as subsidised transport, holiday entitlements and shift premiums. Interested investors can get a free copy by calling Andy Clark at Telford & Wrekin Council on +44 (0)1952 202390.
Active, a wholly-owned subsidiary of the Bank of Ireland group, has expanded its call centre operation at Hellaby in Rotherham, Yorkshire and Humber, adding 250 workers to its existing 600-strong workforce after winning major new information processing contracts. A further 100 jobs are to be added at a second call centre located in the West Midlands.
Cerro EMS, part of Chicago-based engineering group Marmon, has acquired Bailey Peerless, a specialist engineering business based in Birmingham, West Midlands. The UK company manufactures brass and aluminium hot pressings, drain rods and other components for the gas, heating and plumbing industries.
Another Chicago-based firm, printing company RR Donnelley & Sons, has opened a printing facility in Flaxby, Northern England. The 220,000 sq ft facility features a fully digital computer-to-plate pre-press system, together with four-colour heat-set printing and advanced binding and finishing facilities.
Sanrise Group, a California-based managed storage service provider, has opened a new office in London to serve its customers in Europe, Africa and the Middle East.
International technology company Meridio Ltd, launched in 1999 by Fujitsu of Japan, is to invest $16 million in Belfast, Northern Ireland, where it will create 165 new jobs - 45 of which are already in place. It will market a new document and content management product via a new company called Teamware.
Also in Northern Ireland, German software company InVision Software AG is to establish a development facility in Londonderry, which will create 30 new jobs.
Pinnacle Computing, a major Irish IT supplier, has located its UK offices to Widnes in Cheshire, North West England, following its takeover of locally-based LSI Computers in a deal worth $700,000. The company will create around 20 new jobs.
Annuncio Software of Mountain View, California has created a European subsidiary, Annuncio Europe, based in London. Annuncio produces an e-marketing platform that helps companies to develop proactive customer relationships.
OpenTV, also headquartered in Mountain View, is to acquire London-based Static for $59 million. OpenTV is a leading interactive television (iTV) and media solutions company, with 16 million set-top boxes deployed internationally and distribution via 43 digital cable, satellite and terrestrial networks in more than 80 countries. Static specialises in iTV application development and broadcast design services for TV networks and operates its own entertainment and games channel, PlayJam.
Sydney-based AMP, Australia’s leading international financial services company, is to buy Towry Law of Bracknell, South East England for around $107 million. AMP’s core businesses are pensions, investments, insurance and banking; it employs 22,000 staff and has 10 million customers worldwide. Towry Law is an established financial adviser with a base of 100,000 medium-to-high net-worth clients in the UK.
Trapeze Software Group, based in Ontario, has acquired Cerney Computer Services of Gloucestershire, South West England. Cerney specialises in demand response scheduling and reporting systems for community transport and has more than 70 clients across the UK.
Vitaminic, based in Milan, Italy, is planning to purchase Peoplesound.com of London for around $34 million. Vitaminic is one of Europe’s foremost digital platforms for the promotion and distribution of music over the internet and other electronic networks, using broadband and wireless communications networks. Peoplesound.com is a well-established European website that features music from new and emerging artists. Consumers can choose from thousands of tracks and can but custom-produced audio CDs.
Development agency Scottish Enterprise has launched a $7 million plan over the next two years to meet skill shortages in the financial sector. It will help more people obtain masters degrees as well as teaching basic IT skills to the unemployed. The Scottish financial services industry currently employs 90,000 people, but a recent survey found that rising demand will create the need for 18,000 more workers over the next two years.
The Property Show 2001, held in Birmingham, West Midlands on 21-22 June, attracted more than 100 exhibitors and 2,000 trade visitors from all sectors of the UK property market, report the organisers. Industry representatives were able to network against a background of presentations by big-name speakers. The show has evolved from the one-day Midlands Property Show, held in Birmingham for the past four years, and this year was national in its scope for the first time. Bookings are already being taken for next year’s event; contact Steve Jordan at: stephen@propertyshowltd.com