News
September 2001
Land Rover expansion targets US market
Ford subsidiary Land Rover is to target the US market with a $2.8 billion offensive that includes the launch of five new models. The plan is part of a widely trailed expansion of the company’s product portfolio that centres on increased output at its plant at Solihull in the West Midlands. The new models are likely to include a new small Range Rover and a replacement for the Discovery and will most probably use engines developed by Jaguar and safety systems made by Volvo, sister companies within Ford’s Premier Automotive Group.
"In the next six years, we will launch five major new vehicles - a huge undertaking from a company which, in its 53-year history, has launched only seven new vehicles," said Bob Dover, Land Rover’s chairman. "In the future, every new Land Rover model will be engineered for the US at the very beginning of its life. Let me be clear: the US is our absolute number one priority market worldwide."
BT lays broadband foundations for new financial centre
British Telecommunications (BT) has announced plans to invest $70 million in high-speed broadband connections to help build a new financial services district on the banks of the river Clyde in Glasgow, Scotland. The company has already invested nearly $15 million this year to lay fibre-optic cabling in the area, which stretches from Glasgow Central Station to the city’s Kingston Bridge, and will commit similar sums each year for the next four years.
At least 18 new office projects are already under construction or have won planning consent in the district, which is being developed in collaboration with Glasgow city council, industry body Scottish Financial Enterprise and local development agencies. In total, $350 million of investment is proposed, creating 2 million sq ft of office space and 20,000 new service jobs. The new business district will cater primarily for the expansion of the financial services industry in Glasgow and is expected also to attract overspill from nearby Edinburgh.
BT is also planning to launch a satellite service that will bring high-speed internet services to many parts of rural Britain for the first time. The service is likely to be offered in Scotland and Northern Ireland from November, before rolling out to other parts of the country over the next 12 months. It will require the use of satellite dishes and will cost subscribers approximately $140 per month. The service will be operated by US company Gilat, using existing European satellites to transmit signals to homes and small businesses.
"The launch of our satellite service will meet the demand for always on high-speed internet services for businesses in more remote locations, and will now mean that more than 90 per cent of customers connected to an enabled exchange will be able to access broadband technology," said Andy Green, chief executive of BT Openworld, the company’s internet division.
UK and US update double taxation treaty
The UK and US governments have signed an updated double taxation treaty which, among other measures, scraps a 5 per cent withholding tax levied on dividends paid by US subsidiaries to British parent companies. Tax experts believe the move will give the UK an edge over other European countries and help make it a gateway for European companies seeking to invest in the US. Other measures agreed in the amended treaty, last updated in 1975, include greater powers for US tax authorities to investigate the affairs of US citizens with UK sources of income.
US Treasury Secretary Paul O’Neill and UK Chancellor Gordon Brown held what officials called an "informal and wide-ranging" meeting on their countries’ respective economies at the end of July. Among the topics under discussion were ways of raising productivity and employment and ways of promoting competition and international trade, together with Mr Brown’s plans for a US-EU trade initiative. There is reportedly considerable agreement between the two on policies for economic reform, particularly the need for structural reform within the European Union.
Proposed new measures will enhance business environment
Meanwhile the government has promised a radical overhaul of company law to cut costs and reduce red tape for companies operating in the UK. Trade and Industry Secretary Patricia Hewitt welcomed the publication of the final report of the independent Company Law Review, which has been looking at ways to lighten the regulatory burden, particularly on small companies. "A more user-friendly system will boost productivity and make this country a better place to do business," said the minister.
The report contains a blueprint for the comprehensive modernisation and reform of existing legislation. Among its recommendations is a radical simplification of the law for small companies, with simpler decision-making requirements and reduced accounting and audit obligations; a statutory statement of directors’ duties to encourage responsible and informed decision-making; an operating and financial review to improve the quality of reporting by larger companies; and tighter annual reporting cycles, with more effective use of new technology.
Ms Hewitt has also announced a shake-up of the rules governing competition and bankruptcy. Measures proposed in a Competition White Paper include a more transparent regime; strong deterrents against anti-competitive behaviour; stronger action against cartels, including the possibility of criminal proceedings against directors; the setting up of consumer bodies with enhanced powers to handle complaints; and new powers for appeals tribunals. On the insolvency side, a second White Paper proposes measures that include a new emphasis on saving viable companies wherever possible; a ‘fresh start’ rule to give bankrupt entrepreneurs a second chance; tougher penalties for reckless bankrupts; and greater transparency in the administration regime.
Meanwhile, the Skills Council is aiming to raise educational standards among British youngsters, with the launch of a ten-year, $7.7 billion plan. The plan’s first-phase targets are to raise the proportion of 16- to 18-year-olds in full-time education from 75 per cent to 80 per cent by 2004 and to raise the number of 19-year-olds with level two qualifications (equivalent to five GCSE passes at grades A-C) to 85 per cent, a 10 per cent increase on current levels.
Demand holds up as rental growth starts to slow
Although demand for business premises in the UK remains strong, there are signs that the current global economic certainty is beginning to have a cooling effect on the property market. The latest quarterly market report (Summer 2001) from consultants Healey & Baker shows that demand for office space is beginning to stabilise. In central London availability edged up in the second quarter as new developments came on stream and space was released back onto the market, although demand still outstrips supply by a ratio of 5:1. Strong take-up in the City has led to a slight fall in active demand, while in the West End increased demand from the professional and financial sectors has offset a slight fall-off from technology companies to maintain previous overall levels.
In the key Thames Valley area demand has softened, with a number of projects on hold - although, says Healey & Baker, this trend could quickly be reversed. Demand has fallen from the technology sector but this has been offset by increased take-up from the pharmaceuticals and professional services sectors. Pharmaceutical companies and other knowledge-based enterprises are holding up levels of demand in regional markets such as Scotland, with availability limited in both Edinburgh and Glasgow.
Demand in the industrial sector remains active, with an expected slowdown over the summer period failing to materialise. There has been a fall-off in manufacturing requirements, but the distribution sector is still strong. There are shortages of good sites in the South and in parts of the Midlands and demand is particularly strong in the M25 area. In Scotland, warehousing premises are at a premium.
DTZResearch’s summer report on the central London office market provides a more detailed picture of demand. The company detected signs of caution, with availability rising for the third successive quarter. It currently stands at 8.3 million sq ft, an increase of one third over the past three months and a ratio to stock of 4.2 per cent. Most space coming on to the market is second-hand, with new or refurbished space accounting for just 15 per cent of the total. The volume of speculative development remains low, with 17.1 million sq ft of space under construction, of which three-quarters is pre-let.
Take-up in the second quarter of the year was 3 million sq ft, half the level in the first three months. Pre-let activity was strongest in the Paternoster Square and Times Square developments in the City and at Paddington in the west of the capital. Rents in almost all sub-sectors notched double-digit growth in 2000 but have now begun to decline, particularly in the prime West End market, where rents have fallen from $119 per sq ft to $115 per sq ft. In the City, rents have remained static at $87.5 per sq ft.
New research by Jones Lang LaSalle indicates that office space rentals in centres to the west of London are set to slow in the period to July 2002. Slough, for instance, where rents rose by 5 per cent to $45 per sq ft over the past 12 months, could see zero growth for the period. Other towns, such as St. Albans, Bracknell, Farnborough and Egham, are likely to record increases in the 3-4.5 per cent range. Take-up fell by 46.9 per cent across the region in the January-July 2001 period, and by 39.2 per cent in the Thames Valley area, said the company.
No sign of slowdown in communications sector
Despite the slowdown in the high-technology and communications sectors, cutting-edge firms are still eager to establish a presence in the UK - especially US software, telecoms and internet services companies. Fractal Antenna Systems of Boston, Massachusetts, for instance, is to open its first European office in London in the autumn. The company supplies advanced antenna technology based on fractal geometric shapes to the wireless and telecoms industries and will use its new base as a springboard into markets in northern and western Europe. Another newcomer is Avesair of Cary, North Carolina, a supplier of carrier-class mobile application software, which has also opened a European office in the capital. Joining them will be CI Host of Bedford, Texas, a web hosting and internet solutions provider, which is opening a 24:7 data centre to serve customers across the European Union.
Software company Syntellect, of Phoenix, Arizona, has established a new international headquarters at Maidenhead, South East England. The company is a global leader in open systems, enterprise voice portal software and hosted services. Luxxon of Mountain View, California has based its new European subsidiary at nearby Marlow. The company specialises in hardware and software for the capture and delivery of audio and video content over wireless networks. Another new neighbour is audio, data and video-conferencing specialist ReView Video Services of Naperville, Illinois, which has opened an office at Hadworth Common, near Reading. Also locating in Reading is Comergent Technologies, of Redwood City, a leading provider of sales-side B2B e-commerce software solutions, while SeeCommerce of Palo Alto, California, is opening an office in Bracknell. The latter company specialises in supply-chain performance applications.
Elsewhere in the South East, Lightning Source of La Vergne, Tennessee has opened a new facility at Milton Keynes. Lightning offers a suite of services for the conversion, storage and distribution of digital content and maintains a library of books and other information that can be delivered electronically on demand. OPNET Technologies, a provider of intelligent network management software based in Bethesda, Maryland, has opened an office in Oxford to service the UK and Scandinavian markets, while French company Com6 of Paris is moving its UK operation to larger premises in Dartford. The company’s main offering is a software suite for the electronic customer relation management (e-CRM) industry that integrates operations via telephone, e-mail and the internet. In the East Midlands, Engineous Software of Cary, North Carolina, a developer of design engineering software, has opened a new European subsidiary in Nottingham.
IT services support company ACS International Resources of Newark, Delaware, has announced plans to establish a subsidiary in Belfast, Northern Ireland. The $2 million investment will create 40 jobs by the end of 2003. In Scotland, Galileo International of Rosemont, Illinois has opened a new office in Glasgow. The company’s core business lies in the provision of electronic distribution services for the travel industry. Tality of San Jose, California, a subsidiary of Cadence Design Systems, has opened a new test facility at nearby Livingston. The company is the largest independent provider of engineering services and intellectual property for the design of complex electronic systems and integrated circuits, and has 1,000 engineers at 14 design sites worldwide.
Also in Livingston, French company Alcatel Optronics, part of the Paris-based Alcatel group, is to acquire Kymata for around $134 million. Kymata is a provider of integrated optical components for the networking industry. In another acquisition deal, Hummingbird of Toronto has bought Edinburgh-based software firm PeopleDoc. PeopleDoc’s products are designed to create web-based collaborative environments for enterprise-wide project management.
PC maker chooses Scotland over China
In an unusual reversal of industry trends, UK home computer manufacturer Tiny has shifted production of its PCs from China to Scotland. The company, based in Surrey, South East England, had previously sourced all its products in the Far East but has now appointed Fullarton Computer Industries of Prestwick, Ayr on contract to manufacture all its PCs for the UK market. The savings in transport costs, says Tiny, will allow it to cut prices to the consumer by 5 per cent. The company has about 16 per cent of the UK market and sells around 400,000 home computers annually.
The five-year deal is worth $56 million and will create 160 assembly jobs in Scotland, with Fullarton planning to produce up to 1,300 PCs daily from the end of September. Tiny is also planning to switch production of its laptops, which account for 10 per cent of its output, to Fullarton. The new Scottish base could also provide it with a springboard for expansion into Europe.
Technium centres foster hi-tech incubation in South Wales
The Welsh Development Agency (WDA) helped to create or safeguard more than 3,000 jobs and secured more than $85 million in private sector investment in South Wales last year, according to the agency’s annual report. The single most significant project of the year was the Technium project at Port Tawe, Swansea. The $3.5 million innovation centre is designed to nurture new high-technology enterprises and to serve as a model for a series of similar centres across Wales.
The centre is already fully occupied by 12 knowledge-driven businesses; the aim is for these to outgrow their accommodation and move to larger premises within 18 months, freeing up the space for a new crop of high-tech entrepreneurs. Similar Technium R&D incubators are being developed at Baglan Energy Park, the National Botanic Garden at Llanarthne and at Cyber Bay, Pembroke Dock, together with automotive, media and digital centres elsewhere in South Wales.
Regions play to their strengths
Other regional development agencies (RDAs) have also reported successful years. Yorkshire Forward, the agency for the Yorkshire and Humber region, for example, reports the creation or safeguarding of 26,000 jobs, the training of 120,000 people in IT skills and the investment of $322 million in deprived communities. Among its major successes were bringing Boeing to the Advanced Manufacturing Park at Rotherham [see picture], creating 7,000 jobs over the next five years, and encouraging Insight Enterprises Inc to build its European headquarters in Sheffield, creating a further 1,700 jobs. The region boasts a diverse economy and a strong manufacturing base that accounts for 20 per cent of total employment, significantly higher than the national average.
Looking to the future: RiDO manager Richard Poundford, left,
with Adrian Allen, centre, one of the men behind the Boeing project,
and Boeing's head of manufacturing-process improvement, Jimmy Williams,
at a Sheffield University seminar on the project.
In the South East the focus is more on high-technology businesses. The region has some 300 biotechnology companies, with clusters in Oxford, Surrey, the Thames Valley and Kent, putting it at the forefront of biotechnology R&D in Europe. Of these companies, around 60 per cent are expecting rapid growth over the next two years, according to the results of a recent survey. The RDA for the region, SEEDA (South East England Development Agency)has identified a shortage of suitable premises as a limiting factor on growth, with annual demand for laboratory space currently running at 200,000 sq ft. Developing new space, through business partnerships and the funding of enterprise hubs, is therefore a priority for the continued growth of the sector.
Elsewhere in Kent, SEEDA has helped to fund the development of a new business park, strategically located at junction 13 of the M20 motorway, that offers workspace to hi-tech business ventures. The first building on the 23-acre Shearway Business Park will be a $5 million complex designed by Basepoint plc, offering 66 office units and workshops suitable for small and new businesses, together with conference and meeting rooms, secretarial services, communications facilities and a café. SEEDA also plans to convert an old drill hall at Chatham into a fully serviced high-tech business incubation centre, providing space for up to 30 small businesses and start-ups. The building, part of the Chatham Maritime project, is located next door to research facilities at the University of Greenwich Medway Campus. It will provide more than 85,000 sq ft of office space, and is the first speculative development in the Medway towns for a number of years.
The rich get richer…
Chief executives of UK manufacturing companies are better rewarded than anywhere else except in the US, although their workers are the lowest paid in the industrialised world, according to a global survey by magazine Management Today. CEOs of UK companies with annual sales of more than $500 million enjoy average remuneration packages of $712,627, compared with the $1,390,164 collected by their peers in the US. Their rewards are a third higher than those of French CEOs and well ahead of the average in countries such as Australia, Japan, Sweden and Germany. The survey did find, however, that the rate of increase in executive pay appeared to be slowing.
In directors’ pay, the survey found marked regional discrepancies within the UK. Directors of companies in the South East are the best paid, with average earnings of $93,660, followed by their colleagues in London, who get $85,974. At the other end of the scale are directors in Eastern England ($80,976) and Northern Ireland ($77,196). Manufacturing workers, on the other hand, earn on average just $28,665 per annum, 20 per cent less than their counterparts in France and around half as much as workers in the US. They are unlikely to be consoled by the fact that the UK has the world’s highest-earning accountants, who each rake in on average $106,803 per annum.
Around the regions
Weymouth & Portland Borough Council is to redevelop a former Royal Naval air station at Portland in Dorset, South West England as a mixed-use scheme led by the marine industry. The 80-acre Osprey Quay development will include housing, leisure facilities and marine craft workshops in what will be Dorset’s biggest regeneration initiative. Among organisations already operating at Osprey Quay is US cruiser builder Luhrs Marine, which employs 60 people at its new European headquarters, on a 15.2-acre site.
The East Midlands Property & Business Show is due to take place at the East Midlands Conference Centre, Nottingham on 8th November. More than 90 exhibitors and over 2,000 delegates are expected to attend. Last year’s show proved a resounding success, with Japanese textile firm Barudan setting up its UK headquarters in Nottingham on the strength of its experiences there. For information on this year’s show, contact Martin Freeman on +44 (0)115 936 3741.
Anglo-Swiss Syngenta, based in Basel, is to locate its regional centre for the EMEA market at Guildford in South East England. The company, formed from the merger of Novartis Agribusiness and Zeneca Agrochemicals, is a leader in the agri-business industry, with 20,000 employees worldwide and 4,000 at 15 sites in the UK. Its investment globally in research and technology amounted to $707 million in 2000.
Work has begun on the new @ccess 26 M1 Industry and Business Centre at Langley Mill in the East Midlands. The 37.5-acre site will be developed over the next few years at a cost of $35 million and will provide space for office, production and distribution uses. The project is expected to create hundreds of new jobs.
US energy merchant and power generator Dynegy, based in Houston, Texas, is to acquire BG Storage from the BG Group of Reading, South East England for around $597 million. BG Storage provides gas storage facilities in the UK; its assets include storage facilities in the North Sea and a 73 per cent holding in the Easington onshore gas processing terminal on Humberside.
Data centre hosting company Clearspace has become the first tenant at Monkton Business Park in Hebburn in South Tyneside, North East England. The company has moved into the largest of three industrial units built by developer Priority Sites Ltd, a public-private partnership between English Partnerships and the Royal Bank of Scotland, on the site of a former cokeworks. Clearspace’s 35,000 sq ft server farm is expected to create 50 jobs.
Human resource services and solution provider Amadeus GS of Germany has acquired Greenwall & Gleeson (G&G) of Birmingham, West Midlands. G&G offers executive search, permanent placement, interim management and temporary staffing services for accounting and finance companies. Meanwhile temporary staff provider Westaff, of Walnut Creek, California, has opened a new office in Chichester, South East England. The company specialises in staffing services in suburban and rural areas.
OSI Pharmaceuticals of New York is to acquire some of the pre-clinical research operations of British Biotech, based in Oxford, South East England. The $12 million deal will give the biopharmaceutical company leases on research facilities in Oxford, together with a fully integrated pilot manufacturing plant and the services of 60 research and administration staff. OSI’s focus is on the gene-targeted small-molecule drugs in areas such as cancer, respiratory diseases and diabetes.
Detwiler, Mitchell & Co (DMC) of Boston has formed a UK subsidiary in London. The company’s activities include institutional and retail securities brokerage, market making, mergers and acquisitions and advisory services. DMC (UK) Ltd will focus initially on investment banking and institutional sales, particularly those involving technology and alternative energy companies.
German company Nord, which manufactures high-performance gearboxes, gear motors and drive electronics, has opened a new, expanded factory at Abingdon Science Park, South East England, after outgrowing its previous premises after just five years in the UK. It has invested $2.8 million in the 25,000 sq ft, purpose-built factory and already plans to extend this by a further 7,000 sq ft.
TRW, a subsidiary of automotive electronics manufacturer TRW Inc of Cleveland, Ohio, is to invest a further $24 million in its facilities at Birmingham in the West Midlands. The new investment will create around 150 new jobs.
Kia Motor Company of Korea, part of the Hyundai corporation, is to begin production of four-wheel-drive transfer case systems for its new sports utility vehicle, to be launched in January 2002, at the BorgWarner plant at Margam, South Wales. The plant, the only one of its kind in Europe owned by the Chicago-based multinational, had been threatened with closure after the completion of a major contract.
Outline planning consent has been granted for a 580,000 sq ft mixed-use expansion of Hillington Park business park near Glasgow Airport, which will make the facility the biggest business park in Scotland. Developer Caledonian Land is planning to make space available for office, technology and industrial uses and will target IT and financial services tenants in particular.
US company Brand Institute, based in Miami, Florida, has opened a UK office in London. The company is a global brand name and identity consultancy and has branded products and services for more than 200 companies in the pharmaceutical, consumer and high-technology sectors. Clients include Pepsi, Starbucks, Paramount, Mercedes-Benz and Kelloggs, while customers to be served by the London office will include Astra Zeneca, GlaxoSmithKline, Bayer, Aventis, Novartis and Roche.
Border Biofuels, a subsidiary of Vancouver-based DynaMotive Energy Systems, has submitted a planning application to build a forest-residue-fired power station on the island of Arran, off the west coast of Scotland. The project will use wood from sustainable forestry operations to produce ‘green’ electricity and is expected to meet up to a third of the island’s electricity needs.