News

 

October 2001

Global FDI to fall, warns UN body

Global flows of foreign direct investment (FDI) were set to slump by 40 per cent this year even before the devastating terrorist attacks in the US, according to the United Nations Conference on Trade and Development (Unctad). The UN body predicted that flows would shrink to $760 billion from last year’s record $1,270 billion, the first drop since 1991.

Unctad said this was due almost entirely to the fall-off in corporate merger activity in the industrialised world, and in particular the end of the kind of $1 billion-plus deals that fuelled the surge in FDI in 1999 and 2000. This year’s biggest deals so far - Deutsche Telekom’s $24.6 billion acquisition of Voicestream in the US and British Telecom’s $13.8 billion acquisition of Viag of Germany - are small compared with last year’s record $200 billion takeover of Germany’s Mannesman by Vodafone Airtouch. The decline will be compounded by falling share values and by a lull in the consolidation of industries such as telecommunications and the automotive sector.

As a result, flows between the world’s richest countries have been running at about half last year’s levels - $510 billion this year compared with more than $1,000 billion in 2000, estimates Unctad. The world’s 63,000 trans-national corporations (TNCs) and their 800,000 foreign affiliates account for around two-thirds of world trade. The US, the EU and Japan dominate both inward and outward FDI, accounting between them for 71 per cent and 82 per cent respectively of the total. Unctad officials would not speculate on the consequences for FDI of the recent attacks but warned that the investment climate would deteriorate further if gloomy global market conditions persisted.

 

… but UK environment encourages investment

Despite the current sombre climate, levels of investment in the UK remain healthy - and the government is doing all it can to keep it that way. A new report from the Department of Trade and Industry (DTI), shows that in 2000-2001 government-funded Regional Selective Assistance grants worth $572 million were awarded, helping to secure business investment of $4.8 billion. The RSAs, a major plank of regional industrial policy, helped to create 40,000 jobs and safeguard a further 20,000 over the year. Flagship projects included US software firm Insight Direct Worldwide Inc, which was encouraged by a $21 million grant to set up its European headquarters in Sheffield in Yorkshire, investing $94 million and creating 1,700 jobs for the region by 2007.

Another DTI report, from the Future and Innovation Unit, demonstrates that higher investment in research and development leads directly to improved company performance. The report showed, for example, that the sales growth of consumer goods companies with high R&D spending could be six times higher than that of their lower-spending competitors while productivity levels also improved, with sales per employee doubling or even tripling in some sectors. The market values of FTSE 100 companies with high R&D investment has risen more than twice as much as those with low investment over the past four years.

In international terms, some sectors in the UK have above-average intensity in R&D investment (R&D investment as a percentage of sales): pharmaceuticals, which accounts for 50 per cent of all UK R&D spending, has 38 per cent intensity, while health has 2 per cent and aerospace 10 per cent. However, overall R&D intensity in the UK is 2.1 per cent, compared with an international average of 4.2 per cent. Science and Innovation Minister Lord Sainsbury urged UK companies to do better.

“Levels of business expenditure on R&D in the UK have been rising steadily over recent years, from 1.18 per cent of GDP in 1997 to 1.25 per cent in 1999, but we need to see substantial further growth if our companies are to bring innovative global products and services to market and remain internationally competitive,” he said. “The UK pharmaceutical, aerospace and defence sectors invest more in R&D than their overseas competitors, and are examples of the success that can be achieved.”

 

Knowledge is key to economic growth

A similar message, with particular reference to Northern Ireland, was delivered by Bruce Robinson, permanent secretary at the Department of Enterprise, Trade and Investment. Addressing conference delegates at Queen’s University, Belfast, he stressed the importance to the province’s economic development of even greater cohesion between universities and businesses. “The universities are the primary training ground for technologically skilled people and provide the R&D expertise our companies will increasingly need to compete successfully in an international business environment in which change will be constant,” he said.

Belfast has recently welcomed a $1.2 million investment by UK firm BDR Consulting of Buckinghamshire. BDR is to set up a Systems Integration Campus that will train personnel of other UK companies in the latest internet-based technologies, in particular electronic customer relationship management (e-CRM) solutions, which are its own speciality. The campus will create around 45 new jobs over the next three years.

A new survey from the Organisation for Economic Co-operation and Development ranks the UK’s knowledge-intensive manufacturing and services sectors fourth out of 30 of the world’s most developed nations, behind Switzerland, Germany and the US. The OECD’s Science, Technology and Industry Scoreboard is updated every two years and provides a snapshot of the strengths of different countries in knowledge-based sectors.

Overall, the most knowledge-based country turns out to be Sweden, which invested the equivalent of 6.5 per cent of its GDP in knowledge activities in 1998, followed by the US with 6 per cent and Finland and Korea with 5.2 per cent apiece. Knowledge-based activities are defined as manufacturing areas such as aerospace, pharmaceuticals and motor vehicles, together with services such as telecommunications, finance and insurance. The UK was ranked 13th, with total knowledge-based spending amounting to 3.9 per cent of GDP. The average across the OECD was 4.7 per cent.

 

UK ‘a great place to build cars’, says Honda

Japanese companies are continuing to invest. Canon Europe, for example, has just selected London as one the key hubs for its European expansion and efficiency programme. It has established a new headquarters at Stockley Park near Heathrow Airport, to develop pan-European strategies for its business. “Canon’s new approach recognises the importance of the UK as a gateway to the European market. The UK provides a unique location in Europe that combines cutting-edge research and development experience, a skilled and creative workforce and a stable economy that promotes business,’ said Baroness Symons, minister for international trade and investment.

Car components manufacturer Toyoda Gosei is to expand its European base in Rotherham, South Yorkshire, just four months after the plant’s official opening. It plans to increase its floorspace by 50 per cent, from 110,000 sq ft to almost 161,000 sq ft, and to create 100 new jobs, taking the workforce to 500 by the end of 2004. The plant went into full production last October, ahead of schedule, and is already exceeding production targets. It makes rubber and plastic weatherseals for Toyota and Honda and will supply other European car manufacturers in future.

Workers at Nissan’s plant in Sunderland, North East England, have signed flexible working agreements that are set to help raise production targets to 500,000 vehicles a year by the middle of the next decade. A projected 135,000 to 140,000 Primera models are to be built at the plant, already the most productive in Europe, next year under a $300 million investment programme. A new Micra model is due to go into production in 2003 in a further programme valued at $340 million.

Honda meanwhile has opened the first car plant to be built in the UK for eight years. [see picture] The plant, the company’s second at Swindon in Wiltshire, South West England, brings its total investment to $2.2 billion and creates 200 new jobs. Swindon is home to 39 European headquarters of large companies and has one of the lowest unemployment rates in the country. Honda’s first UK factory opened there in 1992.

The new factory will raise Honda’s overall capacity at the twin plants from 150,000 vehicles a year to 250,000 by 2003, and Swindon will be the only production facility in the world for the new three-door Civic model, which is destined for export to Japan and North America. “We are here today because we believe the UK is a great place to build cars. We now produce over 2.56 million cars globally, but we still need additional capacity - Swindon is a key element,” said Hiroyuki Yoshino, the company’s president and CEO, as he opened the plant. [see picture]

 

Car-makers increase production

Elsewhere in the automotive industry, Peugeot workers have signed flexible working agreements to end the traditional two-week summer shutdown at the Ryton plant near Coventry in the West Midlands. This will allow production to continue for 49 weeks of the year, with minimum downtime for maintenance and statutory holidays. The plant, which produces the French car-maker’s 206 model, is currently working seven days a week to meet demand.

BMW of Germany is hiring 500 new workers at its Mini plant in Oxford, South East England, after reaching a deal with unions to move to seven-day production. The move allows BMW to introduce a second shift; the new workers, who will work mostly weekends, will bring the factory’s total workforce to 4,800. BMW plans to build 30,000 vehicles at the plant this year, rising to 100,000 in 2002. The company’s luxury car subsidiary, Rolls-Royce, has begun construction work on a new head office and manufacturing plant at Goodwood, near Chichester in Sussex. The $84 million facility, due for completion in 2003, will produce 1,000 cars a year.

Jaguar, the luxury car arm of Ford Motor Co, is to invest $5-$6 billion over the next three years on 16 large new product programmes and a switch to aluminium-body assembly. The company will become a testbed for Ford’s aluminium vehicles, and plans to overhaul its plants in the Midlands. It also plans to introduce a wide range of new products, including an F-type sports car, diesel and station-wagon variants of existing models, new engines and transmissions and an all-aluminium replacement of its flagship XJ saloon.

 

Energy and chemicals sectors attract investors

A flurry of new investments has also highlighted the interest of overseas investors in the UK’s energy and chemicals sectors. US company Tyco Plastics, for example, is to buy the plastics division of the Macfarlane Group, based in Glasgow, Scotland for $70.5 million. The division accounts for some 28 per cent of the company’s turnover. The Minneapolis-based company is one of the largest manufacturers of plastic film products in the US, producing items such as plastic sheeting and bags, shrink wrap and stretch film for the agricultural, horticultural, packaging and retail markets.

Tessenderlo of Belgium, an international chemicals group with more than 100 branches in 21 countries, has acquired UK company Acordis Fine Chemicals, based in Leek in North West England. Acordis employs 90 people and is a market leader in a range of aroma chemicals, acetate esters and chloroesters. Nippon Gohsei of Japan has announced plans to build a chemical production plant within BP’s chemicals site at Saltend on the River Humber at Hull, North East England. The facility will produce 15,000 tonnes a year of SOARNOL, an ethylene vinyl alcohol copolymer that is used a an environmentally friendly alternative to food packaging that contains chlorine or aluminium. The plant will employ 70 people and will target markets in Europe.

Weatherford International of Houston, Texas acquired Downhole Technology of Aberdeen in Scotland earlier this year and is now to spend $2.2 million to upgrade facilities at the company. Weatherford is one of the world’s largest oilfield service companies, with more than 300 locations around the world. Seamap of Singapore, a company which manufactures electronic systems for use in the oil exploration and offshore industries, has established its UK headquarters in Shepton Mallet in South West England. And Platts, a division of McGraw-Hill, based in new York, has acquired Financial Times Energy, part of the London-based Pearson group. FT Energy is one of the world’s leading providers of energy information, publishing a number of newsletters for the global industry. Platts is the world’s largest provider of energy market information, with 14 offices worldwide.

 

Flexible working is good for business

It’s official - flexible working is good for your business. The UK labour market is among the least regulated in Europe but full-time employees work on average 43.6 hours a week, four more than most of their European counterparts. In Germany the figure is 40.1 hours, in France 39.6 and in Belgium 38.4. The UK has the longest working hours of any country in the European Union - many put in more than 48 hours a week , ignoring EU working time directives. Government research shows that on average 7.8 working days were lost per employee in 2000 due to workplace absence - a total of 192 million days which, at an estimated $608 a time, cost business a total of $15 billion.

An Industrial Society survey showed that 75 per cent of businesses thought flexible working patterns made good business sense while 63 per cent said they helped to build trust, commitment and loyalty. They also help to cut expenditure on recruitment costs, training and supervision. A number of big companies - besides Nissan and Peugeot - have already introduced such practices, including BP, J Sainsbury, BT and Lloyds TSB.

The government is doing its bit, with two new DTI guides to help employers and staff see for themselves the benefits of flexible working. Work-Life Balance: The Business Case illustrates how innovative companies have used flexible working to reduce absenteeism, boost productivity and reduce long hours, while Work-Life Balance: The Essentials Guide looks at different solutions individuals have found to manage the demands of their work and home life. To get copies of the booklets, visit: www.dti.gov.uk/work-lifebalance

 

Train takes strain while Stansted raises horizons

New statistics from the Department of Transport, Local Government and the Regions show that the number of passenger journeys on light rail systems in England increased by 27 per cent, from 93.9 million in 1999/2000 to 119.6 million in 2000/01. Much of the growth was in London, with use of the Docklands Light Railway almost tripling since 1995/96 and the new Croydon Tramlink accounting for 15 million passenger journeys in 2000/01.

The government has set a target of doubling light rail use by 2010 under its 10-Year Plan for Transport. There are currently six light rail systems in operation in England - Croydon Tramlink, the Docklands Light Railway, Manchester Metrolink, Midland Metro (between Birmingham and Wolverhampton), the Sheffield Supertram and the Tyne and Wear Metro. These networks are set to be supplemented by an extension to the Tyne and Wear system, opening in 2002, and a new 8.7-mile system under construction in Nottingham, which is due to open in 2003. The government has also approved plans for seven new lines in Leeds, Manchester and South Hampshire.

BAA, the owner of Stansted Airport in Eastern England, is seeking planning permission to raise its capacity from 15 million passengers a year to 25 million. Stansted, fuelled by the expansion of low-cost airlines Ryanair, Go and Buzz, is the fastest-growing airport in Europe and this summer passed the 13-million passenger mark for the first time. BAA plans ultimately to raise throughput to 35 million passengers a year, the maximum possible from Stansted’s single runway. Its ambitions should be helped by planned road improvements in the area: government consultants have recommended the construction of a three-lane dual carriageway to link the A1(M) motorway south of Peterborough with the M11 at Cambridge, while approval has been given for a second scheme to remove six roundabouts from a 70-mile stretch of the A1 north of Peterborough.

Gentler forms of transport have also received a boost with the opening of the final one-mile section of combined footpath and cycleway around the Greenwich Peninsula on the River Thames in London. The section completes both the 180-mile walking route from the source of the Thames to the Thames Barrier and the 44-mile Thames Cycle Route from Hampton Court to Dartford, and means that more than 90 per cent of Greenwich’s waterfront is now accessible to the public. The Greenwich Peninsula, site of the Millennium Dome, is an important development site for government regeneration agency English Partnerships. Among other projects, it is building 700,000 sq ft of mixed use development, including offices, and 242,000 sq ft for employment uses.

 

Property opportunities around the country

Regional development agency Yorkshire Forward is to sell off almost all of its completed property portfolio to the private sector. It is looking for buyers for the 1.8 million sq ft portfolio, which comprises 600 industrial, office and hi-tech buildings on 50 estates and is valued at up to $84 million. It is hoping to find a single buyer, and a shortlist is expected by the end of the year.

Yorkshire Forward is the first RDA to make such a move. It owns and manages the portfolio on behalf of the government but has decided to sell the assets rather than sit on rental income. This is not its prime purpose: like other RDAs, its brief is to develop the sites and attract inward investment. The body’s sales agent, King Sturge, is selecting and valuing sites in towns such as Doncaster, Barnsley, Sheffield, Leeds and Whitby. Ongoing projects such as the 128-acre Europarc Innovation Centre at Grimsby and the E-Campus project in Sheffield will not be included in the sale.

Neither will two new projects in North Yorkshire that are just getting under way. Infrastructure work has begun at Sherburn Enterprise Park near Selby, which is expected to create 500 new jobs in the area. The 95-acre development, on the site of a former airfield, will open up land for advanced manufacturing units. At Catterick, a former army garrison is the site for the new Colburn Business Park, which is expected to create 400 new jobs. Work has begun on infrastructure at the site, which will eventually offer 25 acres of development land.

In Peterborough, Eastern England, there are plans for two speculative office villages following the success of an earlier scheme. Developer Hunting Gate has acquired a site at Savile Road, Westwood, where it plans to build up to 24,000 sq ft of offices, while another developer, Business Homes of Leeds, is proposing to build an office village with up to 12 units at Cygnet Park in the new township of Hampton.

English Partnerships meanwhile has opened up a 14-acre site at Orton Southgate near existing Peterborough business park developments Southgate Park and Pegasus. The area has been designated for a wide range of business uses though EP is hoping to attract a high-quality office complex as part of the development. Peterborough’s first speculative industrial development for more than 10 years, on an adjacent site, was more than two-thirds pre-let before its completion earlier this year. The Links offered 64,055 sq ft in two units, one of which was taken by Coloplast, the UK subsidiary of a Danish healthcare products manufacturer, on a 15-year lease.

In London, a derelict site in the City is to be turned into a prestigious new block offering 100,000 sq ft of office space and the very latest in cabling and communications infrastructure. The corner site, at 140 Aldersgate Street, next door to Barbican tube station, is being developed by partners Bank Leumi, Whitecliffe Ltd and project manager Centurion Millennium. Rents for the building are expected to be lower than prime rates for comparable blocks in the City.

The Welsh capital Cardiff meanwhile is to get a new business park. The 12-acre site, known as Woodstock Park, is situated at a junction of the M4 motorway and is expected to provide 258,000 sq ft of office space. Those looking for premises in the UK should note the dates of 22-23 May in their diaries: that’s when The Property Show 2002 takes place at the National Exhibition Centre in Birmingham, West Midlands. More info at: www.propertyshowltd.com

 

Video games industry sets high scores

One area of the knowledge-based economy in which the UK is particularly strong is the computer games industry. It employs some 20,000 people in the UK in development, publishing and distribution, and is the third largest market for games after the US and Japan. Some 40 million units of leisure software were sold to UK consumers in 2000 and the value of the market was estimated at $1.3 billion.

The government now plans a major new competitiveness study to analyse the industry’s strengths and identify future opportunities for growth. “Games developed here typically can be found at the top of the global best sellers’ list. We also boast a world-class publishing sector, with a plethora of global publishers choosing the UK for their European headquarters,” said e-commerce minister Douglas Alexander. “If the industry is to enjoy long-term success, we must make an effort to develop best practice and identify opportunities for new markets.”

One of these markets is likely to be Japan. The minister pledged support, through the DTI’s International Technology Service, for a trade mission to visit the country in November that will investigate best practice in games development and represent UK developers. Japanese companies, however, have already recognised the potential of the UK leisure market, and not just in the video game sector. Kobe-based Canopus, for instance, Japan’s largest manufacturer of digital video graphics and editing products for both enthusiasts and professionals, set up a UK subsidiary in London in September.

And in a different part of the hi-tech leisure industry, internet gaming technologies provider World Gaming, based in Antigua, has opened a new corporate headquarters in London. The company develops and licenses a range of online gaming products, including casino, sports book and pari-mutuel betting.

 

Around the regions

• The DTI has awarded funding of $105,000 to help develop a business plan for a new metals ‘centre of excellence’ in Rotherham, Yorkshire and Humber. The centre is intended to bring together industry, science and academia to create a network for UK metal producers, fabricators and users and is a key part of RDA Yorkshire Forward’s plan to develop a high-growth engineering and metals cluster in the region. Meanwhile AvestaPolarit, a company created this year from the merger of Avesta Sheffield of the UK and Outokumpu Steel of Finland, has announced a $22 million investment to expand the product line at its factory in nearby Sheffield, which employs 800 people.
• US company Customer Operations Performance Center (COPC), headquartered in Austin, Texas and Amherst, New York, has opened a European office in Bedford, Eastern England. The company specialises in operations such as customer contact centres and customer fulfilment services.
• Manchester Investment and Development Agency Service (MIDAS) has launched a new website - www.manchestercalling.com - to help companies looking to set up, relocate or expand in the Manchester area. The site contains detailed information on population and workforce, transport and communications, education, sites and premises and lifestyle, along with key business sectors such as customer contact centres, information and communication technology, air transport and biotechnology.
• The Telford Development Agency, meanwhile, has updated its own website, www.telford.uk.com. Enhanced features on the 150-page site include a powerful new search facility and an online property database, with key information available in French and German. The West Midlands town has also set up a new partnership to support local businesses. The Telford Aftercare Service is a joint venture between the Telford Development Agency, Advantage West Midlands and English Partnerships.
• Another city focusing on aftercare for investors is Dundee in Scotland. Dundee City Council recently held a call centre fair to highlight career opportunities for local people; currently more than 2,000 people in Dundee work in call centres for companies such as Tesco, BT and Bank of Scotland. The city also has a well-developed digital technology sector and is home to the Medipark, an 18-acre site dedicated to biotechnology and healthcare projects. A new building of 13,000 sq ft has recently been completed at the park and a second is expected to come on stream in the spring of 2002. In a totally different sector, Dundee’s port is home to a number of businesses serving the North Sea offshore oil and gas industry.
• Porcelanosa, the Spanish-owned tile company, is planning a $5.6 million expansion of its premises in Peterborough, Eastern England. Work has already begun on a 52,500 sq ft building containing warehouse space, showrooms and offices, and the company plans to move in before the end of the year. Meanwhile Swedish furniture giant Ikea is planning to build a $56 million distribution centre in the town. The 1.4 million sq ft facility at Hampton will supply the company’s ten existing stores in the UK and support a planned $1.1 billion retail expansion programme in the UK. Subject to planning permission, it is expected to be fully operational by March 2003.
• The Tees Valley, in the North East of England, is to get its own Urban Regeneration Company to help attract investment to the area. The new body will work in tandem with the RDA for the region, One NorthEast.
• The highlands of Scotland are enjoying an “unparalleled” period of stable growth and low employment, even leading to skills shortages in some areas, according to development agency Highlands and Islands Enterprise. Unemployment in the northerly region, which stretches from Argyll to Shetland, is at its lowest level for 15 years. HIE helped to find full or short-term jobs for 2,600 workers made redundant in the oil fabrication industry over the past year, and altogether helped to create or sustain 2,427 jobs. Eight new inward investment projects created 737 jobs.
• The Royal Mail is facing direct competition in its core letters business for the first time in 350 years. As part of a process to introduce more competition to the sector, the Postal Services Commission has licensed business services group Hays to start postal deliveries in London, Manchester and Edinburgh. The commission is also considering licences for UK Mail, which plans to offer services in 12 locations, and Deya, which wants to provide a service for local authorities and utility companies.
• Israeli company RADCOM has formed a UK subsidiary, based in Bristol, South West England. The Tel Aviv-based company manufactures protocol analysis equipment for LANs, WANs and ATM systems, supporting over 350 protocols.
• Stargen of Marlborough, Massachusetts, has opened a European headquarters in Cardiff, South Wales. The semiconductor company, founded in 1999, develops new switch fabric technology for the communications industry, specialising in equipment for next-generation voice, data and video networks.
• Online B2B and consumer auctioneer Ableauctions of Scottsdale, Arizona is to acquire London-based iCollector, which provides an indexed catalogue of art, antiques and collectables for than 300 auction houses in the UK, US and Europe. The company also broadcasts live auctions over the internet in conjunction with eBay Live Auctions.
• Bombardier Transportation, an offshoot of Bombardier Inc of Canada, has officially opened its new $42 million Central Rivers train maintenance facility near Burton-on-Trent in the West Midlands. The 29-acre centre, with a workforce of 250, will be used to maintain the fleet of new Voyager and tilting Super Voyager trainsets currently being built for use on Virgin Trains’ CrossCountry routes.
• Yorkshire and Humber has the potential to become a key energy supplier to the rest of the UK, according to a study by the Regional Energy Foundation. This will offer local businesses opportunities to attract investment and secure pilot projects in new ‘clean’ energy transmission technologies. The region is currently a net exporter of energy, exporting a third more to the rest of the country than it consumes itself. The report highlights the job-creation potential of energy efficiency buildings, clean coal technology and renewable energy sources, including windpower.
• Harris Interactive of the US has acquired UK company Market Research Solutions Ltd (MRSL), based in Oxford, South East England. Harris, of Rochester, New York, is a worldwide market research, polling and consulting firm, best known for the Harris Poll and its pioneering use of internet market research techniques. MRSL has a reputation in the UK for high-quality data-gathering.
• Chicago-based Thoughtworks, a private company which develops customised e-business applications and platforms for Global 1000 companies, has opened an office in central London.
• GE Industrial Systems, a division of General Electric Company, based in Fairfield, Connecticut, has acquired the Sensing Solutions group of Spirent, based in Crawley, South East England, for $220 million. Sensing Solutions manufactures temperature, humidity and pressure sensing systems for the pharmaceutical, biomedical and automotive industries.
• Stolt Sea Farm, a subsidiary of Stolt-Nielsen of Norway, has taken a 20-year lease on an advanced fish processing plant on an island off the west coast of Scotland. The company is investing $14.5 million in the 31,000 sq ft development, which is expected to create 109 new jobs.
• Dutch banking group Insinger de Beaufort is to acquire the London-based United Trust Group, incorporating United Trust Bank. Insinger de Beaufort provides private banking, asset management, securities trading, corporate finance and trust services from offices in 19 countries.
• Archipelago Europe, a wholly owned subsidiary of Archipelago Holdings of Chicago, has opened an office in London. The new office will offer transaction services to UK and European broker dealers and institutional investors.
• Franco-Belgian banking group Dexia has bought Ely Fund Managers of London for an undisclosed fee. Ely, previously owned by a consortium of shareholders, manages approximately $462 million of business for more than 1,200 clients.

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