News
March 2002
UK retains top spot in Europe for inward investment
The UK has regained its ranking as the second most popular destination for inward investment in the world after the US, and the most popular in Europe, according to 2001 estimates by the United Nations Conference on Trade and Development (UNCTAD). Investment fell sharply in all developed countries over the year, but the decline in the UK, from $120 billion to $72 billion, was less severe than in many other countries. Germany, for example, which in 2000 had ranked third, largely due to Vodafone's acquisition of Mannesman, fell to seventh position. Foreign direct investment (FDI) flows to Germany in 2001 totalled $25 billion, while those of France and the Netherlands totalled $38 billion and $40 billion respectively. The UK's total was bigger than those of France and Germany combined, suggesting that the government's decision not to sign up for the first wave of euro membership has had no significant impact on investment decisions. See Linked Article: Financial Futures.
Outward investment from the UK was $48 billion in 2001, compared with $179 billion for the US, $92 billion for France and $60 billion for Germany. The previous year the UK claimed top spot, again largely due to the exceptional Vodafone-Mannesman deal.
Globally, FDI fell by 40 per cent, to $760 billion from $1,300 billion in 2000, estimated UNCTAD. Flows to developed countries fell by nearly half, from more than $1,000 billion to $500 billion, due to sluggish economic growth and a sharp decline in the number of cross-border mergers and acquisitions. FDI flows to developing countries also fell, though countries such as Mexico and India bucked the trend to register increases. The biggest winner was China, where FDI rose to $46.8 billion, from $41 billion in 2000. The country rose to third place in the rankings - and is expected by UNCTAD to overtake the UK following its accession to the World Trade Organisation.
Business costs in the UK are lowest in Europe
The UK is still one of the cheapest places in the world to do business, according to a new survey by tax and auditing company KPMG LLP. It is the least costly country in Europe, maintaining its position from a similar study two years ago. It has the second lowest labour costs, while its manufacturing costs are 12.5 per cent lower than those of Germany and 20 per cent lower than in many parts of continental Europe. Only Canada is cheaper overall: partly due to a declining currency, Canadian manufacturing costs are 10 per cent lower than in the neighbouring US. At the other end of the scale, Germany and Japan emerge as the most expensive countries in which to do business.
KPMG's Competitive Alternatives study measured 27 cost components, such as labour, taxes and utilities, in nine leading industrialised countries: the UK, the US, Canada, Germany, France, Italy, Japan, Austria and the Netherlands. It compared after-tax costs for the start-up and operation of 12 specific types of business over a 10-year period, and evaluated 85 different cities. Telford, in the English West Midlands, emerged as the most cost-effective city in Europe. In North America, Edmonton ranked as the least expensive city.
Call centre market set to keep on growing
The booming call centre sector is set to continue on a path of strong growth for several years to come, according to research company Datamonitor. There are already 6,000 call centres in the UK, employing nearly 500,000 people, or 1.7 per cent of the working population. This number is expected to grow to 8,000 by 2005, with a further 140,000 employees, meaning that call centres will employ more than 2 per cent of the UK's total workforce, eclipsing many traditional industries. Since 1998 the number of agent positions in centres has more than doubled, to 362,000. Although the rapid growth rates of the late 1990s have slowed, Datamonitor still expects the market to expand by 6 per cent in 2002, with a further acceleration to follow.
Many organisations have reduced branch staffing in favour of centralised call centres in a bid to cut costs. Some 90 per cent of call handlers work in the customer service arms of large organisations, such as banks and utility companies, where the typical starting salary is around $18,000 a year. The remaining 10 per cent are employed by specialist call centre operators which handle outsourcing work for other organisations. For these operators - such as Vertex of the UK, Convergys of the US and Merchants of South Africa - margins are tight, due to stiff competition. However, according to Datamonitor, barriers to entry are low and margins should rise as call-handling technology develops. The company estimates that the outsourced part of the UK market is currently worth nearly $2 billion, twice as much as in 1997, and that growth is running at 15 per cent a year.
Property market remains optimistic despite slowdown
The Central London office market saw availability rise by almost 200 per cent over the course of 2001, with the ratio of vacant property rising from 2.6 per cent to 7.5 per cent of the total, according to a new report from DTZ Research. Availability over the final quarter of the year rose by around 50 per cent to 15.1 million sq ft, driven by a decrease in take-up and a sharp rise in the amount of secondhand space coming onto the market. Just 12 per cent of available space was new or refurbished accommodation. Much of the newly available space consisted of large units placed on the market by tenants, reflecting the impact of the current downturn on occupiers such as IT companies.
There was 16.3 million sq ft of office space under construction in Central London at the end of the year, although only a third of this was speculative development. Take-up in the fourth quarter totalled 2.3 million sq ft, the lowest quarterly total since the second quarter of 1995, according to DTZ. Over the course of 2001, satisfied demand totalled 16.6 million sq ft, 30 per cent down on the record level of 23 million sq ft in 2000 but favourable in comparison with the long-term annual average of 15 million sq ft. Prime rents in most sub-markets have remained stable since the first quarter of 2001, with the exception of the West End, where they have fallen slightly.
The slowdown is also being felt outside London: in Cambridge, Eastern England, for example, local agents are predicting that up to 1 million sq ft of secondhand space will come onto the market over the next six months. Developer Carisbrooke Alliance, however, is staking its fortunes on a fresh upturn in the region's R&D sector and has acquired a 64-acre site at Helions Park in Haverhill, which it will develop into a 1 million sq ft office and industrial park. Renamed Haverhill Business Park, the development will include offices, warehouses, restaurants and a hotel.
In Kent, South East England, finance company Global Home Loans (GHL), has taken a further 17,000 sq ft of speculative office space at Crossways Business Park. GHL, a joint venture between UK banking group Woolwich and US-based Countrywide, has agreed a 10-year lease with developer Land Securities.
In the Tees Valley, in North East England, the government has approved a $50 million package to fund the second phase of the Middlehaven waterfront development in Middlesbrough. The first phase of the scheme will see the creation of a new business park including high-specification office accommodation around a former dock basin. The second phase will include a further 540,000 sq ft of commercial space, together with housing, schools and leisure and community facilities.
In the North West, Widnes Waterfront Vision, a 200-acre business park sited near the proposed second crossing over the River Mersey, is one of several proposed developments to receive new government funding. Work on the high-tech business park is due to start in 2003. Sites in Lancaster and Blackpool are also to benefit, with the granting of economic development zone status. A total of $46 million will be invested to improve 50 acres of industrial sites in Lancaster.
Confidence returns to London manufacturers
Business confidence is returning to London-based manufacturers after 11 September although most companies expect an increase in unemployment, according to a survey carried out in January by the London Chamber of Commerce. When asked to judge their own prospects, 51 per cent of manufacturers responded positively, while 42 per cent were also positive about prospects for London. This put the sector second only to business and financial services, which had a 77 per cent positive rating.
However, unlike financial services, where there was a 20 per cent margin in favour of increasing staffing levels, more manufacturers expected to shed staff than to retain them. Some 80 per cent also expected unemployment in general to increase. The monthly London Monitor was based on a statistically selected group of more than 300 companies, weighted to reflect the make-up of business in the capital. It usually provides a good indicator of future economic patterns and business sentiment, according to the Chamber.
In the meantime, British-manufactured goods are to get a new kite-mark aimed at promoting home-grown quality. The new logo, featuring the slogan 'British-Made for Quality' combined with a bold tick on a Union Jack background, was unveiled at the end of February. The mark of excellence, designed to appeal to a wide range of businesses in the manufacturing, wholesale and retail sectors, was devised by Julian Basely, managing director of Guildford, South East England-based home decorating company Earlex. "Our aim is to champion the interests of British manufacturing industry, and at the same time to help consumers make informed purchasing decisions," commented Mr Basely.
East of England underlines research strengths
The University of Cambridge, in the East of England, is to establish a national centre that will promote the use of powerful computing techniques to research in the environmental sciences. Applications include studies of atmospheric research and climate change; volcanoes and earthquakes; industrial pollution and waste management; remote sensing and image processing; and integrated modelling of the effects of climate change on ecosystems and human population.
The centre, to be known as the National Institute for Environmental e-Science, is supported by the Natural Environment Research Council and will be closely integrated with other departments of Cambridge University and with the recently established Cambridge e-Science Centre, which offers powerful computing resources linked to a national network. It will build on environmental research already being carried out in the East of England, and will run demonstration projects, workshops and courses with the participation of visiting experts.
As a whole, the East of England has an economy worth $114.5 billion and a population of 5.4 million - both larger than those of Scotland - but local RDA the East of England Development Agency feels that many potential investors are ignorant of the region's attractions. As a result, it is launching a major campaign to raise its profile and to attract inward investment. The agency is keen to see the enterprising and innovative culture of the regional capital Cambridge and the surrounding 'Silicon Fen' area spread throughout the neighbouring counties of Cambridgeshire, Essex, Suffolk, Norfolk, Bedfordshire and Hertfordshire.
The Eastern region recorded a 4 per cent leap in competitiveness in 2001, after years of relatively constant performance. In 1999 it spent more of its GDP on research and development than any other region. The new campaign, backed by funding of $700,000, is focusing on six enterprising local companies, all of which use local labour and suppliers but whose reputations are international. They include low-cost airline Go, Lola Cars International of Huntingdon, consulting engineers Faber-Maunsell of St. Albans and Kettle Foods of Norwich.
Centre of excellence puts steel in metals industry
A new centre of excellence for the metals industry, located at Rotherham, South Yorkshire, is to play a key role in RDA Yorkshire Forward's plans to develop a high-growth 'cluster' in the region based on advanced engineering and metals. The National Metals Technology Centre (NaMTeC) will bring together industry, science and academia to identify gaps in R&D and to provide expert advice to small firms - producers, users and fabricators -in the metals sector across the UK.
The centre, which will occupy a 100-acre site at the Advanced Manufacturing Park in Waverley, is expected to benefit up to 500 businesses in the Yorkshire and Humber region and a further 5,000 nationwide. It is being developed as a partnership between UK Steel, TWI, Casting Technology International and the Confederation of British Metal Formers, and its world-class R&D facilities are expected to attract investors both from the UK and overseas. Overall, the Advanced Manufacturing Park is expected eventually to create around 7,000 high-technology jobs.
Trade and Industry Secretary Patricia Hewitt, announcing funding of $3.8 million for the new facility, said: "It is appropriate that South Yorkshire, a region synonymous with the metals industry since the Industrial Revolution, should be the location for the centre of excellence. The centre will play an important role in ensuring that the UK metals industry is equipped to continue to be a world-class competitor in the future."
Warrington targets digital telecoms players
Warrington, in North West England, is aiming to attract start-up companies in the mobile telecommunications sector with a new high-tech business incubator. The facility, established at Cinnamon Park, Birchwood with the aid of a $1.4 million grant from the Northwest Development Agency, will also focus on areas such as mobile internet/intranet access, location-based services, multimedia messaging and customised infotainment, and will forge links with universities in the region.
Warrington is already home to a number of IT and telecoms companies, while the North West as a whole is focusing on digital technologies and the ICT sector. At the end of January a new strategy for the sector - 'englandsnorthwest connected' - was launched, along with a new industry-led initiative, digital industries northwest. Industry leaders are hoping to build digital technology clusters in the region and to attract investors from around the globe. Find out more at: www.digitalindustriesnorthwest.org
There are still plenty of high-tech players eager to establish a presence in the UK, particularly companies from the US. Lincoln, Massachusetts-based corporation Unica, for example, has opened an office in London to cover the Europe, Middle East and Africa markets. The company specialises in enterprise marketing management solutions for the collection and analysis of data. Also setting up European offices in London are Atlanta-based Servigistics, which provides supply chain planning and forecasting software, and Imperito of Santa Clara, California, which offers a virtual private networking service with secure access for remote users.
Another new arrival in the capital is Datamirror of Toronto, Canada, which has established its European headquarters alongside Waterloo station, with its fast rail access to continental Europe. The company's business is data integration solutions, and 40 per cent of its revenues are generated in Europe. Just outside London, Ethernet specialist Appian Communications, of Acton, Massachusetts, has opened its European headquarters in Reading, South East England. Also in the South East, software company SciTec of San Diego, California, has opened an office in Chipping Norton, Oxfordshire, while Australian company Exodus Systems, which supplies software to the travel industry, has opened a UK office in Horsham, West Sussex.
Car plant closures offset by expansion plans
Two of the UK's longest-established car plants have ceased production, but positive plans to capitalise on their assets and expertise are already well under way. Ford's former flagship plant at Dagenham in Essex, on the River Thames just to the east of London, closed its doors on 20 February. However, diesel engines will continue to be made at the site, and 260 acres of former Ford property is earmarked to become the biggest mixed-use development in the South East of England.
The site, bought in December by the London Development Agency, will be known as Beamreach and will comprise 1.4 million sq ft of industrial and distribution space, together with a 100-acre mixed-use scheme. The industrial part of the scheme will occupy 92 acres at Mudlands Farm in Dagenham and South Ferry Lane in Rainham, while Ford's former Fiesta factory, located between the A13 trunk road and the London-to-Southend railway line, will house the mixed-use element. Rents for industrial space are expected to be around $10.50 per sq ft. Rail links to the Channel Tunnel are planned which, it is hoped, will help attract logistics and distribution companies to the area. The development is also expected to include offices, shops and residential housing.
In Luton, Eastern England, the shutters will come down on Vauxhall's car assembly plant on 21 March. Luton, which has been making Vauxhall cars since 1905, could not be faulted on productivity, quality or efficiency, claiming to be parent company General Motors' best plant in Europe, with defect rates running at half the GM average. However, GM decided to close the plant after financial and structural problems forced it to cut costs across Europe, trimming 500,000 units a year from its production capacity.
The closure will be partly offset by expansion at Vauxhall's other main UK plant, Ellesmere Port on Merseyside, in North West England. GM plans to switch production of the new Vectra here from Luton and has invested $280 million to accommodate it alongside the smaller Astra model. Vectra production at Luton was 70,000 units in 2001; at Ellesmere Port, the company expects to produce 200,000 Astras and Vectras this year, compared with 150,000 in 2001. Around 980 of the 1,900-strong workforce at Luton are being transferred to the adjoining IBC Vehicles plant, where the Vivaro panel van is being produced in a joint venture with Renault, while a further 200 will be retained to make the Frontera sports utility vehicle. Others have been offered retraining and help with finding alternative employment.
Elsewhere, the Northwest Development Agency has launched an automotive supply chain 'tool kit' for businesses locating within its region. The kit provides key information and contact points under headings such as property/sites and planning, training, recruitment, financial incentives, local suppliers and economics and demographics. The North West has a strong tradition in the automotive industry, and is home to companies such as Vauxhall, Jaguar, Rolls-Royce, Bentley, Leyland, DAF and Jensen. More information from: claire.hodgkinson@nwda.co.uk
Vehicle traffic to Europe continues to rise
The total number of vehicles travelling from the UK to mainland Europe rose from 585,500 in the second quarter of 2001 to 601,200 in the third quarter, according to the Department for Transport, Local Government and the Regions. The number of powered vehicles rose by 2 per cent while the number of unaccompanied trailers grew by 3 per cent. Foreign-registered vehicles accounted for 49 per cent of the total, the same as in the previous quarter. Year on year, the total number of vehicles was 3 per cent higher than in the third quarter of 2000. The number of powered vehicles rose by 7 per cent, with the number of UK-registered vehicles falling by 4 per cent and that of foreign vehicles rising by 12 per cent.
On the UK's inland waterways, 49 million tonnes of cargo were carried in 2000, accounting for 1.7 billion tonne-kilometres (tonnage multiplied by the distance travelled). Water transport, including inland waterways, coastwise and one-port (mainly offshore oil) accounted for 8 per cent of all goods lifted (in tonnes) and 33 per cent of goods moved (in tonne-kilometres) over the year. Crude petroleum and petroleum products accounted for 87 per cent of all waterborne freight, with two-thirds of this being one-port traffic from the North Sea oil fields. The River Thames was the busiest inland waterway, with 14.5 million tonnes of goods lifted and 0.6 billion tonne-kilometres of goods moved.
East Midlands aims to buck economic trends
Despite the current economic uncertainty, the East Midlands Development Agency (emda) is on course to meet its inward investment targets for the year. The organisation is channelling its energies into the market sectors that show the best prospects for growth and which contribute to its strategy of cluster development. The region has traditionally been a hub for the clothing and textile industries, for example, and emda has lent its support to a new trading group, Leicestershire and Northamptonshire Textiles Association (LENCAT), a sub-division of East Midlands Textiles Association (EMTEX). It is also marketing the region to industries that are resilient to cyclical change, such as information and intelligence gathering, food and drink, logistics and pharmaceuticals.
The past year has seen many success stories. For instance, the agency helped US-owned West Pharmaceutical expand into new premises at Nottingham Science Park and Swedish rubber seal manufacturer Trelleborg to relocate to a purpose-built site at Bursom Park in Leicester. It also helped German die-cutting manufacturer Kocher and Beck to relocate and has played a part in attracting US companies Belkin Components and Liberty Hardware to the region. In Spalding in Lincolnshire, German firm Support in Sport is supplying real and artificial turf to leading football clubs, including Manchester United, and has recently created 15 new jobs. And from Asia, Japanese company Markon Sawafuji has set up a joint venture in Rutland to supply AC generators to the European market while SML Ltd, a Hong Kong-based maker of woven labels for textile products, has set up an operation in Leicester, at the heart of the UK textile industry.
In a separate initiative, two East Midlands businessmen, Martin Freeman and Ron Edmonds, have been appointed joint chairmen of the Great East Midlands campaign, a private-sector organisation that promotes entrepreneurial activity in the region. Mr Freeman has a number of business interests and is an adviser to Deloitte & Touche while Mr Edmonds is the owner of REA Associates and a consultant to the Engineering Employers Federation. They take over from Lee Stokes, who has held the position since the organisation was set up in 1997. Contact: +44 (0)775 466 4523
Northern Ireland stakes future on innovation
Digital Theater Systems Inc (DTS), a Los Angeles-based company specialising in digital audio systems for cinemas and home entertainment applications, has relocated its main R&D base from the US to Bangor in Northern Ireland. The $370,000 investment is expected to create 18 new jobs over the next three years. The company will build on pioneering work in the digital audio sector carried out at Queen's University, Belfast, which has helped to establish the province as a centre for the digital technology industries.
In the meantime, development agency Invest Northern Ireland has launched its draft corporate plan for the period April 2002 to March 2005 for public consultation. The plan focuses on fostering innovation and entrepreneurship by providing increased levels of venture capital funding. Copies can be obtained at: www.investni.com/corporateplan
Around the regions
- German company EMCO, which supplies entrance matting, is to expand its UK operation with a production unit at Telford in the West Midlands. The company opened a sales office there in 1998. Also in Telford, Stirchley Technical Services, the logistics division of Japanese-owned Toyota Tsusho UK, is expanding into additional premises, adding a further 86,000 sq ft of warehousing space to its existing 215,000 sq ft.
- The Northwest Development Agency has designated 14 additional strategic sites as priorities for economic development, in addition to the 11 already identified in the North West Regional Strategy. The 14 new sites are all within regeneration priority areas (including West Cumbria, the Mersey Belt and East Lancashire), conurbation cores or leading regional towns or cities. Locations include sites in and around Manchester and Liverpool, together with Chester, Salford, St. Helens, Lancaster and the Wirral. The agency will work with local authorities and other partners to attract inward investment and stimulate economic growth in all 25 of the strategic areas.
- Sasol, one of the largest industrial groups in South Africa, is to establish a research laboratory at the University of St. Andrews in Scotland. Based in Johannesburg, the company supplies 40 per cent of South Africa's liquid fuel requirements and employs some 20,000 people. The new lab will conduct research into homogeneous catalysis, which focuses on the formulation and behaviour of compounds to promote certain chemical reactions.
- Borders Books and Music, the London-based subsidiary of Borders Group Inc of Ann Arbor, Michigan, has opened its new 172,000 sq ft distribution centre at St. Columb Major in Cornwall, South West England. The centre will service the company's 12 existing book, video and music stores in the UK and help facilitate its continuing expansion - five new stores are planned for this year.
- Wolverine World Wide, the footwear company headquartered in Rockford, Michigan, has set up a European subsidiary in London. Wolverine Europe will market the CAT brand of footwear to countries across Europe as well as in the UK. Wolverine World Wide is also expanding its Merrell footwear operations in the UK to cover additional markets in Spain, France, Austria, Germany and the Benelux countries.
- Mad Catz Interactive, a manufacturer of video games accessories based in San Diego, California, has opened an office in London to service the UK and French markets. The company sells a wide range of accessories for video games consoles and PC gaming systems and is a leader in peripherals for the interactive entertainment industry.
- Ciena Corporation of Linthicum, Maryland, has added a 21,500 sq ft customer demonstration laboratory to its existing premises in London. The company supplies intelligent optical networking systems and software and the new facility will offer customers live simulations. Ciena also plans to open four dedicated training units at the lab.
- Engineering group Wärtsilä of Finland, a leading supplier of power generation systems, is to acquire John Crane-Lips, part of the London-based Smiths Group, for around $350 million. John Crane-Lips, which supplies and maintains marine propulsion systems and employs 1,200 people, will become part of Wärtsilä's marine division.
- The Association for Investment Management and Research (AIMR), based in Charlottesville, Virginia, has opened an international office in London. Dedicated to advancing the interests of the global investment community, AIMR has a membership that includes 54,000 investment practitioners from 107 countries and 106 professional societies in 29 countries. The organisation's new London office will co-ordinate its 10 European chapters and will be responsible for liaising with professional and regulatory bodies across Europe.