News
October 2002
UK maintains FDI lead in Europe
The World Investment Report 2002 from UNCTAD (United Nations Conference on Trade and Development) confirms that the UK’s stock of inward investment for 2001 was the highest in Europe, and second in the world only to the US. The UK’s FDI stock totalled $496 billion, compared with $1,321 billion for the US. The UK’s share of European FDI stocks rose to 18.8 per cent from 18.3 per cent in 2000, beating Germany back into second place, on 18.2 per cent.
Worldwide, FDI flows in 2001 declined to $375 billion, less than half the figure for 2000. UNCTAD attributed the biggest decline in 30 years to the slowdown in the global economy and declining business confidence, accentuated by the events of September 11. In particular, cross-border mergers and acquisitions showed a sharp fall. The downturn was most pronounced in developed countries (a fall of 59 per cent) and less so in the developing world (down 14 per cent). FDI flows to central and eastern Europe actually increased by a modest 2 per cent.
China, boosted by its accession to the World Trade Organisation, saw the biggest rise in inward investment, from $41 billion in 2000 to $47 billion in 2001. The best-performing countries, relative to the size of their economies, were Belgium/Luxembourg, Hong Kong, Angola and Ireland. The US, because of its huge GDP, ranked 74th on these criteria. The UK was 25th, Germany 43rd, Spain 52nd, France 69th and Italy 115th. The economies showing the most potential were the US, Sweden and Singapore.
Given the severity of the slowdown in the world’s three largest economies - the US, the European Union and Japan - and the slowness of recovery worldwide, the agency does not expect any significant rebound in FDI flows this year. M&A activity in particular is expected to remain subdued, while lower foreign investment in the US and western Europe indicates stagnation at best.
Science partnerships to boost manufacturing innovation
Innovation in manufacturing was given a boost with the announcement of six new Faraday Partnerships, a government initiative designed to help companies raise productivity by building links with scientific research institutes. Supported by funding from the Department of Trade and Industry (DTI) and other sponsors such as the Research Councils, the partnerships bring together leading researchers to work with firms of all sizes through ‘core partner’ organisations, such as universities and independent research and technology organisations. They employ ‘technology translators’ who act as a link between research and business and ensure that good ideas are properly developed.
The new partnerships include one at the Roslin Institute in Edinburgh, Scotland which will focus on integrating genetics and genomics research into the UK’s animal breeding and animal health industries. The National Physical Laboratory will concentrate on global navigation satellite systems (GNSS), such as the Galileo programme. Other partnerships will revolve around high-throughput technologies for manufacturing; powder-manufacturing technologies for complex components; design and manufacture of medical devices; and waste minimisation in industry.
"Faraday Partnerships give manufacturers a real boost," commented trade and industry secretary Patricia Hewitt. "They mean companies can take advantage of the world-class ideas coming from universities and research institutions." The announcement brings to 24 the number of such partnerships established since the launch of the programme in 1998.
In a related initiative, Ms Hewitt announced a new pilot scheme to help mothers wishing to return to science, engineering and technology (SET) jobs. It is estimated that up to 50,000 women SET graduates are not working at any one time and, of those who do go back to work, only 8,000 return to a job that makes use of their training. The scheme will be run by Coventry University in conjunction with the DTI, and will provide business-based training and work experience.
Healthcare companies target UK sector
Swiss healthcare group Novartis is to build a $214 million manufacturing plant at Grimsby, in Yorkshire and Humber. The company, whose core businesses include pharmaceuticals, generics, eyecare products and animal health, will produce its anti-hypertensive drug Diovan at the new facility. Meanwhile biotechnology specialist Genzyme Corporation of Cambridge, Massachusetts has opened a new $82 million manufacturing facility at its plant at Haverhill in Suffolk, Eastern England. The facility includes two large-scale plants which will boost by ten times the production of Sevelamer, the active ingredient in Genzyme’s Renagel product, which is for the treatment of patients with kidney disease.
Elsewhere in the sector, the Thomson Corporation, based in Stanford, Connecticut, has acquired Current Drugs of London. The UK company provides databases, systems and services to pharmaceutical and biotechnology companies; its primary product is the Investigational Drugs database (IDdb), a research tool. DataSpectrum, based in Raleigh, North Carolina, has opened a European office in Battle, South East England. The new facility will provide data management, statistical analysis and medical writing services to support pharmaceutical and biotech drug development. And TekCel, a Massachusetts-based developer of distributed compound storage and management systems for drug research, has opened its first European office in Cambridge, Eastern England.
Call centres at forefront of boom in employment
Unemployment in the UK remains at historically low levels. Both the claimant count measure of unemployment and the preferred ILO (International Labour Organisation) yardstick were unchanged in August, at 3.1 per cent (the lowest since 1975) and 5.2 per cent respectively, according to the Office for National Statistics. The UK rate of 5.2 per cent compares well with 5.7 per cent in the US, 5.4 per cent in Japan and 8.3 per cent in the Eurozone. Of major markets, only Sweden comes in lower at 4.9 per cent. Average earnings growth, measuring a three-month period against the same months of the preceding year, rose to 4 per cent in July, compared with 3.9 per cent in June.
One area that is still enjoying strong employment growth is the call centre sector. In contrast with suggestions that UK call centres may soon see their operations transferred to lower-cost countries such as India and South Africa, three out of five UK centres expanded their workforces in the past year and the same proportion expected them to grow in the year ahead, according to an annual research report by employment specialist Incomes Data Services. Only 20 per cent reduced their workforces in the past year, and an even lower proportion expected to cut their staff in the year ahead.
Call centres now handle a startling range of activities, including banking, betting, health advice, holiday bookings and cinema ticket reservations. Around a third of organisations operate their centres round the clock, seven days a week. A further third open seven days a week but close at night.
Half the organisations surveyed reported difficulties with staff recruitment, more than in previous years. Staff turnover rates were 24.5 per cent in 2002, up from 22 per cent in 2001. The average call centre agent stays in their job for just two years. However, pay levels have risen, with the average starting salary for a customer adviser up 4.6 per cent at £12,400 ($18,600). Three-fifths of organisations also pay bonuses, and many are introducing other incentives in a bid to retain staff. It is estimated that in all there are 5,300 call centres in the UK, with around 315,000 agent positions (indicating the number of desks rather than actual employees).
More than 250 companies attended Call Centre Expo 2002, a two-day event held at the National Exhibition Centre in Birmingham, West Midlands in mid-September. The event featured a full conference programme and attracted more than 7,000 delegates. Among winners in the European Call Centre of the Year Awards, sponsored by Call Centre Focus magazine and BT Retail, was Northern Ireland company gem, which won the accolade of Best Multi-Media Contact Centre. Northern Ireland is recognised as a premier location for call centres, with more than 30 established in the province in recent years, employing 7,000 people. A highly educated workforce, world-class telecommunications and low costs are among its attractions.
Be patient on mobile internet, says ITU
The International Telecommunication Union (ITU) believes it could take up to ten years for the rewards of investment in third generation (3G) mobile internet technologies to become apparent but, despite the delays and difficulties, the sector still has huge commercial potential. In a new report that looks at the prospects for the convergence of mobile and internet services and the take-up of 3G (Internet for a Mobile Generation, www.itu.int/mobileinternet), the ITU ranks countries on a mobile/internet index that measures performance and potential, according to infrastructure, usage and market structure.
The countries that appear to offer the most fertile ground for development are Hong Kong, Denmark and Sweden. They are followed by Switzerland, the US, Norway and South Korea, with the UK in eighth place. Outside this high-income group, countries such as China, the Philippines, Romania and Peru are also well placed to be rapid adopters of the mobile internet.
The huge investment required in acquiring 3G licences, building networks and rolling out services represents the biggest gamble the telecoms industry has ever taken, says the ITU. However, as with other technological advances, it continues, "we should not expect to see the commercial fruit of the mobile internet for 10 or 15 years… but that does not mean it will never happen."
New standards to tighten IT security
The government has introduced a new set of guidelines to ensure information systems are secure against viruses and computer hackers. The guidelines have been agreed between the 30 member countries of the OECD (Organisation for Economic Co-operation and Development) and replace standards drafted in 1992. They are based on a need for increased awareness of security and on "making the information age a safe place to do business," according to e-commerce minister Stephen Timms, who also launched a new British standard for information security management, BS7799. In particular, businesses will be encouraged to make security measures an integral element of their IT systems.
A recent survey by the Department of Trade and Industry revealed that less than a third of UK businesses encrypt files containing confidential customer details and that more than a third of websites have no firewall in place, leaving them vulnerable to hackers. Viruses are the most serious cause of security breaches, with 40 per cent of companies admitting to virus infection. Despite this, 17 per cent have no anti-virus software in place to guard against attacks.
Rents steady as financial giants build to order
Prime rents in the commercial property sector remained virtually unchanged in the year to June, according to the latest quarterly Marketbeat report from Cushman & Wakefield Healey & Baker. Strong demand in the retail and industrial sectors was offset by a slight decline in the office market, particularly in the London and Thames Valley areas. International concerns over issues such as weak financial markets, redundancies and corporate accounting practices have led investors in the property market to proceed with caution. Overall, Cushman & Wakefield predicts only limited rises in rents over the coming year.
In the central London office market, it reports, rents were flat for the first six months of 2002, with demand 30 per cent below 2001 levels. Available space in the City and Docklands areas grew by 7 per cent in the second quarter, taking the total to 8.4 million sq ft. Rents were reasonably stable, though there was an increase in the level of tenant incentives on offer from landlords. Outside London, regional office markets saw greater demand and rents rose in cities such as Nottingham, Newcastle, Bristol, Bath, Cardiff and Birmingham. Rents in the Thames Valley, however, continued to fall, due to increased availability and a fall in take-up.
In the industrial sector, demand was strong for large warehouse units, though availability remained limited, especially in the South East. Locations such as Liverpool, Aberdeen, Milton Keynes and Crawley proved particularly popular, while there was strong take-up by distribution companies, particularly along the M1 corridor.
A separate report (more) from DTZ research shows that availability in the M25 office market increased by 25 per cent in the second quarter of 2002, to stand at 8.7 million sq ft. The M25 area, bounded by London’s orbital motorway, is dominated by newly built or refurbished accommodation, which accounts for 55 per cent of the total. Speculative space under construction increased sharply, to reach 800,000 sq ft, though much of this was due to a single scheme, The Heights at Brooklands. Take-up in the second quarter rose by more than 75 per cent to 365,000 sq ft. Rents remained reasonably steady, reported DTZ, though there was increasing pressure on asking terms.
None of this seems to have deterred some of the world’s largest financial companies from building to their own specifications. Several are set to take up residence in new, purpose-built corporate headquarters buildings in London’s Docklands financial district. Banking giant HSBC, for example, has moved into 8-16 Canada Square, its new 41-storey tower at Canary Wharf. The company will move more than 8,000 staff into the 1 million sq ft building over the next six months, uniting all its London-based employees in a single location by February.
At nearby Heron Quay, Northern Trust Company moved into a new headquarters building, HQ4, in August. In 2003 more leading companies, including Morgan Stanley, Lehman Brothers and Clifford Chance, will occupy new premises at Heron Quay. McGraw Hill will take possession of a 500,000 sq ft building at 20 Canada Square, and in 2005 Barclays will move to a new 30-storey building at Churchill Place.
Development projects set to boost commercial stock
High demand for commercial premises means that developers are constantly striving to provide new, high-quality office and industrial accommodation. Numerous new development schemes are under way around the country in a bid to meet that need.
A new development at Kings Business Park in Knowsley on Merseyside, North West England, for example, is to provide 38,000 sq ft of office accommodation [see picture]. Nearly $1.5 million of funding for the project, which has the potential to create more than 200 new jobs, was provided by the Northwest Development Agency. Also in the North West, construction is well advanced of four new buildings at Abbots Park, a four-acre business park at Preston Brook in Runcorn. The two-storey, self-contained office units range in size from 5,000 sq ft to 10,160 sq ft and are available freehold or leasehold.
In the East Midlands, redevelopment opportunities include two former brewery sites totalling six acres near the centre of Mansfield. At Sherwood Park Enterprise Zone a seven-acre site (site 14) is available for office or high-tech use, while at Manton Wood Enterprise Zone two plots, of four and eight acres, are available. A major new city centre development is planned for Nottingham. The 45-acre former site of the Royal Ordnance factory will be redeveloped to provide more than 500,000 sq ft of office space, together with retail and leisure facilities and housing. One of Nottingham’s largest employers, Experian, has already announced plans to build a 170,000 sq ft office complex on the site.
Work is under way on a new high-tech business complex at Adwick Park in Manvers Enterprise Zone in Rotherham, Yorkshire and Humber. The $10.5 million Innovate Workspace Campus will comprise six buildings with 77,000 sq ft of space, in units from 3,200-12,000 sq ft. Suitable for a range of uses from R&D to light assembly, the new complex is sited next to the recently completed Innovate Office, a 20,000 sq ft office development.
In the South East, Fernhurst Business Village, at Haslemere in Surrey, is set to become a ‘green’ digital business centre. The village is a conversion of a former ICI/Zeneca complex and already has a number of high-quality buildings in place. These will be reconfigured as serviced offices and stand-alone units for larger businesses, and fitted with the latest broadband communications technology. Altogether there will be 250,000 sq ft of offices, workshops and conference facilities, together with a health/sports complex and parking for 800 cars.
In the South West, construction has begun of four office buildings at Express Park near Bridgwater in Somerset. The first building will provide 52,500 sq ft of space and there will be 320,000 sq ft in total. Suites will be available in sizes from 5,000 sq ft and the developers are hoping to attract a range of companies, from SMEs to large corporates. There will also be a range of facilities on-site, such as shops, a pub and a hotel.
In Bedfordshire, Eastern England, Vauxhall Motors is in negotiations with developers for the sale of its former car factory at Luton. Vauxhall, owned by General Motors of the US, closed the factory in March this year to consolidate its operations at Ellesmere Port in the North West. If the plan goes ahead, the 2.5 million sq ft of factory buildings, located next to Luton airport, will become one of the biggest development sites in the country. Although planning permission has not yet been granted, the developers want to build a mixture of offices and homes.
English Partnerships steps up regeneration programme
Meanwhile, English Partnerships, the government’s national regeneration agency, has added ten new sites to its National Coalfields Programme. The programme aims to regenerate former coalfield communities by encouraging investment in commercial premises, housing, retail, leisure facilities and parks. In all it aims to create more than 21.5 million sq ft of commercial floorspace and 40,000 new jobs. The sites are spread throughout England, though most are located in Yorkshire, the East Midlands and the North East.
Newly designated sites in the Yorkshire and Humber area are Frickley Colliery at South Elmsall and Fryston and Wheldale at Castleford, both in West Yorkshire, and Rabbit Ings at Royston in South Yorkshire. In the North West are Haig Colliery in Whitehaven, Cumbria and Bickershaw North at Leigh, Greater Manchester. Clay Cross Colliery is at Chesterfield, Derbyshire in the East Midlands. The other sites are Fenwick Eccles at Backworth, North Tyneside in the North East; Chatterley Whitfield at Stoke-on-Trent in the West Midlands; Chislet Colliery in Hersden, Kent, in the South East; and Steam Mills at Cinderford, Gloucestershire, in the South West. Altogether, 98 former coalfield sites have been designated under the programme, involving a total of 10,000 acres of land.
South West is fastest-growing region
The South West is currently the fastest-growing region of the UK, according to a monthly survey of national purchasing managers. The survey samples 100-300 companies in each region, looking at economic indicators such as manufacturing, services and construction. All regions reported increased output in August, with the South West, South East, London and the North East performing best. Orders were up everywhere except in the West Midlands and the North West, which reported marginal contractions. Tourism, retailing and other service industries were behind the South West’s success. Cities such as Bristol and Plymouth have strong call centre sectors, supporting businesses such as mobile telephony and financial services.
Cornwall, the most westerly of the region’s counties, has been going through something of a renaissance this year. Generally seen as rural and remote, it has nevertheless been celebrating a number of economic achievements, such as the success of the Eden Project at St. Austell, the opening of Tolvaddon Energy Park at Camborne and a $24 million expansion by Tripos Receptor Research at Bude. In addition, low-cost airline Ryanair has launched a daily service between Newquay airport and London Stansted.
Borders, the international retailer of books, music and video, has officially taken possession of a new 50,000 sq ft warehouse at St. Columb Major in the county. The distribution centre will service the company’s rapidly expanding network of UK stores. Its construction was part-funded by the South West Regional Development Agency (SWRDA) and European Objective One funding. Borders will create 60 new jobs at the warehouse, as well as relocating staff from an existing facility at nearby Penryn.
The largest single investment in Cornwall to date by the SWRDA has been the $19.2 million it has put into the Combined Universities in Cornwall (CUC) initiative. Taking shape on a new campus near Falmouth, a striking new 215,000 sq ft building will accept its first students in September 2003. The CUC is a partnership between Exeter and Plymouth universities, the Open University and a number of local colleges. As well as the main campus, $24 million will be invested in further education sites across Cornwall, where a variety of courses will be available.
York, in Yorkshire and Humber, has been an attractive location to people from all over the world for a very long time - and York Inward Investment Board recently emphasised the point with a humorous poster campaign at Leeds Bradford International Airport. Showing the faces of the Roman Emperor Constantine, a Viking settler and a modern-day US investor, the poster underlined the fact that York has been a strategic base for more than 2,000 years. The poster site was backed up with literature aimed at visitors and inward investors.
Dundee to host digital city conference
The third general meeting of the Global Digital City Network (GDCN) is to be held in Dundee, Scotland from October 29 to November 1. The GDCN is an international organisation of ‘knowledge-based’ industrial cities and Dundee - the ‘City of Discovery’ - will host delegates from South Korea, Australia, Japan, China and Russia.
The city’s Abertay University has strong links with the Gifu region of Japan, a centre for the development of computer game technology. Together with Dundee University, it will also work closely with Canadian-based 3D digital scanning specialist Arius3D, which is to open a $10.5 million digital imaging centre in the city. More information on local digital initiatives and the programme for the GDCN meeting can be found at: www.dundeecity.gov.uk/edo/busdev/gdcn.htm.
Around the regions
Shipping company Mitsui OSK Lines of Japan is to open a European sales office in London. The new office will focus on the company’s energy transport business, particularly on anticipated growth in the transport of liquefied natural gas.
Louisiana-based Alexander and Hamilton, a credit management and commercial collection firm, has set up its European headquarters in Cambridge, Eastern England. The company provides consultancy on credit control processes, collection strategies and debtor rehabilitation.
Imperial Tobacco, the world’s fourth largest tobacco company, is to open a new sales and marketing headquarters in Slough, South East England, which will merge the operations of offices in Nottingham and Bristol in the UK, Hamburg in Germany and Joure in the Netherlands. The move is part of a wholesale restructuring of the company following the acquisition of German tobacco firm Reemtsma earlier in the year.
German-owned Elero UK has moved from Runcorn to a new headquarters building in nearby Halebank in Widnes, in North West England. The company, which produces motors and control systems for shutters, blinds and awnings, is expanding and the 4,500 sq ft warehouse and office facility gives it the required space for development.
RDA Advantage West Midlands and Freeman Business Information are to publish a new guide to doing business in the region. The 500-page Business: West Midlands will combine information on government, business, education and tourism and will carry detailed listings of all major employers in the public and private sectors. It will be available in spring 2003.
Honeywell International of New Jersey is to buy the sensor systems business of London-based Invensys for $394 million cash. Invensys Sensor Systems supplies sensors and controls for many different industries and applications, including on- and off-road vehicles, office automation, medical, appliances and aerospace.
Henkel Group of Germany has acquired the Sellotape business of Verdoso Holdings of Dunstable, Bedfordshire in eastern England. Verdoso manufactures a variety of clear adhesive tapes and employs 198 people.
In a parallel move, ScandStick of Helsingborg, Sweden has acquired SJP UK of St. Neots, Cambridgeshire, also in Eastern England. SJP produces PSA lamination, specialising in roll and sheet materials for paper and synthetics, based on acrylic and hot metal adhesives. ScandStick is a leading manufacturer of adhesive reel material for the label industry.
The number of roads goods vehicles travelling to Europe in the second quarter of 2002 was 624,700, virtually unchanged from the previous quarter but 5 per cent up on the same period in 2001, according to the Department for Transport. Of the total, 455,400 were powered vehicles and the rest were unaccompanied trailers. Of powered vehicles, 28 per cent were UK-registered, compared with 30 per cent a year earlier.