News
May 2003
Brown’s budget steers a steady course
There were few surprises in Gordon Brown’s latest Budget, announced on 9 April, but the Chancellor did unveil a number of measures aimed at improving the UK environment for business. Among the new rules introduced were an extension of tax credits for research and development, measures to promote investment and cut red tape for small companies, reforms of the taxation regime, and a new scheme that rewards employers for giving workers time off to train.
Mr Brown pledged to increase the scope of the $640 million package of tax credits for R&D announced last year, with small businesses expected to be the main beneficiaries. He reduced the minimum annual expenditure on R&D needed to qualify for the scheme from $40,000 to $16,000, and small firms already receiving other forms of state aid will also be able to claim tax credits. He also promised to consult with the Inland Revenue on ways to widen the definition of the scheme and to simplify the way it is administered.
The Chancellor extended 100 per cent first-year capital allowances for IT investment until the end of March 2004, to encourage up to 3.7 million small and medium-sized enterprises (SMEs) to invest in information and communications technology. He also proposed the establishment of US-style Small Business Investment Companies, private-sector vehicles that would inject new capital into SMEs. This would be part of a wider consultation process looking at other measures to improve access to capital funds, such as relaxing the tax treatment of equity finance.
A number of measures aimed to simplify the tax system and reduce bureaucracy. They included aligning company law definitions with the European Union maximum of $32 million; exempting companies with a turnover of $90,000 or less from Value Added Tax (VAT), and abolishing automatic fines for late payments for up to 200,000 other companies; relaxing accounting requirements; and allowing more businesses to benefit from 40 per cent allowances on plant and machinery. The rates of corporation tax and climate change levy were frozen, as were capital gains tax and personal taxation levels.
A new package is to be introduced by the Department of Trade and Industry (DTI)’s Small Business Service, in partnership with high street banks, to support advice and training by small businesses, including a web-based training directory. The Employer Training Pilots scheme will be extended for a second year, under which the government will contribute towards wages and training costs, in return for companies giving staff time off to train and improve their skills levels. Jobcentres will be given more flexibility to develop solutions applicable to their local areas.
Stamp duty (property transaction tax) on land and buildings has been modernised, with new compliance and enforcement powers and tougher anti-avoidance measures. Stamp duty on residential and commercial property was frozen, and the exemption threshold for commercial buildings was raised from $96,000 to $240,000. A proposed new lease duty of 1 per cent will be introduced in December, subject to consultation. There will be further incentives for businesses to locate in regeneration areas, with relief on duty on all non-residential property in such areas applicable from April.
Mr Brown plugged a tax loophole on unapproved employee share options, but did not change the rule that allows wealthy foreign nationals living in the UK to avoid paying tax by claiming non-domicile status. However, he indicated he would return to this issue in the future.
Fuel duty increases have been deferred for at least six months, and vehicle excise duty for trucks (and motorcycles) frozen. VED for private cars will rise by $8 a year, though a lower rate of excise duty was introduced for the environmentally-friendly cars, and duty was reduced on bio-ethanol and sulphur-free fuels. Tax rates on beer, wine and cigarettes, however, all rose slightly. In other measures, Mr Brown set aside $4.8 billion to cover the cost of the conflict in Iraq, and a further $530 million for counter-terrorism measures.
Mr Brown cut his estimate for economic growth this year by 0.5 percentage points to 2-2.5 per cent, but kept his forecasts for 2004 and 2005 unchanged at 3-3.5 per cent. He expected fixed investment to grow at 4.25-4.75 per cent this year and at 4.75-5.25 per cent in 2004. His inflation forecast remained at 2.5 per cent for next year, while domestic demand was expected to grow at 3-3.5 per cent in the period to 2005.
Reaction to the Budget was generally favourable. "In a difficult business environment and with little room for manoeuvre, [Mr Brown] has turned to more creative ways for improving the overall performance of the economy, especially productivity and investment. His economic forecasts are more in tune with reality and he has resisted the temptation to slap more taxes on business, which would have delivered a serious blow to confidence," said Digby Jones, director-general of the Confederation of British Industry.
UK companies perform well under difficult conditions
Last year was a difficult one for companies operating in Europe, but UK companies have weathered tricky conditions better that many of their European counterparts, according to a new report from the Department of Trade and Industry. The DTI’s 2003 Value Added Scoreboard shows that the UK has more of Europe’s top 600 wealth-creating companies - just under 30 per cent of the total - than any other country, while 56 of the top 100 UK companies succeeded in increasing their wealth as a proportion of value added, compared with 48 of the top 100 European companies.
The Scoreboard (which is endorsed by a number of leading business organisations), measures wealth as value added - ie sales minus the cost of bought-in materials, components and services. It covers the top 600 companies in Europe and the top 800 in the UK, grouped by sector. "The figures show that the most successful companies are the ones who are investing heavily in R&D and capital equipment," commented Trade and Industry Secretary Patricia Hewitt. A copy of the report is available at: www.innovation.gov.uk.
Businesses back flexible working practices
UK firms are also proving themselves to be family-friendly, with 90 per cent of employers expressing support for flexible working practices, according to another DTI report. The Work-Life Balance 2003 survey of more than 2,000 employers and 1,200 workplaces showed that the vast majority of employers believed that flexible working was low-cost and good for their business, and 82 per cent had already introduced some form of work-life balance arrangements. Ninety-four per cent of employers agreed that people worked best when they could strike a healthy balance between work and the rest of their lives, and 81 per cent of those with such arrangements already in place reported a positive effect on employee relations. Of these, 75 per cent said they had a more committed and motivated workforce, and 60 per cent reported a lower turnover of employees.
Some 26 per cent of UK employees already work flexitime, and 49 per cent of those who don’t said they would like to work this way. Thirty-six per cent of employees said they would like to work reduced hours, and 35 per cent of managers and professionals said they would prefer to work from home on a regular basis.
The report follows new legislation introduced by the government at the beginning of April to help working parents. Those with children under the age of six (or disabled children under the age of 18) now have the legal right to ask their employers to seriously consider requests for flexible working. At the same time, entitlements to both maternity and paternity pay and leave have been improved, with the government picking up the bill for around 60 per cent of all companies.
UK leads breakthrough in mapping of human genome
Scientists working in collaboration in six countries have completed the Human Genome Project, a pioneering and ambitious project that maps out the genetic structure of human beings. The breakthrough holds out the prospect of revolutionary progress in healthcare and the development of medicines to treat lethal diseases such as cancer. The completion of the project came almost exactly 50 years after UK scientists Crick and Watson made their discovery of the double helix structure of DNA, providing a ‘roadmap’ for their successors to analyse the genome. All the data discovered is now freely available on the internet.
Scientists from the UK, US, France, Germany, Japan and China worked on the project, but the UK was the largest contributor. One third of the human genome was sequenced at the Wellcome Trust’s Sanger Institute near Cambridge in Eastern England, and this institute was also the first to publish the complete sequence of an entire chromosome. The UK’s biotechnology industry as a whole is the biggest in Europe and worldwide is second only to that of the US. It involves almost 500 businesses, which between them employ 20,000 people and generate revenues of $3.2 billion annually.
North West attracts major new science projects
The scientific sector in North West England has received a boost with the news that pharmaceuticals giant Astra Zeneca is to build a $112 million cancer research centre at its Alderley Park site in Manchester. The new unit, which will house 240 research and support staff, represents the company’s biggest ever investment at the site, which is already the largest of its nine R&D locations worldwide. The centre itself will cost $97.5 million; the rest of the money will be spent on infrastructure improvements and the construction of a mini power plant.
There was further good news when the North West Development Agency announced it would provide $41.1 million in funding for the development of Daresbury Science Park, near Warrington in Cheshire. The park will be developed as a mixed-use science campus, with involvement from both universities and private-sector business. At the same time, the DTI has provided $18.4 million for the R&D and design phases of the Fourth Generation Light Source (4GLS) project at Daresbury Laboratory. This is a suite of accelerator-based light sources that emit extremely bright light and are used by scientists for experiments in a wide range of disciplines. The Daresbury 4GLS project will provide a unique resource worldwide, and will give UK-based scientists a cutting edge in many areas of research. The new announcements, which follow recent decisions to base Europe’s most powerful academic research computer and the world’s most powerful microscope at Daresbury, confirm the site’s future as a centre of excellence for scientific research.
The University of Manchester Institute of Science and Technology (UMIST) meanwhile has opened a new centre to promote R&D in manufacturing processes and products. The STRIX Centre for Manufacture will join two other institutions - PERL (Polymer Engineering Research Laboratory) and the NEPPCO Centre for Small and Medium-sized Enterprises - in promoting four key technology areas: materials and materials processing, information and communication, healthcare and food processing and distribution. All are seen as crucial to the UK’s economic development.
In North East England, a new organisation has been set up to represent the interests of the pharmaceutical industry. The Pharmaceutical and Speciality Cluster Limited (P&S Cluster Limited), the first organisation of its type in the country, will represent more than 100 North East companies involved in the pharmaceutical sector, which between them employ some 12,000 people and generate business worth $1.8 million each year. The board of P&S Cluster Limited will include representatives of companies such as ICI, GlaxoSmithKline and Merck Sharp & Dohme, and it will be headed by CEO Dr Stan Higgins. Its aims include attracting new businesses to the area, creating a collaborative network between its members and building partnerships with academic institutions.
Rents remain static but developers look to the future
Vacancy rates in the Central London office market will peak this year and rents will find a floor by the end of the year, predicts property analyst Cushman & Wakefield Healey & Baker. The West End will see a modest recovery later in 2004, although the City financial district may take longer to stabilise, it goes on to say in its latest Marketbeat UK report. Rents are likely to remain static, or even fall slightly, over the next 12 months, though there are signs that demand is strengthening, which may indicate that rents will start to rise again by 2005. Outside London, demand for office premises - and rents - continue to fall in the South East, particularly in the Thames Valley area, though business is brisker in regional markets such as Glasgow and Edinburgh. In Newcastle, in the North East, a prestigious 30,000 sq ft city centre development, Lloyds Court at 62-78 Grey Street, has recently been added to the available stock.
In the industrial sector, says Cushman & Wakefield, spare capacity is unlikely to be absorbed before late 2004 and rents are expected to remain static in the meantime. One exception is the distribution sector, where demand is high for large units strategically located near motorways. Another is mixed-use facilities, as businesses reorganise in a bid to increase the efficiency of their operations.
A major new development is on the cards for the Thames Gateway area east of London, with the announcement by tyre giant Pirelli that it plans to put a 40-acre site at Erith, in Kent, up for sale. The site, currently home to Pirelli Cables UK, consists of 600,000 sq ft of manufacturing space and is located next to one of three planned river crossings announced last October by Transport for London. The new toll bridge, which will link Thamesmead on the south bank of the River Thames with Beckton on the north, is set for completion by 2010 and will greatly improve freight access to the area. A number of developers have already expressed interest in redeveloping the site as a distribution hub, and a deal is expected to be completed by the end of the year. The Thames Gateway regeneration corridor stretches 42 miles along the Thames and includes parts of east London, Kent and Essex. The government hopes it will create 250,000 new jobs over the next 15 years.
Wales sets the pace with aviation and optronics centres
A number of large new development schemes are also on the drawing board in Wales. More than $48 million of European Objective One Funding is to be invested in the Welsh Development Agency’s St Asaph Business Park in Denbighshire, in the north of the principality, providing 300,000 sq ft of new floorspace and creating or safeguarding 1,000 jobs. At the heart of the development is the flagship OpTIC Technium, a $23.5 million technology centre for the Welsh opto-electronics industry. There is already a strong optronics cluster in North Wales, and the centre is expected to create around 460 new jobs. Construction of the facility is under way, with completion set for November. Elsewhere at St Asaph, work is progressing on a number of other high-tech and office developments, including the $2.2 million Integra facility, which consists of two industrial units of 16,000 sq ft and 20,000 sq ft.
In South Wales, former Ministry of Defence land at RAF St Athan, in Glamorgan, is being redeveloped to create one of Europe’s most advanced aerospace business parks. Plans for the site include the construction of a new ‘super hangar’ by the Defence Aviation Repair Agency (DARA), which will be capable of maintaining and repairing the latest military aircraft. The first commercial venture to be linked to the site is a skills training programme for aircraft maintenance engineers, which is backed by German airline Lufthansa. Lufthansa Technical Training is to launch a joint venture with aviation recruitment and training specialist Blakebrook International, based in nearby Cwmbran, to offer an international training programme that will use the DARA facility for practical work.
Several new schemes are set to boost the stock of office and industrial space on offer in the South Wales city of Newport. Cedar Court, a 23,000 sq ft speculative development nearing completion on the Cleppa 4 Business Park, offers a range of units from 1,500 sq ft up to 10,600 sq ft, available for purchase or for rent. Some 54,000 sq ft of offices are available at the Celtic Springs Business Park, at a rent of around $23.00 per sq ft, and a 38,000 sq ft industrial property, Delta House, is available on the city’s Queensway Meadows industrial estate at a rent of $8 per sq ft. Other projects planned for Newport include a $160 redevelopment of retail space in the city centre and a mixed-use development on 600 acres of land at the former Llanwern steel plant site, to include factories, homes and sports facilities. Newport has recently launched its own urban regeneration company (URC), Newport Unlimited - the first URC in Wales.
Broadband prices fall as network expands
BT Group, the UK’s main telecommunications provider, has cut its wholesale costs for broadband business services from 1 May, some by up to half. BT was ordered late last year by regulator Oftel to reduce prices to open up competition in the broadband sector; the company says it is up to internet service providers to decide whether they will pass the reductions on to end-user customers. BT claims it is on track to hit its target of one million ADSL broadband connections by the summer, and promises it will eventually make broadband available to 90 per cent of homes in the UK. During the next year it aims to achieve 80 per cent coverage, compared with 67 per cent at present.
Somewhat ahead of the game, communications company Redstone Communications has quadrupled access to its 27km Metropolitan Area Network (MAN) in Cambridge, Eastern England, making high-speed internet, voice and data services available to more than 80 per cent of businesses in the city. It delivers data at speeds of up to 8Mb per second over existing copper cable, and offers a suite of managed services that includes wire-speed back-up, secure data storage, web hosting, videoconferencing and smart building systems.
Go east for innovation
The East of England is at the forefront of many sectors of technology. Cambridge itself is a renowned centre for scientific innovation, and Intel, the world’s largest chip maker, has just opened a dedicated laboratory at the high-tech West Cambridge campus of the University of Cambridge. Based in the William Gates Computer Laboratory, Intel Research Cambridge joins Microsoft and the university’s own team in a world-leading computer sciences complex. A 50-strong team of researchers, consisting of Intel staff and university scientists, students and visiting researchers, will collaborate on projects in the fields of computers and communication, focusing on networking systems and software development technologies.
The city of Peterborough meanwhile is concentrating on the environmental sector, and is aiming to become a world leader in environmental technology development. It is already home to more than 250 environment-sector organisations, which between them employ 4,500 people and generate an annual turnover of $544 million. The city’s environmental business support organisation, Encluster, celebrated its first birthday in February, and land has been purchased for the construction of a new 40,000 sq ft Innovation Centre at Lynch Wood Business Park. Current initiatives supported by Encluster include an electrical equipment recycling scheme that is backed by global manufacturers such as Hewlett-Packard; a Centre for Ecology and Hydrology; the installation of photovoltaic roof tiles on local housing; a feasibility study for a renewable energy study; and links with an environment cluster in Helsinki, Finland. Local companies are also getting in on the act: Swedish furniture retailer Ikea has installed an energy-saving geothermal heating system at its new $64 million distribution centre in Peterborough.
Also in the region, US car giant Ford is to operate a wind farm on its old car production site at Dagenham, Essex, where it has increased its engine production capacity to 900,000 a year, as part of a $640 million expansion plan. The $6.4 million facility, which will comprise three 1.8 MW turbines, will generate enough power to meet all the needs of the 473-acre site, and will also feature a viewing platform open to the public, with sweeping views of the River Thames. It is being developed in partnership with renewable energy group Ecotricity, which has been successfully operating a commercial wind farm at Swaffham in Norfolk since 2001. The Dagenham facility will begin operations in June, to tie in with Ford’s centenary as a UK car-maker.
Improvements announced for air and road links
Yorkshire is to get a new international commercial airport, with the development of a former RAF base at Finningley, near Doncaster. The airport will operate both passenger and freight services, and will complement expanding services at Leeds Bradford International and Humberside airports. The development will also encourage growth in the region’s aerospace industry: there are already many aerospace companies in the area, and advanced metals and engineering is one of its key growth sectors. In all, the new airport could create up to 7,000 jobs locally.
In the North East, low-cost airline easyJet has launched its first flights from Newcastle Airport to Belfast in Northern Ireland and to Barcelona and Alicante in Spain. It will also introduce services to Paris, Prague and Bristol in August. The company’s four new Continental routes boost the airport’s scheduled international links by 50 per cent. It also operates a popular route to Stansted Airport in London.
Meanwhile a package of new road improvements has been announced by Transport secretary Alistair Darling. Among the improvements, aimed at tackling congestion points, is a $784 million upgrade of the A14 between Huntingdon and Cambridge in Eastern England, which will be made into a dual three-lane carriageway. Elsewhere, there will be $91 million worth of junction improvements on the A45 and A46 at Tollbar End in Coventry, West Midlands, and $64 million will be spent on improving the Shrewsbury to Chester Road in Shropshire. In addition, 74 different stretches of road around the country will be resurfaced to reduce noise pollution.
Northern Ireland agency celebrates first birthday
Invest NI, Northern Ireland’s economic development agency, has celebrated its first birthday. In its first year the agency, which combined the operations of a number of existing investment bodies, has supported a number of initiatives to foster innovation and entrepreneurship in the province. Milestones include the introduction of a set of Principles for Business Support, to help companies achieve sustainable growth, and the launch of the $4.8 million NITech Growth Fund, a venture capital fund designed to commercialise R&D undertaken by universities and small and start-up companies.
The agency has also supported the establishment of 17 Centres of Excellence, designed to foster innovation, and seen the 2,000th company established under the Northern Ireland Business Start Programme. Companies to benefit from its Business Improvement Services include Japanese-owned Ryobi Aluminium Casting, based in Carrickfergus, which reckons to have saved $160,000 by applying a US-developed technique known as Six Sigma to its manufacturing production processes.
Invest NI has also helped overseas companies find suitable premises for their new businesses. Turkish company Protekila, for example, is setting up an R&D centre at the agency’s Whiterock Business Unit in West Belfast, as part of a plan to expand into European Union and US markets. The Istanbul-based company specialises in smartcard technology for secure data transmission and payment in electronic banking, telephone and e-commerce transactions. Its home R&D base is at Istanbul University Technical Campus, and it will be seeking to establish relationships with local universities, which have a reputation for excellence in software design.
Another West Belfast company, Andor Technology, is to invest $9.6 million in new premises, equipment and processes in an expansion of its operations at Springvale. The company, originally set up as a spin-out from Belfast’s Queen’s University, produces specialist scientific cameras and has recorded steady growth over the past five years.
Around the regions
Englishsites.com, the website of government regeneration agency English Partnerships, has been expanded. The site, which provides information on key strategic development sites in England and detailed regional data, now also includes a news section updated daily, from sources such as Dow Jones, IPA World and Brownfield Briefing, together with links to more than 300 websites of partner organisations.
Irish company QUINN-direct Insurance is investing $12 million to establish a customer contact centre at Enniskillen in Northern Ireland. Founded in 1996 and part of the Quinn Group, the company now has more than 130,000 policyholders. The new centre is expected to create around 350 jobs by 2006.
Meridien Technologies Inc of Canada, one of the world’s leading suppliers of magnesium die-cast components and assemblies to the automotive industry, is to build a new $8 million manufacturing facility at Sutton-in Ashfield, Nottinghamshire, in the East Midlands. The company will supply instrument panels, seat frames, transfer cases, steering column brackets and front end modules to European automotive manufacturers such as Jaguar, BMW Mini and Land Rover. The new facility is expected to create 87 jobs within five years.
Also in Nottinghamshire, US-owned WHA/Oriel Insurance is the latest company to benefit from Nottinghamshire County Council’s Connect project, which supports the county’s booming call centre industry. WHA, part of the Warranty Holdings Group, a major provider of breakdown cover for used cars, recently opened a call centre in the town of Mansfield, and the Connect team helped it to recruit and train its entire workforce within a three-month deadline. Call centres are one of the fastest growing sectors in Nottinghamshire and currently employ more than 15,000 people.
Three new Urban Regeneration Companies (URCs) have been established in England, to complement the work of the 11 already operating around the country. West Lakes Renaissance will be the new URC responsible for the West Cumbria and Furness region of North West England, while Derby in the East Midlands and Sandwell in the West Midlands also get their own bodies. URCs are government-backed vehicles tasked with attracting both public- and private-sector investment to regenerate specific areas. They can be either urban or rural, and concentrate on targets such as employment, skills and training, and transport links.
Global financial services firm JP Morgan & Chase, based in New York, is creating up to 150 new jobs for software engineers at its European Technology Centre in Glasgow, Scotland. There are currently 260 permanent staff at the centre, which develops technology support systems for the company’s operations.
New York-based Thor Technologies Inc, a provider of enterprise provisioning solutions, has opened an office in London. The company’s Xellerate product is designed to allow users to manage user access, improve security and reduce their administration costs without changing their existing IT infrastructure.
Pittsburgh Simulation Corporation (PSC), a provider of verification tools based in Pennsylvania, is to open a European sales and design headquarters in Dundee in Scotland. The company , which produces high-end IC design verification hardware, plans to establish links with the Alba Centre in Livingston, a leading electronic design facility, and with local universities. It expects to create up to 15 new jobs.
Italian paper products manufacturer Sofidel SpA is to set up a new paper-making plant at Baglan Bay Energy Park in South Wales, via a new company, Intertissue, part of the Delicarta Group. The 230,000 sq ft plant, which will include a facility for converting paper into finished tissue paper products, will employ more than 300 people. It will manufacture products such as toilet paper, kitchen towels, tissues and napkins.
The Port of Felixstowe, in Eastern England, plans to build a new deepwater container berth, following the withdrawal of ro-ro operations by P&O North Sea Ferries. The development will include the upgrading of container facilities in the southern part of the port that were originally developed in the 1960s and 1970s. Meanwhile, a new container port is planned at Bathside Bay at the Port of Harwich. Adjacent to the existing ro-ro port, the new facility will have a capacity of 1.7 million containers a year. Both projects will be funded by the ports’ owner, Hutchinson Ports (UK) Limited, whose parent company is based in Hong Kong.
Two Japanese electronics giants, Hitachi and Mitsubishi Electronics Corporation, have launched a joint-venture company, Renesas Technology Europe, based in Bourne End near Maidenhead, South East England. A wholly owned subsidiary of Renesas Technology Corporation, the new firm will design and manufacture highly integrated semiconductor system solutions for the mobile, network and automotive industries, in the industrial and digital home electronics markets. Its key products will include microcontrollers, such as integrated circuits for smartcards, flash memory technologies and mixed signal devices.
German electronics system iSYSTEM, based at Schwabhausen near Munich, has set up a UK subsidiary, iSYSTEM Ltd, with a sales and support office at Newbury, South East England. The company produces a range of development tools for designing and testing embedded systems, and the new subsidiary will provide technical support to UK companies working in industrial electronic development.
Los Angeles-based Applied DNA Sciences Inc, which provides embedded-DNA security solutions, has opened a European sales and marketing office in London. The company designs verification products used by companies and government agencies to guard against counterfeiting, fraud and piracy.
Menard Cheever Technologies (MCT) of Indianapolis has acquired engine design company TWR Engines, based in Kidlington, near Oxford, in South East England. The company will be renamed MCT, UK and will continue to develop components, systems and engines for open-wheel, sports car and touring car racing.
RDAs East Midlands Development Agency (emda) and Advantage West Midlands are to market themselves in partnership across Australia and the Asia-Pacific region as The British Midlands. Offices in Australia and India will follow the lead of The British Midlands office in Singapore, which made the transition last September. The organisation also has an office in Tokyo and three in the United States, in San Jose, Chicago and Boston.
RDA Yorkshire Forward has invested $4.8 million to help boost the media, interactive and film industries in Yorkshire and Humber. Funding will be provided for production facilities, R&D, and skills and business development and a new film and media industry body, Screen Yorkshire, has been established. The Yorkshire region has been responsible for a number of international film successes (such as Little Voice) in recent years, and its two main television producers - Yorkshire Television and the BBC - have created some of the UK’s most popular television programmes. The region is also home to a large number of smaller independent TV producers and successful computer games companies, such as Revolution Software, based in York. Over the next three years, Screen Yorkshire aims to create or safeguard more than 600 jobs and to attract $4.8 million in private-sector finance to support the growth of the digital industries.