February 2006

News

Economic performance predicted to strengthen
The UK economy is set to pick up this year and to enjoy stronger growth over the coming few years, according to the latest projections from forecasting group the Ernst & Young Item Club. In its Winter economic prospects report, the group predicted that UK GDP would rise by 2.3 per cent in 2006, compared with 1.7 per cent in 2005. This echoes the forecast of the Treasury, which expects growth of 2-2.5 per cent this year; the consensus on growth from independent economists stands at 2.1 per cent. The group cited a better-than-expected Christmas for retailers, higher share prices and a rebound in the housing market as positive signs for the economy.

The Item Club also backed Chancellor Gordon Brown’s optimistic outlook, forecasting that growth would move back up towards 3 per cent for 2007 and 2008. However, the group also sounded a note of caution, warning that both consumer and business confidence remained fragile. Combined with the prospect of higher global interest rates, this meant “the outlook is still very uncertain”, it said.

According to the Office for National Statistics (ONS), November saw the strongest growth in manufacturing since April, with the sector registering a 0.8 per cent increase in output, compared with a fall of 0.4 per cent in October. The improved performance was driven by strong demand in the transport, machinery and equipment sectors. Industrial production, a wide measure that also includes mineral extraction and energy, climbed by 0.6 per cent, compared with a decline of 1.1 per cent in October.

London and South East England accounted for nearly a third of the UK’s economic activity in 2004, as measured by gross value added (GVA), according to data from the ONS. With GVA topping $1.8 trillion for the first time, London claimed 16 per cent of the total and the South East 15.3 per cent. Across the country, the GVA generated by real estate, renting and business activities (such as accountancy, consultancy, legal services, security and interior design) has grown, while that produced by the manufacturing industries has declined. In the UK as a whole, these three sectors accounted for 24.9 per cent of GVA in 2003, compared with 18.2 per cent in 1993, while the share of manufacturing declined from 21.4 per cent to 15.1 per cent. The sectors’ contribution was lowest in Northern Ireland, at 14.7 per cent, but in London and the South East they accounted for more than 30 per cent of GVA.

The UK’s labour force is projected to continue growing and to reach 32.1 million people by 2020, according to the January issue of Labour Market Trends from the ONS. This would represent an increase of 6.7 per cent from the 2005 figure of 30.1 million. Until 2015, it is expected that growth in the labour force will be driven mainly by changes in the age composition of the population, but that after 2016 it will be due mainly to increases in the proportion of the population who are economically active. There is expected to be a 23.5 per cent increase in the number of working people aged 50 or over in the next 15 years, due to the ageing of the ‘baby boom’ generation and an overall trend towards longer life expectancy. By contrast, the number of people aged 16-24 will fall by 4.9 per cent. It is expected that more people will remain economically active even after reaching retirement age, with the number of working over-65s growing from 582,000 in 2005 to 775,000 in 2020.


Broadband technologies to revolutionise communications
UK broadband company Pipex is preparing to trial WiMax, a new broadband technology that offers faster speeds and better-quality mobile access to the internet. The move, which follows the agreement of a worldwide standard for the technology, will make the UK one of the first countries in the world to offer the new service. Pipex is one of two official UK licence holders for the technology, the other being PCCW, a Hong Kong-based telecoms company that operates in the UK. Pipex plans to start consumer trials in Stratford-upon-Avon in the West Midlands in the next few months. WiMax operates at much wider ranges than the wi-fi technology currently available via hotspots in locations such as cafés and airports – potentially at a range of up to several kilometres. It also promises to provide faster speeds, of up to 8 megabits per second. Pipex is expected to link up with a major telecoms company to offer the service, which is likely to eclipse next-generation ‘3.5G’ technologies currently being developed by operators such as O2 and Vodafone.

Broadband connections formed 60.5 per cent of all new internet connections in November 2005, up from 59 per cent in October. There was a 5.7 per cent increase in the total number of internet connections between November 2004 and November 2005, while broadband connections increased by 57.5 per cent. BT is continuing to upgrade its exchanges around the country so that they can handle broadband services. At the end of December, Yorkshire and Humber became one of only three regions to date to have achieved 100 per cent broadband enablement. A final exchange at Ramsgill Dale in North Yorkshire was upgraded to enable broadband for 4,000 households and 800 local businesses. Development agency Yorkshire Forward will now concentrate on encouraging greater take-up.

US-based Broadcom Corporation, a global leader in wired and wireless broadband communications semiconductors, has opened a new European office in Cambridge in Eastern England. The new facility will employ 85 engineers and will be based at the Cambridge Science Park, part of the established technology cluster known as ‘Silicon Fen’. It will focus on research and development for the company’s mobile and wireless and broadband communications groups and will work to develop hardware and software for multimedia products, including graphics, video and audio for portable devices, mobile TV, DSL modems and next-generation broadband technologies. Broadcom, based in Irvine, California, has been expanding rapidly into Europe over the past year and has built up a network of ten offices.


UK leads the way in innovation
The UK has the best environment in the EU in which companies can be innovative, according to the European Commission’s Innovation Scoreboard. The scoreboard ranked the business performance of the 25 European Union nations, along with the US, Japan and others, looking at factors such as science and engineering graduates, patents, R&D spending and exports of high-tech products. It placed the UK seventh overall in the EU25, concluding that it had a highly efficient science base covering a wide range of disciplines and that it scored particularly well on indicators such as graduates, venture capital and broadband penetration. Overall, the EU has a long way to go before it matches the innovation performance of the US or Japan, but the UK is working to close the gap, focusing for instance on R&D and programmes to facilitate licensing, technology transfer, outsourcing and joint ventures.

The University of Manchester has launched a research institute that will pioneer new light and laser technologies. The Photon Science Institute (PSI), a $72 million initiative, will be the largest research and teaching centre of its kind in the UK. It will have an annual research income of $9 million and will have more than 30 full-time academic staff. Research will focus on laser technologies and systems for use in medicine, pharmaceuticals and life and physical sciences. Projects will include the development of new optical materials, such as solar cells, and of non-invasive medical technologies: for example, measuring the blood sugar levels of diabetics without taking a blood sample or using pairs of laser beams as ‘micro tweezers’.

Toshiba’s research team in Cambridge, Eastern England has discovered a way to generate pairs of photons for quantum physics that allows entangled pairs to be produced on demand from a semiconductor quantum dot, by subjecting it to a laser pulse. Previously, researchers had no control over the generation time or the number of photon pairs produced. The discovery is a breakthrough for applications such as quantum computing, and Toshiba expects to produce commercial devices within three years. Toshiba Research Europe was founded in Cambridge in 1991 as the company’s first overseas research facility; it has since opened another lab in Bristol, South West England.

Research by the University of Cambridge’s Centre for Entrepreneurial Learning (CfEL), based at the Judge Business School, shows an “ecosystem of innovation” amongst Cambridge-based entrepreneurs that is unrivalled anywhere in Europe. Carrying out what it calls a “first-level archaeological dig” into the formation of the city’s high-tech, biotechnology and consultancy clusters, the study focuses on the human element and traces hundreds of start-up companies back to a core group of businessmen. One – Hermann Hauser, the founder of Acorn – is credited with creating up to 70 millionaires. Along with highly talented individuals, the CfEL puts Cambridge’s success down to a world-class university and a network in which such entrepreneurs can connect with one another.

A new survey by the Aspen Institute ranks Nottingham University Business School among the world’s best in pioneering work to encourage ethical and responsible behaviour in commerce. The survey, entitled ‘Beyond Grey Pinstripes 2005’, analysed 600 full-time MBA programmes around the world. It ranked Nottingham number one in the UK and number 12 globally for its success in incorporating issues of corporate and social responsibility into its MBA programmes. Professor Jeremy Moon was singled out for an award as a ‘Faculty Pioneer’ and exceptional scholar in this field.


Sector initiatives champion leading-edge technologies
The Department of Trade and Industry (DTI) has published a list of ten of the best green energy projects that began generating electricity in 2005 – “an excellent year for renewable energy”, according to Energy Minister Malcolm Wicks. The projects included an offshore wind farm at Kentish Flats in the Thames Estuary and onshore facilities in South Lanarkshire in Scotland and at Cefn Croes near Aberystwyth in Wales; solar installations at the CIS Building in Manchester, the Eden Project in Cornwall and the Science Museum in London; microgeneration projects at the Nissan motor plant in Sunderland and at a school in Leeds; a wave buoy in north Cornwall; and a biomass energy plant in Enniskillen, Northern Ireland. All are contributing to the government’s aim of supplying 10 per cent of the UK’s energy from renewable sources by 2010.

Also looking promising is the marine renewables sector. A new report by the Scottish Enterprise Energy Team, focusing on opportunities in Scotland, states that between 2004 and 2008 global capital expenditure on wave energy is expected to be in the region of $130 million and that 50 per cent of this will be concentrated on the UK. Capital expenditure on tidal projects is estimated at around $99 million, 90 per cent of which will relate to the UK market. Although the industry is in its early stages, an increasing amount of interest is being shown, and Scotland is in a strong position to take advantage, according to the report. It has a large share of Europe’s natural wave and tidal energy resources, along with an established marine engineering sector, an international reputation in the offshore sector and a strong academic base.

Major companies include Rolls-Royce, Goodrich, Smiths and Meggitt. Scottish-based Selex Sensors and Airborne Systems meanwhile has been chosen by the US Coast Guard to supply a high-tech radar system for 27 aircraft. The Italian-owned company, which employs 2,000 people at its base in Edinburgh, will supply its Seaspray 7500E system in a deal worth $67 million.

The Materials Knowledge Transfer Network is a new partnership between businesses, research and technology organisations and universities that is aimed at making cutting-edge science available on the factory floor. It will provide a ‘one-stop shop’ to share knowledge, make the best use of resources and encourage best practice. Individual businesses will have access to the latest information on materials, research and advice services, and the forum will have sections dedicated to individual classes of materials, such as metals, composites, plastics, ceramics and smart materials. The $360 billion materials sector contributes 15 per cent of the UK’s total GDP, employs 1.5 million people directly and supports a further 4 million jobs.

The creative industries are another important sector for the UK, and Northampton in the East Midlands is the latest town to host an internationally significant visual arts project. Under Scan by Mexican-Canadian artist Rafael Lozano-Hemmer will be on display in the town’s Market Square for 10 nights from 3-12 February. The installation features 1,000 interactive video portraits of local people that are projected at random onto the ground when activated by visitors. The work uses highly sophisticated technologies, including the world’s brightest projector, which has 110,000 lumens of intensity. When it finishes its run in Northampton, Under Scan will go on tour in the region, moving to Derby and Nottingham in March.

The Eden Project, Cornwall

Go-ahead given for new port developments
The government has given the go-ahead for one major port development and is likely to approve another. Transport Minister Derek Twigg has given final approval for Quay 2005, a project by the UK’s biggest ports operator, Associated British Ports, to build a short-sea container terminal at Alexandra Dock in Hull, Yorkshire and Humber. The approval comes after ABP submitted revised plans aimed at mitigating potential impacts on the local area, including noise reduction and the conservation of natural habitats. The two-berth development will allow the port to accommodate larger vessels than at present and to meet anticipated growth in short-sea container traffic: container volumes at Hull rose by 10.2 per cent in the first half of 2005. The facility will only be built once a customer contract is in place, and ABP is currently negotiating with potential users. Construction work will take 18 months to complete, at an estimated cost of $54-$63 million.

Mr Twigg has also indicated that he is “minded” to approve plans for a new container port proposed by Hutchinson Ports (UK) Ltd at Bathside Bay in Harwich, Essex in Eastern England. This follows a public inquiry in 2004 that decided in favour of the proposal, subject to certain conditions such as improvements to local road and rail infrastructure. Hutchinson plans to build a 1.4km quay wall to accommodate the terminal. “We believe this expansion in ports capacity is justified by the economic benefits it will bring regionally and nationally, for UK industry and the economy,” said Mr Twigg.

In North West England, NorseMerchant Ferries has increased its ferry capacity on the route from Birkenhead to Belfast in Northern Ireland with the addition of the Mersey Viking, a new vessel capable of carrying 970 passengers, 160 cars and 150 commercial vehicles at a time.


Sky’s the limit as air services continue to expand
Birmingham International Airport (BIA) had its busiest year ever in 2005, with just under 9.4 million passengers using the West Midlands facility, an increase of 5.8 per cent over 2004. In three consecutive months – July, August and September – more than 1 million people passed through the airport. Scheduled flights experienced the biggest growth, with a 13.7 per cent increase in passenger numbers. There was a big expansion of services, with new airlines to operate out of BIA including bmibaby, Air India, Monarch, Sun-Air, Germanwings and AeroSvit-Ukrainian Airlines. Existing carriers such as Flybe expanded their networks and increased the frequency of flights to popular destinations such as New York, Dubai and Frankfurt.

Overall, transatlantic services from BIA grew by 26.4 per cent and services to Asia by 22.6 per cent in the course of the year. Flights to non-EU countries grew by 16.7 per cent and to EU countries by 13.4 per cent, while domestic services expanded by 13.1 per cent. Scheduled traffic accounted for 71.5 per cent of the total, with charter traffic making up the remainder. The number of charter flights fell by 9.8 per cent, reflecting the trend for passengers to tailor their own trips abroad, using low-cost airlines and internet booking services.

EasyJet has launched four new routes from Liverpool John Lennon Airport in North West England, linking Merseyside with Krakow (Poland), Marseilles (France), Mahon (Menorca) and Faro (Portugal). It has also replaced its fleet of Boeing 737s operating out of the airport with new Airbus 319s. Ryanair meanwhile is to operate daily flights from Humberside Airport in Yorkshire and Humber to Dublin in the Republic of Ireland, adding an estimated 100,000 passengers to the airport’s throughput in 2006 – its 30th anniversary year. Flights will begin operating from 28 April. Humberside will also operate services to a number of new holiday destinations in the Canary Islands and around the Mediterranean.

Air Berlin plans to create a transfer hub at London Stansted, adding domestic UK routes to its schedule and expanding its roster of international flights. The carrier, Germany’s second largest airline and the third biggest low-cost carrier in Europe, will introduce connecting flights from Manchester and Glasgow via Stansted to destinations in Germany, including Berlin, Düsseldorf and Nuremburg. This is the first time that Stansted has been used as a hub in this way; average transfer times will be 45-60 minutes. Air Berlin runs a similar hub operation on the Spanish island of Majorca.


Emphasis on technology in new property schemes
Construction work has begun at two new technology-led developments in the West Midlands. The third phase of the Malvern Hills Science Park in Worcestershire will provide 44,000 sq ft of space for technology companies, in a $12.6 million development alongside existing buildings. The new building will feature cutting-edge environmental technologies such as thermodeck flooring and a groundwater heat exchange, and is due for completion early in 2007. The project is expected to create 130 new jobs. Work has also begun at Bromsgrove Technology Park, a 23-acre site that hopes to attract a community of technology companies, both established firms and start-ups. Plots will range in size from 0.75 acre to 5 acres, and it is hoped that the development will create up to 350 jobs. Malvern Hills and Bromsgrove both form part of the Central Technology Belt, an area designated as a high-technology corridor that stretches from Birmingham to South Worcestershire.

Elsewhere in the West Midlands, work has begun on a $54 million regeneration project at Chatterley Valley in North Staffordshire. Around 57 acres of former colliery land will be used to create a major employment site, creating or safeguarding up to 750 jobs. Infrastructure work will begin in March and will take a year to complete. Over the next ten years a total of 175 acres of land in the Chatterley Valley area will be regenerated, creating up to 4,000 jobs. Infrastructure work has also begun at the Morlands Enterprise Park in Glastonbury, South West England. The South West RDA and its partners will develop 15 acres of land as serviced plots, which will be made available for development by the end of the year.

Development work is well advanced at another former colliery site, Dinnington Colliery just off the M1 motorway in South Yorkshire. Three phases of development have already been undertaken at a cost of $6 million, with companies in the manufacturing and engineering sectors targeted as tenants. Work will start in February on a fourth, $4.9 million phase that will comprise eight hybrid units ranging in size from 3,500 sq ft to 5,000 sq ft. The units will contain offices on the first floor while the ground floor will be used for assembly, storage or manufacturing. At nearby Tankersley, phase two development has been completed at Maple Park, with four freehold office buildings on the market, ranging in size from 3,000 sq ft to 4,250 sq ft.

Maple Park, Barnsley

Also in Yorkshire and Humber, approval has been given for the new $57.6 million East Leeds Link Road, which is seen as a key project in regenerating the Aire Valley area of the city. The road will link Junction 45 of the M1 with the Leeds inner ring road and will open up major development opportunities in one of the largest regeneration areas in the north of England. It will also benefit existing businesses in the area, such as the Cross Green Industrial Estate. Construction work is expected to start in November, with completion scheduled for November 2008.

In Knowsley on Merseyside, North West England, the first stage of the Prescot Business Park has been completed. The site will provide 200,000 sq ft of new business floorspace and up to 540 new jobs. In Chorley, Lancashire, a 100-acre strategic regional site is to be developed at Buckshaw Village, after a deal was struck between development agencies and LEX Auto Logistics, which will build its own new warehouse and offices there. The site, part of the former Royal Ordnance Factory, is also part-owned by BAE Systems. The development, which will include both commercial premises and housing, is expected to generate up to 2,000 jobs over time.

A new business park is to be developed in Llanidloes, Powys in mid-Wales, on the former site of an aluminium die-casting factory. Great Oak Business Park (or, in Welsh, Parc Busnes Derwen Fawr) will have a new link road from the town’s bypass, and around 32,000 sq ft of business space will be created on its five acres of space. This will include a range of commercial and industrial units built with environmentally friendly features, including the capacity to generate their own wind power.

In North Wales, the Welsh Development Agency (WDA) reports strong interest in the first phase of development at one of its key sites. Construction work is due to begin in the summer at The Point, an office development on the site of a former Hotpoint washing machine factory. In South Wales, bids are being considered for development of the first site to be made available at Llanelli Waterside. The gateway plot will form the entrance to Delta Lakes, a 34-acre site that will be developed as a high-technology business park. The 1.6-acre plot is capable of housing a three-storey building containing 30,000 sq ft of space. The WDA and Carmarthenshire County Council are currently looking at proposals from five different developers.


Regional news
New York-based technology research company ABI has opened a new office in London’s Chancery Lane, as it continues to expand into Europe. The company will offer intelligence services, market reports and research programmes to European clients. “We felt it was important to establish a new presence in the heart of the world’s great financial and business cities,” said Tim Archdeacon, ABI’s research president.

Widevine Technologies, based in Seattle, has opened a new European sales office in Cambridge, Eastern England, together with a technical support base in the Portuguese capital Lisbon. The company is a leading supplier worldwide of content security solutions for IP video operators. Its combination of hardware and software-based encryption allows telecoms, cable, satellite and internet service operators to generate revenue through the secure distribution, identification and tracking of digital content.

India-based Tata Consultancy Services (TCS) is making a move into the UK life and pensions industry. After a year-long selection process, the company has agreed that a new UK subsidiary, to be based in Peterborough, Eastern England, will take responsibility for the business processes of closed fund company Pearl Group Limited. The new company will employ around 950 of Pearl’s current workforce of 1,100, with the remainder staying with Pearl. The new subsidiary will specialise in business process outsourcing for life and pensions businesses, starting with Pearl’s closed books portfolio but also offering similar services to other life insurance companies. The deal is expected to generate some $847 million in revenue over the next 12 years.

The State Bank of India (SBI) has opened a branch in Manchester, North West England, its first in the UK outside London. SBI, the largest bank in India, has been operating in the UK for 80 years and has three branches in the capital. Manchester has strong ties with India, and the NorthWest Regional Development Agency played a pivotal role in helping the bank to set up operations in the city.

Biotech giant MedImmune is to significantly expand its capacity to produce its flu vaccine FluMist at its plant in Speke in Liverpool, North West England. The company will build a new plant 10 times larger than its existing facility, with the capability to produce up to 15 million doses of the vaccine every month.

Medicor is now the world’s third largest supplier of breast implants

US-based Medicor has acquired two UK companies, Biosil and Nagor, that produce and market breast implant products for the plastic and reconstructive surgery markets. Biosil makes silicone gel and saline-filled breast implants in 60 different countries around the world, along with a range of other silicone implant products. Nagor markets the products worldwide.

Combined with its existing Eurosilicone product line, the acquisitions make Medicor the world’s third largest manufacturer and distributor of breast implants, with a 30 per cent market share, excluding the US. It plans to expand the operations of the two companies, which are split between sites in England, Scotland and the Isle of Man off the coast of North West England.

first, the Wakefield District Development Agency, has launched a new website to promote this area of North West England. The site, at www.wakefieldfirst.com, contains features such as a property database with details of more than 400 properties and 600 acres of development land, an interactive map providing information on local business parks, a monthly e-newsletter and a press release service.

Pharmaceuticals company Serologicals plans to expand its workforce in Scotland, adding 30 new employees to its operations in Dundee and Livingston. Most of the new positions will be created within the company’s drugs discovery unit in Dundee. Serologicals acquired the Upstate drug discovery group in 2004. The company’s Scottish operations are growing at a rate of about 50 per cent a year and it currently accounts for about 70 per cent of all drug discovery work undertaken in Scotland. Dundee’s large research community has also prompted Ablett and Stebbing, a London-based firm of intellectual property specialists, to establish an office in the city.

Cornwall and the Isles of Scilly, in South West England, are likely to receive a third more funding under a new European Union regeneration initiative, according to a new budget agreed by EU member states in December 2005. The current Objective 1 funding programme is due to be completed by the end of 2008, but it is hoped that the new Convergence programme will begin in early 2007.

Glasgow’s International Financial Services District has beaten off competition from Manchester and London to be recognised as ‘Best Commercial-Led Regeneration Project in the UK’ at the 2005 Regeneration Awards, sponsored by Building, Building Design and Property Week magazines. The award recognises the achievement of the IFSD in attracting more than 4,500 jobs from big-name banking and insurance companies. Over $1 billion has been invested in the district since its inception, transforming a 1 sq km area in the west of the city centre, bordering the River Clyde at Broomielaw. Earlier in 2005, the Scottish city won another award from the Chicago-based International Economic Development Council for Excellence in Partnership.

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