News
October 1999
BT ties up with AT&T in face of global competition
British Telecommunications (BT) and AT&T of the US have announced a "strategic alliance" that links their wireless telecoms businesses around the world, 14 months after an agreement that amalgamated their traditional wireline services. Some analysts see the continuing rapprochement as a sign that the two companies might eventually merge, and ascribed it in part to consolidation pressure in the global wireless market following UK carrier Vodafone's acquisition earlier this year of Airtouch, the biggest wireless operator in the US.
The new alliance will see BT and AT&T developing services in 150 countries. The companies claim that the deal will result in lower prices on wireless calls for international executives and travellers, and promise within a year new mobile handsets that will function both in the US and in Europe. Although their networks use differing technologies, the two claim they have sufficient market clout to persuade manufacturers to develop devices that could be used anywhere in the world by their 41 million subscribers. The two also plan to co-operate in developing third generation wireless services - the next wave of technology, which promises to enable mobile devices to receive high-speed data and Internet services.
At home meanwhile, in response to mounting competition from cable communications groups and mobile operators, and pressure from the telecoms regulator to cut its prices, BT has announced a pricing shake-up for its domestic wireline services. Most residential call charges have been reduced, and new packages offering inclusive 'free' call-time have been introduced. Some of these are aimed particularly at individuals or businesses who need time on-line to access the Internet.
In the meantime Motorola, one of BT's mobile competitors, is planning to double manufacturing capacity at its semiconductor plant near Edinburgh, Scotland. The plant currently makes 4 million cellular phone chips per week and has a workforce of 560. The $96 million expansion will increase output to 8 million chips per week and create a further 200 jobs. Motorola has already begun recruiting engineers and graduates.
Survey offers snapshot of call centre workforce
Another mobile player, Orange, has opened a new customer call centre in Plymouth, South West England, creating 1,100 jobs. The UK is the biggest call centre market in Europe, helped by its telecommunications infrastructure and the English language. A new survey gives a snapshot of working conditions in call centres up and down the country.
Independent employment information body Incomes Data Services (IDS) polled 150 call centres employing 53,000 people. It found that 71 per cent of call centre employees were in permanent, full-time jobs, and that union recognition is widespread. Starting salaries for customer advisers ranged from £9,800 ($15,680) to £11,650 ($18,640) a year, while team leaders could expect to earn between £14,600 ($23,360) and £19,000 ($30,400) annually. More than 80 per cent of employers offered their staff pensions, 63 per cent gave staff discounts, 49 per cent subsidised meals and 56 per cent performance-related awards, although only 13 per cent provided assistance with childcare. The most generous employers offered childcare or other perks such as private healthcare and even free gyms.
Average staff turnover was 18 per cent a year, although there was wide variation and some 40 per cent of employers admitted that staff turnover was a problem. Absence due to sickness was also higher than in other sectors, at an average of 5.3 per cent. The intensity of call centre work was the main reason cited for this. Around a third of call centres operate 24 hours a day, seven days a week.
Unions pledge support for partnership with employers
Support among trades union members for genuine partnership between unions and employers was underlined at September's Trades Union Congress (TUC) annual conference. Bill Morris, secretary general of the Transport and General Workers Union (TGWU), for example, said: "My union is committed to partnership as a bridge that can link the divide at work, a model where workers are not just told management decisions but genuinely consulted about the solutions to problems."
The TGWU, along with six other unions, recently signed a new partnership agreement with British Nuclear Fuels under which 12,000 workers will receive substantial improvements in earnings and benefits in return for changes in working practices. The company has promised to provide its workers with secure and sustainable employment and to involve them in business development plans.
Both unions and employers seem to be taking a flexible, common-sense approach to implementation of the recently introduced European Union working time directive, which limits working hours to 48 per week. Government amendments have identified the concept of "unmeasured work time" such as reading or writing reports at home or doing unpaid overtime in the office. This applies largely to white-collar workers, but others for whom longer hours are acceptable include executives who normally work long hours and shop floor workers earning paid overtime. In all cases the key factor is that work in excess of the 48-hour limit is done voluntarily, without pressure from employers.
Companies are permitted to opt out of the legislation altogether if employees agree; in one recent case, all 100 workers at a Yorkshire engineering company said they wanted to opt out. The government, affirmed trade and industry secretary Stephen Byers, is happy to retain an element of ambiguity in interpreting the directive and is committed to avoiding "heavy-handed" employment legislation.
A little venture capital goes a long way
The UK is Europe's most important source of venture capital, with firms prepared to supply companies with backing for every stage of their development, from small start-ups through expansions and refinancing to large-scale management buy-outs. The British Venture Capital Association (BVCA) recently announced the winners of its 1999 Venturer of the Year Award, in association with Cartier and the Financial Times, to honour the most successful venture-backed companies of the past year. Two of the award winners were UK companies acquired by US firms after demonstrating remarkable growth potential.
Venturer of the Year was A&J Gummers Ltd, a Birmingham-based manufacturer, which also won the Small Management Buy-Out Award. Backed with venture capital from Lloyds TSB Development Capital Ltd, managing director Ken Shaw has built up the company into a world-class manufacturer of valves and fittings for showers and other water control devices. So successful has the company been that earlier this year it was snapped up by Masco Corporation of the US, and is now set for further expansion.
Similarly Roslin Bio-Med (RBM), the winner of the Scientific Research Based Award, was acquired in May 1999 by Geron Corporation of the US. The Edinburgh-based firm, led by chief executive Simon Best and founded just a year earlier, with backing from venture capital firm 3i, commercialised research by Edinburgh's Roslin Institute that led to the cloning of Dolly the Sheep. The value of this breakthrough was recognised by Geron, whose research focuses on cloning human cells to combat degenerative diseases such as arthritis, leukaemia and Parkinson's.
"Starting out as an entrepreneur is never going to be an easy option but the climate has never been better," said BVCA chairman James Nelson. "The venture capital industry has the funds, the sector expertise and an appetite to support good ideas. I hope these winners will inspire others to go for it."
Rents rise - but slowly
The UK's commercial property market continued to rally in the second quarter of the year, according to the latest report from property consultant Healey and Baker. Rents grew 3.8 per cent, driven mainly by a recovery in the investment market, with strong demand from a wide range of UK and international buyers. Growth in the occupier market was steady, with continued demand for prime space. As this was in short supply, rents continued to rise, albeit unspectacularly.
In the office market, rents increased at an annualised rate of 6.8 per cent over the first six months of the year. Demand for prime space is highest in the South East, although Edinburgh has also seen strong demand, being the location of the new Scottish Parliament. In London there has been an increase in speculative building, particularly in the West End.
Prime industrial rents rose just 2.7 per cent in the year to June, well down on the 13 per cent growth in the year to June 1998 and barely above the rate of inflation. In the second quarter however rents grew at an annualised rate of 5 per cent, following an annualised rate of just 1.25 per cent in the previous six months. Demand is again highest in the South East, but throughout the UK the strongest demand is for modern, quality space that is flexible enough to be adapted to the user's business.
Support for manufacturing excellence
Trade secretary Stephen Byers has renewed the government's commitment to the UK's manufacturing industry and announced two new measures to help foster competitiveness and innovation. Financial support will be given to help train engineering technicians, while a new award scheme will recognise excellence in innovation and strategic forward planning across the manufacturing sector. The government is also holding talks with the country's Regional Development Agencies (RDAs) about the possibility of developing a network of regional centres for manufacturing excellence. Mr Byers was speaking at the Department of Trade and Industry's first Manufacturing Summit, which brought together key players from industry, the unions and government.
One manufacturer has come up with an innovation, which benefits haulage contractors. Lorica Research, based in Malvern, in the West Midlands, has developed a fabric that protects curtain- sided vehicles from the attentions of thieves. The fabric has a woven-wire textile base stabilised with nylon and coated with a tough, flexible and chemical-resistant polymer, and is resistant to attack by knife and even chainsaw. It also lasts longer than traditional materials. Lorica developed it from material used for making stab-resistant police vests, and it is now attracting attention from airfreight operators and defence companies.
Transport schemes add value to network
A variety of new schemes that will improve the UK’s transport network are in the pipeline. Plans have been approved for a $272 million rail link between Heathrow Airport and destinations in South London and southern England. The scheme, known as Airtrack and expected to carry 5 million passengers a year, will make use of a disused rail track along the M25 motorway and link with the airport's proposed fifth terminal and the existing Heathrow Express line, which connects directly to North London. It will also provide the airport's first direct link to the rail network serving the west of England and South Wales. The new line could open in 2005 or 2006.
Manchester-based property group Peel Holdings plans to build a new terminal at Liverpool Airport, with an adjoining restaurant and retail complex, in a development worth $61 million. The new terminal, due to open in 2001, will have a capacity of 2.1 million passengers a year. In the south of England, at Ramsgate in Kent, property group Wiggins has bought Manston aerodrome from the Ministry of Defence for $16 million and plans to develop commercial passenger services there, particularly low-cost flights to Europe. The airport, 65 miles from London, was the wartime base of the Royal Air Force's 617 Squadron, better known as the Dam Busters.
In a more down-to-earth development, a new metro line has opened in Birmingham in the West Midlands. Midland Metro Line One runs 20.4km from Birmingham Snow Hill to Wolverhampton St. George's, and is expected to carry some 18 million passengers a year.
Meanwhile the government's biggest ever Freight Facilities Grant, worth $15.5 million, has been awarded to transport company TDG Nexus to enable it to move chemicals by rail rather than road from British Petroleum (BP)'s site at Grangemouth in Scotland to sites in England and Wales. Altogether grants worth $28 million have been awarded in the past ten months.
New developments create business space around the country
One of the biggest urban regeneration schemes of recent years is under way at Park Royal in West London. The $640 million First Central project is a 1.25 million sq ft business park, which is being developed jointly by Guinness Ltd and London & Regional Properties. The 60-acre site, where Guinness has earmarked the first phase of 187,000 sq ft for its new world headquarters, will offer a large range of new office space. It will also have strategic transport links to London's existing network that includes access to the A40 highway and a new tube station. The scheme, planned with government policy on integrated transport in mind, has attracted government funding of $19 million for transport infrastructure. When complete, its attractions will include a hotel with conference facilities and a business centre, a wine bar and restaurant, a fitness club and a day care nursery.
Property group CIT meanwhile has proposed a $2.24 billion scheme for a stretch of the South Bank between Tower Bridge and London Bridge in central London. The scheme involves the last major development site on the fringes of the City of London, and will be well served by the busy London Bridge commuter rail station and the new Jubilee line underground link. The Greater London Authority has already signed up for a new building that will house London's mayor and will be complete in 2001, and the British Broadcasting Corporation (BBC) is considering a 500,000 sq ft site for a new headquarters building. Other major companies considering a move to the site include Chase Manhattan Bank and accountants PriceWaterhouseCoopers. Rents are expected to be around £40 ($64) per sq ft, some 20 per cent lower than top rents in the City. The developers are also hoping to lure tenants away from Canary Wharf and Docklands further to the east.
Outside London, a new 128-acre business park with the potential for 1.3 million sq ft of floorspace has opened at Grimsby in North East Lincolnshire. The Europarc site, developed by regional development agency Yorkshire Forward and the local council, is well located for the busy Humber ports and is expected to create up to 3,200 jobs. The first phase consists of five high-quality factory units ranging in size from 7,000 to 43,700 sq ft, and is due for completion in May 2000. The first tenant is Ultimate Packaging Ltd, a UK food packaging firm that is moving into a 35,000 sq ft purpose-built factory.
At Mansfield, in North Nottinghamshire, a new business park was launched in September. The Millennium Business Park is a 45-acre greenfield site, just outside the town centre, which offers a range of serviced development plots and buildings. Mansfield is already home to companies from Europe, the US and Japan; firms moving to the new business park will qualify for grants under the government's Regional Selective Assistance Scheme. Mansfield's inward investment team has recently revamped its website: details of the Millennium Business Park and the town's other available sites can be found at www.mansfield.gov.uk
Bristol, in the west of England, and Northern Ireland are to get new science parks, as the government's emphasis on hi-tech, knowledge-driven businesses gives new impetus to the development of such parks around the country. Science parks are generally allied to university research departments and aim to encourage the establishment of hi-tech and innovative businesses. The UK Science Park Association, which currently has 57 members who play host to some 1,400 tenant companies employing 25,000 people, aims to attract up to 20 new members over the coming year.
The Bristol venture will tap the science and engineering expertise of both Bristol and Bath universities, and will be located on a 68-acre site near the M4 motorway. In Northern Ireland, which has a growing reputation for hi-tech ventures, Queen's University, Belfast and the University of Ulster plan to establish a park with a main campus in the city of Belfast and satellite sites at Coleraine and Londonderry.
Scotland draws fresh hi-tech investment
Scotland has welcomed in the autumn with a rash of new investments, mainly in the hi-tech and IT sectors. US giant Unisys is to open a specialist software centre in Glasgow to develop next-generation IT solutions for large businesses. The centre, which will have a workforce of 350 software engineers and support staff, will work on projects for companies across Europe, including financial institutions, telecommunications companies and government departments.
US semiconductor company Atmel is to open a development centre for smartcard technology that will employ more than 200 design engineers. The company plans to expand its existing operation at East Kilbride and eventually move to a new location, although this has not yet been chosen. National Semiconductor, also of the US, has meanwhile reversed a previous decision to sell off its wafer manufacturing plant at Greenock, and has pledged fresh investment over the next two years.
Bermuda Systems, a subsidiary of Bank of Bermuda, has opened a $7.5 million software support and development centre at Stirling which will work with the bank's existing units in Bermuda and Hong Kong to provide a global, 24-hour IT service to customers. Power products company Minebea of Japan has opened a $4 million R&D centre at Inchinnan, near Glasgow. The company, which first came to Scotland in 1992, now has 200 employees at two neighbouring facilities, which serve as its European headquarters for keyboard and power electronics businesses.
In other sectors, US-based Quintiles Transnational Corp, the world's largest pharmaceutical outsourcing organisation, has announced plans to expand its subsidiary Quintiles Scotland Ltd, creating 1,500 jobs. The new jobs will be created over the next six years in a variety of fields related to drug development. Polaroid Corporation, based in Cambridge, Massachusetts, has opened a new instant film manufacturing facility at the Vale of Leven, Dumbartonshire. The multi-million-dollar facility will produce film for the company's new pocket camera, and is expected to create 250 jobs over the next few years. And Mitsui Babcock, a subsidiary of Mitsui Engineering and Shipbuilding Company of Japan, is to build a new technology centre at Renfrew. The plan was announced as the company opened a new multi-fuel burner for testing power station burners on the same site.
Last year Scottish Enterprise, Scotland's development agency, helped create 30,000 new jobs in total, adding some $960 million to the local economy. The Highlands and Islands region, the most remote economic region in the UK, had its best year ever for attracting inward investment, creating an estimated 1,275 jobs in a total of 18 projects worth $66 million. Sir Ian Wood, chairman of Scottish Enterprise, however warned that the region still faced "immense challenges" in the face of growing globalisation, and urged political leaders to set aside their divisions to create a shared vision for future economic development.
Around the regions
- Raytheon Systems, the London-based subsidiary of the US Raytheon Company, is to build a multi-million-dollar software development centre at Londonderry, Northern Ireland. The centre will support the company's electronics programmes, including air traffic control systems, and will eventually employ 150 people.
- Mexican food giant Mission Foods, based in California, has started work on a $25 million manufacturing plant in Coventry in the West Midlands. This is the first factory outside Central America and the US for the company, part of the Mexican Grupo Maseca (Grumo), and the largest ever manufacturing investment from Mexico to the UK. The factory will produce tortillas, tortilla chips and other Mexican products and, with a workforce of 300, will begin operations next spring.
- Katsuhiro Matex Company, a heavy engineering firm from Japan, is to invest $8 million in setting up its first European plant in Stockton-on-Tees, North East England. The plant, which will trade as Katmex UK, will employ 150 workers and will manufacture steel structures for heavy construction machines and forklift trucks.
- Compal Electronics Inc of Taiwan, one of the world's largest manufacturers of notebook computers, is to set up a European servicing HQ at Trafford Park in Manchester, North West England. The facility will create 60 jobs within the next three years. Meanwhile Sylvan Learning Systems of the US, a leading global provider of educational services, is also moving to Manchester. It will set up a regional headquarters for its computer-based testing division, Sylvan Prometric, in 20,000 sq ft office premises at Exchange Quay in the Surrey Quays area of the city.
- Transport minister Lord MacDonald has offered to open Prestwick Airport in Scotland to new cargo services by US airlines. So-called "fifth freedom rights" would allow carriers to load freight at Prestwick for delivery to a third country. The decision, which follows an application from US carrier Federal Express, comes despite the continuing lack of reciprocal rights for UK carriers in the US.
- Toyota, Japan's third largest company by market capitalisation, planned in September to lists its shares in London and New York. The issue involved 45 million shares worth about $1.4 billion, and was aimed at attracting international investors as the auto maker increasingly moves towards globalisation.
- North American Van Lines, based in Naperville, Illinois, is to merge with the Allied Pickfords worldwide moving services business of London-based NFC Plc. The $450 million merger will create a global industry leader with locations in 36 countries and revenues of more than $2 billion.
- Concentric Network Corp of San Jose, California has acquired London-based Internet service provider Internet Technology Group (ITG) for about $215 million. Concentric, which supplies e-business services to small and medium-sized businesses, will use the acquisition to expand into Europe.
- Germany's third-largest law firm, Frankfurt-based Pünder, Volhard, Weber & Axster, is to merge with one of the UK's biggest firms, Clifford Chance, and Rogers & Wells of New York to create what is being hailed as the first top-tier global legal practice. Clifford Chance merged with Rogers & Wells in July this year. The new firm will have 2,700 lawyers and 30 offices worldwide.
- Swedish forest products group SCA is to acquire UK tissue group AM Paper Group (AMPG), based in Skelmersdale, North West England, for around $320 million. AMPG is one of the UK's leading suppliers of retail brand soft tissue, including bathroom tissue and household towels, and has a domestic market share of 13 per cent.
- Paris-based international service company Bureau Veritas has acquired engineering and management consultant firm ATL Consulting Group, based in Southampton, South East England, for an undisclosed sum. The acquisition will allow the French company to expand its asset management client base in the oil, gas, process and utility markets, initially in the UK but ultimately worldwide.
- Pac Creative (PTY), of Johannesburg, South Africa, is to buy the manufacturing business of skin- and hair-care product firm The Body Shop International for about $21 million. The transaction includes a five-year agreement for product development and supply, with guaranteed orders from The Body Shop, but the 500 employees at the Littlehampton, South East England plant will transfer to Pac Creative.
- California-based Internet retailer eToys is to launch a retail website in the UK, backed up with a warehouse for its toys and other products at Swindon, South West England. The expansion, the company's first outside the US, is seen as a beachhead for further expansion into Europe.