November 2006

News

UK confirmed as top FDI recipient, says UNCTAD
Global flows of foreign direct investment (FDI) increased substantially in 2005, the second rise in two years, according to the annual World Investment Report from the United Nations Conference on Trade and Development (UNCTAD). At $916 billion, they were 29 per cent higher than in 2004. Flows to developed countries rose by 37 per cent to $542 billion, while those to developing countries increased by 22 per cent to reach a record $334 billion. Developed countries attracted 59 per cent of all FDI and developing countries attracted 36 per cent, while South-East Europe and the Commonwealth of Independent States (CIS) accounted for 4 per cent.

The biggest single recipient country was the UK, followed by the US, China, France and the Netherlands. The 25 members of the European Union as a whole received $422 billion. FDI into the UK surged by $108 billion to reach a total of $165 billion. A large part of this was due to a single transaction, the restructuring of energy group Royal Dutch/Shell, which resulted in a nominal inflow of $74 billion from the Netherlands to the UK. The UK government generally has a relaxed attitude to ownership of UK companies by foreign multinationals, believing it tends to improve management and productivity.

Merger and acquisition (M&A) activity increased worldwide, approaching levels last seen in the M&A boom at the end of the 1990s and accounting for 80 per cent of all FDI activity. The value of cross-border M&As rose by 88 per cent over 2004, to $716 billion, while the number of deals rose by 20 per cent to 6,134, according to UNCTAD. There were 141 ‘mega deals’ worth more than $1 billion apiece, which was close to the 2000 peak of 175 such deals. Private equity and hedge funds, most of them based in the UK and the US, accounted for $135 billion-worth of M&As in 2005, or 19 per cent of the total. The service sector remained the dominant area of interest, with FDI in this sector rising six-fold. Companies involved in mining and oil accounted for the bulk of primary-sector investment, but there was a decline in the share claimed by the manufacturing sector.

In terms of outflow, the biggest investors were the Netherlands, with $119 billion, followed by France ($116 billion) and the UK ($101 billion). These three between them accounted for almost half of all FDI outflows. Germany and Spain were also significant investors. In terms of companies, General Electric of the US was the biggest multinational worldwide in terms of foreign assets, while UK company Vodafone was in second place and two other UK-based companies, BP and Royal Dutch/Shell, figured in the top ten.

In the developing world, the highest growth rate in FDI was in West Asia (up 85 per cent to $34 billion), followed by Africa (up 78 per cent to $31 billion). Developing world and ‘transition’ economies also emerged as significant sources of FDI, investing a total of $117 billion in 2005. They were led by Hong Kong (China) with $33 billion. Chinese companies invested in particular in natural resources-related sectors in Africa and Latin America. Companies from India, Russia and Singapore were also significant outward investors.

Global flows of FDI were expected to increase further in 2006, said UNCTAD, basing its predictions on continued economic growth, increased corporate profits and policy liberalisation. In the first half of 2006, cross-border M&As were up 39 per cent compared with the same period of 2005. However, the Geneva-based organisation also sounded a note of caution, saying that high oil prices, high interest rates and increased inflationary pressures could dampen growth in some regions.

Indian companies emerge as leading inward investors in UK
Two other reports confirm the UK’s standing as the leading destination in Europe for FDI. According to Ernst & Young’s European Investment Monitor, the UK won 315 projects in the first half of 2006, 22 per cent of all European deals and more than Germany and France combined. London was the top investment destination, attracting 133 projects – the same as the whole of Germany. In total, London attracted 5.7 per cent of all FDI in Europe, more than any other city. France claimed 181 projects, Spain 90 and Belgium 63.

The overall number of investment projects across Europe rose to 1,432 in the first six months of the year, compared with 1,144 in the same period of 2005, according to Ernst & Young. Indian firms more than doubled the number of European projects they were involved in to 36, the third highest total behind the UK and US. They also nearly trebled their total of projects in the UK compared with the previous year. Most investments into the UK came from the US, which claimed 145 projects, followed by India (21 projects, up from eight in 2004), Canada (18), Germany and Japan (17 apiece).

An annual survey by IBM’s business services division confirms the UK as Europe’s top investment destination for multinationals involved in manufacturing, business services and R&D. Europe was the top destination worldwide for FDI in 2005, according to the survey, attracting 39 per cent of all inward investment projects, compared with 31 per cent for Asia. For Europe this is an improvement on the previous year, when the two regions were evenly balanced with 35 per cent apiece. Globally, emerging markets such as Brazil, Russia, India and China lost out as multinationals chose to invest in more mature economies.

Within Europe, the UK was by far the most popular destination. The survey counted nearly 700 new investment projects in the UK over the past year, including more than a quarter of all R&D projects. IBM attributed this high level of investment to a combination of a highly skilled academic and research base, strong industry clusters and financial incentives from government for businesses undertaking R&D in the UK. The survey also confirmed the UK as the top international destination for investment by Indian companies, which it attributed to longstanding cultural ties between the two countries.
 

London retains top spot as leading European business location…
	London has held on to its top position as the leading European city in which to locate a business and has increased its lead over its nearest rival Paris, according to the annual European Cities Monitor (ECM) report from property consultants Cushman & Wakefield. The UK capital ranked first in Europe in seven of the 12 categories measured by the survey: access to markets, availability of qualified staff, external transport links, telecommunications, availability of office space, languages spoken and internal transport.
Cushman & Wakefield interviewed senior managers and board directors in charge of location at 507 top European companies, and then compared the performance for each factor of 33 leading business cities. Communication factors were seen as the most important, followed by cost; quality of life factors were seen as the least significant. London and Paris were ahead of the rest by some margin, and London was comfortably ahead of its cross-Channel rival. It improved its weighted score from 0.87 in 2005 to 0.91, while Paris declined slightly from 0.60 to 0.59. Paris came second in five of the 12 categories, but rated worse than last year for quality of life and freedom from pollution, and lost its top ranking for internal transport to London. As in previous years, Frankfurt was in third place. Top city for quality of life was Barcelona, which moved up another place overall in the rankings to fourth. Barcelona was in 11th place when the ECM survey started back in 1990. The top ten was completed by Brussels, Amsterdam, Madrid, Berlin, Munich and Zurich. Four other UK cities were included among the top 33: Manchester in 21st place and Glasgow in 25th, together with Birmingham and Leeds, new entrants at 19th and 28th respectively. Warsaw was top for both the cost of staff and the value for money of office space. Dublin was the best in terms of the climate created by the government, while Stockholm was the least polluted city. Nineteen per cent of the companies sampled had outsourced part of their operations to another country in the past 12 months, and 21 per cent planned to do so in the next two years. The new eastern European member states of the EU were the most popular destinations for this, followed by India and China. Executives rated the growth of the China market for products and services as the factor likely to have the greatest impact on their businesses over the next ten years, while few cited terrorism as a major factor. Forty-three of the 507 companies sampled expected to establish a presence in Shanghai within the next five years. James Young, head of Cushman & Wakefield’s City of London office, said: “With the current trend towards globalisation, London has consolidated its position as part of the elite group of global cities, together with New York and Tokyo, and in all likelihood Shanghai in the near future. This puts London in a league apart when comparing it with other European cities.”
… but at home, Birmingham mounts a strong challenge Another Cushman & Wakefield survey, UK Cities Monitor 2006, performed a similar rating exercise for cities in the UK. The categories on which the cities were judged were very similar to those of the ECM, although the survey included some different criteria, such as availability of leisure and retail facilities and ease of car parking. Unsurprisingly, London emerged as the most favoured destination overall, but Birmingham emerged as a big winner, beating Manchester into third place. Birmingham came top in a number of categories, including best place to establish a new HQ, best for availability of offices and best for car parking, and second in several more. Blythe Valley Park, Solihull   Leeds and Bristol were fourth and fifth, and Sheffield, Glasgow, Newcastle, Nottingham and Liverpool completed the top ten. Edinburgh scored best on freedom from pollution, Sheffield for costs of staff and offices and Belfast for financial incentives. Executives questioned for the survey rated ease of recruiting staff as the most important factor in deciding where to locate, followed by ease of access to markets, cost and availability of office space and the cost of staff. More planned to move to Manchester within the next five years than to any other city. Adrian Hill, head of business space at Cushman & Wakefield, said: “Birmingham has experienced a renaissance over the last 15 years and its success in this survey is recognition of this. The fact that the city was ranked as best in the UK for a new corporate headquarters ahead even of London must surely augur well for an influx of companies over the coming years.”.

UKSPA reports big increase in tenant companies
The UK Science Park Association (UKSPA) reported another successful year in 2005-06, with a number of major new initiatives under way. The association signed a Memorandum of Understanding with its counterpart in China, a move that should lead to long-term benefits and collaboration, and became a founder member of the World Alliance for Innovation (WAINOVA), a body of national science park associations that represents science parks at an international level. Domestically, it inaugurated UKSPA Focus Groups at members’ meetings and launched the Affinity Programme, a group purchasing initiative aimed at reducing costs for science park tenants. UKSPA is also organising a special conference for members at the Herriot Watt conference centre in Edinburgh in February 2007, on the theme “Maximising the value of the global knowledge base”.

UKSPA was formed in 1984 and now represents around 80 per cent of all the UK’s science parks, research parks and technology-based incubators. A number of new members joined in the past 12 months, among them several biotechnology incubators, and membership now stands at 66 full members and 11 associate members. UKSPA members have over 1.5 million sq ft of space between them, the vast majority of it fully occupied and operational. The number of tenant companies rose sharply over the past year, from 2,388 in 2005 to 3,006, and between them these companies employ nearly 68,000 people. An increasing number of tenant companies – almost a fifth in total – originate from overseas.

The association offers numerous benefits to its members, including business development and networking opportunities, representation and lobbying, website support, good practice guides, surveys, statistics and directories. Research by UKSPA shows that the overall commercial performance of science park tenant companies, measured by their levels of growth, is significantly better than that of similar businesses located elsewhere.

In news of individual members, Chesterford Research Park in Cambridge has welcomed several new tenants over the past year, including Sosei of Japan, and is working on a number of new developments. Its Mansion House starter units are ready to let, with units available from 200 sq ft upwards and a menu of additional services from which companies are able to choose. It is also building a speculative 40,000 sq ft laboratory building and is working up plans for a science village.

Seabraes Yard in Dundee, an associate member, started work in June on a new four-storey, 28,000 sq ft building that will be marketed to companies in the digital and creative media industries. Meanwhile, reports UKSPA, plans have been unveiled for a new science park in Leicester in the East Midlands. The Leicester Regeneration Company is working on plans for a 120,000 ft science park in the Abbey Meadows area of the city, consisting of 56 units capable of accommodating high-tech businesses of all sizes.
 

New science facilities to expand R&D and boost business
In other scientific developments, a new facility in Scotland is set to become the first in Europe to develop stem cell lines for pharmaceutical research. The Roslin Cells Centre (RCC) will develop human stem cell lines for testing and developing new medicines and will then sell them to pharmaceutical companies and academics, on a non-profit basis and without intellectual property rights attached. The $3.8 million project will ease the task of researchers and could lead to new treatments for diseases such as diabetes and leukaemia, say its backers. The RCC will also act as the first step in a supply chain supporting the stem cell sector in Scotland.

European science ministers agreed in September to fund embryonic stem cell research within the EU’s expanded science budget, just a week after the administration in the US confirmed its ban on federal funding for such research. The UK has built up a strong lead in the field, and a new $19 million research centre is being established at the University of Cambridge in Eastern England. Some observers have predicted a ‘brain drain’ of US scientists working in the stem cell field to the UK following these recent developments.

The Daresbury Science and Innovation Campus (DISC), located near Manchester in North West England, was officially opened on 19 September by Lord Sainsbury, Minister for Science and Innovation. The new campus will build on the international reputation of the CCLRC Daresbury Laboratory, one of the UK’s major research facilities. Developments at this national strategic site include the Cockcroft Institute, a National Centre for Accelerator Science; Daresbury Innovation Centre, a new facility designed to attract science- and technology-based businesses to the region; and 2.5 hectares of serviced land available for development. The Northwest Regional Development Agency (NWDA) has invested some $95 million to develop the site.

The Cockcroft Institute, set up by the Particle Physics and Astronomy Research Council (PPARC), will lead the way in designing the next generation of particle accelerators, putting the UK at the forefront of international efforts in this field. The new Daresbury Innovation Centre offers 24,000 sq ft of office, workshop and laboratory space as well as a range of business support services. It has already attracted 23 companies to the region, among them IBM. Developers with proposals for high-quality schemes are being sought for the remaining 2.5 hectares of land.

The Northern Ireland Science Park at Queen’s Island in Belfast has received detailed planning permission for its next phase of development. A new extension to the facility will provide 210,000 sq ft of space in three five-storey, interlinked buildings. It will double the existing amount of workspace at the park and will cement its reputation as Northern Ireland’s premier location for knowledge-based businesses, according to its management. The development will be located on the city’s Queen’s Road, near to existing research facilities and overlooking Belfast Lough. Work is expected to begin on a first building module of 60,000 sq ft in early 2007, with completion set for early spring 2008.

In Nottingham in the East Midlands, BioCity Nottingham Ltd has opened a second building, three years after it opened its first BioIncubator and Innovation Centre. The Stewart Adams Building (named after the Boots the Chemist scientist who discovered Ibuprofen on the same site) will add 32,000 sq ft of space to the 54,000 sq ft provided by Phase 1 of the BioCity development. The new facility will focus in particular on medicinal chemistry and pharmaceuticals. It contains 36 chemistry fume hoods and a manufacturing unit for the production of sterile and general pharmaceuticals. The building is already fully occupied and has set up a waiting list for space.

Meanwhile the new East Midlands Media and Technology Enterprise Centre (EMMTEC) at the University of Lincoln is designed to strengthen links between academia and the region’s wider business community. Officially opened on 11 October, the $10 million building will provide Lincolnshire with an IT centre of excellence and outreach for media- and computer-based learning, as well as R&D facilities. An extension to the university’s existing Media, Humanities and Computing building, it includes a 250-seat conference auditorium, R&D labs for computing and media technologies, dedicated training suites and TV broadcast to satellite uplink technology.
 

Patent Office simplifies design registration system
The UK leads the rest of Europe in commercialising its scientific research. British universities filed 363 patents in 2005, more than 25 per cent of the EU total, according to market research organisation Thomson Scientific, quoted in Business Week magazine. They also attracted $1.9 billion in private equity investments, nearly half the European total raised by academic institutions. The most successful spin-out firm in 2005 was Cambridge Enterprises, which filed 41 new patent applications and granted more than 40 licences or options to license, generating income of more than $5.1 million.

UK universities tend to retain ownership and licensing rights to intellectual property developed on their premises, rather than the rights remaining with individual researchers who may not be interested in commercialising their work, as is often the case in other European countries. Instead, inventors receive a proportion of revenues from royalties. This means that development and technology transfer tends to happen more rapidly in the UK than elsewhere. The process is also helped by the presence of private equity companies such as the London-based IP Group and the US firm Utek, which actively seek out academic research projects with market potential. Another strong incentive is the chance of a listing on the Alternative Investment Market (AIM), which gives smaller companies access to capital markets.

From 1 October 2006, new Patent Office rules will make it easier and more cost-effective for innovative companies to register their designs. The government agency has conducted an extensive review of the design registration system and has introduced what it believes to be a modern system more in tune with European practices. Benefits include a simplified application process, the possibility of making multiple applications on a single form, access to official files documenting the application process and postponement of public disclosure, on request, for up to 12 months. A guide to the new procedures, forms and fees can be found at: www.patent.gov.uk.
 

Government redraws the map of Assisted Areas
The government has published its new map of Assisted Areas within the UK, showing the zones where businesses can apply for regional aid over the next seven years. It has also unveiled a new package of measures for areas not included on the map. Regional Development Agencies (RDAs) will be able to give grants to small and medium-sized businesses in such areas from January 2007.
Under EU rules, the government has had to cut a fifth of the UK’s assisted area coverage, and in July it published a draft map for consultation. The latest version of the map, which must now be sent to Brussels for final approval, retains most of the cuts, but incorporates more than 30 changes made in response to representations. EU rules only allow regional state aid to businesses located within designated areas, although all other forms of government aid is permitted to firms outside these areas. “We had tough choices to make, but I believe we have reached the best balance we could between the needs of areas and the opportunities in those areas,” said Margaret Hodge, Minister for Industry and the Regions.

For the period 2007-2013, all western members of the EU will have to cut their assisted area coverage, as funding is redistributed to the poorer areas of the enlarged EU. The UK has had to cut the proportion of its population covered from 30.9 per cent to 23.9 per cent, although some countries have had to accept even sharper falls (in Ireland, for example, assistance is being cut from 100 per cent to 50 per cent).

A number of disadvantaged regions in the UK will automatically qualify: Cornwall and the Scilly Isles, West Wales and the Valleys and the Scottish Highlands and Islands. The whole of Northern Ireland will also continue to be an assisted area. Six areas that previously qualified (including Ellesmere Port, South Manchester, Brighton and Hove and North Warwickshire) have been excluded, as EU rules judged their economic performance to be too strong.
 

Honda to rev up Swindon car production to the max
Japanese car-maker Honda is to increase production at its plant in Swindon, South West England from 190,000 to 250,000 cars a year, and will create an extra 700 jobs, enlarging its workforce to 4,900. The move comes in response to soaring demand from Europe, mostly for the company’s three- and five-door Civic models. In the first eight months of 2006 the company sold more Civics than in the whole of 2005. The new Honda CV-R, unveiled in September at the Paris Motor Show, will also be made at the Swindon factory from January 2007. Most of the extra jobs will be in production, with an extra shift being added to boost efficiency. This will take production at the plant up to its maximum capacity.

The announcement was a “massive vote of confidence” in the workers at Swindon, said Dave Hodgetts, director of planning and administration at Honda UK. “[It] clearly demonstrates Honda’s long-term commitment to the region and to British manufacturing,” he added. This year marked Honda’s 20th year of operation at the Swindon plant; cumulatively over that time it has invested around $3 billion. The latest investment follows the news that both BMW and Nissan intend to increase their production in the UK, at their plants in Oxford and Sunderland respectively.

In a separate development, Honda UK has opened a new state-of-the-art wind tunnel at Brackley in Northamptonshire in the East Midlands, in a bid to boost the performance of its Formula One racing team. Honda has had a longstanding presence in the region’s ‘Motorsport Valley’, a centre for the development of racing technology that incorporates the Silverstone and Donington Park race circuits and the National College for Motorsport, among numerous other motorsport-related facilities.

Yasuhiro Wada, Shigeru Takagi, President-Honda Motor Europe at the Honda Racing F1 Team wind tunnel launch

The new wind tunnel is capable of creating wind speeds of up to 180mph and has a rolling road that can run at the same speed. It was officially opened in October by Alistair Darling, Secretary of State for Trade and Industry. At Silverstone, meanwhile, a prestigious new conference facility at the Silverstone Innovation Centre was opened in September by former Formula One world champion Damon Hill.

 

Telecoms operators join forces in mobile TV trial
Four mobile phone firms have joined forces to trial a new mobile television project in Bristol, South West England. Orange, 3, Vodafone and Telefonica are jointly working on the trial, which will test key performance and deployment aspects of the mobile TV technology TDtv. Customers will be able to receive broadcast services from specially deployed base stations on their TDtv-enabled mobile phones.

The main advantage of the technology for operators is that it operates in the universal unpaired 3G spectrum bands that are available across Europe and Asia, meaning they do not need to buy new radio spectrum to broadcast mobile TV. An Orange spokesperson, for example, said the company was able to offer up to 50 mobile TV channels using its existing 3G spectrum. TDtv enables mobile operators to deliver services to an unlimited number of customers, along with digital audio, multicast or other IP datacast services. The use of 3G will also allow mobile phone vendors to develop TV phones quickly and cheaply, say the partners. The Bristol trial is scheduled to run until the end of the year.

Regional news

Corus

Steel-maker Corus has received a grant of $523,000 from RDA Yorkshire Forward to research science and manufacturing technology to produce premium-grade steel rails at its Swinden Technology Centre laboratories in Rotherham, South Yorkshire. Corus will use the grant to develop rails with improved resistance to degradation, which will increase their lifespan and lead to lower costs. It will focus on ‘rolling contact fatigue’, which causes the formation of small defects in the rail and is a major cause of rail life reduction in railways throughout the world.

Yorkshire Forward has also made a $665,000 grant to Rofin Sinar UK to develop more economical and environmentally friendly lasers at its Willerby site in Hull. The company, part of the worldwide Rofin group of companies headquartered in Germany, is the leading European supplier of compact sealed carbon dioxide lasers at powers greater than 100 watts. It will match-fund the RDA grant to develop a range of low-powered carbon dioxide lasers that will be used to mark bar codes and batch codes on packaging. The new lasers will be more cost-effective, efficient and stable, says the company, and will replace ink-based coders that use environmentally unfriendly chemical solvents.

In yet another partnership, Yorkshire Forward is investing more than $950,000 in an Indian-owned pharmaceuticals company in a project that could bring major savings to the pharmaceuticals industry. NPIL Pharma, the UK subsidiary of Indian drugs giant Nicholas Piramal, is developing a new pharmaceutical process technology that will be used to make drugs in a more cost-effective way. The company, based in Huddersfield, West Yorkshire, is developing a process it calls SCRAM, which will improve yields and cut costs and environmental waste. During manufacture, many drugs consist of a ‘mirror image’ – two forms of the same chemical structure. Fifty per cent of the drug may be clinically ineffective and sometimes toxic, and is usually discarded. However, SCRAM catalysts will enable manufacturers to turn the mirror image into the required molecular structure. NPIL Pharma will match-fund the grant from Yorkshire Forward to perfect the process.

Vincogen of New Jersey, a company that specialises in radio frequency identification (RFID) biochips for use in the diagnostic and pharmaceuticals industries, has set up a new HQ for its UK operations at the Sheffield Bioincubator in Yorkshire and Humber. “Vincogen’s move to the Sheffield Bioincubator is a great strategic move. We are now within arm’s reach of all the research expertise and resources that Yorkshire has to offer,” said Wim Shih, the company’s business development manager in the UK.

Swedish contract manufacturing company PartnerTech AB has acquired Hansatech Group of the UK for around $11 million. Hansatech, whose bases include plants in Cambridge and King’s Lynn in Eastern England, has 320 employees and annual sales of around $38 million and is one of the UK’s five biggest manufacturers of industrial electronics products. It has advanced expertise in areas such as prototype development, printed circuit board assembly and box build and has a large customer base, a strong balance sheet and stable orders. “The Hansatech Group’s market and position, along with PartnerTech’s structure and business set-up, will create value and benefit to both us and our customers,” said Gary Howse, Hansatech’s managing director.

Handleman UK Ltd, a US-based supplier and merchandiser of home entertainment products such as CDs and DVDs, is to open a new facility in Bolton, North West England that will create more than 400 jobs. The company already employs 300 people at its existing Birchwood site in Bolton and 1,000 nationally. The new 275,000 sq ft facility will be located on the Big Sam development at Wingates Industrial Park, and is strategically located for the national motorway network. Worldwide, Handleman employs more than 2,000 people. The company manages 4,000 stores on three continents, has annual sales of $1.2 billion and accounts for 9 per cent of all music sold in the UK and 11 per cent in the US.

Software company Northbrook Technology, a subsidiary of one of the US’s biggest personal insurance companies, is creating 400 new jobs in Northern Ireland as part of a $44 million expansion programme. The company, which set up in the province in 1998, already employs 1,400 people in Belfast, Londonderry and Strabane. The new jobs will be divided between the company’s Belfast and Derry bases. The latest investment – $11 million of which was contributed by inward investment agency Invest NI – will be used to carry out higher-value software development and to expand the company’s range of products and services.

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