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Britain Finds Success In Attracting Foreign High-Tech Investment

By Alexander MacLeodSpecial to The Christian Science Monitor / August 24, 1995



LONDON

BRITAIN is set to become Europe's leading high-technology manufacturing center.

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That is the view of government officials and independent analysts as they appraise a series of large industrial investments made by foreign companies in the United Kingdom this year.

The biggest high-tech investment so far, announced on Aug. 4 by the German electronics group Siemens, is a 1 billion (US$1.53 billion) semiconductor manufacturing and research plant near Newcastle-upon-Tyne in England's northeast. The plant will eventually create about 2,000 jobs in an area of high unemployment, a Siemens representative said.

The Siemens venture follows investment moves in the past 12 months by Japan's NEC electronics group; Samsung, the Korean chipmaker; and Jaguar, the carmaker, now owned by Ford.

All have decided to establish or expand factories in Britain, where wage rates tend to be low and government inducements for overseas companies to invest can be generous. Together the Siemens, Samsung, and Jaguar investments are expected to create about 10,000 new jobs.

Close in the wake of Siemens, the Japanese computer company Fujitsu announced plans last week to build a microchip plant, also in the northeast.

Two days later the German electronics company Grundig said it was switching production of satellite receivers from Germany to a factory in Wales.

Officials applaud decision

Welcoming the Siemens move, Michael Heseltine, Britain's deputy prime minister, said the decision to build a plant in the area known as Tyneside was ''welcome news and a vindication of the government's flexible employment strategy.''

He added: ''Britain is leading Europe out of recession. We now see ourselves as the enterprise center of Europe.''

Claims by Mr. Heseltine that Britain is ''beginning a second industrial revolution'' may be somewhat bloated, but figures published by the Department of Trade and Industry (DTI) suggest the country is now regarded by foreign companies as a prime investment venue. The DTI says the United Kingdom is attracting 40 percent of all United States and Japanese investment in the 15-nation European Union.

Analysts ascribe Britain's attraction to a combination of factors: the weakness of the pound sterling against the German mark and the Japanese yen, relatively low wage rates, and government-financed ''sweeteners'' offered to likely investors.

Heseltine has refused to come clean about how much help Siemens was offered to make up its mind about the Tyneside factory. The DTI says 30 million pounds was made available under its regional selective assistance scheme, but there are reports that the actual figure was closer to 200 million pounds.

Similar inducements earlier

In the 1980s Britain offered similar inducements to Japanese car manufacturers such as Honda and Nissan to establish factories on so-called ''green field'' sites in Scotland and Wales.

The strategy then - as now - was to attract investment into British-based industry and derive advantages from the sale of the resulting products to other European Union countries.

That will be the aim of the Siemens Tyneside factory. Jurgen Gehrels, head of the company's operations in Britain, says it will make integrated circuits used in mobile phones, smart cards, and other high-tech electronic equipment.

One advantage around Tyneside is the ready availability of high-grade water, essential in the manufacture of semiconductors. Also, there are abundant and reliable supplies of electricity.

Until two or three years ago, most inward investment in Britain was coming from Japan, but Germany is fast catching up. In the last 12 months Germany's BMW has acquired the Rover Group of carmakers, the Dresdner Bank has purchased British merchant bankers Kleinwort Benson, and the German chemicals group BASF has bought Boot's pharmaceuticals division.

A London-based BASF representative said British wage costs running 30 to 40 percent lower than those in Germany, and the strength of the German mark, had helped persuade his company to invest in Britain.The trend looks like it will continue. According to a survey by the German-British Chamber of Commerce, there are some 1,000 German companies operating in Britain, and 9 out of 10 of them say they plan to expand their operations here.

Much of the new investment is flowing into England, rather than Scotland and Wales, which attracted most of it in the 1980s. A DTI official says that this is because in 1993 Heseltine established an agency, English Partnerships, to promote investment in England.

''The agency was able to draw attention to the advantages of areas such as Tyneside for high-tech companies,'' the official said. ''Until quite recently those advantages were not stressed.''