The North of England From Ships to Chips

The cradle of the
Industrial Revolution
stars in the Tech-
nology Revolution.

Once the seat of shipbuilding, steel making and coal mining, the North of England is emerging as the high-tech center of the UK and Europe's most popular destination for foreign investors.

The region closed the final chapter on a distinguished tradition just two years ago, when the last of the big shipyards abandoned production. Now a new book stars semiconductors and scientific instruments, autos and advanced materials, biotechnology and information technology.

The five-county North of England, home to a population of three million, has captured many of the major investments going into Europe in recent years. Investments flow into the North from around the globe -- the region is the European base for 185 North American companies and 80 firms from the Asia-Pacific region, the largest concentration in Europe. Investors from elsewhere in Europe bring the total of foreign firms to over 450. The North chalked up one of the highest levels of economic development in England in recent months. In 1995 investment in new plants and expansions reached almost $2 billion and generated over 5,800 jobs. In the last decade, investors poured over $10 billion into the region, creating and saving 64,000 jobs. Among prizes were a new $1.8 billion Siemens factory and research center that is bringing 1,800 jobs to Tyneside, reportedly the largest investment ever by an overseas company in the UK. Observers say it was the combination of land, a hefty grants package and training that persuaded Siemens to locate the computer chip plant in the North. But other advantages of the area also have an impact on the bottom line: Wages in the area are relatively low -- about 13 percent less than the British average, which is about 40 percent lower than in Germany. Too, industry in the UK can schedule round-the-clock shifts and flexible work time -- options not permittted in other parts of the European Union. Since the Siemens site will also house a research center, it was important to the company to be able to tap local technology expertise. Siemens established a relationship with Newcastle University's department of computing science and its department of electrical engineering, which has a reputation as a center of excellence in semiconductor technology.

Quick Facts about the North of England A large pool of labor, particularly skilled in the engineering trades. Lower wage rates and operating costs than other parts of the UK. Low absenteeism and turnover in the work force, flexible as to shift work. Over 20 free-standing sites of 50 acres or more, plus numerous fully serviced industrial estates. One of the most aggressive grants programs in the UK. Enterprise Zones at Sunderland (running to the year 2000); six newly designated zones in East Durham (running through 2005); and four sites in North and South Tyneside (operational in 1996). Excellent transportation infrastructure, little congestion. A familiarity with the needs of foreign investors. Five universities with extensive R&D programs readily collaborate with industry. University of Durham (international business school, applied physics, polymer science, electronics) University of Northumbria (industrial design, electronic engineering, fashion) University of Newcastle (medicine, dentistry, computing and software, design and transport) University of Sunderland (pharmaceuticals and pharmacology, polymers and advanced materials, Japanese studies, offshore engineering) University of Teesside (civil and mechanical engineering, industrial and interior design, information engineering)

The Siemens announcement came close on the heels of another success story -- Samsung's 3,200-job, $900 million electronics complex at Wynard in Cleveland County. And the Samsung project followed Fujitsu's 1991 decision to locate a semiconductor plant in Newton Aycliffe in County Durham, an investment that will eventually reach $1.5 billion.

This is what global business networks are all about. A U.S.-based firm (Simula Automotive Safety Devices) invests in a North of England plant to supply a German automaker.

While the numbers involved in the Siemens and Samsung announcements are impressive, it is equally interesting that the word about the sunny business climate of the North is filtering down to smaller firms. For example, Simula Automotive Safety Devices, based in Arizona, recently selected a site at Wansbeck Business park in Ashington, Northumberland, for its first plant outside the U.S. The company will make side-impact head protection airbags for BMW from a 30,000-sq, ft. plant.

Neyr Plastique has a new plant generating 200 jobs and a $24 million investment. Two Asian firms -- Young Shin and Dong Jin -- are more recent investors.

While announcements from new investors keep coming, now they are being joined by expansion after expansion, as existing firms confirm that their original decisions were solid.

For example, a recent expansion of the $600 million Fujitsu semiconductor plant in County Durham, represents capital investment of $1.2 billion and 500 additional jobs. Hutchison Telecom's recent expansion was worth 500 more jobs.

This year, car parts maker TRW announced a new factory in County Durham -- its fifth in the North. (Other plants make seat belts, valves and electronics.) The 50,000-sq. ft. plant in Peterlee will initially produce air bag inflators for several carmakers. The plant is the first phase of a $37.7 million investment to expand TRW air bag production in County Durham.

Nissan, which employs 4,000 in the UK, recently said it will establish a European data center at its North of England plant. The $15 million investment will control production at both the company's Sunderland and Barcelona manufacturing sites, as well as create a "leaner" vehicle distribution network across Europe.

"Sunderland was the ideal choice for setting up the company's Europe-wide computer brain," says John Hope, general manager of Information Systems. "We already have a highly qualified team in Sunderland, as our current computer system controls the manufacturing process here. The new hardware will mean a larger team, bringing further expertise to the North."

Moreover, Nissan's latest European auto plant expansion brought an investment of $375 million and 500 new jobs. Nissan came to Sunderland, Tyne and Wear, a dozen years ago.

Another expansion was recently announced by The Orange Group, whose wireless phone network covers 90 percent of the UK. Owned by Hong Kong-based Hutchison Whampoa and British Aerospace, The Orange Group will invest in a 50,000-sq. ft. building. The company's operations include a customer service center and other support for Hutchison Paging and Hutchison Cellular services.

The impressive number of announcements is the result of an aggressive team of local and regional development organizations. They are led by Northern Development Co. (NDC), one of the few development groups to seek and achieve ISO 9001 status. NDC, a coalition of private sector interests, government bodies and unions, is a one-stop shop for investors. Having a quick response team at hand was critical for Siemens -- the company wanted to build its plant in less than a year. NDC is well aware that other high-tech companies, whose products may have a fleeting shelf life, look for fast action.

As Chief Executive of Northern Development Co., Dr. John Bridge fields an aggressive team with an outstanding record of luring business to the North.

Northern Development Co.'s "aftercare" team includes a corporate legal adviser, finance manager and banker to help assure smooth operations once a company is established. NDC's supplier chain development program has helped companies in the region secure over $35 million in contracts to supply Samsung and over $270 million in contracts to supply Siemens.

Working in unison with NDC is an aggressive group of local development agencies, as well as qualified private developers like Akeler Developments PLC, one of the most active development companies in the UK. Beginning operations just seven years ago, Akeler now manages the largest speculative development portfolio in the UK, with 600,000 sq. ft. of spec space in place.

The company concentrates on "shell and core" office and industrial space, with expansion and outfitting options that can be finished off quickly to meet the needs of the enduser. Much of the space is in the North's Enterprise Zones.

The company, which bills itself as "mutidisciplined," likes to do every phase of a project for an investor -- from site selection to design and build, and from construction management to property management. On the construction side, for example, Akeler has a better understanding of low-energy buildings than anyone else in the UK, says CEO Mark Glatman. "We also have better knowledge of slim floor technology than anyone else in the UK," he adds. "This gives height savings on a building and better usability within the building."

Doxford International in Sunderland is one of Akeler's largest projects, with 540,000 sq. ft. of offices and high-tech space built or under construction. When completed by the year 2000, the project will be well over one million sq. ft. Among occupiers is London Electricity, which had looked at 28 sites in the UK for a new call center. Akeler moved the business to the North after demonstrating massive cost savings. Akeler provided a total package, including offices, grants liaison and housing for the 750-employee project.

Despite its recent successes, the North wrestles with a worrisome unemployment rate, higher than the UK average. When the Siemens and Samsung plants were announced, the work-hungry flooded employment hotlines with calls. Siemens expected at least 10,000 calls for its 2,000 jobs.

"The loss of the mining, steel and shipbuilding industries created a significant mind shift of the work force," says Glatman. "People want work. And when they get it they are incredibly loyal and hard working."

To corroborate the point, Glatman cites the example of TRW in Sunderland. The company is a supplier to the Nissan plant, shipping on a just-in-time basis. As the story goes, employees were idled one day when a component from an outside supplier didn't arrive on time. The shift supervisor suggested that instead of wasting TRW's time and money, everyone go home and come back at 8 that night when the errant part was due to arrive. "When you get that kind of commitment from your staff, you respond," says Glatman. "TRW has now invested over $100 million in that region."

Toasting success: Siemens announced in1995 it would bring a $1.8 billion semiconductor plant to the North of England.

Because of its long industrial tradition, the work force of the North built strong engineering-based skills. Where once those skills designed locomotives and war ships, now they are just as applicable to automotive and microelectronics.

Underpinning the native talent is government and education support to provide industry with what it needs. For example, supporting the burgeoning consumer electronics industry is a new computer science chair at the university at Newcastle, sponsored by Siemens, as well as a new microelectronics institute, with European funding. "This adds value to the area as a center of learning and training in electronics, not just manufacturing," says Gordon Ramsey, chief executive of Tyne and Wear Development Co.

Another growth industry in the North is call centers. British Airways started the trend a few years ago when it placed its 1,500-employee European-American reservation center in the North. Today, thousands are employed by such companies as Matrixx Marketing, GE Capital, London Electricity, Mercury One 2 One and others. The region has the sophisticated telecom systems necessary to such operations, with diverse routing over fiber optics from BT, Mercury and other telecom suppliers now coming into the UK. There are also advanced training programs that keep a steady stream of workers flowing into the call center operations. The training is available at no cost to the companies. Increasingly, the call centers service all of Europe, not just the UK.