New Company Towns

Are we in a re-run of Victorian civic paternalism? Some communities would be all but dead were it not for the presence of a dominant firm in their midst, handing out the jobs and even shaping their surroundings. Dave Waller reports on an uneasy relationship.

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Last Updated: 31 Aug 2010

Earning a crust during the industrial revolution must have been hard.

You lived in a slum, and went off to your 14-hour factory shift knowing each day that there was a possibility you weren't coming back...

It was against this background that visionary philanthropists like George Cadbury, Titus Salt and the Lever brothers developed the model for the original company town - a healthy and productive environment for their mill and factory workers to live in. For their revolutionary, company-built suburban estates - Bournville, Saltaire and Port Sunlight - they rejected back-to-back housing in favour of an enclave designed to provide character homes set amid open spaces and greenery. They created avenues to self-improvement, too, with libraries and night schools, where workers were encouraged to spend their evenings productively, rather than lounging in gin palaces.

Such paternalism was a product of its time. These philanthropic entrepreneurs were deeply religious men who felt a duty to help the deserving poor.

Today's social and economic climate is vastly different, yet the company town has its modern equivalent, with single firms dominating the economic landscape of a community and exercising a massive impact on the working lives of its population.

Driven more by commercial expediency than altruism, these new company towns have sprung up organically rather than by design. Many are home to firms started by local entrepreneurs who made it big - such as Folkestone-born Roger De Haan, whose empire for the over-fifties, Saga, grew from a single hotel into a provider of holidays, insurance and financial services; and John Caudwell, who founded the £2 billion mobile phone company Caudwell Group in Stoke. Says Caudwell: 'Stoke is my heartland, where I had people I could depend on. I didn't want to start up my business anywhere else.'

Others centres, such as Swansea and Greenock, had lost the key industry on which they once depended, leaving an economic void into which new big guns could move. They offered major organisations the advantages of a willing workforce and a low cost base.

Visit these new company towns and it's clear where the jobs are coming from. The houses may be privately owned, the pubs full and the libraries empty, but the firm is still everywhere.

Landmark factories of old have been replaced by airy, modernist headquarters.

'It's all Vodafone, Vodafone, Vodafone,' says one Newbury resident. If it wasn't for the mobile giant, she points out, half the cab firms and hotels in the area wouldn't survive.

In Folkestone, Saga's HQ looms large over the economically depressed seaside resort, its impeccable exterior (see p51) in stark contrast to the boarded-up old high street. In Swansea, the DVLA's 20-storey nerve-centre rises from the middle of a hilltop council estate. The people below know where the jobs come from - the DVLA employs about 6,000.

Such organisations can provide locals with a sense of job security and a social network through which others can find their way into work. Speak to residents and most know several people who work for the big firm, even if they don't themselves - husbands and wives in permanent positions, school leavers starting their careers and students paying off their loans by working through the summer holiday.

'Youngsters get invested in by the company and move up,' says David Danielli, Vodafone's head of community relations. 'They might not have that option in the area with anyone else.'

Having a big employer bringing prosperity to a town is no bad thing, even if house prices rise as the town becomes a desirable place to live.

The corporate presence can gee up local service industries - cab firms prosper and caterers and pubs gear up to meet workers' needs. And, adds Danielli: 'A large company brings clout and a clustering of others taking advantage of the larger market.' He cites the fact that his company drew Ericsson to the area. Similarly, financial services specialists flocked to Leeds to join HBOS, nearby.

But such reliance has its dangers. 'If something goes wrong, you've had it,' says Murray Steele, senior lecturer in strategic management at Cranfield School of Management. In the days of Salt and Cadbury, it was a long-term deal. Business was tied to an area by its need for raw materials, whether water for mills or coal for steam power. Modern firms, though, are drawn by less tangible factors - transport links, low rent, available workforce and favourable tax regimes. They can uproot and move to where it's cheapest.

The cost to the firm that relocates is relatively low, but it can be devastating to the area left behind.

IBM's withdrawal from Greenock provides a sobering example. Having arrived in 1951, the computer giant was Scotland's largest exporter at its production peak in the 1990s, with a turnover of £2.2 billion. It had 5,500 staff in the town and provided work for 8,000 local sub-contractors and suppliers.

Steele, who grew up in Greenock, says his relatives saw IBM as 'a guaranteed future, like a civil service job'. But the firm's shift away from manufacturing to services has led to the outsourcing of much of its work - to Sanmina-SCI in 2003, and last year to the Chinese Lenovo Group - and hundreds of job cuts. Sanmina itself announced the closure of its operation in January, sending its Greenock staff to Hungary to train their own replacements.

Even smaller moves can have a big impact. Says a Newbury resident: 'When Vodafone had its offices in the centre, the place was buzzing every day from 12 till 2, with loads of young people with a disposable income. When it moved to the complex on the outskirts, it killed the town.'

But even the great Victorian philanthropists understood that the bottom line drove everything. If proper housing and education created a better life for the employees, they also guaranteed higher productivity and better profits. Some residents find it hard to acknowledge the economic benefits, seeing the dominant firm as the villain on their doorstep. Witness the term 'Vodaclones', applied to the firm's 5,000 employees by disparaging Newbury residents.

'There's a worrying problem of economic illiteracy in the UK,' notes Steele. 'People see companies as the great capitalist monster, but don't see the value of what they're doing for them. Vodafone is a major UK company, and its success reflects on the UK economy as a whole. The more successful Vodafone is, the better these people's pensions will be.'

NEWBURY

'If it wasn't for Vodafone, you'd see a tumbleweed flying past,' says one resident of the pleasant, if sleepy, market town. Vodafone arrived as a fledgling firm in 1985. The rent was low, and the M4 and Heathrow were near. Moreover, CEO Gerry Whent was a big fan of horse racing. Now Vodafone is a global player, employing local school-leavers and attracting graduates to its campus HQ (right) with the twin carrots of career and countryside. 'If we weren't here, Newbury would hold its own,' says David Danielli, Vodafone's head of community relations, 'but a large company brings clout.' He cites the positive effect on cab firms, caterers and hotels, and Vodafone's role in attracting telecoms and software players such as Ericsson and Logica to the area. The firm has close ties with schools, stages arts events and likes staff to volunteer in the community.

But not all residents are convinced by the corporate philanthropy. 'You can watch five Vodafone buses go past empty,' says one. 'If you haven't got a big red speech mark on your head, you can't get on.' Relations won't be helped by Vodafone's decision in May to offload 400 of its 5,000 Newbury staff to cut costs.

SWANSEA

Wales' second city has suffered since it lost its shipping, steelworks and coalmines. 'It's pretty much a drinkers' town now,' says one local.

'The only jobs are - for want of a better word - menial.' Big firms in the area are bailing out fast, the latest being Sony in nearby Bridgend - illustrating the precariousness of attracting multinationals with grants and then relying on them for jobs. Residents complain of low-paid Poles taking the remaining work. The DVLA, which came to Swansea in the early '70s and now employs 6,000 at its HQ (left), is valued as a secure long-term option. Swansea's future is focused on a £200m scheme to build a business park and marina that will create 2,000 jobs. The DVLA's role could expand too, through involvement in new government admin initiatives such as ID cards, and this may draw other government departments as Gordon Brown continues his mission to cut civil service costs. But Swansea people remain sceptical. 'I've got mates who have been up at the DVLA nine years,' one local tells us, 'but most have their fingers in other pies now, just in case.'

STOKE

John Caudwell's mobile phone empire is one of Britain's business triumphs of the past 20 years. It has also brought the local-boy-made-good a personal fortune of £1.3bn. The old coal and potteries town suffered mass layoffs in the wake of pit and factory closures in the mid-'80s. This depressed economic vacuum was a perfect home for a business in the technology boom, but sentiment played its part. 'I wanted to make a positive contribution to where I grew up,' says Caudwell (the old Minton tiles factory, right, is now his head office). He puts the group's local financial input at £100m a year, via the use of local suppliers and the payment of council rates and 3,500 salaries. But the Communication Workers Union has criticised his 'poor welfare provision and heavy-handed management'; and his plans to employ 14-year-olds in his Phones 4U stores and build posh homes on greenbelt land have brought a local backlash. For Caudwell, it's all part of being prominent: 'We're constantly under the media microscope. Whatever we do makes the papers.' But the scrutiny will ease if he completes the £1.5bn sale of the group this year. It brings a new phase of uncertainty for Stoke, though.

FOLKESTONE

'One of the prettiest watering places on the South Coast,' said Charles Dickens of the Edwardian seaside haven. MT's cab driver described contemporary Folkestone in less affectionate terms: 'It's a shit-hole nowadays.' Visitors will find a town low on confidence, its port killed off by Eurotunnel, and the once-picturesque quarters like the Old High Street, winding lazily up from the coast, boarded up and deserted. Folkestone folk spend about £250m a year shopping outside their town, and most of their time complaining about its rampant refugee population. Saga, which sells insurance and holidays for the over-50s, is the town's only big employer, putting 2,000 salaries into the area. Small businesses such as Gate 28, a cafe based at the foot of Saga's extensive Sandgate grounds (its HQ, designed by Sir Michael Hopkins, is pictured), rely exclusively on the flow of Saga staff for their lunch trade. 'If it wasn't for Saga we wouldn't be here,' says co-founder Justin Terry. Many residents cry foul over Saga's monopoly and alleged low wages, but the town would be worse off without the company.

And there are signs that Folkestone's tide is about to turn. Roger De Haan, Saga's native founder and former owner, has already begun revamping run-down areas via the not-for-profit Creative Foundation. In March, he unveiled his masterplan for a £200m Foster & Partners-designed waterside redevelopment. De Haan's vision includes a marina and a university, and a catamaran link to Boulogne - he aims to put Folkestone back on Europe's cultural map. Meanwhile, the high-speed rail link to London's St Pancras station, due to open in 2007, should put people in 35-minute reach of the capital. Investors have latched on to the town's benefits - the elegant infrastructure, enviable coastal location and proximity to the Continent.

The local buzz that Folkestone may soon be a commuter town to rival Brighton suddenly seems less far-fetched.

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