UK: BRITAIN'S OFFSHORE INDUSTRIAL PARK DAYS MAY BE NUMBERED. - New competition is making the UK look less attractive to foreign firms.

by Peter Wilsher
Last Updated: 31 Aug 2010

New competition is making the UK look less attractive to foreign firms.

Britain's biggest machine tool-maker these days - in case you were not aware of the fact - is a company called Yamazaki Machinery UK. Its main plant is in Worcester, where six years ago its parent, Yamazaki Mazak, decided to invest £40 million in an enterprise which now represents some 270 direct jobs in the city, and probably as many again indirectly among local service businesses and suppliers. It has already figured prominently among the annual winners of the Queen's Award for Export, and it is happy to report that almost 90% of its output is regularly crated up for shipment overseas, mainly to markets concentrated in Continental Europe.

It is a classic example from a gratifyingly long list. This country, whatever its other economic deficiencies, has been extremely successful in selling itself as an offshore industrial park. Almost a fifth of the estimated £220 billion spent in the past five years on updating and expanding the UK stock of plant and machinery has been put up by firms whose headquarters are located beyond these shores. The Americans, who, for the best part of a century, have been routinely setting up shop here as their first step towards multinationalhood, now account for no fewer than 3,500 distinct and separate operations in these islands. The Japanese, who were barely visible 15 years ago, have already passed the 200 mark. And the Germans, as they agonise over the ever-rising costs of doing business at home, are increasingly seeing Britain as an attractively convenient alternative. Last year they took second place behind the US, with 51 new projects, representing 16,000 new jobs. In total, foreign-controlled firms here now account for one-sixth of all manufacturing employment.

Unhappily there are reasons to fear that the good times may be coming to an end. This is partly due to global recession. But beyond that there are complex strategic shifts reshaping the global economy, and it is far from clear that these eccentrically situated offshore islands of ours will always retain such a large share of the location consultants' approval. In fact we could soon be fighting to retain what we have. The scaling-back at Nissan's showcase Sunderland plant is only one of several recent warnings.

The challenge we are facing has two main prongs. First, there is a lot of rethinking going on about growth prospects for the European Union, whose proximity, opportunities and relative unfriendliness to external investment have provided us up to now with such a mouthwatering menu of attractions. We have much less to offer anyone seeking to explore the newly dynamic trading areas to be found in North America, the Far East and the former Soviet empire. And to make things even tougher, we now face an uprush of fresh competition, often right on our doorstep, as our once-passive neighbours and partners wake up to what they have been missing, and start seriously setting out their own stalls.

Some of these can look distinctly enticing. The Rhone-Alpes region of France, and locations like the Sophia-Antinopolis business park which basks in the sun-drenched Mediterranean olive groves behind Antibes, enjoy the sort of climate and life style that go a long way to offset the high costs, obstructive trade unions and bureaucratic chauvinism which have made investment in President Mitterrand's bailiwick so off-putting in the past. Now that Paris has decreed a more welcoming attitude - and some important new flexibilities on the wage and labour-relations front - a lot of once-cautious corporate advisers are having second thoughts. Meanwhile Sophia-Antinopolis, which already accomodates 900 companies, is well advanced with plans to double its size next year. It is hard to see this as good news for the distinctly less well-endowed Scunthorpes and Cumbernaulds of this world.

At least they know where Provence is, though, and what it has to offer. Stand up those who could pinpoint Szcezin on the European map and explain why it is developing into such a potentially dangerous rival. Under its previous name of Stettin it was once Berlin's main outlet to the Baltic. Now, alongside Gdansk-Gdynia, it has transformed itself into one of the most explosively dynamic cities in Poland, which in turn will probably emerge as Europe's fastest-growing economy this year. Such places, with wage rates still barely one-sixth of those in neighbouring Austria and East Germany, are already becoming powerful investment magnets, presenting a far from remote threat to such still struggling areas as the North East and South Wales. Even tiny, impoverished Albania, with little to offer but rock bottom prices for everything from land to labour, is now setting off down the same trail.

It is going to take a lot of effort and imagination if we are going to hang on to our existing lion's share - let alone expand it much further. After all, the most worrying thing about Britain's largest machine tool-maker is not that it is Japanese-owned but that it only employs 270 people. You need a very steady supply of such enterprises to make much of a dent in 10% unemployment.

Peter Wilsher is a freelance consultant and writer.

Find this article useful?

Get more great articles like this in your inbox every lunchtime