Don't wait up for a Korean invasion: As a handful of big companies blaze the trail into the UK, Richard Thomson asks if they herald a new industry trend

IT ALL BEGAN on Monday morning with large newspaper advertisements by a company called Daewoo (pronounced day-oo) claiming to be 'the biggest car company you've never heard of'.

These adverts announced that Daewoo, which also makes cargo ships, aircraft and mechanical diggers, was preparing to launch a new car range in Britain, with a prototype at the International Motor Show in Birmingham, which opened last week.

On the same day Samsung, the consumer electronics group, announced plans for an investment of pounds 450m in a new manufacturing complex on Teesside, creating more than 3,000 jobs. Ssangyong, meanwhile, announced that it would start selling a four-wheel drive vehicle, the Misso, in Europe.

Then on Tuesday, Rover Group said that it, too, was launching a new investment programme, part of which would involve a joint venture with Kia to develop a new engine.

What all these developments have in common is that Daewoo, Samsung, Ssangyong and Kia are all South Korean companies. Is this merely a coincidence, or does it mark the beginning of a manufacturing invasion by South Korea - one of Asia's fastest-growing 'tiger' economies - to compare with the arrival of the Japanese in Britain over the past 15 years?

Korean interest in Britain is undoubtedly strong. A seminar on UK investment held by Michael Heseltine, President of the Board of Trade, in Seoul last Tuesday was attended by representatives of more than 100 Korean companies.

Korean investment here is still relatively small and recent. There are 11 Korean manufacturing projects in Britain, only two of which were started before 1990. They employ a total of 2,000 people. That contrasts with more than 200 Japanese projects, on which employment runs into several thousands.

Yet Chan Bae, managing director of Samsung UK, is in no doubt the Korean presence will increase. 'The Korean economy is growing fast and the Korean government is encouraging big companies to invest abroad. First it will be the big manufacturers like us. Already the smaller companies, the component makers, want to come here in their wake. We are like the Japanese: the small fish follow the big fish.'

That was indeed the Japanese model. The large industrial conglomerates arrived in the 1970s to set up sales and marketing offices over here. Only when they had cultivated a substantial market for their goods - mainly cars and electronics - did they establish a manufacturing base to service their European customers.

In their wake came a second wave of smaller Japanese companies, mainly component manufacturers, following their best clients westwards.

Samsung fits this model. As the 13th largest company in the world, and among the top three computer manufacturers, it is ripe for overseas expansion. It already has a large market for its televisions, hi-fis and microwave ovens in Europe. It makes a million colour TV sets a year in Britain, 80 per cent of which are exported to the rest of Europe. Gold Star, another Korean electronics company with a high UK profile, has also found it worth setting up a manufacturing base here.

'We want to be near our customers and inside the European Union,' Mr Bae says. Moreover, conditions within the Korean economy are starting to provide good reasons for moving the manufacturing process elsewhere in the world.

'Korean labour costs are rising, and there is no benefit any more in manufacturing in Korea and then taking 50 days to deliver to Europe. Our customers want door-to-door service now,' he adds.

Samsung appears to want to recreate in the UK a miniature copy of its vast electronics manufacturing complex - the largest in the world - outside Seoul. On the same site will be factories making TVs, microwaves and computers, using about 3,000 employees.

Critics of this process, who condemn the pounds 80m Government grant that attracted Samsung to Britain, claim that these will be low-quality, screwdriver assembly jobs. Mr Bae, however, insists that Samsung will be looking for UK and European suppliers to feed the factories rather than just shipping in Korean components.

Already, 80 per cent of the components that go into Samsung TVs made in Britain come from Europe. The only trouble at the moment, he says, is that there are not enough UK suppliers who come up to the required quality standards. This is exactly the problem the Japanese found when they first arrived in this country.

But Mr Bae's confidence that a wave of Korean investment is on the way is not shared by all. In many respects, South Korean industry is organised much like Japanese industry. There are a number of very large conglomerates, or chaebols, which manufacture a wide range of goods. They are supplied by a much larger number of smaller companies. The question is whether the chaebols are ready to move abroad en masse.

Rising wage costs at home are certainly forcing them to look towards other manufacturing centres. But Michael French, the partner at Coopers & Lybrand in charge of Japan and Korea, believes Samsung is unusual. 'It is very expansionist and talks more publicly of globalisation.' Other chaebols are further behind.

Korean cars, one of the country's leading industries, are as yet little-known in Europe. The motor manufacturers have a huge domestic market to satisfy - around 700 new cars are registered every day in South Korea.

Meanwhile, Hyundai, Kia and Daiwoo are still in the early stages of cultivating their market here (hence Daiwoo's slogan about the car company you've never heard of).

'Nissan only started making cars over here once it had established a big enough market in Europe,' Mr French says. For the time being, at least, Korean market share is simply not large enough to justify any of the chaebols manufacturing cars in Europe.

Another factor likely to slow down Korean investment in the West is the country's increasing interest in China, a rapidly growing market on its own doorstep. There is evidence that China is already absorbing resources that South Korea might otherwise have channelled towards Europe.

And there is less worry about European trade protectionism than a few years ago. It was such worries that persuaded many Japanese companies in the 1970s and 1980s that they had to manufacture inside the EU to get around any future protectionism. The Koreans, by contrast, do not feel this pressure at all strongly.

There may be steadily increasing investment in the UK from the South Korean chaebols over the next five years, but it seems unlikely to turn into a flood like the Japanese wave a decade earlier. And without the chaebols, the secondary wave of smaller companies may not materialise in the near future either. Those showing much interest in expanding overseas tend to prefer the US or other countries in the Far East; areas they understand better than Europe.

Mr Bae's optimism, therefore, seems somewhat premature. Few new manufacturing projects have been launched even by the Japanese on the scale announced by Samsung last week. But for the time being it looks like a one-off event. There appear to be no other large-scale investments in the pipeline at the moment.

The Department of Trade and Industry is assiduously cultivating Korean businesses in the hope that more will want to open up shop in Britain. But it has no false illusions. 'Investment from Korea will not be on the same scale as Japan,' said one insider. In other words, the Koreans are coming, but don't hold your breath.

(Photographs omitted)

PROMOTED VIDEO
News
video
Life and Style
tech
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Extras
indybest
News
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
education
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform