Siemens aims at pounds 1bn UK factory

Siemens, the German electronics group, is talking to the Department of Trade and Industry about getting grant aid in return for building a pounds 1bn factory in the UK.

Siemens' chairman, Heinrich von Pierer, has discussed the plans with the former President of the Board of Trade, Michael Heseltine, now Deputy Prime Minister.

It comes just two weeks after the DTI's controversial decision to award an pounds 80m aid package towards Jaguar's pounds 400m investment in a new car plant in Birmingham.

The grants are being scrutinised by the European Commission authorities in Brussels, which have warned that part of the aid may be blocked.

Siemens plans to build a microchip plant in Europe and has shortlisted Germany, Austria and Ireland, as well as sites in north-west England and in Scotland's "Silicon Glen".

The company said yesterday that it delayed making a final decision last week in order to continue discussions with the DTI. Mr von Pierer said a decision on the site would be made within two months.

Siemens, which already has a semiconductor plant in Dresden, Germany, believes the investment could create up to 2,000 jobs. A new factory would make semiconductor chips for mobile telephones and smart cards.

The DTI confirmed that an approach had been made, but declined to comment further. Siemens could not comment on the size of the aid it wanted.

One of the main criteria for awarding grant aid is the number of new jobs to be created. Jaguar's investment will mean about 1,300 jobs at the factory and an estimated 5,000 generated through spin-off work.

The UK government also justified the grant by saying that other countries also offer substantial incentives to encourage inward investment.

But Karel van Miert, Brussels' competition commissioner, is known to be increasingly irritated by attempts to get around anti-competitive regulations and has threatened a tougher approach.

Siemens yesterday reported a rise in net profits of 3 per cent to DM4.4bn (pounds 2bn) in the first nine months of its current business year.

A pick-up in western European demand for capital goods, particularly in Germany, is boosting Siemens' sales, he said. An expected doubling of the semiconductor division's profit to more than DM340m, plus a turnaround to profit at the computers unit, Siemens Nixdorf, should help to offset exchange rate problems. Public communications networks and the power generation division, on the other hand, have seen sales decline sharply.

Sales in the first nine months rose 4 per cent to DM60.2bn, while incoming orders were up 3 per cent to DM66.9bn.

The workforce is expected to fall to around 370,000 by the end of the fiscal year from 376,000 on June 30. The reduction of around 6,000 jobs is less than the planned reduction of 12,000 the company mentioned a few months ago.

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