Siemens ordered to repay pounds 18m in grant aid

SIEMENS, the German electronics giant, was yesterday ordered to repay pounds 18m it received in government grant aid to help build its doomed semiconductor plant on Tyneside.

Stephen Byers, the Secretary of State for Trade and Industry, told the Commons that Siemens had failed to meet conditions that were set down when it received the money towards opening the pounds 1bn factory in 1997.

Siemens announced the closure of the plant at Wallsend with the loss of 1,100 jobs last July, blaming a collapse in semiconductor prices.

The demand for repayment of the pounds 18m in regional selective assistance effectively spells the end of attempts to find a buyer for the plant.

Speaking during a Tory-led debate on the economy in the Commons, Mr Byers said his department would now offer regional selected assistance grants to help attract other inward investment in the North East region and other parts of the country.

"Siemens will now be required, as a matter of urgency, to repay the pounds 18m they received," said Mr Byers, whose own Tyneside North constituency is close to the plant.

The Siemens plant received a total of pounds 60m in aid, of which pounds 43m came from the UK. In addition to the pounds 18m of RSA, Siemens also received pounds 10m from English Partnerships, pounds 8m from City Challenge to pay for roads and other structural improvements, pounds 5m from Tyneside Training and Enterprise Council and pounds 2m from North Tyneside Council. Further financial aid was provided from European Union funds

A spokeswoman said: "We have always said we would return any money we were asked to pay back and we will not renege on that." Alan Wood, the chief executive of Siemens UK, is expected to meet Mr Byers today to discuss the repayment.

Siemens could not say how much more of the outstanding UK aid would be repaid. The spokeswoman said it was not possible to return some of the financial support because it had been provided in the form of training.

Mr Byers stressed the timing of the announcement was not a result of the company's decision to open a new plant near Paris.

"The time is a pure coincidence", he said. Officials had sent out the invoice this morning after Siemens had ceased to continue with a marketing campaign for the Tyneside plant.

There is a skeleton staff of about 80 people left at the plant, which will be officially mothballed in June. The actual amount invested in the project was pounds 680m as the closure was announced before Siemens went ahead with a second phase of expansion at the site.

Immediately after the closure announcement, the then Secretary of State for Trade and Industry, Peter Mandelson, set up a government-led taskforce to try to save the plant. Since then there have been several expressions of interest but no serious buyers, and the taskforce has ceased work.

However, Siemens said it remained open to offers from any interested parties.

When the go-ahead was given for the plant in 1995, Siemens forecast that the world-wide market for semiconductors would reach $200bn within three years, but it only reached $145bn. Over the same period, overcapacity in the world-wide semiconductor market brought the price of memory chips down from $55 to $3.

The Tyneside plant was also hit by the loss of a partnership agreement with a Taiwanese company that would have guaranteed half its output for 10 years.

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