Siemens to pour pounds 1.1bn into 2,000 new UK jobs

Government lobbying and aid package win ships-to-chips investment for North Tyneside

RUSSELL HOTTEN

Siemens, the German industrial giant, is creating up to 2,000 jobs at an unemployment black-spot in North-east England with the biggest single investment by a foreign company in the UK.

The investment of pounds 1.1 bn in a semiconductor factory, a deal brokered personally by Prime Minister John Major and his deputy Michael Heseltine, includes a substantial aid package from the government.

Siemens intends that the plant, being built near the former Swan Hunter shipyard on North Tyneside, becomes its worldwide centre for production and design of microchips for mobile telephones and smart cards.

As Mr Heseltine hailed the move as an example of Britain's competitiveness and talked of its importance to the trade balance, the German government warned that it could not continue to allow such large investments to go overseas.

The factory, built in two phases and due to come on stream in 1997, is part of a worldwide investment strategy by Siemens to take on its rivals, Toshiba and IBM, and double sales of semiconductors.

Siemens said several factors persuaded it to invest in Britain, including exchange rate concerns, availability and cost of labour, and grant aid.

The Department of Trade and Industry is providing pounds 30m in regional selective assistance, but the total package could be far more. Local authorities and agencies are providing funds, and English Partnerships, a government body, is working on preparing the site.

Mr Heseltine dismissed suggestions that the total aid amounts to some pounds 200m as "wildly high", but he refused to disclose a figure.

Referring to the outcry over last month's award of pounds 80m in aid towards Jaguar's pounds 400m investment in a car plant, Mr Heseltine said: "We learn from our mistakes, and are not going to reveal the size of the aid."

The grants will be closely scrutinised by the European Commission, which has become increasingly concerned about the way governments attempt to disguise what is illegal state aid. Mr Heseltine said he did not see any problems over approval.

The battle to win Siemens' investment was fiercely fought between a number of European countries, including Austria, Portugal, Spain, Ireland and Germany.

It is thought that the company had until four weeks ago decided to choose Austria, but last-ditch attempts were made by Mr Major and Mr Heseltine to woe Siemens' chairman, Heinrich von Pierer.

Mr Heseltine met the board at the company's Munich headquarters, and organised introductions to some of Britain's leading industrialists, who were told to extol the virtues of coming to the UK.

Negotiations between the Prime Minister and Mr von Pierer were even held at the Wimbledon tennis championships, where Mr Major is thought to have promised to increase the aid contribution.

That meeting pursuaded Mr von Pierer to go back to his board for further discussions, and the UK was due to have been chosen last Friday. But an eleventh-hour intervention from another country offering more money saw the meeting broke up without agreement, and a special board meeting was called for yesterday morning.

Mr Heseltine's role in winning the project was underlined by the fact that he made yesterday's announcement, not the Trade and Industry Secretary, Ian Lang.

Mr Heseltine said: "The Siemens plan is the largest single high-tech investment ever made in Britain and puts us at the forefront of world semiconductor technology.

"It confirms, too, that, as far as international mobile blue-chip investment is concerned, the UK is Europe's competitive base. The Siemens plant will make a substantial contribution to the balance of payments by providing pounds 200m in import substitution and pounds 700m in exports every year."

Siemens is anxious to expand overseas because the strength of the mark is hitting exports and labour costs in Germany are rising. Siemens estimates that an 8 per cent appreciation of the mark this year will cut about DM3bn (pounds 1.3bn) from the company's sales, while about 7.6 per cent will be added to wage costs.

Jurgen Gehrels, chief executive, said no single factor that clinched the deal for Britain. And he strongly denied that it was because the UK is a low-wage economy and not committed to the Social Chapter. "This is a long-term investment, and you cannot always assume that the mark will be high, or the pound low. We will be employing highly-skilled engineers, who are not cheap."

He said Siemens was attracted by the sheer size of the UK semiconductor market which is worth about pounds 3.5bn a year. "We want to be close to that market," he said.

The prospect of the North Tyneside industrial accent switching from producing ships to chips has been eagerly anticipated for weeks. Yesterday's announcement is another big boost for the whole region, coming within a year of Teesside's scooping of the South Korean Samsung project which will employ 3,200. Foreign investment has been a big part of the transformation.

Stephen Byers, Labour MP for Wallsend, the constituency in which the plant will be located, said: "After successive rounds of large-scale redundancies on Tyneside, today's decision will not just bring badly-needed jobs, but will give new hope to the area."

The semiconductor industry is enjoying a sales boom because of the increase in sales of mobile phones, and some analysts predict annual growth rates in the microchip business of as much as 15 per cent.

Siemens' chip sales have doubled to DM4bn over the past two years and now it plans to double them again as part of a worldwide strategy.

Up to DM500m will be invested at Villach in Austria, and DM100m at its Regensburg plant in Germany.

News
people'It can last and it's terrifying'
News
people Emma Watson addresses celebrity nude photo leak
Arts and Entertainment
tv
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
PROMOTED VIDEO
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
footballRadamel Falcao and Diego Costa head record £835m influx
News
i100
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Danish director Lars von Trier
tvEnglish-language series with 'huge' international cast set for 2016
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
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

HR Generalist (standalone) - Tunbridge Wells - £32,000

£30000 - £32000 per annum: Ashdown Group: HR Generalist (standalone) - Tunbrid...

Derivatives Risk Commodities Business Analyst /Market Risk

£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...

Power & Gas Business Analyst / Subject Matter Expert - Contract

£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...

Infrastructure Lead, (Trading, VCE, Converged, Hyper V)

£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering