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.

Start your day with The Independent, sign up for daily news emails
Voices
Homeless Veterans charity auction: Cook with Angela Hartnett and Neil Borthwick at Merchants Tavern
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
PROMOTED VIDEO
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick