Foreign investors take the road out

Click to follow
The Independent Online
JUST SEVEN weeks ago ministers were trumpeting the fact that a record number of inward investment projects had been lured into Britain in the Government's first year in office.

From now on they may prefer to draw less attention to Britain's increasing reliance on the decisions of foreign businessmen and its vulnerability to economic conditions overseas.

Tony Blair is to meet the management and workforce at the Fujitsu microchip plant in his Sedgefield constituency after the announcement yesterday that it is to close with the loss of 670 jobs because of a glut of computer chips. But that news - and the previous announcement of the closure of the giant Siemens plant in North Tyneside with the loss of 1,100 jobs - casts doubt on the inward investment policy.

Ron Davies, Secretary of State for Wales, was yesterday seeking assurances from the LG South Korean electronics company that its merger with Hyundai did not place a question mark over its pounds 1.2bn computer-chip plant being built at Newport.

Figures show Britain attracts a lion's share of inward investment in Europe - 40 per cent of Japan's investment; 40 per cent of American and about 50 per cent from South Korea. Overseas companies account for about two-fifths of the top 100 exporting businesses.

At the last count, foreign-owned firms made up 17 per cent of manufacturing employment; 33 per cent of manufacturing capital expenditure; 26 per cent of net manufacturing output, and 40 per cent of UK manufacturing exports.

Firms suffering from a bad business climate will always tend to close plants farthest from home. And it is easier to sack British workers. Despite government plans for new employee rights, on the Continent there are often more stringent rules on redundancies.

Scotland, the North-east and Wales act as strong magnets to foreign executives looking for sites for new factories. In all three areas there has been a lack of home-grown entrepreneurship, but a compensating talent for securing subventions from the state, so that companies do not lose so much of their own money when they decide to close a plant. Ministers are unlikely to attempt to claw back much state money for fear of deterring future investment from abroad. The most worrying aspect of the present problems encountered by the foreign-owned companies is that they are operating in sectors that will be critical to our industrial future.

David Blackaby, reader in economics at the University of Wales, Swansea, argues that while foreign companies proved more resilient in the last recession, the meltdown of economies in South-East Asia means they will be particularly vulnerable this time round.

Britain may be less successful in attracting foreign companies in future. The 11 nations joining the European Monetary Union may seem a safer bet than a country whose currency may be less stable.

North-east England has suffered an estimated 4,000 job losses in two months and employees' leaders believe there could be more to come as a direct consequence of the strength of the pound.

While managers point to over-capacity in the micro- electronics industry, unions believe Labour's high interest rate policy has made it far worse.

The Fujitsu closure is another bitter irony for an area forced to abandon its old smoke-stack industries of coal, steel and shipbuilding with the consequent loss of tens of thousands of jobs.

The future was said to lie in the likes of the hi- tech Fujitsu plant, which the Queen opened in 1991.

Standing outside the factory, - recently voted best Fujitsu factory world-wide - Peter Middleton, 49, a personnel worker, said: "There are a lot of companies (locally) that support Siemens and Fujitsu, so there may be further job losses. I am out of work, the same as everyone else, with a mortgage and family. We are all contracted until 4 December." His son, 23, has also lost his job.

Shop stewards for 16,000 manufacturing workers in the Amalgamated Engineering and Electrical Union in the North-east met yesterday and urged their leadership to call for the Government to take back responsibility for setting interest rates from the Bank of England's Monetary Policy Committee.