Heseltine hails 2,000-job deal

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Michael Heseltine, Deputy Prime Minister, last night hailed a decision by German industrial giant Siemens to invest pounds 1.1bn in a UK factory as a turning point in the Government's fortunes.

The huge investment, creating 2,000 jobs near the site of the collapsed Swan Hunter shipyard in North Tyneside, was won against fierce international competition.

The factory, which will produce microchips for mobile telephones and smart cards, is the largest ever single investment in the UK by an overseas company.

Mr Heseltine said the Siemens investment was "a landmark success for the UK economy which would be a major contribution to the balance of trade".

The Government is providing substantial grant aid, including pounds 30m in regional selective assistance, but the full package has not been not disclosed. Mr Heseltine said suggestions that the total package was worth up to pounds 200m were inaccurate. Work on the factory starts in November and the plant begins production in 1997.

The grants will need approval from the European Commission, which has become concerned at the ways 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 fought between a number of European countries. Austria was the chosen location until about four weeks ago, but Siemens was persuaded by the personal intervention of John Major, who met the company's chairman at the Wimbledon tennis tournament.

Siemens said that several factors persuaded it to invest in the UK, including exchange rate concerns, the availability and cost of labour, and grant aid. Meanwhile, the German economics minister, Guenter Rexrodt, said the decision was greatly regretted by his country.

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