A breeding ground for Asian tigers

The influx of Far Eastern companies into the UK has been one of the economic success stories of recent times.

About 600 regional development agencies operate in Europe, all vying to attract lucrative inward investment to their area. But when it comes to the Asian tiger companies, the UK is by far the most successful.

Around 221 Japanese companies now operate in the UK, employing some 60,000 people. There are just 11 South Korean operations and nine from Taiwan in the UK, but this is still many more than the rest of Europe put together.

Although some Asian enterprises planted their industrial roots in the UK decades ago, the real breakthrough came more than 10 years ago when the car giant Nissan opened a plant in Sunderland.

It prompted other manufacturers, all looking for a bridge-head into the European Community, to sit up and take notice of the UK's changing economic and workplace environments.

Honda and Toyota followed suit, along with dozens of component suppliers - so called tiger cubs - to serve these companies' "just-in-time" manufacturing methods.

But the UK has not only been attractive to the motor industry. Yesterday's announcement underlines the fast growth of the electronics industry, and follows Samsung's pounds 450m investment last year and Fujitsu's pounds 400m investment this year.

Scotland's Silicon Glen is now the capital of Europe's electronics industry due mainly to the large number of Japanese and Korean firms setting up there.

Economists say it is all to do with "critical mass", though some Far Eastern specialists have spoken of a herd instinct among the region's companies. "I do not mean it in a derogatory way, but they like the security of numbers," one Japanese analyst said yesterday. Hence the decision of more than 20 Japanese companies to site their UK facilities in the small Shropshire town of Telford.

Another important cultural factor is the English language, and not only because it is the tongue of international business. "It's one of few languages the Japanese can understand," said the analyst.

Of course, economic factors are vital, though not necessarily exchange rate issues. The recent rise of the yen has led some Japanese manufacturers to step up investment in the UK, but such short-term decisions pale against these companies' long-term strategies.

More important has been the changing industrial conditions in the UK: social costs are much lower than on mainland Europe; the old rigidities of the labour market have gone and single union deals are now acceptable; a wealth of grants are available, especially to re-train employees.

Such benefits are, of course, available to all foreign companies, which is why the UK attracts about one third of all inward investment in Europe. But these factors are of particular importance to Asian companies, which prefer to establish overseas operations from scratch, on green-field sites and sometimes recruiting large numbers of staff who need complete retraining.

Recent evidence suggests the number of new Far Eastern companies setting up in the UK may be tailing off. But those companies already here are firmly rooted, and there are plenty of reasons to believe they will go on investing to expand.

Russell Hotten