£100m Down the Drain...

By Tamzin Lewis

The Scottish Mail on Sunday, January 12th 2003

Revealed: How the jobs have vanished following huge handouts to the hi-tech giants

More than £100 million of public money has been lavished on hi-tech firms which have abandoned Scotland, the Mail on Sunday can reveal.

The huge bill to attract jobs to Scotland is disclosed as yet another company - Universal Scientific Industrial (USI) in Irving, Ayrshire - faces closure.

Enormous government grants luring international companies to Silicon Glen have been handed to computer and telecommunications giants, only for their workforces to be laid off in the economic downturn.

Huge handouts have been given to 14 firms which have now quit their Scottish factories for the Far East and Eastern Europe, where costs are lower. Employment in the electronics industry, which represents almost half of all Scottish manufacturing has been badly hit, with 12,000 workers losing their jobs in the past four years.

Last week the crisis-ht sector was hit by a double blow after computer giant IBM announced it was transferring 640 jobs to US multi-national Sanmina SCI while Fullarton Computer Industries in nearby Gourock, said it would close, with 500 job losses.

The Scottish Executive hopes to retrieve most of the £7.8 million Regional Selective Assistance (RSA) grants given to IBM since 1995.

Sanmina received an RSA grant of £3.8 million to fund 750 jobs at its Irvine plant, which closed last year after a 12-year presence.

However, jobs at the £15 million USI electronics factory are also on a knife-edge. The firm received a £500,000 grant in 1999 to create 700 jobs yet at its peak the plant only employed 450 staff.

An industry insider said: "The company has been significantly downsized and is operating with a staff of 40. It is expected its Taiwan base will close the Irvine factory sooner rather than later".

The Executive is being warned against offering enormous subsidies to firms such as Motorola and NEC Semiconductors in West Lothian and Chunghwa in Lanarkshire, which have all announced closure in the past two years.

All three failed to satisfy the grant terms. The Executive has recovered £2.4 million of its £13.1 million grant to NEC Semiconductors and £16.75 million of the £50.75 million given to Motorola.

It is pursuing Chunghwa for part of the £15 million given since it opened in 1997 promising 3,000 jobs. There are 40 workers left.

Compaq in Erskine, Renfrewshire, Alctel and Mitsubishi in Livington, Solectron Scotland in Dunfermline and Matsushita of East Kilbride were also granted millions in RSA aid only to close with the loss of thousands of jobs.

SNP economy spokesman Andrew Wilson said: "The writing was on the wall for the government's inward investment strategy of attracting low value jobs using low-cost labour and subsidies. This was not a sustainable route to growth."

Electronics expert Gerald Michaluk, of Marketing Management Services International, said: "The computer industry was overhyped and Scotland bought into the hype. The government gave companies money to locate in Scotland then left them alone without realising they would be looking to reinvest in four years. The government didnít understand how these companies work. "

Professor Brian Ashcroft, director of the Fraser of Allander Institute, said: We need to rely less on external investment, and more on our own companies."

Stots Tory enterprise spokesman Annabel Goldie said: "Unless we cut business reates and red tape we are at a disadvantage for firms looking to locate in Scotland."

A spokesman for the Executive said: "Companies come to Scotland to provide sustainable employment. But if that proves not to be the case and if the company has benefited from RSA we pursue the recovery of grants when appropriate.

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