By Lorraine Johnson

Britain easily retained its lead as America's favorite European location for corporate investment during the 1997/98 year. A rise of more than 34% in US company projects has been announced by the UK Government's Invest in Britain Bureau (IBB), bringing the American total to 323 investments in the year - an all time record.

The most recent figures from independent agencies showed the UK as the developed world's second largest recipient of foreign direct investment after the US itself as well as the leading recipient of cross-border investment within the European Union. The total value of world-wide investment stock in the country was an estimated $257 billion. Mergers and acquisitions reached record levels.

This was the first year of inward investment under the government of Prime Minister Tony Blair. With the commitment to the single European market, its competitive environment with low inflation, taxation and other costs, labor flexibility, sophisticated infrastructure and English language the UK offers American investors just about the most attractive combination of location advantages available anywhere outside the US itself.

Other popular aspects of investing in Britain include London's strength as a global financial center; the right intellectual property rules; tax-free opportunities for research and development; the lack of foreign exchange controls or restrictions on repatriated profits, and you have a winning recipe for profitability.

Government grants can further enhance the attraction in some areas of Britain. For a country smaller in land area than the state of California but with a population between double and triple the size, the UK has a surprisingly wide selection of sites available for manufacturing development. And with the world's busiest international airport at London Heathrow and the Channel Tunnel making it far easier than ever before to reach continental Europe, Britain's transport infrastructure is well placed to serve companies operating in Europe and North America.

Californian companies have played a major role in investment to the UK. Last month, a major supplier of specialty water treatment chemicals, Argo Scientific, opened its new European headquarters and technical center on the research park of Heriot Watt University in Edinburgh. Dale Walker, president of the company, said that it had had a presence at the research park for the past five years and had shown its long-term commitment to operating from the UK. He added: "We chose the site because of the benefits of a working relationship with a higher education institution, in particular the department of chemistry."

Again looking for European headquarters, Simpson Strong-Tie of Pleasanton, designer and producer of steel structural connectors for the construction industry, is developing a brand new UK manufacturing and warehousing facility as its European headquarters. Building a 78,000-square feet plant at Tamworth in England's West Midlands, the company already had existing facilities nearby and in Chelmsford, north-east of London. It chose Tamworth to lead Europe because of its convenience for the national transport network and competitive land and labor costs.

And Redwood Shores-based Oracle has recently expanded its British operation with a $32 million investment in new offices in Solihull in the West Midlands. When explaining the reasons for choosing this location, Philip Crawford, senior vice president in the UK said: "These include the proximity to an international airport, local skilled employees, local universities for future technologists, and most importantly our existing customer base."

Within a few months of agreeing to a multi-million dollar joint venture with York Trailers of Northallerton, North Yorkshire, California-based Utility Trailer Manufacturing Co won a major new order to supply 150 of the new ZT curtainsider trailers to rental giant TIP. Utility International managing director Stephen Bennett said: "We are delighted to have received this order. It is an excellent reflection of the confidence TIP have in this new British company. One of the reasons we decided to locate to North Yorkshire was the caliber and quality of the people here. We are aiming to be a world-class manufacturer producing a world-class product and for this we need a world-class workforce which we aim to develop and strengthen over the next few months."

Scotland's "Silicon Glen" continues to attract investment. Semiconductor design technology and services supplier Cadence Design Systems of San Jose, is setting up the largest system-on-chip design facility in its global network at Livingston. Jack Harding, Cadence chief executive officer, said: "Our decision to come to Scotland was influenced by the fact that there is a first class educational infrastructure and a pool of highly skilled and readily available engineering talent. This project will fundamentally change the landscape of the electronics industry." The complex is expected to draw many other firms keen to undertake system-on-chip semiconductor design in the UK.

Again in Scotland, SMART Modular Technologies of Fremont opened a new $12.8 million plant, manufacturing specialty memory products for the computer and telecommunications industries. Ajay Shah, president and chief executive, said: "This new facility will support both our European and US-based customers who sell to the European marketplace. East Kilbride offers excellent infrastructure to a company like ours, bringing us close to customers and vendors alike."

Californian investors are keen on England too. Software company Molecular Simulations Inc of San Diego has expanded its European headquarters in Cambridge to carry out more R & D;, customer service, marketing and sales. Producing simulation software and services for scientific research, it has had a presence in the city since 1989 and employs 50 people, mainly scientists. It also has close links with other British universities. Indeed, Cambridge is fast growing as a center for US investors in R & D; comparable with Berkeley and Stanford. Hundreds of electronics and biotechnology firms now operate there and one of last year's most spectacular investments was Microsoft's $80 million establishment of its first R & D; center outside the US.

Between them, these companies span the entire range of inward investment categories - from acquisition to joint venture, expansion of existing operation to new manufacturing, R & D;, and European headquarters. There are estimated to be at least 4500 US companies now operating in the UK. The message is clearly getting through - Europe is the place for future profit, starting from Britain.

Lorraine Johnson is Consul (Investment) for the British Consulate-General, Los Angeles.

For more information on investing in the UK, contact the Invest in Britain Bureau at the British Consulate-General in Los Angeles at (310) 996 3022.

For reprint and licensing requests for this article, CLICK HERE.