England's lure for U.S. firms.

Counties like Devon and Cornwall in Southwest England are attracting a host of U.S. firms with eyes on the European market

The search for new consumers is an enduring part of any business, particularly in today's global marketplace where opportunities are not restricted to old geographic boundaries. One of the most attractive overseas markets is the emerging European Community of 350 million consumers. And for U.S. companies firmly embedded in English-speaking traditions, the United Kingdom is undoubtedly one of the most appealing locations for overseas manufacturing, sales and marketing operations. Siting a facility in England, for instance, offers not only tariff-free access to the European Community but also affords a viable entree -- for large and small operations alike -- to the 57 million people of Great Britain as well. Foreign regions competing for a piece of the inward investment pie may resort to similar language, citing the financial incentives, infrastructures and sophisticated labor force to make it worthwhile. And in their efforts to attract foreign companies, they may tout everything from their high standard of living and quality of life to their low crime rate and low operating costs. Yet to be fair, not all regions can lay claim to these attributes equally, and potential investors need to consider many other factors including:

* the track record of foreign companies already doing business in the region -- do they echo the claims?

* whether labor legislation favors the entrepreneur, and is the labor pool sufficient to meet recruitment needs?

* the nature of the tax structure and financial regulations -- how will these affect profits?

* availability and cost of land and premises, and how do they compare to costs in other countries?

* political stability -- is it likely to last?

In Great Britain, for instance, labor unions are not required by law. This "open-shop" policy means that cultivating skilled and unskilled workers can often be easier and less costly than in areas encumbered by more complicated labor legislation. In addition, there are numerous tangible benefits reflecting the long tradition of U.S. companies doing business in the UK.

Deciding to go

Particularly valuable to both new and established enterprises are such pro-business arrangements as an attractive double-taxation agreement with the United States, ensuring that profits earned by U.S. firms in the UK will not be double taxed, and the lack of restrictions on the repatriation of profits.

As in other areas engaged in the highly competitive battle for inward investment, state authorities in Britain frequently own the land zoned for commercial use, thereby allowing them to negotiate attractively priced deals. Combined with financial incentives to induce a company to set up overseas, this can add up to an irresistible package. These elements of Britain's pro-investment environment are bolstered by other factors. For instance, the UK's political stability lends great confidence that the current welcoming attitude toward foreign investment will continue into the long-term future, making it unlikely that foreign investors will have to face the sudden imposition of such penal measures as exchange controls to prevent the flight of capital. While the decision when to invest abroad should never be based on something as fickle as the exchange rate, neither should periodic fluctuations be ignored. The UK's withdrawal from the Exchange Rate Mechanism (ERM) in 1992, for example, makes Britain a good buy right now, particularly in light of the continuing softness of the UK property market. And other cyclical factors should also enter into the informed decision.

Global recessions may in fact bring rare investment opportunities - if you know where to find them. While the UK as a whole enjoys numerous advantages as a base for overseas manufacturing, the counties of Devon and Cornwall in the Southwest of England are uniquely inviting.

Choosing Devon and Cornwall

Although Southwest England is regarded as Great Britain's loveliest resort region, tourism is not its only priority.

Boasting the highest living standards in the UK and highly competitive costs of doing business, the area appeals on the basis of profitability to international business.

Indeed, Devon and Cornwall counties are headquarters for a solid base of foreign companies spanning a wide range of industries from high-tech, electronics and precision engineering to health care and food processing, including the U.S.-owned Beckton Dickinson (health care products), Dow Corning (sealants), Howmet Turbine (airfoil castings), Kendall Co. (compression hosiery), Silent Channel (rubber and plastic products), the Pall Corp. (filtration devices) and the Wrigley Co. (chewing gum).

Devon and Cornwall's U.S.-owned industries exhibit both diversity and success. Two noteworthy examples:

* Precision engineering: Silent Channel, a wholly owned subsidiary of Standard Products of Cleveland, Ohio, is producing rubber and related PVC products for the automotive industry from a 130,000-square-foot facility in Plymouth. Highlighting its success, the plant was awarded Ford's "Q-1" for excellence in record time.

* Food processing: Wrigley's plant in Plymouth (Devon) manufactures nine out of 10 packs of gum sold in the UK and supplies most countries in Europe.

Praise for work force

While blessed with the requisite well-developed infrastructure of telecommunications, banking, educational facilities and transportation networks that allow a region only about twice the size of the state of Delaware to compete favorably with larger areas of the UK and Europe, the quality of the work force in Devon and Cornwall is universally praised. Newcomers may marvel over the tenacity, loyalty and skills of the labor pool, but the fierce work ethic of the region is well known to those familiar with Cornish pasties (meat pies that are the local version of fast food) and world-famous Devon cream. The Pall Corp., for instance, first invested in the region over 30 years ago. Nineteenth in the Fortune 500 list for after-tax profits as a percentage of sales (fiscal 1992), the Long Island, N.Y. firm has risen from $7 million to $700 million in sales without an acquisition, growing solely from within. This includes three plants employing 750 people in Devon and Cornwall where Pall has fully replicated its U.S. operations for the purpose of exporting to the Economic Community. Maurice Hardy, Pall's CEO, knew the work force would be an asset. "The people here are flexible and hard working; they learn quickly and adapt well," says Hardy. "It is a work force in which turnover is virtually non-existent." And unlike other areas of the UK, Southwest England has a growing population. Until the year 2000, its civilian labor force is forecast to grow at Britain's highest rate, ensuring that qualified workers remain relatively easy to recruit. Contico, the St. Louis-based world leader in mold-injected plastic tool boxes, which opened a 130,000 square-foot facility in Cornwall in 1992, agrees. Notes CEO Lester Miller, "The great schools and quality of life make this a terrific place to raise a family. But it's the diligent, skilled work force we're finding most amazing." And for VIDAmed, a Menlo Park, California company that selected Devon and Cornwall as the location to develop a promising new treatment for prostate problems, "beyond the availability of top-notch R&D facilities," says CEO Stuart Edwards, "the talent of the work force has been the deciding factor." VID Amed's recent decision to locate in Devon and Cornwall is further evidence of U.S. health care companies establishing overseas divisions in Europe in efforts to bring promising new medical products to market faster than may be possible in the United States. In the UK, once a procedure or process has been shown to be safe, free market forces are allowed to decide if it's to be successful. It's an approach that can make all the difference to innovative start-ups like VidaMed.

Innovation and education

Just as the availability of well-trained, skilled individuals has been a key factor in the development of Devon and Cornwall as a new base for international business, a backbone of research and development underlies local respect for innovation -- with two admired universities and numerous colleges in the region.

Nowhere in Britain are the links between education and industry more closely established than in Devon and Cornwall. At Exeter University, the Faculty of Science is the institution's largest. The University of Plymouth's major strengths are in the modern triumvirate of technology, science and business. An advanced computer-aided engineering facility was added recently, and activities include advanced research in satellite communications.

While Great Britain as a whole attracts more U.S. electronics firms than any other country in Europe -- in fact, more U.S. business investment of any kind -- Devon and Cornwall is the fastest-growing region of Britain in the high-tech field. Two reasons are the wide availability of sites and ready-built factories at reasonable costs as well as the broad base of skilled personnel from which to draw. And according to a Coopers & Lybrand survey conducted in July, 1991, which included British Aerospace and Japanese high-tech firms, the Devon and Cornwall region has become the UK's new "Silicon Valley."

Easy living

The glorious coasts and countryside, and fair weather, make Devon and Cornwall a magnet for tourism. However, business comes primarily for the high profitability and superb quality of life. Accordingly, the area is considered one of the country's most desirable places to live, a status reflected in the great many prominent figures who live here including former British premier Harold Wilson, novelist John le Carre, actor Jean Shrimpton, and musicians Phil Collins and Charlie Watts.

As someone charged with attracting inward investment to Devon and Cornwall, I'm well aware that quality of life issues, however significant in the ordinary scheme of things, can never displace a company's rightful concerns relating to operating costs, tax regulations, financial incentives, infrastructure and the availability of suitable sites and work force, all of which contribute more directly to the bottom line.

Nonetheless, the quality of life affects every company's ability to attract and retain the kind of skilled personnel needed to make an overseas operation successful, and no one disputes the positive impact that pleasant surroundings and an enjoyable lifestyle make on the corporate enterprise. Having resided in South Africa, Hong Kong and elsewhere, I cannot overlook the natural beauty of the Devon and Cornwall region. Its magnificent coastline boasts miles of golden sands, with sheltered coves and harbors.

Inland lie picturesque villages and majestic Dartmoor, a protected national haven. And the area is steeped in history for it was from Plymouth that Sir Francis Drake set sail en route to defeating the Spanish Armada, and it was from this same port, with its famous waterfront known as the Hoe, that the Pilgrim Fathers sailed in 1620.

For today's residents, there are first-class shops, restaurants and entertainment in the handsome cities of Plymouth, Exeter and Truro. Housing ranges from centuries-old cottages to ultra-modern homes. Sports include sailing, fishing, surfing, riding and golf. And manufacturing operations from around the world have discovered in the region a thriving industrial and commercial community that shares the common goal of building a growing, profitable business in Europe.

International focus

To this end, the Devon and Cornwall region of Southwest England is much more than a great place to live; it is strategically positioned and competitively priced. Fast and efficient road, rail, sea and air services link the area with its markets in the rest of the UK and Europe. With three regional airports offering an increasing number of flights, London's Heathrow airport is only an hour away.

Transportation and shipping requirements are also well served by the region's own ports and ferry links to France and Spain. Goods can be moved in and out easily and cost-effectively both in terms of raw materials used in the manufacturing process and end products ready for sale on the continent. While Great Britain offers one of the lowest corporate tax rates in the world (33 percent), it claims an even lower rate for small businesses (25 percent). In selected areas of Devon and Cornwall we can offer cash grants from Britain's Department of Trade and Industry according to the jobs created, capital expended and the nature of the business. And with Britain's most enviable record in industrial relations -- like turnover and absenteeism, disputes are all but nonexistent -- it's not surprising that dozens of U.S. companies have chosen to locate their European operations in Devon and Cornwall.

A new California company's British branch

Menlo Park-based VidaMed joins others in establishing European headquarters

Devon & Cornwall Development Bureau, the development arm for Devon and Cornwall counties in Southwest England, has prevailed over other regions of the United Kingdom and Belgium in attracting a new California company that has developed an alternative procedure in the treatment of prostate problems. The bureau says the company's move is further evidence that U.S. health care companies are establishing overseas divisions in Europe in attempts to bring promising new medical products to market faster than may be possible in the United States.

The new company is VidaMed, based in Menlo Park, which will establish its European based in Language Science Park, a corporate center in Plymouth, which is the largest city in Devon and Cornwall counties. VidaMed, was established in 1992 by health care experts working on the development of a new treatment specifically targeted at prostate ailments.

Space for expansion

In securing a 15,000-square-foot facility, which includes a class 10 clean room and space for future expansion, VidaMed will manufacture a new catheter designed to treat Benign Prostatic Hyperplasia and to diagnose prostate cancer. The procedure was unveiled at the National Urological Conference earlier this year in San Antonio, Texas.

According to VidaMed, the use of its new medical device has distinct advantages over previous treatments because it is a less invasive, less traumatic treatment than the traditional use of surgery. Health care providers would also benefit because the procedure can be performed on an outpatient basis, thus reducing the cost of the tree-day hospital stay required using conventional surgical procedures.

The Devon and Cornwall region is already home to a number of health care companies, many of which are foreign-owned, including such names as Becton Dickinson and the Pall Corp.

"We're committed to the health care sector, and we see a great deal to be gained in medical research and new product development in our part of the world," said Robert Farrugia, director of the Devon and Cornwall Development Bureau's U.S. and Canadian operations.

Less restrictive markets

"Unlike in the United States," Farrugia explained, "in the United Kingdom, once the manufacturer has shown that the device or procedure is safe, then free market forces are allowed to decide if it's to be successful. It's a difference in approach that can make all the difference to start-up companies like VidaMed," he said.

Farrugia said VidaMed selected Plymouth because of factors such as its highly motivated work force and high quality of life, access to state-of-the-art medical research facilities at Derriford Hospital and the University of Plymouth and a phased grant from Britain's Department of Trade and Industry that is linked to VidaMed's progress.

Farrugia said VidaMed is expected to create up to 50 new jobs in Plymouth -- mostly skilled manufacturing positions -- by the end of 1994, with the prospect of considerably more to follow.

Affecting about half of all men over 50, prostate problems are seen by some medical experts as a natural part of the aging process. The potential market for VidaMed's new catheter treatment is therefore huge: 16 million men in the United States alone are believed to suffer from the types of conditions that can be treated with the new device.

Regional growth

Devon and Cornwall counties occupy 4,000 square miles, an area about twice the size of Delaware, and the development bureau describes the region as "enjoying the fairest weather, cleanest air, most affordable cost of living and lowest crime rates in England."

Unlike some areas of the United Kingdom, the Southwest Region is growing both in population and work force. It is projected that until the year 2000, the area will post the highest rate of growth in the civilian labor force in Britain.

Robert Farrugia is director of Devon and Cornwall Development Bureau for the United States and Canada.