August 11, 2008

IBM UK Lands GBP1.35m in Government Grants


THE IBM United Kingdom operation in Greenock, part of the huge US- based information technology company, has accepted a GBP1.35m Regional Selective Assistance grant from the Scottish Government to "safeguard" 613 jobs.

IBM, which will create no new employment as part of the deal, was among 25 IT and other businesses that received grants in the three months to end-June.

About 2000 Scottish jobs are to be created or safeguarded with the help of RSA grants, Enterprise Minister Jim Mather announced yesterday.

The IBM plant in Spango Valley, Renfrewshire, once assembled personal computers but most of that work was out-sourced in 2002, though still on the same Spango site, to another US corporation, the contract manufacturer Sanmina SCI.

Later, the Chinese group Lenovo completed a GBP1.25bn deal to acquire IBM's entire personal computing division, creating a new number three in the global PC marketplace.

IBM employees in Greenock now staff multilingual contact centres for clients all over Europe or are engaged in e-business.

IBM United Kingdom's parent company, International Business Machines, reported a net income of Dollar10.4bn (about GBP5bn) for 2007, the latest year that results are available, and revenue of Dollar98.8bn. The company has total worldwide assets of Dollar120.4bn.

Last week, IBM said it will spend about Dollar400m (about GBP200m) on computing centres in Raleigh, North Carolina, and Tokyo that deliver programmes to customers over the internet.

However, the GBP1.35m grant to IBM is dwarfed by a GBP5.1m handout to Serco, a management service company that has 55,000 employees and a turnover of more than GBP2.5bn. Serco is contracted to work for the National Health Service, among other government agencies.

According to the Scottish Government's RSA report, Serco has accepted the money, promising to create 650 jobs in the IT and outsourcing sector.

According to Serco's 2007 results published on its website, the company reported revenues of GBP2.8bn, up 10.3per cent from 2006. It increased pretax profit by 17.3per cent to GBP123.2m in 2007.

The awards to IBM and Serco would seem likely to re-ignite the debate about the government at Holyrood handing out taxpayers' money to large, profitable corporations.

In 2006, HSBC, one of the world's biggest banks, provoked anger over a controversial GBP1m grant from the Scottish Executive after likening the award to claiming "an OAP bus pass" despite being able to "afford to pay the full fare".

The unfortunate comment was made as it unveiled record annual British banking profits, with an 11per cent rise in pre-tax profit to Dollar20.97bn.

HSBC received the hand-out, paid for by Scottish taxpayers, to locate a fund management unit in Edinburgh, creating 257 jobs, under the RSA scheme.

Asked whether acceptance of the grant was morally wrong in light of the bank's record profits, Douglas Flint, HSBC's Scots-born finance director, told The Herald: "I don't think it is immoral. Is it immoral to claim an OAP bus pass if you can afford to pay the full fare?"

The government offered an explanation in its latest RSA report why it is necessary to spend taxpayers' money to keep or create jobs in Scotland. "Encouraging investment and job creation is an essential ingredient of achieving increased, sustainable economic growth in Scotland, " Mather stated.

"The latest quarterly report demonstrates that Regional Selective Assistance is an important tool in helping business projects come to fruition at a time of global economic uncertainty.

"RSA complements other initiatives by the Scottish Government to create the more competitive business environment this country needs. Other economic policies introduced, such as cutting and scrapping business rates for 150,000 businesses, will help breathe new life into Scotland and see the benefits of growth felt in all communities."

He said 25 Scottish businesses accepted RSA grant offers totalling more than GBP13.5m in the second quarter of 2008. The offers relate to planned investment of more than GBP57m.

Regional Selective Assistance is the main Scottish Government scheme of financial assistance to industry. It provides discretionary grants to investment projects that will create and safeguard employment in the Assisted Areas - areas designated for regional aid under European Community law.

The government said in the report that "payment of RSA is made in instalments, typically over several years as job and capital expenditure targets are met. Not all projects will proceed, and nor do all accepted offers result in full payment, as projects are sometimes scaled down or abandoned before payments are made".

Originally published by Newsquest Media Group.

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