Not all the opportunities arising from emerging markets are happening thousands of miles away in India and China.
While many Midland firms are rushing to establish themselves in these fast growing regions, there is also a trend of investment into Britain from emerging markets.
The $2.3 billion purchase of Jaguar and Land Rover by India’s Tata Motors is only the latest in a growing trend.
Last year Shanghai Automotive Industry Company created and safeguarded 350 jobs by establishing the SAIC Motor Technical Centre in Warwickshire, and is expected to invest more at the former MG Rover factory at Longbridge following its takeover of Nanjing Automobile Corporation.
In the Black Country, Indian-based electrical component manufacturer Victory Electricals acquired Craig and Derricott in Walsall safeguarding 62 jobs.
In 2007-2008 there were 25 new inward investments into the West Midlands from the Asia Pacific region, up from 22 in 2006-7 and overtaking the 21 from North America last year. This investment created 1,289 jobs and safeguarded 15,248, according to figures from the West Midlands Regional Observatory.
This trend is expected to accelerate in the coming months as the slowdown in American economy reduces investment from across the Atlantic, while companies from emerging markets become ever more confident.
Richard Butler, head of inward investment at development agency Advantage West Midlands, says: “Companies from emerging markets are investing in the Midlands because they want to be global players and get into Europe. They are using the UK as a stepping stone to do it and many of them are coming to the West Midlands. This is a fantastic opportunity for the region, and it is up to the West Midlands to grab it.”
The development could have positive effects for Midland companies.
For example, the Tata purchase of Jaguar and Land Rover, which will guarantee the future of the two companies in the Midlands and the 13,000 people they employ in Birmingham, Solihull, Coventry and Gaydon, Warwickshire.
“There is an excellent future ahead for Jaguar and Land Rover. They couldn’t have asked for a better new owner,” said Lord Kumar Bhattacharyya, head of the Warwick Manufacturing Group in central England, which has worked with Tata.
“Tata is a very benevolent company — they are not going to be looking for a quick buck, they are going to be there for the long haul.”
Prof Fujit Banerji, professor of operations management at Warwick Manufacturing Group said the Tata deal could lead to more investments from Indian companies in the Midlands.
He said: “The Tata acquisition has been in the news a great deal, and has raised awareness of companies in the Midlands to investors in India. It will have a positive impact.”
Other notable acquisitions from emerging markets have included Russian automotive firm Gaz’s purchase of Birmingham van maker LDV, and the £479 million deal by two Kuwaiti investment groups for luxury car maker Aston Martin.
Together Investment Dar and Adeem Investment have assets of $5.5 billion some of which is being used to develop Aston Martin’s Rapide four-door sports car and expand the company’s dealership presence in Russia and China. At the time of the deal, the Kuwaitis stressed their interest in retaining the company as a long-term asset, and their interest in the company as an iconic British brand which could be sold around the world.
Adnan Al Musallam, chairman and managing director of Investment Dar, said: “As an investor you look at a company’s product, and Aston Martin has a great product with a great future. Whatever plans the board of directors has in place, we will look to support.”
According to Mr Butler, many cash-rich companies in China and India were looking to buy British companies to access to their technology as well as quicker entry to the UK and European market.
Getting hold of brands like Aston Martin and Land Rover is also very important, according to Mr Butler. “There are lots of big Indian companies for example which are not known outside that country,” he said.
“If you had said three or four years ago that Tata was going to buy British Steel, Tetley Tea, Jaguar and Land Rover, you would have been laughed at.
“But having these names raises global awareness of the company.” Acquisitions make up just over a third of the foreign investment into the Midlands, while the other types of inward investment – start-ups and expansion of existing projects are both responsible for around a third each as well.
Although many people looked at China and India as equal opportunities for investment, there are crucial differences between the two, said Mr Butler.
“There is increasing investment from the emerging markets, but India has far more immediate short term opportunities than China,” he said.
“Indian companies operate in a very Western way, they are very open. They are very keen to be global players and are nearly all privately owned.”
Prof Banerji said: “In the coming years, as the Indian economy grows, there is more and more money there, that needs to be channelled and invested. There will be a growing impetus of possible deals.”
In contrast, although many Chinese companies may appear to be privately owned but are invariably controlled by the government.
This means much slower decision making and less transparency.
“We have got 30 to 40 Indian companies in the West Midlands already, compared with less than ten Chinese companies,” said Mr Butler.
This could be partly attributed to the population make up of the region.
From a population of 5.3 million people in the Midlands, it is estimated that only 16,000 people are from China or of Chinese descent.
This compares with 180,000 from India or of Indian descent.
This attracted Indian companies when they were making their investment decisions because there was likely to be more cultural similarities for its workers.
The historic links between India and England, as well as the English language were also greater attractions to Indian business, said Mr Butler.
“A major Indian IT company came to the region and was looking at bringing some Indian staff across,” he said.“One issue they had was ‘will our staff feel at home quickly?’ The fact that in the Midlands there is an Indian population, with Indian restaurants,
Indian shops and culture gives people at degree of comfort and is an asset for the West Midlands.”
There are three key areas which are attracting interest from emerging markets, Mr Butler said – financial services, engineering and IT.
“All the hot sectors in India – IT, telecoms, engineering, will be looking to invest in the UK because that is where the money is accumulating,” said Prof Banerji.
The State Bank of India and ICICI have both set up branches in the region and more could follow.
They were doing this to provide services for the Indian population in the UK as well as looking to make the most of opportunities in the UK finance sector.
There has also been large growth in the Indian IT sector which is now looking to supply outsourced services to UK companies and organisations.
The Midlands is proving attractive because of its central location and the fact it is cheaper than the South-east.
The other key area is engineering, particularly in the automotive sector.
This development has been driven by cash rich Indian companies wanting to make profits outside of their home country, which has become increasingly competitive as global manufacturers set up in India.
Indian firms are also interested in Midlands technology as well as access to the market.
Land Rover’s expertise in 4x4 technology and Jaguar’s skill in aluminium welding will have proved very attractive to Tata, as well as the value of the brands themselves.
“In advanced engineering, the Indians have a limited long-term experience compared with what we have here,” said Mr Butler.
“There are fantastic opportunities for West Midland companies to trade in India, but equally the Midlands has fantastic attributes to attract Indian investment.
“It is a two-way process. Often with investment one side is benefiting more than the other, but here both sides can really win.”
