Aggreko seeks government cash to maintain Scots manufacturing jobs

Published on Tuesday 26 August 2008 21:38

AGGREKO, the global supplier of temporary power, is seeking government financial aid to help build a new multi-million pound factory in Scotland, warning it may move its manufacturing to China.

Glasgow-based Aggreko yesterday disclosed that it had applied to the Scottish Government for assistance to bolster the financial case for constructing a new plant near Dumbarton, instead of in Wuxi, near Shanghai.

The firm, which yesterday posted a 42 per cent rise in underlying first-half profits to 68.6 million, manufactures its generators at a number of factories in and around Dumbarton.

With plants at near capacity, Aggreko is considering building a purpose-built facility at a cost of between 15m and 20m but is also mulling a move to China where running costs are lower.

Rupert Soames, Aggreko's chief executive, yesterday said that either Dumbarton or Wuxi would provide the company – one of Britain's fastest growing service providers – with "significant additional capacity, should we choose to use it".

He refused to say whether an investment in China would threaten the positions of any of Aggreko's 240 manufacturing staff in Scotland.

Soames told The Scotsman: "At the moment we're doing the sums and it's a question of whether we do it all in Scotland, some in Dumbarton and some in China or all in China. There are strong arguments either way."

Soames would not say how much money the company – which has promised record capital expenditure of more than 265m this year – was seeking to maintain all of its manufacturing in Scotland

But the company was seeking "help to even out what is a narrow economic case between the two" options.

Dumbarton is closer to the company's Glasgow headquarters, but labour costs are lower in China. Asia is also expected to provide much greater growth in the medium term than Europe, where demand is "softening" as the economy slows. Aggreko is likely to be applying for a Regional Selective Assistance Grant – administered by Scottish Enterprise but funded by the Scottish Government.

Investment projects in selected areas qualify for help if they "create or safeguard" jobs.

In the second quarter of 2008 SE approved grants worth up to 13.5m to 25 companies, including a 1.35m grant to computing giant IBM to safeguard more than 600 IT jobs in Renfrewshire.

A spokesman for Scottish Enterprise said all applications remain confidential until grants are formally offered.

Analysts expect Aggreko's profits will continue to rise in the next few years as it takes advantage of a "structural imbalance" between demand and supply of power.

The company was demerged from trucking company Christian Salvesen in 1997, but has grown quickly over the last five years, and now has a market capitalisation of almost 2 billion.

As well as providing temporary power for major construction projects throughout the developing world, it is also the leading provider for sporting and cultural events, including the Beijing Olympics, supplying 140 megawatts of capacity to 37 venues.