Memorandum submitted by the Confederation
of Shipbuilding and Engineering Unions
The United Kingdom Aerospace Industry has, since
the Committee last examined the sector, undergone large scale
restructuring but has enhanced its central importance to the UK
economy and our wider international strategic economic and political
interests.
Aerospace is perhaps the best example of the
"knowledge driven" economy—where commercial success
and high value employment can be created and sustained with the
right competitive conditions. The continued success of the UK
aerospace industry is proof that the industry does have the ability
to thrive in the global economy because of a commitment to global
competitiveness.
The industry will be damaged by the continued
fall in the resources for research, development, technology and
demonstration for both civil and military sectors.
There should be a real concern that the UK aerospace
industry will be damaged by the fall in R&D levels over the
last 20 years and in particular that our main competitor countries
USA, France and Germany heavily outspend the UK in this key area.
Under-investment in R&D will in the long-term damage the industry's
ability to compete internationally.
The value of CARAD funding continues to fall
in real terms and is 20 per cent of its value in real terms from
when it was launched 28 years ago. CARAD continues to be an important
source of funding for the industry and although relatively small
in size this unique stream of funding remains important to the
industry and the wider research community, it deserves to be augmented
with a larger budget.
The Ministry of Defence needs to reprioritise
budget allocations to provide increased resources for research
and development. Although the changed strategic environment since
the end of the cold war has led to an inevitable reduction in
defence budgets across the NATO alliance consideration should
be given to the effect of these reductions on defence R&D.
HMG's 20 per cent reduction in defence R&D
in real terms since 1986 has caused significant difficulties for
the industry. Although the UK alone is unlikely to ever again
develop a major combat platform there is a risk that the industry
may soon be unable to meaningfully participate in co-operation
and compete with the major North American companies.
The CSEU welcomes the Government support to
this industry through the provision of Repayable Launch Investment
(RLI). As the Airbus project has clearly demonstrated initial
programme support this has led to a global success story. There
is however a requirement from the sponsoring department to ensure
that RLI achieves stated objectives of maximum benefits for taxpayers
and as importantly the workers throughout the aerospace industry.
The CSEU is concerned that the proportion of work sourced to the
UK supply chain may not reflect the stated original intentions
of the application for launch aid. It is important that government
departments ensure that the UK derives maximum benefit from this
risk sharing scheme.
GLOBAL ENVIRONMENT
The CSEU welcome the concept of the global environment.
With approximately 60 per cent of the UK aerospace industry turnover
exported in 1999 and nearly 40,000 employed by the UK aerospace
industry outside of the UK,[1]
globalisation has become one of the most central issues since
1993.
However, whilst there has become a growing reliance
upon exports and investment outside of the UK to stimulate domestic
economic growth, it is crucial that expansion abroad through merges/takeovers/partnerships
etc, that the UK aerospace industry retains critical manufacturing
and technical mass in the UK. Since January 1998 through to March
1999 the UK aerospace industry announced or completed 32 cross-border
transactions of which 16 were with the US alone.[2]
As with the BAe Systems and Taiwan Aircraft Corporation joint
venture (as cited in the 1993 submission) many joint ventures
lead to the transfer of key technologies and skills in order to
gain access to new markets. Whilst the CSEU accepts, in principle,
that there is a need for transfers to take place, it is the belief
of the CSEU that this should not be in a one-way direction, ie
out of the UK. This area has, in part, been addressed in Europe
with six European governments signing the Letter of Intent. However,
with the US stance of a less co-operative interdependence and
a more guarded control over core technologies, this one way direction
out of the UK applies specifically.
Therefore, in order to maintain the UK aerospace
industries reputation as a world leader and to attract both inward
and outward investment, it is imperative that the core technology
remains within the UK.
GOVERNMENT SUPPORT
The Government plays a crucial role in the future
of the UK aerospace industry. One area in particular that can
influence the performance of investment is through Export Credit.
While it is recognised that the need to regain the loan is of
foremost importance, consideration must be given in order to ensure
that the UK are setting the level of interest and length of time
for repayment at a competitive rate. This is a sentiment shared
by the Export Credits Guarantee Department in their report to
the Trade and Industry Committee.[3]
The Department recommended that attention be "given to extending
the timescale for the break-even objective to provide for averaging
out over a longer time period".
The report goes on to say that as a result of
delays in decisions on export guarantees or insurance cover British
exporters are suffering in terms of losing business. If the report
is to be believed then this must be addressed to prevent not only
the UK aerospace industry but all UK industries being disadvantaged.
The CSEU believe that in order to give UK industries increased
competitiveness in the global market then there is a need to assess
both industrially and financially the practices of our competitors.
TRAINING
A fundamental requirement for any successful
company whether it be global, continental, national or otherwise
is a highly skilled, articulate, committed workforce. This requirement
is more apparent in the aerospace industry where the driving emphasis
is on an increasing development on new technologies and manufacturing
processes. Such is the demand for continuing improvement in product
design and improved performance, including price and quality,
it is imperative that these are met. This demand can only be achieved
through an ongoing upgrading and reassessment of skills, technology's
design and innovative improvements if global advantage is to be
maintained.
The CSEU welcome the Government's support for
training such as the Modern Apprenticeships and National Training
for the engineering sector as a first step towards improving the
overall wellbeing of the engineering sector. There is, however,
a requirement if we are serious with regards to maintaining the
aerospace industries and their world prominence for special treatment,
for this sector. Whilst by and large the large companies within
the industry do have in place training programmes, not only providing
progressional routes through various structures of the company
(craftsman/women to technician etc) and improving and complementing
existing skills. However, this is extremely expensive and requires
Government underpinning, particularly when companies experience
down turns which as a consequence training becomes the first casualty.
The construction of the industry with its preponderance
of small to medium sized company's raises the fundamental issue
in relation to training. It is a well-established fact that this
particular sector faces acute skills and intellectual shortages
as a result of the prohibitive costs associated with training.
The CSEU supports the principal of grouping together on a geographical
basis small/medium sized companies to alleviate these immediate
needs. The CSEU is well aware of the role and function of the
assumed RDA but feel that such a scheme supported by central government
would not complicate or undermine the function of the supposed
RDA.
Notwithstanding the requirement of continuous
improvement of all aspects of training requirements and the fact
that training within the sector does not come cheap, there is
the issue of how, as a country, companies can maintain the funding
generated for training initiatives. There can be no question there
is recognition that in part taxpayers should participate in the
funding of training, equally there should also be contributions
from companies. There is however an inherent weakness in this
scenario with companies funding voluntarily or only for their
self-interest. As companies, particularly the small to medium,
refrain from training there is increasing pressure placed upon
the taxpayer to pick up the shortfall in funding requirements.
Quite often companies with little or no intention of training
will adopt predatory tactics to skilled recruitment, this in turn,
especially in the small and medium sized factory environment,
leads to a reluctance to train in the first instance, for obvious
reasons. This distortion undermines the whole process of training
leading to shortages, and a short-term approach, which has bedevilled
the industry over the last 30 years. Surely the principle that
those who benefit from skilled training, UK plc, companies large
or small, should accept the responsibilities for the funding for
training. "The taxpayer's contribution to training contains
no opt out provision". Why should companies be allowed to?
Fiscal measures need to be considered to ensure that this option
is not permissible. Programme support for inter transfer programmes
(design, drawing office, technical staff) should also be considered.
9 January 2001
1 UK Aerospace Facts and Figures' SBAC, 1999. Back
2
Ibid. Back
3
Trade and Industry Committee, Press Notice No. 5 of Session 1999-2000,
20 January 2000. Back
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