Select Committee on Trade and Industry Minutes of Evidence

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.


  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.


  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.


  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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