APPENDIX 3
Memorandum by the Air League Council
THE COMPETITIVENESS
OF THE
UK AEROSPACE INDUSTRY
1. The importance of the UK Aerospace Industry
should not be underestimated. It is the last engineering-based
manufacturing industry that is world-class as evidenced by its
success in supplying both Airbus and Boeing and by its positive
contribution to the balance of payments. It provides hundreds
of thousands of highly paid and high value-added jobs. It is the
type of knowledge and technology-based industry that other countries
envy.
2. The exemplary performance of this industry
is hidden in the overall "average" of the UK manufacturing
industry. The "average" is pretty lacklustre and is
consistent with the steady decline in the UK's manufacturing competitiveness.
Whole sectors have been absorbed by more successful overseas competitors
or have disappeared altogether.
3. During WWII, and for 20 years after,
the UK Aerospace Industry had everything for airframes, engines
and equipment in terms of innovation and technology. However,
between 1957 ("no more manned aircraft") and in the
late 60's (cancellation of TSR2 and withdrawl from Airbus) the
collective nerve of both government and industry began to fail
and the UK's relative global position began to decline. Only collaborative
projects were entered into and these turned out to be hugely wasteful,
inefficient and slow. Their only advantage was that they were
almost impossible to cancel.
4. In the early 90s, studies conducted by
the SBAC, concluded that the UK was consuming its technological
inheritance because of lack of investment by both government and
industry exacerbated by the absence of an industrial policy and
strategy.
5. In the past 25 years, the three aerospace
sectors have behaved quite differently. The equipment sector was
the first to realise that the domestic market was not the relevant
market to address. So, after an exceptional record for exports,
the equipment companies (Smiths, Dowty, Lucas, Cobham, Meggitt)
all acquired subsidiaries overseas. No other country achieved
this on the British scale. The consolidated jet engine companies
(Rolls-Royce) achieved an exceptional export record and then set
up overseas operations, firstly for overhaul and later for research,
development and manufacturing (50% of Rolls-Royce R&D is now
performed outside of the UK due to more attractive economic conditions)
The consolidated aircraft manufacturers (BAE Systems), ironically,
were slow in setting-up shop overseas mainly due to their preoccupation
with collaborative programmes, but now have a substantial subsidiary
in North America.
6. In the early 90s, the SBAC attempted
to re-start a dialogue with government (DTI, MoD, No 10) about
the future of the industry and the need for a joint plan including
a substantial uplift in R&D spending. (Incidentally, the SBAC
"discovered" that the government spent over £6
billion on Research and Technology but found no one was in charge
of the total). This initiative proved largely ineffective because
of a lack of resonance. Both of the top level government/industry
committees, (DTI Aviation Committee and National Defence Industries
Council) became mere talking shops.
7. In the mid 90s, The Technology Foresight
Programme was a breathe of fresh air under the leadership of the
Government Chief Scientific Advisor. At one time the Defence and
Aerospace sector committee had more than 200 people working on
the programme at no cost to the government. Technology road maps
(including technology demonstration programmes) were prepared
for the eight key technologies identified to be essential for
the future of the Defence and Aerospace Industry. This really
was a joint effort between Industry, Academia and the Government.
The CSA concluded that the Defence and Aerospace Industry was
"at the cusp" and could go either way.
8. Then in 1997 the government changed and
despite protestations to the contrary the Foresight Programme
for Defence and Aerospace slowly disappeared into the background.
9. Subsequently, the fresh approach became
the Aerospace Innovation and Growth Team. Launched with much fanfare
and promise, even this initiative has achieved very little. Industry
frustration with lack of government response led to a breakfast
at No 10. However, no commitments were made other than assigning
another co-ordination task to Lord Sainsbury.
10. Perhaps the surprising thing is the
continuing success of the industry in spite of the relative lack
of government support. (Launch Aid is really Launch Investment
with commercial returns to the government for taking a relatively
longer view than commercial banks.)
11. Evidence suggests that properly structured
aerospace manufacturing operations in the UK can still be world-class
competitive and even the lowest-cost producer. One example is
the Messier-Dowty plant at Gloucester which for the first time
has won the complete landing gear system for the Boeing 7E7.
12. Rolls-Royce has been the outstanding
example for successful implementation of a global strategy ever
since 1971. This is a uniquely valuable enterprise and maintains
the world's most recognised prestige name. This company will be
the bell-weather for the industry in terms of how it adapts to
the new realities.
13. However, the industry has become anti-synergistic—the
whole is worth less than the sum of the parts. This explains why
so much of the industry has been sold to more successful overseas
competitors (often partially government-owned) eg Airbus, Messier-Dowty,
Lucas, Claverham, Westland, Ferranti, Plessey, Pilkington, Racal,
and nearly Alvis-Vickers. And ownership does matter in the medium
to long term.
14. Today's position of the UK aerospace
industry is comparable to that of British Leyland in 1968 when
BL was still the fourth largest volume car manufacturer in the
world. The remaining rump has recently been rescued by Shanghai!
15. Before it is too late, the Government
needs to decide that a UK-owned Aerospace Industry is worth supporting
for the long term. Substantial sums of government investment are
required in research, technology and technology demonstrators.
The allocation of these funds needs to be controlled by a joint
council composed of industrial, academic and government members.
It is quite straight forward—we just need to decide.
Tony Edwards
Visiting Professor, Royal Military College of Science
Chairman, The Air League
President, British Aircraft Preservation Council
Past President, The Society of British Aerospace
Companies
Past President, The Royal Aeronautical Society
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