APPENDIX 10
Supplementary memorandum by the Department
of Trade and Industry
1. A BRIEF ON
THE AID
THAT IS
AVAILABLE TO
THE UK AEROSPACE
INDUSTRY
Scope of operation (is application open to
all tiers of the industry?)
Launch Investment is a mechanism for providing
risk-sharing development capital for civil aerospace projects
in the UK. It is repayable with interest.
Any company may apply for Launch Investment.
Applications once received are subject to a rigorous evaluation—see
below.
The process once an application has been made
by a company, including how and when repayments are made:
Launch Investment is not a budgeted scheme and
there is no application form or specified format for applications.
Launch investments (LI) have tended to be large projects and relatively
few in number—each case is different.
In applying for LI, companies need to set out
in detail the nature of the project and their business plan for
delivering the project. When an application is received it will
be subject to rigorous evaluation. The DTI undertakes market,
financial and technical analysis of the project and assesses the
wider economic benefits to the UK. A key consideration for government
is whether other sources of finance are available for the project.
Once the evaluation is complete, a recommendation
is made to Ministers. There is no guarantee, however, that a positive
recommendation to support a project will result in an offer of
LI to the applicant. A decision to put public funds into an LI
project has to be balanced against other public sector funding
priorities.
If LI is offered to a company, a contract is
negotiated setting out the terms and conditions. Each project
is different and therefore the terms and conditions of the contracts
are all different. They have also evolved over time to take account
of policy developments and also to meet our international obligations.
Payments are made in the early years of the
project for eligible development costs. Repayment is typically
based on a per aircraft or per engine levy set at a level designed
to achieve repayment with a target rate of interest within a specified
period of time. An agreement between the EU and US regulating
support for the development of large civil aircraft, concluded
in 1992 (and of course a subject of the current dispute between
the EU and US) set limits for LI in terms of amount, interest
rate and repayment period.
After the contracts have been concluded, the
DTI holds regular meetings with the companies concerned to monitor
the progress of the project.
Expenditure on Launch Investment and repayments
since its introduction (1982):
The government has provided Launch Investment/Launch
Aid to civil aerospace projects since 1946.
1982 is a significant date because of the passage
of the Civil Aviation Act 1982. This in turn updated and repealed
the 1949 Civil Aviation Act. The 1982 Act empowers the Secretary
of State to invest in the design, development and production of
civil aircraft.
A LIST OF
PROJECTS THAT
HAVE RECEIVED
LAUNCH INVESTMENT
Since 1982 the following aerospace projects
have received Launch Investment:
| A320 | Airbus UK
|
| A330/340 | Airbus UK
|
| A380 | Airbus UK
|
| EH101 | Westland Helicopters
|
| RB211-535 | Rolls-Royce
|
| Trent 500/800 | Rolls-Royce
|
| Trent 600/900 | Rolls-Royce
|
| V2500 | Rolls-Royce
|
| Lear 45 | Short Brothers
|
| |
|
Expenditure on LI since 1982 to 2003-04 was £2,039.4
million and the repayments were £1,639.3 million in nominal
terms.
2. A NOTE ON
WHAT OTHER
AID IS
GENERALLY AVAILABLE
TO INDUSTRY
AND THEREFORE
THE AEROSPACE
INDUSTRY, ESPECIALLY
R&D AND EXPORTING
The aerospace industry can apply for grants under the "Collaborative
Research & Development" and "Knowledge Transfer
Networks" of the DTI's Technology Programme. The DTI announces
twice every year a competition for these grants in specific technology
areas.
Collaborative Research & Development is designed to help
businesses take advantage of new technological developments and
take out some of the financial risk, in the form of a grant for
support of between 25% and 75% of the R&D costs.
Knowledge Transfer Networks aim to help businesses find out
what is new in technology or national and international policies
that may benefit or effect them—as well as enabling them
to find suitable, collaborative partners or debate specific issues.
Knowledge Transfer Networks will also play an important role in
the development of Technology Strategies.
Selective Finance for Investment in England is designed for
businesses that are looking at the possibility of investing in
a European Union Assisted Area, but need financial help to go
ahead. Assistance is also available to SMEs investing in "Tier
3" areas. Delivery of the scheme in England is primarily
through the Regional Development Agencies.
The Export Credits Guarantee Department works with exporters,
project sponsors, banks and buyers to help UK exporters of capital
equipment and project-related goods and services to win business
and invest overseas. ECGD helps manufacturers and investors trade
overseas by providing them with insurance and/or backing for finance
to protect against non-payment. Its largest operation involves
underwriting the sale of capital goods, such as aircraft, machinery,
and services and to help companies take part in overseas projects
such as hospitals, airports and power stations. On average, ECGD
issues around £4 billion worth of guarantees a year.
3. LABOUR PRODUCTIVITY
IN AEROSPACE
IN SELECTED
G7 COUNTRIES 1991-2001
Labour productivity is defined as Gross Value Added per worker
employed in that sector.
CONVERTED FROM DOMESTIC CURRENCY USING PURCHASING POWER
PARITIES
| Current prices in US$ (thousand)
| Canada | US |
France | Italy |
Germany | UK | Japan
|
| Spain | |
| | | |
| | |
| 1991 | 52 | 61
| 29 | 43 | 42 |
48 | 40 | 49 |
| 1992 | 60 | 61
| 36 | 40 | 44 |
43 | 41 | 52 |
| 1993 | 67 | 64
| 30 | 41 | 37 |
45 | 45 | 60 |
| 1994 | 71 | 65
| 45 | 47 | 37 |
55 | 43 | 55 |
| 1995 | 85 | 66
| 65 | 45 | 35 |
51 | 50 | 52 |
| 1996 | 83 | 72
| 43 | 42 | 45 |
50 | 52 | 58 |
| 1997 | 94 | 74
| 87 | 49 | 58 |
61 | 56 | 62 |
| 1998 | 79 | 75
| 82 | 70 | 67 |
60 | 66 | 64 |
| 1999 | 95 | 88
| 89 | 69 | 78 |
64 | 58 | 63 |
| 2000 | 110 | 92
| 93 | 94 | 71 |
70 | 52 | 67 |
| 2001 | 125 | 106
| 110 | 99 | 83
| 80 | 70 | 54 |
| | |
| | | |
| |
Source: Derived by DTI from OECD STAN Database and Groningen
Growth and Development Centre, 60-industry Database, October 2004.
Aerospace is defined as International Standard Industrial Classification
heading 353.
Notes: Data should be interpreted as indicating broad orders
of magnitude of differences across countries and over time as
data taken direct from national surveys can give a quite different
picture; there may well be legitimate reasons for at least some
of these differences. For example, estimates for France in 2001
vary from 92 to 110 depending on source chosen.
LABOUR PRODUCTIVITY LEVELS IN 2001 PRESENTED WITH UK EQUALS
100 AND AVERAGE GROWTH RATES 1990-1992 TO 2001
| Canada | US
| France | Italy
| Germany | UK |
Japan | Spain |
| Labour productivity 2001 (UK=100) | 158
| 133 | 138 | 124
| 104 | 100 | 88
| 68 |
| Annual average growth rate in labour productivity
| 3.2 | 2.1 | 1.4
| 0.1 | 5.9 | 4.7
| 4.8 | -0.3 |
| | |
| | | |
| |
Notes:
Rates of growth in productivity are sensitive to base year
chosen which is why productivity levels for have been averaged
for 1990 to 1992. Also see notes above on variation between international
and national sources.
Sources:
Derived by DTI from Groningen Growth and Development centre
60-industry database October 2004. Aerospace is defined as International
Standard Industrial Classification heading 353.
PERCENTAGE CONTRIBUTION OF AEROSPACE TO NATIONAL GROSS
VALUE ADDED IN SELECTED OECD MEMBER COUNTRIES 1991-2001
| USA | UK
| France | Germany
| Canada | Italy
| Japan | Spain |
| 1991 | 0.9 | 0.8
| 0.3 | 0.3 | 0.4
| 0.2 | 0.1 | 0.1
|
| 1992 | 0.8 | 0.6
| 0.3 | 0.3 | 0.4
| 0.2 | 0.1 | 0.1
|
| 1993 | 0.7 | 0.5
| 0.2 | 0.2 | 0.4
| 0.2 | 0.1 | 0.1
|
| 1994 | 0.6 | 0.6
| 0.3 | 0.2 | 0.4
| 0.2 | 0.1 | 0.1
|
| 1995 | 0.5 | 0.5
| 0.4 | 0.1 | 0.5
| 0.2 | 0.1 | 0.1
|
| 1996 | 0.5 | 0.5
| 0.3 | 0.2 | 0.5
| 0.2 | 0.1 | 0.1
|
| 1997 | 0.6 | 0.5
| 0.5 | 0.2 | 0.6
| 0.2 | 0.1 | 0.1
|
| 1998 | 0.6 | 0.6
| 0.4 | 0.3 | 0.5
| 0.2 | 0.1 | 0.1
|
| 1999 | 0.6 | 0.6
| 0.5 | 0.3 | 0.6
| 0.2 | 0.1 | 0.1
|
| 2000 | 0.5 | 0.6
| 0.5 | 0.3 | 0.6
| 0.2 | 0.1 | 0.1
|
| 2001 | 0.6 | 0.6
| 0.5 | 0.3 | 0.7
| 0.3 | 0.1 | 0.1
|
| | |
| | | |
| |
COUNTRIES' SHARE OF TOTAL AEROSPACE GROSS VALUE ADDED
IN THE EIGHT COUNTRIES SHOWN (US$ BILLIONS AND PERCENTAGES)
| USA | UK
| France | Germany
| Canada | Italy
| Japan | Spain |
| 2001 | 55.0
(60.0%) |
9.2
(10%) | 7.7
(8.4%) |
6.8
(7.4%) | 6.1
(6.6%)
| 3.6
(3.9%) | 2.5
(2.7%)
| 0.8
(0.8%) |
| | |
| | | |
| |
Sources:
Derived by DTI from OECD STAN database and Groningen Growth and
Development Centre, 60-Industry Database, October 2004. Aerospace
GVA converted to US$ using Purchasing Power Parities.
Notes:
Aerospace is defined as International Standard Industrial Classification
heading 353.
* Share of industrialised total value added in the(OECD) production
of civil aircraft, engines and related equipment. Figures may
not add to 10% due to rounding. Other non-OECD producer countries
are Brazil and China. Comparable data are not available for these
countries.
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