Select Committee on Trade and Industry Written Evidence


APPENDIX 16

Memorandum by the South West of England Regional Development Agency

  The South West Regional Development Agency is pleased to respond to the House of Commons Trade and Industry Select Committee inquiry into the competitiveness of the UK aerospace industry.

SOUTH WEST RDA

  Our goal is to improve the economy of the South West. This involves giving people the skills they need, encouraging enterprise and improving communications. We also promote the strengths of the region and help people to regenerate their communities. All our work is guided by the Regional Economic Strategy. The aerospace industry is one of our priority sectors and we are working very closely with the DTI, AeIGT and industry to promote the continued growth and strength of this sector.

1.  THE IMPORTANCE OF THE UK AEROSPACE INDUSTRY TO THE UK ECONOMY

  1.1  South West England has one of the most important and diverse aerospace regions in the world. It has enormous expertise in the design and manufacture of—amongst other things—jet engines, wings, propellers, under-carriages, avionics, rotary wing aircraft, fuel systems, materials, missiles and aircraft testing services. At least 43,000 people work directly for companies in the industry, many undertaking highly skilled engineering design, development and manufacturing tasks (Mair and Mair Report, South West Aerospace: the challenges ahead, the regional agenda 2002).

  1.2  This long-standing and respected expertise is evident in the role the region's companies are playing in the development of the Airbus range of civilian and military aircraft, the US-led Joint Strike Fighter (JSF) aircraft and the EH101 helicopter.

  1.3  The South West is home to some of the world's most respected prime contractors, a highly developed supply chain, excellent universities/colleges, and the West of England Aerospace Forum (WEAF)—one of the most dynamic industry groups in the aerospace industry offering practical help to the 700+ member businesses. The region also houses the UK's largest procurer of manufactured goods, the Defence Procurement Agency, part of the UK Ministry of Defence.

  1.4  Of the 11 largest aerospace companies in the UK (by employees), nine have major facilities in the region (see those underlined). This demonstrates the region's attraction for major national and international companies looking for critical business advantages.


Prime Organisation
UK based
aerospace employees
BAE Systems25,000
Rolls-Royce23,500
Airbus11,000
Bombardier Shorts6,300
Smiths Aerospace5,000
Thales5,000
Cobham3,500
GKN Aerospace Services 3,500
Goodrich3,500
Westland Helicopters 3,500
MBDA2,500
Astrium2,000
(Source: SBAC)



  Highlights include:

  1.5  Airbus UK: It is headquartered in Bristol and employs over 5,000 highly skilled employees involved in the design of wings, fuel systems and landing gear and the manufacture of trailing-edges for the Airbus family. It is well into a £300 million investment at the Filton site which makes it one of the most important sites within the Airbus group.

  1.6  Rolls-Royce: The Bristol Patchway facility is the headquarters of the Rolls-Royce military engine division and is the second-largest R-R site in the UK and third-largest in the Group (after Derby and Indianapolis). The company recently announced the redevelopment of the current site at a cost of £75 million.

  1.7  Smiths Aerospace: Headquartered in Cheltenham, the company is playing a leading role in the move towards the "more electric aircraft" and announced major contracts for Boeing 7E7 and Airbus earlier this year.

  1.8  Messier-Dowty: Part of the SNECMA group, the company has won two major contracts in the past six months, winning both the Boeing 7E7 and Airbus A400M landing gear.

  1.9  Westland Helicopters Ltd: Following the sale by GKN of their 50% share in the company, the business is now wholly owned by Finnmecanica of Italy and employs almost 4,000 people in Yeovil.

  1.10  Supply chain companies: The West of England Aerospace Forum is a trade association for the South West Aerospace Industry and represents over 700 organisations. The forum works in partnership with its members on many levels to promote the sector both in the UK and worldwide. WEAF champion the interests of all aerospace companies in the region, particularly the SMEs that help make the South West a region of global excellence. WEAF is funded by the SWRDA for £5 million over three years.

2.  INDUSTRIAL PERFORMANCE IN THE CURRENT ECONOMY

  2.1  The region has an even balance between civil and military activity which has provided some protection against the impact of 11 September.

  2.2  In the defence sector Westland, Rolls-Royce, Cobham, Claverham and Thales are all major contractors and significant exporters. The UK MoD remains the key market for these and many other smaller companies. Rolls-Royce has a major share of the Eurofighter engine programme and a central role in the huge JSF contract by virtue of its pioneering work on the lift fan.

  2.3  Airbus overtook Boeing as the world's leading supplier of large civil aircraft in 2003. The design of the A380 and A400M has increased the activity at Filton and the volume of work in the supply chain. Some of the region's leading first tier suppliers have also announced substantial contracts for forthcoming Airbus and Boeing programmes.

3.  CHALLENGES IN THE DOMESTIC AND INTERNATIONAL MARKETS/BARRIERS TO TRADE

  3.1  Certain defence contractors are concerned by slippages in the timing of major defence orders including:

  3.2  Typhoon/Eurofighter: Rolls-Royce and Cobham have both faced difficulties as a result of delays in the awarding of the second tranche of orders. The latter commented that this contributed to the 140 job losses announced in September 2004 (Source: Financial Times).

  3.3  Future Air Tanker: the EADS-led consortium (which includes Cobham, Rolls-Royce, Thales and VT Group) are affected by the delay/possible cancellation of this programme.

  3.4  Helicopters: The delays/possible cancellation of the BLUH and SCMR versions of the Lynx, and the effect this could have on the Merlin programme give rise to serious concerns.

  3.5  Exchange rates: The strengthening of Sterling and the Euro against the US dollar (in which aircraft are sold) is eroding margins and resulting in price pressure in the supply chain.

BARRIERS TO TRADE

  3.6  Concerns over the level and type of support offered by other nations to attract high value work remain, specifically France, the USA and Canada.

4.  INVESTMENT IN RESEARCH AND TECHNOLOGY

  4.1  According to the AeIGT report, the industry nationally spends £150 million on R&T—second only to pharmaceuticals. The bulk of all R&T work in the region is undertaken by aerospace companies either using their own resources, in collaboration with others under a variety of UK or EU funded programmes or by commissioning research with universities.

5.  PROGRESS TOWARDS THE IMPLEMENTATION OF THE RECOMMENDATIONS OF THE DTI-SPONSORED AEIGT

  5.1  In October 2004, the RDA agreed to contribute over £3 million towards a £14 million Airbus led investment in composites materials in the region. This facility is a direct response to the AeIGT report which stated ". . . the UK is now falling behind in the rate of technology acquisition . . . . The consequences of this can be seen in the migration of R&T activities on small and medium size aero engines . . . to the USA, Germany and Canada, and the threat posed to the UK position on civil aircraft wings by the heavy investment in composite technology in Spain and Germany". These facilities will form part of the National Composite Network which will be formally launched on 30 November.

  5.2  The Agency and West of England Aerospace Forum is supportive of the AeIGT process. Agency staff are active on the Integrated Wing Aerospace Technology Validation Project (one of the four pilot ATVPs) and the Advanced Aerospace Materials and Structures Aerospace Innovation Network (one of the three AINs) as a representative of the RDAs and DAs.

  5.3  The ATVPs and AINs envisage the RDAs and DAs making significant financial contributions to supplement those of industry and other public sector bodies. The Agency is actively working with AeIGT, DTI and other RDAs to find ways of engaging constructively in this process. It will be a very significant challenge to find the sums of money envisaged from existing sources but we are actively engaged to find solutions if possible.

6.  GOVERNMENT SUPPORT FOR THE AEROSPACE INDUSTRY

  6.1  Whilst CARAD has been abolished it seems that the new DTI business support products of Collaborative R&D and Knowledge Transfer Networks can be used to deliver at least some of the needs of the AeIGT working groups. There are concerns however that the government/public sector will be able to deliver the additional £50 million per annum identified in the AeIGT report.

  6.2  The Agency works closely with the DTI Aerospace and Defence team. A reduction in the capability or capacity of this team would be of concern.





 
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