Examination of Witnesses (Questions 93-99)
AMICUS
14 DECEMBER 2004
Mr Hoyle: I am a member of Amicus.
Mr Berry: I am also an Amicus member.
Q93 Chairman: I think I am also a member
of Amicus. We have had fairly good news this morning. How do you
see the future of the UK aerospace industry at the moment? What
do you think needs doing? If it is as successful as we are led
to believe, how do you see things developing from where we are?
Mr Wall: Before I start, mea
culpa. I have just passed to staff the final version of what
was the draft of our written submission. I am the National Officer
for Amicus with responsibility for aerospace and shipbuilding.
I am also the chair of the Confederation of Shipbuilding and Engineering
Unions Aerospace Committee which embraces all of the unions in
UK aerospace. Finally, in my spare time, I am also chair of the
European Metal Workers' Federation Aerospace Committee and that
is certainly relevant to the way in which I will attempt to respond
to your questions today. How do I see the future? I see it with
a real sense of challenge. I think we are in quite good shape
but we have to get in better shape. One of the big things we have
going for us is the passion of the people involved in the industry.
You have seen some examples of that today, particularly from my
rock and roll partner, Kevin Smith. Being a child of the sixties,
I do not know why he missed out the other two things we used to
enjoy back then but certainly the rock and roll aspect of it he
is probably still capable of performing. What we also have going
for us is that we have at least been given the opportunity by
government to sit down and take a long, hard look at where we
are and where we need to get to through the auspices of the Aerospace
IGT. That was a crucially important exercise. What was most important
was that we had all of the stakeholders involved in that. If I
look across at the competitive nations, they have not done that.
They have either never even attempted to do it or their peers
in the United States could not come across with the same breadth
of stakeholder involvement. That was the Blue Ribbon Commission
and there was a single member from the trade unions involved in
that but they could not even reach fundamental agreement and he
had to end up writing a note of dissent. What we do have going
for us is a shared responsibility and a shared passion to try
and make the industry grow. What we need you have touched on here.
We most certainly need an environment in which fiscally we need
to be able to compete. The Repayable Launch Investment is crucial
as are export credit guarantees. In R&D, we have been living
off the back of legacy investment for far too long. We really
need to shape up on that. We have to encourage the innovation
that has been highly instrumental in getting us to where we are
and, from the trade union side, we have had our wake-up call.
If we needed a final one, it is the aftermath of 9/11. We are
responding. I think we are proactive. All of the successful companies
in the business recognise us as a major contributor and sit down
and work with us to try and meet these challenges. What is happening
in the outside world? The emerging low cost economies will take
some watching. We will have to very carefully observe what is
taking place there and carefully judge our involvement with them.
I touch on the United States and that is a biggy. We have to examine
very closely what we have done and how much we can improve on
that. At the very top level we have to sharpen things up but we
can also do something a bit further down at the congressional
level. We can certainly engage much more there. We have enough
people in the United States to engage more with congressmen.
Q94 Chairman: You make a reference in
your evidence to US subsidiaries locking the technology in, sometimes
to the detriment of the UK, but there are other concerns about
outsourcing. You mention the low cost economies but what about
the amount of R&D that overseas subsidiaries are undertaking?
This is in some ways denying us access sometimes to the fruits
of that R&D. How can the Government help aerospace companies
overcome these kinds of technology barriers?
Mr Wall: That gives you a feel
for the highly globalised nature of the sector. It is possibly
the most globalised of all the industrial sectors. We have to
ensure that the financial environment that we have is competitive
at all times. What we are up against—and I think we are
just starting to understand it with the concept of the RDAs—in
many cases is not just a federal financial support mechanism;
it is also very much a regional financial support mechanism. An
example of that is the Quebec region of Canada which has a very
high concentration of aerospace companies, where that regional
government does enormously well in helping to support its immediate,
indigenous aerospace industry. They get two bites at that cherry.
You talked earlier on to the SBAC representatives about how the
RDAs are performing. I still very much think they are finding
their way. There is money out there. How much I do not think people
know. How do you access it? I think they are still learning. Sally
Howes brought out very well that we are maybe four or five years
further down the line in Scotland with evolution. There is much
more a recognition of how important and how good an investment
aerospace can be to that global economy. We are still a number
of years away from that in the RDAs and even in regions like the
north west and the south west where it forms a huge part of that
economy. We are still very much finding our way. An example of
that is that GKN had been trying for quite some time to get some
part investment on a composite centre on the Isle of Wight. They
went through so many hoops and over so many fences it was unbelievable.
We became involved in that and we whispered in a few ears. Eventually,
it shook loose. We are not talking about a huge amount of money
but what we are talking about is a scenario where the state of
Alabama was prepared to put much more funding for that composite
centre up front to that company, conditional upon them moving
that centre of excellence to Alabama. We cannot afford to take
that long to start shaping up with our regional assistance and
regional encouragement.
Q95 Mr Berry: You have referred to the
emerging low cost economies and you talked about China and so
on, as have others this morning. On the one hand, a growing market
means that there will be competition which potentially could put
certain UK jobs at risk but also the other side of the coin is
that a growing market means that there are more export opportunities
which is good for the UK workforce. Therefore, what is your overall
impression about this globalisation? Is it going to be a net benefit
to the UK workforce or is it going to be a net loss?
Mr Wall: It depends on whether
your view is that your cup is half empty or half full. Mine is
always half full. Let us recognise that it is global. If we do
nothing, we vanish. We are not going to do that. That is just
not in our nature. We will not allow it to happen within the industry
and neither should HMG allow it to happen. We really have to get
in there and compete. What we have to recognise is that in order
to get in there, there has to be some exchange of technology.
Hopefully we can do it at the lower end and we can control it.
At the same time, we have to decide what we want to be really
good at and become the best at it. That is the only way in which
we can approach that. Also, we have to do it in such a fashion
where we are taking our workforce with us. The better companies
are doing that. They are into works councils, employee fora and
situations where it is not just a question of saying, "We
will sit down with you when the wage deal comes round or the annual
redundancy comes round." "This is our strategy. What
do you think about it?" The better ones are saying, "Do
you have a view on it?" We have to do that together.
Q96 Mr Berry: Some levels of the supply
chain are obviously more robust than other parts of the industry.
How should the Government respond to that?
Mr Wall: We have recognised for
quite some time I think what we call tier four and five, the lower
value, lower technology, machine type stuff. We have to continually
do a skills audit, evaluate exactly what skills we need to be
good at, try and encourage our workforce to respond to it. It
is life long learning. There is no alternative to that. What you
find is that if we approach it in a proper fashion people will
respond positively to that. The days are gone when there was a
queue of people waiting to grab the early retirement or the redundancy
and run out the door. We have people now who by and large are
willing to respond to training, to upskilling, to learning new
things. We have to go down this road really heavily.
Q97 Mr Clapham: We heard this morning
from the SBAC that they see the trade unions as being a very important
element in the overall capacity of the industry. We also hear
that, for example, Airbus industries are looking at getting their
costs down. We know from the way in which some of the outsourcing
has gone that it has not just gone to some of the cheaper countries
of Asia. Some outsourcing has gone to Austria and Italy. What
do you think is causing the UK to be a more expensive option than
other parts of Europe?
Mr Wall: I do not believe there
is any evidence that indicates it is a more expensive option than
other parts of Europe. If work has gone there it is possibly on
the back of joint ventures. Possibly it is offset. I do not think
it is on the basis that we are more expensive than Austria and
Italy.
Q98 Mr Clapham: Given that from the information
we have that has happened and outsourcing is going to those two
countries, it does present us with a challenge. Would it be possible
to increase productivity and get costs down perhaps by the introduction
of more technology? Would you be in favour of that?
Mr Wall: Nothing stands still.
It is always possible to try and squeeze a little more out. There
comes a point in time when you say that it is becoming counter-productive
to squeeze too much. Our response to high performance workplace
organisations, our response when companies have sat down and consulted
with us on the benefits of new technology, has been a positive
one by and large, if it is linked to new investment, to new facilities,
to the fact that there is going to be a future there. It is not
just about driving cost out. That is the key. If we are allowed
to take part ownership of that process, then we respond positively
but cheapest is not always the best.
Q99 Mr Hoyle: On skills and training,
are there enough skilled people for the industry?
Mr Wall: In certain areas, yes.
If we are looking at the more traditional, metalworking trades,
there are plenty of people in them. If we are looking at the top
end, computer software engineers, there are never enough of them.
A concern that I have in terms of skills is that we may at times
lose sight of a very useful traditional route of acquiring skills.
It is bright, young people starting on the apprenticeship route
and moving from the tools into the drawing office and the design
areas; and then being encouraged yet further to possibly go out
and turn that into engineering degrees. There is still some of
that going on. We have some real leaders in the UK industry who
went via that route, guys like John Ferry from Smiths. I am a
bit wary that it may be taking a bad second place to get hold
of graduates and bring them in without letting them experience
a bit of the traditional part of the skills acquiring route also.
The basic answer is in some areas, yes, but not in the traditional
areas.
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