APPENDIX 44
Memorandum submitted by the Society of
British Aerospace Companies
1. INTRODUCTION
1.1 SBAC is the UK's national trade association
representing companies supplying civil air transport, aerospace
defence, homeland security and space. SBAC encompasses the British
Airports Group and UKspace. Together with its regional partners,
SBAC represents over 2,600 companies, assisting them in developing
new business globally, facilitating innovation and competitiveness
and providing regulatory services in technical standards and accreditation
1.2 SBAC welcomes the House of Commons Trade
& Industry Committee's inquiry into the future of manufacturing
in the UK. SBAC and member companies have direct experience and
views on the three specific areas the Committee wishes to address,
the marketing of UK plc, public procurement and skills shortages.
1.3 Manufacturing has risen up the political
agenda in recent years. Government produced its Manufacturing
Strategy in 2002 and this was updated in 2004. The Government
established the Manufacturing Forum to oversee the implementation
and evolution of the strategy. It has focused specifically on
skills, public procurement and the image of manufacturing.
1.4 In addition Government has worked with
a number of sectors to develop longer term strategies through
the innovation and growth team (IGT) process. These have been
supplemented by a Technology Strategy and more recently by a Defence
Industrial Strategy. These have stressed the Government's commitment
to supporting the development of high value manufacturing in the
UK and identified the aerospace industry as being of particular
importance.
2. INDUSTRY PROFILE
2.1 Aerospace is a UK success story and
remains the largest aerospace industry outside the USA. It directly
employs 124,000 people, has a turnover of £22.7 billion and
has seen record levels of new orders, £30 billion in 2005.
UK aerospace manufacturing is globally competitive and exports
67% of its total sales. UK companies also have a significant presence
overseas, employing 43,000 people and generating sales of £6.5
billion.
2.2 Aerospace manufacturing provides high
value and highly skilled jobs. The latest data shows that 34%
of all employees in the sector hold a university degree or equivalent
and is forecast to increase to 40% by 2010. Average salaries in
the sector are £33,645, 43% higher than the UK average and
31% above the manufacturing average. The industry is committed
to improved training and skills development and employs 2,719
apprentices.
2.3 Research, development and new technology
are incredibly important for long-term competitiveness in the
aerospace industry. Whilst the sector is one of the most R&D
intensive sectors in the UK economy and invested £2.7 billion
in 2005, up 31% on a year earlier, downward pressure on the R&T
component of this figure suggests that the UK will struggle to
maintain its advantage over time unless the trend is reversed.
3. MARKETING
UK PLC: UKTI STRATEGY
3.1 SBAC strongly supports the priorities
identified in the strategy unveiled by UKTI in July 2006. SBAC
had identified a number of areas of concern and was pleased to
see most of these recognised within the strategy document. These
include:
— Providing sufficient resources for
consistent and high quality marketing of UK strengths and capabilities.
— Focusing resources on important sectors
and technologies where the UK has a comparative advantage.
— Tailoring its services to best support
the companies in its target sectors.
— Stronger co-ordination of trade promotion
activities undertaken by Regional Development Agencies to focus
resources and avoid unnecessary confusion amongst potential customers
and investors.
— Making greater use of the individuals
in UKTI's overseas posts and sharing the information they gather
with industry.
— UKTI undertaking and sharing market
research on emerging markets.
— Bringing together the trade and investment
parts of UKTI to provide a more coherent service.
— Ensuring more experienced exporters
can access support to establish themselves in new markets.
4. MOVING FORWARD
4.1 The UKTI strategy does not give any
detail of how the positive changes it outlines will be delivered.
SBAC would argue strongly that the UK aerospace industry should
be seen as a priority sector. It is globally competitive, highly
R&D intensive and has a range of companies active in international
markets. SBAC would like to develop a strategy with UKTI to maximise
the export opportunities and encourage new investment into the
UK aerospace industry.
4.2 SBAC would particularly like to see:
— Additional UKTI resources dedicated
to maximising the impact and attractiveness of UK companies at
selected major international exhibitions.
— A specific focus on the Farnborough
International Airshow as a showcase for UK aerospace manufacturing.
— Specific assistance offered to aerospace
companies to assist their export efforts. This is particularly
important for a range of mid-sized companies that currently miss
out on any direct support from Government.
— A closer and more strategic working
relationship between UKTI, DESO and the Aerospace, Defence and
Marine Unit at DTI, to ensure political, financial and technical
support for companies is co-ordinated and focused.
— A closer working relationship between
UKTI and SBAC on inward investment activities to maximise support
and sector specific knowledge.
4.3 SBAC enjoys a close working relationship
with UKTI and is keen to support the organisation through the
implementation of its five year strategy. A strong and coherent
presentation of UK manufacturing strengths and capabilities in
key markets is essential in helping companies win business and
attract investment. There is some concern that planned budget
reductions will not allow UKT&I to progress its plan as quickly
as SBAC would like.
5. THE VALUE
OF AEROSPACE
RESEARCH AND
DEVELOPMENT
5.1 SBAC has recently commissioned a programme
of research assessing the economic importance of the aerospace
industry and identifying the public policy issues critical to
its future well-being. This work has been led by Sir Donald Mackay
and been supported by Oxford Economic Forecasting (OEF). The results
emphasise that the UK aerospace industry is globally competitive,
but faces challenges from both traditional and emerging aerospace
economies. It concludes that to remain competitive and a successful
base for high value manufacturing, it is essential to increase
R&D investment.
5.2 The importance of raising levels of
R&D investment is recognised by Government and it has a specific
objective of increasing R&D to 2.5% of GDP by 2014. The research
work undertaken by OEF has examined the broader economic benefits
associated with R&D investment, the mechanisms that facilitate
them and the sectors most likely to deliver them. This work demonstrates
that the benefits to the economy from increased R&D investment
are large. OEF estimates that the social return on R&D investment
in the manufacturing sector as a whole is around 50%, however,
the economy-wide social return from R&D by the aerospace sector
as a whole is considerably higher at around 70%.
5.3 The OEF research provides strong empirical
evidence that there is a very large difference between the private
and social returns to investment in UK aerospace R&D. This
imbalance, alongside the lower profitability of UK aerospace companies
in comparison to their international competitors, suggests that
total investment in aerospace R&D in the UK is lower than
is economically desirable.
5.4 R&D intensity in the aerospace sector
in the UK is less than half of that in Germany or France, and
lower than in the US. This suggests there is scope for a significant
increase in the level of R&D investment to the benefit of
the sector and the wider economy. Sir Donald has concluded that
without specific action from Government to encourage higher levels
of investment there will be sub-optimal R&D expenditure for
the industry and the UK as a whole. This could put at risk the
global position of the UK aerospace industry and undermine efforts
to meet the Government's own 2.5% target.
5.5 Whilst the Government has put in place
a number of support mechanisms, SBAC believes there should be
an explicitly industrial component to the allocation of Government
R&D support to reflect the social returns made by different
sectors. SBAC has shared the OEF work with various Government
departments and is keen to discuss with them how to achieve the
substantial increase in aerospace R&D required to maintain
international competitiveness and raise the productivity and competitiveness
of the UK economy.
6. NATIONAL AEROSPACE
TECHNOLOGY STRATEGY
6.1 The DTI Technology Programme is the
mainstay of funding for the National Aerospace Technology Strategy
(NATS) and essential for the future competitiveness of our industry.
SBAC recognises the huge steps made to help co-ordinate funding
for the NATS by the DTI, RDAs and devolved administrations. After
some excellent progress it now appears that the prospects for
the sector are being undermined by a lack of appropriate themes
within the twice yearly project calls.
6.2 The NATS is a strategic approach to
the research and technology demonstration needs of the aerospace
sector. The current piecemeal approach to project calls, despite
some notable successes, is beginning to fragment the coherence
of the strategy and undermine its potential value.
6.3 The Aerospace Technology Steering Group
(ATSG) has made a number of submissions to the TSB on the themes
that would best support the NATS, these appear to have been ignored.
In addition, the ATSG, and industry generally, has not been allowed
access to the TSB to explain the National Aerospace Strategy or
support its submissions.
6.4 There is growing frustration across
industry that the Government's policy support for high value,
high technology manufacturing sectors, like aerospace, is not
being reflected in the approach being adopted by the TSB.
6.5 The proposed move to an `arms length'
TSB increases our concern, particularly when there appears to
be no plans for further public consultation on the role and remit
of the new body. It is essential that the new body recognises
the NATS as an essential component of the Technology Programme
and reflects this is in the themes chosen for project calls and
in the continuity of funding for key programmes.
7. PUBLIC PROCUREMENT
7.1 The development and implementation of
Defence Industrial Strategy (DIS) is the most significant public
procurement issue currently facing the sector. Industry had been
urging the Ministry of Defence (MOD) to develop a strategy since
the publication of the Defence Industrial Policy in 2002. Industry
was encouraged by the energy and drive that was applied to developing
and publishing the DIS. It was particularly pleased by the significant
engagement between MOD and industry which helped to inform the
strategy and to prepare industry for the new approach.
7.2 Industry gave a generally positive response
to the strategy and welcomed the recognition of the idea of "appropriate
sovereignty" and the need to maintain industrial support
in the UK for the Armed Forces. It was also heartened by the MOD's
recognition of the need for a profitable defence industry, a more
open and transparent approach to future capability requirements,
MOD's willingness to adopt a variety of procurement models offering
better value for money (including partnering and competition)
and the emphasis placed on Through Life Capability Management
(TLCM).
7.3 Industry is keen to see DIS implemented.
The National Defence Industries Council, its various sub-groups
and a range of other DIS specific groups are working closely with
MOD to press for effective implementation. The recent publication
of the review into Enabling Acquisition Change indicates MOD's
determination to make the necessary changes to deliver TLCM.
7.4 For industry, the primary focus is to
develop partnering arrangements in key sectors. Progress in some
sectors is good, the announcement of the partnering agreement
with AgustaWestland being an obvious example. While in other sectors
tough negotiations continue. Work on partnering agreements is
proving a real life test for the changes in culture and behaviours
in MOD and industry heralded by the launch of the Defence Values
for Acquisition which underpin the DIS. It will also need to demonstrate
that DIS deals with the whole supply chain, not just the MOD/Prime
contractor relationship.
7.5 The next six to twelve months are crucial
for DIS and the future of the UK defence industry. As the various
strands of the MOD change programme are pulled together industry
has been looking at how to improve its engagement to provide even
more constructive feedback. The membership of the Defence Industries
Council has been reviewed and new members have joined. If MOD
and industry working together are jointly able to deliver against
these goals DIS will be regarded as a success.
8. SKILLS ISSUES
8.1 Aerospace employs a highly skilled workforce
which accounts for more than 25% of the total workforce in the
engineering sector. Employment in the sector increased by nearly
10,000 jobs during 2005 and is set to remain stable in the medium
term. The industry has identified some key skills challenges these
include:
— Skills gaps at management, professional,
craft and operator/assembler levels. There are particularly acute
shortages in technical engineering, CNC machine operations, Computer
Aided Design and Computer Aided Manufacture. The Maintenance Repair
and Overhaul (MRO) sector has reported difficulties in recruiting
in technical areas including non-destructive testing technicians
and other technicians, instructors/trainers, aircraft tradesmen
and avionics engineers.
— In addition to these skills gaps
industry is also concerned by the lower number of students studying
science, technology, engineering and maths (STEM) in schools and
universities and the implication this has for the future talent
pool.
— Employers are also finding that many
students and school leavers enter the labour market without basic
employability skills. These can range from basic literacy and
numeracy skills, a lack of appreciation of the attitudes required
in a modern business environment and a level of knowledge that
does not reflect the qualifications gained. These factors lead
to companies investing substantial time and resources in in-house
training to ensure new employees can meet the needs of employers
and begin to add value to businesses.
— The aerospace sector needs more and
better qualified engineers in electrical, electronic disciplines,
software and manufacturing. Emerging technologies will drive the
requirement for skills in areas such as:
— Software, systems and modelling simulation
(technical, process and business)
— Electrical systems including power electrical
and power dense systems
— Advanced manufacturing engineering, manufacturing
science and simulation to support increased focus on cost reduction.
— Smart materials, electrical and magnetic
materials and lightweight, structural materials and composites.
— Diagnostic and prognostic tools to support
the growing importance of our services business.
9. IMPROVING
MANUFACTURING SKILLS
9.1 The aerospace sector offers challenging,
exciting and rewarding careers. It is an entrepreneurial and wealth
creating sector that has tremendous growth potential. Addressing
skills issues is a long-term process that requires a strategic
approach and close co-ordination across industry, Government and
other stakeholders.
9.2 SBAC has established a close working
partnership with the engineering Sector Skills Council, SEMTA,
and Amicus, the main trade union in the sector. Together we have
developed a skills delivery programme to ensure all aerospace
companies are aware of the skills needs of the industry and how
to obtain support in addressing particular gaps.
9.3 SBAC would like to see greater efforts
made to make the teaching of science, technology, engineering
and maths more interesting and challenging. This should be accompanied
by improved careers advice in schools to provide an up to date
view of the range of career opportunities within manufacturing
generally and aerospace in particular.
9.4 There is a broader need for the public
agencies involved in the manufacturing and skills agenda to help
improve the public perception of manufacturing. Better co-ordination
and communication across these agencies would provide an opportunity
to more effectively promote engineering careers and a better understanding
of modern manufacturing.
10. FUNDING SYSTEMS
FOR WORK
BASED PROGRAMMES
10.1 Work based training programmes have
traditionally suffered from being influenced by a range of different
funding priorities and initiatives. Currently, funding is spread
by level, type, age (Age discrimination policies will influence
the need to review and change current funding streams aligned
to age limits on apprenticeships, NVQs and Higher Education pathways
and qualifications) and influenced by funding body priorities
and initiatives.
10.2 There is very limited funding for Vocational
NVQ/ Apprenticeships, Higher Education and Further Education for
over 25s. Most funding currently comes through the Learning and
Skills Council, although Level 4 and above tends to come through
Higher Education Funding Council. Regional Development Agency's
help with special funding in support of major redundancy/retraining
issues where potential local "social costs" make this
appropriate, although interpretation of their remit and priorities
can vary from region to region.
10.3 The current funding regime for work
based training is a complicated environment to negotiate through
and is resource intensive with onerous audit and reporting requirements.
Industry would prefer a single source of funding and a single
responsible body that industry can build a coherent relationship
with.
10.4 Industry would like to see funding
made available for trainees of all ages and this should reflect
the higher costs of training in the aerospace sector.
11. NATIONAL
MANUFACTURING SKILLS
ACADEMY
11.1 Employers have some straightforward
expectations of the education system. They want people with the
skills and attitudes to make a positive impact on business as
soon as they start. They want effective training for their existing
workforce and they want affordable training, with clear guidance
of where they can to address their training needs.
11.2 A large number of bodies are involved
in the coordination and provision of education and training, which
can be confusing and ineffective for businesses, particularly
SMEs. Whilst clarity is emerging on the roles of the various organisations,
further work needs to be done.
11.3 SBAC is a major contributor and strong
supporter of the National Manufacturing Skills Academy (NMSA),
an initiative being led by SEMTA which aims to streamline education
and vocational training provision and create an improved and simplified
accreditation regime. This project brings together industry and
government in a bid to streamline courses and ensure the training
that is available is in tune with industry needs.
11.4 The NMSA is industry led and will focus
on the ensuring that industry sends strong demand signals to education
providers on the type and content of courses, as well as creating
a mechanism for validating the quality of training on offer. The
NMSA should make it easier for companies, particularly SMEs, to
find the right courses, providers and sources of funding for their
education and training needs.
12. CONCLUDING
REMARKS
12.1 UK aerospace is a manufacturing success
story, a globally competitive and successful industry experiencing
record growth and investing significantly in research & development.
The future of the industry is positive and their remains much
to be optimistic about.
12.2 Aerospace companies operate in highly
competitive global markets. To sustain the UKs position as an
attractive location for prime companies it is vital that the right
Government creates a competitive environment to retain and attract
new investment into the sector. The key areas for the industry
are the levels of support and investment in research and technology
and ensuring that the UK has the right skills base to continue
to add value to aerospace innovation and productivity.
12.3 Our industry makes an enormous contribution
to the economy but cannot continue to thrive without a rich pool
of engineers and graduates. Joint initiatives between government,
industry and the trade unions such as the National Manufacturing
Skills Academy have a significant contribution to make in ensuring
that training provision meets the needs of manufacturing. Wider
initiatives to increase the uptake of core science subjects are
also important.
12.4 The aerospace industry recognises its
environmental responsibilities and is committed to meeting tough
targets to improve fuel efficiency and reduce perceived noise.
The National Aerospace Technology Strategy clearly identifies
areas where investment is crucial to meet these challenges and
retain global competitiveness. Although aerospace companies have
been successful in winning DTI funding, there is growing concern
about the difficulties associated with the current system of support.
The reorganisation of the Technology Strategy Board provides an
opportunity to address these concerns and ensure long-term funding
for important aerospace research projects.
| 
