Examination of Witnesses (Questions 208-219)
MR WARRICK MALCOLM, MR ANDY LEATHER, MR JOHN COLES AND MR HANS PUNG
11 MARCH 2008
Q208 Chairman: Good morning. I would like to welcome the witnesses for our session on employment and skills for defence in Scotland. I am sorry we have started 12 minutes late; I apologise for any inconvenience. Would you like to introduce yourselves for the record?
Mr Leather: I am Andy Leather; I am Director of Aerospace Innovation Growth Team Programmes for the SBAC.
Mr Malcolm: My name is Warrick Malcolm and I am Head of Public Affairs for SBAC Scotland.
Mr Coles: John Coles, Chairman of UKNEST.
Mr Pung: I am Hans Pung; I am the Director of the Defence and Security Programme, RAND Europe.
Q209 Chairman: Before we start on the detailed questions do you have any opening remarks you would like to make. No. Thank you. We have heard from a number of witnesses that the aircraft carrier programme is vital and crucial for the shipbuilding industry in Scotland and on the Clyde for jobs, for apprenticeships, for stability in the industry. Do you think that there are some other potential benefits from this order of aircraft carriers; for example, could industry use the investment to become more globally competitive so that we can attract some more orders from abroad?
Mr Coles: I think it is unlikely except, of course, building on at the expertise that will come from the work that is being carried out on that ship and the talents that we develop during the time. So, yes, there is some cross-fertilisation to use on those other projects when they come to fruition, to build up the skill set, but not specifically for something specific, I would say.
Mr Malcolm: Certainly we at SBAC Scotland had a meeting with Des Browne and he was certainly of the opinion that it offered a fantastic opportunity for Scotland to show the world the engineering expertise that we have all the way through the supply chain in terms of sub-contracts that will come out of the project, and that it was a fantastic opportunity and it was really up to the sector as much as anybody to make sure that we do not squander it.
Q210 Chairman: The future carrier programme is obviously very crucial and significant for the ship building industry in Scotland. Could you tell us what proportion of total defence spending and employment in Scotland it represents? Is Scotland getting its fair share from the MoD?
Mr Malcolm: We would say from SBAC Scotland that we do very well from MoD contracts in terms of the employment which is generated from MoD contracts. It is a significant employer and a recent survey has shown that 16,000, 17,000 people are employed in the sector and that is going up, and the sector generally is growing at a faster rate in the Scottish economy as an average, so the sector at the moment is doing very well indeed.
Q211 Mr Davidson: Just to follow up that point, can you clarify for me what sort of percentage of the economy, or the manufacturing base that is?
Mr Malcolm: I do not have the exact figure to hand. In terms of manufacturing base I think the word we would is significant but in terms of putting a figure on that I could not go further.
Q212 Mr Davidson: Is it a bigger share of the Scottish economy than defence is of the economy in England?
Mr Malcolm: I would expect not, no; I do not have the figures to hand.
Q213 Mr Davidson: So it is a smaller share in Scotland than in England?
Mr Malcolm: As I say, I do not have the figures to hand.
Q214 Mr Davidson: Could you give us a note indicating what the position is, as you understand it?
Mr Malcolm: Of course.
Q215 David Mundell: Apart from the naval sector what other defence-related industries have a strong presence in Scotland and are you able to give us some form of overview of the different sectors, because to date we have focused a lot on the carrier programme and the ship building side of things in the evidence we have had, but perhaps you can give us an overview of the wider defence sector in Scotland?
Mr Malcolm: One thing we found from SBAC Scotland—and we are a relatively young organisation in Scotland, we only started in Scotland three years ago, and certainly in that period we have come to realise that the sector in Scotland is of a much different profile than perhaps was previously considered to be the case. Scottish Enterprise, for example, considered there to be a strong aerospace cluster at Prestwick and considered defence perhaps not to be as strong in Scotland as has turned out to be the case, and certainly our research has found that the defence companies are spread throughout Scotland with clusters certainly at Prestwick, Glasgow, the northeast and also on the east coast as well. We have had evidence from Thales Electronics based in Glasgow and there is Selex Galileo obviously over in Edinburgh, so there is quite a wide range of companies spread throughout Scotland.
Q216 David Mundell: Can you give a bit more depth as to exactly what they are doing then?
Mr Malcolm: Thales, for example, does a periscope, which is one of their key strengths. Selex do a lot of radar technology and Raytheon in Glenrothes are also doing a lot of work winning contracts in America. So a wide range of stuff—they are the de-strength of the sector rather than manufacturing, mass manufacturing.
Q217 David Mundell: Where does the balance lie then in terms of employment contribution to the economy? That is clearly as significant as, for example, the carrier programme?
Mr Malcolm: Our survey has shown that the split in employment terms is half within the aerospace sector, perhaps.
Mr Wallace: Your figures show that 27% are naval in Scotland and the rest aerospace and defence; that is the split in your submission.
Q218 David Mundell: Let us then expand on the aerospace sector. What is its relative significance to Scotland?
Mr Malcolm: Aerospace alone accounted for 43% of the sales in 2006 from a latest survey, so a significant part of the sector, no doubt. In recent times, for example, the inward investment has been in the aerospace sector with Spirit Aerosystems moving to Prestwick. And in fact in the past month of so we have Slingsby Aviation also moving to the Prestwick area to focus on composites as a future technology, and in discussion with Slingsby the reason they have moved to Prestwick and to Scotland in particular is because of the availability of the skills that the sector has there and in Prestwick.
Q219 David Mundell: How dedicated to Scotland is that as a location because a lot of what the Committee has been considering to date is the vulnerability of the sector in terms of that it could move, it could be done elsewhere and how easily that could happen. How tied to Prestwick is it?
Mr Malcolm: I think the sector, as for other sectors, really is a global sector, obviously by definition almost, and the companies can move their facilities very easily and very quickly. What ties them to Scotland are things like the education and the skills and the people and so on, and the support that they obviously receive from people like SBAC Scotland and indeed from the Scottish Government, which is extremely important. But it is the people, the skills and the innovation that are indeed attracting people to Scotland; and as long as that stays competitive they will stay in Scotland.
Mr Leather: And there are some quite high barriers to entry in terms of changing source of supply in the aerospace industry. That does also help, but it depends on what the challenge or the benefit is from moving somewhere.
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