Examination of Witnesses (Questions 340-359)
MR VIC EMERY AND MR IAN MCMAHON
1 APRIL 2008
Q340 Mr McGovern: To go further into the future carrier programme, can you tell us what challenges the Scottish defence industry will face following the end of the future carrier programme?
Mr Emery: I can only talk about the shipbuilding element of that, I cannot talk about the Scottish defence industry because there are quite a lot of electronics in Scotland and there is a lot of aerospace, but from a shipbuilding point of view the Defence Industrial Strategy calls for a consolidation of the industry across the whole of the UK. How that gets divided between north and south of the border is a long way from being decided. The industry will contract after the carriers and I think that has been given to you in evidence previously, and the MoD's requirement is one 5,000 tonne ship every year, so our forward planning has been on that basis.
Mr McGovern: Thank you.
Chairman: Support for small and medium enterprises in Scotland. Jim Devine.
Q341 Mr Devine: Before we get to how many jobs are directly affected, genuinely I think everybody thoroughly enjoyed yesterday, it was a real eye-opener for people who had never seen it before, it was a real education of the skills, the training and the morale in the workforce. I wonder how many small and medium enterprises are involved in the supply chain for the defence industry and for what we saw yesterday?
Mr Emery: I do not have a precise answer. I think in my written submission I have taken the Type 45 as an example and in the value streams there and something like, I cannot remember if it is 27% or 37% of the value stream goes into the Scottish supply chain. I can come back to you and give you a precise number but I believe it was in the written submission I gave you previously.
Q342 Mr Devine: How many jobs would that be, including your own and in the supply chain?
Mr Emery: If you look at the Fraser of Allander Report which was done, that said for every job we have in our own facilities, 0.57 of a job was created outside of the company. If we have 4,000 people, that is probably creating another 2,500 people outside.
Q343 Mr Devine: When we look at the likes of Rosyth and other dockyards and other companies that are involved in the defence industry, it is not unfair to say it is around the 15,000?
Mr Emery: I have not done the numbers, but I think currently Rosyth employ about 1,200 people, I am guessing here, but I believe the stats are about 1,200 people. I would think they have an effect on their economy in the Rosyth area as well and they would similarly have that multiplier.
Q344 Mr Devine: I know you do not want to go down the road of what would happen if they were independent, but what percentage of your workforce comes from the MoD at the moment?
Mr Emery: At the moment 100% of our work comes from the MoD.
Q345 Mr Devine: There is nothing from companies in Ireland, Norway, you are not getting any orders?
Mr Emery: No.
Q346 Mr Devine: Within the defence industry, is it the case that most national governments purchase within their own countries?
Mr Emery: For items where they have to preserve their sovereign capability, and that is what the Defence Industrial Strategy set out to do. What the document says—I am sure you are familiar with this—is we need to keep within our own country sovereign capability to be able to protect the nation and, therefore, the Defence Industrial Strategy calls for that to be the focus of future workload.
Q347 Mr Devine: Are you confident that the SMEs have the information necessary to be able to bid for the work?
Mr Emery: Yes.
Q348 Mr Devine: You are very confident about that?
Mr Emery: Yes, I am.
Q349 Mr Devine: Ian, are you the same?
Mr McMahon: Yes, but I think there are opportunities for more SMEs, which is why we are now seeking to get more involved with the SME community in addition to the work we have already been doing.
Q350 Mr Devine: That was very good, that was my second question!
Mr McMahon: What have we already been doing?
Q351 Mr Devine: We have heard that there are a number of issues preventing Scottish SMEs from being as successful as they could be. They include a lack of support when applying for EU research and technology money, no easy way to find consortium partners and no organisation championing them at a national or international level. What are you doing, Ian, to tackle this problem, or do you recognise the problem?
Mr McMahon: Yes, we do recognise the problem and we have been seeking to do a variety of things. One of the reasons why SBAC Scotland was set up—and it was set up with substantial assistance from Scottish Enterprise, in fact the office would not be there if we had not chosen that to be a route—is to support the SME sector and to further the interests of the industry. Over the last three years we have supported the development of a project called the ADS—Aerospace Defence and Security—along with European Union ERDF funding, SEEKIT funding, industry funding, plus our own funding, through Glasgow University, which is also a co-funder, and their job has been solely to go out and engage with the SME community and set up a series of events, not only events but also direct one-to-one with the companies. Of the 17 events they have run, or are about to run, 13 of those have been addressed by the MoD directly. The people have been instructed on a variety of different topics, including how to do business with the MoD, help with making bids to the MoD, but a whole variety of other topics as well. That will address in the region of 1,000 companies.
Q352 Mr Devine: One of our contributors yesterday made the point that the last Scottish Government went out to schools and did roadshows on engineering, shipbuilding and such like specifically. I think every 13 and 14 year old had to be given half a day and that has stopped.
Mr McMahon: The Make it in Scotland initiative?
Q353 Mr Devine: That is what it was, exactly that.
Mr McMahon: That was operated when Careers Scotland was part of Scottish Enterprise. Clearly, I am not here to talk about what Skills Development Scotland might do. I would endorse that as a concept. One of the reasons for producing the DVD which you saw earlier was to make sure, and as we go through this campaign over the next few years, that part of the effort is going to be devoted to getting out there into schools at the appropriate stage. The companies themselves are very active, and Vic will probably be able to talk about what BAE Systems has done. Because Babcock is not here I can tell you what I know they have been doing, and that is basically they have been out and have spoken to 3,500 school pupils in the last couple of years, so they are very active and out there in the community, just as BAE Systems is. Anything we can do in Scottish Enterprise to support and promote the industry is what we ought to be doing.
Q354 Mr Davidson: Can I clarify why that initiative was dropped?
Mr McMahon: I am afraid I do not know, I cannot help you.
Q355 Mr Davidson: Can I be clear. There was a government initiative to contact all schools on the merits of engineering and now the responsibility for that is being thrown back at the individual companies to follow through.
Mr McMahon: No, I am saying the companies would be doing it no matter what. They were supported with the Make it in Scotland campaign. I am not aware of why Make it in Scotland was stopped. I would endorse that as a way for the future, but not necessarily call it the same thing.
Q356 Mr Davidson: What has replaced it?
Mr McMahon: I am not aware that anything has replaced it directly, other than services, from Career Scotland to the individual schools' careers advisers and sending information out and I have certainly covered that for the maritime sector. As an example of what I am proposing to do with the shipbuilding sector, take the maritime sector, the merchant navy training side of it where Scotland produces more than 50% of the merchant navy officer intake, we have set the ambitious target of tripling that by 2010. The only way I am going to be able to do that is to make sure we are out there in schools with careers advisers telling them and advising them of their future career. Shipbuilding had a reputation for hire and fire in the past and we have to get away from that.
Q357 Mr Davidson: Is that an adequate replacement for what was there before, or are you making the best of the circumstances?
Mr McMahon: In terms of trying to get to it, it will not be a direct replacement, it will be an alternative approach.
Chairman: We will move on to skills in Scotland, Ian Davidson.
Q358 Mr Davidson: I want to comment on other areas of defence now, particularly defence electronics. Maybe you can clarify this for us. Clearly defence and non-defence are related in photonics and other areas. Is the Scottish expertise limited to the defence market or are we also involved in the civil market? To what extent do the industries in those circumstances depend upon the defence side, as it were, for the poor business and then the civil side is on top of that and therefore might collapse if the defence access to market was removed?
Mr McMahon: I do not have detailed figures on that and you have had evidence from SBAC Scotland already who undertake the annual survey which says that somewhere in the region of 17,000 jobs are involved in the defence sector. The extent to which those are dependent on the defence sector, I do not have detailed visibility of that. What I am aware is that the two sectors are inextricably linked, the defence sector and civil sector in most companies are covered by both. Again, an example of that would be Selex Galileo. As I mentioned earlier, our R&D Plus scheme, the one which we stand out alone within the rest of the UK and indeed Europe, is not able to contribute towards defence expenditure, however it is able to contribute towards civil research and development activity, and so far Selex Galileo has had three grants from the R&D Plus scheme on the basis of the civil spin-off from the defence work they are doing.
Q359 Mr Davidson: The difficulty we have got in that answer, if you are unable to distinguish, is that the subject of our inquiry is to clarify the extent to which defence in Scotland exists and to what extent it is then dependent upon MoD orders and so on and so forth. We are trying to identify the extent to which, if the plug was pulled on some of these defence projects, because they would no longer be part of a home market, the industries would then survive on their own or whether or not they would either have to relocate or they would just collapse. Are you able to give us any illumination in that area?
Mr McMahon: I am not. I would be speculating if I did that.
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