Memorandum submitted by the Society of
British Aerospace Companies (SBAC)
SUMMARY
— The aerospace industry is
a highly attractive and growing industrial sector. The UK has
the largest aerospace industry outside of the US and is potentially
well placed to exploit further growth in the global marketplace.
— The aerospace industry, alongside pharmaceuticals,
provides important balance to the UK economy and sustains high
value careers in design, research, engineering and manufacturing.
— The UK aerospace industry is globally competitive,
exporting 63% by value of all aerospace sales. The sector supports
a positive balance of trade worth in excess of £2 billion
and invests more than £2.5 billion each year in research
and development.
— The UK aerospace industry
is entering a critical period in its development. Increasing globalisation,
intense cost pressures and the difficulties of selling in a US
dollar denominated market are making aerospace research, development
and production more internationally mobile.
— The defining business opportunities
for UK aerospace will be future single aisle programmes and the
delivery of the fixed and rotary wing sector strategies, as part
of Defence Industrial Strategy. It is essential industry and Government
work to maximise the opportunities for UK based businesses on
these important programmes.
— The UK aerospace industry
has the opportunity to secure competitive advantage and to help
deliver improved environmental performance across the global aviation
industry, by the faster development of new, lower emission technologies.
— The UK aerospace industry
is a major contributor to the success of other key industries.
It supports major developments in information technology, computer
software, advanced electronics and systems integration. Aerospace
investment in research and development creates significant economy
wide social returns well above rates achieved in other sectors.
— Future competitiveness and
global success in meeting these challenges will be heavily dependent
on high levels of investment in research and new technology. The
globalisation of the aerospace industry and the technologically
advanced supply chains that support them, now mean companies have
a wide choice of possible locations for their investments.
— In an increasingly competitive
global market place it is essential for UK based companies to
increase productivity at a faster rate than competitors. The aerospace
and defence industry has embraced lean manufacturing techniques
and delivered significant productivity improvements. SBAC, through
its SC21 initiative, is encouraging greater collaboration at all
levels of the supply chain to maximise productivity gains and
foster greater innovation.
— The UK aerospace industry
sustains a high proportion of innovative small and medium sized
enterprises. These companies play a major part in the development
of new technology and bring a spirit of enterprise and achievement
to the sector.
— In technologically advanced
sectors a highly skilled workforce is essential. The UK aerospace
and defence industry has identified skills gaps at management,
professional, craft and operator/assembler levels. SBAC supports
the development of the National Skills Academy for Manufacturing
and would like to see greater efforts directed to simplifying
the currently fragmented funding for skills and training.
ROLE OF
AEROSPACE IN
THE UK
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.
2. SBAC welcomes the House of Commons
Trade & Industry Committee's inquiry examining the role of
Government in promoting high value-added activity by UK business.
The UK aerospace industry is globally competitive and has a strong
reliance on new technology, advanced manufacturing techniques
and a highly skilled workforce.
3. Aerospace is a highly attractive
and growing industrial sector. Globally the top 100 companies
generated sales in excess of $480 billion in 2006 with growth
currently running at approximately 5% per annum. The UK has the
largest aerospace and defence industry outside of the US and is
potentially well placed to exploit further growth in the global
marketplace.
4. The UK is home to a large
number of globally successful aerospace and defence companies.
Their presence and continued investment in the UK helps to sustain
and develop a highly competitive and technologically advanced
supply chain.
5. The aerospace industry,
alongside pharmaceuticals, provides important balance to the UK
economy and sustains high value careers in design, research and
engineering. It directly employs 124,000 people; in 2006 it had
a turnover of £20 billion and secured more than £26
billion of new orders.
6. UK aerospace manufacturing
is globally competitive and exports 63% of its total sales. UK
companies also have a significant presence overseas, employing
48,000 people and generating sales of £8 billion.
7. 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 this is forecast to increase to 40% by 2010.
The industry also has a growing demand for technicians with NVQ
level 3 and 4, equivalent to two or more A levels.
8. Average salaries in the
sector are £33,645, 43% higher than the UK average and 31%
above the manufacturing average. In many parts of the country,
particularly the south west, east midlands, north west and north
east, this means aerospace is one of the highest value uses of
labour and makes a significant contribution to regional economies.
9. Major aerospace companies
and their supply chains provide many of the high technology jobs
in regional economies. Investment by Rolls-Royce has made Derby
the area with the highest proportion of high technology jobs in
the country. The industry is committed to improved training and
skills development and employs 2,600 apprentices.
10. Research, development
and new technology are incredibly important for long-term competitiveness
in the aerospace industry. The sector is one of the most R&D
intensive sectors in the UK economy and invests £2.5 billion
per annum.
FUTURE SINGLE
AISLE PROGRAMMES
11. The UK aerospace industry
is well placed to compete for a wide range of civil and defence
opportunities, both new build and technology insertion. The most
important of these will be future single aisle programmes and
the delivery of the fixed and rotary wing sector strategies, as
part of Defence Industrial Strategy (DIS).
12. Single aisle aircraft represent close
to 70% of all new civil aircraft sales. They are the aircraft
of choice for low cost airlines in Europe, USA and the fast developing
markets in Russia, China and India. Within the next decade Airbus
and Boeing are likely to develop replacements for their successful
A320 and B737 family of aircraft.
13. These aircraft will define
the global aviation industry's environmental performance in the
first half of the 21st century. Positioning UK industry for these
programmes and enabling cutting-edge technology to be developed
and matured in time for inclusion on these programmes is of paramount
importance.
14. In addition there will
significant opportunities for UK companies on future regional
aircraft, business jets and new aircraft programmes in existing
and emerging markets.
15. Collectively these will
offer a diversity of opportunities for UK industry in developing
wings, engines, avionic and electrical systems, landing gear and
structures. The scale of the commercial risk and opportunity provided
by these programmes far outweigh all other opportunities for civil
aerospace.
16. Single aisle programmes
will define the next generation of civil aerospace technology
and capability. They will need to meet increasingly demanding
environmental targets, as well as the sophisticated safety, security
and in-flight systems demanded by the travelling public. The single
aisle programmes will fundamentally change the nature of aircraft
manufacturing requiring a wide range of new technologies and production
processes.
17. A failure to win a substantial
share of new business on these programmes would seriously undermine
the long-term sustainability of the UK industry. It needs to equip
itself to meet the technology and production challenges of these
programmes and all Government support for the industry should
reflect this priority.
DEFENCE AEROSPACE
18. In the defence sector
DIS has set out the key capabilities and programmes the Ministry
of Defence (MOD) will be taking forward in the next decade. This
focuses on the development of unmanned aerial systems (UAS), the
upgrade and through life capability management of existing platforms
and future helicopters. The development of DIS has highlighted
the increasing critical role of technology in securing military
advantage.
19. The emphasis is increasingly on rapid
delivery of capability to the front line and the upgrading of
existing assets. This is being achieved through the addition of
improved C4ISTAR and complex weapons capabilities, which have
their own specific DIS sector strategies.
20. Meeting the aspirations
of MOD for the fixed wing, helicopter, C4ISTAR and complex weapons
sector strategies will require significant investment in research,
technology and demonstration projects. MOD is currently preparing
DIS v2.0. Industry is closely engaged in this process and seeking
to ensure that the key gaps, technological and strategic, identified
in the original strategy are addressed. DIS v2.0 should create
opportunities for bringing together civil and defence technology
for dual use applications in areas such as unmanned aerial systems.
A HIGH VALUE-ADDED
ECONOMY
21. SBAC is confident that
the aerospace industry provides a wide-range of high value-added
employment. Its reliance on a skilled workforce, record of investment
in research and new technology and success in highly competitive
global markets marks it as one of the strongest sectors in the
UK economy.
22. Aerospace is a long-run business that
offers greater manufacturing predictability than many other sectors.
Investment in research, development and manufacturing capabilities
leads to a high value run for a new aircraft lasting 20 years
or more, with a further substantial period of support and technology
insertion activity.
23. A high value-added economy
suggests a range of well paid, interesting and long-lasting careers.
These would need to be sustained by a significant competitive
advantage based on skills, research, new technology and innovation.
High-value added implies that the location of the work is less
influenced by low costs and more reliant on quality and access
to particular skills and know-how.
IMPORTANCE OF
RESEARCH AND
DEVELOPMENT (R&D) TO
A HIGH-VALUE
ADDED ECONOMY
24. The Government has recognised
the importance of R&D investment to the broader economy and
has the aim of increasing it to 2.5% of UK GDP. In March 2005
the Treasury and Department for Trade and Industry published Economics
Paper No.11—R&D Intensive Businesses in the UK.
This set out how the required growth in business R&D could
be achieved:
— Maintaining or growing R&D
where the UK is strong;
— Attracting investment into the
UK from multinationals in an already highly internationalised
system;
— Increasing R&D intensity
in firms or sectors that are lagging behind their peers;
— Developing new R&D intensive
sectors through the creation and growth of R&D intensive small
and medium sized enterprises (SMEs).
25. Economics Paper 11 identified
aerospace, defence and pharmaceuticals as sectors where the UK
is strong. It also confirmed that Government funding for R&D
had declined significantly during the 1980s, which was largely
related to cuts in defence spending. The recent Sainsbury Review
of science and innovation highlighted the importance of aerospace
and defence in sustaining high value research and development
activities and the need to provide additional support for globally
competitive sectors.
26. The benefits to the economy
from increased investment in research and development are large.
In 2006 Oxford Economic Forecasting (OEF) estimated that a one
time investment of £100 million in aerospace R&D would
raise UK GDP by £70 million per annum. This work estimated
that these economy wide-social returns or spillovers were higher
for aerospace than other manufacturing sectors. (a full copy of
the OEF study has been submitted to the Committee)
27. In the 2003 Government,
industry and academia jointly collaborated on the development
of the Aerospace Innovation and Growth Team (AeIGT) report. This
was undertaken in the wake of 9/11 and the SARS epidemic and sought
to establish a 20 year vision for the continued competitiveness
of the UK aerospace industry.
28. The AeIGT report identified
skills, productivity, environmental issues and technology as the
key factors determining future competitiveness. It also recommended
a significant increase in Government funding for collaborative
aerospace research and technology.
29. The National Aerospace
Technology Strategy, jointly funded by industry, Government and
regional development agencies, provides a coherent framework for
achieving competitive advantage in environmental, safety, security
and defence technologies. This collaborative programme helps pull
through investment made by Government in the science base.
30. Government funding for
aerospace collaborative research declined steadily until 2003.
The introduction of the Technology Programme, under the control
of the Technology Strategy Board, has seen public investment increase
from around £20 million in 2003 to £43 million in 2006.
31. The aerospace industry
helps to support and encourage a world-class science base through
its work and relationships with UK universities. These relationships
are essential in maintaining valuable research facilities and
ensuring academic studies maintain relevance for UK industry.
32. There are relatively few
studies on the level of public support for aerospace R&D provided
in other countries. In August 2005 TECOP International Inc, published
a study of government support for civil aeronautics research.
This was undertaken for NASA and looked at all countries within
the European Union. The study shows that in 2002 UK Government
support for civil aeronautics R&D was significantly below
that offered in France, Italy, Spain, Germany and the Netherlands.
33. International competition
for high value aerospace investment has intensified. In addition
to the traditional aerospace economies there are a growing number
of emerging markets that wish to develop their own national aerospace
capabilities. This means that successful international companies
are faced with a wider range of investment locations and frameworks
of support.
34. SBAC recognises the efforts
made by UK Government to raise the level of funding available
for collaborative research and the support it and regional development
agencies have provided to the National Aerospace Technology Strategy.
It is anticipated that the establishment of an arms length Technology
Strategy Board with an increased budget and leadership role will
help raise overall level of business R&D investment.
35. The UK aerospace industry
is entering a critical period in its development. Increasing globalisation
and intense cost pressures are making aerospace research, development
and production more internationally mobile. If the UK is to remain
and prosper as a location for all these activities and the intellectual
property associated with them, it is essential that Government
ensures the framework of support it provides is globally competitive.
A failure to do so will result in an increasing proportion of
high-value R&D being undertaken outside the UK.
INCREASING PRODUCTIVITY
36. The aerospace industry
has made significant efforts to improve its productivity. SBAC
data shows that there has been sustained improvement in productivity,
with average annual increases of more than 5%. There are a large
number of world-class companies that have embraced and implemented
lean manufacturing techniques.
37. In a highly competitive global marketplace
the need to deliver continuous improvement is well understood.
In 2006 SBAC launched its Supply Chains for the 21st Century (SC21)
initiative. This aims to increase the rate of productivity improvement
at all levels of the aerospace supply chain by encouraging companies
to work more collaboratively and by focusing resources.
38. SC21 is a change programme
designed to accelerate the competitiveness of the aerospace &
defence industry by raising the performance of its supply chains.
International competition, together with the challenges posed
by the defence industrial strategy, necessitates rapid improvement
in the effectiveness of our supply chains. At the same time, industry
must ensure that it delivers competitive solutions for customers
whilst maintaining profitable business growth.
39. Signatories to SC21 are
committed to developing supply chains to ensure they remain competitive
and able to deliver increased value to customers. Companies from
all levels of the supply chain are active participants in SC21.
40. SC21 is about collaboration
at all levels of the supply chain. The initiative is currently
focusing on three key issues:
— Reducing duplication and waste
by minimising the number of customer audits undertaken across
the supply chain.
— Developing a common and co-ordinated
approach to supplier development, that identifies lead companies
and common metrics.
— Strengthening relationships
at all levels of the supply chain to build greater trust and collaboration.
41. SC21 now has some 244
individual companies committed to working collaboratively to improve
productivity and enhance innovation. It has gained the support
of the Ministry of Defence and is working closely with Airbus
to inform its Power 8 programme.
PROMOTING SKILLS
AND TRAINING
42. The UK aerospace industry
sustains a full range of high value and highly skilled jobs encompassing
design, research, technology development, engineering and manufacturing.
It is a crucial contributor to the "knowledge economy".
43. The UK aerospace industry is committed
to sustained improvement in skills. It is a major contributor
to the National Skills Academy for Manufacturing (NSAM) and works
in partnership with universities, further education colleges and
schools throughout the country.
44. The sector has identified
skills gaps at management, professional, craft and operator/assembler
levels. The 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.
45. 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. It is hope that NSAM will play a key role in
delivering this objective.
46. Industry would like to
see funding made available for trainees of all ages, particularly
for advanced vocational qualifications. This would help to support
industry efforts to boost productivity and provide employees with
a wider range of career opportunities.
SUPPORTING A
WORLD-CLASS
AEROSPACE AND
DEFENCE INDUSTRY
47. To sustain a world-class
aerospace industry UK Government must ensure its support for collaborative
research and new technology is globally competitive.
48. New aircraft will need to meet increasingly
stringent environmental performance criteria. This will demand
significant technologically advances and extensive systems development
activity. The Government should work with industry to ensure the
UK is equipped to meet these future challenges.
49. Civil aerospace and defence
are global industries and senior Government representatives should
play a role in championing UK industry in the international market.
50. The Defence Industrial
Strategy and the Defence Technology Strategy set the framework
for the defence industry. DIS v2.0 should reinforce the implementation
of these strategies and should be supported by appropriate levels
of public expenditure.
51. The UK aerospace industry
has an important role to play in the emerging security and resilience
market. It is important that Government works to create a more
coherent market for equipment and services with clearer long-term
technology requirements.
October 2007
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