Examination of Witnesses (Question Numbers
300-319)
DEPARTMENT FOR
BUSINESS, INNOVATION
AND SKILLS
26 JANUARY 2010
Q300 Mr Wright: That is asking the
company. What I am asking is what has the Government actually
done to help support? You mentioned the scrappage scheme in terms
of the motor car industry, which is one sector we are not looking
at at this stage, but this is specific to the aerospace industry
and there are considerable numbers—as I said, 9,000 in total—that
actually rely on these industries. We met some companies, in terms
of the Formula 1 engine, that employ four to five people to companies
that employ 50 or 60 people. They are the companies that rely
on these. What I am after is has the Government given any initiatives
or any help and support to help these SMEs?
Ian Lucas: Launch investment in
Airbus, GKN and Rolls-Royce assists supply chain companies involved
in those projects. The fact that launch investment is made with
a large company means that the supply chain that supplies into
those companies benefits as a consequence of the investment that
the Government has made; so the Government has provided support
in the long-term for the long-term projects that the industry
is involved in. The industry itself has worked, through the SC21
project, really looking at improving the work that needs to be
done to build better supply chains, because supply chains are
now internationally competitive. It is very important that British
companies are able to work with the major manufacturers to compete
with foreign companies in providing support and the products that
the big companies need to manufacture successfully.
Q301 Mr Wright: One company in particular,
Lola, have said quite clearly that the depression has been quite
catastrophic for them because, obviously, their race cars are
for sale to clients as any commercial product is, and what they
say is that large work opportunities have all but dried up as
it is not politically acceptable and unsold cars are being stockpiled
and people are being globally laid off in their thousands. There
is the evidence that the recession has had a drastic effect on
one company which is a recognised company. If you translate that
across the whole of the SMEs, quite clearly there is a serious
issue here. What I would seek, if we have not got the answers
now, is to see how many of those companies have actually gone
to the wall, what support there has been out there from the Government
to give them specific help to ensure that they continue outside
of what the private sector has given them.
Ian Lucas: The other area in which
the Government has acted is that we have invested in training
through the Train to Gain scheme in England and through schemes
such as ReAct and ProAct in Wales to provide support to industry
to upskill the workforce at this particular time when there are
real pressures on the companies themselves and, where there is
available time, to use it effectively and productively to develop
the skills of the workforce which are very important in these
high-tech areas.
Q302 Mr Wright: I would suggest that
is probably driven more by the large manufacturers rather than
the smaller companies. Moving on, one of the initiatives that
the industry took on board in 2006 was the supply chains for the
21st century. The Government in a note said that they you were
supporting this. Could you give us details of how the Government
was actually supporting that initiative?
Ian Lucas: It has been an industry-led
initiative but we have been discussing with ADS, who have been
leading on this, ways of looking at the type of training and skilling
that is needed amongst the workforce and using the free time that
may be available because of the impact of the recession to upskill
the workforces that are operating in these skilled areas. We link
in very closely to the aerospace industry as a whole, try to identify
the skills shortages that are there and work with them to try
and fill them.
Q303 Mr Wright: Has there been any
financial remuneration directly into this particular scheme?
Ian Lucas: In different areas
we have increased the level of funding that has been available
for apprenticeships, and through organisations like Centre we
have been trying to support the industry as a whole in ensuring
that apprentices can be kept on as far as possible and that the
type of support that companies need to maintain skills at the
time of financial pressure is actually there.
Q304 Mr Wright: Has there been any
encouragement from the Government to extend a similar programme
into other industries, such as automotive sports?
Ian Lucas: I think that the automotive
sector as a whole has been very good at looking at trying to maintain
and develop skills and, for example, extend procedures such as
new manufacturing and the management involved in that during this
very difficult time. There has been a lot of work done with regional
development agencies to try and improve the performance of companies
and to focus on more competitive modes during the last year. I
think that any company that comes forward, including from the
motorsport sector, could benefit from that sort of advice.
Q305 Chairman: Could I push this
for a bit longer. This is what you actually said in your memorandum
to us: "The industry-led `Supply Chains for the 21st Century'
change programme designed to accelerate the competitiveness of
the UK aerospace and defence sectors by raising the performance
of its supply chain is supported by the Government." If the
answer is it is moral support, I do not mind that, but I want
to know what the nature of that support is. Is it just really,
when it comes to it, moral support: "It is a good idea. We
congratulate you in doing it"? Perhaps these things are best
done by industry rather than by government. There is no right
or wrong answer, I just want to know what that phrase "is
supported by the Government" actually means.
Ian Lucas: It is certainly morally
supported, but it is also supported through regional development
agencies that do provide financial support for improvements in
manufacturing processes, lightening manufacturing and through
improving production techniques and competitiveness for businesses.
Q306 Chairman: What you are saying
is that the big companies leading this initiative can say, "Hey,
you need this particular help and you can get it from the RDA."
They can signpost them to the other more cross-sectoral initiatives
of government. Is that what you are saying? Because they are available,
that is the nature of the support you are giving.
Ian Lucas: Yes, that is the focus
of the support that we have been providing through the Regional
Development Agencies.
Chairman: That is fine; there is nothing
right or wrong; I just wanted to understand what you meant by
the phrase.
Q307 Mr Wright: One of the things
where industries can help each other is to diversify. Unfortunately,
I think, as you have said, many of the industries that have been
attached to one particular industry and rely on that become entrenched
within that particular area. What can the Government do, or what
are they doing, to encourage SMEs to diversify to other sectors—in
particular, into the aerospace sector? One of the problems there
is that there are regulatory burdens which become prohibitive
to them. Is there something that we can do to ease the way through
to different sectors to protect them? Clearly, one of the issues
that has been raised in the evidence is that once we lose the
skilled personnel we lose them forever; they have gone forever
and it is very, very difficult in a very competitive market to
get them back. Quite clearly, there is competition throughout
the world in this particular area. So what can we actually do
and what are we doing to help these companies to diversify?
Ian Lucas: Firstly, the establishment
of the cross-sectoral bodies, such as the National Composite Centre
that I referred to earlier, is very important because it creates
an opportunity for a business, for example, that might be involved
in the motorsport sector to become engaged in a body that operates
across a number of sectors. So it creates relationships with organisations
from different sectors to that which the company normally operates
with. That company will then be able to see opportunities developing
in different sectors. As you say, spreading the benefit of supplying
to a number of different sectors will be very positive for any
company because it means it will not be adversely affected by
diminution of work in one particular area. Now, there is a lot
of very innovative and positive work going on in, for example,
composites, which has been happening in different institutions
in different places in recent years. We are trying to bring that
together and encourage individual companies to become involved
in the process and to secure work and access to innovation and
skills because of that.
Q308 Mr Wright: Is there a role for
the Manufacturing Advisory Service to help diversification?
Ian Lucas: Absolutely. They are
providing advice to companies on a day-to-day basis. I think the
figures are there somewhere. The number of companies that have
benefited from the advice of the Manufacturing Advisory Service
is enormous and those companies become more competitive, become
more productive and real progress is made as a result of the advice
that they provide.
Q309 Miss Kirkbride: All the companies
that we went to visit—Rolls Royce and British Aerospace
(I did not go to Bristol)—said that there is a real problem
in an idea that was conceived and workable to the point where
it actually could be put into manufacture before a company could
make money from it. There used to be the Aerospace Technology
Validation programmes, which have now been overtaken by these
new centres of excellence. What do you think was wrong with the
old scheme and why will these new ones be better, do you think?
Ian Lucas: I think they very correctly
identify a difficulty that UK industry has had for many, many
years. Everyone says that we have tremendous universities and
that we have tremendous centres of innovation but the commercialisation
of the product has been problematic and we have not really made
the progress that we would like to have made in that field. It
is for that reason that we do feel that we need to be doing things
differently. What we are doing through creating centres of excellence
is looking at bringing together the skills, for example, of universities
and industry and trying to get them to collaborate—perhaps
through the creation of companies involving universities and industry
together—to take forward and commercialise the product in
a more successful way. So that is the sort of model we want to
see developing. That is the line that we are pursuing as a government.
Q310 Miss Kirkbride: What is it about
the new centres of excellence that is different to the old programme
that is going to make this difference? There is clearly a gap
at the moment, and there was a scheme to address it.
Ian Lucas: Yes. I think what we
are beginning to see is much more co-operation by different businesses
across sectors in particular areas which require very, very high
levels of research and investment. I visited in Bristol the establishment
of the National Composite Centre and saw the level of innovation
and research that has been going on, and what we are doing is
drawing together investment and commitment from different companies
who are operating in that sphere to benefit from the research
that is taking place in the university sector so that they can
be internationally competitive in the product that is going to
come out of the work that is taken forward.
Q311 Miss Kirkbride: It is interesting
you raised the Bristol centre because, of course, that was quite
controversial in that whilst it ended up being sited in Bristol
there was quite a push for it to go elsewhere. Yet that is rather
illogical, bearing in mind that the main composite centre with
Airbus is down in Bristol and it could benefit from those synergies
of being around those companies doing that. Why was there such
controversy surrounding the siting of the Bristol composite centre?
Ian Lucas: Firstly, it had to
be somewhere but, secondly, because we are so strong in aerospace,
there are very, very strong geographical areas, not least the
north-west of England, and, also, north-east Wales, I might add.
Q312 Miss Kirkbride: What about Sheffield,
Minister, which is where it was likely to go? Why was that a runner?
Why was it not given to Lindsay's constituency? If you are going
to have two potential sites why was Sheffield the runner versus
Bristol when there is no obvious cluster in that area?
Ian Lucas: I think that there
are a lot of factors involved, both in terms of involvement of
universities and the involvement of particular companies—and
I should stress that this is a national centre. It happens to
be sited in a particular place.
Q313 Miss Kirkbride: What was the
case for Sheffield?
Ian Lucas: Sheffield has a very
strong manufacturing base.
Q314 Miss Kirkbride: Any composites?
Ian Lucas: I actually visited
the Advanced Manufacturing Centre in Rotherham, which had some
very innovative and exciting work going on in composites in the
visit that I made.
Q315 Miss Kirkbride: So it was not
political then?
Ian Lucas: It was not political?
I do not know. The decision was made to site this for a multiplicity
of reasons and when you see the level of expertise that is within
the sector, both in terms of the university and also industrially
in that area, I think it is perfectly reasonable to suppose that
the centre would have been sited where it is.
Q316 Chairman: This is a happy ending
to a very muddled and bad story. There was not going to be a National
Composites Centre at all. Actually, the idea came to government
from academia and industry during the discussion on how to use
the Strategic Investment Fund money; it was not part of a great
strategy, it was not there. The Government rightly embraced the
idea but it came by accident—and thank God it did because
it is really important to our competitiveness. Then there was,
I think (as Julie said, rightly) one logical place to put it,
which was Bristol. Had it gone to Rotherham where Boeing have
very close relationships with university, Airbus would have had
nothing to do with it because of the competitive issues. Yet,
the procurement process—the competitive bidding that went
on—was shrouded in mystery for all those involved; they
did not know the specifications, they would change at the last
minute; they were asked to resubmit their bids—it was chaos.
Bristol felt they were being actively discriminated against by
the Government in an attempt to gerrymander it to Rotherham. Despite
that, in my view (I think Members of the Committee may disagree),
the right decision was reached. However, this was a shameful episode
of mismanagement by government. Surely, it really should have
been done much more strategically and much more efficiently, but
thank you for the right outcome.
Ian Lucas: They were very happy
when I went to visit them when this centre was opened, but I will
certainly look into the issues that you raised and discuss them
within the Department.
Mr Hoyle: The Chairman is correct in
what he said but everybody recognised that, really, it should
have gone in the North West because there is a composites site
that is already being used in military aircraft, we had already
got the expertise there and we have got the universities. So we
could all argue for where it should have gone but, in the end,
it is at Bristol and it is working well.
Chairman: The process was, in my view,
appalling. I do not think we will get many more of these national
centres. We were at Rolls-Royce on Monday and we were told that
they felt the right sort of framework was now in place; they were
content with the arrangements (and I think Julie may be asking
about that). Please, if ever there is another one, do make sure
this process is run better, more openly, more transparently and
more efficiently than it was this time.
Q317 Miss Kirkbride: I suppose, on
that point, is the Government contributing to the establishment
of a UK aeronautics research institute? If not, why not?
Mr Walters: Yes, we are. We are
talking to industry, at the moment, through the aerospace knowledge
transfer network about the proposal that there should be some
form of a UK national aeronautics research institute. At the moment,
we are waiting for industry to come to us with a sort of consensus
view as to what that would do, because I think there are quite
different views in industry, at the moment, as to the role that
might play, all the way from something at one end which is a smart
programme management organisation right through to something at
the other end that owns facilities, employs scientists and does
its own research. I think, at the moment, there is not a single
consensus view that we have had from the companies that we are
talking to (a) about what it would and (b) about what would be
a sustainable business model for it. So we are talking to them
about it at the moment.
Q318 Miss Kirkbride: Conceptually,
the Government thinks that is necessary? It is a desirable thing
to happen?
Mr Walters: I think, at the moment,
we are just waiting for industry to come back to us with a justification
and strong case for doing it and to come up with a model that
actually would work and deliver the sorts of benefits that have
been proposed for it at the moment.
Q319 Miss Kirkbride: When we went
to visit Airbus they argued that "there is a lack of an authoritative
voice to speak on behalf of UK excellence and scattered islands
of capability may never achieve `critical mass". Is that
true?
Ian Lucas: I am aware that they
expressed that view. I think that the Innovation and Growth scheme
in 2003 has been a basis for what has been a quite successful
relationship with government, and we have tried to engage on a
strategic basis with the aerospace industry as much as we can.
We met with many of the leading CEOs only last week to discuss
the future progress of the industry. So we try to take a strategic
approach and to engage. I think that is very important to do.
I do not think we have got a "scattered" approach—I
do not think that is fair—but we are conscious that there
is a feeling that there does need to be a more formal, co-ordinated
body.
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