Conclusions and recommendations |
1. Due to time constraints we have not been able to give the space sector the attention it deserves during this inquiry. We recommend to our successor committee that it considers conducting an inquiry into the role of the space sector in the UK economy.
2. It is clear the aerospace sector is broadly content with the Government's aerospace strategy as set out in the AeIGT Report. However, the report is now five years old and is in need of updating. We recommend that the Government undertakes a short review in order to ensure that its strategy takes account of the latest economic and technological developments.
Repayable Launch Investment
3. We welcome the Government's continued use of Repayable Launch Investment. This investment has not only been successful in supporting the thriving aerospace sector, but has also delivered a substantial return to the taxpayer. We believe that the Government should continue to offer Repayable Launch Investment to companieswhere no viable commercial financing is availableto ensure that the United Kingdom's aerospace industry retains its position as a world leader in the development of new technologies. To do otherwise would put the industry at a serious competitive disadvantage given the prevalence of similar measures available to overseas competitors.
4. We strongly support the Government's use of Repayable Launch Investment and the Government's defence of that investment at the World Trade Organisation. However, the Government cannot rely on a favourable ruling from the WTO. It has to be prepared for all eventualities. We recommend that the Government explore alternative ways for it to channel its support in the event that the WTO rules against Repayable Launch Investment. This should not be seen as the Government abandoning its position, but a sensible and pragmatic precaution to enable it to respond to all possible outcomes. We hope, and suspect, such a plan will not need to be implemented.
5. Export credit is an important mechanism through which the Government supports the aerospace sector. It is therefore vital that it operates in a way which does not disadvantage British firms. We welcome the ECGD's consultation on its interpretation of OECD codes and principles and recommend that it includes, in any subsequent review, the possibility of offering direct support to businesses when a company cannot find a commercial bank loan to finance the purchase of aircraft.
6. The Government needs to ensure that all three European Export Credit Agencies work together as effectively as possible and we invite the Department to update us on the progress that has been made with the "fronting" system developed by the three agencies. However, we agree with the Minister that it would not be appropriate to accept Airbus' recommendation to create a pan-European agency. It would not be right to create a new agency which in practice would deal with only one company.
7. The current financial problems surrounding the A400M places the Government in a difficult position given its role as both a customer and an investor in Airbus. However, Airbus, and in particular the A400M, are important to both UK manufacturing and national security. The Government is right to be forceful and frank in its commercial decisions, but it also needs to set those decisions in the context of the wider national interest.
8. We were concerned by the fact that the Minister appeared to be unaware of the accusations of government complacency from the motorsport industry; whether or not such accusations are well founded, the simple fact that they are made so widely should be a matter of deep concern to the Department.
UK Automotive Council
9. While we welcome the Minister's promise to ensure that the UK Automotive Council engages with the motorsport industry we do not believe that it should be the primary organisation that takes forward motorsport policy. To treat motorsport purely as a sub-section of the automotive industry would be to ignore many of the features which have made it a globally successful sector, for example its close links with aerospace. We recommend that a separate, dedicated policy unit in the Department be established to ensure that these links are properly made and that the motorsport policy is fully integrated into developments in automotive, aerospace and other high performance engineering industries.
10. The Minister is right to acknowledge the skills required by the two industries are very similar, and we believe that this should be reflected in the Department's approach to the industry. The rationale behind the creation of a single department with responsibility for both business and skills was to align skills training more closely with the needs of industry. The Department should no longer merely think of industries in terms of what they manufacture but also the skills they require. Failure to do so would undermine the value of the new arrangement of departmental responsibilities. The skills that underpin both the motorsport and aerospace industries have much in common, and it would be damaging to pigeonhole the motorsport industry in the general automotive sector.
Motorsport Development UK
11. The clear view we received from industry was that Motorsport Development UK (MDUK) failed in its aim to act as a partnership between industry and Government. We are particularly worried that it might have lessened the industry's willingness to work with Government. The Department needs to reflect on why the evaluation report's conclusions differed so greatly with those of industry. We invite the Department to use its response to this Report to outline how it will ensure that future engagement with the motorsport industry is more successful and what lessons it has learnt from the failure of MDUK to do so effectively.
Health of the sport
12. We congratulate all those involved in the negotiations to retain the British Grand Prix for concluding a deal which has secured the event's long-term future. This was important not just for the sport in Britain but also for the continued strength of the UK's motorsport industry.
13. We were surprised that the Minister appeared not to be briefed about the level of participation in motorsport. We can only assume that this is again the result of a lack of specialist knowledge about motorsport in the Department, which would be remedied by the presence of a dedicated policy team.
14. A flourishing and vibrant sport is vital to ensure that motorsport manufacturing remains in the United Kingdom. We have not had time to investigate the Motor Sport Association's concerns about the regulations surrounding races and Forestry Commission in detail but we recommend that the Department, together with the Department for Culture, Media and Sport engages with the sporting bodies to assess the effects of these two concerns on the sport. We further recommend that the Department provide us with their assessment of these concerns in its response to our Report.
15. We have repeatedly emphasised the fact that the UK motorsport industry is pre-eminent internationally, yet the Government continues to perceive it as a niche area of the automotive sector and not as an industry in its own right. We disagree with this assessment. Motorsport is an industry of national importance and it must feel able to engage effectively with Central Government. It should not be restricted to engagement at a regional level. The establishment of a dedicated motorsport policy unit would represent an important first step in ensuring that this happens.
16. We remained concerned that the accusations of government complacency are not being taken seriously by Government. The fact that there is no team or section with responsibility for motorsport within the Department only gives strength to that view. We find it hard to imagine another country which would sideline such an important industry. We reiterate our belief that the Department needs to establish as a matter of urgency, a policy team which will have responsibility for the industry. Furthermore, we recommend that the first objective of that team is to commission an updated survey on the health and needs of the industry.
17. We congratulate the aerospace industry on the proactive steps it has taken to improve the quality of the supply chain through the SC21 programme. We are encouraged by the steps taken by Regional Development Agencies to support this scheme and by extension small businesses.
18. Encouraging SMEs to diversify into other sectors has a number of benefits; it creates more robust supply chains, it can facilitate the spread of best practice and it can drive up the quality of supply chains. However, government backing and support are needed to take this work forward. We recommend that the Government revisit the Motorsport Industry Association Cluster Development Report as a matter of urgency and report back on how it will proceed. It is regrettable that the ideas contained in the Report were not acted upon and were instead left to languish on paper.
19. We recommend that the Government explore ways in which it can facilitate SMEs entering the aerospace supply chain. In particular, we recommend that it undertakes a simplification review of regulations governing entry to that industry and explores how it can reduce the costs to SMEs seeking accreditation. Guidance on how to comply with existing programmes should be produced as a priority.
Promoting science-based careers
20. We support the work of Manufacturing Insight to attract young people into the engineering and manufacturing professions. It is important that young people are made aware of the exciting and rewarding careers that manufacturing has to offer. The Government needs to ensure that the work of this body compliments the many excellent projects already being run by industry. We recommend that the Government sets out how Manufacturing Insight will co-ordinate its work with the existing activities in this area run by professional bodies and companies.
21. We congratulate the Government on the Young Apprenticeship Scheme which has been highly successful in attracting young people into further education and training. We recommend that BIS be involved in any discussions about the programme's future to ensure that it continues to properly align the demands of young people with the needs of business. We would welcome an update on these discussions in its response to our Report.
22. The industry's experience of working with the Sector Skills Council for Science, Engineering and Manufacturing Technology (SEMTA) does not give us confidence that the sector skills agencies have properly engaged with industry, especially in the motorsport sector. The development of a skills strategy for the sector is vital to its success. We recommend that the Minister, as a matter of urgency, facilitate a closer working relationship between SEMTA and the motorsport industry to resolve these differences of views.
23. We welcome the decision by the Government to take steps to encourage more young people to study STEM subjects at university. Equally we recognise that its proposals to provide greater resource to STEM subjects will result in a reduction in funding to some other courses. This is a decision that we support in times of great stringency for public expenditure. We seek clarification on how the £10 million of funding HEFCE has kept back to increase the proportion of students on STEM courses will be used, and whether it will be used to fund additional places or stimulate student demand for science courses.
24. Courses purporting to be "motorsport" engineering must produce graduates with the skills that the industry requires, this is currently not the case. We welcome the approach to accrediting courses that has been taken in other sectors. We recommend that the Government, working with SEMTA, industry and universities explores the feasibility of establishing a similar programme for the motorsport industry.
25. There is clearly a balance to be struck between supporting home-grown talent and utilising the skills which come from overseas students; attracting the best international talent to the UK will enhance our industry's competitiveness but only if those students continue to work for British companies. The Government needs to keep this under review to ensure that an appropriate equilibrium is maintained; it is right that the skills of young people in the United Kingdom are fully developed so that we do not become over-dependant on overseas students.
Centres of excellence
26. We welcome the development of the National Centres of Excellence and congratulate Rolls-Royce on its leadership role in this programme. We see it as a strength, not a weakness, that the idea for these centres came from industry itself.
27. We welcome the establishment of the National Composite Centre at Bristol University. It has the potential to make a significant contribution to the future development of composite technology in the UK. However, while the right decision was made in the end, the establishment of the National Composite Centre was an episode of worrying mismanagement by Government. We are deeply concerned about the lack of strategic thinking that was present during the bidding process for an institution of such importance to the future of UK manufacturing. The Government must ensure that lessons are learnt, and we therefore expect it to provide us with a clear critique of its management of the competition for the National Composite Centre.
Aerospace Research Institute
28. A dedicated aerospace research institute clearly has the potential to strengthen and secure the UK's aerospace manufacturing base. The industry needs to come together to provide the Government with a clear and detailed proposal for such an institute. The proposal should be used as the basis for an industry bid in the next round of Strategic Investment Fund support. We recommend that the Government looks favourably on such an application. If we do not enable the aerospace industry to compete on an equal level with other nations, it will be difficult for the industry to maintain its strong international position.
29. It is important that all parts of the network of Centres of Excellence work together effectively. We recommend that the Government creates a small, lean team responsible for ensuring that the work of the centres is properly co-ordinated, without placing additional burdens on the research organisations. They represent a national resource and cannot be left to work in regional silos.
Government R&D spending
30. When the Department decides on the funding allocation to the higher education sector, the science and research savings announced in the 2009 Pre-Budget Report must be managed in a way that minimises the impact on research that supports higher value-added manufacturing, and areas of research which are directly linked to the UK's competitiveness.
31. We also agree with Rolls-Royce that the there should be a strong presumption in favour of large research projects being funded, on a national basis, by a single organisation. The Government should use its current review of research spending to investigate ways in which the system could be adapted to make this possible.
32. While defence research is primarily the responsibility of the Ministry of Defence it is important that the Government acknowledges the fact that defence research has an impact on other areas of R&D, especially other high-tech industries. The Department for Business, Innovation and Skills should be involved in any discussions about funding for defence research to ensure that the impact of any reductions on advanced manufacturing industries is minimised.
33. The previous success of the aerospace industry should not preclude it from receiving R&D grants in the future. While we understand the desire for Government to support innovative new industries it is important that established sectorswith successful track recordsare not disadvantaged as a result. We recommend that the Government ensure that the desire to support new industries is not disproportionally directing funding away from established industries such as aerospace and motorsport.
R&D tax credits
34. We support the Government's moves to simplify and increase the reach of the R&D tax credit system. We note the arguments made by some that directing resources from tax credits to the Technology Strategy Board would be a more effective use of public funds. We believe that this is something that the Government should address as part of its review of R&D tax credits. However, we remain concerned that such a move could penalise R&D intensive SMEs, including those in the motorsport industry, who would find it difficult to apply for grants through the Technology Strategy Board.
35. While improving industry-academia relations is primarily a task for industry and academia, the Government has an important role to play in facilitating engagement and providing a positive policy framework within which this can happen. However, the Government has yet to communicate successfully this need to the SME sector. We have yet to be convinced by the Government's proposal of an SME university, and we believe that it should instead concentrate on promoting and expanding its existing work in areas such as the Innovation Vouchers Scheme.
36. Both motorsport and aerospace are engaged in a plethora of initiatives aimed at improving their environmental record and "greening" their technologies. However, both industries remain of the view that Government does not fully recognise these initiatives. Government and the industries need to co-operate fully to better articulate the "green" initiatives currently under development in motorsport and aerospace.
37. We also agree with the Government that motorsport has the potential to shift the debate about carbon emissions away from a dry conversation about carbon budgets, towards a more valuable debate on the role that technology and innovation can play in addressing climate change and green issues. We welcome the fact the Government is considering this as an area of action.