Memorandum submitted by Department for
Business, Innovation and Skills
INTRODUCTION
The Department for Business, Innovation and
Skills supports industry through the Government's active industrial
policy designed to increase competitiveness and productivity.
The aerospace and motorsport industries are important elements
of the UK's manufacturing base providing high value, high quality
jobs that tap into our strengths of industrial and academic research
and development. They are integral to the UK's advanced manufacturing
sector and to maintaining a balanced economy. The Government's
Advanced Manufacturing package published on 28 July set out a
number of new initiatives to build on work to support manufacturing
to ensure companies will be in a position to take advantage of
opportunities once we come out of recession.
AEROSPACE
2. The aerospace industry employs over 100,000
people of which some 36% hold a university degree or equivalent,
and has an annual turnover of around £20.5 billion. The United
Kingdom is one of only a small number of nations involved in the
design, manufacture, marketing, and maintenance and support of
the full range of aircraft products—from complex composite
aero-structures, wings; aero-engines; aircraft systems and avionics;
rotorcraft; through to maintenance, repair and overhaul services.
3. The Government recognises the importance
of the aerospace industry to the economy, and is an active partner
in helping the industry to build on its existing world class expertise,
in a global market now acutely focused on more environmentally
friendly products.
4. As part of its commitment to the sector,
Government has recently agreed to provide funding for a number
of major repayable launch investments (bringing the total repayable
launch investment since 1997 to around £1.5 billion; with
receipts during the same period totalling £1.7 billion):
— £114 million to Bombardier Aerospace
(Shorts) in Belfast towards the design and development of CSeries
composite wing (July 2008).
— £60 million to GKN for the design
and development of A350XWB trailing edge and rear spar composite
wing components (September 2008).
— £340 million to Airbus towards the
development of the A350XWB (August 2009).
5. In addition, as part of the wider Advanced
Manufacturing package, the Government announced in July £45
million of Grants for Business Investment to Rolls-Royce, which
will see the company build four new manufacturing facilities over
the next five years creating and securing 800 jobs for the long-term.
Three of these facilities are for aerospace: for military fan
blades at Barnoldswick; aero-engine discs and single crystal castings—locations
for which will be announced shortly. The fourth facility to be
built is for new civil nuclear manufacturing.
6. The aerospace industry has also been successful
in winning government funding for strategically important collaborative
research ie £50 million in composite wing on Airbus led projects;
and £45 million on low carbon aero-engine research, led by
Rolls-Royce, funded by the Low Carbon Strategic Investment Fund.
7. UK Trade & Investment continues to work
closely with the Society of British Aerospace Companies to promote
the UK aerospace sector to a global audience. The Society of British
Aerospace Companies' international strategy recommended where
best to deploy UK Trade & Investment resources, which has
resulted in a number of missions to key markets. UK Trade &
Investment's support for the Farnborough air show, facilitating
networking and business to business meetings, runs well into six
figures. In 2009-10, support for aerospace activities amounts
to some £300,000, which includes a major presence at the
Paris air show, upfront costs for the Farnborough air show 2010,
missions to China, Russia, Brazil and the USA and hosting Chinese,
Spanish and Brazilian delegations. Additionally aerospace companies
are forecast to receive around £80,000 from the Tradeshow
Access Programme.
8. The financial markets crisis in 2007 saw
a sharp reduction in commercial banks' willingness to fund aviation
sector transactions, and led to the significant rise in the demand
for export credit support, which is expected to be even higher
in 2009-10. In 2008-09, the Export Credits Guarantee Department's
support for the civil aerospace industry was around 20% higher
on the previous year, at over £1 billion. It guaranteed financing
for more than 100 aircraft deliveries, of which approximately
40% had UK built engines. This represented the largest number
of aircraft ever supported in a single financial year.
9. The Aerospace Innovation & Growth
Team report of 2003 has provided a shared industry and government
action agenda that has proved resilient in standing the test of
time. Its purpose is to ensure the UK aerospace sector increases
its global competitiveness and maintains its leading world class
capabilities. Action is focused on four main areas: technology,
skills, business process & supply chain improvement, and sustainable
aviation. BIS will continue to work closely with the UK Aerospace
Industry, including through the Aerospace Leadership Council,
to consider strategic issues affecting the sector and how these
should be addressed. This will build on our strong recent support
to strategically important advanced composite wing and propulsion
projects as outlined in paragraphs 4 to 6.
Technology
10. The industry has a National Aerospace Technology
Strategy roadmap that identifies the critical aerospace technologies
required to ensure UK competitiveness in the global aerospace
market, and to meet ambitious environmental performance targets.
The Aerospace & Defence Knowledge Transfer Network manages
the relationship with the aerospace industry, government and universities.
Since 2004, the Government has invested over £270 million
in aerospace projects, which has been matched by business. This
includes the launch of a number of Aerospace Technology Validation
Programmes identified in the National Aerospace Technology Strategy,
such as Integrated Wing, Environmentally Friendly Engine and ASTRAEA
(Autonomous Systems Technology Related Airborne Evaluation &
Assessment). The industry has secured support for further large
projects, such as Next Generation Composite Wing, Environmental
Lightweight Fan and REACT (Rotor Embedded Actuator Control Technology).
11. In 2007, the Aerospace & Defence Knowledge
Transfer Network amalgamated the various Aerospace Innovation
Networks and National Advisory Committees, drawing on the strengths
and successes of both communities, into a series of National Technology
Committees. These now have the responsibility of translating National
Aerospace Technology Strategy roadmap priorities into applied
research projects.
12. Aerospace is a key industry for the Engineering
& Physical Sciences Research Council (EPSRC), and a major
strength of the UK academic research base. EPSRC currently funds
over £200 million of research with relevance to the industry,
which involve over 300 collaborators from industry.
13. The Government's strategy for the defence
industry was published in 2005 as the Defence Industrial Strategy
(DIS). The DIS stated that there was no requirement for a new
design of manned aircraft beyond the Ministry of Defence's existing
plans and envisaged the future need being for helicopters and
increasingly for unmanned aerial vehicles (UAVs)—pilotless
aircraft for attack, reconnaissance and civil patrol. However,
the retention of an aerospace engineering and design capability
remains critical for through life capability management of aircraft
with a service life of 30 years or more, in order to provide for
maintenance, major upgrade and integration of new weapons systems,
avionics and defensive aids. The current research and development
for defence aerospace emphasis is on the development of unmanned
air vehicles through programmes such as "Taranis", the
development of an unmanned combat aerial vehicle and ASTRAEA which
is addressing key technological and regulatory issues to allow
unmanned air vehicles and manned aircraft to use the same (non-segregated)
airspace. The DIS recognised that these trends, combined with
increasing market globalisation and escalating development costs,
posed a tough challenge for the industry. The MOD has undertaken
to work with companies in the defence aerospace sector so that
it can reach the appropriate size and shape for the demand. With
this process, the sector can be helped to remain a healthy, competitive
and profitable and one that can survive into the long term to
meet changing future requirements.
Business process and supply chain improvement
14. The industry led "Supply Chains for
the 21st Century" change programme designed to accelerate
the competitiveness of the UK aerospace & defence sectors
by raising the performance of its supply chains is supported by
the government. The programme has been successfully running for
three years, with over 500 companies have now signed up.
Skills
15. The Sector Skills Council for Science, Engineering
and Manufacturing Technologies (SEMTA) leads the delivery of government
funding for training and skills development, and works with industry,
the National Skills Academy for Manufacturing and universities
to develop training programmes for the long term. The Society
of British Aerospace Companies is developing a Skills Roadmap
that identifies requirements to deliver the National Aerospace
Technology Strategy roadmap, so that SEMTA's skills provision
is aligned to demand. The Society of British Aerospace Companies
and SEMTA have also developed a strategic workforce planning tool
to help companies match needs with training courses that in the
medium term will provide a clearer demand signal of employers'
needs. It is being piloted with several companies, with a target
of 200 companies to be using the tool by the end of 2009 with
results feeding into the roadmap.
Sustainable aviation
16. The sector operates across international
borders and serves global markets—and consequently we consider
that action to reduce environmental impacts is best taken at international
level. The UK plays a strong role in the International Civil Aviation
Organisation—the global forum for civil aviation—in
formulating new policies and adopting new standards on aircraft
noise and engine emissions, ensuring that the UK industry can
continue to operate competitively. We are pressing for international
aviation to be included in a new global climate change deal to
be agreed at Copenhagen in December 2009, and are supportive of
the decision that carbon dioxide (CO2) emissions from aviation
will be subject to a legally-binding, tightening cap from 2012
through the EU Emissions Trading System, as an initial step towards
a global trading scheme. We recognise that technology and operational
improvements, supplemented by market-based measures, will be required
to deliver the scale of the emission reductions required, and
are working with the aerospace industry through the National Aerospace
Technology Strategy programme to develop technologies that will
assist in meeting environmental targets, including the ambitious
2020 environmental goals proposed by the Advisory Council for
Aeronautics Research in Europe (ACARE). The UK government has
announced a new target to bring CO2 emissions from UK aviation
below 2005 levels by 2050, and the Committee on Climate Change
is currently identifying how this could be achieved.
Recession
17. The effects of the recession on the aerospace
industry have lagged behind other sectors, primarily due to record
order books secured between 2004 and 2007, which saw Airbus outpace
Boeing. However, the industry is now experiencing the onset of
the globally-synchronised recession, with plummeting orders, and
some deferrals and cancellations. Business and regional jet manufacturers
have been impacted the most so far while the large aircraft manufacturers
have only made modest changes to production rates despite the
severity of the current economic downturn. Companies began making
recession related job cuts late last year and are continuing to
do so. The government continues to work actively with companies
across the sector to understand the challenges they face and ensure
that they are reflected in initiatives such as the Advanced Manufacturing
Strategy and as part of the New Industries New Jobs approach.
MOTORSPORT
18. Motorsport and high performance engineering
is a genuine cluster of passionate, like-minded technology companies
and organisations with core engineering capabilities. There is
no one single "sector" or statistically acknowledged
single industry classification—it is a cluster of firstly
engineering companies that are directed toward the development
of, or who contribute to the development of advanced or high performance
engineering, many focusing on automotive products, cars and motorbikes
with a broader application in for example aerospace and marine
and applied in a variety of applications in military, medical,
everyday transport and sporting products.
19. In 2009, work commissioned by the Advanced
Institute of Management research suggests 4,500 companies are
involved in what it terms the UK motorsport and high performance
engineering industry—with an annual turnover of £6
billion and a contribution to the UK economy of £3.6 billion
through exports. The report suggests the industry employs 38,500
full and part time jobs, including 25,000 engineers.
Mitigating the global economic slowdown
20. Unsurprisingly companies in the motorsport
and high performance engineering sector are focusing on cost issues
to mitigate the effects of the recession. Around three-quarters
of companies surveyed by Experian in December 2008 as part of
the Motorsport Development UK Motorsport 100 survey—see
below reported undertaking cost reviews and cost reductions. However
companies are also looking longer term with 67% diversifying into
new markets whilst more than half of companies are developing
new products and/or services.
21. Encouragingly the slow down forced companies
to adapt existing technologies to create opportunities in markets
which were less affected by the recession. For example UK Trade
Investment Passport to Export programme is helping one company
expand into the highly affluent, fast moving markets of the Middle
East, where the motorsport sector is said to be booming. Indeed,
38% of companies now see their major opportunities over the next
12 months being in the overseas motorsport sector, followed by
35% who see opportunities in the UK motorsport sector and 28%
in other industries in the UK.
Crossover and collaboration
22. A number of leading motorsport companies
are spearheading innovative practices, and undertaking collaborations
with other industries. Williams F1, for example, is working with
Airbus and Rolls Royce to develop the next generation of computational
aerodynamic technology. Similarly, Renault has worked alongside
Boeing, Force India with Airbus and McLaren with BAE Systems on
collaborative projects.
23. Undoubtedly the most pressing area for transferable
technology innovation is environmental development. UK motorsport
has become a breeding ground for "environmentally friendly"
technology; particularly energy efficiency and bio fuel development,
as well as super light materials innovation. The Motorsport Development
UK initiative to support the Energy Efficient Motor Sport project
sought to encourage the application of energy efficient technologies
into motorsport, focusing on the development of hybrid race cars.
While its contribution to the development of green technology
is therefore considerable, it is important that the industry continues
to improve its position internationally and further involve itself
with similar collaborative projects in the future.
MOTORSPORT DEVELOPMENT
UK
24. Motorsport Development UK (MDUK) was established
in 2003 as a key recommendation in the Motorsport Competitiveness
Panel to act as a partnership between the sport, industry and
government to oversee the implementation of the recommendations
to "lead, coordinate and prioritise development activities
and drive growth and improvement of both sport and the industry".
Funding
25. £11.5 million of funding for MDUK came
from the then Department of Trade and Industry and from four Regional
Development Agencies where 80% of the sector is based, ie East
Midlands Development Agency, Advantage West Midlands, East of
England Development Agency and the South East England Development
Agency.
Programmes
— Learning Grid: Set up in 2005
to utilise motorsport to help support activities designed to engage
young people in science and engineering. The Learning Grid encompasses
about twenty curriculum-related and quality assured activities
from early school age to university; project costs: £3.6
million.
— Motorsport Academy: Established
in 2006, following a number of developmental projects, the Academy
stemmed from the sector's Workforce Development Plan and aimed
to address the education and skills needs of the sector (ie act
as the national "virtual" umbrella for the range of
related activities); project costs: £3.1 million.
— Energy Efficient Motorsport: Drawing
from early Motorsport Industry Association work, and initial development
of a strategy, the project has aimed to put energy efficiency
at the heart of modern motorsport by demonstrating and supporting
alternative fuels and technologies; Project costs: £1.8 million.
— Business Development: A range
of activities focused on improving business practice and performance
in the sector and supporting continued competitiveness through
innovation, technology transfer, and diversification, and utilisation
of the full range of business support services; project costs:
£1.2 million.
— Widening Participation: Activities
focused on expanding the number of participants in the sport,
especially through broadening the socio-economic profile of participants
and including both under-represented groups and potentially new
forms of racing. Project costs: £0.9 million.
— MDUK Administration: costs £0.9
million.
Results
26. An evaluation report produced in June 2009
commented that "MDUK was innovative and ambitious, based
on a robust rationale to support the competitiveness of a pan-regional
industry cluster, and in doing so deliver a national sectoral
policy at regional level". Ministers are currently considering
the results and recommendations of this report.
Support for Formula 1
27. The UK is home to six of the Formula 1 teams
and it was estimated that in 2008 the total economic impact on
the UK economy was £816 million of which £54 million
is directly attributable to the British Grand Prix that helps
sustain 1358 jobs.
28. It has been estimated that were the British
Grand Prix cease, the net impact on the UK economy would be the
loss of 245 FTE jobs and a loss of up to £6.1 million of
expenditure. This does not take account of either the reputational
damage to the image of the UK as a premier sporting location or
the wider impact that this would have on the motorsport industry.
29. Minister's and officials in BIS, the Department
for Culture, Media & Sport and local government agencies have
been pro-actively working with the owners of Silverstone and Donington
race circuits and other key players to secure the long-term future
of the British Grand Prix to ensure that it remains a key sporting
fixture in the UK calendar, as part of the Prime Minister's "decade
of sport". At the time of writing Donington look to have
secured the rights to host the Grand Prix until 2017.
30. BIS has recently been supportive of the
new Brawn Team helping through the intervention of Ian Pearson
to secure additional time for Ross Brawn and Nick Fry to put together
a proposal to buy the team from Honda. BIS, working with South
East England Development Agency has helped to secure new facilities
for McLaren to build its new sports car at its base outside Woking
safeguarding investment and jobs.
CONCLUSIONS
34. The aerospace industry lagged behind other
sectors in the recession, primarily due to record order books.
The industry is now experiencing the onset of the recession, with
plummeting orders, and some deferrals and cancellations, and as
a result will probably be later than other industries to come
out of the recession. The government is a strong supporter of
aerospace, and fully recognises the importance of its contribution
to the UK economy. It has invested heavily in new aircraft programmes
and collaborative research projects to ensure that the UK is at
the forefront of new technologies in engines, wing, systems, unmanned
air vehicles and helicopter design and production. The UK aerospace
industry has secured work on the CSeries and A350XWB aircraft
and is positioning itself to gain work shares on the future single
aisle replacement aircraft programmes.
35. Motorsport and Formula 1 provide high performance
engineering jobs in the UK. The recession has had its impact,
but they are diversifying into new sectors and international markets.
Transferable technology innovation is of paramount importance
particularly in the environmental field. The UK motorsport is
at the forefront of "environmentally friendly" technology,
such as energy efficiency, bio fuel development, and super light
materials innovation. All of which will have applications in other
sectors. The government is pleased that it looks as if Donington
has secured the rights to host the Grand Prix until 2017.
17 September 2009
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