Memorandum submitted by A|D|S
INTRODUCTION
1.1 A|D|S is the trade body advancing UK
AeroSpace, Defence and Security industries with Farnborough International
Limited as a wholly owned subsidiary. A|D|S brings together the
combined strengths of the long-standing Association of Police
and Public Security Suppliers (APPSS), the Defence Manufacturers
Association (DMA) and the Society of British Aerospace Companies
(SBAC).
1.2 Aerospace, Defence, Security and Space
industries are major UK business sectors based on high-value engineering.
With a turnover of £20 billion a year, UK aerospace companies
continue to invest c £1.8 billion in research and development
and sustain 223,000 UK jobs. Aerospace turnover was evenly divided
between civil and defence sales in 2008 with exports making up
a considerable share of income, accounting for 69% of UK aerospace
sales.
1.3 The UK has a 17% global share of the
civil aerospace market, 10% of the defence market and is well
placed to provide the equipment and necessary expertise to take
the lead in the increasingly significant security and space sectors.
UK companies also have a significant share of the global aftermarket
(service) sector, including maintenance, repair and overhaul of
both fixed-wing and rotary-wing aircraft providing significant
components of the UK industry.
1.4 As well as being substantial generators
of activity in their own right, the four sectors also stimulate
GDP and employment in other parts of the economy. For example,
the Space sector whilst supporting 70,000 jobs, also generates
an additional £1.6 billion a year through R&D spill-over
effects.
2. THE EFFECTIVENESS
OF GOVERNMENT
POLICIES IN
SUPPORTING THE
SECTOR
2.1 There are many cross cutting Government
strategies that have an impact on the UK aerospace industry including
the Advanced Manufacturing Strategy, Low-Carbon industrial strategy,
High-level Skills Strategy & Leitch review, the Defence Industrial
Strategy and the developing Space Innovation and Growth team process.
2.2 Industry and Government developed a
joint strategy for the sector which was published in 2004 as the
Aerospace Innovation and Growth Team report (AeIGT). This publication
identifies the key strengths of the UK industry and identified
what was needed to ensure the UK maintained and grew its global
position. Both technology and skills investment were identified
as being of paramount importance. These conclusions have been
reviewed and underpinned by the development of a National Aerospace
Technology Strategy report and the development of a set of Technology
Roadmaps, which link collaborative research programmes to business
opportunities worth $3.15 trillion.
2.3 The overall trend is for strong order
growth over the next 20 years, Airbus forecast that 25,000 new
passenger and freighter aircraft valued at US $3.1 trillion will
be delivered between 2009 and 2028. Getting the right levels of
investment in UK research programmes is fundamental to UK based
companies winning work on future programmes and securing high-skilled
manufacturing jobs.
2.4 UK aerospace companies are world leaders
in the rotorcraft (helicopter) market which is forecast to be
worth £30 billion, up to 2027. Whilst the Defence Industrial
Strategy does include rotorcraft and identifies the need to retain
skills onshore to provide through life support for the Armed Forces,
there is no specific rotorcraft strategy designed to support the
development of the UK civil market.
2.5 Unmanned Aerial Systems is another key
market for the aerospace sector estimated to be worth $20 billion
up to 2020, due to emerging developments in security and surveillance.
A key element to UK companies winning work in this market in addition
to sustaining the right investment into technology development
programmes is ensuring a supportive Air Traffic Management framework
which permits both flight and testing of unmanned systems.
Technology Strategy Board
2.6 There are a range of existing government
support mechanisms that aerospace companies can apply to for investment
in research and development. The Technology Strategy Board (TSB),
has been the main source of research funding for early stage collaborative
research. Aerospace companies have been successful in bidding
into relevant themes and those that have received funding since
2004, include the Environmentally Friendly Engine, Next Generation
Composite Wing and the SAMULET (Strategic Affordable Manufacturing
in the UK through Leading Environmental Technologies). A sum of
£270 million, which has been match funded by industry has
been invested in early stage research.
2.7 Since receiving independent status the
TSB is moving broadly in the right direction although its budget
is inadequate to fulfil the task of investing in Advanced Engineering
success stories like aerospace. Moreover, the widening brief of
the TSB has led to less opportunity for the Aerospace sector to
bid.
2.8 Additional parallel investment in programmes
has been provided by Regional Development Agencies (RDAs). There
is generally a constructive view towards working with the RDAs,
however there is scope for improvement, as companies working with
multiple RDAs have found that this can bring complexities, for
example there are no standard contracts across all RDAs.
UK Aeronautics Research Institute proposal
2.9 The Aerospace and Defence KTN are brigading
government, industry and academia to develop a proposal for a
UK Aeronautics Research Institute. This will deliver leadership
in aeronautics research excellence and address fragmentation that
exists in the UK today.
2.10 Aeronautics expertise is currently
scattered across a large number of university departments. This
dilution of academic excellence threatens to degrade UK capability
and disable strategic inward investment from industry. In a number
of cases, technology "push" from publicly funded research
is currently disconnected from applications.
2.11 The absence of such a body means there
is no national organisation mechanism to undertake a programme
of underpinning research of national strategic importance which
can safeguard strategically important facilities and sustain and
grow National capabilities in composites, flight physics, electronics
and many other areas.
2.12 Other nations such as France and Germany
have maintained large, powerful, publicly funded research institutes
in the Aerospace sector (eg DLR and ONERA), which has given them
greater influence on the European stage, eg in shaping the Framework
Programme.
2.13 The proposals are still being developed
but the objective is that an institute would reduce complexity
and encourage greater industry and university collaboration. The
ease of working through a central point of contact in comparison
to separate negotiations with multiple universities is attractive
to industry and academia. In addition, the institute would provide
a stronger link between academic research and the market-driven
National Aerospace Technology Strategy. The NATS roadmaps span
more than a decade but research grants usually last a few years.
The institute would provide continuity to research programmes
and a stronger link between academic research and commercial applications.
2.14 Currently, the UK is strategically
disadvantaged with respect to influencing EU Aeronautic Strategy
for two reasons.
(i) the UK is not represented on influencing
bodies such as the Association of European Research Establishments
(EREA); and
(ii) we are unable to attract anything more than
50% EU funding in the absence of a Public Research Institute.
2.15 There is a real opportunity to address
these gaps and deliver greater linkages between academia and industry
and to increase the ability of the UK to achieve greater EU support
for research funding. The objective is not to duplicate or competitively
undermine the excellence already established within Industry,
Academia and RTOs, but to create coherency between these individual
entities, thus ensuring UK Aeronautics remains globally competitive
and sustainable. Initial proposals will be finalised in October,
2009.
Advanced Manufacturing Strategy
2.16 The UK aerospace industry is recognised
as one of the key sectors in the Government's Advanced Manufacturing
Strategy. As part of this approach Government and industry have
committed to significant investments in research and development
programmes.
2.17 These programmes will help to mark
the UK out as an international leader in wing technology, advanced
composite materials and aircraft engine technology. Investment
has been channelled through different mechanisms including both
repayable launch investment and research and development funding.
2.18 Support from Government is matched
by significant investments from the companies involved and is
crucial. These joint commitments include £340 million from
Government, for new A350 wing technology to Airbus, £45 million
for new manufacturing facilities to Rolls-Royce, £60 million
to GKN for trailing edge and rear spar components and Bombardier
received £125 million for C-Series wing development.
R&D tax credits
2.19 R&D Tax Credits are also fundamental
in supporting investment in research and development and are particularly
attractive to SMEs. In addition, they contribute in helping to
make the UK an attractive place to carry out research and development.
The need to reaffirm the Defence Industrial Strategy
2.20 In the development of defence equipment
and technology the Government through the MoD has a direct influence
on aerospace through both procurement and research investment.
There has been much public discussion about the need for a Strategic
Defence Review and A|D|S supports this process. Since our armed
forces cannot do their job without defence equipment provided
by industry it is essential that a renewed and refreshed Defence
Industrial Strategy is an integral part of the SDR process.
2.21 Research and Technology investment
is the key to future capability and responsive kit. It is the
investment that turns innovative ideas and theory into equipment
that saves lives on the battlefield. The erosion of research investment,
down 7% last year and the same degree of decrease expected next
year, is a major concern to industry. It not only affects the
ability of industry to deliver world class equipment, but also
sends a negative signal about the commitment to developing future
capability.
2.22 In this context, A|D|S believes that
wider cross government objectives should be involved in the SDR.
As set out in Innovation Nation (2008), published by the Department
for Innovation Universities and Skills, "The Government's
aim is to make the UK the leading place in the world which to
be an innovative business, public service or third sector organisation".
2.23 Defence equipment like health and IT
procurement programmes is a direct means by which Government investment
has the ability to channel investment into skilled jobs, technology
and innovation, whilst at the same time delivering world-class
equipment to our Armed Forces.
2.24 A recent report by Oxford Economics
produced an analysis of how a range of sectors contribute to the
national economy. The report concluded that relative to other
parts of the economy, the defence industry generates significant
benefits consistently across a range of comparators. These include:
returns to the Exchequer, impact on GDP, number of jobs, skill
development, research and development investment and export potential.
Across all these criteria, defence is judged the third most attractive
sector out of 27 included in the study.
2.25 Defence equipment also provides export
opportunities as equipment that is tried and tested in the UK
is more likely to attract export customers. Defence exports in
the UK account for 55,000 jobs and additionally encourage innovation
and contribute returns to the Exchequer.
2.26 As further recognised in the Innovation
Nation report (2008), "Government procurement can drive innovation
through creating `lead markets' for innovative products and services.
Regulation can drive or get in the way of innovation depending
on conditions. Government has a role in creating markets where
they may not exist or demonstrating the viability of innovations
that others will not necessarily adopt. Through procurement Innovation
Nation, it has the potential to act as a leader on its own, pulling
innovative products and services through from the UK economy in
areas such as defence, health or the environment."
3. THE IMPACT
OF THE
RECESSION ON
THE SECTOR
3.1 The UK based civil and defence aerospace
industry is well-developed and corporate strategies are responsive
to the cyclical nature of the industry.
3.2 The sector is characterised by long
programme cycles so that in addition to managing its way through
the downturn, the industry is continuing to maintain investment
in vital research and technology programmes. This investment will
ensure that the industry is best positioned to compete for work
on future programmes. So when other industries might naturally
cut back on research investment in difficult periods aerospace
companies maintain commitment.
3.3 The industry experienced a difficult
year in 2008, and many companies, particularly those that supply
into both aerospace and automotive experienced a marked impact
from the downturn. This has continued in the first half of 2009
where the downturn has been felt most markedly in the business
jet, general aviation, civil fixed-wing and rotary-wing sectors.
3.4 The long term nature of large-scale
projects means that effects can be delayed. The industry is working
hard to minimise the impact through traditional means, including
laying off temporary/contract workers and offering voluntary redundancies.
However, it is inevitable that there will be some compulsory redundancies
and where this is the case, work is progressing to ensure that
skills are retained in the industry.
3.5 Liquidity poses a significant problem.
The low availability of commercial credit continues to pose a
threat as it affects the potential purchase of commercial and
corporate aircraft. The demand for support provided by the Export
Credit Guarantees Department has increased significantly over
the last nine months and A|D|S anticipates that this level of
support will remain crucial for the foreseeable future. The ability
of companies to access short-term credit to sustain and/or restructure
their business is important to the continuity of the aerospace
and defence supply chain.
3.6 Supply-chain continuity is one of the
most significant factors affecting the productivity and competitiveness
of the UK industry as well as its long-term survival at its current
world-class level.
4. THE ROLE
OF SMES
IN THE
SUPPLY CHAIN
SUPPORTING THESE
TWO SECTORS
4.1 The aerospace and defence industry comprises
c 9,000 suppliers. SME's in particular play an important role
in supporting manufacturing operations and provide a degree of
flexibility, responsiveness and agility that is rarely found in
larger corporations.
4.2 In particular, manufacturing SMEs who
are local to the main production facility provide a valuable source
for one-off manufacture or re-work of small components which may
be required to keep the production line flowing. Additionally,
SMEs in the systems and software arena provide a level of innovation
into the business, leveraged from their work in other sectors.
4.3 The SME community is valued by the Aerospace
Community as a whole, evidenced by the commitment of the major
players to the industry's SC21 programme, which is a programme
designed to increase the efficiency and performance of the supply
chain and eliminate duplication in auditing processes.
5. WHAT BARRIERS
ARE THERE
TO FURTHER
INNOVATION AND
WHAT CAN
BE DONE
TO OVERCOME
THEM?
5.1 Innovation is driven by numerous parameters,
and a number of the barriers have already been noted.
5.2 The UK has an excellent academic base,
however international competition is intensifying. Full economic
costing is making the UK a more expensive place to do academic
research, and protracted negotiations with some Universities over
intellectual property rights are hampering the pace at which new
programmes can be launched.
5.3 Research Councils are increasingly receptive
to the needs of industry, and initiatives such as EPSRC Strategic
Partnerships are welcomed and should be encouraged.
5.4 The benefits of a strong Aerospace industry
have been recognised by other nations. The global nature of the
industry enables companies to make choices as to where they invest,
including in innovation. The UK must remain vigilant and agile
to respond to the increasing threat of very attractive propositions
being tabled overseas. It is inevitable that manufacturing will
follow where innovation takes place.
5.5 Innovation in the UK rotorcraft sector
has largely been driven by the military market. Technology pull-through
has however been sporadic, hampered by a lack of clear exploitation
strategies. This situation has worsened over the last two years
with MoD investment switched almost entirely to resolving urgent
operational requirements. There is now little if any MoD funding
being invested in long-term rotorcraft development. This is a
key point, and one that has to be addressed if we are to provide
cutting edge platforms.
5.6 The technology and innovation created
by aerospace research often transfers between civil to defence
applications and vice versa. For example composite materials developed
in civil aerospace are used in defence applications, defence technology
has a role in security applications. The same is true of skills
and process improvements. There is an opportunity to achieve more
efficient investment in government supported research through
bringing together joint defence and civil programmes. The Technology
Strategy Board which has a coordinating role in investment is
the natural body to bring these different objectives together.
Advancing this goal does require the engagement and support of
MoD.
6. WHAT STEPS
CAN BE
TAKEN TO
ENCOURAGE THE
APPLICATION OF
TECHNOLOGY DEVELOPMENT
IN AEROSPACE
TO CREATE
NEW DESIGNS,
PRODUCTS AND
PROCESS IN
OTHER INDUSTRIES?
6.1 The network of Advanced Manufacturing
Research Centres have an important role to play in creating new
designs, products, processes and skilled employees for both aerospace
and wider applications, as many technologies from the sector spill
over into other sectors.
6.2 The proposed Manufacturing Technology
Centre (MTC) in the Midlands, along with the Advanced Manufacturing
Research Centre (AMRC) in Sheffield and the Advanced Forming Research
Centre (AFRC) near Glasgow, will provide a powerful network linking
companies, industrial sectors and Universities and spanning a
range of high integrity, high productivity process technologies.
At several levels, the network will provide an infrastructure
capable of supporting future public and privately supported manufacturing
technology research.
6.3 Industry experience with the Advanced
Manufacturing Research Centre (AMRC) an initiative led by Sheffield
University and Yorkshire Forward has been very positive. The centre
which opened in 2004 operates as a department of the University
around a partnership of some 40 industrial companies. The focus
is on machining processes, composites and automated assembly.
6.4 The programme has already been expanded
with a £10 million additional investment earlier this year,
by Yorkshire Forward with support from Rolls-Royce. The Rolls-Royce
Factory of the Future, has delivered a four-fold expansion of
the AMRC on the same Sheffield site. Further plans are also being
formulated to further expand facilities with two further buildings
providing a 40% increase in floor space.
6.5 The compelling characteristics of the
model are pace and scale underpinned by industrial leadership
and a very non-traditional and results-led approach from the University.
6.6 This successful model has been built
upon and scaled up to bring a broader range of technologies whilst
preserving the benefits of specialisation within each Centre.
In 2007, industry achieved agreement with Scottish Enterprise
and Strathclyde University to launch the AFRC—a Centre that
will focus on advanced forging and forming processes with an initial
capital input from Scottish Enterprise of £17 million. Land
preparation is now complete, construction has started and the
Centre will open during 2010.
6.7 The Manufacturing Technology Centre
(MTC) represents an ambitious step towards completing the first
stage of a UK network. The proposal is to bring together three
Universities—Nottingham, Birmingham and Loughborough along
with The Welding Institute and a more broadly based, cross sector
industrial partnership. The scale of the Centre reflects the very
rapid growth seen in Sheffield and an intention to straddle a
broader range of process technologies including high integrity
joining, net shape fabrication and automation.
6.8 The programme is now at an advanced
stage with the East Midlands Development Agency and Advantage
West Midlands. A final formal decision on funding is expected
during Q3 2009 with MTC research projects being launched during
the second half of 2009 and the facility to be opened early 2011.
The MTC was "announced" as part of the Government's
manufacturing strategy in September 2008.
6.9 A|D|S expects that industrial support
for the manufacturing research network will be strong and international.
As with the AMRC in Sheffield, we believe that industrial membership
of the new Centres will grow rapidly once the facilities are open.
6.10 A number of leading industrial companies
are already committed to centres within the emerging network (including
Rolls-Royce, Airbus, Boeing and BAE Systems) with significant
interest from a wider group of cross sector industrial partners.
6.11 At an industrial level A|D|S believes
that there are strong overlapping interests in high integrity,
high productivity manufacturing technologies that will continue
to attract a range of industrial sectors—including automotive,
heavy vehicles, nuclear, oil and gas and aerospace.
6.12 In summary the benefit of these centres
to industry include:
— Access to world-class research facilities
and academic staff supporting fundamental and applied research
in manufacturing technology.
— Strong market pull and industrial leadership
from partners, especially the larger Original Equipment Manufacturers.
— Leverage knowledge from cross-sectoral
collaborative partnerships between leading academic institutions
and major industrial companies.
— Rapid "technology pipeline"
from concept—demonstration—exploitation, bridging
the gap between University research (MCRL 1-3) & industrial
application (MCRL 7-9).
7. HOW EXISTING
INITIATIVES SUCH
AS THE
AEROSPACE INNOVATION
NETWORKS AND
AEROSPACE VALIDATION
PROGRAMMES HAVE
BEEN TRANSFORMING
NEW CONCEPTS
INTO MARKETABLE
TECHNOLOGY
7.1 The AIN model was not successful in
supporting aerospace innovation as it was not viewed as a means
of channeling government funding for research programmes. The
outcome is that a disconnect was created between technology push
(as funded by EPSRC and TSB) and application pull (as demanded
by the National Aerospace Technology Strategy). The Aerospace
and Defence KTN has been developed to bringing together the best
aspects of National Advisory Committees (NACs) and AINs. They
formulate roadmaps in particular topics which represent the pan
sector needs in terms of R&T. These are then used to advise
agencies of priorities so that they may accommodate relevant topics
and themes in funding calls.
7.2 Once competitions are launched, NTC
participants have already created a collaborative ethos that enables
them to form relevant and appropriate consortia to bid for funding.
NTCs are not pre-assembled consortia, but the breeding ground
for partnerships. Moreover, the road mapping process which had
brought them together embeds the spirit of collaboration, partnership
and risk-sharing within those Committees.
7.3 NTCs are already spawning collaborative
research; the Witness programme recently announced emerged form
the Health Management and Prognostics NTC. NTCs enable the strategic
fitting (ie alignment to NATS through roadmapping) of smaller
programmes.
7.4 Aerospace Technology Validation Progammes
has some deficiencies. The concept is good but the lack of a relevant
validation specifically for rotorcraft makes it difficult to support
the Vertical Lift sector.
24 September 2009
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