Aerospace Industry

Andrew Stephenson Excerpts

Wednesday 12th September 2012 Westminster Hall

[Andrew Stephenson (Pendle) (Con)]

I congratulate the hon. Member for Wrexham (Ian Lucas) on securing this important debate and welcome the new Minister to his role. His predecessor, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), was a strong and vocal advocate of the aerospace industry, and I hope that the Minister will become one, too. I apologise to him and other Members that I have to leave straight after my contribution, but I look forward to reading the debate and the Minister’s response at a later date.

The aerospace industry is vital to Pendle’s manufacturing base. I raised the subject during Business, Innovation and Skills questions last Thursday. In reply, the Secretary of State said:

“Aerospace is an excellent example of how Government and industry can work together to create growth and world-leading industries.”—[Official Report, 6 September 2012; Vol. 549, c. 382.]

The UK aerospace industry is the second largest in the world. It is worth more than £24 billion and employs a huge number of people in Pendle in highly skilled jobs in firms such as Euravia, Graham Engineering, the Merc Engineering Group, PDS (CNC) Engineering, Regal Precision Engineers, Rolls-Royce, T and R Precision Engineering, Weston EU and Whitwam Precision Components.

Last November, the hon. Member for Wolverhampton North East (Emma Reynolds) re-established the all-party parliamentary group on aerospace, and I was delighted to take on the minor role of treasurer. In June, we held a meeting with the Secretary of State for Business, Innovation and Skills, and I was encouraged by what he said about Government support for the industry.

The broad picture both locally in Pendle and nationally is encouraging. I have visited most of the companies that I just mentioned, and on the whole, they are doing well and are positive about the future. Aerospace industry exports rose by 15.6% in 2011 and the civil aerospace market is booming worldwide.

Pendle’s largest aerospace employer, Rolls-Royce, which employs more than 1,000 staff at its sites in Pendle, recently reported record profits and an order book of nearly £52 billion in its civil aerospace division. I took my right hon. Friend the Chancellor of the Exchequer to the Barnoldswick site before the last general election and look forward to my next visit there on 19 October.

I echo what the hon. Member for Wrexham said about the positive role of the trade unions. One concern that was raised by Rolls-Royce trade union officials at their last meeting with MPs here in Parliament—it was also raised with me by my local trade union representatives—is the unforeseen consequences that the EU’s reform of financial regulation could have on companies such as Rolls-Royce, and I could not agree more with them.

The Minister might be aware that, after the financial crisis, the G20 agreed that over-the-counter derivatives contracts should, if sufficiently standardised, be moved to clearing houses and be reported to trade repositories. That poses real challenges for large non-financially based companies that utilise OTC derivatives for risk management purposes. That is particularly important to the UK aerospace sector, because virtually all deals are done in US dollars.

[Mr Jim Cunningham]

Does the hon. Gentleman agree that the issue affects not only aerospace but UK manufacturing, which is something that we are all trying to build up at the moment? He has touched on an important issue.

[Andrew Stephenson]

This is a huge matter that will affect all non-financially dominated companies and all large-scale manufacturing companies. Using OTC derivatives allows companies to focus on development and growth of the business and is a simple way of managing risks; it is simply good housekeeping. If the move goes ahead, it will not be long before companies such as Rolls-Royce will be looking to move their headquarters overseas. It is a crucial point, and I applaud the trade unions for spending so much time trying to raise it.

Turning back to my local area, the regional growth fund has had a positive effect. The Government have agreed to fund the Regenerate Pennine Lancashire bid for an additional £7.5 million in business support and its accelerating business growth in Lancashire scheme is designed to meet the needs of local manufacturing small and medium-sized enterprises.

There was also a successful bid from the North West Aerospace Alliance, which I met last December to discuss the challenges that face the industry. It is currently putting together a bid for a national aerospace supply chain centre that would be based in the enterprise zone at Samlesbury in Lancashire. Needless to say, I strongly support the creation of such a centre in the north-west, even though it would not actually be in my constituency.

The regional growth fund announcements came just two weeks after the Government said that they would back the bid from the Visions Learning Trust to create a new £18 million university technical college in east Lancashire. The sponsors of the new UTC are Pendle companies with large aerospace contracts, such as Graham Engineering and Weston EU, so the college will play a key role in addressing the skills shortages faced by many local aerospace companies.

All such developments come on top of issues that the Minister has previously talked about, such as cutting corporation tax, promoting exports and getting the banks lending again. However, there are some areas where the Government could go further. In advance of this debate, I spoke to Dennis Mendoros, the founder and managing director of Euravia—an aerospace company based in Kelbrook. It is a medium-sized business with a global reach, and it won the Queen’s award for export in 2010. Mr Mendoros believes that the main issue that has not been extensively discussed is the support that should be provided to aerospace companies with a strong export record.

As many hon. Members will know, exports account for nearly 75% of the UK aerospace turnover. None the less, Mr Mendoros feels that UK export companies do not receive any real structured support from the Government, whereas other countries, such as France, Singapore, and the USA have a structured national strategy for aerospace development. He believes that much more could be done to ensure that UK Trade and Industry and the Ministry of Defence are focused and committed to supporting UK export companies, especially small and medium-sized businesses such as his own. In addition, he believes that it would be helpful to receive tax incentives to help procure new technologies, skills and expertise, which are essential for continuous growth.

I am aware that industry and the Government have formed the aerospace growth partnership to look at those issues and at what more can be done to support the industry. Will the Minister explain how that partnership and other structured support can help SMEs such as the one run by Mr Mendoros?

In conclusion, the aerospace industry, which is vital to Pendle, is doing incredibly well, with a growing number of orders and jobs. However, more could be done to help SMEs with exports. As I have said in previous debates on manufacturing, the long-term future of the aerospace industry in the UK cannot be secured without a long-term commitment to research and development and support for the supply chain. The Government have done a lot for the aerospace industry so far, but many of our international competitors are taking similar steps, so we need to be constantly striving to stay ahead of the game.