Aerospace Industry

Gordon Birtwistle Excerpts

Tuesday 2nd September 2014 Westminster Hall

[Sir Peter Luff (Mid Worcestershire) (Con)]

I apologise to the House for my voice; I am suffering from the after-effects of a long and difficult summer cold. I will croak my way through my 30 minutes or so and hope that I can be heard throughout my speech.

It is a great pleasure to welcome the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for Mid Norfolk (George Freeman) to his second Adjournment Debate on a subject that he and I have discussed in the past. I am confident that he will lend a sympathetic ear. In keeping with the prevailing wisdom about the meaning of the word “aerospace”, I will discuss primarily the civil airframe market and its supply chain rather than space or defence, although I will make some remarks about both.

My interest in aviation goes back to the 1960s in Windsor. I grew up directly under the flight path of the rapidly expanding Heathrow airport, where I went plane-spotting regularly. I remember the Viscounts, the Comets, the VC10s and of course the magnificent Concorde. Those wonderful British and Franco-British aircraft inspired many British children, and they and the outstanding military aircraft that we have built have handed to this generation an extraordinary legacy of excellence in aviation that we must honour by continuing that success.

The debate is also an opportunity for me to return to the 2010 report of the Select Committee on Business, Innovation and Skills, which I chaired. The report was entitled “Full speed ahead: maintaining UK excellence in motorsport and aerospace”, and the inquiry convinced me of the extreme urgency of addressing the engineering skills shortage in our country. More than four years later, we are making some progress, but there is still a lot more to do. I will return to some of the report’s recommendations later in my remarks, but its conclusion states:

“The Government’s role in support of the aerospace sector is to enable the industry to compete on an equal footing with its international competitors. Other countries actively support and promote their aerospace industry through the provision of financial support, access to trade credit and funding for R&D work. The UK Government must ensure that the level of support it provides industry does not place the British aerospace sector at a disadvantage.”

There has been much to welcome in Government policy since that report. Government and industry now work together successfully through the Aerospace Growth Partnership in a concerted effort to secure the UK’s position as a leading aerospace nation, the second largest in the world, to invest in innovation and to take advantage of the future growth opportunities within the civil aerospace industry.

I hope that all participants in the debate—I am glad to see that the number is growing—offer unqualified support for the Aerospace Growth Partnership approach, but that does not remove the need for Ministers to be accountable to Parliament for the progress made. The debate is an opportunity to challenge aspects of the AGP approach constructively and test its progress. It is also an opportunity to demonstrate cross-party support for the broad approach being adopted.

In that spirit, I will be asking whether the strategy is sufficient to rise to the international competitive challenge. Are the various mechanisms being established sufficiently integrated and comprehensive? Are the views of the major US players in defence and civil aerospace who value our supply chains so highly properly understood? Is support for aerospace exports sufficiently strong? Is it understood that the sector and its supply chains comprise many medium-sized businesses, not just large original equipment manufacturers and small firms? Is the British supply chain sufficiently robust? Is it right to limit the scope of the work to the civil aerospace market? Should not links with the defence aerospace and space sectors be more explicit? Is the approach to skills adequate? Can the momentum being generated in the AGP be sustained?

Isaac Newton said:

“If I have seen further, it is by standing on the shoulders of giants.”

The modern British aerospace industry indeed stands on the shoulders of giants. British scientists and engineers have an outstanding track record of technical and commercial success since the earliest days of manned flight. We are heirs to a roll-call of famous names of companies and individuals. Aerospace is a significant manufacturing success story for the UK, and is one of our most important high-technology industries. As the BIS Committee 2010 report said:

“Britain is one of the few nations involved in the design, manufacture, marketing, maintenance and support of the full range of aircraft products—from complex composite aero-structures, including wings, aero-engines, rotorcraft, aircraft systems and avionics, through to maintenance, repair and overhaul services.”

Ours is the largest aerospace sector in Europe and, as I said before, the second largest globally, after the USA. A Boeing 787 Dreamliner flying with Rolls-Royce engines is 25% British by value. An Airbus A380 with Rolls-Royce engines has about 40% British content, broadly the same as other Airbus variants fitted with Rolls-Royce engines. Indeed, the new A350 XWB and the A330neo are supplied only with Rolls-Royce engines.

[Gordon Birtwistle (Burnley) (LD)]

I congratulate my hon. Friend on securing this debate. He mentioned the Airbus and Boeing aeroplanes using Rolls-Royce engines. Is he concerned, as I am, that Rolls-Royce has stopped making smaller engines for A320s, A319s and the smaller Boeing aeroplanes and is concentrating solely on big engines? Would it not be advantageous if Rolls-Royce could get back into making smaller engines, either with a partner or on its own? Smaller aeroplanes are becoming very popular at the moment.

[Sir Peter Luff]

I do not think it is right to double-guess companies’ commercial strategies, but my hon. Friend makes an important point and I am sure that the company has heard what he said. I hope it responds to both of us to explain its industrial rationale for taking that particular decision.

Airbus’s UK contribution includes civil wing design at Filton and build at Broughton; fuel system and landing gear design and testing at Filton; and A400M wing design and manufacture at Filton. UK suppliers providing other significant components and services to Airbus include landing gear manufacture in Gloucestershire; window manufacture on the Isle of Wight; maintenance service panel manufacture in Greenford; design houses around the country; and even a standby compass. We are also strong in the military market. Eurofighter, the Saab Gripen and the F35 all have significant British content.

These are exciting times for the UK aerospace industry, and there are significant opportunities for further growth. The latest monthly commercial aircraft order and delivery data, published last week by the trade association ADS, reveal a further increase in the backlog of more than 12,000 aircraft and 21,000 commercial aircraft engines. That equates to about nine years’ work in hand for the industry and could be worth about £155 billion to the UK economy.

Obviously, the UK civil aerospace sector makes a huge contribution to UK jobs, skills, exports and long-term growth. In 2013, UK aerospace was worth £27.8 billion to the UK economy, with 91% of final demand coming from exports. Aerospace exports grew by 12% in 2013, and the industry employs 109,000 people in well-paid, highly skilled jobs, and supports another 120,000 in the supply chain. The average wage is about £41,000, more than 50% higher than the UK average, and the sector has grown 10 times faster than the rest of the UK over the past three years.

After the record number of orders and commitments made at the recent Farnborough international air show, the longer term looks strong and opportunity-laden too. It is estimated that by 2032, more than 29,000 new large civil airliners, 24,000 business jets, 5,800 regional aircraft and 40,000 helicopters will be required. As the UK specialises in developing and manufacturing some of the most complicated and high-tech parts of modern aircraft, the industry estimates that that requirement means a potential market share of about $600 billion for the UK.

Against that background, we must ask ourselves whether the Government and the industry are doing enough to ensure that the UK retains and improves on its current position. To be honest, I was concerned by the breezily optimistic picture painted in “Flying High”, this year’s update on the Aerospace Growth Partnership. It reads more like a sales brochure for Government policy than an honest assessment of the challenges facing British aerospace companies. Only on the very last page do we read:

“However, the challenges of intensifying international competition, the rapid pace of innovation in the sector and a need to broaden our customer base remain.”

Those words encompass my reasons for seeking this debate.

There were starker warnings in the strategy “Lifting Off”, published last year, which says that

“recent trends have shown that UK content on new aircraft is in decline and that, without action, this will accelerate as new generations of aircraft are introduced.”

My confident hope is that the new Minister’s response will reveal a depth of thinking about the competitive challenges and a strong commitment to do all that it takes to maintain the UK’s position internationally. [Interruption.] I am encouraged by his affirmation of my hopes and aspirations. I also hope—again, confidently—to hear recognition from the official Opposition spokesman that the AGP’s success is built on the firm foundation laid by previous Governments, and therefore an expression of strong support for this Government’s approach to working with the industry. This should be an opportunity to examine in a bipartisan spirit how we can ensure that the success story of British aerospace is maintained.

The industry, through its trade association, identifies four principal challenges: overseas competition and innovation, environmental demands, access to finance, and skills. Advances in technology are driven by environmental needs to cut emissions, reduce fuel-burn and increase aircraft efficiency. The UK must continue to be at the forefront of research into improvements in those areas in order to stay competitive, drawing on its capability in propulsion, and advanced structures in particular. Small and medium-sized enterprises throughout the supply chain will face increasing pressure from larger companies to cut costs and innovate. Many companies face problems accessing the necessary finance to grow, respond to new demand, collaborate and conduct R and D. Banks and financial institutions can be less willing to offer the finance needed for innovation due to the inherent risk and the long time scales involved.

UK industry requires not only a greater number of aerospace engineers and technicians to replace the current generation, but candidates with the right skills and knowledge to understand the use of new materials and structures in aerospace manufacturing. I will return to that at the end of my remarks.

However, my first specific question to the Minister flows from the first of those four industry concerns—overseas competition and innovation. Innovation underpins growth. If we do not invest in innovation now, the UK will not be competitive in the years to come. That is especially true in high-tech industries such as those in the UK aerospace sector, which face increasing global competition. We know that public investment increases private investment in innovation, but as the Business, Innovation and Skills Secretary has observed, the UK has both lower public funding and lower total investment in R and D than most of our competitor nations. More must be done to boost UK aerospace R and D, and to create a more level playing field with Europe and the rest of the world. For every £1 invested in the UK, France spends €10 and Germany €15.

However, the AGP looks set to improve that position. Later this year, the Government are due to publish their science and innovation strategy, which also offers an excellent opportunity for the UK to make a serious commitment to innovation policy, complementing all existing industrial strategies. However, countries such as South Korea, Japan and Brazil are throwing their immense firepower at building their share of global markets—for example, we can look at the strong position of Japanese suppliers on the new Boeing 787. Other nations such as France and Germany have been doing more, and often for longer, to stimulate technology and R and D. The growth in opportunities in civil aerospace means that the UK faces increasing competition from both mature and emerging markets. Therefore, we must foster innovation throughout the supply chain to bring new technology, products and expertise in order to stay ahead in a competitive market.

I worry about whether the various mechanisms being established are sufficiently integrated and comprehensive. The response that has developed and that is spelled out in the AGP’s strategy is built around a variety of mechanisms. It rightly identifies areas of UK competitive advantage—wings, engines, aerostructures and advanced systems—and emphasises the importance of reinforcing that success. It seeks to address a major shortcoming in the UK business environment for aerospace. As “Lifting Off” says:

“Long-term predictability and stability of Government funding for R&D is a key factor in determining where it”—

the industry—

“chooses to invest and...the UK needs to do better in this research.”

At the pinnacle of the AGP is the Aerospace Technology Institute, an industry and Government co-funded £2 billion investment over seven years. That is precisely what the BIS Committee 2010 report called for and I am delighted to see our recommendation being so enthusiastically embraced. The ATI’s small team will lead on the development of the strategy and will identify the specific technological activity required to address capability needs in the UK. It aims to align early research and cross-sectoral R and D innovation delivered through the Technology Strategy Board, which will soon be known as Innovation UK. It already has more than £300 million of collaborative R and D projects under way, spanning the four UK priority areas: wings, engines, aerostructures and advanced systems.

The ATI works alongside the recently established UK Aerodynamics Centre and the various component parts of the High-Value Manufacturing Catapult, but a manufacturing accelerator programme is also being proposed. I am not currently clear about what that programme would add to the complex landscape of organisations. Indeed, I confess to being just a bit concerned about the complexity of the environment, with the ATI, the UKADC, the MAP, the TSB, the HVMC and its seven component parts, including the excellent Advanced Manufacturing Research Centre near Sheffield, the inspirational Manufacturing Technology Centre at Coventry, the important National Competence Centre near Bristol, and, possibly finally, the National Aerospace Technology Exploitation Programme that is aimed at smaller companies, never mind the host of academic organisations and those many organisations involved in defence aerospace.

I am a strong supporter of the AMRC and the MTC. I have been to both—I went to the MTC last week. They are fantastic centres of excellence, designed to encourage improvements in manufacturing across Britain and not just in aerospace, and they have a vital part to play in the aerospace sector and across all sectors. However, I worry whether that is a complex environment. How are the Government and the AGP assessing the strength of the international competitive challenges, and what lessons are they drawing about the adequacy and, crucially, the coherence of the UK’s response? We must always remember that the aviation industry works to very long time frames—they are often several decades per programme—and therefore consistent and long-term support from the Government is vital to provide a stable policy environment in which to operate.

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[Sir Peter Luff]

The hon. Gentleman makes an important point. We are talking about the long-term commitment to this sector; long-term commitment to ownership also matters very much. I strongly endorse what he said.

Of course, the new North factory in Broughton was opened by the Prime Minister three years ago. That factory shows the continued commitment of Airbus to the future of UK manufacturing and R and D. The company deserves the kind of high-level endorsement demonstrated by the Prime Minister. However, we need to give that endorsement practical substance by attacking non-compliant World Trade Organisation subsidies of Boeing and by robustly supporting export campaigns for Airbus aircraft.

Let us move briefly to Washington DC and, in a sense, to Washington state. At the end of July, it was astonishing to hear a senior Boeing executive tell a congressional hearing about

“the economic and employment benefits Europe has achieved with aerospace using massive state support over the past four decades”.

The old biblical phrase about the mote and beam comes to mind. The land of the free does not always extend its commitment to freedom to free trade.

Sadly, an ongoing dispute before the WTO regarding US and EU support for large civil aircraft manufacturers remains a real threat to the competitive position of Airbus. In essence, the WTO has found that European repayable launch investment loans to Airbus are legal and WTO-compliant but that many US grants, contracts and tax concessions to Boeing between 1989 and 2006 were WTO-inconsistent. Against this background, it is bewildering that, in blatant disregard of the 2012 WTO findings, Boeing has been awarded the single largest targeted tax break in US history, amounting to nearly $9 billion, in order to underwrite development and production of the new 777X aircraft in Washington state. The 777X is a serious competitor to Airbus’s wide-body A350 XWB and A380 families. This latest tax break for Boeing essentially allows it to develop the new aircraft for free, which places Airbus and its suppliers at a huge competitive disadvantage. It means that fair competition is not possible for products such as the A380. The “massive state support” happens not in Europe but in the USA. Will the Minister assure me that the UK Government will use their strong influence with bodies such as the European Commission and the WTO, and work with other Governments, to ensure that there is a level playing field in which UK companies can operate, with a fair global legislative environment?

Having said all that, Boeing builds excellent planes and it will remain a force to be reckoned with for the foreseeable future. We may think that the US Government’s use of subsidies is outrageous, but we still respect the technical skill of Boeing and the success of its aircraft. As the Defence Minister with responsibility for equipment, I was determined that all the major defence suppliers—including Boeing, Lockheed Martin and Northrup Grumman—should be made to feel entirely welcome in the UK and were encouraged to invest here, so as to work ever more closely with our supply chain.

In that spirit, we should recognise the way in which Boeing has thrown itself into the UK, supporting the AMRC at Sheffield and, for example, the Royal Aeronautical Society’s excellent “Build a Plane” challenge. The views of the major US players in aerospace—defence and civil—who value our supply chains so highly must be properly understood if we are to ensure that British suppliers can play a significant part in their future products. Yet the very name “Boeing” seems virtually to have been exorcised from AGP documentation, with only the briefest and most cursory of mentions. We want British technology to be so compelling that Boeing has no choice but to increase UK content on its planes, but we will get to that point only if we properly understand its needs, too. What are we doing to ensure we have that understanding?

I turn to exports. Industry insiders tell me that official support for sales campaigns is absolutely vital for the aerospace industry. From my time at the Ministry of Defence—I look to my hon. Friend the Member for Aldershot (Sir Gerald Howarth) in this regard as well—I have supported, in India, Turkey, South Korea, and elsewhere, the excellent work of the UK Trade & Investment Defence & Security Organisation. Sadly, UKTI is seen as being

“a long way from being optimal on the civil side.”

Specifically, the industry needs more advanced information on when Ministers are travelling on trade missions and not just to have what one chief executive described to me, in a description I recognise all too clearly, as

“a complete obsession from a media/comms perspective for ‘announcables’.”

Aerospace contracts take a long time to negotiate and cannot just be pulled out of a hat because a Minister happens to be visiting a particular country. As that same chief executive said to me,

“The UK diplomatic service is one of the best in the world; my colleagues from overseas regularly say that to me, the PM has a high regard on the global stage—we should use it more. He has said to us on several occasions that he is happy to be the number one Airbus salesman—it’s just that sometimes the back-up from UKTI is lacking.”

Another company has emphasised to me that advance warning of ministerial visits abroad and of trade delegations here to help support sales campaigns is just not being given, although that happens regularly—routinely—in other European countries such as France. On exports it seems we could do much more. Will the Minister pledge to look at that issue?

When politicians speak of SMEs, they often mean the very smallest firms, employing perhaps 10 or 20 people —members of the Federation of Small Businesses, say. Much of the debate about the aerospace industry appears to the outsider to revolve around the original equipment manufacturers on the one hand, and SMEs on the other. Discussion of the former usually focuses on the pursuit of new programme investment, in the case of purely indigenous companies, or on the methods by which non-indigenous companies can be persuaded to invest in the UK, embody original intellectual property in the minds of UK employees and deal with the constraints of the US international traffic in arms regulations regime.

Discussion of SMEs quite properly tends to concentrate on increasing their market access. However, in such a debate the industry layer below that of the OEMs but above that of the SMEs tends to be ignored. This layer, made up of companies that we could call the large sub-prime suppliers, includes companies such as Marshall Aerospace and Defence Group, Cobham, Meggitt, Ultra Electronics and Martin-Baker, most of which are completely British; the value they generate flows directly into the British economy and the Exchequer.

I acknowledge that many of these companies have particularly strong positions in defence aerospace, but I will be asking shortly whether we are right to think of the defence and civil markets in such distinct compartments. Any serious analysis of the future of the UK aerospace industry should take account of the large sub-prime suppliers and their contribution to the UK economy, national security and prosperity as well as to innovation, skills and training. Are we focusing sufficiently on the large sub-prime businesses in the AGP strategy?

We must also ask whether the British supply chain is sufficiently robust. Monday’s Financial Times reported that there were concerns about the ability of the UK supply chain to cope with the rapid upturn in orders. Industry chief executives have expressed concern to me about the lack of ambition of some of their suppliers, which are content to remain static but are risking stagnation or worse through an absence of plans for growth. Others have expressed concerns about the stability of small suppliers and said that they are forced to use two different suppliers for the same component to ensure stability of deliveries—and that second supplier is generally not a British one. There may be a need to provide not just finance to the smaller SMEs, as the AGP promises, but management consultancy on growth strategies and possible consolidation with other suppliers. I suspect more active intervention in the supply chain will be needed. Will the Minister consider that?

Is it right to limit the scope of the AGP’s work to the civil aerospace market? I ask because I am sure the linkages with defence aerospace, and space in particular, should be more explicit. Indeed, the Office for National Statistics classifies activity in this area as

“manufacture of air and spacecraft and related machinery”.

The Library briefing note reminds us that support for the sector from successive Governments owes much to the need to sustain the defence aerospace sector.

The AGP could learn directly from the Defence Growth Partnership, too. As noted in “Delivering Growth”, recently published by the DGP, the UK’s defence value chain comprises all suppliers of equipment, support and technology for defence, including defence aerospace, and includes the enabling functions of Government, ranging from test facilities to regulators, and the UK’s strong academic and science base in universities, research bodies and technical institutes. This is a profoundly capable resource, but a diverse one.

The DGP intends to harness the power of the value chain in a more co-ordinated way, to enhance responsiveness, agility and competitiveness in meeting customer needs. In addition to leveraging the existing value chain, it aims to maximise the synergies with other sectors and attract new companies into defence—particularly SMEs that can bring fresh thinking into the sector, but might otherwise struggle with market access. This is the kind of approach that we see in all industrial strategies, but I do not see it in the AGP.

In the 2010 Select Committee report, we looked at defence research and expressed concern about the sharp reductions being planned by the last Government, concluding that

“If we are looking at developing UK national capabilities for future defence requirements, it is self evident that if there is less being spent on research and technology now, we will have less UK capability in future.”

We also stated:

“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.”

As Minister with responsibility for defence equipment, I was proud to put a floor under the Department’s spending on science and technology and prevent any further cuts, but our spending on defence S and T remains far too low.

In defence aerospace, much of the activity will have a direct read-across to the civil sector, particularly, for example, when it comes to sustaining relevant skills and fostering innovation. The rigid policy separation between defence and civil markets owes much to departmental boundaries, but also to a disappointing sense that promoting defence is not quite as acceptable as promoting civil aerospace. No such concerns cloud the minds of US policy makers and Boeing is again the beneficiary. It is time we grew up and joined up the parts of aerospace more convincingly.

That leads me to my final comments on the importance of sustaining the engineering skills of the aerospace sector. This was one of the most compelling sections of the 2010 BIS report and, more than four years on, there is not a word I would alter. “Lifting Off” gives a graphic account of the skills shortages and the demographic problems facing the sector. However, what I find profoundly disappointing is the apparent lack of acknowledgment that these are the problems of the wider engineering sector, too. Yes, the strategy outlines actions of Government and industry to address the issue—I welcome unreservedly the 500 masters-level postgraduate places announced in the scheme and the development of high quality, employer-led apprenticeships—but as EngineeringUK says, the UK, at all levels of education, does not have either the current capacity or the rate of growth needed to meet the forecast demand for skilled engineers by 2020.

The Royal Academy of Engineering and EngineeringUK estimate that by 2020 in the UK there will be demand for between 1.28 million and 1.86 million engineers and technicians. Approximately 640,000 graduate engineers will be required by 2020 across all sectors of the economy. Seven out of 10 jobs will be to replace the ageing work force. UK higher education institutions currently produce only 21,000 engineering graduates and UK industry creates only 66,000 engineering apprenticeships each year.

Against that background, it is profoundly worrying that each of the published industrial strategies, including the AGP, seem to regard skills in their sectors in isolation. The progress report on the AGP this year speaks of

“improving the image of the”

aerospace

“sector to make it a more attractive career choice”.

Companies have briefed me proudly on their own contribution to solving the aerospace skills shortage, but the Government and the Royal Academy urgently need to work for consolidation and co-ordination of the plethora of schemes, to build a coherent, comprehensive cross-engineering approach.

[Gordon Birtwistle]

Does my hon. Friend agree that the first step in encouraging young people to go into apprenticeships and engineering is careers advice at school, which is sadly lacking? At the moment, careers advice is normally given by a teacher who has only ever been a teacher and all they want is for young people to go on to university and further education. Engineering desperately needs young people to go into the craft skills, so it can carry on building the products of the future that this country is famous for.

[Sir Peter Luff]

I could not agree more profoundly or absolutely. My hon. Friend is right. One of the great disappointments of recent years is the decline in the quality of careers guidance in schools. The engineering profession is seeking to address that through a number of initiatives, but the industry should not be required to do that. The Government should understand the importance of this crucial part of the education process.

What worries me is that the Government contribute to the plethora of schemes, sponsoring small and particular solutions to problems that are probably designed to give Ministers announcements to make and sound bites to hide behind in debates such as these. It is time to concentrate on the big schemes that the Government fund, such as the excellent STEM—science, technology, engineering and mathematics—ambassador scheme.

I commend the major companies such as Rolls Royce and Airbus, which demonstrate a commitment to work with existing nationwide schemes—for example, encouraging their staff to become STEM ambassadors. Will the Minister take this opportunity to give his support to STEM ambassadors? In the detail of the AGP’s skills work there is much to applaud, but the micro solutions will work only if the macro issue is addressed: how to make all forms of engineering attractive to young people.

I still regard the looming engineering skills shortage as the single biggest avoidable threat to Britain’s prosperity and security. One way to help address it is to ensure that all industrial strategies, including this one, join up in a big picture approach so that each of them does not just go its own sweet way. It was good news that this summer saw the largest STEM outreach of the aerospace sector during “Futures Day”, on the Friday of the Farnborough International Airshow. More than 7,500 11 to 21-year-olds visited the air show for a hands-on programme of activity designed to enthuse them about the many opportunities in the aerospace sector. A poll by ADS of 150 aerospace MSc students found that one in five were inspired to pursue an aerospace career because of a visit to an air show, so “Futures Day” offered a unique opportunity to inspire the next generation. However, we must always recall that the future of aerospace in the UK is, in Airbus’s words,

“ultimately dependent on the availability of high-calibre scientists, mathematicians and engineers willing to enter the aerospace industry.”

Finally, is the momentum being generated capable of being sustained? Our competitors are snapping at our heels and staying ahead in this particular global race will require every ounce of exertion by both Government and industry. The future is bright, but only if we work to make it so.

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[Mr Iain Wright (Hartlepool) (Lab)]

May I begin, Mr Hollobone, by saying what a pleasure it is to serve under your chairmanship again? I also want to thank the hon. Member for Mid Worcestershire (Sir Peter Luff) for securing the debate and for advancing his argument in such a characteristically persuasive and courteous, although on this occasion very quiet, manner. I hope that his voice returns soon. I have said it before, but it bears repeating: I am sorry to see him leave the House, especially given the work he has been doing on raising the status of engineering in this country. He leaves a good body of work and I am sure that it will continue outside the House. He will be missed, certainly by the Opposition, for the work that he has done.

As this is the first time I have debated with the new Minister, I want to welcome him to his post. Since he obtained his red box, he has aged about 35 years, so the Government must be working him far too hard. I am pleased that he has been given specific responsibility for the life sciences sector, and I hope that we can soon debate the future of that vital industrial sector, too.

We have had a good debate about the future of the UK aerospace industry, which, as has been said many times, is a remarkable success story. Indeed, it is the very model of what a successful modern industrial sector in the UK in the 21st century should look like: high value added, with a focus on design, manufacturing, production, maintenance, innovation and excellence, as well as a relentless drive in the global export market, providing highly skilled and well-paid jobs and enjoying a long-term, collaborative approach between industry, Government, employees and research institutions.

Over the summer, I was privileged to visit the design team and view the manufacture of the A400M at Airbus in Filton. I have been to Marshall of Cambridge, which is one of only 15 companies out of a total global supply chain of 23,000 suppliers to be presented with a supplier of the year award in 2014 from Boeing. I also visited Rolls-Royce in Derby and the manufacturing technology centre in Anstey to see how innovation and collaboration between industry, research institutions and Government is ensuring that British industry retains its competitive edge.

The aerospace industry is vital to the UK economy, and, as the hon. Member for Strangford (Jim Shannon) said, this country should rightly be proud of it. It is worth noting that the UK aerospace industry grew on average by over 7% each year since 2008. Bearing in mind where we were in 2008, with the global financial recession and the drying up of credit across the world, that is a remarkable achievement. One reason for that, apart from the technical brilliance, drive and entrepreneurialism within the industry, is long-term collaboration between Government and industry. The aerospace industrial strategy, set up by the previous Labour Government and, thankfully, continued under the current Administration, has provided the industry with long-term certainty to plan and invest in Britain with confidence. Labour remains determined to ensure that the UK maintains its position as Europe’s No. 1 aerospace manufacturer, and that Britain remains second only to the US on the global stage.

We are well placed to capture a sizeable part of future growth in the industry. As has been said today, it has been estimated that, by 2032, more than 29,000 new civil airliners will be required, with a value of almost $4 trillion. As the hon. Member for Mid Worcestershire said, according to the data released by the trade association ADS last week, the largest ever month-on-month increase in the industry’s order book will bring it to about 12,000 aircraft and 21,000 engines in total, worth between £135 billion and £155 billion to the UK economy in the next nine years.

Labour Members welcome that and we will actively look to capture greater market share in a growing industry, although, as has been acknowledged today, that will be difficult, given the rapid pace of innovation and technological progress, the intensifying competition and the determination of other nations to secure a firm foothold in a high-value, lucrative and prestigious sector. In direct response to what the hon. Gentleman was asking me, that is why the next Labour Government will prioritise the aerospace industrial strategy as a vital sector. We will maintain the Aerospace Growth Partnership and the Aerospace Technology Institute, and we will emphasise the importance of long-term policy stability to allow the industry to soar ever higher.

A number of issues need to be addressed—many have been aired today—in order to ensure that the ambition for the industry is realised. I was particularly pleased to hear what my hon. Friend the Member for Alyn and Deeside (Mark Tami) said about the importance of the supply chain, because he is absolutely right. It is key that the supply chain is aligned with what the primes require to maintain competitiveness and technological innovation. No one wants to see work leak away from our shores, costing jobs and industrial capability, because of an un-coordinated, uncompetitive or unresponsive supply chain.

The hon. Member for Mid Worcestershire, in his opening remarks, mentioned the report in yesterday’s Financial Times. It is worth the Minister having a look at the report, which questioned the industry’s supply chain capacity to deliver the backlog of orders, especially when combined with the simultaneous emergence of new product development lines. Geoff Ford, who runs Ford Aerospace in my region of the north-east—I have been to see his factory—stated in that Financial Times report that the backlog of orders should give the suppliers the confidence to expand and to increase capacity. He said:

“If we don’t do that we’ll lose out to other countries.”

He is absolutely right.

What is the Minister doing to ensure that British-based companies in the aerospace supply chain are geared up to take advantage of the industry’s great order book? Not only is capacity important, but so is ensuring that technological advances and product development cascade through the primes and into the supply chain. The role of a proper, co-ordinated industrial strategy is crucial. If industry states that composites will be used more in future at the expense of metals, how are the supply chain companies being assisted to make the investments needed, not only to grow capacity, but to stay relevant to the primes’ modern production requirements? What are the Government doing to assist?

Access to finance has not been mentioned as much as I thought it would in the debate, but it is equally crucial, especially in the aerospace supply chain. The nature of the industry means that up-front capital expenditure is often required with long pay-back times. Supply chain work might move from Britain if British companies do not have access to the finance necessary to invest and compete. Will the Minister update the House about progress on the supply chain finance forum set up by the AGP? What tangible improvements have been seen? How many companies have received access to finance for up-front investment costs? Similarly, will the Minister let us know how many companies have benefited from and actually received the cash from the National Aerospace Technology Exploitation Programme since its launch?

In connection with the importance of the aerospace industry, I think about the three S’s: supply chain, skills and certainty. I have already mentioned certainty and the supply chain, but I must make a point about skills as well. Skills are the means by which the industry will maintain its competitive edge. The work force is ageing and, traditionally, the sector has not provided as many apprenticeships as other comparable sectors have done, although that is now changing. There is a need to increase the industry’s capabilities in certain skills and trades. Many companies carry vacancies that cannot be filled because of a lack of suitable skills. Unless that problem is addressed urgently, activity will move away from the UK, because of a lack of suitable skills.

Is the AGP going as far as it can to identify the specific crafts and skills necessary to enable the UK to maintain its comparative advantage? For example, the AGP has introduced standards for an aerospace manufacturing fitter role, and something similar for electrical fitters and machinists is being developed. What other trades are being considered? That is important and would show the benefits of a proper, co-ordinated industrial strategy.

[Gordon Birtwistle]

I agree with the shadow Minister. The craft parts of the industry are critical. Plenty of young people wish to be involved in design and the high-tech part, but the craft side is critical. Does he agree with me and with the big companies such as Rolls-Royce, BAE Systems and Airbus, which are now training more than the necessary number of apprentices? For the benefit of its supply chain, Rolls-Royce took on double the number of apprentices that it needs. Does he agree that some of the bigger companies should be getting on board and doing that for the smaller companies in the supply chain?

[Mr Wright]

The hon. Gentleman is right, and that model works well for the aerospace industry. I certainly want to see that encouraged, because an oversupply of apprentices then cascaded down through the supply chain reassures the primes about quality. It can be a means by which the whole competitiveness of the sector can be maintained and something that we should certainly encourage.