Aerospace Industry

Peter Luff 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.

[Sir Gerald Howarth (Aldershot) (Con)]

I reinforce the point that my hon. Friend made about the lead time for developing new aircraft today in comparison with even a generation ago. This morning, we had a briefing from the Royal Navy project director on the joint strike fighter programme. That programme has taken 14 years of development to get to where it is today, and we are a long way from getting any aeroplanes into service, which really illustrates my hon. Friend’s point.

[Sir Peter Luff]

That is true in the civil and defence markets—long lead times are a characteristic of new aircraft development. That is why the AGP is intended to span 15 years, and why it is vital that it receives cross-party support, to ensure support continues throughout future Administrations. Therefore, I have a central and, I hope, easy question for the Opposition. Do Her Majesty’s loyal Opposition hold true to the principles to which Labour worked in the last Parliament, and do they still endorse the broad approach being followed by the Government in this Parliament, subject to the kind of detailed questions that we are asking today?

I cannot avoid the sensitive issue of the understandable rivalry between Airbus and Boeing. I bow to no one in my respect and admiration for Airbus UK and its management team. I bitterly regret that the British share in the ownership of this fine business was lost when BAE Systems unwisely divested its shareholding. As a result of that decision, we have to work all the harder to ensure that we keep, and if possible increase, the UK’s share of each Airbus aircraft that is built. Airbus employs around 10,000 people directly in the UK: 6,000 at its site in Broughton, north Wales; and 4,000 at Filton, in Bristol. Broughton manufactures the wings for all Airbus civil aircraft; Filton designs the wings, as well as designing and testing the fuel systems and landing gear. Filton is also the manufacturing site for the wings of the A400M military transport aircraft, which will soon go into RAF service as Atlas. The Airbus supply chain involves another 1,000 UK companies; Airbus is one of the UK’s biggest inward investors in R and D, with 2013 investment at around £480 million; and there is the new North factory in Broughton.

[Mark Tami (Alyn and Deeside) (Lab)]

I join other Members in saying that I am very pleased the hon. Gentleman has managed to secure the debate. I will make a point before he moves off the issue of BAE Systems. He clearly said that he regrets the sale by BAE Systems of its share in Airbus. In hindsight, BAE Systems may have taken a different road, but one of the problems that was harming Airbus in this country was that BAE Systems cried wolf so many times, threatening to sell its share—it said it was not selling the share, then threatened to sell it. Does he accept that that, too, was not a sustainable position?

[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.

[Mr Philip Hollobone (in the Chair)]

Sir Peter’s excellent tour d’horizon of the UK aerospace industry took half an hour, and I want to call the Front Benchers no later than 3.40 pm. There are three Members standing, so if they could confine their remarks to no more than 13 minutes each, they should all get in.

--- Later in debate ---

[Mark Tami]

I totally agree. Going even further back, I remember when an Industry Secretary had the choice whether to keep the Airbus share or go for Concorde. He went for Concorde, which, in hindsight, was probably not the best choice. There will be crucial choices for the UK about Airbus in the coming years; the new A320 is almost certain to be a wholly composite aircraft, with structures different from those we are used to.

There is a big challenge for us out there, but there are also other threats to Airbus. The hon. Member for Mid Worcestershire (Sir Peter Luff) mentioned unfair competition. There is nothing wrong with competition, which is good in many ways, but unfair competition is bad and threatens the future of an important industry. For years, the US dominated both the civil and military aircraft markets and I suppose it thought that no one would ever challenge it. Airbus did, however, and it now accounts for a large share. New players such as China, Canada, Russia and Brazil are all looking for a segment of the market, so we cannot assume that the big players will remain unchallenged.

We need only to look at the 747, which was funded by the American Government as a military transport aircraft. Boeing actually received all the funding and had many of its costs paid and then—surprise, surprise—somebody decided that people could also be put on it and that it could be used as a civil airliner. Airbus and Boeing have both been to the World Trade Organisation. Such processes are always long and drawn out, but the WTO found in 2012 that many of the US subsidies were not allowable under WTO rules. Back in 2011, the WTO found that repayable launch investment was, but there was some issue with the interest rates.

The EU has sought to address some issues, but, as the hon. Gentleman made clear, the Americans have done the exact opposite and decided to give the biggest ever single tax break of $9 billion to Washington state, which will then hand it on to Boeing to pay for the development costs of the 777X, which is exactly what was done with the 747. That is happening at a time when America is looking to Europe for an agreement about more competition and more open markets.

To be honest, the problem is that the US wants to compete freely in our markets, but it does not think that we should be able to compete in theirs. We have seen that before, such as when BAE Systems tried to break into the American defence market. Probably the worst example was the air tanker competition in the US, which was won convincingly by Airbus, but Boeing then went crying to the US Government, who then stopped the competition and changed the rules so that Boeing could be the only winner. Surprise, surprise, the contract went to Boeing.

I certainly do not want us to return to a system of closed markets because that would not be good for Airbus or our industry, but we need a level playing field. We cannot have a system in which we are expected to play by the rules when others are not; many jobs will be lost, plants will close and we will return to Boeing, or whatever company, ruling the roost once more. We want open markets for our companies to compete in and can expect that America does as well, but the situation cannot be unfair. I hope that our Government will be far more forthright with Europe and will work with it to ensure that we stand up and make our case, because it is vital to the future of the industry.

I want to refer to another threat—the hon. Member for Mid Worcestershire may disagree with me on this: our future in Europe. I am particularly worried because Airbus is an example of the perfect way in which Europe can work together. Were we outside the EU, I have serious doubts that we would have the same level of investment. I am not saying that the plants at Filton or Broughton would close tomorrow or that we would lose existing orders, but we would jeopardise future investment as the Germans, the French and the Spanish would make a strong case for investment to be made within the European Union and not in an outside country. Those who are calling for our exit need to consider the implications for jobs.

[Sir Peter Luff]

I am grateful to the hon. Gentleman for his fine speech. Just for the record, I strongly agree with his point about membership of the European Union and the particular impact on the aerospace sector.

[Mark Tami]

I thank the hon. Gentleman for that. Such a move would affect not only Airbus, but also the many thousands in the supply chain.