Anyone looking for a UK success story need look no further than the country’s aerospace industry.
Some 2,600 companies, ranging from giants like Airbus, Rolls-Royce or GKN down to small specialist suppliers, command 17% of the global aerospace market – a clear number-one in Europe, and second globally only to the USA. Together, the businesses employ more than 100,000 people, directly support another 130,000 jobs, contribute £24 billion ($41 billion) to the UK economy yearly and export three-quarters of their output.
Expectations of continued global aerospace growth bode well for UK industry. Estimates by the ADS industry association anticipate global deliveries through to 2032 of 29,000 new large civil airliners, 24,000 business jets, 5,800 regional aircraft and some 40,000 helicopters – valued at over $5 trillion. The UK aerospace industry can expect to bank some $600 billion – around $12 of every $100 over the next 20 years.
The UK government has, not surprisingly, been an enthusiastic advocate – even partner – for this star performer of an industry. At least since the financial crisis of 2008, national policymakers have talked of “rebalancing” a UK economy seen as dominated by the massive banking and financial services industry.
But as the financial crisis amply illustrated – with thousands of job losses in the financial services industry – diversity has merit. It is thus hard to dispute government insistence that the manufacturing economy – long perceived to be in steep decline – should be supported.
Seen through the prism of the modern UK political culture, however, the scale and nature of support for aerospace borders on the revolutionary. Favourable tax schemes, financial incentives for training or targeted regional development assistance all fit the longstanding assumption that market forces prevail, and while they can be channelled they cannot, any more than the tide, be resisted. However, a vastly more comprehensive government-industry scheme – the Aerospace Growth Partnership, discussed from 2010 and firmly established in 2012 – amounts to an industrial policy, something that went distinctly out of fashion in the UK during the Margaret Thatcher-era free-market revolution following the economic trauma of the 1970s.
That AGP initiative has spawned several tangible results – the most dramatic of which is the UK’s new Aerospace Technology Institute. Opening the ATI’s headquarters at Cranfield in Bedfordshire in April of this year, business minister Michael Fallon put it bluntly: “The UK has the number-one aerospace industry in Europe. I want to make sure we keep it that way.
“The government’s industrial strategy will give the industry the long-term certainty it needs to stay competitive and create jobs, and will ensure the UK remains one of the world’s most attractive locations for aerospace manufacturing.”
The ATI is particularly noteworthy for two key reasons. One is a significant amount of money – around £2 billion, split between government and industry. The other is that this perhaps-belated UK answer to NASA, France’s CNES or Germany’s DLR is a very modern concept.
Cranfield is hosting just a skeleton staff. This team will seek to join up existing or proposed university and industry research projects deemed useful to UK companies looking to lead development of technologies that will enable the next-generation of cleaner, quieter aircraft. Some new facilities will be built – a £60 million aerodynamics centre stands out, which will also benefit from £40 million from industry to support its research programmes. However, the ATI is essentially a virtual institute. Gary Elliott, former head of Hybrid Air Vehicles, has been appointed chief executive.
Marcus Bryson, GKN’s head of aerospace and land systems and leader of the ADS’ aerospace segment, sees the work done in the past couple of years to create the ATI as significant.
He describes the institute as government-involved but industry-led, with commercial relevance as a “constant goal”. Much of that government involvement comes through the UK’s respected Technology Strategy Board, which guides the public half of the funding.
Critically, this £2 billion 50:50 funding pact runs for seven years. As Bryson observes, that time scale is important because it establishes the principle of aligning programmes with the business cycle, not the political cycle. Vince Cable, secretary of state for business, innovation and skills, has told Bryson that a change of administration – a possibility in a May 2015 general election – would not end the policy. In any case, Bryson says he “can’t imagine” an incoming government would want to drop such a job-creating policy.
But Bryson believes the value of AGP/ATI goes beyond the UK. The policy, he says, has had a positive effect on international attitudes towards the UK as a place to invest and engage – to the extent that other countries see the AGP/ATI as a model to consider when looking at their own industrial strategies.
So, while much work remains, the outcome so far has been noteworthy. “I got involved [in the ADS] to promote UK PLC,” Bryson says.
If plans and forecasts bear much resemblance to reality, the future looks bright. The government’s strategic vision paper for UK aerospace describes the sector as “one of the jewels in the crown” of the UK’s advanced manufacturing sector.
And, the paper adds: “We are also one of only a handful of nations with the capability to design and manufacture advanced helicopters.”
Government estimates have the UK aerospace industry growing at 6.8% annually over the next few years. Air traffic growth in Asia alone stands to contribute £4.7 billion to UK exports annually for the next decade, adding 20,000 high-value jobs.
The strategy paper also notes that the UK’s four key strong suits – wings, engines, aerostructures and advanced systems – stem from a highly skilled workforce, institutional knowledge and a strong science and research base. Barriers to entry are therefore high, but the paper warns, “the UK’s incumbent position is at risk as the next generation of aircraft will feature substantially different product and manufacturing technologies from those used today”.
Thus, the plan is to ensure the UK is “positioned at the forefront of these new technologies”, by “focusing investment on those areas where the UK has particular strengths, rather than simply trying to match the investment of other nations”.
Optimistically, the paper concludes that “with the right actions by government and industry the UK can realistically build on its position to secure jobs and generate significant UK economic value from major programmes”.
Specific actions supporting that thrust include the aerodynamics centre and a push – again jointly funded by government and industry – to train 500 new aerospace engineers to Masters degree level over three years.
Another important effort recognises that while big companies are almost by definition competitive, small firms in the supply chain are often wanting for the management skills needed to grow with the programmes they supply – and hence risk being supplanted by foreign rivals. Sharing in Growth, launched in November 2013, is a four-year initiative that looks to bring seasoned experts from large firms to smaller suppliers, to provide on-site training and long-term follow-up.
Supported by £50 million in government cash and that much again in in-kind support from the industry, Sharing in Growth is a good example of just how serious the industry-government partnership in UK aerospace really is.
In the bad old days of British industrial policy, government ministers actually talked about “picking winners” – which all too often meant protecting, and propping up, big-name dinosaurs. In its modern incarnation, UK industrial policy looks to be about working from the bottom up to help aspiring winners. That is a change worth supporting.