Aerospace Industry

Michael Fallon Excerpts

Wednesday 12th September 2012 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

It is a pleasure to serve under your chairmanship, Mr Turner. I thank the hon. Member for Wrexham (Ian Lucas) both for giving me such an early opportunity to answer this debate as Minister for the aerospace industries and for the tone he set in launching this debate. I may have other debates with the hon. Member for Hartlepool (Mr Wright) where words such as “dogma” and “ideology” are more appropriate, but I do not think this has been one of them. It has been an excellent, timely debate that allows me to report on yesterday’s meetings in Berlin of the European Ministers in this area, which focused on Airbus, one of the world’s largest aerospace companies and a key part of our aerospace sector. I met Thomas Enders and Tom Williams and heard directly from Airbus about its position in the marketplace and its reports on progress with each of its planes.

The aerospace sector, as the right hon. Member for Coventry North East (Mr Ainsworth) and other hon. Members reminded us, is not just about the large global companies. The UK has many thriving mid-sized companies and small and medium-sized ones as well. Hon. Members might be interested to know that, while in Berlin, I spent some time with one of the aerospace regional trade associations, the Midlands Aerospace Alliance and some of the smaller companies exhibiting at the show. They were doing a great job seeking out export opportunities for this country. One of the companies there, for example, was Tritech, based in the constituency of the hon. Member for Wrexham. It is interesting to note that Tritech, which provides castings for a range of customers, was formed in the difficult industrial climate of the early 1980s, but has gone from strength to strength.

In his speech yesterday on industrial strategy, my right hon. Friend the Secretary of State for Business, Innovation and Skills said that aerospace was a sector where the Government are developing a long term strategic partnership. I emphasise that, because there has been much discussion about picking winners, and so on. This is much more about backing winners and helping the industries pick their own winners and seeing what Government can do to support them. As the Secretary of State emphasised yesterday, there is a need for a partnership between Government and the industry on aerospace because, although it demands long-time horizons, the potential prize is measured in trillions of dollars.

It was clear from our meeting and update with Airbus yesterday that the opportunities are immense in terms of future orders to replace the ageing fleets, both in the United States and Africa, and there are also enormous challenges from increasing global competition and the need for step changes in technology to further improve the environmental performance of new aircraft. I hope that it is clear that this Government recognise the value of the aerospace sector and are committed to work with companies, not simply to sustain it, but to grow it.

Several hon. Members mentioned the size of the sector. It contributes more than £24 billion a year to our economy and provides directly more than 100,000 highly skilled and high-paid jobs, and many more than that indirectly. At present we are a world leader in the design and manufacture of large aircraft wings and components, aero-engines and advanced systems, such as landing gear. These are the most complex parts of any aircraft. The UK is well placed to pick up a significant share of the huge growth opportunities that exist in the global market for new aircraft. Airbus estimates that more 27,000 new large passenger aircraft will be required by 2030.

As several hon. Members emphasised, including the hon. Member for Alyn and Deeside (Mark Tami), this is a competitive market. I do not want to tempt the hon. Member for Hartlepool any further, but I am a little surprised that he mocks privatisation: these are all successful companies because they are private companies, competing in a competitive private market. However, I recognise the role of Government in sustaining that market and helping it grow. That is why we created the growth partnership, to work with companies and tackle barriers to growth, boost exports and grow the number of high-value jobs in the UK. I confirm that I will chair the group, together with Marcus Bryson from GKN.

The growth partnership is not about the Government trying to impose a strategy on business, but about better understanding where companies see opportunities, helping them to identify them and removing the bottlenecks to growth. The growth partnership now involves the commitment of more than 80 senior business people, supported by eight full-time secondees provided and funded by the aerospace industry. That is a major investment by the sector and an indication of the importance that it attaches to the initiative.

Hon. Members have been kind about the “Strategic Vision” document that we published in July. I will add more detail to that, showing how we will implement it, towards the end of the year. However, we are already supporting the industry in a number of ways. At Farnborough air show, we announced a further package of Government and industry investment—more than £200 million—which includes £100 million of investment in aerodynamics; joint industry and Government funding for 500 masters-level degree places in aerospace engineering; and further investment in low-emissions engine technology and towards major business-led aerospace research and development projects.

In addition, the aerospace sector is benefiting from the creation of a high-value manufacturing catapult centre, part of a network backed by £200 million of Government funding, helping to better commercialise the outputs of our world-class research base. We continue to support aerospace exports through UK Export Finance, supporting more than £2 billion of aerospace business last year.

Such support should not, as hon. Members have said, simply be about money. A lot of this work is about how to flesh out the partnership and deal with some issues that this sector, like others, confronts—notably, the shortage of skills, which is particularly an issue for small and medium-sized businesses and better UK sourcing of the supply chain—and, of course, what the industry and the Government need to do collaboratively to help bolster our research and development base. I will give the House more details on how we will implement the strategic vision in a few months.

Let me deal with some questions asked by hon. Members. I apologise if I am not able to deal with all of them in the remaining six minutes. I will write to hon. Members about any questions that I have missed.

Access to finance is critical for small and medium-sized companies, which is why we are working hard to reform banking and have more challenger banks able to develop those more traditional business relationships, which the larger banks got away from in the run-up to the financial crisis, and ensure that lending is really getting through to those small companies when and where they need it and on terms they can afford. My Department will be monitoring access and the use that the bigger banks are making of the funding for lending scheme, ensuring that the full benefit of that scheme is being passed on.

On the emissions trading scheme, Airbus yesterday left the Ministers from France, Spain and Germany, and me, in no doubt that the threat of retaliatory action is now extremely serious. I, too, left my fellow Ministers in no doubt of our position. The emissions trading scheme is now law—part of a directive—and that has been passed not only by the European Parliament and Council but by this House. We have environmental obligations that all of us want to honour. Equally, the directive makes it clear that there is provision for review where there is international agreement to deal with such a review, and I have made it clear that the work of finding a solution to the problem, in particular the issue of extraterritoriality, is now urgent. The clock is ticking as the directive has to come into force in April. We need to find a way through—a solution through the International Civil Aviation Organisation or other forums in which there is dialogue between the European Union and China and so on.

The regional growth fund was mentioned by a number of Members, and there have been criticisms of the pace of some of the earlier awards under the scheme. I look forward to responding on that when I appear before the Select Committee shortly.

The hon. Member for Wolverhampton North East (Emma Reynolds) asked me specifically about the aerodynamics centre. The £60 million is obviously not all for the centre. On the location, it will be no surprise to learn that a number of options have been put forward. A panel of experts is meeting this week and will give me advice shortly. We hope to announce the decision soon.

On investment in composites, we will continue to support the national composites centre in Bristol, part of the series of catapult centres, and to encourage the use of the centre by aerospace companies. The right hon. Member for Coventry North East asked me about the manufacturing technology centre at Ansty Park, which is also part of the high-value manufacturing catapult centres. At Farnborough, we announced some £40 million to support a series of projects that Rolls-Royce is leading on advanced manufacturing processes and that is one of the first initiatives to go through the MTC. If the right hon. Gentleman is suggesting that it is still underused and that there is scope for greater capacity, I am happy to have a look and to reply in more detail.

The United Kingdom has an aerospace sector of which we can be justly proud, but I assure hon. Members who have participated in the debate that we cannot afford to be complacent. They will see nothing other than an unstinting and unflagging commitment from the Government to making Britain the best place in the world for aerospace businesses to invest, design, manufacture and export.

I am grateful for the kind words that hon. Members offered me on my appointment and for their interest in this particular sector and their non-political approach, exemplified by the formation of the all-party group, in the work of which I shall certainly take an interest. I might have missed some individual points made in the debate, but I hope to demonstrate the kind of commitment to the industry that others in the Chamber have demonstrated previously and so well in the debate. The sector is vital and I certainly pledge to do what I can to support it.