George Freeman responds to debate on the future of the UK aerospace industry

George Freeman responds to a back bench MP’s debate on the future of the UK aerospace industry.

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (George Freeman): It is an absolute pleasure to start my Front-Bench work in Westminster Hall under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Mid Worcestershire (Sir Peter Luff) on securing this debate. I also want to take this opportunity to pay tribute to his work on this sector and on industrial strategy more generally, in what has been a very distinguished career in this House and in Government. From our work over the past few years, he knows that I share his passion for making sure that we use every pound of Government money to support a wider, more balanced long-term economic growth agenda for this country. This debate has played an important part in highlighting those issues.

My hon. Friend has raised a number of excellent points about the civil aerospace sector in the UK: the role of innovation in driving long-term growth; whether the current strategy is sufficient to rise to the international competitive challenge; how we can improve linkages between the defence sector and the space sector; whether both we and the supply chain sufficiently understand the views of the major US players; the case for improving export support; the need to support companies in the supply chain, both small and large; whether the approach to skills is adequate; and the importance of maintaining the momentum of the AGP.

We have also heard important contributions from my hon. Friends the Members for Aldershot (Sir Gerald Howarth), for Burnley (Gordon Birtwistle) and for Tewkesbury (Mr Robertson), from the hon. Members for East Antrim (Sammy Wilson), for Strangford (Jim Shannon) and for Alyn and Deeside (Mark Tami) and from the shadow Minister. There is a strong consensus in the room on the importance of the sector and its need for cross-party support. I will strive to respond to all the points raised as best I can in the time available. If I fail to do so, I will write to Members to deal with points in detail.

The Government know well that the aerospace industry is vital for the UK economy. It is one of our key industrial sectors and, like the life sciences sector, a key driver of long-term growth. I was struck by the recent figures from ADS showing that since 2011 the sector has grown by 14%. That is a real success story for the UK and something we should be rightly proud of. There is a huge opportunity for the UK to benefit from the forecast growth in aerospace, with forecast demand for 29,000 new passenger aircraft, valued at over $4 trillion, between now and 2032.

The sector has achieved so much, through a combination of good management, a skilled, innovative work force, supportive trade unions and long-term Government policy. The recent aerospace sector strategy provides long-term stability for the UK. It is particularly important for sectors such as aerospace and the life sciences that we lay out a programme for long-term support to secure investment.

The Aerospace Growth Partnership, set up in 2010, was designed to transform the way in which Government and industry work together. The AGP led on developing the industrial strategy published in 2013 and is now taking forward its implementation. It is not something that we can take for granted. In early meetings with the aerospace industry’s business leaders, it was striking that our national success is dependent on investment in research and technology. The UK’s No. l position in Europe was built on heavy investment in the ’70s and ’80s. However, over the years, public funding reduced significantly, resulting in some of our research capability going overseas, followed, inevitably, by some manufacturing jobs. That had to be addressed. It was through those honest, frank conversations that the seeds were planted for what became the aerospace industrial strategy.

It quickly became apparent that there was a need for Government to operate strategically over the long term. For critically important sectors such as aerospace, that is essential. For example, all hon. Members here will know that the Airbus A320 family was launched in 1984 and first flown in 1987, and is still selling strongly in 2014, with over 6,000 delivered so far and an order backlog of 1,200. Like the other sectors for which the Government have set out industrial strategies, the aerospace sector has long-term product development time scales that last well beyond a single Parliament and require a stable environment where industry and Government pull in the same direction. In that context, I warmly welcome the shadow Minister’s comments.

At the heart of the industrial strategy was a commitment to set up the Aerospace Technology Institute and for industry and Government to invest £2 billion over the next seven years in new technology and manufacturing—the largest and longest commitment on aerospace in a generation, creating funding certainty through to the end of the next Parliament, to give industry the certainty it needs to invest in the UK. It is a new way of working that avoids the piecemeal, ad hoc, hand-to-mouth approach of the past. It matches industry time scales that allow new technology to be developed and harnessed into game-changing products.

I am pleased to say that industry and Government have made good progress in setting up the Aerospace Technology Institute. Key posts have been filled, the office has been established in Cranfield and the institute has been fully operational since the beginning of April. A key part of the ATI’s work in the months ahead will be to develop a technology strategy for the UK that will take into account the international competitive challenge of which my hon. Friend the Member for Mid Worcestershire spoke.

We have wasted no time in putting that work to good use. To strengthen critical parts of infrastructure, we have already committed £60 million to the manufacturing technology centre in Ansty and £15 million to upgrade wind tunnels in research organisations. In total, we have announced well over £300 million of collaborative research projects, involving companies of all sizes working alongside academic and research institutions. Over 100 UK companies and 26 universities are now involved across the UK.

Knowing that long-term research funding is available gives business the confidence to invest. I was delighted at the announcement at Farnborough air show that Airbus will develop a new version of the A330, which will exclusively feature the new Rolls-Royce Trent 7000 engine. With over 120 orders already, the new aircraft will support jobs in Airbus, Rolls-Royce and the wider supply chain.

I turn now to skills, another issue raised by my hon. Friend. A big success story has been the jointly funded initiative to create an additional 500 masters-level postgraduate places. Last year, as planned, 100 bursaries were awarded; this year we have awarded a further 200 bursaries and the remainder will be awarded next year. I am delighted to report that industry has just opened up a portal on the Talent Retention Solution website so that bursary holders can link up with companies of all sizes.

I can also report that industry has submitted a bid through the AGP to the Government’s employer ownership programme to tackle its priority skills needs. It includes actions to boost apprenticeship numbers, and improve early career opportunities and the flow of high-level skills into the sector. That bid, for over £10 million of public funding, will leverage in additional investment by industry. I will take the opportunity to set out my support—as my hon. Friend invited me to—for the flagship apprenticeships and the STEM programme, which he talked of earlier.

Mr Laurence Robertson: Will the Minister be so kind as to look into any possible effect that the changes in funding of apprenticeship schemes might have on the industry—not necessarily now?

George Freeman: That is an important point. I will be delighted to look into it and come back to my hon. Friend.

We have also opened a dialogue with industry about the potential to create a national college for aerospace to help the sector tackle its long-term skills needs. My hon. Friend the Member for Mid Worcestershire also mentioned the importance of promoting women in science, technology, engineering and mathematics. I pay tribute to him for his campaigning work on increasing the flow of STEM skills into the economy and increasing the number of women working in STEM jobs. As in the life sciences, that is a key strategic priority for the future of our country. I want particularly to take the opportunity to support the STEM ambassador scheme.

To boost the pool of potential engineers, the Government are making a series of interventions across the spectrum, within vocational and higher education and with employers. In response to Professor Perkins’s review, we are putting in £30 million for employers to address engineering skills shortages in sectors, £18 million of investment in a new elite training facility at the Manufacturing Technology Centre in Coventry and £250,000 of seed funding to encourage children in schools to consider engineering careers through the Tomorrow’s Engineers initiative. In addition, last year my right hon. Friend the Member for Havant (Mr Willetts) announced a £400 million boost for English universities to promote science and engineering —a £200 million fund from Government that will be matched by universities on a one-to-one basis.

The Government cannot tackle this agenda alone: engineering employers, the profession and educators need to work together with Government to increase the supply of engineers in the UK. Companies such as QinetiQ, based in the constituency of my hon. Friend the Member for Mid Worcestershire, are taking a leading role through initiatives such as the 5% Club.

The AGP is also working to increase the competitiveness of our supply chain. The ambitious Sharing in Growth programme is part of that work and a great example of how the sector is raising the capability of our aerospace suppliers, mainly at mid-cap and smaller business level. Sharing in Growth is an ambitious £120 million performance improvement programme tailored to the specific needs of the participating companies. The programme is backed with £50 million from the regional growth fund and aims to secure or create up to 3,000 UK jobs. The Aerospace Growth Partnership has also created the National Aerospace Technology Exploitation Programme, a £40 million programme backed by £23 million from the advanced manufacturing supply chain initiative, to help smaller companies innovate and expand.

I will also pick up on my hon. Friend’s comments on Boeing. Although Boeing was not a formal part of the Aerospace Growth Partnership, given that it has no civil manufacturing presence in the UK, we have made it clear that initiatives coming out of the AGP, such as R and D funding, are open to Boeing when working with UK suppliers.

As time is running short, I shall conclude by touching on the issue of the Washington state tax breaks. I am pleased my hon. Friend has taken this opportunity to set out a balanced description of the WTO disputes. We continue to work with EU counterparts and I will be happy to write to him in detail on that ongoing work.

My hon. Friend also touched on the importance of links between the civil and defence aerospace sectors. Again, I will write to him in detail, but I emphasise that the Government are looking at that crucial area.

I conclude by highlighting once more the work the AGP has done and congratulating it on what it has achieved so far. It is already beginning to make a difference, which was summed up in a recent interview in The Sunday Telegraph with Fabrice Brégier, CEO of Airbus, who said—I will not use a French accent:

“I must say the UK has an approach which is to support industry, to support the economy and to be very pragmatic…We would like at times for other parts of Europe to have the same pragmatism and support.”

The signs are that there is increasing confidence in investing in the UK, and we are seeing fantastic new aerospace facilities. In less than four months, we will all be in election mode, but the best test of all this work will be if we can maintain sufficient unity of purpose. Today’s debate has suggested that that unity does indeed exist, which is important and to the benefit of us all.

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