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The uk aerospace Industry Fifteenth Report of Session 2004–05 - bet 6

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37

 

 

be funded?”.

 214

 And later: “the onus is on us to coordinate the various public sector bodies 

that are potentially able to fund this”.

215 


 

99.


 We were interested to find out how the progress towards the implementation of NATS 

and the work of the NASG was being reported. The DTI told us that the formal reporting 

process was through the executive of the AeIGT and through themselves: “we track it 

ourselves because we are trying to act as the co-ordinators. There will be milestones. Given 

that this is tending to revolve around the DTI technology strategy calls and those are made 

every six months, one significant milestone is how successful are the projects that are put 

into that call, because it is a competitive bidding process, in terms of securing funding. 

That will be pretty clear and pretty public. Whether, for instance, the Aerospace 

Technology Group that produced the implementation report will want to have an annual 

report on how it is going I do not know. That is something that maybe they would want to 

do. I do not think we have discussed that with them particularly”.

216


 

100.


 

We are content that the DTI holds a ‘watching brief’ over the implementation of 

the National Aerospace Technology Strategy (NATS) by the Aerospace Technology 

Steering Group (ATSG) and the co-ordination of funding for the NATS by the National 

Aerospace Strategy Group (NASG). However, we believe that there is a wider public 

interest which needs to be addressed. We therefore recommend that a report be made 

to Parliament annually by the Government on the progress that has been made towards 

the NATS. This should, as a minimum, include a report on the work of the ATSG and 

the progress that has been made by the NASG.

 

101.

 

Aerospace is a technology-intensive industry and the benefits from public sector 

investment in aerospace R&D are not confined solely to the industry itself. This is 

witnessed by the number of ‘technology spill-overs’ into the wider economy, which has 

allowed other sectors, such as the UK motor racing industry, to be world beaters. We 

recommend that the work of the National Aerospace Strategy Group should be 

prioritised and the public funding requirements of the NATS be granted so that the 

vision of the Aerospace Innovation and Growth Team, that the UK will continue to be 

recognised as one of the world’s most innovative and productive locations, can be 

realised. 

  

 

Process Excellence 

102.


 Despite improvements over the past ten years, the UKAI continues to lag behind 

other countries in terms of aerospace industry productivity. For example, in 2001, UKAI 

productivity was 75 percent that of the US aerospace industry (table 4).

217


 In response to 

the UKAI’s continuing productivity ranking, the AeIGT Report called for the wider use 

and take up of Process Excellence techniques within the UKAI supply chain.

218


 Although 

 

214

 Q 226 

215


 Ibid. 

216


 Q 229 

217


 See page 10 above 

218


 The AeIGT define Process Excellence as: “the continuous pursuit of perfection in all business processes. It eliminates 

business process failure and removes non-value adding activities”. Source: AeIGT website. 



38

     

 

the report acknowledged that Process Excellence techniques were already used within the 

UKAI supply chain, the AeIGT advocated that there was a need for their wider adoption to 

improve the UKAI’s productivity ranking: “by 2022, UK Aerospace must exhibit world-

class Process Excellence across complete businesses and extended enterprises, and 

throughout entire supply chains”.

219

 The AeIGT Process Excellence Working Group 

(PEWG) has been leading on the implementation of the Process Excellence objective. 

However, this working group has now been amalgamated with the SBAC’s Enterprise 

Excellence Board (EEB). The new EEB, chaired by Dr John Ferrie (Managing Director of 

Smiths Aerospace), held its first meeting in November 2004.

220

   103.

 Prior to its amalgamation with the EEB, the PEWG launched a number of Product 

Excellence pilot programmes to: “provide a catalyst for productivity improvement across 

entire supply chains, and the promotion of initiatives such as the UK Lean Aerospace 

Initiative and Supply Chain Relationships In Action (SCRIA)”.

221

 In the autumn of 2003, 

three pilots were launched to demonstrate Process Excellence: 

  

Pilot 1: 

The A318/319/320 Fuel Quantity Indication System. Led by Smiths Aerospace;

   

  

Pilot 2: 

The Meteor Missile Fin Actuation System Supply Chain. Led by Claverham 

Limited; and

 

  

Pilot 3: 

The Tornado Tactical Data Link Supply Chain, Tactical Information Exchange 

Capability (TIEC). Led by BAE Systems.

222


 

104.


 The pilots adopted an untraditional approach in that they were not led in a ‘top-down’ 

method by a ‘prime’ aerospace manufacturer, as had traditionally been the case, but by the 

next layer down (a ‘tier 1’ aerospace company). Each pilot considered a specific supply 

chain, its constituent components and how those companies in the supply chain could 

work collaboratively to improve their business performance. This focus on the supply 

chain enabled proven improvements to be disseminated within other supply chains across 

the participant companies.

223


  

105.


 The pilot programmes are now complete and ‘step change’ improvements against 

quality, cost and delivery targets have been achieved.

224

 For example, a 15 percent price 

reduction in Pilot 1 was achieved, as was a two-year lead time reduction in Pilot 3. The EEB 

is expected to launch further pilots in the near future. The results from all these pilots will 

create the basis for a Directory of Learning, which will act as an evolving industry resource, 

as new experience is gained.

225

 The prototype Directory of Learning is expected to be 

available by May 2005, at which point the EEB will consult with stakeholders within the 

UKAI, for feedback and validation.

226

    

219

 DTI/AeGIT, An Independent Report on the Future of the UK Aerospace Industry, June 2003, page 73 

220

 EEB Pilots Paving Way for Process Excellence, AeIGT News, February 2005 

221

 Ibid. 

222

 AeIGT website (14 March 2005): www.aeigt.co.uk/workinggroup2.shtml 

223

 EEB Pilots Paving Way for Process Excellence, AeIGT News, February 2005 

224

 Ibid. 

225

 Appendix 9 

226

 EEB Pilots Paving Way for Process Excellence, AeIGT News, February 2005 



    

39

 

 

Skills and People Management 

106.

 The AeIGT Report concluded that it was necessary for the UKAI to develop a world-

class workforce to ‘drive through’ R&D from innovation to production and: “must take 

action to quantify its skills requirements and to ensure that they are met by continuous 

training and development of its world class workforce”.

227


 The Science, Engineering and 

Manufacturing Training Agency (SEMTA) is currently working with the AeIGT and 

academia to produce an Aerospace Sector Skills Agreement.

228


 The DTI told us there was 

already a clear view of the current and future skills need, which would be covered by such 

an agreement. These were:

 

 

  Software systems, modelling and simulation; 

  Systems design and modelling, advanced manufacturing design and simulation, 

advanced electrical systems design; 

  Advanced materials engineering; 

  Diagnostic and prognostic techniques; and 

  Skills to support emerging technologies, particularly in relation to environmental 

impact.

229


 

107.


 The DTI also told us that the UKAI was working on a “gap analysis and costed action 

plan”, which would be fed into the work of the Department of Education and Skills. The 

Government was also funding a study by Templeton College, Oxford, into the practices 

and constituents of a High Performance Work Organisation (HPWO),

230

 a plan being 

delivered by the SBAC in conjunction with Amicus.

231


 In order to spread and capture best 

practice from HPWOs, the SBAC’s People Management Board (PMB) and EEB are 

collaborating to increase the awareness and engagement of the UKAI through a 

consolidated regional roll-out programme.

232

 The DTI told us that the final results of the 

HPWO study are expected to be available towards the end of 2005.

 233


 

Safety, Security and Environment 

108.


 The AeIGT Report concluded that the UKAI must be at the forefront of ensuring 

safety and security in aerospace and aviation, as well as setting and meeting environmental 

standards.

234


 The SBAC told us that the activities of the Safety, Security & the Environment 

Working Group (SSE) were moving forward with the National Aerospace Technology 

Strategy (NATS), of which sustainability was a central theme. Further, the programme of 

 

227

 AeIGT, Skills and People Management: Implementation Plan, 15 December 2003 

228


 Appendix 14, para 5.3.1 

229


 Appendix 9 

230


 Ibid. 

231


 Appendix 14, para 5.3.1 

232


 Group Synergies Progressing Well, AeIGT News, February 2005 

233


 Appendix 9 

234


 AeIGT, Safety, Security and the Environment: Implementation Plan, 15 December 2003 

40

     

 

the SSE was aligned to meeting EU aerospace industry environmental emissions targets: 

“hence the need to look at reduced emission combustion technologies in aircraft design”.

235


 

Research under the SSE programme will initially be focused on the need to have a better 

understanding of the impact of aircraft emissions (contrails) on the upper-atmosphere, and 

the role which future air traffic management might play in diminishing that impact. The 

AeIGT is currently talking to the Natural Environment Research Council (NERC) and 

EPSRC about a jointly-funded research project into the impact of aircraft on the 

environment and others were already discussing plans for a new national institute for 

aviation and the environment.

236

  109.

 The SBAC told us that an UKAI-wide sustainability strategy, the Commercial 

Aviation Sustainability Strategy (CASS), would be published sometime during 2005.

237

 The 


Strategy will be “a blueprint for achieving sustainable aviation, which requires consolidated 

support from the major UK industrial stakeholders including airports, airlines and Air 

Traffic Management operators. Currently these stakeholders are making progress towards 

achieving a consensus of agreement and in signing-up to the commitments set out in the 

CASS”.

238


  

Socio-Economic Environment 

110.


 The AeIGT Report recommended that the UKAI should develop an aerospace market 

observatory to create: “a single analysis and intelligence system for the benefit of industry, 

government and universities, and a [online] portal to inform companies of all the sources 

and forms of support and advice that were available to them”.

239

 The Market Observatory 

and Aerospace Portal concept ‘demonstrators’ were launched at Farnborough 

International 2004.

240

 The Aerospace Portal is intended to inform UKAI companies of the 

sources and forms of support and advice which are available to them. The Market 

Observatory, by contrast, looks at the sources of fact-based information and analysis. The 

SBAC told us that, eventually, the Observatory “will generate its own research for 

stakeholders in the industry”.

241

  111.

 The AeIGT’s Aerospace Finance Working Group (continued from the original AeIGT 

team) is currently drawing together a report to summarise the investigations it has carried 

out into the productivity of the UKAI, the economic benefits of externalities (the economic 

benefits to the wider economy from spill-overs from the aerospace industry), and the role 

of capital markets with respect to the provision of development capital for UKAI.

242


 

112.


 

The work of the Aerospace Innovation and Growth Team (AeIGT) is a prime 

example of what can be achieved for an industry through the willing collaboration of all 

 

235

 Appendix 14, para 5.4.1 

236


 Ibid. 

237


 Ibid. 

238


 The CASS Concept, AeIGT News, February 2005 

239


 Appendix 9 

240


 Appendix 14, para 5.5.1 

241


 Ibid. 

242


 Appendix 9 

    

41

 

 

of its stakeholders. The UKAI is one of the most important sectors of the UK economy 

and we believe that, through its support for the AeIGT, this has been recognised by the 

Government.

 

113.

 

With a target date of 2022 for the implementation of the recommendations of the 

AeIGT’s Report on the future of the UKAI, we believe it will be some time before a 

meaningful assessment of progress towards the vision of the AeIGT can be made with 

any degree of confidence. However, the progress which has been reported to us suggests 

that a ‘good start’ has already been made. We have no doubt that our successors will 

wish to investigate the competitiveness of the UKAI before 2022. The progress made 

towards the AeIGT’s vision, that by 2022 “the UK will offer a global Aerospace Industry 

the world’s most innovative and productive location, leading to sustainable growth for 

all its stakeholders”, would doubtless be one of the main areas that they would wish to 

look at.

 


42

     

 

Conclusions and recommendations 

1.

 

The UK aerospace industry (UKAI) requires Government help to reduce barriers to 

trade in terms of technology transfer, especially in the US. We recommend that the 

UK Government should continue to press the US Administration to support 

increased access to US technology for UKAI companies through an International 

Traffic in Arms Regulations (ITAR) waiver for UKAI companies. (Paragraph 48) 

2.

 

We conclude that the challenge from the emergent competitors, be they lower-cost 

economies or other developing economies, is growing. Subcontracting abroad is 

increasing as a result of lower cost or more favourable incentives, such as public 

R&D investment.  As far as we can see, there has been no official study into the 

‘threat’ from emerging competitors to the UKAI. Research which has been carried 

out has tended to focus only on UKAI’s developed competitors. We recommend that 

the UK Government should undertake a study of these emerging aerospace 

industries as soon as possible to gauge the future challenge to the UKAI. (Paragraph 

53) 


3.

 

We believe that the development of aerospace equipment has become increasingly 

complex, risky and expensive and in some cases these investments may represent a 

proportionally larger financial commitment by the companies concerned than 

investments which are currently supported by repayable launch investment (RLI). 

We recommend that the DTI adopts a more positive attitude towards applications by 

equipment makers for RLI, and that it takes into account the size and resources of 

equipment companies when assessing whether or not projects require RLI to go 

ahead. (Paragraph 73) 

4.

 

We recommend that the Government conducts a study into the subsidies which are 

available to other aerospace industries within the EU. If such a study suggests that 

our European competitors are giving aid to their aerospace industries which could 

infringe state aid rules, this should be reported to the European Commission at the 

earliest opportunity. If other EU Member States appear uncooperative, the UK 

Government should ask the European Commission to carry out its own investigation 

of assistance given to the aerospace industry across the EU. (Paragraph 76) 

5.

 

We conclude that Government support for UKAI R&D has fallen over the last few 

years. The recent re-organisation of DTI funding programmes has opened new 

opportunities for aerospace R&D funding through the Technology Programmes, 

such as the Collaborative Research & Development grants and Knowledge Transfer 

Networks programmes. Aerospace companies are also able to benefit from R&D tax 

credits. There is, as yet, little evidence as to whether these new funding streams will 

compensate the UKAI for the loss of the Civil Aircraft Research and Technology 

Demonstration (CARAD) programme. However, evidence from the distribution of 

latest round of Technology Programme funding, where the aerospace industry 

received a quarter of the £60 million, suggests to us that they might.  (Paragraph 77) 

6.

 

We are content that the DTI holds a ‘watching brief’ over the implementation of the 

National Aerospace Technology Strategy (NATS) by the Aerospace Technology 

    

43

 

 

Steering Group (ATSG) and the co-ordination of funding for the NATS by the 

National Aerospace Strategy Group (NASG). However, we believe that there is a 

wider public interest which needs to be addressed. We therefore recommend that a 

report be made to Parliament annually by the Government on the progress that has 

been made towards the NATS. This should, as a minimum, include a report on the 

work of the ATSG and the progress that has been made by the NASG. (Paragraph 

100) 


7.

 

Aerospace is a technology-intensive industry and the benefits from public sector 

investment in aerospace R&D are not confined solely to the industry itself. This is 

witnessed by the number of ‘technology spill-overs’ into the wider economy, which 

has allowed other sectors, such as the UK motor racing industry, to be world beaters. 

We recommend that the work of the National Aerospace Strategy Group should be 

prioritised and the public funding requirements of the NATS be granted so that the 

vision of the Aerospace Innovation and Growth Team, that the UK will continue to 

be recognised as one of the world’s most innovative and productive locations, can be 

realised. (Paragraph 101) 

8.

 

The work of the Aerospace Innovation and Growth Team (AeIGT) is a prime 

example of what can be achieved for an industry through the willing collaboration of 

all of its stakeholders. The UKAI is one of the most important sectors of the UK 

economy and we believe that, through their support for the AeIGT, this has been 

recognised by the Government. (Paragraph 112) 

9.

 

With a target date of 2022 for the implementation of the recommendations of the 

AeIGT’s Report on the future of the UKAI, we believe it will be some time before a 

meaningful assessment of progress towards the vision of the AeIGT can be made 

with any degree of confidence. However, the progress which has been reported to us 

suggests that a good start has already been made. We have no doubt that our 

successors will wish to investigate the competitiveness of the UKAI before 2022. The 

progress made towards the AeIGT’s vision, that by 2022 “the UK will offer a global 

Aerospace Industry the world’s most innovative and productive location, leading to 

sustainable growth for all its stakeholders”, would doubtless be one of the main areas 

that they would wish to review. (Paragraph 113) 

 

 

 

44

     

 

Glossary 

 

AeIGT 


Aerospace Innovation and Growth Team 

AIN  


Aerospace Innovation Network   

ATVP  


Aerospace Technology Validation Programme 

CARAD  


Civil Aircraft Research and Technology Demonstration  

CASA 


Construcciones Aeronáuticas S.A. 

CASS  


Commercial Aviation Sustainability Strategy 

CR&D  


Collaborative Research & Development grant  

DTC  


Defence Technology Centre 

EADS  


European Aeronautic Defence and Space Company N.V.  

EEB 


Enterprise Excellence Board  

EPSRC 


Engineering and Physical Sciences Research Council  

ETW  


European Transonic Windtunnel  

FSTA  


Future Strategic Tanker Aircraft  

GATT  


General Agreement on Tariffs and Trade  

GDP Gross 

Domestic 

Product 


GVA  

Gross Value Added 

HPWO 

High Performance Work Organisation  

IAE  

International Aero Engines  

ITAR  

International Traffic in Arms Regulations  

JSF  

Joint Strike Fighter  

KTN  

Knowledge Transfer Network 

NASG 

National Aerospace Strategy Group 

NATS  

National Aerospace Technology Strategy 

NERC  

Natural Environment Research Council  

OEF  

Oxford Economic Forecasting  

PEWG 

Process Excellence Working Group  

PFI  

Private Finance Initiative  

PMB  

People Management Board  

R&D  

Research and Development 

R&T  

Research and Technology  

RDA  

Regional Development Agency 

RLI  

Repayable Launch Investment 

SCRIA 

Supply Chain Relationships In Action 

SEMTA 

Science, Engineering and Manufacturing Training Agency 

SSE  

Safety, Security & the Environment Working Group 

UKAI  

UK Aerospace Industry 

VTOL  

Vertical Take-Off and Landing  



    

45

 

 

Formal minutes 

Tuesday 22 March 2005 

 

Members present: 

 

Mr Martin O’Neill, in the Chair 

 

Mr Roger Berry 

Mr Richard Burden 

Mr Nigel Evans 

 Judy 

Mallaber 

Linda Perham 

 

The Committee deliberated. 

Draft Report (UK aerospace industry), proposed by the Chairman, brought up and read. 

Ordered, That the Chairman’s draft Report be read a second time, paragraph by paragraph. 

Paragraphs 1 to 113 read and agreed to. 

Summary read and agreed to. 

Resolved, That the Report be the Fifteenth Report of the Committee to the House. 

Ordered, That the Chairman do make the Report to the House. 

Several papers were ordered to be appended to the Minutes of Evidence. 

Ordered, That the Appendices to the Minutes of Evidence taken before the Committee be 

reported to the House.—(The Chairman) 

 

[Adjourned sine die. 

 

 


46

     

 

Witnesses 

Tuesday 14 December 2004 

Dr Sally Howes, Mr Kevin Smith and Mr Colin Green,

 Society of British Aerospace Companies 

 

Mr Iain Gray,

 Airbus UK 

 

Mr John Wall,

 Amicus 

 

Tuesday 11 January 2005 

Sir John Chisholm,

 QinetiQ Group plc 

 

Mr Ken Maciver, Mr Colin Smith and Mr Lambert Dopping-Hepenstal,

 Aerospace Technology 

Steering Group 

 

Mr John Alty, Mr Malcolm Scott, Mr David Way and Mr Christopher Moir,

 Department of Trade 

and Industry 

 

Tuesday 18 January 2005 

Sir Michael Jenkins, Mr George Hibbard and Mr Steve Ford,

 Boeing Company

 

 

 

 

List of written evidence 

1

  Aerospace Technology Steering Group 

2

  Airbus UK 

3

  Air League Council 

4

  Amicus 

5

  BASIC UK 

6

  Boeing Company 

7

  Bombardier Aerospace 

8

  Campaign Against Arms Trade 

9

  Department of Trade and Industry 

10

  DTI (supplementary) 

11

  QinetiQ Group Plc 

12

  Rolls-Royce 

13

  Royal Aeronautical Society, 

14

  Society of  British Aerospace Companies 

15

  Society of  British Aerospace Companies (supplementary) 

16

  South-West of England RDA 

17

  Unmanned Aerial Vehicle Systems Council 

18

  West of England Aerospace Forum 

 

Printed in the United Kingdom by The Stationery OYce Limited

4/2005

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