A dose of common sense

by Tom Williams CBE, EVP Progammes and UK National Representative, Airbus

Whilst job cuts and bailouts have been grabbing the headlines for the last few years, the UK aerospace industry has quietly grown from strength to strength. 

Confidence in our ability is key to delivering economic growth.  The UK needs to be more confident and the aviation industry can play its part.

Airbus has been the world’s biggest commercial aircraft manufacturer for most of the last decade. In fact, 2011 was a record year with over 1,400 orders, 500 deliveries and the launch of the best selling aircraft of all time, the A320neo. Orders worth over $600 billion mean aircraft will roll out of our factories for many years to come. The future looks just as bright, as we expect to deliver half of the 28,000 aircraft the world needs over the next two decades. 

All of those aircraft will have three things in common. They will improve environmental performance, they will drive economic growth and they will fly on wings designed and built in the UK.

Since the start of the downturn five years ago, Airbus has opened a new £400 million state of the art factory in Broughton to build wings for the A350XWB and hired 2,300 more UK employees. We’ll be doing more of the same in 2012, with another 500 new recruits, a fifth of which will be apprentices and graduates. Every one of those jobs supports another 10 elsewhere. That means that Airbus and more than 400 British suppliers contribute nearly £2 billion to the UK economy every year. 

That’s just for starters.

When you start to look beyond Airbus’ economic footprint, you discover quite how much the UK aviation sector has to offer. We support almost 1.5 million jobs and £70 billion GDP. We have world beating facilities like the National Composite Centre, the AMRC in Sheffield and the Filton Aerospace Park, which is due to open next year. In fact every £100 million of aerospace investment is actually worth more than twice that to the UK economy through spillover benefits to other sectors.

Yet I see President Obama telling Boeing that they are “a great example of what American manufacturing can do in a way that nobody else in the world can.”  

Well I’m sorry he’s wrong. The UK aerospace is every bit as good and just as capable of winning. We just need to get better at shouting about it!

It’s true that today, industrial production only accounts for about 15% of the UK economy. But instead of focussing on what we don’t have, let’s build on the manufacturing success and expertise that we do have.

We are the custodians of an incredible manufacturing heritage. Yet the biggest threat to maintaining that tradition is our ability to resolve a just a few key issues. 

First, we need to address the worsening skills gap. There are only 1,250 fulltime aerospace engineering places available at UK universities and half of those students will switch to a different career after graduation. Can you imagine if the same happened with medical students? This has to change.

Second, we need decent investment in long term R&D projects to underpin future growth. Even within Europe, the playing field is far from level. For every £1 the UK spends on aerospace R&D, France spends eight times as much and Germany nearly half that again. This Government talks about focussing on how people will earn their living in the future by looking 10 or 20 years ahead. Unfortunately, safely implementing a significant step change in aerospace technology can take a couple of decades. For example, work on fibre metal laminates started in the seventies, but they were only ready to come on line and cut emissions with the A380. Likewise, an aircraft programme can last over 40 years. So aerospace timescales aren’t 10 or 20 years, they are more than double that.  

And third, resolving either of these issues depends on developing an easy, productive partnership between the aerospace industry and Government. Aerospace and defence manufacturers support this nation’s economic, environmental and security policies. We connect lives and protect lives. We generate jobs and drive economic growth. Yet while our competitors – current and emerging – enjoy clearly joined up strategies, the UK does not. If that doesn’t change soon, we will be a follower not a leader.

What’s more, this doesn’t just apply to the aerospace industry. Sir Roger Carr, President of the CBI, said recently: “Business leaders committed to good governance, known for their achievements and focused on growth and recovery must be heard more loudly.”

He’s absolutely right. We need a stable partnership where business leaders provide consistent, grounded advice that will deliver long term benefits for this country.

The list of issues is small, but the challenges behind them are much bigger. So how do we take a great industry and make it even better?

Well to start with, we can break down some barriers and build up some partnerships, with clear focus on education, trade and investment.

Stock markets and electoral cycles still expect short term results, but companies like Airbus,  Rolls Royce, Bombardier and GKN are strong today because of R&D strategies and investment made decades ago. Playing the long game is essential if we want a strong manufacturing base in this country. Building high tech, capital intensive industrial facilities takes time. Turning a child into an experienced engineer takes time. Exploring, developing, certifying and safely implementing new technology takes time. So we need effective three-way partnerships between government, academic institutions and industry. We need to identify needs and barriers and do something about them.

The right financing is just as critical. Repayable launch investment has supported the development of great products like the A380 and the A350XWB. This continues to create jobs and provide a sound return on investment for taxpayers. However, there has to be more such support for small and medium sized companies right across the supply chain. After all, some of the smaller specialist companies might just hold the key to a stronger, more diverse UK manufacturing base.

More generally, we are still missing some easy tricks to improve both competitiveness and environmental performance. For example, fuel burn is directly related to emissions and accounts for about 30% of airline operating costs. So the less fuel our planes burn, the more we sell and the fewer emissions each flight creates. Likewise, the quieter an aircraft is, the fewer curfew restrictions it faces, the more of them we sell and the less they bother local neighbourhoods. That’s been the case for over 40 years. Punitive taxes don’t change this. However, they do mean that airlines have less money to invest in more efficient aircraft and we have less money to invest in the R&D, training or facilities that will further reduce noise and emissions. So, surely using any environmental taxes for activities that will actually improve environmental performance and create growth is just common sense?

Manufacturing growth as a whole also requires a basic shift in mindset. We need to accept that while the United Kingdom is an island, we can’t afford to keep acting like one. We are just one part of a much bigger, global economy. There is no doubt that the best British firms can compete on cost, quality and innovation, but we are also competing for skills, resource, investment and market access. So, we can't do everything. Nor should we try to.

Instead, UK industry must identify areas to really excel: alternative energy, new materials and transport all offer great opportunities for growth. We also need to get better at leveraging the real benefits of globalisation, instead of just focusing on opportunities for cheap labour. Airbus actively pursues a global industrial footprint to access skills, resources and investment. For example, this approach supports a 24-7 design capacity and local knowledge that provide a huge competitive edge in accessing markets and delivering our products. This in turn creates more jobs and economic growth back here in the UK. Likewise, we use our global base to protect against fluctuating currencies, economic downturns and a changing world order. This is crucial for our future because while Europe currently produces a quarter of the world’s wealth, that figure will drop to just 11% by 2050. At the same time, emerging countries will see their economic weight multiply by five. This is reflected in our order book, 37% of which is destined for Asia-Pacific. That’s more than for Europe, North America and the Middle East combined.

Of course, the catch is that some markets can be daunting, particularly for strategic and high value goods. In particular, anybody looking to access emerging markets must be prepared to share knowledge and investment. That’s one thing for a big company like Airbus, but smaller companies need support and protection to achieve that successfully.

But perhaps, the simplest, easiest trick of all is that we need to starting talking ourselves up. If we don’t have confidence in ourselves, how can we expect anyone else to? If we want to attract talent, investment and customers for UK industry they need to know that we are here and that we’re as good, if not better, as anybody else. So, industry, government and academia must work together with confidence to sort out issues like skills, long-term R&D and globalisation.

This country has achieved great things in the past and there is no reason a more confident UK can’t do the same in the future, if we set our minds to it. The opportunities are certainly there for the picking. If aviation continues to grow without any artificial restraints, it will support over 80 million jobs and £4 trillion around the world by 2030. If the UK maintains its current share of that performance, that will generate over 2 million jobs and £220 billion GDP for this country in the next 20 years. Now that’s worth working for.