Oral statement to Parliament

Royal Aeronautical Society Annual Conference

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Introduction It’s a great pleasure to join you for today’s conference, and I believe you have had a productive two days, both on the military…


It’s a great pleasure to join you for today’s conference, and I believe you have had a productive two days, both on the military and the commercial sides.

I’m also pleased to have the chance to talk about what this Government is doing, in partnership with industry, to help your companies grow and compete globally.

The UK aerospace sector

Of course, the UK starts from a position of strength. Aerospace directly employs over 100,000 highly skilled workers, and indirectly supports many more. Its annual turnover is around £20bn a year and it exports 70% of its output.

However, we know you are facing some real challenges. The tough decisions that this Government had to take, in the Strategic Defence and Security Review, are having an impact.

And yet, it’s important not to forget that over the next four years the defence budget rises in cash terms. The UK will still have the fourth largest military budget in the world. And the label “In use with the UK Armed Forces” is a significant selling point in a highly competitive export market.

So there are still plenty of opportunities out there for agile firms with innovative products - and we are committed to helping business grasp them.

The business environment

That’s why Government is working hard to transform the business environment in this country, which has in the past too often hindered, not helped, enterprise.

We started last June with firm action to tackle the UK’s record budget deficit and restore confidence in UK Plc. But despite these financial pressures, we have still sought to protect vital investments in Britain’s economic fabric.

Thus our decision to ring-fence the science budget and hold it at £4.6bn a year. That’s good news for aerospace - a high-tech sector that depends on innovation.

And last month the Chancellor, George Osborne, unveiled a Budget intended to galvanise growth.

We are cutting corporation tax by 5p in the pound, reducing it to 23p by 2014. That means the UK will be one of the most competitive tax regimes in the G20.

We are also increasing small firms Research and Development tax relief to 200% this year, and 225 % next year. And for investors we have increased the Enterprise Investment Scheme tax relief to 30%.

Together these measures will incentivise investment, research and development.

But Government also needs to remove the barriers which delay and deter business from innovating and growing - especially the unnecessary red tape that weighs so heavily on companies, choking innovation and stifling growth.

We have identified 21,800 rules and regulations affecting companies, and we are asking UK business to tell us which ones should be scrapped. They will all be published, sector by sector, on our Red Tape Challenge website, so you can tell us what you think.

Support for aerospace

Of course, we realise we need to do more. Different sectors of the economy face different challenges, and that requires tailored support to help maintain the UK’s technological and competitive edge.

So alongside last month’s Budget, we published a comprehensive Plan for Growth, which outlined a range of measures intended to support the resurgence in advanced manufacturing we are starting to see in this country.

A number of these measures will directly benefit the UK aerospace sector.

The ‘High Value Manufacturing’ Technology Innovation Centre is one of a network being backed by £200m of Government funding over the next four years.

The centre will bring together a number of existing advanced research centres which already have strong links with aerospace.

These include the Advanced Manufacturing Research Centre in Sheffield; the Manufacturing Technology Centre near Coventry; and the National Composites Centre in Bristol.

In addition, we are establishing nine new university-based Centres for Innovative Manufacturing, with £45m of funding through the Engineering and Physical Sciences Research Council.

We are also putting in £10m to help speed up the development of the International Space Innovation Centre at Harwell in Oxfordshire.

And I am pleased that two aerospace companies - EADS Innovation Works and Messier-Dowty - have received offers from the Regional Growth Fund, which announced its first round offers on April 12.

Another important part of the picture is ensuring that aerospace companies are able to recruit the skilled, talented workforce on which their success depends.

So we are investing heavily in apprenticeships. The extra £180m announced in the Budget means this Government will deliver at least 250,000 more apprenticeships over the next four years, compared to the previous Government’s plans.

This will complement the good work being done by the industry. Companies such as Rolls-Royce are about to train extra apprentices for their supply chains - enabling smaller companies to benefit from their excellent training programmes.

And I must mention and commend the efforts being made by the Royal Aeronautical Society and others, to showcase the dynamic, rewarding careers on offer in aerospace, through the ‘Careers in aerospace’ website and other initiatives.

So, although the public finances are constrained, there is a lot of private and public investment under way. And the UK remains an excellent place for aerospace firms to do business.

I was delighted to see, for example, the announcement by Airbus last month that it will be investing £70m in a new Engineering & Technology Campus at its Filton site. That’s a real vote of confidence in the UK.

Of course, in a global industry like aerospace, it’s just as important that British companies get the help they need to export their goods and services to growing markets around the globe.

The work of the Export Credits Guarantee Department is vital here. They support not only premier brands like Rolls-Royce and Airbus, but those UK manufacturers further down the supply chain.

It expects to have supported over £2bn of aerospace business in 2010/11 - that’s roughly double the amount in 2008/09. As such, it has played a crucial role in ensuring that aircraft deals have been able to get funding.

Government and sector partnership

The range of support I have just outlined is a clear signal of our commitment to enabling UK aerospace companies to grow and thrive.

But one of the big challenges we face is to ensure that resources are properly focused on the areas that will have the greatest impact on the sector. That requires a clear programme of action designed in partnership between Government and industry.

This is why we have set up the Aerospace Business Leaders Group. Chaired by the Secretary of State, and including the chief executives of leading aerospace businesses, and the ADS, the group will work to identify the key issues affecting the sector’s competitiveness.

These issues will be taken forward by the Aerospace Growth Partnership, which I co-chair with Marcus Bryson of GKN Aerospace. This sector-wide partnership will focus on specific action to tackle barriers to growth; boost exports; and grow aerospace job numbers in the UK.

We had our first meeting last month and work is now getting underway to look at a number of issues - including new technologies; manufacturing capability and supply chain competitiveness; skills, and the image of the aerospace sector.

This combination of work - high-level discussion of strategy, coupled with detailed analysis of specific issues - will enable UK aerospace companies to grasp the tremendous opportunities emerging in global markets.


Ladies and gentlemen, as I said at the beginning, we recognise that these are challenging times for the sector, especially those on the military side.

But UK aerospace firms enjoy a global reputation for quality and performance - and rightly so.

We have, in this country, some of the most talented designers, engineers, manufacturers and other aerospace professionals working in the field anywhere in the world.

And, as I hope I have made clear today, the Government is committed to creating the right business climate, so companies of all sizes may flourish.

We intend to be a positive partner and we will do everything we can to support UK aerospace companies in selling their world-class products and services to customers right across the globe.

Thank you.