10 July 2012
Business secretary Vince Cable has moved to banish the decades-old spectre of failed gambles on industrial “winners” by ramping up government backing for the aerospace sector with a £120m funding announcement.
Cable hailed the investment, which includes funding for low carbon engines, as a key step in maintaining Britain’s position as the second biggest producer in the world aerospace industry. The sector is poised to undergo a rapid expansion in the coming decades driven by demand from emerging economies for new airliners potentially worth millions of pounds in exports for UK businesses.
The latest cash injection into the industry will be split between the taxpayer and the private sector, led by an investment of £40m each in a programme steered by Rolls-Royce to develop greener aircraft engines. The announcement was rounded out by joint investments of £15m in 11 research and development projects, £6m in educating 500 aeronautical engineers to master’s degree level and an extra £20m investment from the aerospace industry in a centre of excellence for aerodynamics.
Speaking at the Farnborough air show, Cable said the government had no qualms about showing bias towards certain sectors – extending a policy shift that began under the previous government with the car scrappage scheme in 2008/2009. Prior to that, government attempts to pick favoured companies such as carmaker British Leyland in the 1970s were deemed expensive failures.
He said: “In the past we were rather inhibited in government by being accused of picking winners.
“But I don’t feel at all embarrassed by saying that this sector is one of our winners. There is nothing wrong with the government getting behind successful sectors in the economy.”
Airbus, one of the UK aerospace industry’s biggest customers, said Cable’s announcement on low-carbon engines – which extends a programme launched in 2009 – kept Britain in the frame to develop new aircraft to succeed the A320neo and the A380. Günter Butschek, the Airbus chief operating officer responsible for manufacturing, said: “It is the right time for such a commitment because 95% of our research and development commitments are on ecology, and mainly on fuel efficiency. So this commitment is targeting the same objectives which means the UK is perfectly in line with the overall direction towards the next generation of aircraft.”
Airbus, along with its American rival Boeing, is using the Farnborough show this week to fight it out for new orders. Boeing was the big winner for the second day as it clinched a further two deals worth a little more than $11bn (£7.1bn) for its remodeled short-haul 737 aircraft including one from GE Capital Aviation Services, the commercial aircraft leasing and financing arm of General Electric. Meanwhile Airbus said Cathay Pacific has put in a firm order valued at $4.2bn for its long-haul A350-1000.
Boeing expects demand for 34,000 new aeroplanes over the next 20 years, equating to sales worth $4.5tn and a doubling of the world’s current commercial aircraft fleet.
Cable announced the £120m investment alongside a “strategic vision” for the UK aerospace industry drawn up by the Aerospace Growth Partnership – comprising representatives from the government and the private sector.
The business secretary said the strategy aimed to retain the UK’s status as host to the world’s second largest aerospace industry and the largest in Europe. The vision includes establishing an aerospace banking forum to help small and medium-sized firms secure finance by bringing them closer to banks and financiers. “We are aware that there is a problem and whenever I go around manufacturing companies they reinforce that message.”
Cable added that he was interested in setting up an equivalent to the Aerospace Growth Partnership for the defence industry, which has expressed concerns over an apparent lack of a joined-up government strategy for supporting defence contractors. “We want to have a strategic approach of the kind that we have for aerospace,” he said.