Full speed ahead: maintaining UK excellence in motorsport and aerospace

235 Pages·2010·1.96 MB·English

House of Commons
Business, Innovation and Skills
Committee
Full speed ahead:
maintaining UK
excellence in
motorsport and
aerospace
Sixth Report of Session 2009–10
Report, together with formal minutes, oral and
written evidence
Ordered by The House of Commons
to be printed 9 March 2010

HC 173
[Incorporating HC 1091-i, Session 2008-09]
Published on 22 March 2010
by authority of the House of Commons
London: The Stationery Office Limited
£0.00
The Business, Innovation and Skills Committee
The Business, Innovation and Skills Committee is appointed by the House of
Commons to examine the expenditure, administration, and policy of the
Department for Business, Innovation and Skills. On 5 June 2009, the Department
for Business, Enterprise and Regulatory Reform and the Department for
Innovation, Universities and Skills become the Department for Business,
Innovation and Skills. On 1 October 2009 the Business and Enterprise Committee
was renamed the Business, Innovation and Skills Committee to reflect that
change. The Committee retained the same membership as the Business and
Enterprise Committee.

Current membership
Peter Luff MP (Conservative, Mid Worcestershire) (Chair)
Roger Berry MP (Labour, Kingswood)
Mr Brian Binley MP (Conservative, Northampton South)
Mr Michael Clapham MP (Labour, Barnsley West and Penistone)
Mr Lindsay Hoyle MP (Labour, Chorley)
Miss Julie Kirkbride MP (Conservative, Bromsgrove)
Anne Moffat MP (Labour, East Lothian)
Mr Mark Oaten MP (Liberal Democrat, Winchester)
Lembit Öpik MP (Liberal Democrat, Montgomeryshire)
Ian Stewart MP (Labour, Eccles)
Mr Anthony Wright MP (Labour, Great Yarmouth)
Powers
The Committee is one of the departmental select committees, the powers of
which are set out in House of Commons Standing Orders, principally in SO No
152. These are available on the Internet via
http://www.parliament.uk/parliamentary_committees/parliamentary_committees
Publications
The Reports and evidence of the Committee are published by The Stationery
Office by Order of the House. All publications of the Committee (including press
notices) are on the Internet at
http://www.parliament.uk/parliamentary_committees/bis.cfm

Committee staff
The current staff of the Committee are: James Davies (Clerk), Ben Williams
(Second Clerk), Aruni Muthumala (Economist) Louise Whitley (Inquiry Manager),
Anita Fuki (Senior Committee Assistant), Eleanor Scarnell (Committee Assistant),
Jim Hudson (Committee Support Assistant) and Laura Humble (Media Officer).
Contacts
All correspondence should be addressed to the Clerks of the Business, Innovation
and Skills Committee, House of Commons, 7 Millbank, London SW1P 3JA. The
telephone number for general enquiries is 020 7219 5777; the Committee’s email
address is [email protected]
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Contents
Report
Page
Summary 3 
1  Introduction 5 
Our inquiry 5 
Space sector 6 
2  The Aerospace Industry 7 
Government strategy 8 
Government support 9 
Repayable Launch Investment 10 
Trade support 13 
A400M 15 
3  The Motorsport Industry 17 
The current state of the industry 17 
Government complacency? 18 
Government assistance 20 
UK Automotive Council 20 
Motorsport Development UK 22 
Health of the sport 24 
Government support for the sport 25 
Conclusion 27 
4  Supporting Supply Chains 29 
“Supply chains for the 21st Century” 29 
Diversification 31 
5  Equipping the Workforces 35 
Promoting science-based careers 35 
Skills strategies 38 
Higher education 39 
Motorsport courses 40 
Overseas students 42 
6  Research & Innovation 44 
Centres of excellence 44 
Composites 46 
Aerospace Research Institute 48 
Co-ordination 50 
Government R&D spending 50 
Defence research 52 
Changing priorities? 53 
R&D tax credits 53 
Business-academic engagement 55
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7  The Green Agenda 58 
8  Conclusion 62 
Annex: Visit Programmes 63 
Bristol: Tuesday 27 October 2009 63 
Toulouse: Tuesday 10 November 2009 63 
Northampton: Tuesday 23 November 2009 63 
Derby: Monday 18 January 2010 63 
Conclusions and recommendations 65 

Formal Minutes 73 
List of Reports from the Committee during the current Parliament 76
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Summary
Motorsport and aerospace are two industries in which the United Kingdom is a world
leader. The United Kingdom can boast the second largest aerospace sector, after the United
States and is a global leader in motorsport. Both epitomise the best of UK manufacturing
and form key parts of the higher value-added economy. They are knowledge-intensive,
utilise a highly skilled work force and consistently invest in Research and Development
(R&D) to improve their products and maintain their edge over international competition.
We believe that the future success of the UK economy will be based on these types of
industries.
The aerospace sector is highly competitive with many existing competitors in Europe, the
US and Japan. Many developing countries are also trying to establish themselves in the
sector and capture a share of the market. The Government needs to ensure that British
aerospace firms can compete on a level playing field. While the United Kingdom, like
many other nations, invests in the aerospace industry its ability to do so is currently subject
to a United States’ complaint in the World Trade Organisation (WTO). The Government
needs to robustly defend its right to support this industry through Repayable Launch
Investment, which is much less generous than our competitors, while simultaneously
exploring alternative measures of support that could be adopted in the case of an
unfavourable outcome. We are also concerned that the UK aerospace sector has access to
export trade credit at less favourable rates and through a more complex system than other
countries. The Government needs to address this imbalance so that customers do not have
difficulties in securing the credit they need to purchase aircraft.
When examining the motorsport industry we were struck by the lack of understanding and
effective engagement by Government. The industry repeatedly told us that the
Government was “complacent” about UK leadership in this sector and that previous
attempts by the Government to support the industry had failed to produce meaningful
results. The Government appears to be unaware of these concerns. We are not content
with the Government’s current plans to take forward its work with the sector through the
UK Automotive Council. That approach runs the risk of treating the motorsport industry
purely as a subsection of the automotive industry, ignoring many of the features which
make the industry world beating. Instead, we recommend that the Government establish a
dedicated motorsport policy team within the Department for Business, Innovation and
Skills (BIS).
Small and medium-sized enterprises (SMEs) play a very important role in supporting both
sectors, but they have been worst hit by the recession. We are encouraged by the steps the
Regional Development Agencies (RDAs) have taken to support efforts to drive up the
quality of SMEs but believe that the Government needs to do more to encourage high-
performance engineering firms to diversify into other sectors. This would not only better
insulate them from future economic shocks but also provide a mechanism for spreading
best practice across different sectors; in particular the “motorsport ethos”—which provides
a rapid, tailored response to engineering challenges.
The Government wants academia and businesses to work more closely together to better
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align the education system with the skill needs of industry and to encourage more effective
research. This is a laudable ambition but we are not convinced that the Government has
yet articulated how it intends to bring about the kind of culture change it wishes to see in
this relationship.
Both sectors require a highly skilled workforce able to adapt, develop and deploy new
technologies successfully. This should be addressed by all parts of the education system,
from encouraging children to study science and maths at primary and secondary school to
ensuring the universities design their engineering courses with the needs of industry in
mind. Further education also plays an important role in training the workforce, but the
sector skills council need to properly engage with industry, something that is not always
happening at present.
The UK’s competitive advantage in these industries is based on its constant investment in
R&D to discover new and innovative ways to improve their products and processes.
However too often the excellent research done by universities is never developed to a stage
where companies are able to take it forward and create a new product. Much of that
research is left to languish in the “valley of death”. To combat this the Government has
established a number of centres of excellence designed to bridge this gap between academic
and corporate research.
We fully support these new centres but have concerns over how the Government ran the
procurement process that led to their establishment. In particular, the National
Composites Centre of Excellence in Bristol was only established after a process that was at
best disorganised. There was a lack of clarity about the exact specification of the project
and those bidding for the centre were asked to provide additional information at short
notice, sometimes less than 24 hours. This was an unhappy example of mismanagement by
Government and lessons need to be learnt to ensure that future projects are more
professionally run.
Not all R&D is done through research organisations; much is conducted by SMEs working
on the ground. These companies have benefitted greatly from the Government’s R&D tax
credits. We fully support this scheme.
During the course of our inquiry it became clear that both industries believed that they
were burdened by a “non-green image”, which they believed, put them at odds with
government policy. However, much work is being done in this area, often supported by the
Government. In addition to financial support for “green” research, the Government is
considering the potential for using motorsport to challenge people’s perception of
environmental issues. We welcome the fact the Government is considering this as an area
of action and agree that motorsport has the potential to shift the debate about carbon
emissions away from a dry conversation about carbon budgets, towards a more valuable
debate on the role that technology and innovation can play in addressing climate change
and other environmental issues.
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1 Introduction
1. The motorsport and aerospace industries represent two jewels in the crown of UK
manufacturing. The United Kingdom is a world leader in the motorsport industry, and
boasts the world’s second largest aerospace sector after the USA.
2. Both of these industries represent the best of UK manufacturing, and form key parts of
the higher value-added economy. They have many common characteristics and often work
closely on shared challenges. The motorsport and aerospace industries, are knowledge-
intensive, utilise a highly skilled work force and are constantly investing in Research and
Development to improve their product and to maintain their edge over international
competition. These are industries that need to form the basis of the UK economy in the
future, and are particularly important in efforts to rebalance the economy to ensure the UK
has an appropriate mix of service and manufacturing industries.
3. This Report both celebrates the successes of the industries and looks to the future to
examine what role the Government needs to play to ensure that these industries stay ahead
of their international competitors. In addition to examining government policies directly
targeted at these sectors the Report discusses the wider issues which impact on the
industries, including whether the education system is properly equipping the UK
workforce with the skills that businesses need; the growing need for universities and
businesses to work together more effectively, and the role that both sectors can play to
reduce carbon emissions.
Our inquiry
4. In the course of this inquiry, we received written submissions from 24 organisations. We
held three oral evidence sessions: the first concentrated on the aerospace industry, with
representatives from Airbus, BAE Systems, the Royal Aeronautical Society and A|D|S, the
industry trade association. The second explored motorsport issues with the Motorsport
Industry Association, the Motor Sports Association, Lola—a motorsport SME (Small and
medium-sized business)—and Dr Dickison, a lecturer at Coventry University. At our final
session we questioned the Minister responsible for these two sectors, Ian Lucas MP,
Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills.
5. We also undertook four visits in connection with this inquiry. The first was to Bristol
where we met representatives from GKN and Airbus and visited the aerospace department
at Bristol University. During our visit to France and Italy, in connection with our inquiry
into “Exporting out of recession”1 we were able to visit Airbus’ headquarters in Toulouse.
Our third visit was to Silverstone where we met with the track management, academics,
SMEs and the Brawn GP Formula One team.2 The final visit was to Rolls-Royce’s base in
Derby to discuss its involvement in government-supported research projects. Our visits
always provide us with an excellent opportunity to be appraised of activity on the ground.
Through discussions with people who work in these industries we are able to gain a much

1 Business, Innovation and Skills Committee, Third Report of the Session 2009–10, Exporting out of recession, HC 266
2 Brawn has since been bought out by Mercedes.
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fuller understanding of what the Government needs to do to support these sectors and to
protect their positions as global leaders. A full account of our visits can be found in the
Annex at the end of the Report.3
Space sector
6. While this Report concentrates on the motorsport and aerospace industries, we should
not forget the vibrant space sector which forms part of the aerospace industry. During the
course of this inquiry we became concerned that not enough attention was being paid by
Government to the space sector, something we ourselves were guilty of when drawing up
our terms of reference for this inquiry. We believe that this is often the result of an over-
concentration on the scientific aspects of space which overlooks the fact that there is a hi-
tech industry which has developed from it—most notably the manufacturing of satellites.
The consumer derives enormous benefits from space technology of which the most
noticeable are satellite television and GPS navigation systems. The UK has a flourishing
space sector, which was clearly described to us by EADS Astrium, the space branch of the
European aerospace and defence firm:
Space is one of the UK’s most hi-tech, high-skilled, high-growth, value adding and
strategic sectors, adding £6 billion to the UK economy in 2008 (including £500
million directly in the manufacturing sector), and supporting over 18,000 direct jobs,
and 60,000 jobs indirectly. The UK has built up a 7% slice of a fast-growing global
space market, estimated to be worth €500 billion by 2020. Space is one of the UK’s
most R&D intensive industries, on a par with pharmaceuticals and aerospace and six
times the national average.4
7. Despite this, it is the scientific agenda which dominates discussions of space. Ian Lucas
MP, Parliamentary Under-Secretary of State, illustrated this point when he said:
I tend to associate space with the Apollo missions still, but I think there is a much
more basic involvement of space in industry as a whole now, and I think that we
need to reflect that in our thinking.5
We do not underestimate the importance of the scientific aspect of space research, but we
believe that space now needs to be seen as part of mainstream high-technology
manufacturing and industry; it is no longer a purely scientific endeavour. Due to time
constraints we have not been able to give the space sector the attention it deserves
during this inquiry. We recommend to our successor committee that it considers
conducting an inquiry into the role of the space sector in the UK economy.

3 See p 63 ff.
4 Ev 97
5 Q 256
7
2 The Aerospace Industry
8. The United Kingdom has the world’s largest aerospace industry outside the USA,6 with a
17% global share of the civil aerospace market and 10% of the defence market.7 The
industry has an annual turnover of around £20.5 billion,8 and directly employs over
160,000 people with another 200,000 people indirectly relying on the sector for their
employment.9 UK aerospace companies invested £1.8 billion in R&D activities in 2008,10
and Britain is one of the few nations involved in the design, manufacture, marketing,
maintenance and support of the full range of aircraft products—from complex composite
aero-structures, including wings, aero-engines, rotorcraft, aircraft systems and avionics,
through to maintenance, repair and overhaul services.11
9. The aerospace industry did not escape the recession. In 2008 although the sector
received £35 billion in new orders, this represented a decrease of 23% on the £45 billion of
orders placed in 2007. Over the same period the sector’s workforce had reduced by 11%,
with the loss of 12,578 jobs. In its evidence A|D|S, the industry trade association, told us
that the difficulties faced by the sector in 2008 continued into the first half of 2009, and that
“the downturn has been felt most markedly in the business jet, general aviation, civil fixed-
wing and rotary-wing sectors.”12 However, this was still better than the industry had
initially predicted. Mr Godden, Chairman of A|D|S, remarked that “in the larger
commercial aircraft industry, the order book has held up better than most anticipated.”13
10. The decrease in new orders was partially due to companies cancelling or delaying
orders for new planes in response to falling passenger numbers.14 As well as causing a
reduction in new orders this has also resulted in companies postponing or reducing
maintenance, repairs and improvements to their existing fleet.15 However, larger
companies have been able to minimise the impact of this by reorganising their order book.
Dr Williams, Head of Business Development, Research and Technology (R&T) at Airbus,
highlighted the fact that:
whilst there are some cancellations, typically there will be deferrals or movements of
orders and there is, through prudent management of that order book, an ability to
bring some orders forward and dampen the immediate effect on short-term
production.16

6 Ev 148
7 Ev 76
8 Ev 65
9 Ev 148
10 Ev 76
11 Ev 65
12 Ev 79
13 Q 9
14 Ev 86
15 Ev 139
16 Q 10
8

It is also possible that the longer-term nature of aerospace investments, particularly defence
aerospace, has provided some parts of the industry with a degree of stability.17 A|D|S
asserted that “the long-term nature of large-scale projects means that effects can be
delayed.”18
11. There are 9,000 SMEs in the United Kingdom who supply the aerospace industry. We
discussed with major manufacturers how the recession had impacted on those businesses.
It was clear that there were concerns within the aerospace industry that the recession could
cause SMEs in the supply chain to go out of business. During oral evidence Mr Keen, Head
of Government Relations, BAE Systems, reported that BAE was monitoring closely the
health of its supply chain. He told us that out of 1,200 suppliers:
we have a watch list of about 80 companies that we are keeping a special eye on, and
that we are engaging with on a weekly basis. Beyond that, we have about half a dozen
companies that we have more significant concerns about.19
Mr Godden, Chairman of A|D|S, said that while there was no evidence to suggest that a
large number of suppliers were going out of business, telling us “there are a number of
companies who are exiting markets […] and there are a number of companies that we
think may be in trouble in the future.”20 He also reported that his organisation had
“identified so far six or seven companies that we have passed on to BIS as being in real
trouble.”21 We also heard that many of the SMEs who supply the aerospace industry were
also involved in the automotive supply chain, and were seeing orders in that market fall as
well.22 We return to the issue of supply chains in more depth in Chapter 4.23
Government strategy
12. In 2003 the Aerospace Innovation and Growth Team (AeIGT) published An
Independent Report on the Future of the UK Aerospace Industry, which set out the
Government’s long-term vision for the future of the aerospace industry in the United
Kingdom. The Report concluded that by 2020: “the UK would offer a global Aerospace
Industry the world’s most innovative and productive location, leading to sustainable
growth for all its stakeholders.” The AeIGT’s Report contained a series of
recommendations covering areas including:
• Research and Technology;
• Process excellence skills and people management;
• The environment;

17 Ev 94
18 Ev 79
19 Q 25
20 Q 22
21 Q 22
22 Ev 133
23 See para 84 ff.