Strategic response to BAE-EADS merger failure follows fears UK will miss out on multibillion-pound manufacturing windfall
Ministers and the British aerospace industry are preparing a co-ordinated response to the collapse of the £28bn merger between BAE Systems and EADS, the owner of Airbus, amid fears the UK will miss out on a multibillion-pound manufacturing windfall from the next generation of passenger aircraft and helicopters.
The government and UK-based aerospace companies including Rolls-Royce, GKN, Bombardier and AgustaWestland are drawing up a renewed strategic push for the industry that could be unveiled this month. It comes as the business minister, Michael Fallon, prepares to outline an export strategy for the marine industry on Monday.
Aerospace has been the focus of significant behind-the-scenes attention from the government in recent months. The forthcoming announcement is thought to include plans for an aerospace research centre, in addition to the centre of excellence for aerodynamics announced by George Osborne last year. It is understood the funding for the new centre was close to being announced in last year’s autumn statement but now could be unveiled this month.
The new strategy will be an update on the Reach for the Skies document published last year by the Aerospace Growth Partnership, a body that brings together government ministers, officials and UK-based aerospace companies including Rolls-Royce, the aircraft engine maker; Bombardier, which makes plane wings in Belfast; GKN, the components supplier; and AgustaWestland, the Yeovil-based helicopter maker.
The business secretary, Vince Cable, launched the document at the Farnborough airshow last year, alongside a £120m investment in the industry, which included £40m for a green engine programme led by Rolls-Royce.
The government is determined to push ahead with its commitment to the UK aerospace industry, the second largest in the world with 100,000 directly employed people, after the collapse of the deal between BAE, Britain’s largest defence contractor and manufacturing employer, and EADS.
The transaction was expected to guarantee the continuation of Airbus production work in Britain, which was a key reason for David Cameron’s enthusiastic support for the deal.
The UK accounts for about 15% of Airbus production, with the remainder carried out in France, Germany and Spain – countries that are also shareholders in EADS and control nearly 50% of the company. After political wrangling collapsed the BAE-EADS deal, Angela Merkel’s aerospace adviser, Peter Hintze, said pointedly the future of EADS would lie with close co-operation between the French and Germans.
Consequently, there are fears that the next major Airbus project, a short-haul passenger jet dubbed A30x, will see work transferred to France, Germany and Spain, away from Airbus’s UK sites in Broughton and Filton, which account for the majority of Airbus’s 10,000 employees in Britain.
It is believed that ministers have been won over by warnings from aerospace industry executives that decisions over research and development for projects such as the A30X, as well as the ensuing production plans, could be made before the end of this decade.
With emerging superpowers such as Brazil and China keen to get a foothold in the aerospace market, the UK industry is warning that it must retain its competitive and technological edge to win that work. Aerospace executives believe the industry in Britain has four strengths that need further multimillion-pound investment to remain world class: wings, engines, electronic systems, and airframe components.
The concerns over aircraft also extend to Britain’s world-class helicopter industry. The AgustaWestland site in Yeovil employs 3,500 people and is a candidate to build the next generation of military and civilian helicopters, but there are concerns the UK will lose its competitive edge in helicopter manufacturing – the only aircraft made in the UK in its entirety – because of cutbacks in military spending or procurements by the Ministry of Defence going outside the UK.
The aerospace announcement is likely to be followed by more strategic plans for other industries as the government rebuts criticism that it is failing to produce a growth strategy for the economy, or put serious financial and political weight behind its call for a “march of the makers” that will tilt the UK economy away from services such as banking.
The feeling among aerospace and automotive executives, for instance, is that the government should be realistic and concentrate on at least retaining Britain’s strengths in those areas, rather than expecting to trigger exponential growth in the face of global competition.