Long-serving defence industry oracle, apprenticeship champion and football fanatic Mike Turner CBE, talks to Will Stirling about the defence sector’s travails and how public sector cuts are providing golden opportunities for the support services sector.
He lobbied for Tony Blair and Gordon Brown to commit to a Defence Industrial Strategy and invest heavily in apprenticeships.
He is a non-executive director of GKN and Lazard, was chairman of the Defence Industries Council and a member of the National Defence Industries Council until April 2010, and is one of the Government’s Apprenticeship Ambassadors. He has held executive positions in the defence and support services industries for four decades. Mike Turner CBE, chairman of Babcock International plc, knows a thing or two about British industry.
And, having been on more strategy panels than he cares to remember, he’s not enamoured by government’s latest attempts to shape, or to commit to, a true industrial strategy, for defence specifically or wider manufacturing.
Mike Turner rose from a graduate apprenticeship with Hawker-Siddeley Aviation in 1966 to chair two FTSE-250 companies. Down to earth and on the ball with all questions, he has just returned from a golfing holiday in Barbados. “After 42 years in executive positions at BAE Systems and Babcock, I’m having a bit of a rest as a non-executive,” he says. Such behaviour is atypical. From his first management job as a contracts officer, the string of senior jobs and honorary degrees testifies to a workaholic’s career.
Manchester United Football Club is his other great passion. Turner accompanied his grandfather to his first home game aged seven, and has only recently given up the season ticket, unimpressed with some of the crowd behaviour in matches today.
“My wife always said there were three things in my life: Manchester United, my job and my family. In that order,” he says. “I hope that’s not entirely true. One of my biggest sadnesses is that I cannot remember my children when they were young, I really put my career first. Maybe that’s what you have to do to be successful.” Today he juggles his top appointments with entertaining his five, soon to be six, grandchildren, his sporting interests and he is considering chairing a charity. “I need to be part of the Big Society,” he says.
A member of the Apprentice Ambassador’s Network and a devotee of the apprenticeship career route, Mike Turner spoke to TM about Babcock’s support services strategy, defence cuts and apprenticeships, and gave his strong views on the government’s lack of conviction for a cogent defence industrial strategy.
Babcock’s operations have changed markedly since the 1990s. Why?
When I joined the board in mid-1990s it had just got out of boiler manufacture, thank goodness. Sir John Parker was chairman and with CEO Nick Salmon had done a good job selling that business to the Japanese. Then we got out of process engineering – it was always a strategic intention to move into support services sector. We’ve been successful in transforming from a manufacturing company into a support services business.
We had the right ingredients in the company to do that, including some very good managers. But, importantly, the P/E ratio of the support services sector is certainly a lot better than what was seen then as old-fashioned manufacturing.
Will more firms replicate this strategy, moving to support services, to follow your lead?
My old company BAE Systems is emphasising the support side of the business, perhaps more than supplying frontline equipment. It is important that equipment requirements are supplied onshore UK, but you have to recognise the huge amount of business that the MoD spends through-life. For every pound it spends on equipment, it spends £4 in through-life on maintenance and upgrades, which has gradually been put out to industry. The good news is that industry has demonstrated it can do it cheaper, and the Armed Forces get more reliable equipment too, giving better value for money both in the cost they pay for support and the reliability of the equipment they pay for.
On competition, it’s very specialised at the top end. The barriers to entry are high. I remind people that Babcock is an engineering business, we don’t do a lot of grass cutting, we are at the highly sophisticated end of support in nuclear, power generation and transport networks, for example. But we have competitors, like BAE Systems, Serco and Amec. Hopefully it’s a growing market now that the government is focused on outsourcing.
How has Babcock picked its markets? In nuclear for example
Babcock recognised that nuclear would be very important strategically for us and the UK, it picked up about five years ago. It was identified that 20% of the power derived from our current nuclear power stations had to be replaced. We cannot depend on wind, we need something other than dirty coal, and I’m pleased to see clean coal and gas coming in, and that nuclear is recognised as a very important part of the power supply. The UK Nuclear Decommissioning Agency has a huge job, and a massive budget, for cleaning up the old nuclear power stations, especially at Sellafield. We now have more nuclear engineers in Babcock than any other company in the UK, for NDA – or clean up – operations and to support new stations as they come on stream.
You still do some core manufacturing, like the aircraft carrier programme
We are a significant player in the Aircraft Carrier Alliance involved in final assembly of the two carriers in Rosyth. But it’s not a huge part of our business.
It is an important programme, however, and I’m pleased that the UK is building the carriers, but I’m disappointed that we’re not putting our own Typhoons on them, rather choosing the carrier variant for the Joint Strike Fighter. And clearly we have the embarrassment of having no aircraft on them for a few years. I’ve always said that the right way to go was the navalised version of the Typhoon [BAE Systems,UK-built], which would sustain a huge number of jobs in the North West of England, and the supply chain that goes with that long into the future. I’m sorry that the Government has not picked up on that.
The big question for naval is, after the Type 45 destroyer programme and the aircraft carriers, what’s next for the shipbuilding industry? Do we fall off a cliff edge? The design and development phase of the carrier programme is coming to an end soon.
Are we going to have a defence budget large enough to design, develop and deliver the new Type 26 frigates that the Royal Navy needs, that we hope to be able to export, potentially to Brazil and Canada? If not, the skills in this sector will quickly erode.
It’s a big issue for the UK Government and the UK defence industrial base.
The economy is slowly recovering. Will the UK have adequate public finances to pay for a proper Defence Industrial Strategy in perhaps five years time when these big programmes are waning?
I worry. My biggest concern, speaking about UK governments over the last 30-years, is the lack of a long term strategy for industry.
Visit other countries – I regularly go to China, Germany, Japan and the US – you see industry and government working closely together for the long term. I don’t see that in the UK. We had a brief window when Peter Mandelson was in charge of BIS where we industrialists saw a real attempt to get an industrial strategy into the UK. But it’s an area where we fall very short, I’m afraid. We need a much longer term view, particularly around R&D investment by the government alongside industry.
We fought really hard in 2005 to get a [DIS] Defence Industrial Strategy approved which, with the help of the then Prime Minister Blair and Lord Drayson, we got. They recognised the importance of the defence sector, with a huge number of employees and SMEs dependent on it and with about £5bn in exports a year. Once we got it in place, Gordon Brown and the Treasury, signatories to the DIS, refused to fund it. And I’m afraid the current government have kicked it into the long grass. With the reduced defence budget now we are reduced in essence to buying more off-the-shelf, which is sad for our defence industrial base.
Clearly, to increase trade you need something to export. After Typhoon, what is there? If we can design the Type 26 frigate in a modular way so that we can give the Royal Navy the ship it wants, but also have the flexibility to adapt it for export markets, that would be excellent for the defence sector as well as the RN in spreading costs. On the Army side the Future Rapid Defence System was a real opportunity to develop a family of armoured vehicles that we could export to the world, but the money wasn’t there. With no equipment programmes, what can you export? I fear for the future here.
[Later] I think back to my Airbus days, trying to get launch investment from the government for the A320, or since then for the A330 or A380, was one hell of a fight. It shouldn’t be like that. Airbus is clearly a successful business, its long term, highly skilled, good for exports and yet to get any successful arrangement with the UK government, whether Labour or Conservative, it was a fight.
Listening to Airbus colleagues in France and Germany it seemed a very different story.
You are a member of the Apprentice Ambassador’s Network. Why is this work important?
We have over 500,000 apprenticeships now in the UK [across all sectors], which is about double where we started over 10-years ago. Last year, apprenticeship starts went up by more than 15%.
Some of this is recession-driven, but I’d like to believe some is because we are getting the message across to young people and to employers. But we need more employers offering apprenticeships. In England there are only 11 apprentices per 1,000 employees.
In Germany it is 40 per 1,000. In the UK only 8% of employers offer apprenticeships, in Germany it’s 25%. You could argue that’s one of the reasons why Germany’s industrial sector is recovering so strongly compared with the UK. It’s also linked to the strategic relationship, especially in R&T, between the German government and industry compared to politics in our country, which is all too often short term.
We’ve got to have growth to have the wealth to pay for hospitals and the schools. I’m afraid all we hear far too often from the politicians is how we spend that wealth rather than how we create it in the first place.
Is there a danger that if too many people apply for apprenticeships too quickly there won’t be jobs at the end of the schemes to match?
When I discussed the DIS with Gordon Brown, at BAE Systems we actually almost stopped recruiting apprentices because we couldn’t see a long term future. It’s just not on to recruit apprentices unless there is a real chance of a job for them at the end. That’s why I pushed so hard for the DIS, to show employers there was a long term future for the sector, so they’d have the confidence to take on apprenticeships.
On the value versus a degree, when I passed my ‘A’ levels, I was offered a place at the London School of Economics or to join Hawker Siddeley Aviation to do an undergraduate commercial apprenticeship.
The reason I chose HSA, thinking back, was monetary – HSA was offering me £8 and six pence a week, so I took that. Today, at the end of university you might have a significant debt, where there’s likely to be a job at the end of an apprenticeship, and it’s a difficult job market, why wouldn’t you take an apprenticeship? There are different opportunities, from Levels 2 to 4, you’re learning about business and receive proper training. Having passed my sandwich course degree, I had far more value to offer my employer than as a raw graduate, and I think I was a wiser guy about how industry worked.
And crucially, you learn the importance of getting on with people.
Biography: Mike Turner
1966: Undergraduate commercial apprenticeship with Hawker Siddeley Aviation, studies at Manchester Polytechnic for BA (Hons).
1973: Becomes an Associate of the Institute of Chartered Secretaries and Administrators.
Wins BIM’s ‘Young Manager of the Year’ award. Hawker Siddeley co-founds British Aerospace in 1977.
1984: Divisional Director and General Manager, Kingston and Dunsfold sites – Harrier and Hawker jet trainer.
1988: Executive Vice President Defence Marketing, British Aerospace.
1991-92: Elected Fellow of the Royal Aeronautical Society. Chairman and managing director, British Aerospace Regional Aircraft Ltd including Jetstream Aircraft.
1996-05: Serves on the board of Babcock International Group plc.
1999: Chief operating officer of newly formed BAE Systems. Awarded CBE.
2002-08: Chief executive, BAE Systems.
Expands BAE into North America.
Nov 08: Non-executive chairman, Babcock International Group plc.
Mike was a non-executive director (NED) of P&O in 1995/1996, and he holds NED-ships of Lazard and GKN plc (now a Senior Independent Director).
He has honorary degrees from Manchester Metropolitan, Cranfield and Loughborough universities. Married with four children, Mike’s main interests are sports, especially Manchester United FC. This biography is abridged.