Ian Godden, chief executive officer of the Society of British Aerospace Companies, faces an uphill task this year as economic and political pressures converge on the UK’s successful but vulnerable aerospace and defence industry. Will Stirling asks him which are the most crucial projects for the industry to secure, and how manufacturers have helped the UK aerospace sector to be number two in the world.
When Ian Godden joined the Society of British Aerospace and Defence Companies (SBAC) in mid-2007, the world looked very different. The UK’s aerospace and defence (A&D) industry, the second biggest in the world behind the United States, had peaked following eight years of high growth, mirroring the global boom economy. Airbus, the pan-European aircraft company with big operations in the UK, was launching its flagship A380 superjumbo with the first airline, ahead of arch-rival Boeing’s equivalent, the 787 Dreamliner — despite various technical hiccups, the A380 came to symbolize the vitality of civil aerospace globally. The Government had approved the construction of two new aircraft carriers, the biggest and most powerful warships to be built in UK history. And several UK defence manufacturers of all sizes had full order books, bulging from continued US and UK operations in Iraq and Afghanistan as well as orders for military aircraft, vehicles and vessels from governments worldwide. UK Trade & Investment says orders in 2007 for the A&D sector were up 65% to £43.8bn.
Fasten your seatbelts
Then the credit crunch hit, banks imploded, lending dried up, taxpayers fitted the bill and public finances were stretched to their limit. Today the world is a very different, more cash-strapped place. When public borrowing needs to be reduced, a popular and arguably easy target for spending cuts is defence. Recently, a memo written by the chief contractors on the Queen Elizabeth Class aircraft carrier programme was leaked to the BBC, which said the costs associated had blown about by more than £1bn and allegedly mentioned a number of factors that posed serious threats to the project’s future.
In defence aviation, much of the UK’s manufacturing supply chain is waiting intently for news on the UK’s contribution to the Airbus A400M military aircraft – 25 new aircraft – which SBAC believes is vital to both the UK’s military capability and, as a signal to the global defence industry, that the UK is a viable player in modern, large scale military aircraft contracts. The Government has kept the industry and its European Airbus joint partners guessing as to when and even if it will climb aboard. As the Government faces up to the reality of spending cuts, the worry is which of the big defence contracts is it likely to axe or at least curtail?
In the civil aerospace sector, conditions are hardly better despite some lucrative projects in the potential pipeline. SBAC’s recent Civil Aerospace Strategy
Report 2009 (June) identified Britain’s great strengths in aerospace manufacturing, including over £20bn per year produced in value added revenue and employing over 113,000 people directly, and a further 350,000 indirectly. The report also highlighted a number of high value projects capable of consolidating the UK’s place in a world market and securing jobs, including exciting opportunities in emerging markets better placed to invest in new aircraft than some traditional customers.
Facing falling global demand for civil aircraft and a vulnerable defence budget, SBAC has a heavy burden.
As an organisation which – along with the Defence Manufacturers Association – represents A&D manufacturers’ interests and lobbies government to support its industry to do what it can to ensure the vital contracts are not delayed or cancelled, it has his work cut out. Beyond that, its core services remain the same as before the downturn: in promoting technology; in skills; in business development; and in promoting the industry. Overall, however, its offering has shifted focus during the recession to reflect members’ changing needs. Ian Godden says there are five main areas where the key issues of the aerospace and defence sector have changed with the economy:
1 The shift (which had been predicted in the boom time) towards productivity, supply chain and lean manufacturing has clearly taken off with greater emphasis now. “An example is the Supply Chain 21 initiative which companies have been implementing. “We’ve got some phenomenal improvements in productivity, partly from better working practices and partly due to investment,” he says.
2 Industry has realised in this downturn there is a need for fundamental emphasis on continued technology investment and to seek the next generation
of products. There are some risks there, including government cutbacks in defence research in the last two years. “There is a real nervousness that this is an area that will hurt us in the long term, and it’s one that’s exercising our members’ minds a lot,” Gooden says.
3 The environment. Important for several years, but the emphasis has increased in the last two years.
4 The skills area. The industry realises that there is a lot of risk in the skills gap in basic engineering apprenticeships and capabilities of various natures.
5 A shift in the geographical interests of the companies. “For example, we are in the process of setting up representative offices in India, and are looking at expanding our position in the Middle East,” he says, “and we’re seeking to increase our relationship with Mexico, Japan and Brazil to help many of our medium sized companies who believe that their future growth is going to come from those areas rather than the traditionally areas of the US and Europe.’’
Innovation in discrete manufacturing
While one can visualize the application of process innovation and lean manufacturing techniques in process and FMCG manufacturing, it is less easy to
do so for small batches of highly engineered, discretely manufactured goods – like aircraft engines and wings. Has aerospace and defence engineering benefited from advances in manufacturing techniques?’
“As a sector [A&D manufacturing], the UK has had a huge benefit in the last 15 years from three things. Firstly, companies have been able to invest in capital in a way that UK industry wasn’t in the 1960s, 1970s and 1980s. Then the difference between our industry and others is twofold. One is, bluntly, that we haven’t had competition notably from Japan to wipe us out. Secondly, we’ve had time to adjust to new manufacturing techniques in a way that the car industry struggled with and also the combination of a strong manufacturing base, high value engineering and the need to be flexible in adopting multiple technologies. If you look at an aero engine, it has absolutely every technological feature in it, with the exception of biochemistry: it’s got software; computing power; heat and combustion; hydraulics; electronics and sensors. As a nation, we’re not used to large scale,
high volume manufacturing, or have not been for a while. Aerospace is a fundamentally more mixed and balanced, multiple-skilled manufacturing and engineering ability which suits us culturally very well.’’
Skills gap nears top of agenda
All the sector-specific manufacturing trade bodies have identified skills fulfillment and replenishment as a big issue. How is SBAC working with government, the sector skills councils and industry to encourage more people into engineering to be best placed to fulfill global opportunities in A&D? Godden highlights three ways that SBAC’s work is crucial to the skills issue:
1 The SBAC has a people management board focused on the skills subject
2 Equally importantly, it is working with John Denham’s group in BIS [the Department for Business, Innovation and Skills] and on the skills future of the industry. “We have a 20 to 25 year view about what skills are required and we’re pioneering some work on how to specify and create the demand for the supply of those skills that we have identified,” he adds.
3 Working through the many, disparate skills initiatives for engineering and manufacturing. “We’re doing our bit ourselves, many joint things with
government and we’re focused on larger industrywide initiatives.’’
Strong foundation, uncertain future
In late June, a report from the Institute for Public Policy Research recommended that the UK should consider slashing defence spending by up to £24bn and revisit plans to renew its Trident nuclear deterrent. Britain cannot afford much of the defence equipment it plans to buy, the report said. Godden responded, cannily agreeing that spending was in need of proper strategic review but that widespread cuts would be an overzealous, damaging reaction.
Government faces a difficult balancing act with defence spending. A public spending squeeze is inevitable after the 2010 general election. Defence, and big defence contracts in particular, are high up on the list. The sector itself, voiced by the SBAC and DMA – which will be merged in the autumn to form a single company – says this is an over-simplistic and shortsighted approach. Cutting defence saves money, but it cuts a manufacturing sector that adds value to national output with strong exports, at a time that industry is being championed in a new ‘rebalanced’ economy. Going forward, Ian Godden and his team are focused on lobbying to secure those key contracts like the NSR replacement programme, the QE Class carriers and A400M can benefit the UK economy and its manufacturing base, as well as new markets for British-made aerospace products in Brazil, Mexico, India and beyond.
For the full interview with Ian Godden go to