Examination of Witnesses (Questions 20
TUESDAY 23 JANUARY 2001
MR K MACIVER,
MR D MARSHALL,
MR J ROSE,
MR J WESTON
20. It is one thing to ensure compliance but
surely what you are suggesting is maybe moving at the speed of
the slowest if at all, that nobody will do anything. I have the
impression that you are hoping that it will not happen, therefore
you are ignoring it, apart from what you have to do.
(Mr Rose) No, what I was saying was that unilateral
action clearly has consequences. It is important to balance the
consequences they are likely to have with the other objectives
that we have as a nation. There are bodies which govern emissions
legislation and so on that are in place and with whom we all as
an industry have to comply.
(Mr Maciver) It is legitimate to be concerned at differentials
opening up. That does not really reflect our view as an industry.
We are fortunate in a sense that as an industrial undertaking
it is not the most difficult area from an environmental point
of view. Nevertheless, we take it very seriously and all of us
are improving processes wherever possible, removing harmful materials
which have been traditionally used. Not only that, the SBAC has
taken a wider view and we have made a quite conscious decision
that we should positively engage on environmental issues rather
than simply saying we will do things when we are made to. It might
be helpful if Mr Marshall made some comment on the approach we
have taken in the Society on this.
(Mr Marshall) Together with a number of other organisations,
we have formed a grouping across the aviation community in the
UK under a broad banner called Air Travel: Greener by Design.
The key point in it really is that these future solutions to improving
the environmental impact of aircraft are not just in the hands
of the manufacturers, it also involves the operators, it also
involves the air traffic system. It involves a whole lot of activity
which goes on around airports, not just in the air but on the
ground. An holistic solution is needed. That group is going to
deliver a report round about April time this year with recommendations
from a UK point of view. Mr Rose's point is important, that we
should not do anything which is other than try to move this along
internationally. It could not be to our advantage either to try
to instigate a unilateral approach to the environment from the
point of view of aircraft, nor to see somebody else do it. When
we have developed our ideas, we shall then be pushing those internationally.
I do not sense a reluctance on people to do that because they
realise this is a key area, if the industry is going to go on
growing at the rate it is. The reason the civil business has flourished
so much over that period is because air travel has continued to
grow. Environment is one of the issues which has to be tackled
if it is going to go on growing at that rate in the future.
Chairman: We shall wait to see what you bring
out. We shall also be interested to see to what extent ECGD will
be happy with that as a formal environmental streaming. Obviously
this is one of the things which is coming up on their agenda.
It is not near the top but it did come up in our discussions with
21. May I return to the SME issues? What impact
are you expecting from the Lean Aerospace Initiative in terms
of effect on working practices in the UK industry?
(Mr Maciver) The Lean Aerospace Initiative started
off really looking at what constituted a competitive company in
the aerospace industry. Out of that I am afraid we quite unashamedly
copied things from the motor industry. The core is a series of
master classes which over a 15-day period really provide in the
workplace help and advice to a company to improve its practice
in a very practical way. I think we have run some 100 of those
now. Typically I think we would improve the effectiveness by some
30 per cent; in some cases very much more. Really the nature of
the industry is that we have seen other industries where we were
laggards. We cannot afford to be laggards in the aerospace industry.
We have to be in the forefront of competitiveness. While that
may be painful in some cases, at the individual level it is the
surest safeguard of long-term employment in the industry. I do
not know whether it feels like that from the point of view of
somebody who has used these things.
(Mr Wood) Let me talk on behalf of my own company.
We started working along similar lines some three or four years
ago and then made substantial progress in terms of improving our
own cost competitiveness. However, with the arrival of the master
classes we saw an opportunity to move up another ten gears and
accelerate the rate of change. I genuinely believe, and this is
a belief shared by the SMEs who are also members of the SBAC,
that we simply have no choice. We simply have no choice. It has
to be very complete in its application and I am not alone in having
put myself and my senior management teams through the practical
classes, building product, and then middle management, supervisors
and then the operators themselves. We simply have no choice. But
the benefits are substantial and crucial to our existence.
(Mr Maciver) On the question of working practice it
does actually make a profound change. It gives greater responsibility
to the individual employees, it puts more demands on them, in
fact it tends to require a wider skill base. All this is pushing
in the right direction of a higher skilled workforce and ultimately
higher value employment in the industry. It does put additional
demands and in addition to the programme, I think most of the
large companies would be investing a great deal in training to
support this kind of industrial redesign. Indeed, whilst the master
class in itself takes us so far, the individual companies such
as Mr Wood's have to complete the process thereafter.
22. Where are you finding that most action needs
to be taken? Where are the problems in the industry? What is being
(Mr Maciver) While I would argue that the British
industry is a competitive industry, there is room for further
improved competitiveness. There are examples in other industries
which we should not like to follow. We would wish to be ahead
and that means we really have to push productivity and effectiveness
and with the related issues of quality and on-time delivery we
have to push these as far as we can. All the experience says that
if you tackle a traditional industrial area which has not been
thought through on modern lines, you will see the opportunity
for very large improvements indeed. We quote the modest figure
of some 30 per cent. I would argue that in most cases you can
go further and possibly double the performance of an individual
area. That imposes stresses and strains but long term, if you
do not do that, somebody else will and we will not be competitive.
23. Are you seeing the impact, is the change
actually happening on the ground? Are you getting the returns
(Mr Maciver) Speaking for my own company, without
any doubt. Frankly, if we had not embarked ourselves on this type
of programme, we would not be in business, or maybe still in business
but with no future in business. It has transformed the way we
operate. We have some way to go but it has made an enormous difference.
You will be interested in the comments from the other individual
companies on this.
(Mr Rose) We have been investing very heavily in improved
practices and investing in infrastructure and capital. It is really
important to understand that this is not just about changing behaviours
of the small companies, it is about changing the behaviours of
the big companies too. We have to enable the smaller companies
to be as successful as they can be and that has not always been
the case. Huge strides have been made but there is still a long
way to go in making that a more productive relationship. A lot
of the cost does not come out of simply doing things better, but
actually not doing things at all which they did not need to do
in the first place. We imposed practices and behaviours on our
supply chain which were quite unnecessary in some cases. We did
not know we were doing it necessarily, but once you asked the
question it was pretty clear that was what was happening. It is
quite a complicated activity and it is not simply a small company
issue, it is the whole of the supply chain.
(Mr Weston) It is very difficult to give a simple
answer to that because it is such a complex question. For us it
actually starts with the way we get people involved and what we
are trying to do in the business. I might characterise it in that
15 years ago everybody who worked for us thought we were a big,
rich company and their prosperity depended on how well the unions
did in the annual headbutting competition with management. We
have moved that relationship on to getting everybody involved
in thinking about what it is that gives us the availability of
cash in the business, whether it is to invest in pay rises, new
plant and equipment, technology or new products, which this is
all about. Do we have customers out there who are prepared to
pay a margin above our costs? That removes a lot of the barriers.
You are never going to see eye to eye with the unions on everything,
but it puts you in the same boat in terms of whether you have
a competitive business, so you can get out there and sell. This
would not be true of every industry, but in the United States
for example we probably have about an eight year lead over a lot
of the US industry in terms of the way we actually involve everybody
who works in the company and focusing on what we needed to do
to get performance improvement. Beyond that it was about focusing
on specific issues, like how we get the design for manufacture
right, whether we have systems which provide us with the right
data at the right time, whether we have one set of databases and
one set of information so we are not wasting a lot of time trying
to correlate different sets of data which are supposed to be measuring
the same things, whether we have the logistics and flow of the
production processes right. That is where we begin to reach down
into the supply chain, looking at just-in-time deliveries and
the way we organise working capital in the business so we do not
have a vast amount of money sitting around non productively for
significant periods of time. You really need to look across that
entire spectrum of activities to see whether the improvements
have come in. I think we have made some huge strides over the
last decade but we can never be complacent about it. It is something
we need to keep working away at and we can always do things better.
24. You said earlier that this is not a one-way
flow system, it is a two-way flow system that the big operators
are learning from this process too. Are you confident that the
relationship is sufficiently robust? As big suppliers, big operators,
you are expecting a tremendous amount from the small companies
in terms of flexibility and focus and development but also in
terms of capital investment. They are making very major commitments
in terms of their size for companies which are global and can
take global decisions and shift around the place.
(Mr Wood) There is an important point to make. Your
comments about the rate of change and the increasing pressure
are absolutely right, but then they are increasing pressures for
everybody within the industry. Another important point is that
a lot of work is already done collectively and we have talked
about the master classes and the Lean Aerospace Initiative. Most
of the smaller and medium-sized enterprises have run classes or
workshops with their largerin some cases much largercustomers.
A considerable amount of work is done together. That does not
remove the commercial pressures which are quite naturally and
quite rightly applied to us. At the end of the day there is a
very clear understanding that we are talking about competing supply
chainsif you will pardon the jargon. It is in our best
interests for all of us to work closely together and that is what
we are doing in many cases, notwithstanding the fact that I recognise
that my customers have a choice to make.
(Mr Maciver) We have no interest in unsuccessful suppliers
at that level. It is very important that they are able to invest
and are able to take the business forward. They do have a choice
and businesses that choose not to modernise along the lines we
are talking about will not survive in the industry. It is as simple
as that. Those who are able to adjust and are able to adapt, as
clearly Mr Wood's own company is doing, will form a very secure
part of the supply chain, which is absolutely necessary. We can
be stopped making these sophisticated products because of one
small supplier employing 50 people. That is of no help to anyone,
so we have a very strong vested interest in a secure strong supply
chain. It is not just companies like Rolls-Royce but companies
like my own, a step below in the supply chain. We are also outsourcing
things which we are perhaps not the best people at doing and it
will go to smaller companies. We are asking them to do more and
they have to equip themselves to do that. It is a very positive
step for the SBAC to provide practical assistance in making that
(Mr Weston) In the exchange of best practice through
some of our preferred supplier initiativesand we learn
from them as well as they learning from usI would entirely
endorse the comment that it is in everybody's interests that you
have a healthy supply base. What we really need is for them to
take out cost, not to be cutting back margins in the investment
they actually have for the future. It is cutting out the cost
and the waste which is in everybody's interest and that is why
we really need to focus in making the supply chain work as an
effective part of the same entity.
25. I find this huge commitment which seems
to be being shown to the supply chain very interesting. Is it
not fair to say that the problem with the supply chain is that
these companies which have invested quite heavily and adapted
to the way the big boys want to work suddenly find the work has
been transferred abroad? They are now paying the price for their
investment. I think that is the danger. The real commitment is
not there. We are paying a lot of lip service and some very fine
words are coming out this morning, but the reality is that jobs
are going abroad and that is at the expense of the supply chain
whichever way we look at it.
(Mr Maciver) The fact is in the United Kingdomthis
may be unpalatablelower value added jobs and a number of
the simple processes will go to the cheapest source. Fact. That
does not mean at all that there is any cynicism in the approach.
There are many companies which do not fall into that category
among the small and medium-sized enterprises. It is very important
that we have suppliers who are closely integrated with us in terms
of linking into our supply chain and integrating from a lower
level products which come to us. A case in my own company. One
of the first companies we did this with was in fact in Northern
Ireland. That company integrates productsin some cases
very simple products from Indonesia. But that company has improved
its position and created additional value by integrating products
into assemblies and kits which go into our factories and are immediately
transformed into a finished product. I do not think the issue
is anything to do with the initiative to improve the supply chain.
The two things will happen. It is much better to have a supply
base close to home. The fact is some simple products will migrate
overseas, as we have seen in all the advanced economies. What
we have to do is create additional higher value and increase the
skills in our labour force. If we do not do that we shall be competing
totally as an industry with the lowest labour costs and that is
something we will not win. To me that is an economic fact.
26. I find your views very questionable. What
you are saying is that human rights do not matter so long as the
price is right; you will accept that work from anywhere. Indonesia
is certainly a questionable country to place work in.
(Mr Maciver) I certainly did not say that and certainly
in my own company we would not countenance practices in any factory
of the kind I think you were alluding to. We would have no interest
in that. In this industry we depend on high quality at any level,
but equally, if you take the view that all countries are suspect
and do not put work into them, it says very little for their chances
of economic development. There is a proper compromise and indeed
in my own company every employee of ours has to sign up formally
to an ethical code of conduct which is enforced and we believe
it and we believe it is in our economic interest as well as being
a point of principle. I am sure the others will say the same thing.
We would certainly not countenance malpractices of the kind I
think you are alluding to.
(Mr Rose) You made the assertion that we were paying
lip service as an industry to the support of the supply network.
I think the facts actually speak against that. In our particular
case our obligation is to be competitive and that is the thing
which gives the best opportunity for the supply chain. As a result
of being competitive, we have doubled the jobs in the supply chain
because we have sold more product and a large proportion of that
product comes from the supply chain. The facts are that we have
increased our spend to over £1 billion and that has had the
impact of creating probably around 15000 jobs in the supply chain.
There is a commitment to it, but underlying that commitment we
have to be competitive and we have to be cognizant of the fact
that we compete in a very, very global industry in which there
are major players who are determined to get us out of business.
If you were to look for instance at General Electric, which is
a non trivial business with a market capitalisation of £500
billion, they buy about 90 per cent of their components for any
aero engine in the supply chain and are actively trying to force
their suppliers to source those components in places such as Brazil,
Mexico, Russia and so on. They will be creating the cost environment
in which we are operating and we cannot ignore that. If we ignore
that we will have nothing to put in the supply chain. The facts
are that we are committed to the supply chain, but we have to
be committed to a supply chain which is competitive otherwise
we shall not be.
27. I suppose the question I was asking previously
and which we have extended here is that you are expecting the
supply chain to have high value added, to develop, to progress,
to become very competitive. That does not just require reskilling,
that also requires considerable capital investment and it also
employs very considerable intellectual investments. You said that
you were copying some practices from the Japanese car industry.
We have seen some quite shocking decisions made by a global market
in the car industry which have had very detrimental effects on
a supply chain which has been competitive, which has put considerable
capital investment in, which has put considerable intellectual
investment in and has woken up one morning and gone into work
and heard on the radio that the entire thing has fallen apart.
I hope those are not practices you are going to be looking at.
(Mr Rose) We have to make a distinction between the
practices of making an efficient factory and a proper investment
in capital and so on and the management practice. That speaks
to the real issue which is: where is the decision made and where
is the IPR owned? The decision to exit a country can be made by
someone who owns their route to market, their design capability
and their IPR and so on elsewhere and is then looking for the
cheapest source of assembly or whatever it is they have chosen.
What we have to do is retain the decision-making capability here
as much as possible, which means we need to own the route to market
and any intellectual property which keeps on coming back to an
investment in research and technology and the fundamental capabilities
to be competitive. Then we made the decisions about where this
work is prosecuted and it is not made by people elsewhere.
(Mr Maciver) This is really at the root of it and
it is a fundamental difference with the car industry. It is perhaps
easier in aerospace, because it is a regulated, high technology
industry, so it is not perhaps as easy to do what you say. The
fact is, a lot of things are internationally mobile and the more
global the industry becomes the more that will be a fact of life.
What we have to look atand this is something we spend a
great deal of time onis what the factors are which will
enable us to continue with a healthy UK based aerospace industry
at all levels. That is really fundamentally important. The fact
that some simpler components go offshore is not the main issue;
it is an issue but it is not the main issue. Once we have set
up a secure supply base we cannot lightly do that. You cannot
simply change supplier in what is a regulated industry. So provided
the right decisions are made, there is no reason why that should
happen. The absolutely fundamental issue in determining whether
this country has a continuing successful aerospace industry is
that the technology is based here and that sufficient of the decision
making is based here. If that is the case, if we were cynical
about the supply base, we would not be investing our own money
in developing the supply base, which we do. I think you are quite
right that there is a threat; but it is a threat we are very anxious
to avoid. Some of the points we have made to you today are really
to seek your support and encouragement in pursuing that. In the
industry the role of the Government is inextricably intertwined
in terms of decision making, in terms of investment in skillsa
very, very important factorand in terms of the overall
R&T that goes into the industry. We have a common cause but
you are quite right to diagnose a threat which we have to counter
and I see no reason why we cannot.
28. May I follow up the original theme of the
last questions about the Competitiveness Challenge which takes
up a fair amount of money, though I suspect not proportionally
a lot in terms of your industry. How do you measure the improvements
which you have actually got or hope to get?
(Mr Maciver) There are many dimensions to it. When
you are familiar with this subject most of us here would recognise
waste and waste takes many forms: half-finished parts sitting
for weeks at a time before anyone gets round to working on them.
In a very old-fashioned business that would be typical of the
kind of waste you would find. What you find as you improve these
things are obviously more competitive costs which hopefully come
through in the prices through the supply chain. You would certainly
see much closer adherence to delivery deadlines, not a strong
point historically in the aerospace industry. You would certainly
expect to see a marked improvement in quality or the quality ultimately
is right but the cost of getting that quality is very often far
too high. I mean quality in the sense that the product is absolutely
right when it is produced. There are many dimensions to it. We
would expect to see all these things.
(Mr Wood) Within these initiatives the industry has
worked to establish a standard approach, a standard way of driving
for improvements but just as importantly a standard way of measuring
improvements. We do actually have an agreed set of seven matrices
which cover just those indicators of performance which Mr Maciver
has flagged. We are able to measure in hard terms what those improvements
29. We have a memorandum from the DTI which
sets out what they say the objectives of the Competitiveness Challenge
were. It also says what has actually happened and I have had some
difficulty relating that back to the original objectives. There
is certainly one I notice which you can perhaps explain to me
because maybe I am misunderstanding it. One of the objectives
was to improve the average business excellence model score by
200 points. Later on it says that the average BEM score has gone
up from 242 to 296, which to me is an improvement of 56. Does
that mean you have not reached the objective or am I misunderstanding
(Mr Maciver) In a sense it probably does, but that
is only one issue. What we had to do after the initiation of the
Competitiveness Challenge, was to decide among ourselves what
the factors were that we wanted to measure. You are quite right
that we have to measure otherwise we have no idea whether we are
getting results and moving in the right direction or not. I cannot
comment on the specific figures but the business excellence model
is an overall way of self audit. It is when companies actually
audit themselves and it covers a multitude of factors in what
constitutes an effective business. It is a reasonable indication
of the overall standard for the industry. Mr Wood referred to
some very, very specific measures which we live with day by day
in our everyday life in terms of delivering to customers and what
have you. I cannot remember the seven precisely.
(Mr Wood) They come back to delivery, performance,
turnover per employee, operational effectiveness, sales per square
foot and a number of standard measures of that nature, customer
returns, quality and so on.
30. The DTI lists three objectives of which
the BEM score was one; the other two are to improve market share
by one per cent, equivalent to £1 billion. Has that been
(Mr Maciver) That is when we cannot measure in a short-term
sense. My impression is that without doubt the industry has much
more than achieved that.
(Mr Marshall) Not only attributable to the Competitiveness
(Mr Maciver) No; due to many factors.
31. Your market share has improved by one per
(Mr Marshall) Yes.
32. What you are saying is that there is no
point measuring the Challenge by this particular measure because
it does not actually say anything at all.
(Mr Wood) The business excellence model actually allows
you to measure a number of different aspects with any given business
and they can be related to manufacturing performance, design,
development performance and also people matters. What we have
been concentrating on in initiatives such as the Lean Aerospace
Initiative are very much focused initially on manufacturing performance.
Therefore I suspectI am pretty certainthat what
you will see is significant increases in terms of performance
within purely manufacturing related operations but we still have
considerable opportunity in the other areas and we can achieve
that through extending the approach we are taking.
33. Some of the other things the DTI say have
been achieved are that an internet marketing based facility has
been established, a careers video has been produced, there has
been a national survey of human resource management in aerospace
to establish the benefits for competitiveness of high performance
HR practices such as team working, appraisal, job rotation. I
should have thought such stuff was pretty obvious. Are these really
achievements or do you have firms which are significant laggards
in these areas?
(Mr Maciver) When you put them the way you have done
34. It is the DTI which is putting them not
(Mr Maciver)they are obvious but sometimes
you do not always do the obvious. The Competitiveness Challenge
addressed a number of things. Just to remind ourselves, we addressed
the supply chain relationships in aerospace, how companies worked
together so that we worked together in a proper intelligent way.
The Lean Aerospace Initiative which has given very practical help
in the manufacturing area, the marketing tool which was designed
to help small companies address remote markets which they could
not afford to access directly without help was rather a different
thing. That was very practical assistance to small companies seeking
to market for example on the west coast of the United States.
Lastly, all of these things relate to the development of people
in the business. You cannot run a lean manufacturing operation
without a properly motivated and properly skilled employment of
people at all levels, managers and people who assemble products
or whatever. They are all interrelated and they are achievements.
As an industry we have managed to work with remarkable cohesion
to make some progress in these areas.
(Mr Weston) May I pick up a point about the business
excellence models which really is quite important? The business
excellence model, the European Federation quality model and the
model in the US are all essentially the same thing, but it is
an extremely thorough process and looks at everything you do in
business from a whole set of enablers, from leadership management,
the processes, all the way through to your impact on society and
business results. I guess the bulk of the UK industry ten years
ago would have been probably scoring something like 250 on that.
To win a British standard quality award you need about 650 and
if you get 750 out of 1,000 that is absolutely a world class company.
Two comments on that. We use this throughout all our businesses
as a standard tool. It is not something you shift in five minutes
because in all of those elements you not only have to put measures
in to take those forward, you actually have to demonstrate in
a closed loop system that you have been effective in getting the
results and you have to go round the loop quite a long time before
you really begin to see things moving. Trying to shift the whole
of industry 200 points on the BEM score in that sort of period
is an extremely stiff target. If we have actually shifted the
entire industry by 50 points over a four-year period, that is
actually not bad. In some of our businesses we have worked on
this for eight years and in eight years we managed to take our
military aircraft business from a score of 250 points to winning
the British standard quality award. That is moving really quite
fast. I do not think you should undersell the extent of that achievement
in the industry.
35. Was that shift of 200 points the target?
If so, was it a target which was meant to be met by a certain
stage? If it was a totally unrealisable target, why was it the
(Mr Weston) It was a stretching target. We like to
set stretching targets otherwise you do not stretch people beyond
their normal achievement levels to do it.
35A. Was that built into the original programme?
(Mr Marshall) Yes. At the beginning of the Competitiveness
Challenge process some work was done measuring companies against
the business excellence model; because there were no other matrices
around at that time, that that might be a basis of setting a very
stretched target. What we have developed to now are much more
specific things. May I just mention the Marketing Centre? That
was actually extraordinarily innovative. Nobody else had done
anything like it in the industry that we could see and across
British industry to provide such an internet based marketing tool.
One of the things in a sense which it has led to is another innovation
in that a number of small companies and some medium-sized ones
now have a bureau in Toulouse. They need a presence there but
it is not cost effective to do that on their own, so we provided
a framework for that and that came out of thinking done through
the Marketing Centre.
36. If these things are so self-evidently good,
why does the Government have to cough up so much money to get
you to do it, the best part of £1 million for something which
by your own admission keeps you in the premier league in the world?
Why should the British taxpayer pay for you to get working?
(Mr Weston) Which £1 million is that?
37. It is just a flea bite but it is the SBAC
Competitiveness Challenge initiative set up and in October 2000
DTI agreed to provide an extra £1 million over 2.5 years
to attract equal industry funding. It is as though you have to
get the money from the Government before you put in something
yourself. I just find it a bit difficult to understand why, if
it is that important and that good, we, the taxpayers, have to
(Mr Wood) May I respond on behalf of the small and
medium-sized enterprises? With regret I would have to say that
had that not been there many, if not most, of the SMEs would not
have woken up. The industry is going through dramatic transformation
and this funding has allowed us to send a very strong wakeup call
through the SME base. As somebody who has regular contact with
other SMEs, with regret I have to say that had that not been there
and had those initiatives not been there, there would have been
relatively few SMEs who would have woken up and responded accordingly.
(Mr Weston) That is absolutely the point. I sat for
many years on the national manufacturing council of the CBI and
after five or six years of really working hard around the industry
on how to improve our efficiency levels, how to aspire to raise
our standards of efficiency and competitiveness, we became aware
on the big company circuit that we were all preaching to the converted
and having a wonderful time making each other feel good in terms
of sharing our experiences of where we had made progress. The
real challenge was how to get out there among the thousands and
thousands of small and medium-sized enterprises where it is not
immediately apparent to an individual entrepreneur that he needs
to be taking time from the day job, when he is running a factory
with 50 people in, to start asking how he could do it fundamentally
better. He is very much keeping the wolf from the door and you
have to find a way of getting their attention and making them
recognise that by doing some of these really simple things they
can actually transform the performance of their business. Therefore
the sort of things that the CBI and the SBAC and the other trade
bodies have been doing together with DTI have been very much directed
in that direction. I would have to say that £1 million spent
on that is £1 million of Government money very well spent.
38. Mr Maciver was talking earlier about the
importance of technology and that it was the critical success
factor in maintaining the UK aerospace as our most successful
export manufacturing industry. As somebody who has a significant
part of that industry represented in his constituency in Christchurch,
I should like to ask you a bit more about the CARAD programme.
First of all, perhaps we can clarify what the acronym actually
stands for because there seems to be a dispute in the evidence
from what the DTI tell us and what the SBAC have told us. Can
you tell us what CARAD actually stands for?
(Mr Marshall) I believe it stands for a Civil Aerospace
Research and Demonstration.
(Mr Maciver) I am afraid the aerospace industry is
full of abbreviations and acronyms.
39. We have just had a third version because
in the SBAC evidence you say it is the Civil Aviation Research
and Development programme. The Department of Trade and Industry
in their evidence say it is the Civil Aviation Research and Technology
Demonstration programme and you have come up with a third one.
Whatever it is, a very critical month is coming up which is March
2001, because that is the month in which the Government has said
it is going to announce the future programme. You have already
said how it has dropped over the years since it was initiated
and it is now down to some £20 million a year. Do you have
any inkling as to what sorts of sums of money are going to be
available from April 2001 and what the contents of that programme
might be? Considering the last programme was over five years,
it seems to a layman like me quite short notice to announce the
amount of money for a programme starting in April, leaving it
right up until the last minute in March. Could you comment about
that and more generally on the point you make in your paper that
UK aerospace is living off the results of past investment in technology
and this seedcorn is not being replaced at a rate which will enable
the UK to retain its position in world markets.
(Mr Maciver) To take the very broad part first, clearly
in total there are large sums spent both by the individual companies
through the defence channel through Government support to relevant
academic research etcetera. The concern some of us have is the
totality of that. CARAD is a very, very important element because
it is the one direct investment in civil aviation research, small
though it is. Its continuation would be a matter of very serious
concern to us.
(Mr Marshall) I am obviously not the person to answer
why it cannot be decided closer to the deadline that there is
going to be a continuation. I can only suppose that is because
of decisions having to be taken in the Department about their
budget as a whole. We certainly hope it does continue. There was
a time a few years ago, indeed two or three years ago, when it
was threatened with being cut altogether, one of the arguments
being that £20 million does not get you anything so you will
not miss it if you do not have it at all. Although as we say in
our evidence it has gone down in real terms from £100 to
£20 million, £20 million is still very important. It
is important to emphasise that although you have different meanings
of the acronym, all the ones you mentioned have the same important
ingredients. That is that it is civil not military. It is for
aerospace aviation and it is research and demonstration. In a
sense that is a very key point. We have mentioned technology and
we have mentioned development, but there is a step in between
those two which is very important in the aerospace industry, which
is the demonstration of that technology before you commit it to
a product. If you fail to take that step in some form or other,
then the risks tend to be very great and often not worth taking
up. So the demonstration part is very key and a good deal of the
programme as it is being spent is being put towards that aspect
of it, albeit at a small level.
(Mr Maciver) The other very important issue is, not
regardless of the amount because the amount is obviously important,
that to have a situation where the British Government were the
only Government with aspirations to have a successful aerospace
industry that was not directly engaged at all with civil research
would be a very strange situation and send a difficult signal.
That link, just as the link and partnership on the earlier subject
of the Competitiveness Challenge, is very important as an issue.
The net answer is that we do not know but we are very anxious
that it should continue.