Aerospace Industry — [Mr Andrew Turner in the Chair]
Ian Lucas (Wrexham, Labour)
It is a pleasure to appear under your chairmanship this afternoon, Mr Turner. This is the first opportunity that I have had to welcome Michael Fallon to his new position as Minister. His closeness to the Chancellor has clearly paid off—congratulations to him.
Aerospace has been much in the news of late, particularly with the ongoing debate on airport capacity in the United Kingdom. My immediate motivation in asking for the debate was that the discussion on airport capacity has largely excluded mention of the importance of the UK aerospace industry. I hope that deficiency will be addressed and remedied this afternoon. The UK aerospace industry is a great national success. We are the premier aerospace manufacturer in Europe and second only to the United States worldwide. We hold 17% of global market share, which generated £24.2 billion of UK revenue in 2011—75% of which was exports.
I have two fundamental points about our world position in aerospace. First, it has been very hard won. It is the result of long-term policy and investment decisions made by Governments of different political persuasions and by the sector itself over many years. Secondly, it is a valuable resource. Developed and developing economies are ambitious to eat into our market share. China and Russia see the importance of the aerospace industry and are anxious to move into it. Companies such as the Commercial Aircraft Corporation of China and the United Aircraft Corporation are ambitious to take part of the expanding world market.
I have read “Reach for the skies”, and I must say that it is an excellent document. A civil servant once told me that he did not think that a change of Government made much difference; I would not quite go along with that. The document is impressive and a welcome template for the future of our aerospace industry—as a former aerospace Minister, I want to put that on record. It is persuasive, and in preparing for the debate, I spoke to a large number of representatives from the industry, and it is striking how widely supported it is by those to whom I spoke.
The document owes a lot to the model the previous Government established for the UK automotive industry. The establishment of the Automotive Council made the UK the investment destination of choice for the world automotive sector in the past five years, not only the past two. The recent announcements by Honda and BMW—trumpeted by the Prime Minister—followed earlier decisions on investment by Nissan, General Motors and Toyota, and are testament to the attraction of the UK.
The Automotive Council has been a success for important reasons. First, it has buy-in at a very senior level from both Government and industry. Secondly, it has shown a capacity to identify the policy required and to implement it. The most obvious example is the car scrappage scheme, which the Government implemented quickly and efficiently in response to a crisis in the automotive sector in 2008-09. The long-term consequences of the
framework for developing effective policy are reflected in the recent inward investment decisions made by businesses based abroad.
Thirdly, there is a spirit of co-operation in the industry between management and the work force. I despair at some of the rhetoric that I hear from the Tory right about fire-at-will policies. Such policies will undermine successful employment relations in successful businesses and do nothing to improve skills development. I urge the Minister to make early visits to plants such as Halewood on Merseyside, where the close working relationship between trade unions and management is creating an effective workmanlike atmosphere in which real progress is being made.
Jim Cunningham (Coventry South, Labour)
Will the Minister extend his visit to Jaguar Land Rover, where the trade unions recently played a big part in securing more than 1,000 jobs in the west midlands? That was no mean feat for trade union co-operation.
Chris White (Warwick and Leamington, Conservative)
I congratulate the hon. Gentleman on securing the debate. The aerospace industry is vital for the UK economy. It has thrived through a combination of good management, supportive trade unions and long-term government support. Does he agree that we should learn lessons from the success of the aerospace industry and draw on them to build a comprehensive industrial policy in Government?
Ian Lucas (Wrexham, Labour)
I agree with everything that the hon. Gentleman says. An important thing that industry and Government can do together is identify deficiencies in the UK and devise policy to address them. Supply chain development has been identified as a difficulty that needs to be addressed in both the automotive and aerospace sectors. I am pleased that the UK aerospace partnership is following that broad structure, which has been successful in the automotive sector. I hope that the successful approach will continue. Will the Minister confirm that he will act as the joint chair of the partnership with Marcus Bryson of GKN? Will that reflect the Government’s commitment to the success of the partnership?
In passing, I should mention that I am grateful to GKN for providing me with an Industry and Parliament Trust fellowship back in, I think, 2003-04. It gave me a great insight not only into the company and the aerospace industry more generally, but into the onset of globalisation, its challenges and the work that a large manufacturing company needs to do to deal with it.
In all my dealings with the aerospace sector, I have been struck by how good it is at engaging with MPs—not only local MPs, but anyone who shows an interest in the industry. It is keen to work with both Government and Back Benchers to extend the appreciation of the industry. The general public still have not got the fact that we are leaders in aerospace—I take part of the blame for that, because I was the Minister for a year—so we need to repeat that fact consistently.
Airbus, which is next to my constituency, has been a great friend to me over many years. AgustaWestland has kept me informed about the exciting developments in the civil helicopter sphere in which it is involved. The ADS group, as a collective organisation, works extremely hard to promote the aerospace industry in the UK.
Alison Seabeck (Plymouth, Moor View, Labour)
My hon. Friend mentioned AgustaWestland. As shadow Defence Minister, I would say that British aerospace’s enormous success and the respect that it is held in globally are extremely important to the defence sector. The commercial and defence sectors are put in separate boxes—one does well and the other less well—but it is vital that we have a strong commercial aerospace industry, which in turn supports our defence needs.
Ian Lucas (Wrexham, Labour)
That is indeed the case. My hon. Friend makes a very good point about the importance of both the defence and the civil aerospace sectors. There will be particularly difficult times, as there have been for the defence sector in the past couple of years, while the civil aerospace sector is more buoyant. It is important to have a very close relationship between those two arms of the sector to ensure long-term planning.
Aerospace is a growing sector. The aerospace growth partnership report states that
“growth in air travel has proved remarkably resilient”.
It is forecast that that will continue, with 27,000 new large civil airliners needed by 2030. There are also extremely challenging climate change regulations in place, so air travel expansion will be coupled with demand targets that will need to be met by technological advances. As a nation, we are well placed to address those challenges—for example, through the development of composite technologies, leading to lighter, more fuel-efficient aircraft. We need to make sure that such commitments are worldwide, so that we do not hand a competitive advantage to our competitors. We must ensure that the UK industry’s advantages are not prejudiced in the world market.
One of the key issues facing UK aviation at present is the introduction of the EU emissions trading scheme. Please will the Minister confirm that the impact of the scheme on UK aviation is being assessed? What steps are the Government taking to ensure that the UK industry is not prejudiced by the introduction of that scheme?
Mark Tami (Alyn and Deeside, Labour)
Does my hon. Friend accept that the aviation and aerospace industries have made great strides and great progress in cutting emissions compared with, for instance, shipping, where emissions are still very high and very little progress has been made? The focus seems to be very much on aerospace, as if it was somehow the only polluter.
Ian Lucas (Wrexham, Labour)
My hon. Friend is absolutely right. He knows the great Brian Fleet from Airbus very well. The first time I met Brian in 2001, shortly after I was elected, I raised the issue of emissions, which took him slightly aback. He was able to give me a very good response on the work that Airbus was doing back then to combat the emissions challenge. That has come to fruition with the A330—an incredibly impressive piece of engineering—and that project has very ambitious
goals for addressing the climate change challenge. As a nation, we have the advantage that we can produce more fuel-efficient, lighter aircraft than anyone else, and we should use that to increase the strength of our industry.
There is, however, a threat. I am advised that China has suspended orders of 45 A330s from Airbus, which amounts to $10 billion of business. That might have a real impact on Airbus jobs across Europe and also act as a barrier to environmental progress. The aerospace growth partnership must also work hard to identify the deficiencies that exist in the UK aerospace sector. The industry is open about those deficiencies and wants to work with the Government to address them.
Recent investment decisions—such as the one in June to shift the conversion of 14 A330 multi-role tanker transports from Cobham Aviation Services to Airbus Military in Madrid, costing about 300 UK jobs—have sent out warning signs. It is important to appreciate why that is happening. There was the real worry about the failure of the UK to win a £13 billion military aircraft contract with India, which the French press called
“the biggest arms contract of all time in the subcontinent”.
The UK lost that contract. I hope that the aerospace growth partnership will consider key decisions made by international investors when such investments happen and, if they go abroad, look at why they do so.
Jim Cunningham (Coventry South, Labour)
Another issue that affects not only the aerospace industry but manufacturing in general is the law of unintended consequences. For example, the EU’s introduction of new financial regulations, even though we all think that they are necessary, can mean—I hope that the Minister will address this—that when companies, such as manufacturing ones, borrow from a bank to hedge against changes in exchange rates and so on, that can have a major impact because it affects their liquidity, which is a big concern in manufacturing at the moment.
Ian Lucas (Wrexham, Labour)
Indeed it is. I am sure that the Minister will address that point in his closing remarks.
It is imperative to have the continuity that I hope we are seeing in aerospace policy taken forward from today. Above all, aerospace is a long-term business that needs long-term approaches from the Government and from industry. What is very encouraging about the aerospace growth partnership is that, as a Minister who had responsibility for aerospace in the previous Government, it has so much in it that I am pleased to support. I am, however, concerned about whether the Government as a whole buy into such an approach. Last weekend, the Minister said:
“Deregulation and privatisation worked before”.
Will he please clarify what particular deregulation he intends to apply to the aerospace industry, and how that will help Britain to compete?
One identified weakness in UK aerospace is access to finance. I take a contrary view to the UK Government about the banking deregulation of the late 1980s, which was one reason why British banking has been so unresponsive in its support for manufacturing companies. Banking deregulation since the late 1980s has reduced competition between banks, and the welcome recent
expansion of challenger banks is a development that could assist supply-chain development in the UK. I am very pleased by what the Secretary of State has said about a business bank that would build on the initiatives of the green investment bank—it would also build on developing Labour policy—but such a bank must not just be a rebranding of existing funding mechanisms. Will the Minister say whether such a bank would be able to raise capital to support the aerospace industry?
Those are all Government initiatives that business has identified as necessary to address deficiencies in the banking market. That market, which has built up since the 1980s, has produced a situation in which businesses, especially smaller and medium-sized ones, have been starved of investment. The advantage of the aerospace growth partnership is that it has identified a defect in the industry and is working in partnership with the Government to address it. The last thing that the industry needs is a raft of soundbites borne out of the dogmatic attachment to laissez-faire that the Secretary of State deprecated in the Chamber on Monday.
The industry also needs an effective Department that not only says the right things, but does them, too. Earlier, I mentioned the success of the car scrappage scheme, and in aerospace there has been repayable launch aid investment, which is a key factor in the continued success of the British aerospace industry. Contrast that with what the Public Accounts Committee said this week about the regional growth fund and the role of this Government—that
“the Committee was highly disappointed to find that so few final approvals had been given and so few projects had actually started. The Committee was particularly concerned that with £1.4 billion set aside for the Regional Growth Fund, of the £470 million so far paid out by Government, £364 million has been parked with intermediary bodies via endowments and a further £57 million paid to other intermediaries. Only £60 million has been spent on front-line projects.”
Mark Tami (Alyn and Deeside, Labour)
The key to repayable launch aid investment is that it is repayable. Aid has been repaid, and the scheme has been very successful for companies such as Airbus, but the Government have also made money on it, so it makes sense all round. It is not only about the money, but about the fact that the Government are demonstrating to other Governments that they support companies such as Airbus.
Ian Lucas (Wrexham, Labour)
Indeed. Airbus consistently says that the scheme has been a great return on investment for the British taxpayer and that it has provided not only payments in cash, but, over many years, jobs—including high-skilled ones—training and careers for young people in regions such as north-east Wales, which my hon. Friend and I are honoured to represent.
When Government funding is limited, it must be efficiently and quickly applied. UK aerospace is a success. In “Reach for the skies” we have an agreed approach across political divides that has been formulated by the industry to ensure that it remains a success, and it is set out in the aerospace growth partnership report. We now need continuity and concentration on swift implementation of policy. It would be a massive mistake to undermine the shared vision of the future by applying outdated
ideology. That has been part of the problem and will certainly not help our aerospace industry to rise to the challenges of the future.
Andrew Stephenson (Pendle, Conservative)
I congratulate Ian Lucas on securing this important debate and welcome the new Minister to his role. His predecessor, my hon. Friend Mr Prisk, was a strong and vocal advocate of the aerospace industry, and I hope that the Minister will become one, too. I apologise to him and other Members that I have to leave straight after my contribution, but I look forward to reading the debate and the Minister’s response at a later date.
The aerospace industry is vital to Pendle’s manufacturing base. I raised the subject during Business, Innovation and Skills questions last Thursday. In reply, the Secretary of State said:
“Aerospace is an excellent example of how Government and industry can work together to create growth and world-leading industries.”—[Hansard, 6 September 2012; Vol. 549, c. 382.]
The UK aerospace industry is the second largest in the world. It is worth more than £24 billion and employs a huge number of people in Pendle in highly skilled jobs in firms such as Euravia, Graham Engineering, the Merc Engineering Group, PDS (CNC) Engineering, Regal Precision Engineers, Rolls-Royce, T and R Precision Engineering, Weston EU and Whitwam Precision Components.
Last November, Emma Reynolds re-established the all-party parliamentary group on aerospace, and I was delighted to take on the minor role of treasurer. In June, we held a meeting with the Secretary of State for Business, Innovation and Skills, and I was encouraged by what he said about Government support for the industry.
The broad picture both locally in Pendle and nationally is encouraging. I have visited most of the companies that I just mentioned, and on the whole, they are doing well and are positive about the future. Aerospace industry exports rose by 15.6% in 2011 and the civil aerospace market is booming worldwide.
Pendle’s largest aerospace employer, Rolls-Royce, which employs more than 1,000 staff at its sites in Pendle, recently reported record profits and an order book of nearly £52 billion in its civil aerospace division. I took my right hon. Friend the Chancellor of the Exchequer to the Barnoldswick site before the last general election and look forward to my next visit there on
I echo what the hon. Member for Wrexham said about the positive role of the trade unions. One concern that was raised by Rolls-Royce trade union officials at their last meeting with MPs here in Parliament—it was also raised with me by my local trade union representatives—is the unforeseen consequences that the EU’s reform of financial regulation could have on companies such as Rolls-Royce, and I could not agree more with them.
The Minister might be aware that, after the financial crisis, the G20 agreed that over-the-counter derivatives contracts should, if sufficiently standardised, be moved to clearing houses and be reported to trade repositories. That poses real challenges for large non-financially
based companies that utilise OTC derivatives for risk management purposes. That is particularly important to the UK aerospace sector, because virtually all deals are done in US dollars.
Jim Cunningham (Coventry South, Labour)
Does the hon. Gentleman agree that the issue affects not only aerospace but UK manufacturing, which is something that we are all trying to build up at the moment? He has touched on an important issue.
Andrew Stephenson (Pendle, Conservative)
This is a huge matter that will affect all non-financially dominated companies and all large-scale manufacturing companies. Using OTC derivatives allows companies to focus on development and growth of the business and is a simple way of managing risks; it is simply good housekeeping. If the move goes ahead, it will not be long before companies such as Rolls-Royce will be looking to move their headquarters overseas. It is a crucial point, and I applaud the trade unions for spending so much time trying to raise it.
Turning back to my local area, the regional growth fund has had a positive effect. The Government have agreed to fund the Regenerate Pennine Lancashire bid for an additional £7.5 million in business support and its accelerating business growth in Lancashire scheme is designed to meet the needs of local manufacturing small and medium-sized enterprises.
There was also a successful bid from the North West Aerospace Alliance, which I met last December to discuss the challenges that face the industry. It is currently putting together a bid for a national aerospace supply chain centre that would be based in the enterprise zone at Samlesbury in Lancashire. Needless to say, I strongly support the creation of such a centre in the north-west, even though it would not actually be in my constituency.
The regional growth fund announcements came just two weeks after the Government said that they would back the bid from the Visions Learning Trust to create a new £18 million university technical college in east Lancashire. The sponsors of the new UTC are Pendle companies with large aerospace contracts, such as Graham Engineering and Weston EU, so the college will play a key role in addressing the skills shortages faced by many local aerospace companies.
All such developments come on top of issues that the Minister has previously talked about, such as cutting corporation tax, promoting exports and getting the banks lending again. However, there are some areas where the Government could go further. In advance of this debate, I spoke to Dennis Mendoros, the founder and managing director of Euravia—an aerospace company based Kelbrook. It is a medium-sized business with a global reach, and it won the Queen’s award for export in 2010. Mr Mendoros believes that the main issue that has not been extensively discussed is the support that should be provided to aerospace companies with a strong export record.
As many hon. Members will know, exports account for nearly 75% of the UK aerospace turnover. None the less, Mr Mendoros feels that UK export companies do not receive any real structured support from the Government, whereas other countries, such as France, Singapore, and the USA have a structured national strategy for aerospace development. He believes that
much more could be done to ensure that UK Trade and Industry and the Ministry of Defence are focused and committed to supporting UK export companies, especially small and medium-sized businesses such as his own. In addition, he believes that it would be helpful to receive tax incentives to help procure new technologies, skills and expertise, which are essential for continuous growth.
I am aware that industry and the Government have formed the aerospace growth partnership to look at those issues and at what more can be done to support the industry. Will the Minister explain how that partnership and other structured support can help SMEs such as the one run by Mr Mendoros?
In conclusion, the aerospace industry, which is vital to Pendle, is doing incredibly well, with a growing number of orders and jobs. However, more could be done to help SMEs with exports. As I have said in previous debates on manufacturing, the long-term future of the aerospace industry in the UK cannot be secured without a long-term commitment to research and development and support for the supply chain. The Government have done a lot for the aerospace industry so far, but many of our international competitors are taking similar steps, so we need to be constantly striving to stay ahead of the game.
Emma Reynolds (Wolverhampton North East, Labour)
It is a pleasure to serve under your chairmanship, Mr Turner. I am delighted to speak in this important debate, and I congratulate my hon. Friend Ian Lucas on securing it. I also want to take this opportunity to congratulate the Minister on his promotion.
As several hon. Members have already said, the UK’s aerospace industry is tremendously successful. It is an industry that we should be incredibly proud of. It is the largest aerospace industry in Europe, and globally we are second only to the US. In addition, huge growth in aerospace is expected, particularly in the commercial sector. Therefore, it is no surprise that there is a great deal of interest from Members from all parties in this debate. As Andrew Stephenson mentioned, given that interest, I re-established the all-party group on aerospace a year ago. I would like to put on record our thanks to the Business Secretary for addressing our last meeting.
I am sure that it will come as no surprise to Members that my constituency has a vital aerospace presence. Indeed, Wolverhampton has a long and fascinating history of aviation and aerospace development. I will not attempt to recount it all in the time that I have available today, but I will talk about one small nugget. Although Sunbeam is better known for its motorcycles and world-beating cars—the first British car to win a grand prix was a Sunbeam made in Wolverhampton—the company first manufactured aircraft in Wolverhampton in 1912 and made aircraft during the first world war.
Today, Wolverhampton is home to a significant and thriving aerospace cluster, with Goodrich Actuation Systems, which was recently bought out by UTC Aerospace Systems, being the biggest employer; indeed, Goodrich has taken on 150 new employees since the start of 2012. There are other aerospace companies in the city, such as Moog, Timken and HS Marston, which is part of
Hamilton Sundstrand, a company that, like UTC Aerospace Systems, is owned by United Technologies. So parts for the world’s most high-tech and impressive civilian aircraft, such as the Boeing 787, Bombardier C series and Airbus A380, are made in Wolverhampton. Beyond Wolverhampton, the aerospace industry is vital to the wider British economy, as hon. Members have already outlined.
Despite the vitality and success of the British aerospace industry, we must not be complacent about its future. The whole aerospace industry is more global than ever before, and with that the British industry faces fierce competition from the world’s largest economies. The US aerospace industry remains the world’s largest, but it is worth noting that huge investment is being made in China and other emerging economies. The global competition that the British aerospace industry faces today is more fierce than ever before, and the competition that it will face in the years to come will be of a different scale and magnitude to the competition that it has faced in previous years.
Continuity of policy is therefore imperative. I want to make that point strongly. We need cross-party agreement about the strategic importance of the industry and about the Government’s role in supporting it. Although two and a half years seems a long time in politics, it is important to the industry beyond 2015 that it receives ongoing support from whichever party—or parties—happens to win the next election.
I welcome some of the steps that the Government have already taken, and I echo the comments of my hon. Friend the Member for Wrexham in welcoming the aerospace growth partnership, which provides an excellent framework for co-operation between the Government and the industry. I have had positive feedback from industry representatives about the AGP, which, as my hon. Friend has said, is modelled on the success of the Automotive Council.
I also welcome the announcement made in the Budget this year—unfortunately, it was one of the few announcements made in the Budget that I do welcome—that the Government will provide £60 million to fund a new world-class centre in the UK for aerodynamics. I would be grateful to the Minister if he gave us some more detail about that centre at some stage. When will it be opened? Will the Government commit to fund it beyond the initial two-year commitment that they have made?
Unfortunately, there is reason to believe that other countries around the world, including those in our own neighbourhood, are much more astute and generous in supporting aerospace research and development. I wonder whether the Minister shares the concerns in the industry that, if we are not careful, our competitors will simply out-compete us if their Governments give them far greater support for that essential R and D.
The industry also has concerns about intellectual property rights, and I would be grateful to the Minister if he assured the industry and Members that the Government are keeping a watchful eye on any further weakening of IPR for aerospace companies.
Whenever I visit aerospace companies in my constituency and whenever I meet representatives of the industry, they always raise the issue of skills, which the hon.
Member for Pendle has already mentioned today. Given the sheer growth of the industry and the existing skills shortage, there is likely to be a cliff edge in five years’ time, with an acute shortage of engineers, technicians and skilled workers. Moreover, engineering graduates unfortunately do not always go into engineering jobs. Some are attracted to the City and some are attracted not to the aerospace industry but to other industries. There is a real concern in the aerospace industry that it will not be able to maintain its global position if more engineers are not attracted to it in the years to come.
The big names, such as Airbus, do not have trouble finding apprentices. I spoke to a representative of Airbus earlier today who told me that the company received 1,300 applications for 85 apprenticeship places, which is quite astonishing. However, the big names are concerned that it is sometimes more difficult to attract apprentices and a sufficient number of skilled workers for the posts that are advertised further down the supply chain.
I want to follow up the point that my hon. Friend the Member for Wrexham made about the EU’s emissions trading scheme. Aerospace companies are investing to reduce the emissions that their aircraft produce and are producing ever-lighter and more fuel-efficient aircraft, but it is absolutely essential that we strike the right balance between tackling climate change and ensuring that European rules—I am an admitted pro-European, so I am in favour of some European rules—do not disadvantage European aerospace companies to the benefit of non-European ones.
As the Minister is aware, there is a real fear that, if the ongoing ETS dispute with China is not resolved, China will threaten to suspend its order of 45 A330 aircraft. That will simply push the production of those aircraft from Airbus here in Europe across the Atlantic to the US. As recently as yesterday in Berlin, he was made aware of these concerns by Airbus, and I would welcome any reassurances that he can give about what the Government can do at a European level to mitigate the risk of losing such a significant order.
In conclusion, we must not be complacent about the future of the British aerospace industry. Although we should continue to celebrate its successes, we must be alive to the growing and fierce global competition that it faces today and in the future. Again, I want to stress that cross-party support for the industry and long-term continuity are incredibly important, given that it is such a long-term industry. In that vein, I look forward to hearing the Minister’s response.
Mark Tami (Alyn and Deeside, Labour)
Thank you, Mr Turner, for calling me to speak; it is a pleasure to serve under your chairmanship today. I also welcome the Minister to his new job, and I am obviously very pleased that my hon. Friend Ian Lucas was able to secure this debate.
As hon. Members have said, we can be rightly proud of the British aerospace industry. It has been a great success for our country; it is high-value, high-tech and high-quality. It is everything that we want it to be. Several colleagues have said that the industry is worth more than £24 billion to the UK economy and that more than 400,000 jobs rely on it, either directly or indirectly.
I am proud to have Airbus at Broughton in my constituency. It is a company that supports around 100,000 jobs, either directly or indirectly. Broughton is the centre of wing excellence, not only for the UK but globally.
Airbus has been a success story, but the success has been hard won. Back in the 1970s, when Tony Benn, the then Secretary of State for Industry, had a choice to take up the share in Airbus or support Concorde, he chose the latter, which in hindsight was probably not the better option. BAE Systems picked up the share in Airbus, and we were fortunate in the UK to have the wings. It was through luck rather than judgment, if we are honest, but the wings have turned out to be the best part of the aircraft to have, with a lot of value added. BAE Systems chose to sell its share several years ago, and that is generally regarded as not the brightest decision it has ever made. Then again, the company probably has a record of such decisions—if I am not being too unkind.
Airbus has continued to grow, and projects such as the A380 and the A350 are moving on. Despite the fact that we were told that there would not be a market for some of the aircraft, the orders are now beginning to come in and the company is extremely successful.
It has not all been plain sailing. The events of 9/11 saw a dramatic decline in orders, and some orders were scrapped. Airbus was able, nevertheless, to ride that difficult period, thanks not only to the company itself but to the unions, which made some difficult choices to maintain employment and, importantly, the skill base, as colleagues have already mentioned. One of the first decisions taken after 9/11 was to write to every apprentice in the company to say, “Whatever happens, your job is safe.” That compares, perhaps, with the approach of some other companies—if I am honest, particularly British ones—whose first decision would have been to get rid of apprenticeships, considering them a cost rather than the long-term investment that they are.
Currently, Airbus has a 64% market share of civil airliners, which is an incredible state of the order book. There were more than 1,400 orders last year and, with a backlog of 4,500 orders, that equates to work for about seven or eight years. Last week we saw the first A350 wing leave Broughton for Toulouse, for the test aircraft that is being put together there.
The apprenticeship scheme is important because it is an investment. There are 393 apprenticeships already going through, and a further 85 apprentices have been recruited this year. We have to praise the company, because it has not been doing this only recently, but for many years, at a time when the rest of British industry had decided, frankly, that somehow apprenticeships were a thing of the past, and that, rather than investing in younger people in their own companies, they could pinch staff from others.
Mark Tami (Alyn and Deeside, Labour)
Yes, that is true. We have mentioned Brian Fleet, who has retired from Airbus but started off as an apprentice there, left and then came back. That is
telling. Such people have a real feel for all levels of the company and are loyal to the aerospace industry and to this country.
Nevertheless, we cannot rest on our laurels. There are threats to Airbus, not only from Boeing in America but from growing industries in Russia, Brazil, Canada and China. When orders are given to Airbus, or indeed to Boeing, part of the deal will often be that some production function will end up going to one of those countries. We might not like that, and in an ideal world it would not happen, but that is how it works, and the challenge for us is to stay ahead and always be moving forward so that no matter what we end up giving away we have something to replace it with, the skills and value of which is hopefully higher than that of what we have lost.
Airbus is a European partnership, and we are fortunate to have the wings. Spain, Germany and France would love to have the wings. Although we have had a good order book, going back, as I mentioned, for many years, it is always about the next aircraft. We have the A350, and the next one will be the replacement for the A320, which is the real workhorse of the fleet for most airlines. Clearly, we want that here, and it should be here, but Spain, Germany and France will make a good case for its being elsewhere. If we lost that work, the long-term future would not be good. It is vital, therefore, that we invest now. Composites are the future—in fact, they are not the future, they are now. Aircraft are being built with composites now. The UK was behind in composites, and is now catching up, but we need to invest more if we are to bridge the gap that is still there.
The Government need to invest. They have put money in and given support, but I am concerned when I hear that government is not about picking winners. I do not have a problem with picking winners; I have a problem with picking losers. We must invest in success. In the past, the Government too often waited for companies to fail and then threw money at them. That perhaps delayed what was going to happen anyway, but rarely did it turn around a business that had probably gone too far to be saved. I do not have a problem with investing early in the success of a company. There is a huge and growing market out there to exploit, and we are fortunate to be in a strong place in it.
Mention has been made of the military side of things, which unfortunately is sometimes seen as totally different from the civil side. Clearly the planes are different, but the ways in which planes are developed, whether via composites or a whole host of engineering changes, often come from innovations made through military aircraft. The 400M military transport aircraft is the first aircraft to have composite wings produced in Bristol. A lot of work has been done there that could be used for composites in civil aircraft as well. We have only to look back to the Boeing 747, the entire development of which was, I think, paid for by the US military apparently because it was going to be a military transport aircraft. Clearly, it was never going to be that; it was just a way of being able to pay Boeing’s development costs for what became a successful large-scale airliner. We cannot, therefore, separate civil and military; they are both important.
Colleagues have already addressed some of the main issues regarding the EU emissions trading scheme, so I will not go into great detail, but the point I will make is
that China and America are concerned and angry about how the scheme operates. I am not saying that we should just scrap it, but we need to consider ways of getting through the issues, otherwise we will end up with a repeat of what we had in the World Trade Organisation, with the different sides throwing rocks at each other and no one really winning.
Mention has been made of the orders that are potentially under threat. It is not just Airbus that would lose from that, but the whole supplier chain, including Rolls-Royce, which would supply the engines for the aircraft. It is important that the situation should not spiral out of control.
The motor industry has also been mentioned; clearly the industry in the UK went through a dramatic decline. I am pleased that we now produce more cars than we ever did in the past—or, if we are honest, we assemble more. However, the supplier chain has not recovered and we have lost quite a lot of the design stuff. Some has not come back—perhaps it never will. Even the aerospace market is very competitive, and there is pressure to get suppliers to give the best price. Sometimes those suppliers will come from abroad; but we still have a good supplier chain in this country, and we need to invest more in it.
Training has been mentioned, and perhaps, whether with Airbus or anyone else, we need to focus lower down, because we still have skill problems. We must be honest about that and address it. It is a major problem, and it relates not just to technical skills but some basic skills. I think many employers are struck by the fact that there are still such problems.
Emma Reynolds (Wolverhampton North East, Labour)
Does my hon. Friend agree that the Government might consider the Rolls-Royce model of taking on more apprentices than are needed, and, at the end of the training, making the extra apprentices available further down the supply chain, so that it has those skills available to it?
Mark Tami (Alyn and Deeside, Labour)
That is a good point. One of our problems is from the days of privatisation. Whatever faults people may have found in state-run companies, they trained a lot of people to a high standard. After privatisation, one of the first things to change was that many people were not trained any more. I am thinking of electricity supply companies. Many people trained in the public sector ended up going into the private sector. Complaints are made to me about Airbus or other bigger companies poaching people from the supplier chains to feed their needs. That can only happen for a while before the supplier chain—and quality—suffers. Then Airbus or whichever company is involved will look elsewhere for support.
Chris Ruane (Vale of Clwyd, Labour)
My hon. Friend will be aware of the Government’s trumpeting 800,000 extra apprenticeships. I think the figures were given to Parliament yesterday. Are those the type of apprenticeships that could help the automobile and aircraft industries, or are they mini-apprenticeships? What sort of apprenticeships are necessary?
Mark Tami (Alyn and Deeside, Labour)
We are still somewhat unclear. We hear large figures, but do not know. Some jobs that are, I think, dressed up as apprenticeships, may be very low-skilled. Clearly, we need all the jobs we can get in this
country. However, aerospace is a high-tech industry and we need people to fill gaps in it; otherwise companies—and today they are all global—will go elsewhere. We must be extremely careful about that, but it is a great industry and can have a strong future if the Government take it seriously. However, we must support it and invest in it.
Bob Ainsworth (Coventry North East, Labour)
I want to talk about two things: the importance of the aerospace industry, not only in its own standing, but as part of our industrial base; and the contribution and potential of the manufacturing technology centre at Ansty, near Coventry. I thank my hon. Friend Ian Lucas for obtaining the debate, which is an important one.
Other hon. Members have talked about how successful the aerospace industry is, and the figures speak for themselves—100,000 direct jobs, £24.2 billion of annual earnings, 75% of which are earned from export markets, and 17% of the world market, second only to the United States. In no other area of industry do we hold such a pre-eminent position. It is not one that we can afford to give away.
There are too many people in this country who think that we are a post-industrial society, and not all of them take that view from a state of ignorance: there are pre-eminent economists—we had one at the Select Committee on Foreign Affairs the other day—who think that we can earn our living in the world by providing financial services and nothing else. I fail to see how that model will ever be successful. We shall not keep our people gainfully employed, and pay our way in the world, off the back of financial services, no matter how successful the sector is—and it has blotted its copybook big-time in the past couple of years.
In my time in the Ministry of Defence I learned the importance of the aerospace industry, not only to the industrial base, but to our ability to produce the wherewithal to defend ourselves and play a role in the world—something that should not be underestimated. Chris White, who has now left us, talked about the need for an industrial policy. Will the Minister tell us whether he agrees that there is a need for such a policy? There are people who are worried, because of some of the views and attitudes that he has expressed in the past, about his arrival in the Department and whether there will be an attempt to push us into a laissez-faire, devil-take-the-hindmost situation. It is a real concern, and I hope that he will take the opportunity to lay that fear to rest.
The aerospace industry is important in itself—but it is not fully appreciated that that is not its only importance. The synergies across the different parts of our far too small industrial base are also very important, not necessarily to the primes—the big companies, the likes of which my hon. Friend Mark Tami has been discussing—but to small and medium-sized enterprises, and second and third-tier suppliers in the Coventry and Warwickshire area. They do not do aerospace: they do aerospace, automotive and defence supplies. They flex between one and the other. They locate themselves in the area, and can continue to manufacture there, because there is a skill base on which they can still draw. It is not as big as those of many of our competitors.
Hon. Members may want to compare the size of the German industrial base, not so far away. We need critical mass, and the aerospace industry plays an important part in our ability to maintain it. I come from what has been recognised as a car town, so hon. Members might ask what on earth I am doing talking about aerospace, but it plays a huge part in underpinning the skill base of the Coventry and Warwickshire area, never mind the celebrated car companies of the past, or Jaguar Land Rover, which continues to provide employment.
The manufacturing technology centre at Ansty, near my constituency, was established by two midlands regional development agencies—the old East Midlands Development Agency and Advantage West Midlands—which came together with several universities. The concept was to do something that we all recognise the country has been weak at in the past. We have had great pure science expertise in our universities and have repeatedly failed to turn it into product, market share, jobs and skills. The manufacturing technology centres were established to provide that through path, to pull those technological capabilities out of the universities and to encourage companies to share and explore the synergies they all need.
The centre in Ansty, led by Clive Hickman, is now fully operational with 125 people and 39 member companies, a third of which are aerospace companies, with Rolls-Royce playing a particular part. The centre currently has 29 projects with small and medium-sized enterprises. If we want to maintain what was sometimes glibly called high-tech manufacturing capability, we need facilities such as the manufacturing technology centre and we need those facilities to spill out and have a bigger impact on the local economy.
The Ansty development site is still underdeveloped and not fully exploited, despite a fantastically favourable geographical position, with direct access to the A46 trunk road, M69 and M6, easy access to the M40 and west coast main line and—if High Speed 2 is ever built and the Government do not back out—the first station out of London not that far away. The old Rolls-Royce Ansty site, now sadly under-utilised, is coterminous with the development site. The problem for Rolls-Royce is that, although valuable high-tech work is still done on the site, output has shrunk compared with overheads, as operations have shrunk over the years.
I want the expertise of the manufacturing technology centre to spread into the rest of the development site, and I encourage Rolls-Royce to exploit fully again the Ansty site next door, which could have a huge impact on the local economy. The Coventry and Warwickshire local enterprise partnership is doing its best to deliver that, but I wonder about its capacity. I know the Government are totally opposed to the old regional development agencies and think they were over-bureaucratic, but the LEP is private sector-led. The Government must ensure that the LEP has sufficient capability and support to provide the leadership necessary to secure such jobs in the Ansty development site off the back of the manufacturing technology centre.
Iain Wright (Hartlepool, Labour)
It is a pleasure to serve under your chairmanship, Mr Turner.
I congratulate my hon. Friend Ian Lucas, who is a very good friend, on securing this important debate. He is to be commended for bringing this vital topic before the Chamber in such a thoughtful, knowledgeable and measured manner. He was an excellent Minister in the Department for Business, Innovation and Skills and acted as a champion for important future sectors such as the aerospace and automotive industries. He has demonstrated that same commitment to British industry today.
Speaking of congratulations, I welcome Michael Fallon to his appointment as minder of state at the Department. This is his first Adjournment debate in that role. I also welcome his elevation to the Privy Council. He has an important role in championing British industry in a long-term, modern and constructive way, relevant to the needs and ambitions of business in the 21st century, and I wish him well in that task.
On a slight tangent, this is my first opportunity in a debate on aerospace to pay tribute to Neil Armstrong, the first man on the moon, who died last month. That extraordinary man was brave, modest and inspirational, and it should be remembered that his first love was flying.
Sitting suspended for a Division in the House.
On resuming —
Iain Wright (Hartlepool, Labour)
Before we were rudely interrupted by the Division, I was about to take off in tribute to Neil Armstrong, whose first love was flying and aviation. After he came back from the moon, he became a professor of aeronautical engineering at Cincinnati university for the best part of a decade.
Coincidentally, today marks the 50th anniversary of President Kennedy’s moving and powerful speech about the moon project, probably the best example in history of Government and industry working in harmony. This is what he said:
“We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard”.
I genuinely hope that the Secretary of State’s speech yesterday, on an industrial strategy for the UK, will have the same sort of wide-ranging and dramatic impact as Kennedy’s speech had in September 1962. Having said that, given that the Secretary of State has made 15 speeches on this topic since he came to office—an average of one every eight weeks—without any real, discernible impact, I shall not hold my breath on behalf of industry.
In today’s excellent debate, we have heard that the UK aerospace industry is a national success story that should be promoted and celebrated, arguably more than it currently is. My hon. Friend the Member for Wrexham and others have pointed out that this country has 17% of the global market, making the UK the largest aerospace industry in Europe, and second only to the United States in the world. Some 2,600 companies
in the UK directly employ more than 100,000 workers, and last year generated a turnover of close to £25 billion, with three quarters from exports.
As we have heard this afternoon, there are huge opportunities and potential for the industry. Airbus, in its global market forecast published last week, estimated that there will be a need for 28,200 passenger and freight aircraft to be delivered between now and 2031, a potential market worth $4 trillion. Passenger traffic will more than double in the next 20 years, with those passengers flying on larger, more efficient aircraft like the A380, that will be made of material that is substantially lighter but more endurable, and which will consume less fuel and make less noise.
Although the growth of civil aerospace will be large and potentially lucrative, there are also targeted opportunities that our defence aerospace industry, because of our global reputation, should be able to, indeed must, take advantage of. In the face of that huge potential, there is also enormous competition, as my hon. Friend Emma Reynolds mentioned. We cannot afford to be complacent in such an important sector. On the back of that, much of today’s debate has rightly focused on the role of Government in relation to business and aerospace in the context of planning an industrial strategy.
Opposition Members believe strongly that the Government should set out a compelling vision for what this country’s economy will look like in the next 30 or 40 years. They should be determined—not necessarily to pick winners at a company level, as my hon. Friend Mark Tami mentioned—to identify those sectors in which we as a nation have a current competitive strength and a comparative advantage that will allow Britain to play a leading role in global markets in the decades to come. Co-ordination of policy right across Whitehall, not just confined to the Minister’s Department, should then be pursued relentlessly and without dither for the single-minded purpose of allowing those sectors to thrive.
With that in mind, Labour Members fully support the championing of the aerospace sector as a vital and much-needed part of the UK economy. As I have explained, UK aerospace has a leading role in the global market, not just now but in the growth of the sector in the next 20 or 30 years. All Opposition and Government Members should therefore be determined to maintain that market edge, and to enhance it for the good of the national economy.
The aerospace sector has capital expenditure programmes and lead times for research and development, design and manufacture measured in billions of pounds and in decades. The industry and its supply chain need to have confidence and certainty to allow them to plan for the long term. Policy uncertainty is bad for business and for the interests of the UK aerospace industry, as my hon. Friend the Member for Wolverhampton North East eloquently said.
We therefore applaud the creation of the aerospace growth partnership, which is somewhat similar, as my hon. Friend the Member for Wrexham said, in its ambition and scope to the work done with the Automotive Council for another vital sector for the UK economy, the automotive sector. The aerospace growth partnership
builds on the progress made by the advanced manufacturing strategy introduced by the previous Labour Government as part of the “New Industry, New Jobs” initiative. The aerospace growth partnership’s strategic vision for UK aerospace, “Reach for the skies”, is ambitious and clear, focusing on what we believe to be the right areas of strategy, technology, manufacturing capability, supply chain competitiveness and engagement and communications, as well as the vital work undertaken on skills for the sector by the aerospace and defence sector strategy group.
The key strategic findings of “Reach for the skies” state quite explicitly:
“The UK can retain its position as the largest aerospace manufacturer in Europe (and number two globally) if industry and Government work together to address barriers to growth”.
It goes on:
“Companies are more likely to invest in creating jobs and capabilities in the UK if they believe the Government is committed to maintaining the UK as an attractive environment for aerospace.”
Opposition Members certainly support such a commitment.
In that context, and given the debate that we have had, will the Minister take this opportunity to appreciate that in the modern economy, in important industrial sectors such as aerospace, close co-operation, partnership and activism is absolutely necessary between the Government and business? Indeed, it is the only way the UK will maintain and enhance its competitive edge. Will he also take the opportunity to support, in full, the industrial strategy approach set out by the Secretary of State this week; in particular, what he told the House on Monday? The Secretary of State said:
“The other theme is the need for partnership between business and industry. Very few countries have a purely laissez-faire approach, and we should learn from their experience. We also should draw on our experience; I have learned much from some of my predecessors, particularly Lord Heseltine, who has an office in my Department and is contributing valuably to thinking on this subject.”—[Hansard, 10 September 2012; Vol. 550, c. 25.]
Will the Minister fully endorse his Secretary of State’s approach? Will he also take the opportunity to reject his own comments in The Sunday Telegraph, particularly—I think my hon. Friend the Member for Wrexham mentioned this—when he said:
“Deregulation and privatisation worked before”?
Is that not a somewhat dated and discredited approach that will do nothing to address the business needs in a fiercely competitive and interconnected global economy of the 21st century? It is like trying to solve the problems of 2012 by harking back to 1982, or like listening to a Sony Walkman when the world is excited about iPhone 5s.
“Reach for the skies” states that business and the Government are working to identify the product and manufacturing process technologies that will position the country for growth, and that a business case will be set out by the end of this month. Is that still on track? Will the Minister update the Chamber on that important matter? Similarly, the document states that business and the Government will develop a strategic plan for the UK aerospace industry’s underpinning and enabling capabilities within academia, the supply chain and the relevant Catapult, as well as creating a strategic roadmap—or should that be runway—to exploit future technologies. Again, will the Minister give an update on progress on that?
I am concerned that business policy should not merely reside in the Department for Business, Innovation and Skills, but that the reach of an industrial strategy should stretch right across Whitehall. In that vein, the Minister will want to address one of the findings in “Reach for the skies”. A big factor in whether we can maintain and enhance our competitiveness in aerospace—mentioned by my hon. Friends the Member for Wolverhampton North East and for Alyn and Deeside, and myright hon. Friend Mr Ainsworth —is the shortage of skilled engineers, particularly at senior technician, graduate and postgraduate level. What work is the Minister doing to address that, and how is he engaging with the Secretary of State for Education on this vital issue, particularly as the Education Secretary has downgraded the engineering diploma? Does the Minister share my concern that studying engineering at school, college, as an apprentice and at university does not seem to be a top priority in Sanctuary Buildings, and that for the sake of our competitiveness in the next 20, 30 and 40 years it should be a priority, especially when it comes to important sectors such as aerospace? Will the skills strategy for aerospace be delivered as planned by autumn 2012?
One of the risks to the industry identified by the aerospace growth partnership is access to finance, especially in the supply chain, and we need to ensure that the gap between banks and aerospace businesses are closed. Yesterday’s speech by the Secretary of State for Business, Innovation and Skills mentioned setting up a British business bank. That is a welcome step, as we are the only country in the G8 that does not have such an institution for small and medium-sized enterprises’ financing requirements. Will the Minister say a little more about that? Will he expand on the points made by my hon. Friend the Member for Wrexham? Will the British business bank have new money and new borrowing powers, or is it a case of existing arrangements being consolidated into something new? How will SMEs in the aerospace supply chain derive benefit from such a bank?
Concerns about the EU emissions trading scheme have been raised in the debate. There is no point in undermining our competitiveness and losing trade to the likes of China and Russia, and order books being lost. I hope the Minister will spend some time addressing that, too.
Opposition Members are passionate supporters of the UK aerospace industry. We need to give the major players certainty and stability, allowing them to invest for the long term. We want UK aerospace to maintain its global pre-eminence as the market grows sharply, but in the face of fierce competition, this is possible only with an active partnership between Government and industry. We will support the Minister and the Government wholeheartedly if they adopt that model. I hope that the Minister will take this opportunity—his first in an Adjournment debate—to pursue such an approach for the sake of the advancement and prosperity of the UK aerospace industry, long into the future.
Michael Fallon (Sevenoaks, Conservative)
an early opportunity to answer this debate as Minister for the aerospace industries and for the tone he set in launching this debate. I may have other debates with Mr Wright where words such as “dogma” and “ideology” are more appropriate, but I do not think this has been one of them. It has been an excellent, timely debate that allows me to report on yesterday’s meetings in Berlin of the European Ministers in this area, which focused on Airbus, one of the world’s largest aerospace companies and a key part of our aerospace sector. I met Thomas Enders and Tom Williams and heard directly from Airbus about its position in the marketplace and its reports on progress with each of its planes.
The aerospace sector, as Mr Ainsworth and other hon. Members reminded us, is not just about the large global companies. The UK has many thriving mid-size companies and small and medium-sized ones as well. Hon. Members might be interested to know that, while in Berlin, I spent some time with one of the aerospace regional trade associations, the Midlands Aerospace Alliance and some of the smaller companies exhibiting at the show. They were doing a great job seeking out export opportunities for this country. One of the companies there, for example, was Tritech, based in the constituency of the hon. Member for Wrexham. It is interesting to note that Tritech, which provides castings for a range of customers, was formed in the difficult industrial climate of the early 1980s, but has gone from strength to strength.
In his speech yesterday on industrial strategy, my right hon. Friend the Secretary of State for Business, Innovation and Skills said that aerospace was a sector where the Government are developing a long term strategic partnership. I emphasise that, because there has been much discussion about picking winners, and so on. This is much more about backing winners and helping the industries pick their own winners and seeing what government can do to support them. As the Secretary of State emphasised yesterday, there is a need for a partnership between government and the industry on aerospace because, although it demands long-time horizons, the potential prize is measured in trillions of dollars.
It was clear from our meeting and update with Airbus yesterday that the opportunities are immense in terms of future orders to replace the ageing fleets, both in the United States and Africa, and there are also enormous challenges from increasing global competition and the need for step changes in technology to further improve the environmental performance of new aircraft. I hope that it is clear that this Government recognise the value of the aerospace sector and is committed to work with companies, not simply to sustain it, but to grow it.
Several hon. Members mentioned the size of the sector. It contributes more than £24 billion a year to our economy and provides directly more than 100,000 highly skilled and high-paid jobs, and many more than that indirectly. At present we are a world leader in the design and manufacture of large aircraft wings and components, aero-engines and advanced systems, such as landing gear. These are the most complex parts of any aircraft. The UK is well placed to pick up a significant share of the huge growth opportunities that exist in the global
market for new aircraft. Airbus estimates that more 27,000 new large passenger aircraft will be required by 2030.
As several hon. Members emphasised, including Mark Tami, this is a competitive market. I do not want to tempt the hon. Member for Hartlepool any further, but I am a little surprised that he mocks privatisation: these are all successful companies because they are private companies, competing in a competitive private market. However, I recognise the role of Government in sustaining that market and helping it grow. That is why we created the growth partnership, to work with companies and tackle barriers to growth, boost exports and grow the number of high-value jobs in the UK. I confirm that I will chair the group, together with Marcus Bryson from GKN.
The growth partnership is not about the Government trying to impose a strategy on business, but about better understanding where companies see opportunities, helping them to identify them and removing the bottlenecks to growth. The growth partnership now involves the commitment of more than 80 senior business people, supported by eight full-time secondees provided and funded by the aerospace industry. That is a major investment by the sector and an indication of the importance that it attaches to the initiative.
Hon. Members have been kind about the “Strategic Vision” document that we published in July. I will add more detail to that, showing how we will implement it, towards the end of the year. However, we are already supporting the industry in a number of ways. At Farnborough air show, we announced a further package of Government and industry investment—more than £200 million—which includes £100 million of investment in aerodynamics; joint industry and Government funding for 500 masters-level degree places in aerospace engineering; and further investment in low-emissions engine technology and towards major business-led aerospace research and development projects.
In addition, the aerospace sector is benefiting from the creation of a high-value manufacturing catapult centre, part of a network backed by £200 million of Government funding, helping to better commercialise the outputs of our world-class research base. We continue to support aerospace exports through UK Export Finance, supporting more than £2 billion of aerospace business last year.
Such support should not, as hon. Members have said, simply be about money. A lot of this work is about how to flesh out the partnership and deal with some issues that this sector, like others, confronts—notably, the shortage of skills, which is particularly an issue for small and medium-sized businesses and better UK sourcing of the supply chain—and, of course, what the industry and the Government need to do collaboratively to help bolster our research and development base. I will give the House more details on how we will implement the strategic vision in a few months.
Let me deal with some questions asked by hon. Members. I apologise if I am not able to deal with all of them in the remaining six minutes. I will write to hon. Members about any questions that I have missed.
Access to finance is critical for small and medium-sized companies, which is why we are working hard to reform banking and have more challenger banks able to develop
those more traditional business relationships, which the larger banks got away from in the run-up to the financial crisis, and ensure that lending is really getting through to those small companies when and where they need it and on terms they can afford. My Department will be monitoring access and the use that the bigger banks are making of the funding for lending scheme, ensuring that the full benefit of that scheme is being passed on.
On the emissions trading scheme, Airbus yesterday left the Ministers from France, Spain and Germany, and me, in no doubt that the threat of retaliatory action is now extremely serious. I, too, left my fellow Ministers in no doubt of our position. The emissions trading scheme is now law—part of a directive—and that has been passed not only by the European Parliament and Council but by this House. We have environmental obligations that all of us want to honour. Equally, the directive makes it clear that there is provision for review where there is international agreement to deal with such a review, and I have made it clear that the work of finding a solution to the problem, in particular the issue of extraterritoriality, is now urgent. The clock is ticking as the directive has to come into force in April. We need to find a way through—a solution through the International Civil Aviation Organisation or other forums in which there is dialogue between the European Union and China and so on.
The regional growth fund was mentioned by a number of Members, and there have been criticisms of the pace of some of the earlier awards under the scheme. I look forward to responding on that when I appear before the Select Committee shortly.
Emma Reynolds asked me specifically about the aerodynamic centre. The £60 million is obviously not all for the centre. On the location, it will be no surprise to learn that a number of options have been put forward. A panel of experts is meeting this week and will give me advice shortly. We hope to announce the decision soon.
On investment in composites, we will continue to support the national composites centre in Bristol, part of the series of catapult centres, and to encourage the use of the centre by aerospace companies. The right hon. Member for Coventry North East asked me about the manufacturing technology centre at Ansty Park, which is also part of the high-value manufacturing catapult centres. At Farnborough, we announced some £40 million to support a series of projects that Rolls-Royce is leading on advanced manufacturing processes and that is one of the first initiatives to go through the MTC. If the right hon. Gentleman is suggesting that it is still underused and that there is scope for greater capacity, I am happy to have a look and to reply in more detail.
The United Kingdom has an aerospace sector of which we can be justly proud, but I assure hon. Members who have participated in the debate that we cannot afford to be complacent. They will see nothing other than an unstinting and unflagging commitment from the Government to making Britain the best place in the world for aerospace businesses to invest, design, manufacture and export.
I am grateful for the kind words that hon. Members offered me on my appointment and for their interest in this particular sector and their non-political approach, exemplified by the formation of the all-party group, in
the work of which I shall certainly take an interest. I might have missed some individual points made in the debate, but I hope to demonstrate the kind of commitment to the industry that others in the Chamber have demonstrated previously and so well in the debate. The sector is vital and I certainly pledge to do what I can to support it.