Difficult decisions face aerospace industry
Posted on 6 March 2002
Difficult decisions have to be made by the Government about the future of the UK's aerospace industry, a University of York academic has warned.
Professor Keith Hartley says that although the industry has become far more competitive than in the past, there is no guarantee that it will remain that way. He said: "Concerns have been expressed about the level of state support for both civil and military research and development, and it is research and development programmes which provide the next generation of projects for export."
Professor Hartley, of the Department of Economics, has been commissioned by the Department of Trade and Industry to make a four-month study of aerospace competitiveness. He says that between 1980 and 2000, using the USA as a benchmark, the UK aerospace industry improved its competitiveness in productivity, scale of output, development times, employment adjustment, exports and profitability.
But he predicts that it is unlikely that there will be any future independent UK aircraft, helicopter and missile programmes. "Future aerospace projects will be collaborative. Airbus is a model of successful collaboration."
He added: "Governments remain important to the future of the UK aerospace industry. They are major buyers of defence equipment, including the funding of defence research and development, and they provide support for civil aircraft research and development (eg Airbus A380). They need to make difficult choices about the value to the UK of its aerospace industry and their continued willingness to provide state support for the industry."
Notes to editors:
- Labour productivity. The UK aerospace industry's labour productivity relative to both the US and EU industries improved over the period 1980 to 2000.
- Output is a major determinant of unit costs and competitiveness. The US aerospace industry has the advantage of a large home market, especially for military aircraft. However, on civil aircraft, Airbus (with a UK involvement on wings, engines and equipment) is approaching US scales of output (eg A320). Also, on military projects, European collaboration results in output levels closer to those in the USA and considerably greater than European national scales of output (eg Eurofighter).
- Development times. Airbus is now competitive with Boeing on development times. On current generations of combat aircraft, development times are similar between Europe and the USA, confirming that the US industry no longer has a competitive advantage in this aspect of industry performance.
- Employment adjustment. Since 1980, the UK aerospace industry's employment has become more responsive to variations in output. UK employment adjusts far faster than the French aerospace industry and it is approaching US levels of adjustment.
- Exports. Military aerospace exports have dominated UK exports of defence equipment. There have been significant successes: sales to Saudi Arabia; a world leader for subsonic combat aircraft (Hawk); and supplying over 60% by value of US imports of aerospace sub-systems (eg avionics; ejection seats; air-to-air refuelling). On civil aircraft, Airbus has increased its world market share from under 10% in 1980 to almost 40% in 2000/01.
- Profitability reflects successful competitiveness. Over the period 1985 to 2000, the UK's profitability generally exceeded that of the US and EU aerospace industries. This was achieved despite the advantage the US industry has with its larger scale of output and larger firms.