The Rt. Hon. Patricia Hewitt

Aerospace IGT Implementation Conference

When we launched the manufacturing strategy and the Aerospace Innovation and Growth team in May last year, it marked a step change in our approach to industrial policy in this country. And the beginning of a new partnership between Government, business, employees and their unions and communities across the country. All of us committed to high wage, high value, high skill manufacturing in Britain.

Our "Industry led and Government backed" approach was put into place with the IGT.

The challenge for industry and Government remains as huge as ever - with the whole world economic map being redrawn.

We've got China joining the World Trade Organisation, India producing a quarter of a million science and IT graduates a year, ten new countries joining the European Union in just a few months, and others queuing to join.

And the speed of change in technology and customer taste so fast that product life cycles, once four, five years or even longer from design to decline, are now, in many cases, just a year or eighteen months.

So new opportunities and new markets - new challenges and new competition too. We can't stop technology and globalisation and we shouldn't want. We must respond with innovation. Higher value added products and processes. Faster, cleaner production processes. A virtuous circle of investment, skills and innovation. Higher profits and higher wages.

Aerospace is one of our most innovative and high value added industries.
We

• Have the second largest aerospace industry in the world, after the US;
• Employ 3,000 people producing the high tech high value added wings for the new Airbus superjumbo, now outselling Boeing for the first time.
• Have one of only three manufacturers of large aeroengines in the world.

Our best aerospace companies are the best in the world. And we're backing you. But we don't have enough. And our productivity still lags our main competitor.

Which is why we must press ahead, in partnership, as we implement the manufacturing strategy and take forward the IGT's work.

Lots has been done since the IGT report was published, reflecting the continued commitment and energy of the Executive, the Working Groups and the key stakeholders. And Government is committed too. I'm here today to tell you that DTI is 100% behind this report. I've told my officials that I'm taking a particular interest in progress on this report and I'll be monitoring it personally.

I'll run through the five main themes of the report, which mirror almost exactly the priorities we highlighted in the manufacturing strategy last year.

First, the need to improve productivity. If the UK matched productivity levels in manufacturing in our main competitors, we'd be £80 billion a year better off.

The aerospace industry has made great strides in tackling the productivity gap but there's more to be done. I'm glad the industry recognises this and is responding with clear recommendations for action.

Like the new proposal on raising process excellence. Your proposal looks to harness best practice (both within the aerospace and other sectors -namely automotive) to raise productivity. I'm very impressed that you've already made considerable progress in getting pilot projects under way, and I can assure you that Government will be playing its part too.

I am pleased to say that, building upon the strong tradition of EPSRC and the Universities working with the aerospace sector, funds are available within the Innovative Manufacturing Research Centres to support the research on process improvement methodologies, related training and dissemination of best practice - both within the industry and across other sectors.

And the project should also be able to access funds from DTI's new business support product, aimed at boosting productivity through the adoption of best practice. To complement this support we are in touch with colleagues in the Regions about how we can work together to take this activity forward.

Second, the need to harness technology as an enabler of innovation.

We've doubled the amount of money we put in science and innovation - £3 billion a year. And we're getting results. University spinouts have trebled.

But we need to be sure we get huge returns from this huge investment. That our money is sharply focussed on the key technologies of tomorrow.

Last week, we had the launch of Richard Lambert's review into the relationships between our universities and our business. It's another tribute to Aerospace that the report picked out as a model example Rolls Royce's University Technology Centres. Very soon, we'll publish the results of our own review of Innovation policy led by David Sainsbury.

Tough decisions have been needed. But high value aerospace has nothing to fear. Indeed, the aerospace sector should be well placed to benefit even more, provided the sector works with the new system and seizes the new opportunities that are provided.

Third - skills and training.

The IGT has done some excellent work in the implementation plan looking at future skills needs and shortages for the sector. It will be well placed to work with the new Aerospace Skills Council established in SETMA - working with the Sector Skills Development Agency and the Learning Skills Council.

The aerospace industry generally works closely with employees and their representatives and I'm delighted this is represented in the IGT, with a trade union member.

Last year, Amicus and the SBAC won one of the first Partnership Fund awards to look at aerospace workplaces in other countries.

I am delighted to announce that, building on that success, DTI has now awarded Amicus and SBAC a grant of £234,000, again under the Partnership Fund, for a High Performance Work Organisation project which will contribute to the delivery of the IGT's skills recommendations.

Fourth - the Economic background.

We need to sustain at all costs the stability we established in the first term.

From a country that used to be first in, last out of recession - it's astonishing to think we're now the only major industrial economy in the world to have grown in every quarter for the last six years. With the lowest inflation and interest rates in over forty years and the highest employment ever.

On top of this, aerospace has benefited from unprecedented levels of Launch Investment and export credit support, the new R&D tax credits, as well as the new Defence Industrial Policy.

The IGT was right to identify the economic background as a key factor for the future success of the industry, and I am pleased to reassure you that it is at the top of the Government's agenda.
I want to see all the energies of the UK's support networks used effectively to realise the IGT's vision. We are committed to working closely with the regions and with industry bodies to support aerospace - directing our collective efforts to delivering the recommendations of the IGT.
One example of this joined up working between Regions and DTI is in the North West, where the Development Agency is currently considering a proposal for substantial support for the establishment of an Aerospace Innovation Centre, with the North West Aerospace Alliance. This will create and develop a focal point and knowledge base for aerospace companies and academe in the Region to build on and develop the capabilities already in place. This joint exercise will help ensure that it fits with the IGT's Implementation plan, and we are being supported by the expertise of the SBAC in this exercise.
Environment and safety. Finally, with the number of air passengers expected to double over the next 20 years, I'm glad the IGT recognised the importance of the environmental, safety, and security challenges.

This will be good for the industry, good for air passengers, and good for wider society.

I want research grants in future to ensure that new technologies being developed have a green dimension.

We'll also stay at the forefront of international negotiations on noise and emissions targets. I'm therefore pleased to announce that DTI and the Department for Transport will jointly be funding the Greener by Design initiative that will be instrumental in driving forward progress on environmental issues over the next year.

To close, these are challenging times. For all industry - services and manufacturing.

Our aerospace sector is absolutely vital. We'll continue to back you as you go from strength to strength. Your industry has traditionally enjoyed strong Government support. We've always worked closely with you, and you are fully entitled to expect that to continue in future.

As Sir Richard correctly anticipated, I haven't come here today with a large cheque to hand over. But I have come with a pledge. My pledge is that DTI will do all it can, working with the industry and with key public stakeholders, to deliver the additional funding which the IGT has identified as necessary for the industry's continued success. That will mean exploring all the possible funding sources, including the Regional Development Agencies, other Government Departments, and the Research Councils, as well as the DTI, to find the support needed. My officials will be working hard on this over the coming months and they will need industry's full co-operation to be effective.

With the partnership, vision and strategy in place, I'm confident we can rise to the challenges that lie ahead.