Typhoon: The last hurrah for the UK aerospace industry?

Defence Management, UK ^ | 22 August 2011 | Anthony Hall

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Typhoon: The last hurrah for the UK aerospace industry?

22 August 2011

Outgoing GKN plc Chief Executive Sir Kevin Smith tellls DMJ editor Anthony Hall what the UK aerospace industry must do to secure its future in tough economic times…

With the government focusing its defence industry policy towards a drive for exports, the invitation from UKTI DSO to visit the Pall Mall offices of GKN plc to speak to CEO Sir Kevin Smith was a timely one.

A business leader with over 30 years' experience in the aerospace industry, Smith has been chief executive of GKN since 2003 and a member of the government's Business Ambassador Network since its inception in 2008. In March, he announced his retirement at the end of the year, but if the interview had the tone of a valedictory, it was also spiced with some straight talking about the future needs of the UK's aerospace sector.

Smith's role as a Business Ambassador and his work as a member of the government's Asia Task Force have seen him promote UK aerospace to some of the world's biggest export markets. Having seen how trade is developing internationally, DMJ begins by asking him where he believes the UK's key markets will lie in the future.

"India is particularly strong for the UK," Smith reveals. "The Typhoon competition that's currently building there is important. The Middle East will continue to be strong for us and is an area we need to continue to focus on." He also points to the recent bilateral arrangements with Brazil as having the potential for some interesting developments, while in Japan, the new fighter programme involving Typhoon provides, in his considered opinion, "the best opportunity we've ever had to get equipment in there".

Markets in which the UK has traditionally performed strongly will always be very important, Smith maintains, citing the work to sell Hawk into the US training requirement as an example. "North America is going to be extremely important to us. Exporting there is difficult, but building relationships where we can take British products will remain important."

Growth in the market around Asia, in Smith's view, will be driven by China's development and how its neighbours see that in terms of potential threat. "I do feel that there is more growth in Asia as their economies give them the ability to spend more on defence," he says. As far as individual nations are concerned, Smith remains unconvinced that Japan will experience major market growth, save for a number of replacement programmes, but suggests that India will continue to grow strongly, again stressing the nation's importance as a UK defence customer and partner.

The normal process of Indian defence procurement, he explains, requires a long-term business relationship. Initial acquisition will move into a phase of license build, where Indian firms will manufacture the technology under a license agreement. "Then you're into support and upgrades that have long-term potential for value generation for the UK and the UK defence industry." This is why maintaining these relationships, particularly in regard to the Indian fighter programme, is so vital. "If we lose it now," says Smith, "we've lost it for a long time."

As regards other countries vying for business in the aerospace sector, Smith identifies North America and France, and to a lesser extent Sweden, as the UK's prime competitors, but also notes Russia's growing competitiveness, particularly in the Asian economies.

UK aerospace and future competitiveness Smith describes a "lumpiness" in terms of global procurement that makes the success of Typhoon all the more important to UK defence: "It's the only product we have in that space in the market at the moment," he says, although he does point to the UK position within the Joint Strike Fighter (JSF) programme, "which is valuable and can be produced in significant volumes," as well as the Hawk.

However, Smith strongly believes that what is required now is an entirely new development programme in Europe, which would have a positive long-term impact on the sector. The UK, he says, has "no aircraft that we own, develop and build". Its real strength has been in systems integration. "We also have a very good reputation for building military aircraft for various roles, but that continues to diminish. If the European governments don't order new platforms," he asserts, "there's no way that the UK industry can continue to compete at home or abroad."

For Smith, the retention of the UK's industrial expertise in the aerospace sector is vital, not just in economic terms but in supporting the defence of the country. "I have worked in and around the industry for a long time, and you were always brought up as being part of the defence capability of the country, and felt very proud of being involved in that. Whenever we've been in conflict, the ability to react rapidly and support our armed forces is something that the industry has always coalesced behind and always felt a real part of what was happening with our armed forces.

"I think we are responsive in the UK and can make things happen very quickly from an industrial point of view to support our armed forces," he continues. "We have some real strengths in terms of aircraft and structural manufacturing and the systems that go in them, and we can continue to develop that into new programmes."

It's not all good news, however: "We're going to struggle to maintain the industry we have today and its competitiveness," he asserts. "Clearly times are very difficult; economically things are really tough, and the armed services in particular are at the front of that. When you go through a period when you have to make cuts, you have to take care of the capabilities that really matter, in terms of the defence of the UK, as well as in terms of the economic value creation that industry is responsible for – not just in terms of exports, but also the spin-offs into other sectors. In my time, for example, the spin-off from military aircraft manufacture into civil aviation has been extremely valuable to the development of that industry."

What has been lost, he believes, is a principle of understanding the value of industrial capabilities in the same way as the value of the armed forces and defence capabilities are understood. Specifically linking the off-the-shelf procurement strategy to this, he suggests that such thinking is "potentially detrimental to the industry in the long term".

Another priority in economically stringent times must be to maintain industry's technological base, Smith outlines. In doing so, industry retains the ability to respond and react as economic times improve and resources become available to invest in defence. "Being able to demonstrate technologies, even if you can't build them at this point...I think that's really important," he says. "Once you lose those capabilities, it's very, very difficult to rebuild."

When asked how easy it would be in his opinion to raise technology in the UK back up to the highest level, Smith is less than optimistic: "I think we have lost a lot. When I worked in the Military Aircraft Division at British Aerospace in the 1990s, we were producing the two variants of the Tornado – the IDS and the ADB – in collaboration. We had Sea Harrier incorporated in production and we had the AV8 in collaboration with the US Marine Corps, which then went back into the Royal Air Force for the GR7 and the Harrier TMK10. We had the 60, 100 and 200 series Hawk and the T45 Hawk collaboration for the US Navy, and we were doing the early phases of development of Eurofighter. Then in the latter part of the 1990s, we moved into the Nimrod programme. A lot of the capability to do that has gone, and continues to disappear. We don't make a whole aircraft anymore and have probably lost that capability as a nation."

While stressing that collaboration is important, and that sustaining the capability to develop advanced systems and weapons systems across Europe is key, he concedes that nationally, once the UK loses its own capability, it cannot be rebuilt: "It goes, and I think that is demonstrated by how the aerospace industry, although it still has a strong position globally, is substantially based on decisions that were made a long time ago."

Once again, the Eurofighter/Typhoon provides a pertinent example. Launched in the late 80s and early 90s, it is viewed today by most of those outside the UK aerospace industry as its defining aircraft. However, this owes little to current practices, Smith explains: "The industry we have today is not a product of what's happened over the last two or five years. It's a product of what happened 10 years ago. The decisions we take or don't take now affect the ability to sustain the industry in the next 10-15 years. The Typhoon could be the last hurrah."

This is why a new European aircraft programme is so important, he says. "In the US, you have the JSF Programme, which is just starting to come into production, and behind that, they have programmes that they're demonstrating technology on today, which are going to be the production programmes in 10 or 15 years' time." The concern, he says, is that the UK isn't developing a demonstration phase.

"I know it's very difficult to commit to major procurement programmes at this point, but to have a long-term understanding of how to develop a defence capability and the industry to support it, and therefore what sort of technologies we should be working on today, I think a demonstration phase is important." Only through collaboration, he says, can this be achieved, adding: "I believe our collaborative homeland has been Europe."

"I love the aviation industry," Smith concludes. "I feel very proud to have been a part of it and very proud that we have the second biggest aviation industry in the world, and a very strong part of that is the defence side." The civil side continues to grow, and he wants to see that continue, but "the technology development on defence and the global positioning of our industry from the defence side is hugely important". The UK, he says, should be doing absolutely everything it possibly can to make sure the core muscle of that industry continues to be supported and developed. "Guys like me have a significant role to play, but in the defence sector you can't do it without government alongside us, and from a UK point of view, we can't do it without European governments alongside us."

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