The four S’s of recovery: strategy, sustainability, skills and strengths
A focus on the four ‘S’s’ – Strategy, Sustainability, Skills and Strengths – together with a real ambition for growth, will help the UK’s aerospace, defence, security and space industries to emerge stronger from the Covid-19 pandemic. That was the view of Tony Wood, President, ADS and CEO of Meggitt, who was in conversation with Katherine Bennett CBE, Senior Vice President of Airbus at ADS Live 2021.
Bennett and Wood’s conversation touched on a number of key themes:
Industry needs to “accelerate ambitions”
Wood acknowledged that 2020 had been “a year like no other.” He said his previously reported original three S’s – strategies, sustainability and skills – had now been joined by another S – ‘strength’.
He said focusing on these four ‘S’s’ was as important to the industry as its partnership with government. He said the industry needed to ask itself many questions before putting itself on track to greater growth: “I would put forward to our members that the real focus is how do we accelerate? We have to find a way to build back: how to restore growth and how to accelerate some of the ambitions that sit behind those relatively simple three priorities which are huge areas for us.”
“On strategy we’re an innovation and technology-led industry: how do we accelerate some of the activity to accelerate research and technology investments in the sector? How do we accelerate the industrialisation benefits of the work that we’ve been doing in partnership with government to find better ways of realising some of those great designs. And how do we find a way to enable these spillover benefits that go to the wider base in the UK, of all of the products and services and the support and services that are provided over many, many years.”
The fourth ‘S’ that Wood added was ‘Strength’. He explained: “The focus now is all about how do we restore growth, so how do we essentially get strength back in, as the fourth ‘S’, and strength is about getting this partnership with government.”
Wood said with many of ADS’ civil aerospace businesses having taken a “battering” during to market conditions, the “focus with government is how do we build that partnership to restore strength, coming out of this pandemic?”
The world is “not a level playing field”
Acknowledging that the past year had been a “really tough year for the country and for all of the four sectors,” he added that members had shown “remarkable resilience and adaptability” in continuing to support their customers.
He thanked the government for providing support via the furlough scheme, loan support and the announcement of increased spending in the government’s defence reviews but added that the pandemic had also highlighted inequalities between countries in terms of economic investment levels.
He said: “My real concern is that we’ve been reminded of the fact that the world is not a level playing field, and the actions taken in France and Germany, and also lastly in the United States with a specific focus within those actions on support and funding for aerospace is something we really do need to include and find the way forward on in the UK. But I think the most acute focus is ‘how do we get the world flying again?”
Wood added that guidance from the Department of Transport’s Global Travel Task Force stating exact conditions required for the restart of international travel would be needed to create a sustainable network, creating opportunities for recovery for civil aerospace members.
The defence industry – a “Bull’s Eye” for the levelling up agenda
Wood said the defence industry could be a real focus for the government’s levelling up agenda with 90 per cent of business activity taking place outside of south east England.
He explained: “Defence represents some 375,000 employees across the UK and all of the sectors we operate in, about 250,000 of those are in aerospace and defence. It’s an amazing industry – some 90 per cent of that activity happens outside of the south east of England and 65 per cent of defence activity is happening, again, in the Midlands in the north of England. If you ever wanted a ‘Bull’s Eye’ from industry to focus on the levelling up agenda this is very much it in terms of where the employment sits.”
But Wood said the industry ran the risk of decreasing influence within the global market – the challenge was to partner with government to invest in those opportunities which have been accelerated by the pandemic.
He said:“A decade ago, the UK sat at number two in the world in civil aerospace, a massive 70 per cent market share, that number today, as we exit the pandemic, is around 12 per cent and our position is now fourth behind two of our European partners who’ve have just crept ahead, sitting behind the United States. That really is a challenge for us but it is an enormous opportunity and with the advent of sustainable aviation with the great companies that we’ve got across the United Kingdom it’s about how do we partner with government, with a challenging time for business to invest, to really focus on some of the opportunities like sustainable aviation, to get the growth back into the industry and some winning for the future.”
Sustainability – “the foothills of opportunity”
Wood said the transition to sustainable flight provided a real growth opportunity for UK industry.
He said the industry had a proven track record of development with the 50 year journey from propeller to jet engine. “Seventy years later, we’re now very much in the foothills of the opportunity to make the next transition to fully sustainable travel by air.”
Wood said there was “optimism and enthusiasm,” along with the fact that 80 per cent of the world’s population were still yet to make their first flight. He said the switch to sustainable flight would take place “within a decade.”
He added: “Certainly at the small end of air travel we’re going to see fully sustainable designs and that’s really why we’re focusing our conversation with government on not just the sustainable incremental improvements every year but those radical improvements in aircraft propulsion technologies in aircraft fuels, sustainable aviation fuels that the Secretary of State was just talking about – those two areas are what are required, and where we need to invest to make that step change. The ask is that’s going to require a doubling of the investment in the Aerospace Technology Institute, which has been very well supported by government over the last few years, but to make that step and re-level our playing field with our competitors around the world, we have a unique opportunity. we’re at an inflection point to do that now to speed the growth as we emerge from the pandemic.”
Wood described the commitment to increased investment contained in the Defence Spending Review as a “big plus.” A focus away from global competition and building the UK’s industrial base was also welcomed.
He explained: “We should not be moving to a default solution of global competition when the UK is looking to purchase defence capability and security capability. There’s a tremendous amount of investment and the opportunity of government to invest in the UK, build that industrial base and get as much benefit from that as they can, so very encouraged by visitors move away from default competition. Secondly, encouraged by the focus on R&D, that is the core of all of our industries but very much in defence, and thirdly actually something that we’ve seen other nations do very effectively but a move back to a focus on government-to-government-led export activity. That’s one big area where the UK has shown in the past how good it can be, so very positive on that.”
Space: ‘a critical sector’
Wood described the space sector as “the cutting edge of technology” and an opportunity for industry and government to work in partnership. ADS represents hundreds of companies with interests in the sector which provided an “increasing focus for the UK” which has been laid out in the Prime Minister’s National Space strategy.
Wood added that the government had shown “real commitment” to space, “not just to their investment in OneWeb for instance on the satellite side, but also commitment to get a launch capability for space which is something that really will take us forwards. It’s a critical sector and ADS is going to be increasing its focus and standing up a board to make sure that members get the proper representation there, and that we have better access to around £300 billion worth of activity across the UK, economic activity which is underpinned by, for instance the satellite activity which is a key part of the space sector.”