2011 budget reaction from UK aerospace, defence & security sectors

A|D|S today (Wednesday) reacts to the 2011 Budget statement from the Chancellor of the Exchequer, the Rt Hon George Osborne MP. A|D|S comments below on the overall aim of the Budget, changes to aviation taxation, science investment, defence spending, skills and education funding, support to small, innovative and manufacturing businesses and the Green Investment Bank.

"Measures to support small businesses, start-ups, exports and manufacturing firms announced today are very welcome and will go some way towards meeting the Government’s growth aims."

The UK aerospace, defence, security and space industries make up around a quarter of UK manufacturing, employ over 500,000 people across the whole country and generate over £60 billion per year to the economy.

Ian Godden, Chairman of A|D|S, said:

“The UK aerospace, defence and security sectors support the Government’s drive for growth and we offer the Chancellor the means to boost the economy and British exports in the future. Our members are already world-leading, successful manufacturing and services businesses that provide a strong foundation on which our nation can build, especially in the light of recent strong performances from the manufacturing sector. Further Government support to create the right climate for these sectors to thrive in the years ahead will go a long way towards meeting the country’s economic, employment and exporting needs.”

“Measures to support small businesses, start-ups, exports and manufacturing firms announced today are very welcome and will go some way towards meeting the Government’s growth aims.”

On proposed changes to Air Passenger Duty, Mr Godden remarked:

“Aviation already pays several times its environmental costs in tax. The Government’s plans to examine reforms to the banding of Air Passenger Duty should be expanded to a wider review of aviation taxes and where the money raised is spent. These charges in future should seek to boost UK international competitiveness by reversing the trend of using flying as a cash-cow. Instead the Government should seek to ensure aviation pays its way, but no more, and to use some of the money raised by aviation taxes to aviation research and development.

“An aircraft today produces 70 per cent less carbon dioxide than its equivalent 50 years ago and a modern aircraft such as the Airbus A380 is more fuel efficient per passenger kilometre than a hybrid car. Further investment to supplement industry funding will deliver even greater environmental benefits where an ever-increasing tax on flying will not.”

On science investment, including in the space sector, Mr Godden continued:

“We welcome the inclusion of the International Space Innovation Centre at Harwell in the £100m investment in new science facilities. The space sector is an unsung success story, supporting 70,000 jobs in the UK and generating £7.5 billion per year to the economy. Industry and Government have in place a shared plan to grow this to £40 billion per year by 2050 and this additional investment will assist in achieving that aim.”

On defence spending Mr Godden said:

“While we welcome the confirmation that the current military operations in Libya will be funded from the Treasury reserve we are disappointed that the sustained fall in defence spending has not been reversed. With defence making up 10 per cent of UK manufacturing it is a mystery as to why the Government does not seize the significant opportunity that long-term, technology-driven investment in the sector represents.

“According to research from Oxford Economics a £100 million investment in defence delivers £227 million to the UK economy as well as important equipment to our armed forces, long-term industrial capabilities and high-quality, sustainable jobs. Increased funding to defence would boost our armed forces and our economy at the same time.

“Defence spending has halved as a proportion of GDP and of Government spending over the last 20 years and we expect further cuts beyond those announced in last year’s Strategic Defence and Security Review. But more worrying is that defence research and technology has been cut drastically in such a way that many doubt that the Government will be able to fulfil its Force 2020 objectives.”

On further skills and education investment Mr Godden said:

“We welcome the increased funding of technical colleges and the training that they provide, which is coordinated with industry. This will help deliver a highly-skilled workforce for the future, which our sectors will most certainly need. As world-leading industries and major employers of apprentices we welcome measures to further boost this scheme, especially for higher level apprenticeships.”

On support to small, innovative and manufacturing businesses Mr Godden commented:

“The small companies R&D tax credit boost is recognition of the contribution made by small firms to high-tech supply chains and will increase their ability to maintain innovation for the nation’s long-term benefit. Along with the doubling of the limit on the capital allowances for short life assets from four years to eight years this will be a welcome boost to UK manufacturing, of which aerospace, defence and security represents a quarter.”

On the Green Investment Bank Mr Godden said:

“Support from the Green Investment Bank should be available to manufacturers, in particular in the aerospace sector. As our aerospace companies deliver further improved environmental performance support from the Government and private investors will be crucial if the UK is to retain its position as number one in Europe and second only to the US globally in aerospace, producing new aircraft today that are more fuel-efficient than a hybrid car. The UK aviation sector has a CO2 roadmap in place demonstrating how new technology will meet the predicted threefold rise in passenger demand to 2050 whilst simultaneously delivering a reduction in carbon dioxide emissions back to 2000 levels. This new technology will require long-term investment and the Green Investment Bank, alongside industry and Government, would be a common-sense source for funding given the environmental benefits that would flow from it.”