To the uninitiated, the Flying Display at Farnborough might appear to be little more than an international get-together of flying enthusiasts, but we know that Farnborough is a manifestation of those qualities of skill, ingenuity and courage which, while not uniquely British, have characterised British aviation throughout its history.
Although others in Europe may claim pre-eminence based on more ground display space, there is only one Farnborough and it will always be the best. This year it seems to be best of all.
The importance of the aerospace industry to the British economy cannot be over-estimated. Indeed, if we had to produce the ideal example of an industry with high added value export products, we need look no further than aerospace. [end p1]
The fact that some 250,000 visitors will attend the flying displays this week is further proof of the tremendous interest taken in flying by young and old alike in this country. These people illustrate the considerable reservoir of enthusiasm and talent which is available and to which we have a responsibility.
In the spirit of Farnborough I see those very qualities of innovation, brilliance in design and sheer professionalism that are needed for the nation to overcome its difficulties. [end p2]
International show this is and we welcome you all. But I know you will understand when I say I speak for Britain. If you can't blow your own trumpet, I'll blow it for you.
The giants of aerospace in Britain are also world leaders. In British Aerospace we have a group which is producing a range of aircraft unequalled by any other company in the world, and producing missiles which sell even to the US Air Force. Rolls Royce is one of the three major Western aero-engine manufacturers, acknowledged to be in the very forefront of technology. While it is the airframe and engine companies whose names make the biggest headlines, we must not overlook the fact that about a third of the value of most aircraft is accounted for by equipment—an immense range covering avionics, instrumentation, electronics, hydraulic systems, and many other components reflecting the excellent work of the large number of equipment companies represented here tonight. We are fortunate in the UK in having an extremely wide-ranging and efficient aerospace equipment sector which makes a considerable contribution to British, European and American aircraft. [end p3]
Mr. President, the world is moving into recession following the oil price shocks of the past two years. At home, we are having to tackle the deep-seated problems of high inflation and low productivity. We have never disguised that the adjustment process would be difficult. We already feel the painful reduction in output and the tragic rise in unemployment.
But we must continue to give priority to securing a lasting reduction in inflation. This is the only basis for restoring confidence throughout the economy and for creating better prospects for output and employment. Already, the rate of price increases is falling. The sooner wage settlements also moderate and productivity improves, the sooner we can achieve more jobs and steady growth. I am confident that both the good sense and the adaptability of the British people will ensure that together we can restore the economy to health. [end p4]
So far as defence spending is concerned, the Government has to reconcile the need to strengthen our defences with the policies that will give us the economic strength to do so. No-one is in any doubt that we are determined to improve our defence capability. At the same time Government spending must be constrained within cash limits. Because of the priority which the Government accords to defence, an addition has been made to the defence cash limit this year. Now that limit must be applied firmly. Francis Pym has taken steps to contain defence spending within the new limit, including the moratorium on new defence contracts which he announced on 8 August. Francis is watching the position with great care and I know that he will not wish the moratorium to continue for a moment longer than is necessary. [end p5]
I did not come here tonight, however, to talk about short-term difficulties. My principal theme is to consider ways in which Government and industry can work more fruitfully together. Although my comments apply to both civil and military work, my main examples come from the field of defence, for in satisfying the country's defence needs, we are the largest single customer of your industry. [end p6]
This year, the British defence budget is over £10 billion, about 40 per cent of it spent on equipment. We must ensure that this enormous budget not only provides our forces with the equipment that they need but also acts as a springboard for the export efforts of our high technology industries.
Export sales of British defence equipment will this year earn £1200 million in foreign currency. This may sound a large sum and I want to pay tribute to those who earn it. But, (ladies and) Gentlemen, it is not enough. The procurement budget of Government and the skills of our people, if used together to the best advantage, could bring the country far larger sums, greater benefits both to our Armed Services and to our industries, and more jobs at the same time. That is the scale of the opportunity we have. If we are to exploit that opportunity government and industry must work more closely together, [end p7]
First, we must ensure that whenever possible the requirements of the Ministry of Defence are met in a way which is compatible with the needs of industry. [end p8]
Faced with the ever-improving quality of Soviet weapons, it is not easy to balance the needs of our Services for sophisticated and expensive equipment with the needs of other markets which may be less demanding. Our own Armed Forces often do not provide a large enough market on their own to secure a proper return on a major investment of national resources. We must therefore examine rigorously our own requirements to see whether simpler weaponry will sometimes meet our needs. The fact is that we will not get the export orders we seek unless we are also producing similar products for the home market. In that examination, we are entitled to look to the aerospace industry to point out exactly where export opportunities lie and precisely what is required for us to compete successfully. This is well recognised by the Government and the prospect of overseas orders will be a factor which will play an increasing part in deciding our own operational requirements. [end p9]
My second point concerns our huge investment in military research and development of both cash and the talents of our most able and creative young men and women.
Although the Ministry of Defence currently satisfies 75 per cent of its needs from British industry with 15 per cent from collaborative projects and only 10 per cent that tends to hit the headlines. The contract for new Primary Radars has been a recent case in point.
The previous Government took the decision to follow the NATO infrastructure route in the case of Primary Radars and most of you will know that the rules are very strict—given technical compliance, the lowest tender must win. Indeed, MOD can only act as a sort of umpire. [end p10]
There are, of course, very important issues arising from this kind of case. Long production runs and attractive development contracts often mean that American corporations can offer their products in Europe at prices which are lower than the domestic industry can match. In Britain, at a time of financial stringency, this leads to a conflict of interest. Do we buy the apparently cheaper product from abroad, or do we retain and develop our own defence industrial capacity? [end p11]
The Government recognises its responsibilities in this kind of situation. A view needs to be taken by the Ministry of Defence and other public procurement authorities of likely requirements well into the future. It could be that a better use of development contracts would help British manufacturers. Too often they feel they need to recover all their own development costs from the first few units sold and consequently set their prices at uncompetitive levels.
If we study these matters, industry for its part will I hope be more ready to spread its R & D costs over the longer production runs that aggressive salesmanship can achieve in world markets. [end p12]
Thirdly, in recent years the advisability of collaboration has become a piece of received wisdom. No nation can afford to meet all its needs alone.
The aerospace industry world wide has a remarkable record for pragmatism in its partnerships and collaborative arrangements. Sometimes the partnerships are put together by industry, sometimes they are imposed by Government. Firms and countries are close partners on one project and strong competitors on another. I know very well that some of the imposed partnerships cause a good deal of concern to some of you. I understand your worries; there is a danger that partnerships and consortia will lack the single-minded control that is necessary to keep a grip on costs: also there is the real problem of technology transfer. [end p13] But there are some projects which can only be realised on a collaborative basis. For those we must ensure that the management and cost control is as keen as on a single company venture.
In my remarks so far the greater emphasis has been on the military side of the industry. I do not want to trespass too far on your forbearance by making a full survey of the civil side of your industry, but let me highlight a few points. There are the remarkable technical achievements of Rolls Royce with the RB211 engine: this has proved itself in open competition both the most reliable and the most fuel-efficient of all the large civil aero-engines. On the airframe side, there has been one event since the last flying display dinner to which I should particularly like to refer—the entry of British Aerospace into Airbus Industrie. [end p14] The successful conclusion of that negotiation was a major step in European collaboration. Ardent though I am in promoting British industry, not even I will go so far as to claim that the dramatic surge in sales of the Airbus since then is entirely due to British participation. I do, however, want to record the importance that we as a Government attach to this European venture. Hawker Siddeley, as a private enterprise company, with acumen and foresight made a major contribution at the start of the programme. British Aerospace, at present as a nationalised industry, and, I hope, before long as a company with private shareholders, is now a full partner. I wish every success to the partnership. [end p15]
It is hardly necessary for me, in this of all gatherings, to draw attention to the close relationship between military and civil programmes. The spin-off from advanced military programmes has often been considerable. In the same way there is much excellent advanced work done both in industry and in the Government's Research Establishments. We can be justly proud of a whole range of endeavours—the Chevaline improvement programme for the Polaris missile; the Airborne Early Warning Nimrod programme and Tornado programme. Thermal Imaging techniques and applications; and Holographic Head-Up Displays, where we have recently clinched an order with the United States Air Force in the face of fierce competition. [end p16] Today has brought more good news. Marconi and Plessey, in association with Hughes of America, have won the major NATO contract worth about £100 million to supply the complex improvements to the United Kingdom Air Defence Ground Environment. This is another fine example of British firms competing with the best in the world and winning. I congratulate the firms concerned.
Mr. President, I am very pleased to be able to address your Society's dinner tonight, because your industry has a record of which we in Britain are proud. And if I have on the occasion of such a truly international Show spoken at times about particular British matters it is because your Show and your Flying Display is the International Show of the Society of British Aerospace Companies. [end p17]
As the public come in their thousands to watch the products of your flair and brilliance this week, they will have no doubt that you are well able to meet the challenge of the ‘Eighties and beyond. In wishing you well, I share their confidence.