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11th Feb 2004, 06:38
BAE gives evidence of role in UK employment
By Peter Spiegel, Defence Correspondent
Published: February 10 2004 20:58 | Last Updated: February 10 2004 20:58
BAE Systems on Tuesday sought to highlight its importance to the UK economy with evidence that it directly and indirectly supported more than 110,000 jobs in Britain in 2002.
The findings, published in an academic study, are part of the defence group's ongoing lobbying campaign amid a string of high-profile contract losses.
The study, conducted by Oxford Economic Forecasting, the independent analysis group, also found that BAE jobs were among the most valuable in Britain, with many of them high-value positions in specialised engineering and design fields.
The £80,000 study, published on Tuesday, was commissioned by BAE a year ago during a bruising procurement fight about a new training jet for the Royal Air Force. BAE eventually won the contract, in which its Hawk was up against an Italian-built Aermacchi, but company executives said the difficulty in winning the deal raised concerns that the government was not taking domestic economic issues into account during procurement decisions.
Since the Hawk decision, BAE has lost out on several other significant contracts - including the £13bn programme to build air-to-air refuelling aircraft for the RAF - in which it made strenuous arguments about the domestic economic impact of the programmes.
BAE acknowledged the report was part of an attempt to staunch the bleeding by showing that the company made a big contribution to British research and development and home-grown intellectual property.
The MoD's defence industrial policy, unveiled last year, emphasises that the health of the domestic defence industry should be taken into consideration when procurement decisions are made. But it makes cost - or "value for money" - the pre-eminent consideration.
Mike Turner, BAE chief executive, has argued repeatedly that Britain was at risk of losing important skill sets if procurement spending was not more targeted.
"The defence industrial policy included some of these principles, but we want to make sure they're not just words," said a BAE official. "It's important not just to spend the money but to spend the money in the right kind of way."
Although the study did not advocate a national-champion policy, it argued that the defence ministry frequently ignored policy that highlighted the need to invest in domestic industry when buying weapons.
"It sometimes appears that those responsible for procurement in the MoD may not pay sufficient attention to the impact that their decision might have on the defence industry in the UK," the report stated.
However, the report's authors said they were agnostic as to whether sending contracts to BAE was the best way of achieving advances in British industry.
Several European and US companies - particularly Paris-based Thales, which bought Racal, the UK electronics group, in 2001; Franco-German EADS, which has Airbus aircraft and Astrium satellite operations in the UK; and Raytheon, which builds missiles in Britain - have established significant presences in the economy.
In addition, the report noted that investment in non-defence R&D increased economic productivity at a higher rate than R&D money spent in defence. Still, it found that BAE made significant contributions to the economy, particularly its fixed capital investment, or the amount of money it spends in plants and high-technology machinery. In 2002, BAE invested £500m in fixed capital, or about £12,400 per employee - more than double the UK average.
It also found that the £1.2bn in R&D spending that flowed through BAE in 2002 - including R&D spent by BAE, its joint ventures, and its share of Airbus - added about 0.1 per cent to British GDP growth. If such levels continue, the R&D spending could contribute 1.5 per cent to GDP after 10 to 15 years. "That's a very large number," said Erik Britton, the study's author.
BAE has sent copies of the report to Geoff Hoon, the defence secretary, and Sir Peter Spencer, head of the defence procurement agency.
By Peter Spiegel, Defence Correspondent
Published: February 10 2004 20:58 | Last Updated: February 10 2004 20:58
BAE Systems on Tuesday sought to highlight its importance to the UK economy with evidence that it directly and indirectly supported more than 110,000 jobs in Britain in 2002.
The findings, published in an academic study, are part of the defence group's ongoing lobbying campaign amid a string of high-profile contract losses.
The study, conducted by Oxford Economic Forecasting, the independent analysis group, also found that BAE jobs were among the most valuable in Britain, with many of them high-value positions in specialised engineering and design fields.
The £80,000 study, published on Tuesday, was commissioned by BAE a year ago during a bruising procurement fight about a new training jet for the Royal Air Force. BAE eventually won the contract, in which its Hawk was up against an Italian-built Aermacchi, but company executives said the difficulty in winning the deal raised concerns that the government was not taking domestic economic issues into account during procurement decisions.
Since the Hawk decision, BAE has lost out on several other significant contracts - including the £13bn programme to build air-to-air refuelling aircraft for the RAF - in which it made strenuous arguments about the domestic economic impact of the programmes.
BAE acknowledged the report was part of an attempt to staunch the bleeding by showing that the company made a big contribution to British research and development and home-grown intellectual property.
The MoD's defence industrial policy, unveiled last year, emphasises that the health of the domestic defence industry should be taken into consideration when procurement decisions are made. But it makes cost - or "value for money" - the pre-eminent consideration.
Mike Turner, BAE chief executive, has argued repeatedly that Britain was at risk of losing important skill sets if procurement spending was not more targeted.
"The defence industrial policy included some of these principles, but we want to make sure they're not just words," said a BAE official. "It's important not just to spend the money but to spend the money in the right kind of way."
Although the study did not advocate a national-champion policy, it argued that the defence ministry frequently ignored policy that highlighted the need to invest in domestic industry when buying weapons.
"It sometimes appears that those responsible for procurement in the MoD may not pay sufficient attention to the impact that their decision might have on the defence industry in the UK," the report stated.
However, the report's authors said they were agnostic as to whether sending contracts to BAE was the best way of achieving advances in British industry.
Several European and US companies - particularly Paris-based Thales, which bought Racal, the UK electronics group, in 2001; Franco-German EADS, which has Airbus aircraft and Astrium satellite operations in the UK; and Raytheon, which builds missiles in Britain - have established significant presences in the economy.
In addition, the report noted that investment in non-defence R&D increased economic productivity at a higher rate than R&D money spent in defence. Still, it found that BAE made significant contributions to the economy, particularly its fixed capital investment, or the amount of money it spends in plants and high-technology machinery. In 2002, BAE invested £500m in fixed capital, or about £12,400 per employee - more than double the UK average.
It also found that the £1.2bn in R&D spending that flowed through BAE in 2002 - including R&D spent by BAE, its joint ventures, and its share of Airbus - added about 0.1 per cent to British GDP growth. If such levels continue, the R&D spending could contribute 1.5 per cent to GDP after 10 to 15 years. "That's a very large number," said Erik Britton, the study's author.
BAE has sent copies of the report to Geoff Hoon, the defence secretary, and Sir Peter Spencer, head of the defence procurement agency.