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The BAE redundancies: how bad for UK engineering?

03 October 2011

BAE Systems dropped something of a bombshell last week when it announced nearly 3,000 job losses within its Military Air & Information and Shared Services businesses. Most of the jobs are to go at the Brough, Samlesbury, Preston and Warton sites where the Eurofighter Typhoon production is concentrated. Chief executive Ian King blamed dwindling defence budgets around the world, saying that some of the company's major programmes had seen significant changes, not least being an agreement by the four partner nations in the Typhoon programme to slow production rates.

The news rather took the shine off Jaguar Land Rover's announcement of only a week earlier that it intended to plough £355m of new investment into a new UK engine plant to be built at one of the government's new enterprise zones near Wolverhampton. This facility is expected to create up to 750 highly-skilled engineering and manufacturing posts at JLR alone, not to mention thousands more skilled manufacturing jobs throughout the supply chain and the wider UK economy.

Britain's biggest union, Unite is calling for urgent action to save BAE's skilled workforce. National officer Ian Waddell has met with the company and has called on the MoD to intervene urgently to protect jobs; unless action is taken, he says, the UK's defence industry risks losing the critical mass it needs to maintain its reputation as a world leader in defence manufacturing.

But as Frost & Sullivan’s aerospace, defence and security sector specialist Balaji Srimoolanathan commented in the wake of the BAE news, the Farnborough headquartered giant is not alone when it comes to work force trimming; several American and European defence primes have also resorted to job cuts as a reaction to budget pressure in their home markets. Aerospace and defence primes in the West have had to face the fact that their home market sales are declining, and the arms industry is preparing for leaner years by cutting its cloth according to its means. For the big prime contractors this means cutting out bureaucracy, increasing production efficiency and passing on the consequences of the crisis over to the subcontractor.

According to Mr Srimoolanathan's analysis, the United Kingdom and France together account for around 40% of European defence spending and 50% of the equipment budget. Axing thousands of skilled jobs, as BAE proposes, could lead to significant gaps long term in the British industry’s capability to develop indigenous technology, with the risk of the economy becoming dependent on imports for advanced technologies.

Carl Jackson, head of recovery at accountancy firm RSM Tenon, said that while BAE is seen as a large and safe employer in the North of England, this announcement does not come as a complete surprise. The government's defence cuts have greatly impacted confidence in the sector, and the slowdown of contracts, particularly for the Typhoon, means that BAE simply didn't have an option. Mr Jackson believes the resulting pool of highly skilled redundant employees will be hard put to find similar work in other parts of the manufacturing economy.

That may be so, given the slowdown in other manufacturing sectors that are heavily reliant on high-end engineering skills, but in the light of recent reports bemoaning the lack of skilled engineering staff here in the UK, Mr Jackson’s view may be overly pessimistic. On the other hand, there is evidence to suggest that engineers do seek alternative employment outside their profession – either early on in their careers or following redundancy - often moving into the services sector of the economy where the rewards are likely to be higher.

For those unfortunate BAE staff facing redundancy, there is the prospect of having to up-sticks and find employers in other parts of the country who are likely to be very keen to take them on. Some may well be contemplating such a move, but for the majority this option remains a non-starter given the state of the housing market and a quite understandable reluctance to uproot children from their schools and exam studies.

The net effect, of course, is a depletion of core engineering skills that the UK simply cannot afford, especially as the government has placed manufacturing so high on its agenda for getting Britain out of the doldrums.

Les Hunt

PS: After this newsletter was finalised, the government gave the following response on Monday October 3:

Responding to the news that BAE Systems will be making redundancies in the UK, Business Secretary Vince Cable said that officials and the BIS local teams are already in touch with the company, local authorities and local enterprise partnerships to make sure that everything possible is done to help those affected at Brough, Warton, Samlesbury and other sites.

"Last year I set up the Skills and Jobs Retention Group, chaired by Allan Cook, to help skilled workers find new jobs in UK manufacturing. The Group will ensure that the shortage of engineers in UK manufacturing is not exacerbated by the loss of talented people from companies like BAE Systems. The Group has set up a new national web based system to make it easier for companies to recruit skilled workers who have been made redundant and the JobCentre Plus Rapid Response Service is also on hand to provide a range of support measures."

The new website, Talent Retention Solution, was launched in July.

Manufacturing and engineering companies which have already signed up to the system and who are recruiting over the coming year include Rolls Royce, Siemens, Nissan and Airbus. Supply chain companies will also be able to use the system for redeployment and recruitment.

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