ALEXANDER CAMPBELL / LONDON
UK aerospace companies are spending more on research and development than their overseas competitors, but their prospects could be damaged because they are making too many of the wrong kind of acquisitions.
This is according to a report from the Department of Trade and Industry, which says that the UK's aerospace industry spent £1.4 billion ($2.3 billion) on R&D in 2002. While this was 9% down on 2001, sales fell 13% over the same period.
R&D spending has also held up compared with that of other European and US companies. However, the UK engineering and aerospace industry has also been acquisitive, spending almost 12% of revenues on buying businesses over the past five years. This compares with just 4.3% for US companies.
The report's authors warn that this could prove a mistake. While the UK government does not want to play a role in directing industry's acquisition policy, Dr Michael Tubbs of the DTI says: "It's important to draw companies' attention to the numbers of underperforming acquisitions, especially enormous acquisitions - even though aerospace has done slightly better on acquisitions than some other sectors."
The report also points out that heavier R&D spending does not necessarily translate into innovative product development. While most large UK aerospace companies have between 1.2 and 2.1 patents granted for every £10 million invested in R&D, non-UK companies achieve a figure of 2.5.
The UK government announced last week that Rolls-Royce will receive £17.3 million in government R&D funding, matching company support for a range of aero engine projects over the next four years. This comes after the Society of British Aerospace Companies called for more state support for research in key areas including advanced materials, environmental protection and propulsion, all of which are covered by the funding. The SBAC says a shortfall in government R&D support for civil aerospace risks "a severe and rapid decline" in the industry.Source: Flight International
