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Aerospace suppliers fear impending cuts.

Byline: CHRISTINASAVVAS

Businesses supplying components to the defence and aerospace sector are facing an uncertain future, as experts predict a 20 per cent cut in the industry following the strategic spending review.

The region is 'particularly exposed' to Government cuts as it accounts for a fifth of the UK's aerospace and defence sector.

Dozens of companies supply components for military aircraft including the Tornado, Harrier and Eurofighter -some or all of which face severe cutbacks or may be scrapped altogether.

Ian Wilson, partner based at the Birmingham office of Grant Thornton, said there would be winners and losers but added that cuts were necessary.

"It may be a bitter pill for many to swallow but I believe it is necessary. We need value for money. We have to be buying cost-effective assets which are most relevant in the future."

He said that security experts and military planners must align resources and tactics in order to respond to new threats.

"It is imperative that the decisions made in the forthcoming Strategic Defence Review create a defence and security force that both meets current needs and can also evolve as the geographical landscape continues to redefine the nature of conflict."

Current key procurement plans include CVF Aircraft carriers, for pounds 3.9 billion and Type 45 destroyers, at pounds 6.5 billion.

Many companies in Birmingham and the wider Midlands region make components for these projects and are concerned about what will happen. Experts predict that the UK will be forced to rely on foreign partners for certain capabilities.

Mr Wilson said: "The likely scenario is that the aerospace and defence sector will be reduced by up to 20 per cent, it is not clear where the axe will fall.

"There is speculation that the UK's Search and Rescue -Helicopter (SAR-H) programme is at risk and Nimrod -I think we could find ourselves working with the US and other partners."

In recent weeks France and Britain have stepped up talks about strengthening bilateral defence co-operation but have ruled out the idea of sharing aircraft carriers as "utterly unrealistic".

After a meeting in Paris last week, Liam Fox, UK defence secretary, and Herv Morin, his French counterpart, said they were discussing with "absolute pragmatism" the scope for closer co-operation or even mutualisation of military capabilities and industrial projects amid tight spending constraints.

Mr Wilson said that although not as many companies in the sector had fallen victim to the recession as expected, the risk remains.

He said the uncertainty in the sector means companies are not able to plan for the longer term future.

He said: "At this point people just want to know what is going to happen -there has been so much speculation -are we going to have one air carrier or two -do we retire the harriers and tornadoes early? Businesses want to know the answer so they can plan for the effects whether they are good or bad."

Many companies have invested heavily in recent months to ensure they are ready to respond to market needs.

Arrowsmith Engineering in Coventry, is positioned at the lower end of the supply chain, providing a range of aero engine components for clients such as Rolls Royce, Goodrich, Pattonair and Gardner Aerospace.

Managing director Jason Aldridge, said: "It has been a tough 12 months because of the reduction in the number of component orders -companies have been cutting down on spares and becoming more leaner. We have more worldwide competition. Our turnover dropped by about 40 per cent but things have picked up.

"The supply chain has had to improve massively with restructuring to become leaner. We have a new factory and computer systems -we have spent a lot of money to prepare for the uplift so we can be more efficient and competitive on price when going for contracts.

"It is not just us -a lot of companies -have invested. Some won't survive but many will."

Alan Overton, quality manager at Aldridge-based Kepston, which specialises in precision CNC grinding, furnace brazing and bright annealing, said: "We have bought new machinery and systems to make sure we can meet the demands of the aerospace industry. We are doing okay and hoping that long term things will improve. We are a little bit worried about the spending review but we have taken steps to ensure we are leaner and more competitive and we will grab whatever we can get.

"Obviously we are worried about a downturn but we are ready for a fight."

But while many companies are remaining cautious Smethwick-based A&M, which specialises in wire erosion and spark eroding, is struggling to keep up with orders.

The company is aiming to increase its turnover to pounds 2 million in 2010.

Managing director, Mark Wingfield said: "We deal with many different sectors so we haven't really been affected by the downturn. We have been very busy.

"We make a large number of components for the UAE engines which are at the development stage - if this goes into production we wouldn't cope. We are going for a big expansion - applying for planning permission and buying new machinery."

Simon Griffiths, chief executive of Manufacturing Advisory Service-West Midlands, said: "The aerospace sector has bounced back from difficult trading positions during the recession. UK industry revenues rose last year by 5.4 per cent according to statistics issued by ADS, the Aerospace Industry body, and there are indications of further improvements this year.

"Generally, trading in the commercial aerospace sector is stronger than military where there is pressure on government spending and this is sure to restrict future contract opportunities for the West Midlands and UK supply chain going forward."

KEY PROCUREMENT PROGRAMMES CVF Aircraft carriers pounds 3.9 billion Type 45 destroyers pounds 6.5 billion FRES Armoured vehicles pounds 4 billion Eurofighter Typhoon pounds 20 billion F-35 Joint Strike Fighter pounds 10 billion A400M pounds 2.5 billion The Trident replacement pounds 20 billion

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Manufacturing programmes including the Nimrod are at risk because of cutbacks, according to experts
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Sep 9, 2010
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