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20 Nov 03. The FT reported that Rolls-Royce, one of Britain’s largest exporters, is threatening to move its remaining research and technology facilities abroad unless the government overhauls science spending to put industrial applications before pure research.

Sir John Rose, chief executive of the jet engine manufacturer, will on Friday warn that the more generous state aid available in Germany and the US has already encouraged the company to shift 56 per cent of its product-development overseas, against only 2 per cent 15 years ago.

“We do not yet have the balance right between funding fundamental research and the part where science is converted into products with a route to market,” he is due to tell an audience of head teachers in Birmingham.

“If I can carry out my research-and-development activity in a more cost-effective fiscal regime overseas, then it is my duty to my shareholders to do so.”

Rolls is already one of the largest recipients of government industrial aid, receiving a £17.3m ($29m) university research grant only last month, but its lobbying comes as the government is considering a radical review of its innovation policy. Later this month the Treasury is expected to publish a report calling on industry to play a greater part in forging links with universities. Lord Sainsbury, science minister, is also conducting an innovation review that aims to halt the exodus of manufacturing abroad by focusing efforts on high-tech industries such as aerospace. Nevertheless, Peter Cotgreave, director of the Save British Science campaign, said: “Of course it is the applied research that pays off for the economy, but this is entirely dependent on blue skies research for new ideas.

“If we reduce government support for research which no one else will back, there is a very grave danger of finding ourselves completely out of touch in 10 years’ time,” Mr Cotgreave said.

Comment: Rolls is quite right to raise this point as the dearth of R&D produced by UK companies is coming close to the lowest in Europe. The UK cannot rely on the service economy to support the growth required of the world’s fourth largest economy and the government must get away from the ’luvvie type’ approach to industry, favouring the trendy rather than the entrenched. Rolls has already overtaken Pratt in the civil market and with more directed technology could become a world leader in advanced engines with its links to the U.S. JSF and European Typhoon programmes. This call also comes at a time when the FT also reported that General Electric (GE), Rolls’ big rival plans to buy a minority stake next year in Snecma, the state-owned French aerospace group, reinforcing their 30-year relationship in the civil aero-engine business. Snecma also plans to increase its share in GE’s large engine programmes. Dave Calhoun, chief executive of GE’s aircraft engine unit, said the planned part-privatisation of Snecma offered the opportunity to take “a very clear minority stake”. But he insisted GE was not seeking control of Snecma. “It would make things worse, not better,” he said.

The French government, which has been toying with the privatisation of Snecma since 1993, is finally expected to launch a partial sale of the group in the first half of next year.

“The latest we’ve heard is that the government intends initially to sell 30-40 per cent of the company and keep majority control,” a senior Snecma executive disclosed. GE is likely to acquire a stake of up to 10 per cent worth between €700m and €800m ($833m-$952m) on the basis of the valuation of the recent sales of FiatAvio, the Italian aero engine group, and MTU, the German aero engine company, to US private equity groups. GE’s acquisition of a minority stake is also expected to be linked to Snecma’s participation in the new GE engine programme to supply the power plant for Boeing’s new 7E7 aircraft.

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