Sir John Parker: The case for defence

Sir John Parker calls on David Cameron to sort out British industrial policy and gives the view from EADS on the proposed BAE merger. Margareta Pagano reports

Lunching with Sir John Parker is like stepping into a time machine, one that sweeps you back through the past 50 years of British industrial life. And what a life he has to tell of: in his twenties, Sir John was learning how to build ships at Harland & Wolff, then one of the biggest shipyards in the world. By his early thirties, he was travelling around the world selling tankers to tycoons such as Aristotle Onassis or to the Vietnamese in bombed-out Phnom Penh.

The Northern Irish naval architect and mechanical engineer was just 35 when the Government hijacked him out of Austin & Pickersgill, another big shipbuilder, to help with the restructuring of the British Shipbuilders Corporation; a business with 86,000 employees and losses of £100m.

Then, aged 41, Sir John was asked by Margaret Thatcher to go back into Harland & Wolff to rescue the yards, which were running out of orders, from bankruptcy. It was a violent and tricky moment in Irish history with bombs going off and hunger strikes, and Sir John says it was one of the most difficult decisions of his life. "I agonised before taking the job. Many of the people were still there in the yards that I had worked with. I knew there was only one way to save the business, and it would be tough; there were 7,500 people and they were cut to 3,500.

"But we did save the yards by doing a deal with the Norwegian shipping line, Fred Olsen. I learnt from my father that most things can be resolved.He would say 'if you are on rough ground: get a three-legged stool'."

It was a bloodying experience from which Sir John earned a reputation as a wizard of turnarounds; going on to take on similar roles at Babcock, Lattice and RMC among others. Since then, he has chaired five FTSE 100 companies and been a director of more than 50. All have been nitty-gritty industries that had engineering as their lifeblood – from coal-fired power station engines to gas pipelines.

He has seen it all: Labour's disastrous industrial policy of the 1970s, Thatcher's decision to take the axe to manufacturing in the 1980s, a strategy continued by the last Labour government. So when Sir John, who is also president of the Royal Academy of Engineering, says this Government is stuck in limbo and needs to come up with a coherent industrial strategy, it is time to sit up.

His argument is simple: unless UK Plc moves fast, we are consigned to irrelevance in a fast-moving global modern economy. For someone who has preferred to keep his sights at submarine depth, it is telling that Sir John has come up above the water line. But needs must.

He says: "It has been two years since this Government came to power but it still has not set out a vision for Britain's industrial future. There has been no leadership from the top – and by that I mean David Cameron – which has given a signal to society that Britain values industrial activity."

Sir John, who carefully adds that he's not in the least political, says the UK must do more to create a climate in which science, engineering, universities, schools and industry work together: "We have world-class industries – pharmaceuticals, life sciences, aerospace, for example – and we have to make sure we all work together to boost them."

By industrial strategy, he means a rebalancing of economic output towards the more productive services including IT, infrastructure, construction as well as the more traditional manufacturing industries.

Our time-machine is the dining room at Anglo American's headquarters just off Pall Mall, a few paces from a mini-museum displaying some of the precious metals the firm's miners have dug out. It's typical of the industries Sir John loves so much, although Anglo's problems in South Africa may be testing even his resilience. For he is still in the thick of it – the 70-year-old industrialist is chairman of the giant Anglo American, which has suspended 12,000 platinum workers following unrest over pay and conditions. He is also a non-executive director of EADS, whose £38bn merger with the UK's BAE defence manufacturer is provoking such political fury. How does Sir John, tipped as a potential chairman for a merged EADS-BAE, square the deal with his vision for UK Plc? Surely keeping the UK's only defence maker British-based and owned, should be essential in such a blueprint? "The reality is that aerospace and defence are industries have a long lead cycle and need to be strong to compete in world markets," he says.

"It's a pity the merger plans were leaked before we could publish the formal offer, as everyone – the press, and the politicians – has tried to write the prospectus before we have had a chance to publish it. Hopefully, we will soon."

"Together, the companies have a stronger future; a stronger balance sheet, a better and more modern governance to be able to compete with companies such as Boeing and new ones emerging in the East," says Sir John. But he can't say more because it is so sensitive, and the deadline by which BAE must ask for an extension is tomorrow. As to the political defence issues raised by the merger, which would leave the French and German governments with 9 per cent, he says: "This is a strong outward and visible sign that European governments can work together on defence across borders. The more sensitive issues, such as the Eurofighter, would be ring-fenced."

A blueprint for the UK, he says, doesn't have to be complicated; it can be set down on one sheet of paper, just as he does for boardroom strategy – if anything, the simpler the better.

"The Germans have a good expression for it," he says. "They talk about tilting government policy towards industry, towards sectors. That's what we should be doing too."

But improving our skills base and scientific education is one area that does need action; positive discrimination, if you will. Indeed, Sir John has spent much of his time as president of the Royal Academy in pushing his agenda to improve the role of engineering behind the scenes, but it's clearly not been enough.

Hot off the presses from the Academy is a new report, entitled Jobs and Growth: The Importance of Engineering Skills to the UK Economy, which shows how acute the shortfall in the number of engineers being trained in the UK really is.

Shocking, actually, showing that a 50 per cent uplift in the number of Stem (science, technology, engineering and maths) graduates is needed to meet even current output. "We have a shortfall of thousands of engineers: we must do more to encourage Stem studies," Sir John says. He gives the example of Airbus – part of EADS and one of the biggest employers in the UK, which needs 2,500 more engineers in the UK and Europe.

And what about Anglo American, where some investors are still niggling over the stewardship of Cynthia Carroll, the chief executive. Anglo's shares are lower than when Ms Carroll took over at the peak before the crash and when Xstrata tried to launch its bid.

But Sir John is totally loyal: "Cynthia is doing a good job." Some investors fear Anglo is open to another attack, and I ask him about the gossip being floated that Mick Davis, the chief executive of Xstrata – which is about to merge with Glencore – should be airlifted into Anglo.

It's rare to see the neat and composed Sir John pull a face. But now he does: "We couldn't afford him, in any way."

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