Outlook: Call it anything, but please don't call it aid

Click to follow
The Independent Online
Please don't call it subsidy or state support and don't even refer to it as launch aid. Now that New Labour has established itself as the natural party of business it invests in partnerships with industry on a risk and revenue sharing basis. Whatever fancy term you chose to dress it up, pounds 200m of Government money winged its way from Whitehall yesterday and the lucky recipient was Rolls-Royce, which will use the money to help fund three new Trent engines for the next generation of Airbus and Boeing jets. Stand by for another pounds 200m to be dispensed any day now to another worthy cause, British Aerospace, which is also on the new Airbus programme.

Repayable launch aid is hardly new - it is the way Europe competes with the billions of dollars pumped into the US aerospace industry through indirect support for defence and space programmes. Nevertheless, yesterday's deal is something of a groundbreaker for Rolls and a feather in the cap of its chairman Sir Ralph Robins.

When the original Trent programme, Rolls most important engine development since the original RB211, was launched a decade ago Mrs Thatcher turned up her nose. She baulked at the cost and Rolls' prospects in a market dominated by GE and Pratt & Whitney of the US and refused to cough up a penny. Rolls was forced instead to go cap in hand to the Japanese, offering them a slice of the action in return for some upfront stake money.

That has turned out to be a poor decision. The first two versions of the Trent have scooped nearly 40 per cent of the market for engines to power the latest widebodied Airbus and Boeing jets and Rolls reckons it can capture a similar share with its latest versions.

In fact earlier launch aid for other programmes is now turning into something of a cash cow for the Treasury. Rolls is contributing pounds 30m a year while total repayments over the next few years will swell the Exchequer's coffers by some pounds 500m. Doubtless BAe and Rolls will employ these arguments when they go for the big one - pounds 700m in launch aid for the 600-seat double- decker Airbus super jumbo, the A3XX. John Battle, the industry minister, will need more evidence that a market exists for that project.