Farnborough Air Show

Feeling UK budget axe, Qinetiq shedding jobs

 - July 19, 2010, 7:05 AM

Qinetiq, which is feeling the squeeze from the dip in research and development budgets, has announced plans to shed several hundred jobs.

“Our markets are likely to remain uncertain for some time, but we have a decisive program of self-help to restore value,” Qinetiq CEO Leo Quinn said on July 6. “We are acting to make our costs more competitive and improve our productivity.” He added that while the privatized research-and-development company that evolved from the UK’s former Defence Evaluation and Research Agency (DERA) had no choice but to review the cost base of its business; its goal is to remain a full-service provider.

Hardest hit will be the facilities and highly qualified scientific staff working at Farnborough and Malvern. Around 390 jobs will go, mostly at Malvern, the former Royal Radar Establishment, where innovative breakthrough technologies ranging from liquid-crystal displays to nano electronics and digital security devices have been developed.

400 Jobs To Be Cut
At Farnborough’s Cody Technology Park some 130 Qinetiq jobs are expected to go initially. This follows earlier rounds of job cuts and a major confrontation with unions and employees last year when the company decided that despite a 22-percent increase in annual profits and a 12-percent rise in shareholder dividends, it proposed to cut 400 jobs, even though there had been staff agreement on a pay freeze.

When DERA became a private public partnership in 2001, the departments with the highest rated security activity were retained within the control of the Ministry of Defence (MOD) and renamed the Defence Science and Technology Laboratory (DSTL). The remaining 75 percent of the organization, including all the scattered outstations, was partially privatized, renamed Qinetiq and floated on the London stock market in February 2006.

The transfer of these facilities into the private sector has long been a contentious issue in the UK, not least because of the way Qinetiq’s top executives became instant millionaires on the floatation of what had been widely recognized as a key national R&D asset. Since privatization, Qinetiq has been highly successful in cutting costs and achieving high profitability.

While the UK government has actively encouraged Qinetiq to exploit its world-class Internet-protocol (IP) potential, and acquisitions have improved access to the U.S. defense market, business reality for the company has been somewhat out of step with its corporate aims and the main source of revenue has remained firmly embedded in MOD-sponsored work. Now, with UK defense R&D activity in steep decline, Qinetiq is speeding up the axing of highly talented scientists and technologists, causing much concern as its technology centers of excellence face an uncertain future.

Qinetiq currently employs 6,500 people in the UK, out of a total of 13,000 worldwide. On top of the planned 390 now to be cut in the UK, more are widely expected to follow with the news that the company is conducting a further review of its businesses this summer. The trade union Prospect has warned that the cuts will have an adverse effect on the UK’s defense capabilities, with up to 700 more jobs at stake. Analysts have suggested 400 may be the likely extra reduction in UK jobs following the summer review.

UK Budget Slashed
Over the last few years the UK’s defense R&D spending has fallen by 25 percent, placing an extra strain on revenue-generating expectations from Qinetiq. Though it has attempted to diversify, MOD test and evaluation, systems integration and R&D in support of programs working closely with industry remain at the heart of what Qinetiq does best. However, last year it faced severe criticism in the Haddon-Cave Report, commissioned by the previous government, which noted that the transfer of previously in-house MOD specialist expertise into the private sector had placed much expert knowledge, advice and support behind a commercial wall and thereby had changed the dynamics of the relationship.

Unless the government’s steady fall in defense R&D spending is reversed, which seems unlikely in the short term, the collective capability of the Qinetiq workforce will be increasingly at risk. Ironically, this comes at a time when the government says it wants to encourage greater investment in science and technology, and is calling for more young people to seek a career in science and engineering.