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Listen to naysayers and you might be led to believe that the UK’s glory days as an aircraft-building nation are behind it. All the independent constructors of the early jet age are long gone or have been subsumed, and – save for the odd Britten-Norman Islander – the country stopped building commercial aircraft in the early years of this century when production of the BAE Systems BAe 146 regional jet ended.
Yet the UK aerospace industry vies with France for the title of largest in Europe and number two in the world after the USA. It is a major player in both the commercial and defence sector, with a 2015 turnover equating to around $42 billion (a few billion dollars less than before the UK’s vote to exit the European Union sparked a fall in sterling – of which more later). The industry employs almost 130,000 people directly, according to figures from trade body ADS.
The UK builds every Airbus wing in Bristol and Broughton. Bombardier’s plant in Belfast does the same for the CSeries and much else besides. Derby-based Rolls-Royce is one of the big three aircraft engine manufacturers in the world, and BAE Systems a major defence contractor. GKN has become one of the most important aerostructures players in the industry, while technologies and equipment designed and built by Meggitt and Cobham are on dozens of platforms. Eleven UK companies are in the FlightGlobal ranking of the world’s Top 100 aerospace businesses by revenue (see table).
Niche manufacturers – from ejection seat specialist Martin-Baker to airship developer Airlander – abound, and the UK is home to hundreds of second- and third-tier machining companies and engineering consultancies who make up a weighty small- and medium-sized enterprise sector. A host of foreign-owned entities – including Leonardo Helicopters, Safran, Thales, SpiritAerosystems and Raytheon – have a substantial manufacturing and design presence.
According to ADS and Oxford Economics, UK industry had one of its strongest years in 2015, much of it due to a strong supply chain presence in a growing commercial aircraft segment, although demand for military aircraft from the Middle East and elsewhere has helped. Turnover rose by about 6.5% in sterling terms over 2014 and has risen by 39% cumulatively in five years. Almost 90% of that turnover comes from exports.
Questioned in February and March for an ADS survey, UK aerospace firms were generally bullish about the future, with 56% expecting growth for their businesses of more than 10% in 2016. However, one huge development since then may have the potential to knock the industry off course: namely the UK’s referendum decision on 23 June to leave the EU. ADS was among several business groups warning ahead of the vote that so-called Brexit had the potential to harm economic prospects.
In a note hastily inserted in the pack release just ahead of the Farnborough air show, ADS says it will now work with government to boost confidence and maximise the business opportunities from voters’ decision to leave the EU”. While steadying the ship is vital in the immediate term, says ADS chief executive Paul Everitt, in the longer run retaining the UK’s access to the European single market is crucial.
As for many in industry, the Leave decision came as a shock to ADS. “We walked into this year feeling good about what was going on, with 2015 a year of growth for aerospace and defence in the UK,” says Everitt. “The outcome was not the one UK industry would have preferred. There are a number of challenges in the short-, medium- and long-term as we wait to understand what our trading relationship with Europe will be.”
For much of the UK’s aerospace industry, the problem is that so many industrial facilities are part of businesses headquartered in the EU and so interlinked with sister operations in the rest of Europe that introducing a relationship that does not allow the free flow of manufactured products could be difficult. These include Airbus’s plants in Broughton and Bristol, Leonardo Helicopters in Yeovil and Safran Landing Systems (formerly Messier-Bugatti-Dowty) in Gloucester.
On the military side, things are slightly less complicated even with European-based firms because of internal corporate walls separating intellectual property and preserving in-country expertise and supply chains, and the UK’s strong links to the US defence industry. Prominent UK defence concerns with ring-fenced IP and operations would include Leonardo Helicopters’ UK defence business, missile house MBDA (in which BAE Systems, Airbus Group and Leonardo share ownership) and Thales.
Supporters of Brexit will claim that UK companies sell most of their products outside the EU. According to ADS, £27 billion of the industry’s £31.1 billion turnover comes from exports – nearly 90% – with only £8 billion of that destined for EU countries. That figure, however, is fuzzy as it involves assessing whether an Airbus wing or a Rolls-Royce engine fitted to an Airbus airliner destined for a carrier in the USA are exports to the EU or outside the EU.
In its statement published immediately after the Brexit vote, ADS called for:
- A boost to government R&D funding of $1.4 million with defence science and technology spending increased to 2% of the defence budget
- The creation of a regional supply chain fund to replace any loss in EU regional development funding
- An effort by government to strengthen security relationships with European partners
- Unfettered access to customers and suppliers in the EU single market
The Farnborough air show – which ADS ultimately owns – is the first industry gathering post-Brexit and will be a chance to assess global opinion about the UK’s decision to leave the EU. It is, says Everitt, “an opportunity for the government to signal a few things, like the need for stablility”. At this year’s Farnborough, the politics might be as fascinating as the business deals.
TOP 11 UK AEROSPACE FIRMS BY REVENUE
COMPANY REVENUE POSITION ON TOP 100
- Rolls-Royce $14.7 billion 10
- BAE Systems $13.7 billion 11
- GKN $3.67 billion 32
- Cobham $2.5 billion 39
- Meggitt $2.17 billion 44
- Senior $884 million 72
- Chemring $664 million 81
- Ultra Electronics $658 million 83
- Marshall Aerospace $506 million 88
- Martin-Baker $326 million 96
- Doncasters $293 million 98
Based on FlightGlobal’s latest Top 100 Aerospace companies listing, based on annual revenues published in 2015, and converted in dollars at the then exchange rate. FlightGlobal’s latest Top 100, covering the 2015 financial year, will be published in September
Source: Flight International
