UK most attractive European nation for aerospace manufacturing

A new report assessing the attractiveness of aerospace manufacturing investments by nations has ranked the UK, with revenues of US$46 billion, within the global top four. While the country scores highly on labour skill and infrastructure, however, Britain’s economy and perceived geo-political risk could hamper investment in the sector in coming years.  

The aviation and aerospace industry has put a period of severe turbulence behind it in recent years, following a sustained trend of high-fuel costs while growing competition forced firms to cut margins. The falling price of oil, growing demand from emerging markets, and considerably lower commodity prices have allowed the industry a period of breathing space – while consumers are subsequently benefiting from lower cost travel.

In the UK, the Government has sought to seize on this moment with a range of policies designed to encourage investment in the British aerospace sector. For example, in 2018, the new Future Flight Challenge initiative saw the Government commit up to £125 million to develop new technologies such as drones and urban air vehicles, something which has seen its position as a leading aerospace manufacturing nation stablise in 2019, in spite of the sustained economic and political turmoil Britain is currently enduring.

According to a new analysis by PwC, the UK has a strong aerospace and defence (A&D) industry, with revenues of $46 billion. This is likely to be buoyed by the UK Defence Minister’s announcement in July that the Government is investing £2 billion through to 2025 in a next generation fighter jet, the “Tempest.” Britain is seeking international partners to provide additional funding for the project, which will likely further improve its A&D status.

The report from PwC subsequently found that the UK’s aerospace attractiveness ranks the fourth highest in the world – and the highest of any European state. Driven by the ability to access skilled labour, well-maintained infrastructure, and a developed and mature overall A&D industry, the UK is only bested by the low-tax Singapore, the geo-politically stable Canada and low-cost US.

While the reasons for the UK lagging behind these nations clearly varies, one common factor does bear closer scrutiny. All three of those countries ranked higher in terms of geo-political stability than the UK, and with the country’s aerospace production chiefly being an export industry, it may well be adversely affected by Britain’s exit from the European Union.

Chemicals, automotive and A&D are the UK sectors most dependent on the unfettered access the UK currently enjoys in the single market. To that end, consultants have previously warned that as single market access will end with a probable No Deal scenario, the UK is unlikely to find itself in a strong bargaining position, given that 45% of UK exports are to the EU and less than 10% of EU exports are to the UK. At the same time, Canada took eight years to reach a free trade agreement with the EU, suggesting any negative impacts of crashing out of the EU could be long-term ones.

Commenting on the findings, Roland Sonnenberg, Head of UK Aerospace and Defence at PwC, said, “We’ve seen a lot of speculation that uncertainty over Brexit terms and the potential disruption to global supply chains may impact the ability to attract global investment and meet production timetables. But this analysis shows that the UK continues to be a strong competitor when it comes to investment and expansion opportunities… The UK has a real depth of talent and capability in the sector, which remains well-positioned to support the economy as we continue to make a strong and vital contribution across global markets.”