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20 April 2017

Britain plays an essential role in the global aerospace industry, but this position could come under pressure if Britain does not hammer out a favourable deal in the Brexit negotiations, a report has found.

The warning comes from manufacturers’ organisation EEF and Santander in their review into the British aerospace industry, which is worth £31bn a year to the UK economy and is the world’s second largest, beaten only by the US.

Britain’s 2,400 aerospace companies are specialists in manufacturing engines and complex components for aircraft, which make up 79pc of the sector’s £28.4bn of annual exports.

The airliner market is dominated by pan-European Airbus and US-based Boeing, and although neither builds complete aircraft in Britain, both rely on UK-built parts to make their products.

Both manufacturers have record order books, meaning that even as they ramp up production rates they have almost a decade’s worth of work in hand, and are reliant on UK aerospace businesses to help them meet demand.

Paul Brooks, Santander’s head of business development for manufacturing, said: “The UK is ‘hardwired’ into the global supply chain”.

“Our aerospace industry has thrived off the back of its competitive advantage in the production of high-value added technology-intensive products, and we forecast that this will continue. Since 2002, the UK industry has more than doubled overseas sales from £13.2 billion to £28.3 billion, an increase of 114pc,” he added.

However, Britain’s essential role in the global aerospace industry could come under pressure as a consequence of the Brexit process.

For example, Airbus builds the wings for its jets in Britain, with the company’s huge plant in Broughton, North Wales, and exports them to factories around the world.

 “The concerns around the nature and conditions of any Brexit deal raise serious questions about the next generation of aircraft and where they will be produced,” the report warns.

“Airbus could face growing political pressure to bring jobs back to France, Germany and Spain as a result of the [UK’s] decision to leave the single market.

“Broughton is likely to face competition for wing work from Germany and Spain as it is the most lucrative part of the supply chain and both nations are keen to accelerate their aerospace sectors.”

If Britain – which is already in the grip of a skills shortage – loses access to talented engineers and technicians as a result of freedom of movement controls arising from Brexit, Germany and Spain will have their position strengthened when bidding for new aircraft models, the report said.

Concerns about protectionist measures in the wake of Brexit are also flagged as a key risk.

Under World Trade Organization (WTO) rules, the industry is exempt from tariffs, but EEF and Santander caution that “there is a growing concern that competitors could try to encourage governments to find loopholes to raise the cost of production for UK businesses”.

Examples of this include EU exemptions on raw materials used to make components being reversed, raising the cost of British-built parts, or customs delays which would slow down the export of components, making the UK a less attractive location for work.

A further worry is over Britain’s membership of aerospace certifying authority the European Aviation Safety Agency (EASA).

If Britain creates its own regulatory regime, then manufacturers will still need to have parts authorised by the EASA, raising costs and adding red tape, which would discourage further investment in the sector.

Source: Telegraph.

 

Written By Sharon Shaw

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