This report will explore the following key issues regarding the aerospace industry in the UK:

  • What are the key determinants driving the aerospace industry?

  • Was the market affected by the financial crisis and how has it recovered since? Has there been any structural changes as a consequence?

  • How has the government influenced and shaped the development of the sector?

  • What are the key issues the UK industry needs to address to maintain its global position in an ever-competitive market?

  • How have companies adapted to cost and environmental pressures?

  • What does the future hold for the UK’s aerospace industry?

Definitions

For the purposes of this report, the aerospace equipment industry includes both civil and military equipment.

The market is segmented into the following sectors:

  • Complete aircraft

  • Helicopters

  • Aircraft parts, including undercarriages, propellers, fuselages, hulls, wings, control levers and fuel tanks

  • Aircraft engines

  • Aircraft engine parts

  • Spacecraft, including satellites and launch vehicles

  • Other aerospace equipment, including ground flying trainers, aircraft launching gear, gliders, hang gliders, balloons and other non-powered aircraft

  • Repair and reconditioning of aircraft

All values quoted in this report are at current prices unless otherwise specified.

Some numbers in tables do not add exactly due to rounding.

Methodology

Reports are researched and written by MBD’s in-house, specialist business-to-business consultants. Research is based on both an analysis of official information and on original, trade research, providing both a quantitative and qualitative view of the market. MBD’s unique range of frequently updated reports provide an integrated body of ongoing research, enabling deep understanding of the prevailing trends and of the drivers of these trends based on trade opinion.

Abbreviations

The following abbreviations appear in this report:

ACARE Advisory Council for Aviation Research and Innovation in Europe
ADS Trade Organisation for the UK Aerospace, Defence, Security and Space industries
AGP Aerospace Growth Partnership
AIS Aerospace Industrial Strategy
AME Annual Managed Expenditure
AMSCI Advanced Manufacturing Supply Chain Initiative
ASD Aerospace and Defence Industries Association of Europe
ATI Aerospace Technology Institute
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Market positioning

The UK aerospace industry comprises firms involved in the design, development, manufacture and support of aircraft, helicopters, missiles and space systems (satellites). It includes aircraft and systems, engines, equipment and maintenance, repair and overhaul companies supplying military and civil markets in both the UK and overseas.

The UK’s aerospace industry is unusual in the manufacturing sector as it was not particularly affected by the recession. Instead, it has benefited from the launch of a number of new aircraft and engine programmes under development in the industry. This includes the Airbus A380 and Boeing 787 over the past five years, while development work on the new Airbus A350 aircraft and the associated Rolls-Royce XWB engine has begun in the past two years.

UK airlines form a privately-owned oligopsony, dominated by British Airways. There are large numbers of state and privately-owned airlines demanding large and regional jet airliners globally. There are also large numbers of buyers for business jets and for light aircraft for pleasure use. On the global supply side, there are duopolies in large jet airliners (Airbus, Europe; Boeing, US) and regional jet airliners (Bombardier, Canada; Embraer, Brazil).

The global supply industry has traditionally been dominated by US manufacturers, reflecting the size of its domestic market, which allows economies of scale in production that offset the high research and development costs inherent in the sector. However, since the turn of the Millennium, the European production base has strengthened and become more competitive due to a number of strategic alliances across national borders, such as the Airbus Industrie and the consolidation of GKN Westland of the UK and Augusta of Italy to form AgustaWestland in 2001, forming the world’s second largest helicopter company. Component parts are therefore produced throughout Europe and assembled to provide greater competition to US suppliers.

The EU aerospace industry is highly concentrated in a few countries, including the UK, France, Germany, and Italy. Other significant aerospace production capacity in Europe is located in Belgium, Greece, the Netherlands, Spain and Sweden.

The ADS Group reported in its latest Aerospace Industry Outlook report in June 2014 that the UK aerospace sector had grown 10-times faster than the overall UK economy in the last three years. Much of this growth has been attributed to the success of the Aerospace Growth Partnership, a joint government and industry initiative that has made significant progress in boosting innovation, skills and enhancing technology development in the supply chain. The UK government recognises that SMEs have a significant role in the industry, with funding of £25 million dedicated to supporting them in developing collaborative research and technology projects. Continued innovation in new structures, engines and composites will differentiate those manufacturers who can best utilise technology to improve efficiency.

Although the UK no longer builds complete passenger aircraft, it retains the skills and capabilities to design and manufacture almost all key components, from fuel systems to jet engines. Whilst the lack of an entirely domesticated civil airliner is viewed by some as a sign of an industry in decline, the UK’s aerospace industry is the second largest in the world and commands a market share of approximately 17% - second only to the US. The UK also exports a substantial 75% of all aerospace equipment produced, making it a key export industry for the country.

UK firms are leading industry efforts to make aircraft more fuel efficient, with significant involvement in the most prominent new civil aircraft of recent times. The design and manufacture of the wings for the Airbus A380 and the A350 XWB took place at Airbus UK’s world-leading Broughton facility, while more than a quarter of the value of Boeing’s 787 Dreamliner came from UK manufacturers, including Eaton, Messier-Bugatti-Dowty and Rolls-Royce.

The UK’s aerospace sector is supported by a widespread research base, with many universities contributing towards the study of flight and the development of new technologies. Notable sites include the National Composites Centre at Bristol University, which has been heavily involved in developing composite wings for aircraft, such as the Airbus A350.

The UK has developed a strong comparative advantage in four key, high-value, complex areas of modern aircraft; wings, engines, aero structures and advanced systems. The adoption of new technologies, such as composites and additive manufacturing, are starting to extend through the aerospace supply chain.

The high degree of internationalisation in the sector has made performance highly reliant on foreign market conditions rather than just domestic market factors.

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