A triple threat to the UK’s aerospace industry has sent shockwaves through its supply chain: Brexit, the suspension of the Boeing 737 MAX aircraft programme and, most devastatingly, COVID-19. With more than 90 per cent of aircraft grounded, the sector is fearing for its future.
But it won’t give up without a fight.
This week’s news that a £40 million aerospace manufacturing and design facility for Moog, a global leader in aerospace engine and flight controls systems is set to be developed in Gloucestershire is great news.
The Midlands, along with the South West of England, are home to two major UK aerospace superclusters. In the Midlands, this includes more than 300 companies forming one of the largest regional networks internationally. The cluster grew rapidly in the last 15 years, with output doubling and employment increasing by more than half. The region is a leader in advanced aerospace manufacturing and its growth was fuelled by demand for high-technology aero engines, complex aircraft systems and precision-engineered components from global giants such as Airbus and Boeing.
In the South West, more than 900 companies sit in the aerospace supply chain, and the MoD’s defence equipment and support organisation’s operational budget is £14 billion, and supports 30,000 jobs, with nine out of the top 10 global aerospace leaders based in the region.
In May, the Midlands Aerospace Alliance announced it was working on a five-point rescue and recovery plan for aerospace and invited supply chain companies to participate in an in-depth survey to help identify the priorities.
The top priority for 70 per cent of aerospace supply chain companies is creating safe and productive workplaces for employees. Many companies have adapted as most have continued to operate during the lockdown and have needed to ensure the welfare of their employees while delivering for aerospace customers and manufacturing hundreds of thousands of parts for medical ventilators required nationally.
But aerospace companies are already making significant redundancies and, without the types of government intervention being provided by other countries (the French government has announced a €15bn bailout of its aerospace industry), up to a third of employees across the supply chain could lose their jobs. It is vital that our region is able to retain the talent required for when demand picks up again, so that the Midlands can remain competitive in the international aerospace market.
ADS, which represents and supports more than 1100 UK businesses operating in the aerospace, defence, security and space sectors, has been calling for the UK Government to address priority areas for support in its industry, including a pragmatic plan to resume flights, rapid expansion of Government support for low carbon aerospace technology and pulling forward public procurement to support jobs and cashflow.
ADS Chief Executive Paul Everitt said: “The French Government has recognised the unique challenges faced by its aerospace industry from this crisis and is delivering the specific support needed to protect jobs and manufacturing capability.
“We have set out priority areas for action, including investment in the development of new green aerospace technology, a pragmatic plan to resume flights without resorting to quarantine measures, and pulling forward public defence and space projects.
“Around the world, our international competitors are acting to support airlines, manufacturers and their supply chains. Tens of thousands of UK jobs are now at risk and the UK Government must urgently put in place the measures we need to make sure our industry is not left behind.”
Winning new business is a high priority for 40% per cent of aerospace supply chain companies in the Midlands Aerospace Alliance survey and is expected to increase in importance into 2021. Many companies invested heavily, in recent years, in response to strong market forecasts. New factories were built, new equipment installed and talented people received extensive training. Suddenly, there is significant idle capacity and companies need to bolster their orderbooks in order to survive.
The majority of respondents want to see the diverse and advanced capabilities of UK aerospace suppliers promoted to a global market, but few relish the prospect of carrying out business development virtually. Facebook Teams, Skype or Zoom just won’t wash when you are dealing with complex requirements and the level of trust required.
This reluctance could affect the take-up, for example, of the virtual meetings set to replace Farnborough International Airshow this year.
Finance is obviously another key priority for the aerospace supply chain. The top issue is ensuring customers pay on time, but respondents to the Midlands Aerospace Alliance survey indicate that not all customers are paying suppliers as they should.
Aerospace suppliers want much better visibility of future requirements from customers to aid their own planning. Respondents rated the importance of ensuring a resilient supply chain as a higher priority next year. The Alliance believes this is because much less is certain in terms of the impact on demand beyond 2020.
But more worryingly, innovation was seen as less critical compared to all the other areas for 2020, with just 20% of respondents saying it was a top priority.
The Midlands Aerospace Alliance thinks this is shortsighted: innovation is not just about the future, it’s about performing better now. It could be even more critical during challenging times, because all kinds of innovative thinking is going to be required to enable slimmed-down workforces to be more productive, increase business resilience and enter new markets at a time when diversification could be key to survival.