The authoritative source for independent research on UK-EU relations

02 Mar 2018

Economy

Relationship with the EU

The aerospace industry is thriving around the world, and companies here in the UK are playing a vital role in this international success story.

Ours is the largest aerospace sector in Europe and the second largest in the world. The UK produces wings, engines, landing gear, fuel systems and avionics for some of the world’s most successful commercial aircraft.

In the UK and globally the aerospace industry continues to break records. Last year saw the seventh consecutive annual record set for aircraft deliveries, with nearly 1,500 rolling off production lines – worth around £29bn to UK industry.

Global order books too have reached record highs as demand for new aircraft continues to grow, creating a backlog of more than 14,300 aircraft orders at the end of 2017 to be fulfilled in the coming years.

As demand rises, manufacturers are stepping up production to satisfy airline requirements for cleaner and more fuel efficient planes. There is every reason to expect production will rise again this year, and for our sector’s sustained growth to continue.

However, there can be no room for complacency. Brexit is creating economic headwinds for UK businesses and our international competitors will be quick to take advantage of any loss in our manufacturing competitiveness.

Businesses in our sectors need certainty over our trading relationship with Europe, and with the rest of the world, after the UK leaves the EU.

Pragmatic decisions must be reached over transition arrangements, regulatory systems, customs processes, movement of labour and pan-European collaborative research programmes.

The immediate priority for UK manufacturers is that negotiators must reach a firm agreement on transition. As the date of the UK’s exit from the EU comes closer, companies will increasingly be forced to make decisions about their plans beyond March 2019.

Urgent agreement on a comprehensive transition deal would give industry the opportunity to plan for the future with confidence.

ADS – the UK trade association for the aerospace, defence, security and space sectors – has written to both David Davis and Michel Barnier to propose that a transition period should last for at least two years and should see the UK remain an EU member state until the end of this period, giving businesses the smooth, single-step transition they need to maintain growth, jobs and competitiveness.

Regulation is another key area of concern for our sectors, where there is little to gain from unnecessary regulatory divergence.

Aerospace is a global business and just as components made in the UK are exported to aircraft assembly lines around the world, our supply chains stretch across multiple borders in Europe and further afield.

The European Aviation Safety Agency (EASA) has regulated aerospace in for the last 10 years, and it is vital to UK aerospace that we remain in this successful regulatory system after Brexit.

With the UK a member of EASA, companies in the aerospace sector continue to benefit from requiring only a single set of certifications for their personnel, facilities and products.

Around the world, EASA’s excellence is recognised and the EU’s agreements with other nations mean that our products can be supplied to customers in all the major aviation markets without requiring additional certification.

EASA includes non-EU nations as members – like European Free Trade Association (EFTA) members Norway, Switzerland and Iceland – and there should be no barrier to continued UK membership.

Sustaining efficient and effective regulation is not the only risk of Brexit facing our industries. We estimate that new customs processes for trade with the EU could add up to £1.5bn in annual costs to the aerospace, defence, security and space sectors that ADS represents.

Analysis shows that costs like these would be unlikely to be outweighed by gains from new trade agreements with countries outside the EU.

Our borders must prioritise flow rather than control, allowing businesses to guarantee they can continue to deliver to customers across Europe on time, every time.

Earlier this year, the CBI called for a comprehensive customs union as a practical, real-world answer to the questions posed about the UK’s new trading relationship with the EU, and we support that approach.

Finally, it is now time for businesses in our sector to make sure they are as prepared as they can be for Brexit.

At the start of this year, we advised our more than 1,000 member companies to examine key questions about their operations and take steps to make sure they remain as competitive as possible after the UK leaves the EU.

Businesses must make sure they understand how their workforce could be affected by changes in citizens’ rights, their dependence on EU regimes like EASA and the EU’s chemicals regulation (REACH), and what problems could be caused by customs checks or border delays.

There has also never been a more important time for companies to invest in their own competitiveness. In the UK, aerospace has been a trailblazer in the UK for partnership between industry and Government through industrial strategy.

The £3.9bn of joint private and public sector investment in the Aerospace Technology Institute is helping to make sure new technology is continuing to be developed at all levels of the UK aerospace sector.

Programmes like SC21, the National Aerospace Technology Exploitation Programme (NATEP), and Sharing in Growth are helping supply chain companies maximise their competitiveness, and the competitiveness of UK manufacturing as a whole.

Industrial strategy is a proven success, and Brexit means it is especially important as a means to make sure UK industry continues to compete in global markets. We hope to see the UK Government take decisive action to support supply chains and address the UK’s national productivity challenge.

There is a bright future for the aerospace industry in the UK and around the world. There is an opportunity for this sector to continue to grow, generating new high value jobs in communities up and down the country.

For this opportunity to be realised, we need to see negotiators deliver a comprehensive, ambitious, and above all a pragmatic Brexit deal that puts prosperity first.

By Paul Everitt, Chief Executive of ADS, the UK trade association for the aerospace, defence, security and space sectors.

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