Executive Summary
U.S. aerospace & defense manufacturers produce the highest trade surplus, year after year, of all manufacturing sectors. According to TradeStats Express, a U.S. Department of Commerce-furnished database showing the latest global patterns of U.S. merchandise trade, the 2018 U.S. aerospace and defense exports to the UK amounted to approximately $10.18 billion. The UK aerospace and defense industry is one of the largest in the world, behind that of the U.S. In 2019, total UK aerospace and defense turnover totaled close to $73 billion, and the sector had a 18% global market share.
The UK does not produce any large civil aircraft and 90% of domestic production is exported. The UK has a particular reputation as a global center of excellence for the design and production of engines, helicopters, wings, structures and aircraft systems (including landing gear). Rolls-Royce-manufactured engines power more than 35 types of commercial aircraft, and the company has over 13,000 engines in service around the world. The UK also designs and manufactures wings for all Airbus aircraft platforms. In addition to manufacturing, the UK has a thriving maintenance, repair and overhaul sector, including servicing the huge numbers of military and civil aircraft that fly through and from the UK every year, which makes up a 17% share of the $45 billion global MRO industry. The aerospace industry is a major market for U.S. exports in the United Kingdom.
Market Entry
Entry or expansion by U.S. companies into the UK aerospace market is challenging for SMEs and OEMs alike. Due to a mature and sophisticated supply chain, a U.S. company can expect to have to commit both time and resources to enter into or expand within the UK aerospace market. The UK aerospace and defense supply chain directly employs some 246,000 people, ranging from very large companies such as OEMs to small businesses making very specialized components.
The UK government has demonstrated significant interest in developing and increasing the domestic supply chain, unveiling a $20.2 billion initiative to help give a competitive advantage to UK companies in the aerospace market. UK industry and government established the Aerospace Growth Partnership (AGP), which develops initiatives to encourage UK companies to cooperate closely and to address gaps and problems that affect the sector, tackle barriers to growth, and boost both UK exports and high value jobs. UK industry and government committed $3.5 billion to an Aerospace Technology Institute and to invest in R&D, to help ensure that the UK remains Europe’s number one aerospace manufacturer.
The UK continues to enjoy a record backlog of orders for equipment across narrow-and wide-body aircraft, but to deliver on these orders is an increasing challenge within the UK supply chain. This backlog of orders is becoming more acute for tier 2 suppliers and below, and may lead UK companies to consider forming new alliances to create extra capacity to meet obligations. U.S. suppliers should consider collaborating with a larger customer with an established presence in the UK which is looking to increase capacity. U.S. companies should also expect to enter the UK market at a lower tier of the supply chain than they might otherwise usually enter in the U.S. or globally. Suppliers may also need to consider using a local distributor or agent with established ties within the market.
Entering the UK aerospace market requires patience, investment, innovative products, and competitive pricing. The aerospace supply chain is well-integrated with the primes all looking to reduce the number of their suppliers. A U.S. company can expect to have to commit both time and resources to enter or expand within the UK aerospace market, especially companies providing what are known as “me too” products and services. Selling to OEMs as well as tier 1 and 2 manufacturers entails a vendor/product qualification
and assessment process. All U.S. companies desiring to become a supplier will need to register with their prospective customer. In addition, AS9100 and NADCAP would be considered minimum requirements for doing business in the aerospace supply chain in the UK. All companies desiring to the Ministry of Defence are required to complete Cyber Essentials accreditation.
Current Market Trends and Demand
The commercial aerospace sector has been significantly impacted by COVID-19. There have been deep job cuts at OEMs and SMEs alike and aircraft production and work orders have been cut by approximately 40%. Airbus have reduced their staffing levels by 1,700 jobs at its factory at Broughton and Rolls Royce have reduced their staffing levels in the UK by 3,000 jobs. Airbus announced that the aerospace industry is facing the gravest crisis the industry has ever experienced that its business in the civil airliner business was reduced by 40%, and that it expects to remain at this reduced level for the next two years. Airbus expects there will be an uptake in single-aisle business in 2022 and that widebody deliveries will take longer to recover, perhaps until 2025.
The pre-COVID surge of demand for fixed wing aircraft and helicopters was being led by high-growth economies from Asia, the Middle East and South America. UK aerospace companies are actively seeking opportunities in these high-growth markets as their importance in the global supply chain increases. These markets were expected to account for 58 percent of new fixed wing aircraft and 45 percent of rotor craft orders to 2031. With previous market projections forecasting a requirement for 29,000 new large civil airliners, 24,000 business jets, 5,800 regional aircraft and 40,000 helicopters by 2032, the right prioritization and strategy will be critical in maximizing the opportunities for the UK aerospace industry. Major international OEMs and MRO providers shifted some activities to these countries or were planning to do so.
Opportunities
Aircraft Parts
The best prospects for U.S. aerospace firms in the UK continue to be associated with the manufacturing of new aircraft or new versions of older aircraft. The key areas include:
- Aerodynamics (e.g. wing design)
- Propulsion (e.g. rotor blades, engine assembly)
- Aero structures (e.g. fuselage & wing assembly)
- Advanced systems (e.g. avionics, undercarriage)
Defense Products
The best prospects for a U.S. defense supplier come in autonomous solutions for air, land, sea and subsea domains; counter-autonomous solutions, artificial intelligence solutions for all 5 domains, cyber solutions, soldier systems such as night vision devises, optical systems for crew served weapons or small arms and tactical radios.
Rotorcraft & UAVs
Officials from the UK’s Maritime & Coastguard Agency (MCA) have begun industry engagement sessions as they work towards the procurement of the second-generation of Search and Rescue (SAR) service. While the tender for the present SAR contract included a technical specification document for the helicopters and base structure that ran to 76 pages, the MCA stresses that it is “agnostic” as to how the future service will be delivered. Although helicopters will remain the primary platforms for rescue missions, the MCA is encouraging bidders to offer solutions that use current and emerging technologies such as UAVs or even high-altitude pseudo-satellites for surveillance.
Contact
PJ Menner
U.S. Embassy London
Commercial Specialist
Pj.menner@trade.gov
+44 20 7891 3419
