Viewpoint

Aerospace manufacturing in Britain

The UK manufacturing sector may be a shadow of its former self and a pygmy relative to the likes of Germany’s, but aerospace is one industry that still reaps huge rewards for the British economy.

Production lines such as those at Rolls-Royce, GKN and Airbus UK make Britain the world’s second biggest player in commercial aviation, with UK suppliers booking £19bn of orders last year according to trade body ADS.

 

And with aircraft deliveries set to rise again, 2014 could well see British aerospace manufacturing exceed its record year in 2013.

However, ADS has warned that the UK’s lofty status is under threat unless more is done to keep top-performing companies in the country and to free up credit for smaller suppliers.

 

In particular, the body is campaigning for more generous capital investment, and research and development tax relief. At present, UK companies can claim 10 per cent of R&D spending as tax credits and 18 per cent of capital investment.

 

The UK’s ongoing membership of the European Union – which is to likely be put to a referendum in the next few years – is also seen as vital to maintaining the country’s share of the global commercial and defence aerospace market.

 

For its part, the government has announced several initiatives, the most eye-catching of which is the Aerospace Technology Institute, which will advance research and development over the next seven years via £1bn ($1.6 billion) of funding from government and £1bn from industry.

 

Politically, of course, support for aviation is an open goal: all parties trumpet the need to rebalance the economy away from financial services and towards manufacturing; high-value items such as jet engines are a great way to address the country’s trade deficit; and research into advanced technology can have important spill-over effects.

 

Government must still tread carefully, however, since tax breaks and research credits can prompt accusations of illegal state aid, while overt support for Britain’s military aerospace suppliers will always attract controversy.

 

Commercial manufacturers have their troubling sides, too, risking embarrassment if millions are funnelled towards companies embroiled in corruption and bribery scandals.

 

Still, the stakes are high: ADS estimates that commercial aircraft, business jet and helicopter production could be worth £600bn to the UK over the next 18 years.

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