Industry expects demand to accelerate through 2021

Aerospace manufacturing declined by 26% in the second quarter of 2020, the largest slump on record.

June’s output was a third smaller than in February, before lockdown policies were imposed in the UK and many other major economies.

Recovery in sectors such as air travel is likely to take longer than in other areas, and this will present a significant challenge to aerospace manufacturers in Britain.

Global aircraft deliveries were down by more than 70% between April and June, although the total backlog of orders is relatively high at 13,673 aircraft. Paul Everitt, Chief Executive of ADS, the industry body representing the aerospace, defence, security and space industries in the UK, said: ‘We are now seeing aircraft return to our skies and increasing consumer confidence. The outlook for the coming months remains uncertain, but industry is confident demand will accelerate through 2021 and beyond.’

Aerospace 

The UK Aerospace Supply Chain Taskforce, led by the former Airbus Chief Operating Officer, Tom Williams, is looking at ways to support the aerospace industry. For example, by helping companies finance their work in progress, stock and tooling. ADS and the taskforce have proposed the creation of a £1bn patient capital investment fund, backed by equal contributions from industry, government and the financial sector. This fund would help the sector manage the immediate crisis and prepare for the longer term.

Everitt said ‘The next generation of technology could take a decade to be developed and executed, and government involvement will allow us to shape the rules and rates of return in a way that is more suited to the long-cycle nature of the aerospace industry.’ Under the proposals, the fund would seek private equity backing in exchange for a de-risked investment.

Meanwhile, British company Reaction Engines and Rolls-Royce have formed a new strategic partnership to develop high speed aircraft propulsion systems. This will include exploring applications for Reaction Engines’ thermal management technology within civil and defence aerospace gas turbine engines and hybrid-electric systems.

Highlands and Islands Enterprise (HIE) has approved Scotland’s first spaceport. The £17.3m Space Hub Sutherland facility is part of the UK’s plan to set up several launch sites and become Europe’s leading destination for small satellite launches. This should also lead to the establishment of several design and manufacturing hubs, helping to grow the UK’s space industry at the time of increasing global demand.

Advanced manufacturing

The UK’s food and beverage sector has been the largest adopter of industrial robots since the country entered lockdown in March 2020. This is according to the British Automation and Robot Association (BARA), which says that the sector accounted for 29% of all industrial robots sold in the UK between April and June.

Meanwhile the Knowledge Transfer Network (KTN) has rebranded with an ambitious five-year strategy. KTN is Innovate UK's network partner and provides innovation networking for businesses in line with its mission to drive growth in the UK. Alicia Greated, the organisation’s CEO, says the new strategy ‘commits to focus not only on economic prosperity but also on societal and environmental benefit, starting with the goal to achieve net-zero carbon emissions’. More information about KTN. here.  

Rail sector

Scandinavian Railways is making its biggest investments to date in its digital transformation process. However, it needs local expertise to completely fulfil its digitalisation goals, and is seeking help from international suppliers. On 10 November, Camilla Ahston, Senior International Strategist at Trafikverket (the Swedish Transport Administration), will be speaking at the Scandinavian Rail Optimisation conference addressing the latest business opportunities in Sweden and how to become a supplier to Trafikverket. Find out more 

A Rail Sector Opportunities in India webinar was presented by the Railway Industry Association and the Department for International Trade (DIT) on 18 August. Indian Railways envisages investment of £100bn in the next five years, with plans to continue investing heavily until 2030. This modernisation programme presents opportunities for UK companies across the rail value chain. Watch the webinar here.

DIT Switzerland has also published details of opportunities for UK suppliers. More information can be found on the export focus page of Rail Forum Midlands.

Manufacturing sector news

Following the publication of UK GDP (gross domestic product) figures for the second quarter of 2020 which showed a contraction of more than 20%, MakeUK said ‘While industry is seeing some signs of a recovery in demand, with manufacturing production seeing its largest increase since records began in 1968, the sector has been through a profound shock and the impact of which will continue to be felt for some time to come, especially with major redundancies coming through the pipeline which are going to remove significant spending power from the economy. Some sectors of the economy are facing accelerated restructuring because of the pandemic, others which are fundamentally sound, and which will be vital to our future growth in high-value and high-skill sectors, will continue to be disproportionately impacted.’

The organisation has called for the Government to be flexible in extending job support schemes, and to follow the lead of our European neighbours.

On 10 September, MakeUK published the 2020-21 Manufacturing Fact Card in conjunction with Santander. This will highlight the fact that the average salary across the sector’s 2.7m employees is £34,538, 13% higher than the national average.

MakeUK is also calling on ministers to make sure BTEC students receive their results as quickly as possible in order that they can access apprenticeship schemes and other manufacturing opportunities. The organisation has also created a guide for employers to help them manage workplace coronavirus outbreaks. View it here

To discuss how Santander can help your business please contact: ccbsectorinsights@santander.co.uk

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