More support unveiled for aerospace industry

Data from the trade body, ADS, shows aircraft orders registered their highest delivery figures of the year in October, with 85 commercial aircraft deliveries globally.

However, the figures remain low relative to pre-coronavirus levels. There were 97 deliveries made in October 2019 and more than 130 deliveries in the same month in each of the previous two years.

Moreover, the pandemic also seems to be prompting a shift in the sector. October’s new orders were entirely for single-aisle aircraft, which are now airlines’ preferred models, as opposed to the larger, wide-body aircraft they once favoured.

Even with October’s improvement, it’s clear the aviation sector faces a slow and uncertain path to recovery. However, one positive step in recent weeks has been confirmation the UK’s ‘Test to Release’ system. The idea is that international travellers arriving in the UK from departure points not covered by a travel corridor will only have to quarantine for five days, rather than 14 as is currently the rule, if they have a negative coronavirus test on their fifth day.

In such difficult times, the sector needs all the positive news it can get. The Government’s announcement of new investment in defence and security is welcome news for the whole defence industry, and also for aerospace and advanced manufacturing. Overall, the investment is expected to sustain existing jobs and create 10,000 new roles.

Major funding commitments include an additional £1.5bn investment in research and development, plus a promise to invest further in the Future Combat Air System. The Government also plans to create a new ‘Space Command’, which will be capable of launching a rocket from UK soil for the first time by 2022. They also plan to set up a new agency dedicated to artificial intelligence and create the National Cyber Force.

Plus measures announced in the recent Spending Review and the National Infrastructure Strategy include the below. 

  • Additional funding of more than £24bn in cash terms over four years for defence, including £6.6bn of research and development (R&D) support.
  • £21m of support for the decarbonisation of aviation, via sustainable aviation fuels and zero emission flight infrastructure, to be overseen by the Jet Zero Council.
  • A pledge that from August 2021, employers that pay the Apprenticeship Levy will be able to transfer unspent funds to small and medium-sized enterprises.

One disappointment is that the Government hasn’t offered long-term capital investment in the industry’s supply chains. This would help to minimise the risk of lost skills and jobs, and enable companies to continue to invest in new technologies.

More positively, it’s increasingly clear that space offers exciting opportunities for the UK’s aerospace sector. Industry association, UK Space, says the Space Command should bolster the UK’s ability to defend both the freedom of space and the UK’s sovereign assets, as well as to enhance the co-ordination of UK military and commercial space operations. It believes the UK can be ‘the global centre of excellence for the satellites and other space industrial assets of the future’. More detail on support for UK space hubs is available here.

Rail sector focuses on collaboration

The Access Project is a new initiative promoting cross-sector collaboration and sustainable supply chains. Led by industry associations from different sectors the Access, standing for Accelerating Cross-sector Collaborative Ecosystems and Sustainable Supply chains, is funded by Innovate UK, the Government-backed innovation agency.

Participating associations include the West of England Aerospace Forum, the North East Automotive Alliance and Rail Forum Midlands (RFM). These groups will create a digital business networking platform to facilitate closer working relationships, with the aim of minimising supply chain risk amid the coronavirus pandemic and into the future. For example, it may help companies expand into new sectors, facilitate onshoring by simplifying the process of identifying new suppliers, and accelerate sustainable transport initiatives by encourage better exchange of technologies, skills, innovation and capacity.

‘The rail supply chain continues to experience significant peaks and troughs in workload and whilst the industry is committed to creating smoother pipelines, we need to do all we can to ensure suppliers don’t have all their eggs in one basket and can tap into wider markets both in the UK and overseas,’ says Elaine Clark, the CEO of RFM.

‘We also need to move faster in the development and deployment of new technologies to ensure that rail can take a leading role in the decarbonisation agenda for the UK. Working with other sectors has the potential to accelerate technology development, help companies make better and more informed investment decisions, and achieve cost effective production volumes faster.’

Manufacturing sector news

The Government has in recent weeks made two important policy announcements that will have a direct impact on UK manufacturers. Its Green Plan is aimed at driving a ‘Green Industrial Revolution’ with targeted investment of £12bn, while its Spending Review sets out the Government’s forthcoming spending plans.

Green Plan

Looking at the Green Plan first, the initiative is focused on ten key areas.

  • Offshore wind. The Government has pledged the UK will produce enough energy from offshore wind to power every home, quadrupling production to 40GW by 2030 and supporting up to 60,000 jobs.
  • Hydrogen. The aim is to have 5GW of low-carbon hydrogen production capacity by 2030 for use by industry, transport, the power sector and homes. Ministers hope to develop the first town that is heated entirely by hydrogen by the end of the decade.
  • Nuclear. The Government is committed to nuclear as a clean energy source, and has plans for both large-scale plants and the development of the next generation of small and advanced reactors that could support 10,000 jobs.
  • Electric vehicles. The Government promises to support manufacturers in automotive centres such as the West Midlands, the North-East and North Wales to accelerate the transition to electric vehicles, including investment in key infrastructure.
  • Public transport, cycling and walking. The Government is committed to making cycling and walking more attractive, and to investing in zero-emission public transport.
  • Greener air travel and maritime. Ministers have promised to help industries seen as more difficult to decarbonise. Plans include research projects in areas such as zero-emission planes and ships.
  • Homes and public buildings. The aim is to improve the environmental performance of homes, schools, and hospitals through energy efficiency improvements. This includes a target to instal 600,000 heat pumps a year by 2028. There’s scope here to create 50,000 jobs by 2028.
  • Carbon capture. The Government says the UK can be a world leader in technology that makes it possible to capture and store harmful emissions. Its target is to be removing 10 metric tonnes of carbon dioxide by 2030, the equivalent of the emissions today of the industrial Humber region.
  • Nature. The Government has pledged to protect and restore the natural environment, with 30,000 hectares of tree planting every year.
  • Innovation and finance. Cutting-edge technologies will be needed to achieve these goals, which the Government believes the UK is well placed to develop. It aims to make the City of London the global centre of green finance.

Spending Review

Turning to the Government’s Spending Review, the Chancellor has this time set out plans for just the next 12 months, rather than for three years, as is the normal practice. Given the uncertainties of the coronavirus pandemic, the Government has chosen to focus on immediate priorities. MakeUK has published a useful summary of impacts on manufacturers from the review, including the below.

  • Increases to the National Living Wage and the National Minimum Wage. These will rise next year, in line with previous announcements, with 23 and 24 year olds now qualifying for the former.
  • An extension of apprentice incentive payments for employers, along with a continuation of the Kick Start initiative, which offers a £2,000 payment for employers that recruit an apprentice.
  • Significant increases in innovation spending, with £16.4bn of funding for research and development. This is critically important if the UK is to maintain its productivity and competitiveness.
  • A warning that the domestic economic environment remains challenging, with bleak forecasts in key areas.

Post-Brexit planning

Time is running out for UK manufacturers to prepare for the end of the post-Brexit transition period on 31 December. A comprehensive checklist of the actions that businesses need to take, along with useful resources, is available on gov.uk

Getting to grips with this new red tape is crucial. Our recent Trade Barometer report warned that manufacturers regard bureaucracy as one of the most significant challenges as they trade internationally, with 63% citing it as a concern. The end of the transition period will only add to the burden, but we offer a range of solutions to help overcome such challenges, including training for businesses making their preparations. Plus, we have several sessions on transition planning scheduled for December and January. For more information, email international@santander.co.uk.

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

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