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Aerospace Industry - UK - October 2016

“The vote to leave the EU could weaken the UK’s standing in the industry over time, with some industry executives admitting that it will force them to work harder to win new business. However, it must be remembered that ‘Brexit’ also has the potential to open up new markets not restricted by EU agreements.”
Lewis Cone, B2B Analyst

This report looks at the following areas:

  • Will the UK's exit from the EU have an impact on the industry?
  • How are oil prices affecting aircraft demand?
  • Emerging markets represent both an opportunity and potential future threat to the UK aerospace industry and major suppliers
  • The adoption of new techniques and technology are leading to changes in the design and manufacturing process

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Table of contents

  1. Executive Summary

      • Market size
        • Figure 1: UK aerospace equipment turnover, 2011-15, £ billion at MSP
        • Figure 2: UK aerospace equipment turnover, by sector, 2011-15, £ billion at MSP
      • Market trends
        • Figure 3: Regional analysis of global air passenger traffic development, 2012-16*, five-year average, (% change in RPK)
        • Figure 4: Forecast development of the Global airline fleet, by aircraft type, 2015 and 2035, (% of total)
      • International trade
        • Figure 5: UK imports of aerospace equipment, 2011-15, (£ million at CIF)
        • Figure 6: UK exports of aerospace equipment, 2011-15, (£ million at FOB)
      • Market factors
        • Recovery in the price of crude oil could boost investment in more efficient aircraft
          • Emerging markets pose threat to UK’s leading position
            • Companies
              • Forecast
                • More than 33,000 new jets expected to be delivered globally by 2035
                  • Figure 7: Forecast World mainline jet deliveries, by type, 2016-35, (number)
                • Asia expected to overtake North America as the region with the largest fleet
                  • Figure 8: Forecast World Airplane Fleet, by Region, 2015 and 2035, (% of Total)
                • Defence spending set to increase until 2019/20
                  • Figure 9: Forecast UK DEL on defence, 2016/17-2019/20, (£ million)
                • What we think
                • Key Insights

                    • Will the UK’s exit from the EU have an impact on the industry?
                      • How are oil prices affecting aircraft demand?
                        • Emerging markets represent both an opportunity and potential future threat to the UK aerospace industry and major suppliers
                          • The adoption of new techniques and technology are leading to changes in the design and manufacturing process
                          • Introduction

                              • Definitions
                                • Methodology
                                  • Abbreviations
                                    • Market positioning
                                      • ATI launches first aerospace technology strategy to help boost productivity and investment
                                        • Industry standards
                                        • UK Economy

                                          • Key points
                                            • Overview
                                              • Figure 10: UK GDP, 2006-16, (% quarterly growth and GDP in £ billion)
                                              • Figure 11: UK output, by industry, 2008-16, (index 2013 = 100)
                                              • Figure 12: Quarters after GDP peak, 1979, 1990 and 2008, (number of quarters and GDP as % of pre-downturn peak)
                                            • Inflation
                                              • Interest rates
                                                • House prices
                                                  • Figure 13: UK house price changes, 2006-16, (12-month % change)
                                                • Consumer spending
                                                  • Manufacturing
                                                    • Figure 14: UK manufacturing, 2014-16, (index, 2013 = 100)
                                                  • Business investment
                                                    • Figure 15: UK GFCF 2005-15, (£ million)
                                                  • Imports
                                                    • Exports
                                                    • Market Factors

                                                      • Key points
                                                          • Figure 16: GDP growth rate, Q1 2012-Q2 2016, (% change on previous quarter)
                                                          • Figure 17: GDP growth rate, Q1 2012-Q2 2016, (% change on previous quarter)
                                                        • ... ‘Brexit’ unlikely to affect the industry in the short term, though it could have ramifications over the long term
                                                          • Recovery in the price of crude oil could boost investment in more efficient aircraft
                                                            • Emerging markets pose threat to UK’s leading industry position
                                                              • AGP continues its drive to ensure industry’s success
                                                                • Other factors
                                                                • UK Turnover and Market Trends

                                                                  • UK turnover
                                                                    • Key points
                                                                      • Boost to R&D funding as UK strives to maintain its competitive advantages
                                                                        • Strong performance at the biennial Farnborough Air Show
                                                                          • New market entrants providing both competition and opportunity
                                                                            • Low-cost carriers maintain their strong development in 2015
                                                                              • The end of the sequester in US spending, for now at least, could provide a boost to defence equipment exports
                                                                                • Industry continues to perform strongly despite slight market turbulence
                                                                                  • Figure 18: UK aerospace equipment turnover, 2011-15, (£ billion at MSP)
                                                                                  • Figure 19: UK aerospace equipment turnover, 2011-15, (£ billion at MSP)
                                                                                  • Figure 20: UK aerospace equipment turnover, by sector, 2011-15, (£ billion at MSP)
                                                                                  • Figure 21: UK aerospace equipment turnover, by sector, 2011-15, (£ billion at MSP)
                                                                                • Aerospace Industrial Strategy (AIS)
                                                                                  • National Aerospace Technology Exploitation Programme (NATEP)
                                                                                    • Market trends
                                                                                      • Key points
                                                                                        • Civil aerospace
                                                                                          • Passenger traffic showing no signs of slowing in emerging regions
                                                                                            • Figure 22: Regional analysis of Global air passenger traffic development, in RPK, 2012 -2016*, (% annual change)
                                                                                            • Figure 23: Regional analysis of Global air passenger traffic development, five-year average, 2012-16*, (% change in RPK)
                                                                                          • China
                                                                                            • Airbus and Boeing face challenging environment
                                                                                              • Growing demand expected for single-aisle and smaller widebody aircraft
                                                                                                • Figure 24: Forecast development of the Global airline fleet, by aircraft type, 2015 and 2035, (number of aircraft)
                                                                                                • Figure 25: Forecast development of the Global airline fleet, by aircraft type, 2015 and 2035, (% of total)
                                                                                              • Government decides to expand Heathrow but opposition remains strong
                                                                                                • Deliveries have risen over recent times, but threat of oversupply may lead to a steep fall in order number in 2016
                                                                                                  • Figure 26: World mainline jet deliveries, by model and manufacturer, 2000, 2012-2015 and partial-year 2016, (number)
                                                                                                  • Figure 27: World mainline jet deliveries, by manufacturer, 2000, 2012-15, (number)
                                                                                                  • Figure 28: Large commercial aircraft net orders, 2014 and partial-year 2015, (number)
                                                                                                  • Figure 29: Regional aircraft deliveries, by model, 2011-2015, (number)
                                                                                                • Business aircraft market suffering a fall
                                                                                                    • Figure 30: Deliveries of business aircraft, by manufacturer, 2011-15, (number of aircraft)
                                                                                                    • Figure 31: Deliveries of business aircraft, 2011-15, (number)
                                                                                                  • Defence
                                                                                                    • SDSR 2015
                                                                                                      • Defence spending rises in 2015/16 following government pledge
                                                                                                        • Figure 32: The UK defence departmental expenditure limits and defence spending, 2011/12-2015/16, (£ million)
                                                                                                        • Figure 33: UK defence departmental expenditure limits and defence spending, 2011/12-2015/16, (£ million)
                                                                                                      • Single-use military equipment forms largest amount of capital expenditure
                                                                                                        • Figure 34: The UK defence departmental capital expenditure limits, 2012/13-2016/17, (£ million)
                                                                                                        • Figure 35: The UK defence departmental cash resource expenditure limits, 2012/13-2016/17, (£ million)
                                                                                                        • Figure 36: The UK defence annually managed expenditure limits, 2011/12-2015/16, (£ million)
                                                                                                        • Figure 37: MoD equipment expenditure, 2012/13-2016/17, (£ million)
                                                                                                        • Figure 38: MoD equipment expenditure, 2012/13-2016/17, (£ million)
                                                                                                        • Figure 39: MoD research and development expenditure outturn, 2010/11-2014/15, (£ million)
                                                                                                        • Figure 40: UK Defence expenditure by industry, 2010/11-2014/15, (£ million)
                                                                                                        • Figure 41: MoD major equipment projects, as at 31 March 2015, (£ million)
                                                                                                      • Recent defence aircraft deals
                                                                                                        • Defence Reform Act
                                                                                                          • Defence expenditure on aircraft experienced a 10% decline in 2014/15...
                                                                                                            • Figure 42: Defence aircraft and spacecraft expenditure outturn in the UK, 2010/11-2014/15, (£ million)
                                                                                                            • Figure 43: Defence aircraft and spacecraft expenditure outturn in the UK, 2010/11-2014/15, (£ million)
                                                                                                          • ... that had a direct impact on the level of the UK’s forward-available fleet
                                                                                                            • Figure 44: Forward available fleet by aircraft type for the UK armed forces, 2010-14, (number)
                                                                                                            • Figure 45: Forward available fleet by aircraft type for the UK armed forces, 2010-14, (number) (continued)
                                                                                                            • Figure 46: Forward available fleet by aircraft type for the UK armed forces, 2010-14, (number) (continued)
                                                                                                            • Figure 47: Fixed-wing platforms and unmanned aircraft systems of the UK armed forces, 2016, (number)
                                                                                                            • Figure 48: Rotary-wing platforms of the UK armed forces, 2016, (number)
                                                                                                          • PFI
                                                                                                              • Figure 49: MoD PFI projects, 2015, (year and £ million)
                                                                                                              • Figure 50: MoD PFI projects, 2015, (year and £ million) (continued)
                                                                                                          • International Trade

                                                                                                            • Key points
                                                                                                              • Overview
                                                                                                                • Imports
                                                                                                                  • Figure 51: UK imports of aerospace equipment, 2011-15, (£ million at CIF)
                                                                                                                  • Figure 52: UK imports of aerospace equipment, 2011-15, (£ million at CIF)
                                                                                                                • Segmentation
                                                                                                                  • Figure 53: Segmentation of UK imports of aerospace equipment, by type, 2011-15, (£ million at CIF)
                                                                                                                • Exports
                                                                                                                  • Export control regulations
                                                                                                                    • The UKTI DSO
                                                                                                                      • Aerospace Growth Partnership
                                                                                                                        • UK Aerodynamics Centre
                                                                                                                          • Cape Town Convention
                                                                                                                            • UK Export Finance
                                                                                                                              • Exports return to growth in 2015
                                                                                                                                • Figure 54: UK exports of aerospace equipment, 2011-15, (£ million at FOB)
                                                                                                                                • Figure 55: UK exports of aerospace equipment, 2011-15, (£ million at FOB)
                                                                                                                              • Segmentation
                                                                                                                                • Figure 56: Segmentation of UK exports of aerospace equipment, by type, 2011-15, (£ million at CIF)
                                                                                                                                • Figure 57: Identified orders of UK exports of defence aircraft and equipment, 2011-15, (£ million)
                                                                                                                                • Figure 58: Identified orders of UK exports of defence aircraft and equipment, 2011-15, (£ million)
                                                                                                                                • Figure 59: UK aerospace equipment trade balance, 2011-15, (£ million)
                                                                                                                                • Figure 60: UK aerospace equipment trade balance, 2011-15, (£ million)
                                                                                                                            • Industry Structure

                                                                                                                              • Key points
                                                                                                                                • Industry development
                                                                                                                                  • New trade partnerships likely to become more prominent following EU referendum result
                                                                                                                                    • New techniques and technology are changing the design and manufacturing process
                                                                                                                                      • Aerospace Growth Partnership’s industrial strategy for 2016
                                                                                                                                        • M&A Activity and market share
                                                                                                                                          • Industry structure
                                                                                                                                            • Figure 61: Analysis of the changes in the structure of the manufacture of air and spacecraft and related machinery industry, 2012-16, (number of factories and businesses)
                                                                                                                                            • Figure 62: Analysis of the changes in the structure of the repair and maintenance of aircraft and spacecraft industry, 2012-16, (£000 and number of companies)
                                                                                                                                          • Structure by employment
                                                                                                                                            • Figure 63: Analysis of the employment structure of the manufacture of air and spacecraft and related machinery industry, 2015 and 2016, (number of outlets and outlet employment size)
                                                                                                                                            • Figure 64: Analysis of the employment structure of the repair and maintenance of aircraft and spacecraft industry, 2015 and 2016, (number of outlets and outlet employment size)
                                                                                                                                          • Structure by turnover
                                                                                                                                            • Figure 65: Analysis of the financial structure of the manufacture of air and spacecraft and related machinery industry, 2015 and 2016, (£000 and number of businesses)
                                                                                                                                            • Figure 66: Analysis of the financial structure of the repair and maintenance of aircraft and spacecraft industry, 2015 and 2016, (£000 and number of businesses)
                                                                                                                                        • Company Profiles

                                                                                                                                          • Airbus Operations

                                                                                                                                                • Figure 67: Financial analysis of Airbus Operations, 2011-15, (£ million)
                                                                                                                                              • Company strategy
                                                                                                                                              • BAE Systems

                                                                                                                                                    • Figure 68: Financial analysis of BAE Systems, 2011-15, (£ million)
                                                                                                                                                  • Company strategy
                                                                                                                                                  • Cobham

                                                                                                                                                        • Figure 69: Financial analysis of Cobham, 2011-15, (£ million)
                                                                                                                                                      • Company strategy
                                                                                                                                                      • GE Aircraft Engine Services

                                                                                                                                                            • Figure 70: Financial analysis of GE Aircraft Engine Services, 2011-15, (£ million)
                                                                                                                                                          • Company strategy
                                                                                                                                                          • GKN

                                                                                                                                                                • Figure 71: Financial analysis of GKN, 2011-15, (£ million)
                                                                                                                                                              • Company strategy
                                                                                                                                                              • GKN Aerospace Services

                                                                                                                                                                • Leonardo Helicopters (formerly Finmeccanica Helicopters and AgustaWestland)

                                                                                                                                                                      • Figure 72: Financial analysis of Leonardo Helicopters (formerly Finmeccanica Helicopters and AgustaWestland), 2011-15, (£ million)
                                                                                                                                                                    • Company strategy
                                                                                                                                                                    • Lockheed Martin (UK)

                                                                                                                                                                          • Figure 73: Financial analysis of Lockheed Martin (UK), 2011-15, (£000)
                                                                                                                                                                        • Company strategy
                                                                                                                                                                        • Rolls-Royce

                                                                                                                                                                              • Figure 74: Financial analysis of Rolls-Royce, 2011-15, (£ million)
                                                                                                                                                                            • Company strategy
                                                                                                                                                                            • Short Brothers

                                                                                                                                                                                  • Figure 75: Financial analysis of Short Brothers, 2011*-15, (£000)
                                                                                                                                                                                • Company strategy
                                                                                                                                                                                • Turbo-Union

                                                                                                                                                                                      • Figure 76: Financial analysis of Turbo-Union, 2011-15, (£000)
                                                                                                                                                                                    • Company strategy
                                                                                                                                                                                      • Figure 77: Profiled companies’ turnover, 2011-15, (£ million)
                                                                                                                                                                                  • Forecast

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Industry outlook
                                                                                                                                                                                        • More than 33,000 new jets expected to be delivered by 2035
                                                                                                                                                                                          • Figure 78: Forecast World mainline jet deliveries, by type, 2014-33, 2015-34 and 2016-35, (number)
                                                                                                                                                                                          • Figure 79: Forecast World mainline jet deliveries, by type, 2016-35, (number)
                                                                                                                                                                                        • Asia expected to overtake North America as the region with the largest fleet
                                                                                                                                                                                          • Figure 80: Forecast World airplane fleet, by region, 2015 and 2035, (number)
                                                                                                                                                                                          • Figure 81: Forecast World airplane fleet, by region, 2015 and 2035, (% of total)
                                                                                                                                                                                        • Brexit is likely to have an impact on...
                                                                                                                                                                                          • Industry employment
                                                                                                                                                                                            • Exports
                                                                                                                                                                                              • Over-production may affect industry following recent boom in orders and deliveries
                                                                                                                                                                                                • Asia-Pacific to oversee largest increase in passenger number...
                                                                                                                                                                                                  • ... that will also benefit the MRO market
                                                                                                                                                                                                    • New aircraft being produced in emerging markets to rival incumbent models
                                                                                                                                                                                                      • Manufacturers are using the following tech developments to obtain greater efficiency and production gains
                                                                                                                                                                                                        • Air defence equipment forecast
                                                                                                                                                                                                            • Figure 82: Forecast UK DEL on defence, 2016/17-2019/20, (£ million)
                                                                                                                                                                                                            • Figure 83: Forecast UK DEL on defence, 2016/17-2019/20, (£ million)
                                                                                                                                                                                                        • Further Sources and Contacts

                                                                                                                                                                                                          • Trade associations
                                                                                                                                                                                                            • Aerospace & Defence Industries Association of Europe
                                                                                                                                                                                                              • Aerospace Industries Association (AIA)
                                                                                                                                                                                                                • ADS Group Limited
                                                                                                                                                                                                                  • Civil Aviation Authority
                                                                                                                                                                                                                    • Farnborough Aerospace Consortium (FAC)
                                                                                                                                                                                                                      • General Aviation Manufacturers Association (GAMA)
                                                                                                                                                                                                                        • Helicopter Association International (HAI)
                                                                                                                                                                                                                          • Midlands Aerospace Alliance (MAA)
                                                                                                                                                                                                                            • North West Aerospace Alliance (NWAA)
                                                                                                                                                                                                                              • West of England Aerospace Forum (WEAF)
                                                                                                                                                                                                                                • Trade magazines
                                                                                                                                                                                                                                  • ADVANCE (Quarterly)
                                                                                                                                                                                                                                    • Aerospace International
                                                                                                                                                                                                                                      • Aerospace Engineering/Aerospace & Defence Technology (Monthly)
                                                                                                                                                                                                                                        • Aerospace Manufacturing (Bi-Monthly)
                                                                                                                                                                                                                                          • Air International (Monthly)
                                                                                                                                                                                                                                            • Aviation Maintenance (Monthly)
                                                                                                                                                                                                                                              • Aviation News (Monthly)
                                                                                                                                                                                                                                                • Flight International
                                                                                                                                                                                                                                                  • Helicopter International
                                                                                                                                                                                                                                                    • Trade Exhibitions
                                                                                                                                                                                                                                                      • Aero Engineering Show 2016
                                                                                                                                                                                                                                                        • Farnborough 2018
                                                                                                                                                                                                                                                          • Helitech International 2016
                                                                                                                                                                                                                                                            • SDSR - One Year On
                                                                                                                                                                                                                                                              • Technology in Aerospace - Vision 2066
                                                                                                                                                                                                                                                                • The Royal International Air Tattoo 2017

                                                                                                                                                                                                                                                                Aerospace Industry - UK - October 2016

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