Dr Simon Bennett considers the impact on the UK aerospace industry post-Brexit
COMMERCIAL BREXIT AND THE UK AEROSPACE INDUSTRY
We live in interesting times. On May 3, the electors of England and Ulster went to the polls and delivered what can only be described as a drubbing to the two parties most closely associated with Brexit – the Conservative and Labour parties. The Conservatives went into melt-down, losing over 1,300 council seats.
Expected to gain seats, Jeremy Corbyn’s left-leaning Labour Party lost them. In the May 23 European elections, the Brexit Party gained 29 seats from a standing start. The anti-Brexit Liberal Democrats won 16 seats.
The Establishment parties – Labour and the Conservatives – received a second drubbing.
Labour won ten seats. The Conservatives just four. On June 7, an exhausted, humiliated and tearful Premier May announced her resignation to a divided and cynical country.
No-one doubts that Brexit will happen – eventually. The parties will compromise, a deal will be cobbled together and Britain will regain her sovereignty. In doing so, Britain, like the United States, will stick two fingers up to internationalism and globalisation. Borders and checks will be reinstated. Rules and regulations will be re-introduced. Businesses that have spent the last five decades integrating with the global economy to create highly efficient just-in-time supply chains while recruiting the brightest and best from around the world, will find life more difficult. More bureaucratic.
The aerospace sector makes an important contribution to the British economy. In its March, 2018, report The Impact of Brexit on the Aerospace Sector, the all-party House of Commons Business, Energy and Industrial Strategy Committee observed: “The aerospace sector is one of the most productive and fastest-growing in the UK [and] accounts for some 7% of manufacturing output …. UK aerospace is well-established and competitive, and … has continued to perform strongly since the vote to leave the EU”. The sector is dominated by a small number of large corporations. Capitalising on the single market and riding the globalisation wave, Airbus has emerged as an industrial behemoth, with plants in France, Germany, Spain, the UK, China and the United States. In a highly integrated and tightly-coupled manufacturing operation, components are shuttled across the globe to be assembled into civilian and military aircraft. Integrated horizontally and vertically, the business is a cornerstone of British manufacturing, employing around 14,000 people in the UK. At Broughton in North Wales, 6,000 are employed making wings. At Filton near Bristol, 3,000 are employed designing and testing aerostructures. More than 4,000 suppliers thrive in the extended economy created by Airbus UK.
Jobs in aerospace are generally highquality and well paid. Employees of Rolls Royce, Leonardo, Bombardier, Airbus, BAE Systems, GKN and other manufacturers pump lots of cash into the UK economy. The taxes they pay help fund hospitals, schools, the police and the armed forces. The Exchequer needs large manufacturers like Rolls-Royce, BAE Systems and Airbus. Liberal Democrat leader and former Business Secretary Sir Vince Cable has said of Airbus UK: “A hundred and ten thousand jobs depend on this company.
About one-and-a-half billion in tax revenue [flows from Airbus UK]”. In June, 2018, a spokesperson for Prime Minister Theresa May said: “W e are confident that we are going to get a good deal, one that ensures that trade is as free and frictionless as possible, including for the aerospace sector”. In the sam e m onth, Airbus said it would “carefully m onitor any new investm ents in the UK and refrain from extending the UK suppliers/partners base”.
Com panies’ traditional reluctance to get involved in national politics m ade Airbus’s w arning all the m ore notew orthy. Like the autom otive industry, the aerospace sector is w orried about w here Brexit m ight take UK plc. Brexiteers counter such fears by claim ing that even if the w orse cam e to the w orse and Airbus pulled out of the UK (albeit over a considerable num ber of years), Britain w ould still be better o by virtue of not having to contribute to the European Union budget.
In 2018, the United Kingdom ‘s share of total contributions to the EU budget w as 11.88%. Poland’s share w as 3.36% and Germ any’s 20.78%.
At the beginning of 2019, Airbus’s management, frustrated at the lack of progress in the Brexit negotiations, took the gloves off. Speaking at a London reception, Airbus’s Chairman, Tom Enders, said: “Being competitive is how we survive. Our factories in the UK are highly efficient – we must not lose this competitiveness, either through increased financial or regulatory burden, or through a lack of clarity that will make future investment very difficult”. Describing the uncertainty over Brexit as “unbearable”, Enders urged UK politicians to “stop filibustering around this issue”. Enders’ plea fell on deaf ears. The Brexit deadline was moved from March 29 to April 12. Then, with the UK parliament deadlocked, tempers fraying and insults flying, it was moved to October 31. Despite the Johnson- Hunt rhetoric, it is possible that it will be moved into 2020.
Determined to rationalise its business model, at the beginning of May, Bombardier announced it was seeking a buyer for its four factories in Northern Ireland. Directly employing 3,600, the factories are vital to Britain’s longterm prosperity. They are especially important to the future of Northern Ireland. Business Secretary Greg Clark said: “The Belfast plant is one of our most important aerospace facilities in the country and a vital asset in the UK’s leading aerospace sector …. The government will work with potential buyers to take this successful and ambitious business forward”. Has prevarication over Brexit influenced Bombardier’s decision to pull out of Northern Ireland? It is axiomatic that uncertainty and turbulence discourage investment. Addressing the House of Commons Liaison Committee on May 1, 2019, the Prime Minister observed: “Obviously, uncertainty has an impact on business”. In April, Bombardier published an open letter urging MPs to take a no-deal Brexit off the table. Bombardier’s Northern Ireland plants make a variety of aerostructures, including the wings for the Airbus A220 (formerly the Bombardier C-Series). The order book for the A220 is growing under the Airbus brand. Airbus might purchase the business. However, the transnational has concerns about the government’s ability to deliver a business-friendly Brexit.
By the end of January 2019, Airbus had reached the end of its rope. In a video message released on January 24, Tom Enders said: “Aerospace is a long-term business and we could be forced to redirect future investments in the event of a no-deal Brexit and, make no mistake, there are plenty of countries out there who would love to build the wings for Airbus aircraft”. He added: “Please don’t listen to the Brexiteers’ madness, which asserts that because we have huge plants here, we will not move and we will always be here. They are wrong”. The political stalemate continued. UK aerospace industry lobby group ADS has taken to issuing a Brexit Bulletin to help its membership understand the political machinations in Westminster and Brussels. Those who are sanguine about a nodeal Brexit accuse the anti-Brexit lobby of scaremongering for political ends, referring to the anti-Brexiteers’ discourse as Project Fear. At the end of 2018, the Daily Express reported economic analyst Chris Clarke as saying: “I absolutely disagree that a no deal is bad for the UK. For me, it’s the greatest economic opportunity this country has had in 100 years …. We go to WTO rules, we’re [going to] get tariffs put on us, but we run a trade deficit with Europe. There is no interest in Europe whatsoever to disrupt the process because they are the ones who are going to hurt …. According to [Governor of the Bank of England] Mark Carney’s own projections, the pound is going to fall 25%, which means our goods are going to be hugely cheaper and more attractive to export”.
Going it alone
It is said that Britain has enough talent to make a success of Brexit. Certainly, over the years, Britain has demonstrated both the will and capacity to develop and apply world-beating technologies, from Frank Whittle’s turbojet engine to rockets such as Black Knight, Black Arrow and Blue Streak to the rugged and highly functional Britten-Norman Islander. When, in 1946, the Americans denied the British government access to nuclear secrets, British scientists worked things out for themselves, detonating Britain’s first fission weapon in 1952 and her first fusion weapon in 1957. Britain also developed three highly effective delivery systems for its nuclear bombs, the Vickers Valiant, Avro Vulcan and Handley-Page Victor. Necessity is the mother of invention, as they say. The deployment around Soviet cities of improved missile defences saw the development of a stand-off weapon called Blue Steel. Avro’s Blue Steel was almost 100% British, the only bought-in component being one element of the missile’s guidance system, a gyroscope purchased from US manufacturer Kearfott. Blue Steel, essentially a cruise-missile, was a huge achievement given the technological limitations of the day. As the website spaceuk.org explains: “The power supply problems for the missile were … considerable: the electronics would have been valve driven, with all that means for power demand and heat dissipation, and the nuclear warhead in particular had to be maintained at a constant temperature, yet while at the altitude which the V bombers were capable, the ambient temperature was -70°C, and after launch the skin temperature could rise very rapidly due to aerodynamic heating”. The missile, constructed of stainless steel rather than aluminium, could carry a fusion weapon up to 200 miles. Firms and agencies involved in its design, construction, development and deployment included Avro, Armstrong Siddeley, Elliotts and the Royal Aircraft Establishment. Blue Steel was the product of a successful industrial collaboration. Washington’s 1962 decision to cancel the hypersonic Douglas Skybolt air-launched nuclear missile left Britain totally reliant on Blue Steel, which remained in service until the end of 1969. At the high-point of the programme, Blue Steel was carried by 36 V-bombers. Had the Skybolt programme not been cancelled, the RAF’s sub-sonic Vulcan would have traded its single 200-mile range Blue Steel missile for two 1,000-mile range Skybolts.
Philosopher George Santayana remarked: “Those who cannot remember the past are condemned to repeat it”. Washington’s 1946 refusal to share its nuclear secrets with Britain and 1962 decision to cancel Skybolt hold important lessons. First, that even countries that claim a special relationship with Albion may disappoint it. Secondly, that when circumstances require, Britain has the talent, resources and determination to go it alone. Thirdly, that Britain can produce successful, world-beating technologies. The Blue Steel programme was a success. A forerunner of the cruise missiles of the 1980s, Blue Steel, carried by British-designed bombers, helped keep the peace for eight years. In contrast, Skybolt, beset by technical problems and over-budget, was cancelled. Britain, almost bankrupted by the World War Two and shut-out by the Pentagon, succeeded where America failed. Of course, while going it alone is always an option, it may not be the wisest thing to do. Collaboration delivers benefits. First, it provides for the sharing of risk. Developing a new aircraft or missile costs a lot of money. In the 1960s, the 747 project almost finished Boeing while the mould-breaking F-111 swing-wing deeppenetration bomber, bedevilled with technical problems, dragged General Dynamics down.
More recently, the C-Series passenger jet drained Bombardier of cash. As the Financial Post’s Kristine Owram noted in October, 2015: “Bombardier’s initial plan was to spend $3.5 billion on developing the C-Series between 2008 and 2013, but the budget … ballooned to at least $5.4 billion”. Britain’s current predicament raises several questions. For example: In today’s increasingly globalised world, could Britain sustain an aerospace industry that directly employs tens of thousands without the support of Airbus, Bombardier, Leonardo and other dynamic transnationals? How would Britain’s aerospace sector fare absentia a single market and tariff-free trade with Europe? The single market, tariff-free trade and free movement of hard-to-find skilled labour has benefitted BAE Systems, Rolls-Royce, GKN and other flagship aerospace companies. One thing is certain however the Brexit saga ends: Britain needs an energetic, profitable aerospace sector. It is good for morale. It generates wealth and opportunity. It helps the country punch above its weight. At the risk of sounding jingoistic, aerospace is something this country is good at. Recent shocks to Britain’s manufacturing base such as Ford’s decision to close its Bridgend engine plant, Honda’s decision to close its Swindon car plant, Nissan’s decision not to manufacture the X-Trail in Sunderland and British Steel Scunthorpe’s travails mean it is even more important that we get aerospace right. AI