Britain’s essential role in the global aerospace industry could come under threat if a favourable deal is not struck during the Brexit negotiations, a new report warns.
The report by manufacturers’ organisation EEF and Santander warned leaving the single market could mean jobs in the UK moving to Europe.
It also raised the possibility of protectionist measures being implemented against the British aerospace industry if the UK falls back onto World Trade Organisation (WTO) rules.
The aerospace sector brings in £31bn a year to the UK economy and is the second largest in the world behind the US.
The sector consists of 2,400 companies that specialise in manufacturing engines and aircraft components, which make up 79 percent of the industry’s £28.3bn of annual exports.
Both the European Airbus and US Boeing manufacturers, which dominate the airliner market, each have nearly a decades worth of orders to complete and are reliant on parts manufactured in the UK.
Santander’s head of business development for manufacturing, Paul Brooks, said the UK aerospace industry “is ‘hardwired’ into the global supply chain”.
Brooks said: “Our aerospace industry has thrived off the back of its competitive advantage in the production of high-value added technology-intensive products, and we forecast that this will continue.
“Since 2002, the UK industry has more than doubled overseas sales from £13.2 billion to £28.3 billion, an increase of 114 percent.”
Despite an optimistic outlook, Britain’s place in the global supply chain maybe threatened by Brexit, the report warned.
For instance, the production of Airbus wings built in Broughton, North Wales, could be moved to Germany or Spain after Brexit.
The report states: “The concerns around the nature and conditions of any Brexit deal raise serious questions about the next generation of aircraft and where they will be produced.
“Airbus could face growing political pressure to bring jobs back to France, Germany and Spain as a result of the (UK’s) decision to leave the single market.
“Broughton is likely to face competition for wing work from Germany and Spain as it is the most lucrative part of the supply chain and both nations are keen to accelerate their aerospace sectors.”
Restrictions on immigration after the UK exits the EU may exacerbate the skills crisis, meaning that British aerospace firms could find recruiting skilled workers more difficult. This would strengthen the position of German and Spanish companies bidding for new models, the report said.
Although the aerospace industry is exempt from WTO tariffs, the report warned that “there is a growing concern that competitors could try to encourage governments to find loopholes to raise the cost of production for UK businesses”.
Protectionist measures could include the ending of EU exemptions on raw materials used to build aircraft parts in order to increase production costs for British companies and custom barriers to delay export times for goods leaving the UK.
In addition, the report queried the UK’s membership of the European Aviation Safety Agency (EASA).
If Britain sets up its own regulatory standards, manufacturers would still need to gain authorisation from EASA. This would lead to increased red tape and costs, an unattractive prospect for investors.