LONDON — The UK needs to quickly signal it will support the aerospace, defense and other industries and not wait for the completion of negotiations with the European Union (EU) to act, according to the chief executive of ADS, Inc., the country’s leading trade body in the sector.
“The government should be looking at what short-term, sensible measures it can take to make the UK a more attractive place for investment or trigger investment that companies might otherwise hold off on,” Paul Everitt told reporters at a Wednesday briefing.
“We don’t believe we can afford to wait two years for them to conclude negotiations. The government needs to use the next six to nine months to begin to explain what they are going to be doing to encourage the investment we need for the long term,” he said.
British voters narrowly voted to exit the 27-nation EU in a referendum last week that triggered the resignation of Prime Minister David Cameron and left whoever is appointed the new leader of the Conservative government with the task of negotiating a trade and freedom-of-movement deal with Brussels.
“What we are saying to government is there are some sensible opportunities they can take to make the UK more attractive,” Everitt said.
“There are things they can do around research and development ... some potential changes to investment allowances and the [business] rate system to make new building, plant and machinery that much more attractive and send a big and strong signal that helps balance some of the uncertainties that now exist,” he said.
Everitt said the autumn financial statement or the budget, which usually takes places in March, would be the natural places to signal enhanced support for manufacturing.
“It’s not a panic situation, we have got time, but it’s important government gets on the front foot, it’s not time for introspection. It’s time for them to be relatively bold to ensure that key sectors understand there is a commitment to them and to make the UK competitive,” he said.
Defense, aerospace, security and space are key British manufacturing centers, employing around 300,000 workers in total.
The aerospace sector, which includes defense aviation, generated £27 billion (US $36 billion) worth of exports in 2015 with about £8 billion of that going to the EU in the shape of wings for Airbus aircraft, Rolls-Royce jet engines, and other systems and components.
The defense and aerospace sector overwhelmingly supported staying in the EU ahead of the vote, with companies like Airbus and Rolls-Royce lobbying employees about the benefits of remaining members.
Unsurprisingly, the aerospace and defense sector now wants the government to negotiate a deal with maximum access to the European single market with the minimum of restriction to the free movement of labor from the region.
That may be a difficult trick to pull off for British trade negotiators with leading EU nations already pointing out there wouldn't be a change to the regional free-movement policy to accommodate London if it wants unfettered access to the market.
Jeegar Kakkad, the chief economist at ADS, reckons as many as 16,000 of the 128,000 workers in the aerospace sector come from overseas.
Rolls-Royce released a statement following the leave vote, saying it was not the outcome it would have chosen but the referendum would have no immediate impact on the company’s day-to-day business.
Everitt said that the threat wasn’t that aircraft deliveries would stop or defense capabilities would decline anytime soon, but the “challenges are about the incremental erosion of competitiveness.”
One potential immediate loss he pointed to was a significant EU-funded research and development program for defense and security which is soon to get the go-ahead.
Everitt was briefing reporters on the performance of the aerospace and defense sectors here, but in the wake of the leave vote the strong showing by the industry in 2015 went largely unquestioned.
The ADS boss said the sector remains strong, in relatively good financial health and with good order books.
Figures released by ADS show defense productivity has grown 18 percent over the last five years. Turnover stands at £24 billion a year.
Nearly half of defense companies expect growth of at least 10 percent in the next 12 months, said the study .
Aerospace, which includes civil and military, was even stronger. The figures show a growth in turnover of £1.9 billion to £31.1 billion and a 30 percent productivity growth since 2010.