Some of the key issues facing companies in the UK aerospace and defence sector include:
Defence contractors and civil aerospace companies are responding to the pressure of a more competitive, international market through increased attention to the supply chain. Risk sharing and low-cost sourcing are now high on the agenda as the supply base moves from a domestic to an international footprint.
No aerospace and defence company can expect to succeed without maximising their share of its domestic market and maintaining an advantage against overseas competition through national identity. Yet domestic and inbound companies must fully understand local procurement processes, maintain insight into national operational requirements and applications, work effectively with the right partners and have a sustainable and transparent delivery model.
M&A activity is particularly challenging for companies in the sector due to the sensitivity, geography and diversity of the industry. However, the major players continue to aspire to grow. Successful business integrations, although expensive and often difficult, help companies unlock value from portfolios where exceeding the expectations of investors is key.
Governments are now more interested in purchasing capabilities than equipment. Contractors are responding with through-life support rather than mere return-to-repair services. Reduced government spending means contractors are extending their value chain into new areas such as financial, training, monitoring and maintenance, often relying on the right selection of outsourcing partners in areas outside their means.
Exporting equipment is an important activity for all major aerospace and defence companies, with governments often supporting their domestic industry in developing in overseas markets. Strategic alliances - and a company's ability to select the right form of alliance structures - are crucial factors influencing the success or failure of overseas business development initiatives.