The UK Aerospace, Defence & Security industry’s perspective on Brexit: focusing on the four T’s – talent, traffic, tariffs and technology

David Walters Aerospace and Defence, Consulting Director

In the wake of the Government’s decision to invoke Article 50, we’ve been talking to current and future leaders from across the ADS sector, both public and private – to elicit their views on Brexit. When we brought these together at a recent event, their insights were fascinating, amounting to a roadmap for both regional and national ADS to navigate through a post-Brexit world.

As the debate unfolded, consensus quickly emerged around two issues. The first was that the UK today is the industrial vision of Europe made real – and that our industrial organisational set-up is based on the free movement of people, capital and goods. A car is composed of 25,000 parts, an aircraft of over 4 million. In each case these components come from all over the world. Our future competitiveness will be dependent on this global, frictionless approach continuing.

The second point of consensus was that Brexit, and the process of deciding the terms of exit will create uncertainty, which will have knock on impacts on decision-making, not least on investments. Even apparently small issues – such as delays at ports – could give an additional reason to invest in a rival location. To help minimise these destabilising impacts, the UK Government needs to provide clarity and commitment at every stage.

An important role was also anticipated for Wales and the West ADS. Like many other industries, Brexit should be underpinned by a vision for economic and social renewal. Some areas of the country who voted strongly to leave, such as the North East, are where the manufacturing industry – ADS included – is strong. This shows the disconnect that exists between society and business, and that as businesses, ADS companies need to engage more with the public. This means ramping up their profile regionally and nationally to show that ADS is important to Britain and that retaining leadership of this sector is vital.

So, as the clock ticks down to Brexit, what’s most important to ADS businesses? The answer that emerged can be summed up as the “four Ts”:

• Talent

• Traffic

• Tariffs

• Technology

In terms of talent, ADS needs access to well-qualified, high-grade engineers who can move easily across borders. There are currently around 50,000 relatively frictionless movements each year between the UK and EU. Ease and speed of this movement is an essential requirement for the industry. Home-grown talent was also recognised as a means to remain competitive and there was some discussion around the Dyson Institute of Technology which is due to open in Autumn 2017, paving the way for businesses to offer academic theory with a real-world job.

The second T – traffic – is closely linked with the third, tariffs. As I mentioned above, our AD&S industry depends critically on seamless movement of goods and components. Currently only four industries have zero tariffs, with one of them being civil aircraft. If WTO tariffs are imposed following Brexit, the question arises of what the impact will be on ADS? The challenge is to use the importance of defence wisely in terms of influencing the deal ultimately struck between the UK and EU.

Finally, technology is a key strength of the UK – alongside our can-do attitude, approach and innovation. Businesses and governments in the rest of the EU will not want to see a reduction in their ability to access the UK as a source of technology innovation. Similarly, we need to retain access to the EU, not least in terms of its technology skills base. The common view was that the UK should focus on high-value design and staying in the top tier of technology, as we have the levels of experience and academia to do this.

Taking all these factors into account, there was optimism that UK ADS can overcome the challenges of Brexit and thrive outside the EU. It was anecdotally pointed out that the UK can become 20% more competitive by offering a better tax regime and social factors, and more enticing R&D incentives. Our nation already has innovation and business pragmatism – and now the Government needs to create an environment for a multinational workforce, supported by an appropriate industrial strategy.

Based on our discussion with industry leaders, the mood in ADS is clear – and determined. True, Brexit raises challenges. But with the right commitment, actions and support, there’s no doubt the industry can overcome these challenges by playing to its strengths. It’s time to do just that.

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