Overview

The UK aerospace and defense industries are inextricably intertwined. The UK aerospace industry is the second largest in the world behind that of the United States, and it is an export-driven industry. In 2021, UK civil aerospace turnover totaled approximately $32 billion. The UK aerospace industry is the crown jewel for UK exports and, even though the UK does not produce large civil aircraft, 98% of domestic aerospace production is exported. In 2021, the UK defense industry turnover totaled approximately $33 billion, $15 billion of which was exported. In 2021, the UK space industry turnover totaled approximately $22 billion, $8 billion of which was exported.

The UK has a very mature supply chain, and new entrants will need to dedicate significant resources to participate. The UK has a reputation as a global center of excellence for the design and production of engines, helicopters, wings, structures, and aircraft systems (including landing gear). The UK also designs and manufactures wings for all Airbus aircraft platforms. In addition to manufacturing, the UK has a thriving maintenance, repair, and overhaul sector (MRO), which provides services to the huge numbers of military and civil aircraft that fly through and from the UK every year.

More than 3,000 aerospace companies operate in the UK, and the aerospace sector has the largest number of SME companies in Europe, providing over 282,000 jobs directly and indirectly. Domestic companies include BAE Systems, Cobham, GKN, Meggitt, QinetiQ, Rolls-Royce, and Ultra Electronics. Non-domestic companies with a major presence include Boeing, Airbus Group, Leonardo (including its AgustaWestland and Selex ES subsidiaries), General Electric (including its GE Aviation Systems subsidiary), Lockheed Martin, MBDA, Safran, Spirit AeroSystems and Thales Group.

Airbus in Broughton assembles the wings for all Airbus civil aircraft, including the new A350 XWB. Boeing has a production facility in Sheffield, Boeing’s first manufacturing site in Europe, and GKN Aerospace produces the Advanced Technology Winglet for the Boeing 737 MAX. Rolls-Royce-manufactured engines power more than 35 types of commercial aircraft, and the company has over 13,000 engines in service around the world.

Drones are playing an increasing role in the UK in areas ranging from emergency services to construction and oil and gas.  In April 2022, the world’s first urban drone airport, Hyundai-backed Air-One opened in Coventry, England, with intent to use the site for electric vertical take-off and landing aircraft (eVTOL) air taxis.  Estimates have forecast that by 2030 the impact of drones could increase the UK GDP by $53 billion and create over 600,000 new jobs. The use of drones in business and public services is predicted to be highly impactful and to deliver significant benefits to the British economy and society. Drones have seen a particularly significant uptake in the oil & gas industry. Drone use is also well established in the utilities industry for the inspection of long, linear assets such as powerlines.

Like the internet and GPS before them, drones are evolving beyond their military origin to become powerful business tools. Drones have already made the leap to the consumer market, and now they are being put to work in commercial and civil government applications. This is creating a market opportunity for companies that provide platforms, sensors, and software.

Leading Sub-Sectors

Space

The UK commercial space industry is growing rapidly, with a turnover of over $22 billion in 2021. The stated ambition is to capture 10% of the global space market by 2030. Accelerating growth year on year, the UK is a world leader in nano and small satellites. Forty percent of all small satellites currently in orbit were manufactured in the UK. The UK commercial space sector has seen steady investments in new and existing space technologies and services, with funding coming primarily from industry and venture capital, with some government support. The market can be broken down into four main components. Over two-thirds of total market income is derived from Space Applications, followed by the smaller components of Space Operations, Space Manufacturing, and Auxiliary Services.

The UK seeks to be at the forefront of new developments in small satellite launch and sub-orbital flight, with seven launch sites planned. The UK’s long coastline and island location make it well suited to host different types of launch services. Scotland is the best place in the UK to reach in-demand satellite orbits with vertically launched rockets. There are also several aerodromes around the UK, each with its own unique geography and local infrastructure, giving the UK the capability to host a variety of different types of spaceflight activity, including both horizontal and vertical launch. Industry and the UK Government are working together to develop UK spaceports, as well as launch vehicle and small satellite technology. These technologies will be complemented by space services, such as test facilities.

U.S. companies that would like to partner with British companies should look to the Harwell Space Cluster, which hosts 92 space organizations including the UK Space Agency, RAL Space, the Satellite Applications Catapult, the Science & Technology Facilities Council and the European Space Agency’s European Centre for Space Applications and Telecommunications.

Analysis by customer type reveals the commercial focus of the UK space industry – 81.3% of total income is commercial, comprised of sales to consumers (including DTH) at 49.7% and sales to other businesses at 31.6%. That said, there is a strong role for public demand (18.7%) – Defense (8.6%), Space Agencies (4.1%), Civil Government including Research/Science (4.3%), and European Commission (1.6%).

A Technology Safeguards Agreement signed in June 2020 has made it easier for U.S. firms to bring rocket hardware into the UK. In addition, a barrier to space exploration from UK soil was lifted in 2021, and the UK Civil Aviation Authority has started issuing spaceflight licenses. Spaceports are expected to be in operation within the UK towards the of end of 2022. Developed with the UK Space Agency and the Civil Aviation Authority, new regulations were created enabling satellites and rockets to launch from UK soil for the first time, with spaceports planned for Cornwall, Wales, and Scotland. All U.S. manufacturers of spacecraft with planned export to the UK will also require a license issued by the FAA.

The UK National Space Propulsion Test Facility was created in June 2021 and allows companies and academics to test propulsion engines. It also allows new types of more sustainable propellants to be tested, such as Hydrogen Peroxide and Liquid Oxygen, which are more environmentally friendly in sourcing, storage, and combustion.

Helicopters

The UK’s helicopter market is dominated by Leonardo and Airbus Helicopters UK. Leonardo is the largest inward investor in the UK defense sector, the largest Italian inward investor to the UK, and one of the biggest suppliers of defense equipment to the UK Ministry of Defence. Leonardo implements its helicopter division activities through a strong industrial presence in the UK. The company employs around 7,000 people in the UK, while supporting an additional 10,000 jobs in the supply chain including 1,550 SMEs, serving both commercial and government customers worldwide.

For over 30 years, Airbus Helicopters UK has provided products and services for both the civil and military helicopter markets. With more than 300 civil helicopters customized and delivered in the UK, Airbus Helicopters UK is the leading provider of helicopters in the UK’s civil and para-public market with a 46% fleet share, and it dominates the UK security and emergency services market.

The National Police Service (NPAS) provides air support to the 46 police forces of England and Wales from its network of 15 bases with 19 aircraft. The NPAS fleet consists of Eurocopter EC135’s and EC145’s. The Police Commissioner of West Yorkshire plays a lead role in the governance of NPAS, and the Yorkshire and Humber Regional Procurement Team is responsible for procurement. All tenders are announced via the Bluelight eTendering portal.

Emergency air ambulances in the UK are generally helicopter based and are used to respond to medical emergencies in support of local ambulance services. In England and Wales, all air ambulance services are charitably funded and operated under contract with a private provider. Approximately 21 charities operate 40 helicopters. Scotland has the only publicly funded air ambulance service, the Scottish Ambulance Service, which operates two helicopters along with a single charity operator helicopter.

Over 99 percent of offshore oil and gas transportation is by helicopter, and the UK and Norway handle most European offshore operations in 11 European countries, mostly serving platforms in the North Sea. Offshore helicopters make up a large portion of the UK helicopter market. The leading offshore helicopter operators in the UK include Babcock and Bristow. As the North Sea remains a hostile environment for helicopter operations, several crashes in the last decade have led to a changing market for the types of helicopters used.

Unmanned Aircraft Systems (Drones)

Delivery drones could become business as usual in the UK by 2030. Large retail and logistics companies are investing in delivery drones with the aim of achieving increased efficiency, lower costs, and increased customer satisfaction. The scope of delivery drones could also be beyond dropping off parcels in the “last mile” of client logistics. Drones will be ubiquitous in warehousing and able to autonomously conduct real time stock checks by scanning inventory. This will integrate seamlessly with other ground-based autonomous warehouse robotics in an end-to-end management and movement of inventory driven by AI with no human touch.

Delivery drones in the UK could also integrate with other advances in technology, for example a driverless vehicle loaded with parcels by robotics at the warehouse that automatically dispatches multiple delivery drones when it nears the most efficient point to complete its deliveries. Such a vehicle would serve as a base station for the drones, providing charging and payload swapping as required. This scenario is some way off, as current technical and regulatory challenges remain, such as flying pilotless and beyond visual line of site (BVLOS) in congested urban areas and integrating with other airspace users.

Accident response drones may well be a common sight above roads in the UK by 2030, enabling live data from accident scenes to be shared in real time with emergency services so they know what to expect prior to arriving on scene. Drones would also be used to store evidence from an accident, reducing the time it takes to reopen the road. Accident response drones may open new revenue streams for the public sector by selling the data to insurance companies.

The UK Search and Rescue organization will also present opportunities for companies that provide technology to assist in rescue operations. The ability to carry sensors that provide real time information during inclement weather to rescue centers will keep rescue personnel away from dangerous situations while still providing needed information. In the construction industry, drones are already providing cheaper and more efficient solutions for mapping sites and recording construction progress. Drones are also providing 3D information and integrating it with existing building information modelling (BIM) systems.

New UK drone laws came into effect in 2019. These require anyone who flies a drone that weighs between 250grams and 20kilograms to take a safety test consisting of 20 multiple choice questions and to register as a drone operator and flyer. The operator ID must be displayed clearly on the drone. This means it is illegal to fly a drone in the UK without meeting these requirements unless the drone weighs 249 grams or less. Police across the UK have received powers to land, inspect and seize. They also have stop and search powers around airports, prisons, and other restricted locations.

Opportunities

The opportunities in this market continue to be those associated with the manufacturing of new aircraft or engine models, or for companies that employ the latest technology such as composites or additive manufacturing. In addition, the UK aerospace industry is also seeing an increase in the use of cloud computing platforms, with innovation in integrated solutions such as flight planning tools and digital flight management systems.

The best prospects in the UK continue to include:

• Aerodynamics (e.g., wing design).
• Propulsion (e.g., rotor blades, engine assembly).
• Aero structures (e.g., fuselage & wing assembly); and
• Advanced systems (e.g., avionics, undercarriage).

The UK continues to enjoy a record backlog of orders for equipment across narrow- and wide-body aircraft, but delivering on these orders is an increasing challenge within the UK supply chain. This backlog of orders is becoming more acute for tier 2 suppliers and below and may cause UK companies to consider forming new alliances to create extra capacity to meet obligations. Suppliers should consider collaborating with a larger customer with an established presence in the UK that is looking to increase capacity. U.S. companies should also expect to enter the UK market at a lower tier of the supply chain than they might otherwise enter in the U.S. or globally. Suppliers may also need to consider using a local distributor or agent with established ties within the market.

Entering the UK aerospace market requires patience, investment, innovative products, and competitive pricing. The aerospace supply chain is well-integrated, with the primes all looking to reduce the number of their suppliers. A U.S. company can expect to have to commit both time and resources to enter or expand within the UK aerospace market, especially companies providing what are known as “me too” products and services. Selling to OEMs as well as tier 1 and 2 manufacturers entails a vendor/product qualification and assessment process. All U.S. companies desiring to become a supplier will need to register with their prospective customer. In addition, they must at a minimum meet a quality assurance standard such as AS9100 and NADCAP to do business in the aerospace supply chain in the UK. All companies desiring to become a supplier to the Ministry of Defense are required to complete Cyber Essentials accreditation.

With such a well-integrated and mature supply chain, new U.S. suppliers must demonstrate a clear competitive advantage if they are to be successful in the UK. With most of the major aerospace manufacturers in the UK looking to simplify their supply chains, there are fewer opportunities to supply, and these opportunities will tend to be further down the supply chain. If suppliers are compliant with EU regulations/standards, they should not encounter any significant technical barriers to entry.

Resources

Industry Events

• Space-Comm Expo, Farnborough (greater London), UK. September 7-8, 2022. This event showcases the manufacturing supply chain for products, services and solutions supplying commercial enterprises and developments in Space. Space-Comm Expo brings together the entire Space sector for business and networking, and provides industry and government speakers, a Meet -the-Buyer program, and face-to-face roundtables.

• MRO Europe, London, UK. October 18-20, 2022. MRO Europe is the largest event of its kind in Europe, where airlines, MROs, OEMs, lessors, suppliers, and industry experts converge to explore and define the aviation maintenance industry. MRO Europe is the meeting place for all those looking to learn, connect and do business in the commercial aviation aftermarket.

• Three Counties Defense & Security Expo (3CDSE), Malvern, UK. November 2-3, 2022. 3CDSE is a Special Forces-focused event and is an active touchpoint for leading-edge technology. It brings together defense and security innovators to create a forum for commercial discussions between industry, the armed forces, government, law enforcement and emergency services.

• DSEI, London, UK. September. 12-15, 2023. DSEI is a four-day international exhibition for civilian and military participants in the defense industry held biennially at the ExCel Center in London. DSEI will attract over 35,000 attendees from over 100 countries and will showcase over 1,000 defense and security suppliers, including all the major prime manufacturers.

• Farnborough International Airshow, Farnborough (greater London), UK. July 22-26, 2024. The Farnborough International Airshow is the second largest show of its kind after the Paris Air Show and includes over 1,500 exhibitors from 48 countries. It is a biennial week-long event to demonstrate civilian and military aircraft to potential customers and investors, and to announce new developments and orders.

Trade Associations

• ADS Group
• UK Space
• Farnborough Aerospace Consortium
• British Helicopter Association
• The Association of Remotely Piloted Aircraft Systems UK
• For further information, please contact:
• PJ Menner

Commercial Specialist

U.S. Commercial Service

Tel: +44 (0)20 7891 3470