First some hard truths. UK economic growth over the last few years has been lacklustre. With growth of only 1.7% compared to pre-pandemic levels, the UK's growth has been the second-lowest in the G7 and behind the US and France, with only Germany having lower growth over this period. In addition, the UK's productivity, i.e. economic output per hour worked, has remained stubbornly flat over the last few years, while the US, France and Germany have stretched their lead in productivity levels. The view from economists is that without improvements in productivity the UK may struggle to achieve significant uplift in living standards and growth of the economy.
The UK aerospace industry is second-biggest in the world behind only the US. It is also highly-skilled, and, unlike much of the UK economy, has traditionally been export-driven. As such, the aerospace industry is one that has a significant effect on the performance of the UK economy as whole, and also offers a potential route to sustained growth in highly-paid jobs and exports. It is interesting to see, then, the latest figures for the year 2023 for the aerospace industry released by the ADS (the industry body representing the UK's Aerospace, Defence and Security and Space sectors) to coincide with the upcoming Farnborough International Airshow at the end of the month, which Marks & Clerk will be attending (do get in touch!).
What do the numbers show?
As shown in the report, not only do these sectors continue to draw a large proportion of their sales from exports, they also show high and growing productivity which is an area the UK as whole has been poor on recently. Value add, which is an industry-specific measure of GDP, is on the up and approaching its pre-pandemic peak in 2018, while the jobs distribution throughout the UK is impressive.
Exports
About 67% of the aerospace industry turnover was exports (£30.5bn of turnover for the aerospace industry, of which £20bn is from exports).
The numbers below shown a 12% growth in exports between 2013 and 2023 for the aerospace industry. Although there was a dip in 2020-2021, the trend is now on the up again.
Productivity
Productivity is now the highest is has been, at about £105k output per worker, which is an impressive 67% higher than the UK average.
Value add
Value add is now £10.9bn for 2023 which is a growth of 16% since 2013. Again, like exports, there was a peak in 2018 and then a drop, but now the trend is on the up and looks likely very soon to exceed that 2018 pre-pandemic peak.
Jobs distribution
88% of jobs in the aerospace sector are located outside London and the SE. The map shows the jobs distribution across the UK, illustrating just how wide an employer the aerospace industry is.
These figures for 2023 show then that the industry is in pretty good health considering the unprecedented difficulties it went through during the pandemic with the grounding of entire fleets of commercial aircraft. The fact that productivity is the highest is has been and value add looks set to surpass its pre-pandemic peak are particularly welcome developments.
Following last week's general election in the UK, the new government should be looking to bolster productivity and growth further by encouraging more investments by employers in R&D and innovation to improve working efficiencies. Companies should give proper consideration to how those investments can be protected using intellectual property, and by doing so individual companies can widen the competitive "moat" around their business and maintain their competitive advantage over rivals. We at Marks & Clerk would be happy to discuss how we can help your company best achieve this.
Let us hope that these encouraging signs from the industry herald a period of sustained growth which can make a meaningful contribution to growth of the UK economy as a whole.
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