FAC STRATEGIC REPORT

2026 Strategic Outlook: The Convergence of Digitalisation and Decarbonisation


Global Market Dynamics & Forecasts - A SUMMARY


The global aerospace market is set to enter 2026 on a strong growth trajectory, having substantially recovered from prior disruptions. The market's total size is projected to reach USD 409.08 billion in 2026, with forecasts indicating further expansion to USD 762.7 billion by 2035, driven by a robust CAGR of 7.18% over that period. This expansion is underpinned by two primary forces. The first is the sustained resurgence in commercial aviation, which accounts for an estimated 70% of market growth, fuelled by rising international passenger traffic and fleet renewal cycles. The second is the continued strength of the defence sector, contributing the remaining 30% of growth as nations modernise their air capabilities in response to a complex geopolitical environment.


Despite this positive outlook, the operational landscape remains fraught with challenges that will continue to define business strategy in 2026. The most significant restraints are systemic and persistent. Supply chain disruptions are reported to impact as much as 50% of all aircraft deliveries, creating production bottlenecks and delaying revenue recognition for the entire value chain. Compounding this issue are acute labour shortages, particularly in the Maintenance, Repair, and Overhaul (MRO) sector, where they affect an estimated 40% of operations and are forcing airlines to extend the service life of older aircraft. For the advanced manufacturing businesses that constitute the FAC, this global context signals a market characterised by strong fundamental demand but significant operational friction. This environment places an unprecedented premium on production agility, supply chain visibility, and manufacturing efficiency—qualities that can only be achieved through deep technological integration.


Executive Summary

The aerospace advanced manufacturing sector is poised for a period of transformative growth and fundamental change leading into 2026. The market is defined by the powerful and inseparable convergence of two meta-drivers: comprehensive digitalisation (Industry 4.0/5.0) and an urgent, policy-driven push for decarbonisation. For the advanced manufacturing businesses of the Farnborough Aerospace Consortium (FAC), navigating this landscape requires a dual focus on enhancing operational resilience through technology and strategically aligning with the UK's ambitious green aviation agenda.


The global aerospace market is projected to reach a value of USD 409.08 billion in 2026, exhibiting a strong recovery and a forecast compound annual growth rate (CAGR) of 7.18% from 2026 to 2035.1 Within this, the aerospace additive manufacturing (AM) sub-sector represents a nexus of high growth, projected to reach USD 8.8 billion in 2026 with a remarkable 16.2% CAGR.2 The UK market reflects this positive trajectory, with aerospace parts manufacturing growing at a 3.7% CAGR and exports forecast to reach USD 40.3 billion by 2026.3


However, this growth is set against a backdrop of significant operational headwinds, including persistent supply chain disruptions and critical skills shortages. This report provides a detailed analysis of the key trends, challenges, and opportunities that will shape the sector in 2026, with a specific focus on their implications for UK Small and Medium-sized Enterprises (SMEs).


Key findings and strategic imperatives include:


  • Technology as a Prerequisite: The adoption of digital technologies is no longer a competitive advantage but a prerequisite for participation in prime supply chains. By 2026, the industrialised Digital Twin will become central to lifecycle management, requiring suppliers to provide not just physical components but also their high-fidelity digital counterparts. Additive Manufacturing will continue its transition to certified, serial production, with automation in post-processing becoming a key enabler and a strategic opportunity for specialised service providers. AI-driven quality control will be critical to achieving the zero-defect standards demanded by the industry.
  • The Green Imperative Creates New Markets: The UK's proactive environmental policy provides a clear market roadmap. The Sustainable Aviation Fuel (SAF) Mandate, which requires a 3.6% blend in 2026, creates a guaranteed domestic market for SAF and its entire ancillary supply chain—from specialised production hardware to certification systems.5 Similarly, significant UK investment in hydrogen and electric propulsion, led by projects from ZeroAvia and Rolls-Royce, signals long-term opportunities in novel powertrain and energy storage systems.6
  • Leveraging UK Strategic Programmes: Government-led initiatives offer SMEs a direct pathway to funded R&D and strategic market positioning. The Global Combat Air Programme (GCAP) / Tempest should be viewed as a national technology accelerator, providing opportunities for SMEs to develop dual-use capabilities in areas like AI, advanced sensors, and digital engineering.8 The Future Flight Programme is actively building the ecosystem for Advanced Air Mobility (AAM), creating near-term opportunities in ground infrastructure, manufacturing, and traffic management systems.10
  • Building a Resilient and Skilled Future: The critical skills gap, exacerbated by an ageing workforce, demands proactive engagement from SMEs. Partnering with new national initiatives, such as the Defence Technical Excellence Colleges launching in 2026, is essential for building a future talent pipeline.12 Concurrently, embracing the Circular Economy by developing capabilities in high-value material recycling and designing for disassembly will become a key competitive differentiator and a requirement for resilient supply chains.


For FAC members, success in 2026 and beyond will be determined by their ability to make strategic investments in digital capabilities, align their innovation with the UK's decarbonisation targets, diversify into high-growth adjacent markets like commercial space, and collaborate to overcome shared challenges in skills and supply chain development. This report serves as a strategic guide to navigating that future.

Conclusion


The aerospace advanced manufacturing sector stands at a pivotal juncture. The path to 2026 is not one of incremental change but of fundamental transformation, driven by the non-negotiable imperatives of comprehensive digitalisation and aggressive decarbonisation. For the members of the Farnborough Aerospace Consortium, this environment presents both profound challenges and unprecedented opportunities. The operational headwinds of supply chain volatility and a critical skills deficit are real and persistent, demanding immediate attention and investment in resilience.


Simultaneously, a clear and proactive UK industrial strategy is creating new, government-backed markets and de-risking innovation in high-growth areas. The SAF Mandate, the Future Flight Programme, and the Global Combat Air Programme are not merely policy documents; they are strategic roadmaps that signal where future value will be created. The technological trends identified—from the industrialised Digital Twin and serial Additive Manufacturing to multifunctional composites and AI-driven quality control—are rapidly moving from the realm of competitive advantage to being the price of entry into prime supply chains.


Success in this new era will not be achieved in isolation. It will require a strategic blend of internal investment in digital and workforce capabilities, a proactive approach to market diversification into adjacent sectors like commercial space, and a deep commitment to collaboration. By leveraging the unique strengths of the South East's innovation ecosystem and aligning with national strategic priorities, FAC members can navigate the complexities of the coming years. The companies that thrive in 2026 will be those that embrace this dual challenge: fortifying their operational foundations while boldly seizing the technological and market opportunities of a net-zero, data-driven future.