NEWS - FAC Summary of US-UK Trade Deal for Aerospace

The UK boasts a truly world-leading aerospace and defense sector. We're the second largest aerospace industry globally, just behind the United States, and a significant portion of what we produce is exported. With a highly sophisticated and integrated supply chain, UK manufacturers are renowned for excellence in areas like engines, wings, and advanced systems.

While navigating international markets can sometimes present complexities, recent developments highlight exciting opportunities for UK manufacturers looking to work with or supply U.S. companies.

Reduced Trade Barriers and Increased Certainty

A significant recent development is the progress on a new U.S.-UK trade deal. Reports indicate that this agreement could lead to British plane parts being exempted from US import tariffs. The US commerce secretary has specifically mentioned that engines from companies like Rolls-Royce and similar plane parts would be able to enter the US market without tariffs. This potential "specific guarantee of zero tariffs" for the wider aerospace industry provides much-needed certainty for our £40bn sector. This framework agreement has been met "with a huge sigh of relief" by many businesses, offering stability regarding jobs, investments, and sales. The deal also "sets the tone for other trading partners to promote reciprocal trade with the United States".

Demand from Major U.S. Customers

Our relationship with major U.S. players is already strong. Boeing, for instance, imports Rolls-Royce engines for its commercial airliners. U.S.-based repair and maintenance (MRO) facilities also require a regular flow of parts, creating ongoing demand for UK-manufactured components. This relationship is underscored by recent news of a UK company (later confirmed as British Airways owner IAG) placing a $10 billion order for Boeing planes. Such large orders for aircraft that utilize UK components directly translate into increased demand and opportunities for our supply chain.

Boeing also has a production facility in Sheffield, its first manufacturing site in Europe, and collaborates with UK firms like GKN Aerospace on components such as the Advanced Technology Winglet for the Boeing 737 MAX.

Collaboration in Cutting-Edge Sectors

Beyond traditional manufacturing, the U.S. relationship offers avenues for collaboration in high-growth areas:

• Space: The UK space industry is expanding rapidly, aiming to capture 10% of the global market by 2030 and is a world leader in nano and small satellites. While primarily commercial, public sector demand is also significant. A Technology Safeguards Agreement signed in June 2020 has made it easier for U.S. firms to bring rocket hardware into the UK. This facilitates U.S. presence and investment, creating opportunities for UK manufacturers and technology providers to partner with these companies, perhaps through hubs like the Harwell Space Cluster.
• Unmanned Aircraft Systems (Drones): Drones are evolving into powerful business tools in the UK, increasingly used across emergency services, construction, utilities, and oil and gas. There's significant investment in delivery drones by retail and logistics companies. This creates market opportunities for companies providing platforms, sensors, and software, areas where collaboration with U.S. technology firms could be highly beneficial.

Furthermore, the UK supply chain is currently facing challenges in delivering on a record backlog of orders. While a challenge, this situation could create opportunities for UK companies to form new alliances to increase capacity, potentially through partnerships with larger established U.S. customers or suppliers looking to expand....

Opportunities in Advanced Technologies

The demand in the UK market continues to be strong for companies working with advanced technologies like composites and additive manufacturing. Specific areas with high potential for collaboration and supply to or with U.S. companies include:

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

There's also the prospect of a future U.S.-UK technology partnership, potentially including key areas of advanced technology such as aerospace.

Seizing the Opportunity

While the UK market is mature and requires patience and investment to enter or expand, particularly for smaller suppliers, the potential rewards of working with U.S. companies are significant. To succeed, UK manufacturers should focus on demonstrating a clear competitive advantage and ensuring compliance with key quality standards such as AS9100 and NADCAP18. For those looking to supply the Ministry of Defence, Cyber Essentials accreditation is also required.

The U.S. relationship remains a cornerstone for the UK aerospace and defense sector. By understanding the avenues opened by recent trade agreements and focusing on areas of high demand and technological advancement, UK manufacturers are well-placed to capitalize on the opportunities to work with our partners across the Atlantic.