uk aerospace industry survey 2007

representing companies supplying civil air transport, aerospace defence & space

SBAC salamanca square 9 albert embankment london SE1 7SP tel: +44 (0)20 7091 4500 fax: +44 (0)20 7091 4545 e-mail: post@sbac.co.uk

www.sbac.co.uk

contents

about SBAC data and information UK aerospace in 2006 a message from the SBAC President sustainable aviation revenue orders financial research and development employment SMEs international trade global trends aerospace cross-holdings

2 2

3 5 6 16 18 19 27 33 38 40 43

Photographs reproduced with the kind permission of: Airbus SAS AgustaWestland BAE Systems EADS Eurofighter GmbH Gardner Aerospace Rolls-Royce plc

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about SBAC
SBAC is the national trade association representing suppliers to the civil air transport, aerospace defence and space markets operating in the UK economy. Together with its regional partners, it represents over 2,600 companies, assisting them to develop new business globally, facilitates innovation and competitiveness and provides regulatory services in technical standards and accreditation. SBAC members interests encompass aerospace manufacturing, maintenance and through life service, professional advice, academic research, training and education, the British Airports Group and UK Industrial Space Committee.

UK aerospace in 2006
data and information
The information provided in this booklet is primarily the result of the UK aerospace industry (UKAI) Survey of 2006 undertaken by SBAC in 2007. Data has been collected not only from SBAC member companies but also other aerospace companies (eg consortia, joint ventures, nonmembers and airline maintenance companies) both in the UK and the rest of the world. The results of the survey are used by a wide variety of stakeholders in the aerospace industry, including government ministers and departments (including Department of Trade and Industry, Ministry of Defence, Department of Transport, Defence Export Services Organisation and UK Trade and Investment), The AeroSpace and Defence Industries Association of Europe (ASD), SBAC member companies and respondents to the survey. All the analyses and information about the aerospace industry survey 2007 are available separately from the SBAC website www.sbac.co.uk Please note that some data for 2005 have been revised.

a message from the SBAC President

SBACs UK Aerospace Industry Survey is the most comprehensive analysis of companies supplying the civil air transport, aerospace defence and space sectors. This years results show that the aerospace industry is enjoying a sustained period of growth and UK based companies are successfully winning business in an increasingly competitive global marketplace. The survey shows aerospace is a UK success story and remains the largest aerospace industry outside the USA. In 2006 it directly employed 124,000 people, had a turnover of 19.81 billion and saw new orders increase by nearly 6 per cent to 26.2 billion. UK aerospace manufacturing is globally competitive and exports 63 per cent of its total sales. UK companies also have a significant presence overseas, employing 48,780 people and generating sales of 7.9 billion. More importantly aerospace is a growth business with demand for freight and passenger travel increasing year on year. It is estimated that demand for new aircraft will exceed 22,000 units up to 2025, of these more than 68 per cent will be single aisle aircraft. These are the workhorses of international aviation fleets and the key products in fast growing markets like Brazil, Russia, India and China. Aerospace manufacturing provides high value and highly skilled jobs. The latest data shows that 34 per cent of all employees in the sector hold a university degree or equivalent and is forecast to increase to 40 per cent by 2010. Average salaries in the sector are 35,168, 44 per cent higher than the UK average and 31 per cent above the manufacturing average. The industry is committed to improved training and skills development and employs 2,593 apprentices. Research, development and new technology are incredibly important for long-term competitiveness in the aerospace industry. The sector is one of the most R&D intensive sectors in the UK economy and invested 2.5 billion in 2006, including 260 million in early stage research and technology acquisition. The UK aerospace industry recognises its environmental responsibilities and is committed to helping to deliver a more sustainable aviation sector. In 2006 aerospace manufacturers, alongside its partner airlines, airports and air navigation service providers published a Sustainable Aviation progress report. This highlighted the wide range of activities being undertaken to reduce the sectors impact on the environment.

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sustainable aviation
a message from the SBAC President continued
Despite the continued strength of the UK aerospace industry we cannot afford to be complacent. The industry is now entering a critical period in its development. Increasing globalisation and intense cost pressures are bringing significant change. At home the Ministry of Defence is implementing its Defence Industrial Strategy, bringing the concepts of through life capability management and partnering to industry and the sector is starting to explore the possibilities for more co-operation in the security and resilience markets. If the UK is to remain and prosper as a location for these activities and the intellectual property associated with them, it is essential that Government and industry work together to provide the right environment for industrial success. SBAC is fully committed to playing its part in sustaining a globally competitive UK aerospace industry. Air travel is an integral part of modern life, vital to the global economy and valued by the travelling public. The continued growth in the demand for air travel worldwide presents major environmental challenges. The launch of the Sustainable Aviation strategy, the worlds first sustainability strategy for the aviation sector, signals UK industrys commitment to deliver environmental improvement, alongside continued economic growth and social responsibility. aviations impact on the environment and was developed by the UKs leading airlines, airports, aerospace manufacturers and air traffic controllers. This pioneering initiative, unique in global aviation, commits UK companies to a joint strategy to deliver radical cuts in carbon dioxide emissions, nitrogen oxide emissions and aircraft noise over the next 15 years. The Sustainable Aviation strategy establishes mechanisms for monitoring and regular reporting of progress toward a range of specific objectives. These include: Limiting climate change impact by improving fuel efficiency and CO2 emissions by 50 per cent per seat kilometre by 2020 compared with 2000 levels. Improving air quality by reducing nitrogen oxide emissions by 80 per cent over the same period. Lowering the perceived external noise of new aircraft by 50 per cent by 2020 compared with their 2000 equivalents. Establishing a common system for the reporting of total CO2 emissions and fleet fuel efficiency by the end of 2005, and pressing for aviations inclusion in the EU emissions trading scheme at the earliest possible date. Airport plans for community-related noise limitations, including landing and take-off restrictions where necessary. Further information on the Sustainable Aviation strategy can be found at www.sustainableaviation.co.uk

Chris Geoghegan President SBAC & Chief Operating Officer BAE Systems

air travel and climate change

Globally, air travel represents about 2 per cent of manmade carbon dioxide (CO2) emissions. Total departing flights from UK airports represented 6.3 per cent of total UK CO2 emissions in 2004.

2005
turnover in UK bn turnover in rest of world bn new order intake bn employment R&D expenditure bn export expenditure bn export percentage trade balance* bn
source SBAC except * DTI

2006
19.82 7.94 26.18 124,234 2.53 12.43 63% 1.54

change
(in real terms)

Total UK CO2 emissions are about 2 per cent of global emissions.

18.78 8.50 24.74 124,237 2.73 11.69 62% 2.25

5.5% -6.5% 5.8% 0.0% -7.5% 6.3% -31.6%

environmental track record

Industry has delivered a 50 per cent improvement in fuel efficiency in the last 30 years. Industry has delivered a 75 per cent reduction in noise nuisance in the last 30 years. Through the introduction of quieter planes the noise contour area around Heathrow has shrunk - reducing the population exposed to significant disturbance by 85 per cent between 1974 and 2000.

sustainable aviation

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Sustainable Aviation is a comprehensive programme for long-term reductions in

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revenue
figure 1 UK aerospace industry sales and employment 1980 2006
Sales increased by 5.5 per cent in real terms in 2006 to 19.82 bn, driven mainly by increases in the civil sector. Aerospace employment remained at 2005 level and was 124,234.

figure 2 UK aerospace industry real growth of sales civil and defence 1980 2006
Since 1980, the civil sector has been the engine of growth and this year it continued the trend with an 8 per cent increase, above the long term trend rates of 2.5 per cent per annum. Defence sector grew 2 per cent in real terms 2006.

30

civil
250 25

defence

baseline

sales (2006 bn)

20

employment (000s)

total sales 19.82 bn

200

1980 = 100

employment 2006: 124.234

15

150

10

100

50

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

year

year

source: SBAC

source: SBAC

.06

.07

figure 3 UK aerospace industry sales by activity 1980 2006

In 2006 civil sales increased to 10.27 bn. Defence sales were 9.55 bn.

figure 4 UK, EU and USA aerospace industries sales to their own governments 1980 2006
Sales to the UK government decreased by 5 per cent to 3.62 bn. The UK aerospace industry (UKAI) remains less dependent on sales to their national government at 18 per cent compared to USA at 51 per cent and the EU average of 26 per cent (2005 figure).

80%

70%

70%

civil

defence
60%

sales to Government - EU average sales to US Government sales to the UK Government

60%

civil sales 2006: 52%

50%

% of turnover

50%

% of turnover

40%

40%

defence sales 2006: 48%

30%

30%

20% 20% 10%

10%

0%

0%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

year

year

source: SBAC

source: ASD, AIA, SBAC

.08

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figure 5 UK aerospace industry growth from 2005 to 2006

Sales increased by 5.5 per cent in real terms in 2006 to 19.82 bn, however different areas had different patterns; - Civil domestic sales increased by 13.8 per cent while defence domestic remain at almost the same level. - Export sales grew by around 6 per cent both for civil and defence markets.

figure 6 UK aerospace industry sales by type and region

The figure below shows the relative contribution of the civil and military markets to the UKAI. 63 per cent of sales were exported, continuing the long term trend of dependence on exports.

25

total turnover 2006: 19.82 bn

2005 2006

20

+ 5.5%

total sales 2005: 18.78 total sales 2006: 19.82

(in real terms)

defence domestic

25%

turnover (2006 bn)

15

civil exports

40%
defence exports
10

23%
+ 6.6% + 0.1% + 13.8%
civil domestic

+ 6.0%

12%
total civil domestic civil exports defence domestic defence exports

exports: 63% civil: 52%

source: SBAC

source: SBAC

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figure 7 UK aerospace industry sales by product group

Aircraft engine sales increased by 11 per cent to 5.91 bn, showing the biggest single sector increase. Aircraft equipment rose by 4 per cent to 5.68 bn. Missiles sales dropped by 16 per cent to 1.2 bn. Space had its third consecutive year of growth, increasing to 689 million, up 14 per cent on last year. Aircraft systems and frames increased by 2.4 per cent to 8.21 bn from last year.

figure 8 UK aerospace industry sales by customer(1)

The global aerospace industry is relatively unusual in having only a few possible end users of whom almost all are either airlines or governments. Sales to all destinations showed growth, apart from sales to the UK government. The growth of sales was mainly driven by sales to the UK industry (18 per cent increase) and by sales to the USA (15 per cent increase).

helicopters aircraft maintenance

8%

6%

sales to the rest of the world

4.03 bn
large civil aircraft

2.77 bn
+ 5%

UK aerospace industry
5.63 bn
+ 2%

3.63 bn
-7%

sales to the UK Government

3.76 bn
+ 18%

aircraft equipment

28%
aircraft systems & frames

+ 15%

8%
regional jets

31%
aircraft engines

sales to the USA

sales to the EU

other sales in the UK

2%
other and business jets space

24% 0.6%
defence aircraft

3%
missiles

6%

14.4%

source: SBAC

source: SBAC
(1)

Sales to UK Government: This includes national authorities like government, ministries, UK public research institutes, national space agency.

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figure 9 UK aerospace industry maintenance turnover by company 1996 - 2006

Maintenance, repair and overhaul (MRO) sales increased by 7.9 per cent to 6.13 bn. Aerospace manufacturers MRO increased by 11 per cent in 2006 to 3.90 bn. Service providers and maintenance specialists increased by 2.9 per cent to 2.23 bn.

total maintenance turnover 2006: 6.13 bn

6

service providers maintenance companies

turnover (2006 bn)

aerospace manufacturers

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

source: SBAC

year

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orders
figure 10 UK aerospace order intake by type and sector 1997 - 2006
Total orders increased by 5.8 per cent to 26.18 bn. The equipment sector saw the biggest increase in the order intake of 23 per cent. Systems and frames orders increased by 10 per cent, and engine sector orders decreased by 11 per cent. New orders were evenly split between civil and defence sectors with 13.3 bn for civil and 12.8 bn for defence. New orders represented 132.1 per cent of sales in 2006.

figure 11 UK aerospace order intake by destination in 2006

Growth was driven by UK orders, which grew by 17 per cent and orders from the Rest of The World, which were up 23 per cent to 4.71 bn. Orders from European Union saw a 1.4 per cent increase to 5.5 bn. Orders from the USA decreased by 18 per cent and were worth 4.98 bn.

35

30

total order intake 2006: 26.18 bn

systems & frames equipment

30

total order intake 2006: 26.18 bn

from rest of world from USA from outside EU

order intake (2006 bn)

25

order intake (2006 bn)

engines

25

from other EU from UK

20

20

15

15

10

10

5
5

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

year

year
source: SBAC

source: SBAC

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financial
figure 12 selected financial UK aerospace financial results 2006
The increases in aerospace industry sales are reflected in the improved performance of selected UK companies with a 7.45 per cent real increase in sales and operating profit at a record level of 20 per cent.

research and development

figure 13 private and social returns to R&D spend
Aerospace is one of the most R&D intensive sectors in the UK economy. While the private return to aerospace R&D is rather low, the external return (spillover) is high. Research by Oxford Economic Forecasting shows the economy wide social return to aerospace R&D investment is around 70 per cent. This means a one time investment of 100 million in aerospace R&D raises UK GDP by 70 million per annum. These economy wide benefits are far greater than for manufacturing as a whole, where returns are around 50 per cent.

company

division
2006 m

turnover
2005 m 12,816 5,015 639 3,073 1,110 628 348 2004 m 13,839 4,620 596 2,803 1,025 499 325

operating profit
2006 m 1,054 748 70 520 182 133 58 2005 m 755 692 55 428 180 104 52 2004 m 1,063 390 40 366 157 86 42

BAE SYSTEMS Plc Rolls-Royce Plc GKN Plc Smiths Group Plc Cobham Plc Meggitt Plc Ultra Electronics Plc

group civil aerospace, defence aerospace group group group group

13,765 5,344 695 3,523 1,015 670 377

80%

70%

private return external return social return

private and social returns to R&D spend, by sector (UK)

60%

25,389

23,629

23,707

2,764

2,286

2,144
50%

40%

30%

20%

10%

0% manufacturing radio and tv equipment chemicals (including pharmaceuticles) precision equipment aerospace machinery & equipment motor vehicles

source: companies financial reports

source: Oxford Economic Forecasting (OEF), Assessing the Economic Impact of Aerospace Research & Development, May 2006

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figure 14 UK aerospace R&D expenditure by type 1996 2006

Research and development (R&D) intensity averaged 12.7 per cent of total sales, at 2.54 bn, down slightly on 2005. 37 per cent or 0.94 bn of the total R&D expenditure was spent in the civil sector and 63 per cent was spent in defence sector. For the purpose of this survey, R&D was defined to comprise: - Development activities leading to series production. - Research and technology (R&T) activities which may not be directly attributable to products, i.e. generic technologies that are designed to maintain or expand the technological base.

figure 15 UK aerospace industry R&D expenditure source in 2006

Self financed R&D totalled 1.00 bn, 69.9 per cent of which was invested in the civil sector. However, HMG funded R&D has the inverted pattern with 95 per cent being invested in the defence sector. Overall the trend was for externally funded R&D to be heavily defence-focussed, i.e. 88 per cent or 1.17 bn.

3.0

2.5

total R&D and R&T spend 2006: 2.54 bn

total R&D spend 2006: 2.54 bn

R&D spend (2006 bn)
2.0

2.5

civil: 37% defence: 63%

civil defence

R&D spend (2006 bn)

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

total
0

self-financed

by UK

by other government

by others

R&T alone

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

year
source: SBAC

R&D +R&T

source: SBAC

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figure 16 UK aerospace R&T expenditure 2000 2006

R&T expenditure saw a significant increase of 20 per cent to 259 million in 2006. Civil R&T accounted for 52 per cent or 135 million while defence R&T was 48 per cent or 123 million.

figure 17 UK aerospace industry R&D expenditure 2000 2006

39 per cent or 991 million of the total UKAI R&D expenditure was undertaken by the aircraft and systems sector. The equipment and engine sectors R&D expenditure increased by 2 per cent each, to 662 and 883 million respectively.

350

R&T
300

total R&T in 2006: 259 million

R&D spend (2006 bn)

3.0

total R&D and R&T spend 2006: 2.54 bn

equipment 2006: 35%
2.5

R&T civil R&T defence

aircraft & systems 2006: 39%

engines 2006: 26%

R&T spend (2006 million)

250

2.0

1.5

200

1.0

150

0.5

100
0.0

2000
50

2001

2002

2003

2004

2005

2006

year

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

year

source: SBAC

source: SBAC

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figure 18 UK aerospace R&D undertaken in the UK and overseas

In the last few years there has been increasing interest in the levels of R&D in aerospace being undertaken outside the UK by UK companies, SBAC data indicates there is a long term increase from 0.14 bn in 1996 to 0.47 bn in 2006. However as the data below shows it does jump significantly from year to year. In 2006 overseas R&D grew by 5.5% and accounts for 16% of total UK and overseas R&D.

figure 19 Technology and first product application life cycle

Aerospace R&D is a uniquely long term investment strategy. UK firms still benefit directly from investment in generic technologies made in the late 1950s and 1960s (e.g. wing aerodynamics and fundamental engine technology which fed into the complete range of Airbus and RB211/Trent engine families). The timescale between research and implementation of new products can be as long as 20 years.

3.50

overseas R&D, 2006: 16%

3.00

technology taken up by industry 5+ years 3-10 years

technology validated

product launch 2-6 years

product certification

Uk based R&D, 2006: 84%

25+ years series production & product support

R&D spend (2006 bn)

2.50

technology readiness

2.00

R&D

contract negotiation selection process technology selected for application by customer technology demonstration technology acquisition Fundamental research

pre-production product & process validation design & development

1.50

1.00

5.0

R&T

science base: universities, industries & other research bodies

0.0

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

year

source: SBAC source: AeIGT

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employment
figure 20 aeronautic research programme funding
The R&D process involves a number of public and private agencies, companies, national research organisations, academia, and increasingly, regional government. It also often requires sophisticated, complex and expensive research infrastructure, i.e. advanced aerodynamics may require wind tunnel test facilities and high-performance computing. Government support for aerospace research from all sources including the Regions is brigaded through the DTI Technology programme following implementation of the Innovation Review. Aerospace projects currently draw more support from the Technology Programme than any other sector.

figure 21 European employment by country 2006

The majority of the European Aerospace Industry is located in the UK which is highlighted by the fact that 26 per cent of all aerospace jobs in the EU are within the UK. Employment in the UK in 2006 sustained at the very similar level of 124,234 and is 4 per cent higher then in France and 38 per cent higher then in Germany.

140

120

50 45

government support in 2006: 43.3 million

CARAD technology programme committed technology programme

total: 457,000 employees

100

40 35 30 25 20 15 10 5 0 1997 1998

employment 000s
2004 2005 2006 2007 2008 2009

80

2006 million

60

40

20

nd s

de n

Sp ai n

Fi nl an d

Ire la nd

nm ar k

UK

an

Ita

re e

ga

Fr an

er m

rtu

ee

rla

Be

Au

Sw

he

Po

year

De

Ne t

country
source: DTI

source: SBAC estimation

.26

Lu

xe

bo u

lg u

st

1999

2000

2001

2002

2003

ce

ce

im

ria

rg

ly

.27

figure 22 aerospace sales per employee 1980 - 2006

Employment in the UK in 2006 remained at the level of 124,234, while sales increased by 5.5 per cent. Productivity went up 5.5 per cent to 159,500 per employee.

figure 23 UK aerospace employment by sector

It is estimated that a further 151,600 people are indirectly supported by the aerospace industry. Total UK aerospace employment was, therefore, in the region of 276,000 in 2006. Aircraft and frames account for 42 per cent of the UKAIs activity, in terms of employment. This is complemented by equipment at 30 per cent and engines at 28 per cent.

200

180

growth of the productivity per employee in 2006: 5%

total: 124,234 employees

turnover per employee (2006 '000s)

160

engines

140

28%

120

100

aircraft & systems

80

42%
equipment

60

30%

40

20

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

year

source: SBAC

source: SBAC
1

.28

Research by the OEF in The economic contribution of BAE SYSTEMS to the UK has suggested an employment multiplier for the aerospace industry of 1.22.

.29

figure 24 UK aerospace industry employment by qualification and activity

The UKAI has consistently maintained a range of long-term, highly skilled jobs. In 2006, 34 per cent of all UKAI employees held a university degree or equivalent. 31 per cent of employees or 38,822 employees were classified in the new class of technicians. 2,593 or 2 per cent of the workforce were apprentices. Production was the largest single group of employees (55 per cent or 68,743).
80

figure 25 aerospace and defence value added 2001 - 2006

Aerospace and defence companies increased value added by 16 per cent to 12.9 bn in 2006. The main reason for the growth of value added is heavy investment in innovation, and increased cost reduction.

14.0

total: 124,234 employees

70

2006: 12.9 bn
production & maintenance 55%
12.0

60

10.0

employees (000's)

value added bn

8.0

50

graduate engineers & managers technicians 34% 31% others 33%

rest 32%

6.0

40

4.0

30
2.0

20

R&D 13%
0.0

10

2001
apprentices

2002

2003

2004

2005

2006

year
by activity

2%

product segments

source: SBAC

source: DTI Value Added Scoreboard 2007

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SMEs
figure 26 UK SME aerospace sales 1997 - 2006
Small and Medium sized Enterprises (SMEs) saw their total sales increase by 20 per cent to 405 m. Defence sales have remained consistent at 133 million per annum, while civil sales increased by 34.5 per cent to 271.7 million. An SME is defined as a company having less than 250 employees, less than 30m turnover and less than 25 per cent external ownership (in terms of voting rights). SBAC only uses the employment criterion here.

800

total SME sales: 405 million

700

total defence
600

total civil

500

sales (2005 m)

400

300

200

100

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

source: SBAC

year

.33

figure 27 UK aerospace industry by company size 2006

The UKAI is characterised by a significant proportion of SMEs, 45 per cent of all companies surveyed by the SBAC were SMEs. However, estimates suggest that there may be up to 2,500 aerospace SMEs in the UK, of which only a small percentage were picked up in this survey. SMEs had 2 per cent of the total aerospace sales, while 82 per cent of the total UKAI sales went to 20 per cent of surveyed companies.
60%

figure 28 UK aerospace industry SME turnover by type and destination 2006

In 2006 civil sales represented 67 per cent or 271 million of SME business, whilst defence sales were 133 million. Exports are still low, compared to the industry as a whole, with only 32 per cent compared to 63 per cent UK aerospace average.

total turnover 405 m

(%) of all companies
50%

(%) of total sales

45% SME's

50%

civil export

23%
civil domestic
35% 32%

40%

44%

30%

military domestic

24%
20%

16%

17%

military export

9%
10%

2%
0%

3%

<250

250-999

1,000-9,999

10,000+

source: SBAC

number of employees in company

source: SBAC

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figure 29 UK aerospace SME sales by destination

5.7 per cent of sales, or 23 m, was sold directly to the UK government, below the UKAI average of 18 per cent. This is in part reflecting the nature of SMEs products as suppliers of components rather than complete pieces of equipment. 68 per cent of sales were within the UK.

total turnover: 405 m

sales to the EU

20.5%

sales in the UK sales to the USA

5%
sales to the rest of world

62.6%

6.2%
sales to UK Government

5.7%

source: SBAC

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international trade
figure 30 UK trade balance of aerospace 1996 2006
In 2006, UKAI exported 62.7 per cent of its total sales, worth 12.43 bn. This was a 8 per cent increase. It is important to note that the trade balance figures, presented in the graph below, come from government and therefore represent the trade in all aerospace goods to and from the UK and not just the UKAI. They include the purchase of aircraft by UK airlines and the sale of secondhand aircraft to the rest of the world, and are therefore different to the SBAC survey figures. UKAI this year contributed net 1.54 bn to the trade balance, representing a fall of 32 per cent on last year. However the long term average remains at 2.71 bn per annum positive balance.
18 import 2006: 15.36 bn 16 export 2006: 16.90 bn balance 2006: 1.54 bn 14
5 6 7 imports exports
balance

figure 31 UK trade balance of aerospace by destination 2006

The EU accounted for the largest share of UK exports 42.7 per cent worth 7.2 bn. There was an increase of 10 per cent in the net trade balance to 3.37 bn. The Americas accounted for 4.8 bn of exports or 28 per cent of the total, the second largest export region. The trade balance deficit with the Americas increased by 143 per cent. The negative balance with other Europe stayed at the same level as last year.

12
4

trade (2006 bn)

10

trade (bn)

3.377

6
1

4
0

0.447

0.202

2
-1

Americas

Asia & Oceania

European Union

Middle East & Africa

Other Europe -0.529

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
-2
-1.934

source: DTI

year
source: DTI

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global trends
figure 32 global sales and employment of UKAI aerospace assets
UK based companies have substantial overseas presence, which generated a further 7.94 bn of sales and 8.93 bn of orders, UK employed a further 48,785 people overseas. The majority of the overseas assets are in the USA which accounted for 4.58 bn of sales and 34,606 employees.

figure 33 global location and sales in the UKAI 2006

The size of the UK aerospace industry presence overseas has increased significantly over recent years. The size of the overseas assets owned by the UK is now equivalent to the size of the rest of the world owned companies presence in UK.

UKAI in USA
sales (bn): 4.58 orders (bn): 5.09 employment: 34,606

UKAI in UK
sales (bn): orders (bn): employment: 19.82 26.18 124,234

location UK sales (bn) 11.85 81,088 7.96 43,145 19.81 124,233 rest of the world 7.94 48,785 n/a n/a 7.94 48,785 total 19.79 129,873 7.96 43,145 27.75 173,018

rest of the world

sales (bn): 29.28 orders (bn): 37.19 employment: 179,059

ownership

UK

global UKAI

employment sales (bn) employment sales (bn)

UKAI in rest of world

sales (bn): orders (bn): employment: 2.44 2.96 10,110

UKAI in rest of EU
sales (bn): orders (bn): employment: 0.92 0.89 4,069

total employment

source: SBAC

source: SBAC

.40

.41

66.6%

5.5%

Atlas Electronics

100%

33.3%

100%

50%

42.5%

100%

100%

100%

15%

19.5%

50%

33%

50%

100%

CTA Intl Rheinmetall AG

100%

100%

31.3%

50%

33% 83% Finmeccanica SpA 100% 32.28% Giat 33.3% RGR Armament IRI SELEX Communications Italian Government

66.6%

Alcatel 67%

49%

.42
turnover (2006 bn)
12 16 20 24 28 4 8 0

There are a number of overseas companies which have directly invested or purchased and incorporated indigenous firms. In 2006, foreign owned UK located companies generated total sales of 7.96 bn and employed 43,145 people.

figure 34 UK located aerospace companies turnover and employment

source: SBAC
1998

total turnover: 19.81 bn

1999
UK turnover (Ihs) UK owned employment (rhs)

2000 2001 2002 2003

non UKAI turnover (Ihs)
foreign UK employment (rhs)

employment: 124,234

year
2004 2005 2006
80 60 40 140 160 180

employment (000s)

100

120

French Government

Lagadare

Sogeade Airbus 37.5% Eurofighter 50% 42.5% 20% 80% 43% EADS Daimler Chrysler A.G. 22.3% 100% Astrium

31.1%

20

Spanish Government 46.2% Dassault Aviation 100% 50.01% Eurocopter

Gripen International

50%

20.5%

BAE SYSTEMS

37.5%

37.5% Saab AB 100% Panavia BAE SYSTEMS North America ATR Celsius

Diehl LFK

51% Diehl Avionik Systeme GmbH GIMD 49% BGT 25% Alenia Selex Sensors&Airborne Systems MBDA 11% 5.7% 66% Eurosam AgustaWestland SELEX Sistemi Integrati Aermacchi 100% Fincantieri

100%

TDA Armanens

50%

Armaris

50%

DCN 100%

Thales Elettronica 33% 20.94%

31.3% JSA 100%

100%

French Government

UK Thales Holdings UK plc France, Germany, Italy, Spain, Sweden USA, Canada Thales Alenia Space Amper Programas International JV / Consortia

figure 35 major European aerospace and defence cross holdings

aerospace cross holdings

.43

Japanese Aero Engines Corporation 15% 85% Cinven 50% Euro Propulsion 100% KKR 50% 19% 23% Avio S.p.A 12%

14%

16%

JSF Programme F136

40%

51%

.44
100% Finmeccanica 32.5% International Aero Engines 30% MTU 33% 28% 33% 37%
28%

32.5% Eurojet Turbo 33% Turbomeca 100% MTR

Pratt & Whitney

28%

EPI

100% Rolls-Royce plc 50% Rolls/Turbomeca 47% 50%

JSF Programme Lift System

SAFRAN S.A (SNECMA) 50%

figure 36 major world engine cross holdings

35.9% French Government

ITP 53% EMA

CFM International

50%

share ownership work share equity

49%

UK France, Germany, Italy, Spain, Sweden USA, Canada, Japan International JV / Consortia

Turbo 2000 AgustaWestland

General Electric

Source: SBAC, Company Data