Airbus’ Brexit ultimatum

In a letter (click here) to Britons on January 24, Airbus CEO Tom Enders issued a warning to the denizens of the British Isles. There was one topic that was making the German, a fearless former paratrooper and staunch European, worried.

“Brexit,” he wrote, “is threatening to destroy a century of development based on education, research and human capital.”

The United Kingdom has the second biggest aerospace sector in the world, after the United States. In 2016 turnover was over GBP30 billion (USD39.5 billion), including at least GBP27 billion in exports.

Britain has the third largest aviation network globally, behind the US and China. By 2050, some 450 million passengers will pass through UK airports, more than double the figure registered in 2017.

Since 2005, UK carriers have bought almost 500 aircraft. The country has a 17% share of the global aviation market. In terms of employment, the industry provided over 200,000 direct jobs in the UK.

Airbus generates GBP6 billion in the UK. The European consortium employs over 14,000 people. Each year the company spends over GBP5 billion with UK suppliers. And it has collaboration agreements with more than 20 British universities.

In 2017 Airbus paid GBP1.7 billion in taxes.

These are dizzying numbers by any measure.

And it could all be ruined from a “No Deal” Brexit.

The hardest to be hit, in the event of a “No Deal”, are the Welsh. Airbus has a large presence in Broughton in north Wales where its 10,000 workers produce over 1,000 wings annually. In the past decade, Airbus has invested over GBP2 billion in this facility.

Ironically, Wales voted nearly 53% in favour of Brexit, despite Airbus contributing close to GBP900 million to its GDP in 2016. That’s equivalent to about 2% of the Welsh economy.

The most critical aspect of a “No Deal” Brexit has to do with aviation regulation.

Instability in airspace rights, daily operations and safety standards are among the critical issues needed to be resolved if the UK leaves the EU without an agreement.

The International Air Transport Association (IATA) noted that the UK “faces a trade-off between accessing the European Single Aviation Market and having the policy freedom to set its own regulations.”

Whilst Brexiteers have suggested Boeing could take up the slack should Airbus leaves the UK, the US company’s contributions to Britain has been miniscule.

Boeing produces machined parts in Sheffield and has established a research and development (R&D) partnership with the University of Sheffield as part of the Advanced Manufacturing Research Centre.

But in monetary terms, Boeing’s investment at Sheffield is at best, only about GBP40 million – a pittance – compared to Airbus’ mammoth contributions. According to Oxford Economics “this means GBP1 in every GBP400 collected by the UK government can be attributed to Airbus’ activity.”

airbus a380 wing broughton 1

The UK’s loss would likely be a gain for other countries, specifically China, given that Airbus already has an assembly line in Tianjin. Chinese airlines are also amongst the biggest buyers of Airbus planes.

Airbus CEO Enders made this point clearly.

He said: “Of course, it is not possible to pick up and move our large UK factories to other parts of the world immediately. However, aerospace is a long-term business and we could be forced to re-direct future investments in the event of a no-deal Brexit. And make no mistake there are plenty of countries out there who would love to build the wings for Airbus aircraft.”

Other Asian countries whose airlines have bought many Airbus aircraft may also get a slice of the supply chain business if the European aerospace firm exits the UK, including Indonesia, Malaysia and Vietnam.

At the same time, the work done at Airbus’ plants in the UK are highly specialised; in particular those associated with design, engineering testing and support for wings, fuel systems, landing gear and aerodynamic research.

This would suggest few Southeast Asian countries have the resources to quickly exploit such an opportunity if Airbus were to depart from the UK.

But then again, as Enders said, it’s a long-term business and something can be worked out in this part of the world if Airbus were to seriously consider it.

Time is ticking down fast for the UK, and Airbus by now would have already mapped out plans B and C.

The potential economic damage to the UK goes far beyond Broughton in Wales. Indeed, we would proffer that it goes so far in fact that the UK would lose its world-class competitive edge in the industry sans Airbus.

For the sake of Britain, we hope we are wrong.

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