Executive Summary

The apparent UK market for aerospace was estimated by Key Note to be around £7.18bn in 1995. UK manufacturers' sales, including avionics, have been in excess of £10bn for the last 6 years, representing 2% of the UK's gross domestic product (GDP) and 9% to 10% of manufacturing GDP. 11 British companies are placed in the world's top 100 aerospace companies in terms of sales. The market is still orientated to defence, with some 53% of turnover for the military.

The aerospace market includes aircraft production, both civil and military, avionics, missile systems, space equipment and refurbishment work. Aircraft production is subdivided into airframe manufacture, parts supply and production for aircraft manufacture, jet engine supply and the supply of parts for jet engines. Avionics are electrical and electronic control systems as fitted to aircraft and missiles, plus ground-based software and systems for flight management, etc. Missile systems excludes non-guided ordnance other than that intended to be carried on an aircraft. Space equipment covers communications and earth observation satellites. Refurbishment work includes maintenance work carried out by the major manufacturers, where such work cannot be distinguished from the remainder of the company's turnover.

The industry has survived a period of severe recession better than its Continental colleagues due to early rationalisation and cost cutting. It is now coming out of recession with greatly improved profitability, partly due to the necessary change of focus to financial, rather than technical, aspects during a period of strong price restraints and falling sales. In the civil airline market, loss of demand for air travel led to airlines choosing not to take up purchase options and creating a buyers' market.

In 1996, the focus has been on whether various key defence contracts would be awarded to British companies. These contracts have now secured the immediate future of a number of firms. As airlines start to purchase again, the price war between Airbus (with its partner British Aerospace) and Boeing has become more intense. General Electric and Rolls-Royce are also battling it out to supply engines for the 777 and to certify their engines for use on the proposed 747-500X and the Airbus A3XX.

The total apparent UK market for aerospace is forecast to reach £7.74bn in 2000. UK manufacturers' sales are forecast to reach £11.14bn and exports £7.8bn by the same year. The projection assumes that the Eurofighter 2000 project will go ahead.

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