With an annual turnover of £30.5bn, representing growth of 14% over ten years, the UK aerospace industry contributed £10.9bn to the economy in 2023.
As well as being a significant source of employment for more than 100,000 individuals – 6,000 of whom are apprentices – the UK aerospace industry is also a massively important contributor to trade, generating £20bn in exports in 2023. In fact, approximately 70% of the sector’s output is exported, making aerospace a vital player in addressing the UK’s trade deficit.
But following the severe turbulence caused by Brexit and the COVID-19 pandemic, UK aerospace finds itself at a crossroads.
Indeed, at the beginning of January, The Manufacturer website published an article based on our latest commercial aircraft data. The figures made for rather grim reading. According to the data, in November 2024, UK commercial aircraft orders totalled just 79 – a four-year low and the weakest demand the month has seen since 2020, when the effects of the pandemic were still very much being felt.
Following the recent news that aerospace manufacturers produced 97% of their forecast ability, this was a good opportunity to assess the challenges and opportunities the sector faces as 2025 unfolds.
An engine for regional economic growth
The aerospace industry is a cornerstone of the UK’s advanced manufacturing ecosystem, with its innovation-intensive nature driving productivity improvements. In fact, productivity in the industry has increased by 25% over the past decade and now stands at £105,000 per worker, further underscoring the sector’s efficiency and value.
We drive above-average wages and contribute significantly to economic output, particularly in regions outside London and the South East. The sector employed around 104,000 people in 2023, with median wages 40% higher than the national average at £48,700. And notably, 88% of aerospace jobs are located outside London, aiding regional economic growth.
13 years’ worth of work worth £257bn in the pipeline
As of today, the UK aerospace sector faces a substantial backlog of 16,000 aircraft orders, equating to roughly 13 years of production and worth a potential £257bn to the UK, according to ADS’ last estimates. This figure reflects the cyclical nature of civil aerospace, with peaks anticipated every few years. We’re reaching an order peak cycle, and while new orders are trickling in, the focus remains on delivering the backlog to stimulate further demand.
However, the pandemic disrupted production schedules, causing delivery delays and extending the average backlog from ten years pre-2020 to 13 years currently. However, many airlines refrained from large-scale cancellations to avoid losing their queue positions, maintaining high demand for new aircraft. This backlog represents a unique challenge and opportunity for the sector. Few industries can boast 13 years’ worth of secured work – it’s something to be celebrated.
Headwinds on the radar
Despite a significant backlog of work, UK aerospace, like most manufacturing verticals, faces a number of challenges.
Skills shortages: One of the most pressing challenges for the sector is the skills shortage. Despite employing 6,000 apprentices annually, the demand for a skilled workforce remains unmet so the availability of critical workforce is still a major challenge.
Companies are increasingly offering wage premiums to attract and retain talent, adding to operational costs. A coordinated effort is required to make aerospace an industry of choice for young professionals and to create a robust pipeline of engineering talent.
Supply chain and financing issues: The pandemic and geopolitical tensions have exacerbated supply chain constraints. Inflation, raw material shortages and higher operational costs have made scaling production rates a daunting task.
Additionally, access to finance remains a significant hurdle for small and medium-sized enterprises (SMEs). Higher borrowing costs and banks’ reluctance to lend to suppliers exposed to both civil and defence sectors are creating bottlenecks and uncertainty.
The aerospace sector’s capital-intensive nature requires consistent investment in working capital and production capacity. However, many companies struggle to balance these investments while navigating fragile margins.
Sustainability goals: Achieving net zero emissions by 2050 is a top priority for the aerospace sector. While the industry has made significant strides in improving aircraft efficiency and developing sustainable aviation fuels (SAFs), infrastructure and regulatory support lag behind. Without sufficient fleet penetration of zero-emission aircraft and supporting infrastructure, the full impact of these innovations may not be realised.
Addressing the challenges through government-industry collaboration
To overcome these challenges, the aerospace sector is working closely with the government and stakeholders. Some of the key initiatives include:
Access to finance: ADS is advocating for government-backed funds to address working capital requirements. We’re urging the government to be a cornerstone investor in financing solutions, ensuring SMEs can meet production demands.
R&D and innovation: Continued investment in R&D is essential for maintaining global competitiveness. The extension of the Aerospace Technology Institute Programme to 2030 is a welcome step, but long-term commitments are needed to align with the sector’s 15-20 year investment cycles.
Skills development: ADS is launching campaigns to attract young talent to SMEs, emphasising the career opportunities within aerospace. Collaboration with educational institutions is also critical to creating a skilled workforce.
Sustainability infrastructure: The government must accelerate investments in infrastructure to support zero-emission technologies, including hydrogen fuel and SAFs. Aerospace emissions are only 0.6% of global emissions, but our technologies have global implications.
A sector poised to take-off
Despite the challenges, the UK aerospace sector is poised to take-off and realise further growth. Increasing production rates, investments in advanced air mobility and the development of novel technologies like liquid hydrogen and non-CO2 emission reduction techniques present exciting opportunities.
The aerospace industry’s resilience during the pandemic underscores its potential to adapt and thrive. Companies are finding innovative ways to streamline operations and improve efficiency, setting the stage for sustained growth.
We’re optimistic about the future, but the government’s support is crucial in unlocking our full potential. With strategic investments and collaborative efforts, the UK aerospace sector is well-positioned to maintain its leadership in global aviation and contribute to the country’s economic recovery.
ADS has just released its full 2024 figures. And while the headline is that aircraft orders declined by 62% year-on-year, demand remains resilient, with a strong order backlog of 15,818 aircraft worth £257bn to the UK.
It’s also worth noting that Aimie Stone, Chief Economist at ADS, highlighted that the large discrepancy in the annual figure is in part related to the extraordinarily large December 2023 monthly orders of 1,193.
Looking towards the horizon
We should keep an eye on developments in the US as Donald Trump’s second presidency unfolds. Trump previously showed his willingness to impose tariffs on exports to the US and the rhetoric this time around shows no signs of that changing. As a result, we’ll likely see a blanket policy approach on tariffs, which could cover aviation and aerospace supply chains. This will put aerospace manufacturing businesses that rely on exporting and importing goods across borders under increased pressure.
Such tariffs could also potentially drive up the cost of assembly equipment and materials that are imported by the US/exported to the US. When you consider that a significant portion of components for Boeing and Airbus jets (and their engines) assembled in the US come from abroad, including the UK, the impact of tariffs could be substantial.
It’s a similar story when it comes to sustainability, with Trump and his allies less supportive of green subsidies and agreements to offset the aviation industry’s carbon emissions. Indeed, Trump recently signed an executive order directing the US to withdraw from the UN’s Paris Agreement once again.
The biggest direct impact could come from the US also withdrawing from the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), administered by the International Civil Aviation Organisation (ICAO).
Under CORSIA, carbon dioxide emissions from international flights above 85% of 2019 levels are offset by airlines and other aircraft operators to stabilise the industry’s impact while greener options are explored further.
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