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Sky’s the limit for harnessing the UK’s aerospace potential

17 Dec 2019

Malcolm Scott, Corporate Development Officer at the Aerospace Technology Institute, on the hidden value that the UK aerospace industry can offer to boosting economic growth

The Aerospace Technology Institute is delighted to offer its first blog to CaSE. We were created almost six years ago by the UK government and commercial aerospace industry to create a transformational technology strategy for the sector, and to usher in a raft of new R&D activity. The government committed £150m per year up to 2026, matched by industry. Now, the research portfolio we support is worth some £2.6bn, consisting of over 250 projects and around 250 organisations – including over 30 universities. 

The government aims to boost the economy by supporting a strong, productive and growing sector.  But what is the actual value of a programme like this?

The UK aerospace industry can be measured in many ways – £35bn turnover annually, virtually all exported; annual gross value added of some £10bn; 120,000 employees including 3,000 apprentices; and the value to local economies through significant clusters in areas like the South West, the North West, the East Midlands, and Northern Ireland.  Aviation is growing at around 5 per cent per year, and the next decades are expected to see a huge increase in innovation as aerial mobility transforms itself to reduce significantly its environmental impact and exploit new possibilities created by autonomy and data – a world of drone deliveries and urban air taxis. 

These figures are impressive enough.  But crucially there is a large additional hidden value driven by technology spillovers. The existence of these is widely recognised. Examples spring readily to mind such as Teflon and the laser.  But what is the true extent of them and how much are they worth?  A recent study by the ATI and Fathom Economics looks at spillovers from aerospace to other industries and reveals that they are essential to understanding the overall impact of R&D.  In summary, other sectors of the economy benefit more than four times as much as aerospace itself – whilst aerospace enjoys returns of around 15 percent from its R&D investments, other sectors, chief amongst them automotive, ships, rail and other transport, rubber and plastics, machinery and equipment, and scientific R&D services,  together receive a 70 per cent return.

These results come from data spanning several decades from seven countries – the US, Canada, UK, France, Germany, Spain and Italy – which together cover 80 per cent of the global civil aerospace market. They establish a long-run statistical relationship between the stock of aerospace R&D and the output in other sectors. Examples of specific technologies include composite materials, metal alloys, and measuring technologies. And of course spillovers do not just occur in one direction – whilst the study did not look at “spill-ins” to aerospace, we are probably a net beneficiary from the electronics industry, and we expect to learn a lot from the automotive sector about electrification for example.    

This has important messages for government, industry and academia. Spillovers matter for the economy as innovation is critical to growth and productivity.  The results suggest we should promote the mechanisms that encourage spillovers such as interactive supply chains, universities/catapults, active dissemination, patents, people movement and networks. They also suggest the mix of industries in an economy could influence how effectively the economy can process spillovers. They are certainly influencing how we operate at the ATI as we redouble our efforts to work with others across the economy.

And coming back to the question of the value of the ATI programme, we expect it to deliver £114bn by 2035, including spillovers.  

The Aerospace Technology Institute is an organisational member of CaSE. You can view all of our members here.

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