Exceptionally high levels of inflation (10 percent plus) and the soaring interest rates (4.5 percent) imposed in a bid to suppress them are the biggest single headache facing UK aerospace and defense companies, according to the country’s trade association ADS. The resulting squeeze on finances is impeding the ability of companies to make the investments needed to overcome continuing supply chain logjams that, in turn, are constraining output and therefore revenues, the group’s CEO, Kevin Craven, confirmed at a press briefing this week to present a summary of the British industry’s performance in 2022. Nonetheless, the numbers are generally encouraging, reflecting progress last year after the Covid-blighted 2021. In the aerospace sector, revenues grew by 20 percent from £22.4 billion ($27.8 billion) to £27 billion, while exports increased in value from £15.2 billion to £18.6 billion and the value added to the UK economy climbed from £8 billion to £10.9 billion. Perhaps surprisingly given rising international tensions, the defense sector numbers showed a slight decline in revenues and exports at £22.8 billion and £7 billion respectively. However, companies involved in the security and resilience sector, which ADS also represents along with space activities, showed impressive growth, boosting revenues to £23 billion. “There is no doubt that investment is a challenge because to achieve production rate ramp ups companies know they need to invest in automation and new tooling, but the cost of capital has gone up significantly,” Craven told reporters at a May 16 press conference. Meanwhile, in view of the fact that much of the supply chain crisis boils down to skills shortages, the aerospace sector employed about 3,000 fewer direct employees in 2022 compared with 2021. On top of that, the number of apprentices also dipped over this period by 300, to 5,500. Across the aerospace, defense, security, and space sectors of the ADS membership, there are more than 10,000 currently unfilled vacancies, some of which resulted from reductions in aerospace headcount inflicted by the unforeseen Covid-induced dip in demand in 2020 and 2021. ADS said that the recruitment of apprentices and graduates continues to be a high priority. It pointed out that, in part due to more flexible working arrangements, more skilled workers now serve in consultancy roles and not all included in the official statistics.
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