U.K. Aerospace Ramps Up Push for Targeted Government Support

(Bloomberg) -- The U.K. aerospace industry is escalating calls for targeted aid to a sector that’s long stood at the core of the country’s industrial fabric but is now at risk because of the coronavirus.

“We’re going to see tens of thousands of jobs lost over the coming weeks and months because the market we’ve been operating in has changed out of all proportion,” said Paul Everitt, chief executive officer of national aerospace trade body ADS Group. “What everybody is looking for is an understanding of how the government will look to support not just the aerospace sector but also the wider economy.”

European planemaker Airbus SE has also waded into the fray, with CEO Guillaume Faury telling the Financial Times that the company’s U.K. employees face “more permanent” job cuts than in France or Germany. He called on the U.K. to “recommit” to its aerospace sector through support measures.

Airbus employs 13,500 people in the U.K. and the majority of wings for the company’s aircraft are designed and built in the country’s plants at Filton in England and Broughton in Wales. The Airbus chief has warned the company needs to act fast on job cuts as demand for aircraft shrinks and has said he now expects to make final decisions by the end of July.

Furlough Plan

The U.K., like other countries, has made furlough programs available to allow companies to temporarily lay off staff and bring them back when demand picks up. It is also offering loans to struggling firms with backing from the Bank of England. It’s also offered loan guarantees to airlines and other companies, and has said it would look at offering targeted support where needed but has so far avoided any sector-wide deals.

Yet that pales against France, which announced a rescue plan worth $17 billion for its aerospace sector earlier this week, including investment, payroll subsidies and credit guarantees to cushion the damage wrought by the coronavirus pandemic.

The country’s finance minister said France was “not in the business of being the village idiots” who would sit back and allow hundreds of thousands of jobs to disappear.

In a statement, the U.K. Treasury said the government has provided more than 6.5 billion pounds ($8.2 billion) to support businesses and protected 8.9 million jobs under a program set to run until October.

“We will continue to look at how to adjust our support in a way that ensures people can get back to work, protecting both the U.K. economy and the livelihoods of people across the country,” the Treasury said.

France, Germany

The French package suggests a desire to keep work in France that could have implications for Britain’s aerospace prospects, said ADS Chief Everitt. “I don’t think we can ignore that they are making a very strong pitch for safeguarding activity in France,” he said.

ADS, which also represents the defense, security and space industries, is calling on the government to revisit its recently introduced quarantine that airlines have challenged in court, claiming it undermines the industry. The trade group also wants the U.K. to bring forward defense and space contracts, invest in research and development and scale up some existing projects.

In Germany, the government has earmarked 1 billion euros ($1.1 billion) for modernizing its aircraft fleet and a further 7 billion euros for a national hydrogen strategy. The government has extended its furlough scheme, while a package of aid for Deutsche Lufthansa AG worth 9 billion euros envisions that some plane purchases will continue.

Jobs at Risk

Around 1.2 million U.K. workers depend on the aerospace and airlines industries for their jobs, according to the Unite union. Rolls-Royce Holdings Plc, which makes engines for long-haul aircraft, plans to cut 9,000 positions worldwide, including 3,000 roles in the U.K., while IAG SA’s British Airways aims to cut as many as 12,000 jobs to preserve cash and cope with a slow recovery.

The U.K. economy shrank a record 20.4% in April, meaning almost 18 years of growth has been effectively wiped out in two months and adding to pressure for additional government stimulus.

“If you don’t have bold government intervention in terms of supporting a recovery strategy for aviation and aerospace, what we’ll find is the French and the Germans and the Americans and the Chinese will march ahead,” said Unite representative Rhys McCarthy. “We’ll come out of the recession with a much smaller market in terms of aerospace.”

©2020 Bloomberg L.P.

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