Thriving British aviation sector confronts price of Brexit

Bloomberg

As monuments to Britain’s past glories go, it’s hard to beat the Royal Air Force Club. Housed in a handsome stone building in London’s tony Mayfair district, the facility for current and former RAF personnel is stuffed with oil paintings of great moments in British aviation, busts of accomplished pilots and historic treasures like the first flight-test report for the legendary Spitfire fighter.
Newer displays at the complex depict jets such as the Tornado, Jaguar, and Typhoon, all products of pan-European defense co-operation. Now, few aircraft are actually built in the UK. What does fuel 120,000 UK’s aerospace jobs: supplying components and systems for planes assembled elsewhere.
Those relationships are on the mind of Colin Terry. The chairman of Boxarr Ltd., a maker of software for managing complex engineering projects, understands better than most the value of continental connections to the UK’s vibrant aerospace and defense sectors. That chain risks being upended by the British decision to leave the EU and the trade arrangements that the bloc makes possible, which have helped companies from tiny Boxarr to continental corporate giants like Airbus SE.
“There are a huge number of planes flying around all over the world with lots of British kit in them, and that’s the product of these very integrated networks,” Terry said. “We need to not take our eye off the ball.”
The uncertainty of Brexit is being felt at Boxarr, where revenue growth is lagging behind goals as customers hesitate about committing to long-term spending in a volatile economic environment. Revenue is likely to reach about $927,000 for 2017, well behind the 1 million pounds the company had targeted, according to CEO Alasdair Pettigrew.
A former RAF Air Marshal and ex-chairman of defense group Meggitt Plc, Terry signed on at Boxarr earlier this year, impressed by the ability of the company’s software to model complicated processes of the kind he oversaw in the military. The Bristol-based startup supplies customers including Airbus, Rolls-Royce Plc and Safran SA..
Almost 18 months after the UK voted to leave the EU, few of the dozens of associated questions have been resolved. How much will Britain have to pay to cover EU employee pensions and future budget costs? How freely will EU citizens be able to live and work in the newly separate country? What will become of dozens of joint defense arrangements that include efforts in intelligence, space launches and military procurement?
Airbus, which has a site in Bristol about six miles from Boxarr’s office, is an example of the potential effects of a rupture with the EU. Planes manufactured by the maker of the A380 superjumbo wouldn’t fly without British efforts—literally, since wings for its jets are assembled in Wales. Other key components and R&D ideas come from the 4,000-employee Bristol plant. Airbus told the UK parliament that its operations are based on a four-country model that “relies on the seamless flow of goods, people, and intellectual property across France, Germany, the UK and Spain.” If Britain became costlier, Airbus might decide to move wing production to China, UK Senior Vice President Katherine Bennett told lawmakers.