THE IMPACT OF AIRBUS ON THE UK ECONOMY - MARCH 2022
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The impact of Airbus on the UK Economy TABLE OF CONTENTS Foreword2 Executive summary4 1. Introduction10 1.1 Airbus in the UK 10 1.2 Motivation for the report 11 2. The economic impact of Airbus in the UK16 2.1 Direct impact 16 2.2 Indirect impact 19 2.3 Induced impact 20 2.4 Total impact 22 3. Airbus’ UK operations in 2021 and beyond26 3.1 Airbus’ activity in the UK in 2021 26 3.2 Looking to the future 27 3.3 Airbus’ recent investments in the UK 28 4. Airbus across the UK32 4.1 Procurement and wage spending 32 4.2 Economic impact across the UK 34 5. The economic impact of Airbus’ divisions40 5.1 Commercial Aircraft 40 5.2 Defence and Space 42 5.3 Helicopters 44 6. Airbus’ catalytic impact48 6.1 Research and development 48 6.2 Upskilling 52 7. Impact of Airbus’ sustainability commitments58 7.1 Social responsibility 58 7.2 Environmental responsibility 66 8. Conclusion72 Appendix: Methodology74 MARCH 2022 1
The impact of Airbus on the UK Economy FOREWORD Airbus pioneers sustainable aerospace for Despite the headwinds we have faced in 2020 a safe and united world, helping to connect and 2021, we are recovering from the demand countries and communities across the globe. shocks caused by COVID-19. Indeed our While we are an international business, it is continued investments throughout the crisis vital that we never lose sight of the impact have ensured we retain the critical knowledge our activities have on the countries and base required to fulfil our long-term strategic communities in which we operate. objectives. Because of prudent management the company is well placed to grow again. Fundamental to our operations is the relationship Airbus enjoys with its four home Central to this recovery are our UK operations: nations. The mutually beneficial nature of this Our £250 million investment in 2021, relationship is exemplified by this report about purchasing the land our Filton and Broughton our activities in the United Kingdom. sites operate on, demonstrates this. In 2022, with the market revival ongoing, we remain a The work by Oxford Economics shows that vital part of the UK’s economic, societal and with more than 25 sites spread across the environmental landscape. country, spanning the Commercial Aircraft, Defence, Space and Helicopter sectors, our We are the largest civil aerospace company presence in the UK contributes to the UK’s in the country, the biggest civil aerospace aerospace sector being the third largest in exporter, Britain’s largest space company, the Europe and fourth largest globally, building on biggest supplier of large aircraft to the Royal a proud 100-year British aviation heritage. Air Force and responsible for around 50% of the UK’s civil helicopter fleet. The COVID-19 pandemic has had a severe negative impact on the global economy with Although our total contribution to UK GDP companies around the world having to adapt to fell as a result of the pandemic, we remained significant levels of market volatility. In addition, responsible for £5.6 billion of total economic the aviation sector has been particularly hard contribution to the UK in 2020, supporting hit by travel restrictions put in place to combat 86,400 jobs across the country, many in the virus, dealing a significant blow to our economically deprived areas. We also pay our customers and partners. employees wages that are around 60% higher than the national average. We are underwriting As a result, our own business has had to adapt our future through our links with dozens of UK to the reduced demand for our products universities and research institutions, along with and services by scaling back the size of investing heavily in young people, employing our workforce and our Commercial Aircraft more than 1,100 apprentices during 2019 and activity. However as this report clearly shows, 2020 alone. the company did not pass on the full degree of the financial impact of the pandemic to our employees or the wider UK economy. Furthermore our workforce adjustments in the UK because of COVID-19 did not include compulsory redundancies. 2
The impact of Airbus on the UK Economy We are steadfast in our commitment to We recognise that high productivity, delivered the UK, and we continue to invest in our through sustainable business practices, workforce, in research and development, and investments in upskilling and efficient use of in the technologies that give the UK strategic capital, produces high quality and in-demand advantage. We do all this while playing a vital products that our global customers desire. role in limiting human-made carbon emissions Indeed in 2019 each Airbus employee generated and providing advanced sustainable aviation £155,000 in contributions to UK GDP. Our high solutions that will benefit the entire planet. productivity and balanced order backlogs With our ZEROe programme we are proud continue to be catalysts for secure sustainable to be the world’s first aerospace company economic growth in the United Kingdom. to pledge to put a zero emission aircraft into commercial service by the mid-2030s and We are proud of these achievements. we continue to promote the acceleration of sustainable aviation fuel (SAF) development, Our strong and enduring relationship with production, and consumption. the United Kingdom is a vital element in Airbus’ ongoing success. We look forward to It is important however to stress that numbers continuing to deepen our ties over the years only tell part of the story when it comes to and decades to come. Airbus’ relationship with the UK; nearly half of the world’s air passengers fly on aircraft with wings that were manufactured at our site in Broughton; the A400M military transport aircraft played a pivotal role in the evacuation of people from Afghanistan thanks to the efforts of our UK- based teams; and our helicopters are used by the British Air Ambulance and Police Air Service, saving lives day in, day out. Our success also Guillaume Faury, depends on our productivity and this resonates Chief Executive Officer Airbus with the core tenets of the UK’s Levelling Up plan, the Plan for Growth, the National Space Strategy and the Defence and Security Industrial Strategy. Beyond our operations in aerospace, this report illustrates the critical significance of our exports in delivering on the UK’s Global Britain ambitions. Our global operations and close ties among our home nations means that in 2019, our £6.1 billion of UK exported products translated into £1 in every £60 of goods John Harrison, exported from the UK. General Counsel and UK Chairman Airbus 3
The impact of Airbus on the UK Economy EXECUTIVE SUMMARY Airbus is the world’s leading aerospace manufacturer. With over 86,400 125,000 employees, and having delivered more than 13,800 commercial jet aircraft to date—with more than 7,000 on order— its significant contributions to the aviation industry are set to continue. Jobs supported across the UK The UK is classified as an Airbus home nation and plays an in 2020. This integral role in its global operations. With more than 25 sites is compared to spread across the country—spanning the Aerospace, Defence, 128,300 in 2019. Security, and Space sectors—its presence in the UK contributes to the UK’s aerospace sector being the third largest in Europe and fourth largest globally. This study investigates the impact of Airbus on the UK economy. It considers Airbus’ own operations, the economic activity supported by its procurement spending, and its payments to employees. It then explores how this economic footprint creates social value for communities across the country. The COVID-19 pandemic created vast challenges for the aviation industry. The number of global air passengers travelling in 2020 was 60% lower than in 2019, by far the greatest disruption the industry has ever experienced. This had a substantial impact on Airbus’ commercial aircraft business in 2020, forcing the company to move quickly to reduce production levels by 40% to reflect a drop in demand. We therefore present results for Airbus’ contribution to the UK economy in 2020 and the pre- pandemic, ‘normalised’ year of 2019. A SUMMARY OF THE KEY FINDINGS OF THE REPORT £1 in every £92 of goods exported Airbus’ UK operations generate significant revenues. In 2019, the company earned £6.8 billion in revenues, £5.5 billion of which was generated by its Commercial Aircraft division, £1.1 billion by its Defence and Space division, and in excess of £120 million from the UK from its Helicopters division. In 2020, reflecting the impact of the were products COVID-19 pandemic, Airbus generated £4.2 billion in revenues manufactured by from its UK operations. Airbus’ UK operations continued to earn Airbus in 2020. significant revenues in 2021, totalling £4.4 billion. This compares to The vast majority of this revenue is generated by exports. In 2019, £1 in every £60 in 2019. Airbus earned £6.1 billion in revenues (or 88% of total revenues) from customers overseas—a significant contribution to the UK’s balance of payments. In fact, £1 in every £60 earned by UK firms from goods exported were products manufactured by Airbus. 4
The impact of Airbus on the UK Economy Airbus supports a sizeable contribution to UK GDP. We estimate £5.6 billion that Airbus supported a total contribution of £9.3 billion in 2019. This is the sum of three channels of impact. Some £2.0 billion was generated by the company itself—its direct impact. Airbus’ sizeable procurement spending with UK suppliers stimulated a further £4.4 billion contribution to GDP—its indirect impact. Total contribution And the payment of wages by Airbus, and the firms in its supply to UK GDP chain, supported a further £3.0 billion contribution to GDP—its supported by induced impact. Airbus in 2020. This compares to In 2020, Airbus’ total contribution to UK GDP declined to £9.3 billion 2019. £5.6 billion in the wake of COVID-19. The contribution it generated itself was £0.5 billion, as profits were impacted by the COVID-19 pandemic. Its indirect impact supported a £2.9 billion contribution to GDP, lower than the previous year owing to reduced procurement spending. The wage-induced spending attributable to Airbus supported a further £2.1 billion contribution to GDP. Airbus supported 128,300 jobs across the country in 2019. The company directly employed 12,600 people at more than 25 sites sites across the country. A further 73,800 jobs were supported along its UK supply chain by its procurement spend. The wage- induced spending of its employees and those employed in its supply chain sustained a further 41,800 jobs. In 2020, the number of jobs Airbus is estimated to have supported fell to 86,400. The company’s own employment remained fairly stable at 12,100 employees, but a decline in its procurement reduced the supply chain jobs to 45,900, with a further 28,400 jobs sustained through wage-induced spending. Airbus’ direct employment fell to 10,800 in 2021, in response to the COVID-19 pandemic—without the need for compulsory redundancies. Airbus employees are highly productive. In 2019, the average 2.5 times gross value added per head produced by Airbus workers was £155,000. This was 2.5 times the national average, and 1.5 times the air and space manufacturing average. Owing to the impacts of the COVID-19 pandemic, the average gross value added per head produced by Airbus workers was £44,400 in 2020. Airbus employees were 2.5 times The Commercial Aircraft division was most impacted by the more productive COVID-19 pandemic. Its total contribution to UK GDP was £7.5 than the national billion in 2019, and £3.7 billion in 2020. The Defence and Space average in 2019. division increased its total contribution to the UK economy, rising from £1.6 billion in 2019, to £1.7 billion in 2020. Similarly stable, the Helicopters division contributed £212 million to UK GDP in 2019, and £210 million in 2020. 5
The impact of Airbus on the UK Economy This economic impact is spread across the UK. Airbus supports 45% thousands of jobs in each of the UK’s nations and regions. Most jobs were supported in the East Midlands—where Airbus spends the largest share of its procurement (45% in 2019)—with 21,000 jobs. Some 18,500 jobs were supported in the South West, and The share of 14,300 across Wales. Airbus’ procurement spending in the Airbus contributes to the levelling up agenda by spending a 10% most deprived disproportionate amount in deprived areas. Some 45% of its UK local authorities. procurement (£2.6 billion) in 2019 was with suppliers based in the 10% most deprived local authorities as identified by the Index of Multiple Deprivation. More than half of Airbus’ procurement is with businesses in local authorities identified as high priority areas for the Government’s Levelling Up Fund. Airbus supports local communities by paying high wages to its employees across the country. The wages it pays are on average 60% higher than the national average. In 98% of the parliamentary constituencies in which its employees reside, Airbus pays above the constituency average. Airbus has a wide impact on the UK by enhancing its productive potential. It invested £352 million in research and development in 2019, and £295 million in 2020, equivalent to 5.2% and 7.1% of its revenue in each year, respectively. There is vast collaboration involved in this: the company works closely on projects with the £3.9 billion Aerospace Technology Institute (ATI), dozens of UK universities, and other research institutions. 600 Airbus is investing in the skills of the UK workforce. In 2019 and 2020 it had 532 and 576 apprentices, respectively, across its sites. This is a significant investment in the upskilling of young Nearly adults, especially given the nationwide decline in apprenticeships in 2020. Around one-in-four apprentices in the Flintshire local The average authority, work and train at Airbus’ Broughton site. number of apprentices at Finally, the global aviation industry produces around 2% of all Airbus in 2020. human-induced CO2 emissions.1 Airbus is addressing this with UK research and development projects, which form a major part of its global decarbonisation plans. Its research into sustainable aviation fuels is centred in the UK. From its site in Filton near Bristol, it is establishing how more environmentally friendly fuel systems can be rolled out across the industry; this includes partnering with universities and building new learning platforms for hydrogen fuels. At its Filton and Broughton sites, Airbus is also exploring how future wings can further improve efficiency and reduce emissions both through the build process and in operations via its Wing of Tomorrow programme, the company’s largest ongoing research and development project. 6 1 ATAG, ‘Facts & figures’
The impact of Airbus on the UK Economy THE ECONOMIC IMPACT OF AIRBUS IN THE UK TOTAL ECONOMIC IMPACT 2019 2020 Contribution to GDP UK jobs supported Tax revenues £9.3 bn 128,300 £2.0 bn £5.6 bn 86,400 £1.4 bn Every £1 in gross value added £1 in every £400 collected generated in 2019, supported a by HMRC was attributable to further £3.80 in the UK economy. Airbus activity in 2020. PRODUCTIVITY UK REVENUE £155,000 average gross value added £6.8 bn earned in 2019 employee contribution to GDP in 2019, £4.2 bn earned 2.5 times the national average. in 2020 UK SPENDING EXPORTS £5.8 billion spent with UK suppliers in 2019, compared to £3.8 billion in 2020. 3 in 10 of Airbus’ UK suppliers 88% of its UK revenue are SMEs. was earned from exports 45% of Airbus’ procurement in 2019 was in 2019, and 82% in 2020. in the 10% most deprived local authorities. £1 in every £60 of goods In 2020, the average wage paid by Airbus exported from the UK in was 1.6 times the national average. 2019 were Airbus products. 8
The impact of Airbus on the UK Economy AIRBUS’ UK OPERATIONS IN 2021 AND BEYOND 14% growth 7,000 outstanding in revenues commercial in 2021. aircraft orders. THE ECONOMIC IMPACT OF AIRBUS’ DIVISIONS Commercial Defence Helicopters Aircraft and space £7.5 billion GDP £1.6 billion GDP £212 million GDP £3.7 billion GDP £1.7 billion GDP £210 million GDP 104,800 jobs 20,400 jobs 3,200 jobs 64,200 jobs 18,700 jobs 2,900 jobs £1.7 billion tax £320 million tax £33 million tax £1.1 billion tax £330 million tax £29 million tax CATALYTIC IMPACT AND SUSTAINABILITY £352 million spent on UK R&D in 2019, Developing zero- £295 million in 2020. emission commercial aircraft by 2035. 5.2% of Airbus’ revenue invested in R&D in 2019, compared to 7.1% in 2020. 400 tonnes of CO2 emissions saved in £129,000 spent on each of Airbus’ three months by 576 apprentices in 2020. Broughton Beluga flights using 35% SAF. 187,000 interactions with young people at Broughton and Filton sites. All Airbus commercial aircraft and helicopters 13,000 ventilators produced by 700 are certified to fly with Airbus employees in three months. 50% SAF. 9
The impact of Airbus on the UK Economy 1. INTRODUCTION Airbus is a global leader in 1.1 AIRBUS IN THE UK the aerospace industry. It is among the largest aerospace Airbus is a multinational division. It is the biggest companies in the world, with company, operating in 180 supplier of large aircraft to over 125,000 employees, locations around the world. The the Royal Air Force. The and more than 12,000 direct UK is however an Airbus home A400M Atlas and A330 MRTT suppliers globally. Its aircraft nation and plays an integral Voyager aircraft, supported are flown across the world, role in its operations.3 Each directly by Airbus’ Defence with orders increasing six-fold Airbus division—Commercial and Space division and since 2000. Indeed, Airbus Aircraft, Defence and Space, the Airbus led consortium has delivered over 13,800 Helicopters—has activities in AirTanker, respectively, commercial jet aircraft to the UK, with more than 25 sites provide the backbone of the more than 450 customers, spread across the country. Its country’s tactical and strategic with a further 7,000 aircraft presence in the UK contributes airlifting capabilities and on order.2 Owing to the to the UK’s aerospace sector Air-to-Air Refuelling (AAR) popularity of Airbus’ latest being the third largest in capabilities.7 The company generation of aircraft, which Europe and fourth largest has owned and operated the benefit from significant globally.4 The strong ties UK’s secure military satellite reductions in fuel burn and to Airbus’ multinational communications fleet for emissions when compared to operations in Europe and more than 18 years, provided previous generation aircraft, beyond are in keeping with the more than 250 satellite its significant contribution to Government’s Global Britain communication (SatCom) the aviation industry is set international ambitions.5 terminals to the Ministry of to continue. Defence, and delivers the UK’s Airbus is the largest commercial Defence fixed network and in aircraft company in the UK theatre-networks, with more and its biggest civil aerospace than 130 military campaign exporter. The majority of wings medals awarded to Airbus fitted to Airbus’ commercial employees, in recognition aircraft are engineered and built of their support to the front in the UK. Indeed, nearly half line. Airbus’ Cyber Security of the world’s air passengers business, based in Newport fly on Airbus wings designed in South Wales, protects the in the South West (Filton) and Ministry of Defence’s vast manufactured in North Wales secure communications (Broughton). network at home and overseas. It also delivers NATO’s However, Airbus’ footprint in Deployable Communication the UK extends far beyond its and Information System, and commercial aircraft. It is also is one of a small number of Britain’s largest space company, sovereign suppliers for high- with operations spread across grade cryptography. the UK—it has worked on missions including the ExoMars In addition, the company also rover and the Solar Orbiter.6 represents around 50% of the UK’s civil helicopter fleet, Airbus contributes to the UK’s providing aircraft and support National Security Objectives to the Air Ambulance, Police Air with its sizeable Defence Service, and Ministry of Defence. 2 Airbus, ‘Orders and deliveries - Commercial Aircraft’ 3 Airbus defines its home nations as France, Germany, Spain and the UK 10 4 Airbus Defence and Space Group statistics 5 HM Government, (2019), ‘Global Britain: delivering on our international ambition’ 6 Airbus (2016), ‘ExoMars - The heat is on!’; Airbus (2020), ‘Solar Orbiter is ready for its close-up with the Sun’ 7 Airbus, ‘Airbus in the United Kingdom’
The impact of Airbus on the UK Economy 1.2 MOTIVATION FOR THE REPORT The COVID-19 pandemic With an economic footprint • Chapter 3 provides an early created vast challenges for the spread across the UK, Airbus indication of the revenue aviation industry. The number supports societal goals. As earned and employment of global air passengers such we address the wider for Airbus’ UK operations in travelling in 2020 was 60% impact of Airbus’ footprint on 2021. We then consider how lower than the previous year.8 UK society. This includes its the company’s economic This had a major impact contribution to the upskilling impact will evolve, including on the demand for new of young people across the with its recent investments. aircraft and businesses like country, the advancement Airbus which manufacture of innovative disruptive • Chapter 4 outlines Airbus’ impact in communities them. With that in mind, this technologies with its across the UK, considering report seeks to provide a research programmes, and its how its activities are comprehensive assessment of integration within many local supporting the ‘levelling up’ Airbus’ contribution to the UK communities and universities. of the UK economy. in a ‘normal year’, 2019, and investigates what happened This report also captures • Chapter 5 investigates the in the year of the pandemic, Airbus’ environmental separate contributions to 2020. We also look to present impact in the UK. It the UK economy of Airbus’ early indication of Airbus’ considers two aspects: how divisions—Commercial operations in the year 2021. Airbus is managing the Aircraft, Defence and Space, environmental footprint and Helicopters. Airbus has a global supply of industrial operations; chain, it stimulates economic and how its product • Chapter 6 analyses how Airbus boosts the activity around the world. This development is contributing productive potential of the study uses a global model to the decarbonisation of the UK economy through its to estimate the impact of industry. R&D and upskilling of staff. the company’s spending and how it feeds back into the The report is structured as • Chapter 7 assesses the UK economy. follows: impacts of the company’s social and environmental With a sizeable presence in • Chapter 2 explores the sustainability commitments economic contribution communities throughout the in the UK. Airbus made to the UK UK, Airbus’ impact reaches all of the UK’s nations and economy in 2019 and • Chapter 8 concludes our 2020, through the GDP, findings. regions. To explore how Airbus employment, and tax is contributing to these local revenues it supported. areas and the ‘levelling up’ agenda across the UK, the impact analysis herein have been undertaken at this local level. 8 ICAO, (2022), ‘Effects of Novel Coronavirus (COVID-19) on Civil Aviation: Economic Impact Analysis 11
The impact of Airbus on the UK Economy INTRODUCTION TO ECONOMIC IMPACT ANALYSIS This report analyses Airbus’ economic impact We analyse these channels of impact using across three core channels. These are the: three core metrics: • Direct impact, which is the economic • Employment (measured on a headcount activity that Airbus itself generates at its basis); UK facilities; • Gross value added contribution to UK • Indirect impact, or supply chain impact, GDP; and, that occurs because Airbus buys inputs of • Tax receipts generated by the UK activity goods and services from UK businesses, and employment supported by Airbus. and Airbus’ international suppliers (or businesses in their supply chain) buy While most economic impact studies assess inputs of goods and services from UK these effects based only on spending that businesses; occurs within the country of interest, this • Induced impact, or wage-financed report goes further, to assess the impact spending impact, which is the economic of Airbus’ global activities. This is a more activity stimulated from both Airbus comprehensive approach that is suited and Airbus’ suppliers’ wage payments to to companies with a global footprint, like employees. Airbus. A detailed methodology discussion is in the appendix to this report. Fig. 1: Illustrating the channels of economic impact DIRECT Airbus employs lots of staff. Its operations generate IMPACT GDP and tax for the authorities. It also spends money with INDIRECT suppliers who employ staff, IMPACT generate GDP and pay taxes. They use other suppliers in turn. Employees (including of the suppliers) spend their INDUCED wages in the wider IMPACT economy, generating more GDP, jobs and tax revenues. Added together, these three TOTAL effects—direct, indirect, IMPACT induced—comprise the total economic impact of Airbus. 12
The impact of Airbus on the UK Economy GLOSSARY AIRBUS DIVISIONS Direct impact: The impact of Airbus at its Airbus is not a single entity, but rather a operational sites in the UK. collection of companies across the world operating under the Airbus umbrella. Employment: The number of employees and Included in this study are those located self-employed. in the UK: Airbus Operations, Airbus Defence and Space, Airbus Helicopters Gross Domestic Product (GDP): The most UK, Surrey Satellite Technology Limited commonly used metric to assess the health (SSTL), NavBlue. Airbus also owns 29.5% of the UK economy. It is often used to of AirTanker Services Limited and 46.1% determine if the economy has entered or of AirTanker Limited. In compiling the exited a recession. It is equal to the gross aggregate results, we consider only the value added of all firms in the UK economy, Airbus’ share of these companies’ total after minor adjustments for taxes and impact, factoring in the change in ownership subsidies. structure that occurred in November 2020. Gross Value Added (GVA): The value a Fig. 2: Airbus’ divisions in this report company generates through its activities. It equates to a company’s revenue minus Commercial Defence and Helicopters the cost of bought-in goods and services Aircraft Space used up in the production of that revenue. Airbus Airbus Defence Airbus The sum of gross value added across all Operations and Space Helicopters companies in an economy is equal to GDP, after minor adjustments for taxes and NavBlue SSTL subsidies. AirTanker (Airbus’ share) Indirect impact: Economic activity stimulated by Airbus’ purchases of inputs of goods and services from its supply chain. This report excludes MBDA—a joint venture between Airbus, Leonardo, and Induced impact: Economic activity BAE Systems. Airbus owns 37.5% of the stimulated by Airbus and Airbus’ suppliers’ business. Its UK division, based in Stevenage, wage payments to employees. employed 3,987 people in 2020 and earned revenues of £930 million.9 Procurement: The spending on inputs of goods and services with Airbus’ suppliers around the world. Productivity: A measure of value added produced in a given period of time, per unit of labour input—such as value added per job per annum (as in this report). 9 MBDA UK Limited 2020 Statutory Accounts published with Companies House. 13
The impact of Airbus on the UK Economy 14
The impact of Airbus on the UK Economy 15
The impact of Airbus on the UK Economy 2. T HE ECONOMIC IMPACT OF AIRBUS IN THE UK Airbus has an economic 2.1 DIRECT IMPACT footprint that is realised across the UK. It employs over 12,000 Airbus in the UK earned £6.8 The company makes a people at more than 25 sites— billion in revenues in 2019. significant contribution to the designing, manufacturing, The majority was generated UK’s exports. In 2019, it earned and delivering its portfolio of by its Commercial Aircraft £6.1 billion (or 88% of total products around the world. division, at £5.5 billion; with its revenues) from customers Below we quantify Airbus’ Defence and Space division overseas (Fig. 3). This means full economic footprint in the generating £1.1 billion; and that £1 in every £60 earned UK in terms of its gross value the Helicopters division by UK firms, from goods added contribution to GDP, the generating £122 million. In exported, were products employment it supports, and 2020, the sharp decline in manufactured by Airbus.10 This the tax revenues it generates. air passenger travel due to is a considerable contribution the COVID-19 pandemic and to the UK Government’s In this chapter, we explore associated travel restrictions, strategy of increasing the each channel of Airbus’ impact adversely impacted the airline share of GDP consisting of on the UK, starting with the industry and the demand for exports from 30% to 35%.11 direct contribution of its own new aircraft. This, plus the operations. After this we need for social distancing In 2020, Airbus exported consider two further channels measures and the resulting £3.4 billion worth of of impact; the purchases limited production levels, goods—82% of its revenues. Airbus makes from its suppliers resulted in Airbus’ UK revenue Such business cultivates stimulating further economic falling to £4.2 billion in 2020— international relationships activity across the country (its this includes £2.9 billion in and contributes to the indirect impact); and the wages revenues from Commercial Government’s Global Britain paid to its employees—and Aircraft, £1.0 billion from the ambitions. those employed in its supply Defence and Space division, chain—funding consumer and £184 million from the spending and delivering Helicopters division. additional economic benefits to the UK (its induced impact). Fig. 3: Airbus’ UK exports by customer location Americas Americas Other Other £4.2 billion 1% 1% Asia 0% Asia 0% 2% 2% UK 12% UK Airbus earned £4.2 billion in 18% revenue in 2020. This compares to £6.8 billion in 2019. 2019 2020 Europe Europe 79% 86% Source: Airbus 10 HMRC, (2020), 'UK Overseas Trade in Goods Statistics - Summary of 2019 Trade in Goods' 16 11 HM Government, (2018), 'Export Strategy: supporting and connecting businesses to grow on the world stage'
The impact of Airbus on the UK Economy Airbus directly generated Airbus employed 12,621 people, employment fell to 10,800 in a gross value added on average, across the UK in 2021 as part of the company’s contribution to UK GDP of 2019. That is equivalent to 14% response to the initial impacts £2.0 billion in 2019. This is of the total employment of the COVID-19 had on the aviation a measurement of the value air and space manufacturing industry (without resorting to added created by Airbus for sector that year. The majority compulsory redundancy). the UK economy, calculated as of Airbus’ employment was the sum of its UK profits and at its Commercial Aircraft The jobs at Airbus span a wage payments. In 2019, its UK Broughton site in North variety of disciplines. Most profits were over £1.1 billion and Wales (44%), followed by its are in manufacturing and the compensation paid to UK Commercial Aircraft Filton site engineering roles (37% each employees was £830 million. near Bristol (22%), the Defence in 2020), with a further 24% This is a significant contribution and Space site in Stevenage in administration roles (Fig. to the UK economy—equivalent (10%), and the Defence and 4). More than two-thirds of to 31% of the total gross value Space site in Portsmouth Airbus’ UK jobs are in the civil added generated by the air and (8%). The remaining roles domain (68%), while 26% are space manufacturing sector were spread across more in defence, and the remaining (SIC 30.3) that year.12 than 20 further sites across 5% are dual-use. the country. In 2020, Airbus As the COVID-19 pandemic employed on average 12,134 82% impacted the aviation industry people across the UK. The in 2020, the company made fall in its employment versus a UK net loss of £260 million. the previous year was 4%, However, it still paid £799 significantly smaller than the million in wages to employees contraction in its contribution of its revenue was earned from across the UK. Its own to GDP, as Airbus retained exports in 2020. This compares contribution to UK GDP was the majority of its skills to 88% in 2019. therefore £539 million in 2020. base in 2020. Airbus’ direct Fig. 4: Airbus’ direct employment in the UK Manufacturing Engineering Administration Other Employees 14,000 12,621 2% 12,134 1% 12,000 23% 24% 10,000 8,000 37% 37% 6,000 4,000 38% 37% 2,000 0 2019 2020 Source: Airbus Figures may not sum due to rounding 12 Office for National Statistics (ONS), (2021), ‘Annual Business Survey - 2019 Results. The ONS use the Standard industrial classification of economic activities (SIC) to define industries.’ 17
The impact of Airbus on the UK Economy Fig. 5: Airbus workers’ gross value added per job versus national averages in 2019 Gross value added per job (£) 160,000 155,000 140,000 120,000 100,000 103,800 80,000 60,000 66,900 61,500 40,000 20,000 0 UK - average UK manufacturing - UK air and spacecraft Airbus average manufacturing (30.3) - Source: Airbus, ONS average Airbus employees are highly average Gross Value Added £155,000 productive. The average Gross per head produced by Airbus Value Added per head—a workers was £44,400 in 2020. measure of productivity—of Airbus workers in the UK was Airbus and its employees paid average gross value added £155,000 in 2019. This is 2.5 £203 million in taxes to the UK contribution to GDP by each of times the national average, Exchequer in 2019, and £159 Airbus’ employees in 2019. and 1.5 times the air and million in 2020. This includes This is 2.5 times the national space manufacturing sector £214 million in labour taxes in productivity average. average (Fig. 5).13 Having 2019, and £219 million in 2020. high productivity workers is Net receipts of R&D relief are important because it boosts deducted from the total, along the price competitiveness of with furlough contributions UK products and the standard claimed in 2020, while VAT of living for the UK’s residents. payments are not included. This also helps to address This is a notable contribution the UK’s historic productivity to the UK Exchequer—these gap with the other six G7 payments are each sufficient in economies.14 One of the main size to fund, for instance, both aims of the Government’s the Government’s Build Back Defence and Security Greener (£160 million) and the Industrial Strategy (DSIS) is to UK Community Renewal Fund “strengthen the productivity (£220 million) projects.16 and resilience of the defence and security sectors”.15 Following the impacts of the COVID-19 pandemic, the 13 The gross value added per worker averages are calculated using ONS data on total gross value added (GDP output approach – low-level aggregates data set) and total employment (Labour Force Survey). 18 14 ONS, (2022) ‘International comparisons of UK productivity (ICP), final estimates: 2020’ 15 HM Government, (2021), ‘Defence and Security Industrial Strategy: A strategic approach to the UK’s defence and security industrial sectors’ 16 HM Government, (2020), ‘New plans to make UK world leader in green energy’; Department for Levelling Up, Housing and Communities (2020), ‘UK Community Renewal Fund: prospectus’
The impact of Airbus on the UK Economy 2.2 INDIRECT IMPACT Airbus has a broad and diverse We estimate Airbus’ global The activity supported along supply chain that spans the procurement stimulated a Airbus’ supply chain also world. UK businesses are £4.4 billion gross value added contributes tax revenues to the important suppliers to Airbus’ contribution to UK GDP, along UK government. Businesses operations both in the UK and its UK supply chain in 2019. in its supply chain pay globally. Airbus’ purchases Owing to the fall in Airbus’ corporation tax and other taxes of goods and services from procurement, the equivalent on production and products. UK businesses stimulate figure was £2.9 billion in 2020. Equally, the people employed economic activity throughout in these businesses pay income the economy. This economic activity is tax and National Insurance estimated to have supported Contributions. Considering all Airbus spends billions of 73,800 jobs with UK suppliers of these taxes, we estimate pounds with UK businesses in 2019. Considering the that Airbus’ UK supply chain each year. In 2019, Airbus spent sectors in which these jobs activities raised almost £1.0 £5.8 billion on inputs of goods were supported, 26,200 billion for the Exchequer in and services with more than (or 35% of the total) were 2019, and £670 million in 2020. 3,300 UK suppliers. This was in the transport equipment £3.8 billion 12% of its global procurement manufacturing sector; a spend (Fig. 6). With the further 11,900 jobs were COVID-19 pandemic impacting supported in the business the demand for commercial services sector; with 6,800 aircraft in 2020, this figure fell jobs sustained in the wholesale to £3.8 billion with 2,900 UK and retail trade sector (Fig. 7). spent with UK suppliers in 2020. suppliers. Included in Airbus’ In 2020, we estimate 45,900 In 2019, Airbus spent £5.8 billion supply chain are hundreds jobs were supported along with UK suppliers. of small- and medium-sized Airbus’ UK supply chain. businesses (SMEs). Indeed, nearly three-in-10 of Airbus’ direct UK suppliers are SMEs. 3 in 10 Fig. 6: Airbus’ procurement of goods and services £ billion 60 Rest of the World UK 49.6 50 of Airbus’ UK suppliers are SMEs. 5.8 (12%) 40 36.0 3.8 (11%) 30 43.8 20 32.3 10 0 2019 2020 Source: Airbus Figures may not sum due to rounding 19
The impact of Airbus on the UK Economy Fig. 7: Airbus’ indirect employment supported by sector in 201917 Transport equipment 26.2 manufacturing (30) Business services (69-82) 11.9 Wholesale and retail trade 6.8 (45-47) Machinery and equipment 5.8 (28) Transportation and storage 2.6 (49-53) Computer, electronic 1.9 and optical (26) Financial activities 1.6 (64-66) Fabricated metal 1.6 products (25) IT services 1.5 (63-63) Construction 1.5 (41-43) Accomodation and 1.2 food services (55-56) Other 11.2 0 5 10 15 20 25 30 Source: Oxford Economics Thousands 2.3 INDUCED IMPACT 1.6 times In 2020, the average wage paid The wage-financed spending of those employed by Airbus, or in its supply chain, form a further channel through which it Airbus pays high wages to its employees relative to those available in the whole economy. The average wage it by Airbus was 1.6 times the contributes to the UK economy. paid in the UK in 2020 was 1.6 national average. Employees make purchases times the national average.18 In at retail, leisure and other each of the UK’s nations and outlets throughout the country; regions in which its employees these purchases stimulate reside, the average wage it further activity, adding value, paid was at least one-quarter sustaining employment, and higher than the region’s raising tax revenues. average—supporting further wage-induced activity in the consumer economy (Fig. 8). 17 Numbers are the relevant SIC code definitions for the industries. 20 18 ONS, (2020), 'Employee earnings in the UK: 2020'
The impact of Airbus on the UK Economy Fig. 8: Average annual gross pay in 2020 £ 60,000 Median resident salary Average Airbus salary 50,000 40,000 30,000 20,000 10,000 0 st t s s d on st t es om es es nd nd an Ea Ea al nd W W gd la la gl W th h Lo id id En th h in ut or ut M tM K or So of N So st d N es te Ea st W ni Ea Source: Airbus, ONS U We estimate that wage- We estimate that this same The wage-financed spending financed spending attributable wage-financed spending of those employed by to Airbus supported a supported a £2.1 billion value Airbus and in its supply- £3.0 billion value added added contribution to UK GDP chain supports a further contribution to UK GDP in in 2020, sustaining 28,400 tax contribution to the UK 2019, sustaining a further UK jobs. The majority of this Exchequer. In 2019, these tax 41,800 UK jobs in that year. difference can be explained by revenues were an estimated Most roles were supported in the fall in the number of roles £830 million, and over £600 the health and social sector supported in Airbus’ UK supply million in 2020. (8,300 jobs, or 25% of the chain, an effect of Airbus’ total) and the wholesale and reduction in procurement retail trade sector (8,000, or spending for 2020. 24% of the total). 21
The impact of Airbus on the UK Economy 2.4 TOTAL IMPACT This chapter has shown In 2020, Airbus’ gross value The activity and employment how Airbus’ impact on the added contribution to UK GDP supported by Airbus generated UK extends far beyond was £5.6 billion. This total was significant tax revenues for the the operations at its own affected by both the fall in UK Exchequer. We estimate facilities. Its total economic profitability impacting Airbus’ Airbus’ operations raised footprint in the UK is the direct gross value added more than £2.0 billion in tax sum of the aforementioned contribution, and the impact revenues in 2019, with the direct, indirect, and induced of reduced procurement majority raised along its UK impacts. By combining these spending on the indirect and supply chain and by the wage- three channels of impact, we induced channels. induced spending it sustains. To estimate Airbus supported a place this number in context, £9.3 billion contribution to UK Airbus supported 128,300 this means £1 in every £310 GDP in 2019, with a gross value jobs across the UK in 2019, a collected by HMRC in 2019 added multiplier estimated to figure greater than the total can be attributed to Airbus’ be 4.8 (Fig. 9). This means for employment of Portsmouth activity.19 Put another way, this every £1 in gross value added or York. The company itself total could be used to fund 42% generated by the company employed nearly 13,000 of the Government’s Levelling itself, it supported a further people across the UK (10% Up Fund, or the Catch-up £3.80 around the rest of the of the total). Mirroring the education programme twice- UK economy through its case with its contribution to over.20 In 2020, we estimate expenditure. Owing to the GDP, Airbus supported the Airbus supported more extensive and sizeable nature greatest number of people than £1.4 billion in total tax of Airbus’ UK supply chain, the through its procurement: an payments, meaning £1 in every indirect channel accounted estimated 73,800 jobs with UK £400 collected by HMRC in for nearly half (47%) of this suppliers, or 58% of the total 2020 can again be attributed to contribution (Fig. 9). To put (Fig. 10). Finally, Airbus and Airbus’ activity. these numbers into context, its suppliers’ wage payments Airbus’ total contribution to supported 41,800 UK jobs GDP was similar in size to (33% the total). that produced by the city of Southampton. We estimate Airbus’ activities sustained 86,400 jobs across the country in 2020. Its £5.6 billion direct employment in the UK decreased slightly to above 12,000, with the majority of the decline being in jobs In 2020, Airbus supported a supported along its UK supply £5.6 billion contribution to UK chain, owing to its reduced GDP, 86,400 UK jobs and more procurement of UK goods and than £1.4 billion in tax revenue. services. This impact spreads into its induced employment impact also, as reduced activity in the supply chain impacts how much those employed by Airbus’ suppliers spend in the consumer economy. 19 HMRC, (2021), ‘HMRC tax receipts and National Insurance contributions for the UK’ 22 20 HM Treasury, (2021), ‘Levelling Up Fund: prospectus’; Department for Education, (2021), ‘Catch-up premium’
The impact of Airbus on the UK Economy Fig. 9: Airbus’ gross value added contribution to UK GDP £ million 10 9.3 9 8 3.0 3.0 7 6 5.6 5 2.1 2.1 4.4 4.4 4 3 2 2.9 2.9 1 2.0 2.0 0.5 0.5 0 Direct Indirect Induced Total Direct Indirect Induced Total 2019 2020 Source: Airbus, Oxford Economics Figures may not sum due to rounding Fig. 10: Airbus’ contribution to UK employment Thousands 140 128.3 120 41.8 41.8 100 86.4 80 28.4 28.4 60 73.8 73.8 40 45.9 45.9 20 12.6 12.6 12.1 12.1 0 Direct Indirect Induced Total Direct Indirect Induced Total 2019 2020 Source: Airbus, Oxford Economics Figures may not sum due to rounding 23
The impact of Airbus on the UK Economy 24
The impact of Airbus on the UK Economy 25
The impact of Airbus on the UK Economy 3. A IRBUS’ UK OPERATIONS IN 2021 AND BEYOND This study was published in Airbus’ long-term commitment to an average of 45 aircraft March 2022, when sufficient to the UK continued through per month in Q4 2021, with detail to conduct a full 2021 as the aviation industry the vast majority of wings economic impact assessment endured restrictions and manufactured in Broughton.21,22 for 2021 was not available. reduced passenger numbers. This is higher than the average Instead, this section seeks There was some recovery of 40 aircraft per month to provide an indication of in commercial aviation—the produced in 2020 (from April Airbus’ activity in the UK total number of global air onwards), but still below the during 2021 using preliminary passengers was 49% below 2019 record-high levels of 60 management accounts. 2019 levels, compared to aircraft per month.23 60% below in 2020—creating speculative demand for the 14% future and permitting Airbus to increase production levels. Having reduced production rates to 30 aircraft per month growth in revenues in 2021. in Q2 2020, Airbus increased its A320 production rate 3.1 AIRBUS’ ACTIVITY IN THE UK IN 2021 Airbus’ UK operations Fig. 11: Airbus UK-operations’ revenue and employment, continued to earn significant 2019 to 2021 revenues in 2021, totalling £4.8 Employment (left-hand axis) Revenue (right-hand axis) billion.24 This marks a slight Jobs £ billion increase on its 2020 revenues. Initial management accounts 14,000 7.0 suggest nearly three-quarters 6.8 of this total were generated 12,000 12,621 6.0 by the Commercial Aircraft 12,134 division, while the Defence and 10,000 10,755 5.0 Space division generated more 4.8 than £1 billion in revenues— 8,000 4.2 4.0 similar to both 2019 and 2020. For further context, the company has posted positive 6,000 3.0 global results for 2021, earning revenues of €52 billion for 4,000 2.0 2021—up 4% compared to 2020—and profits of €4.8 2,000 1.0 billion, compared to €1.7 billion in 2020 (finalised UK results 0 0.0 were not yet available at time 2019 2020 2021 of publishing).25 Source: Airbus 21 Airbus, (2021), ‘Airbus provides suppliers with an update on production plans’ 22 Airbus aircraft assembled in Tianjin, China are equipped with domestically manufactured wings. 26 23 Airbus Operations Limited, ‘Annual report and financial statements (2019 and 2020)’ 24 Preliminary Airbus UK company accounts, subject to external audit, prior to publication 25 Airbus, (2022), ‘Airbus reports strong Full-Year (FY) 2021 results’
The impact of Airbus on the UK Economy The company underwent 3.2 LOOKING TO THE FUTURE restructuring associated with lower production levels in Looking ahead, with more than Not only will these orders 2020 and 2021. Its workforce 7,000 outstanding orders for increase activity and job reduced to 10,800 employees commercial aircraft, there is security at the Airbus across the UK. While this is scope for production levels to facilities that design, test, and below its pre-pandemic level, rise far beyond the 2019 levels manufacture components the impact on Airbus’ direct that supported the economic (most significantly the wings), employment has been limited activity primarily evaluated but they will increase Airbus’ relative to the fall in its revenues, in this report. Using our procurement of other goods as the company has looked previous example of the A320 and services. Some 56% of to retain its skills base and family, Airbus plans to raise the procurement undertaken manufacturing capacity. Its production of these aircraft to by Airbus’ UK operations are 2021 revenues were 30% below 75 per month by 2025. spent within the UK. those realised in 2019, but its workforce was only 15% smaller Airbus scaling up production 7,000 (Fig. 11), retaining its skills base will impact the UK in a for the future. It is worth noting number of ways. For one, the that, while there are no data vast majority of wings for available yet on the contraction the A320, A330, and A350 in employment within the air families—for which there are outstanding orders for and space manufacturing sector more than 6,600 outstanding commercial aircraft. specifically, however the total orders (Fig. 12)—are number of people employed in manufactured at Airbus’ plant UK manufacturing was 9% lower in Broughton, North Wales.27 in 2021, compared to 2019.26 Fig. 12: Outstanding orders for Airbus commercial aircraft 6,000 5,839 5,000 4,000 3,000 2,000 1,000 475 312 456 0 A220 A320 family A330 A350 Wings manufactured in Belfast (Spirit) Source: Airbus Annual Report 2020 ONS, (2021) ‘EMP13: Employment by industry’ Note—first three quarters of the year only. 26 Airbus, ‘Orders & Deliveries December 2021’. Note—Airbus aircraft assembled in Tianjin, China are equipped with domestically 27 manufactured wings. 27
The impact of Airbus on the UK Economy An increase in production Airbus’ continued commitment entirely in the UK, supporting levels will also benefit Airbus’ to the UK extends beyond the UK Space Agency initiative UK suppliers who sell to its its commercial aircraft. For for sovereign UK end-to- overseas operations. This instance, the company is end satellite production and includes the A220 wings contracted to expand and support.28 These commitments it purchases from Spirit enhance the Ministry of are especially important AeroSystems in Belfast, plus Defence’s Skynet fleet. This given the UK Government’s its vast spending on engines will involve the UK-based 2021 integrated defence manufactured by Rolls-Royce development, manufacture, and security review and the in Derby. cyber protection, assembly, defence space strategy, which and integration of the Skynet highlighted the important Indeed, the positive impacts 6A military communications connection between the UK’s of increased manufacturing, satellite—a programme which sovereign capability in the along with other planned is planned to sustain 550 high- space sector and securing projects across Airbus, would value UK jobs and is scheduled the UK’s future security span all three of the company’s for launch in 2025. It will be and prosperity. channels of economic impact the first time a modern era in the future—as demonstrated geostationary satellite is during ‘normal’ 2019 operations. designed, built, and tested 3.3 AIRBUS’ RECENT INVESTMENTS IN THE UK £250 million To deliver increased These two investments alone production levels in the future, equate to 6% of its revenue Airbus has invested substantial in the year, of significant sums in its UK operations in note given the operating 2021. With significant notable environment. spent buying the land at its investments including: Broughton and Filton sites in 2021. • £250 million to purchase the land on which its Filton and Broughton sites are operating. • £35 million to construct Orbit House, Airbus Defence and Space’s new headquarters, opened in 2021 by the Prime Minister.29 28 HM Government, (2021), ‘National Space Strategy’ 28 29 The Comet, (2021), ‘Prime Minister Boris Johnson opens Airbus’ new £35 million facility’
The impact of Airbus on the UK Economy 29
The impact of Airbus on the UK Economy CASE STUDY: AEROSPACE INTEGRATED RESEARCH AND TEST CENTRE, AIRTeC In 2021, Secretary of State for Business, Energy As well as being used to test aerospace and Industrial Strategy formally opened the structures, Airbus is exploring use of these £100 million Aerospace Integrated Research facilities for UK research activities outside of and Test Centre (AIRTeC) at Airbus’ Filton the aerospace sector, including for example, site.30 The research and testing facility, jointly reinforcing domestic capabilities within the UK’s funded by the Aerospace Technology Institute, nuclear and maritime industries. ATI (£40 million) and Airbus (£60 million), is designed to test aircraft parts from wings The facility is critical to Airbus’ largest research down to individual components, along with programme to date, the Wing of Tomorrow (as providing advanced research laboratories and discussed in Chapter 6), and will be, according collaborative office spaces to both Airbus and to Airbus, a key asset in helping to accelerate their external partners. the development of commercial, globally operating, zero-emission aircraft. The AIRTeC facility is designed to contribute to Airbus’ strategic plan within the UK to During the opening launch event John Harrison, accelerate the design, manufacture, testing, General Counsel and UK Chairman of Airbus, certification and commercial operation of said: future zero-emission aircraft. “Airbus makes a significant contribution to the AIRTeC includes 65,000m² of specialist test UK aerospace industry and we are delighted space featuring, to welcome the Secretary of State to help us showcase our fantastic facility. AIRTeC will take • A 40-metre-long strong floor and two strong our research and testing capabilities at Filton walls capable of testing two full-size wings to the next level and will make us even more simultaneously. The adaptable modular facility competitive for the future.” can be used to test the ultimate strength of wings or to understand the lifespan of designs Joint investment projects like this—between under realistic operating conditions. the UK Government and Airbus—are resulting • A high-capacity loading machine—capable of in the UK developing sovereign expertise in applying forces up to 25MN, equivalent to the advanced industrial products and processes, weight of over 200 double decker buses, or including those targeting decarbonisation. over 2,500 cars being stacked atop a wing.31 • Extensive laboratory capabilities to condition test items pre-test and examine them again down to a molecular level post-test. 30 Airbus, (2021), ‘U.K. Secretary of State launches the joint-funded Aerospace Integrated Research and Test Centre’ 31 Assumption made that a double decker bus weighs 12 tonnes and an average car weighs 1 tonne. 30
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