UK Aerospace Exports to Brazil – Why Opportunity Must Drive Growth

This week, UK Trade & Investment (UKTI) are promoting national ‘Export Week’ – hosting a variety of events up and down the country encouraging UK companies to get more involved in the exporting process. As part of the government’s overall push to increase the value of UK exports, Chancellor George Osborne is currently in Brazil, highlighting the future importance of the Brazilian market to UK companies and announcing the establishment of an ‘Economic and Finance Dialogue’ between the two nations.

In his speech to Business Leaders in Rio De Janiero on Monday, the Chancellor also listed a number of statistics showing that the UK must do more to increase its trade with Brazil.

 “In 2010, just 1% of our exports came here …our trade with Brazil is almost four times less than Germany’s”

How do these overall figures compare with the UK’s civil aerospace exports with Brazil? In 2010, exports to Brazil represented around only 0.6% of total UK civil aerospace exports. In 2013, this dropped to 0.3%. Valued at £34m, UK civil aerospace exports to Brazil in 2013 were substantially less than those to Germany – which were listed at around £2.2bn.

Whilst UK-Brazil exports values have fluctuated over the last ten years, these low numbers and the overall lack of consistency shows that a greater focus on the Brazilian market by the UK should stretch to increasing opportunities for the UK’s Aerospace industry.

But why is Brazil such an important future market for Aerospace? Firstly, the global presence of Embraer, the third largest aircraft manufacturer in the world, is set to increase over the next 10-20 years. According to the ‘UKTI/ ADS Global Aerospace Outlook 2014’, the build value of Embraer civil and business aircraft will reach up to $45bn over the next ten years. This is more than the value of future COMAC and other Chinese-manufactured aircraft by 2022.

Secondly, a growing middle class in Brazil means there is much more demand for air travel than ever before. As such, the region will require more aircraft to fulfil this continued increase in demand. The graph below from Embraer’s 2012 Market Outlook reveals the extent of this growth at the expense of both the high and low end share of the Brazilian population.

Brazil MC

As such, it has been forecast that the Latin American region overall will require around 2,300 new aircraft by 2032– with the majority of this demand in the single aisle category. This is more than the forecast for the Middle East over the next 20 years – a region which has continuously been identified as a priority market for aerospace export activity.

Whilst, conducting business in Brazil is not straightforward (the market itself does not offer the same security as the more mature Western markets), the value of the Brazilian, and more broadly the Latin American, aerospace market may bring a range of future opportunities across the capabilities of the UK supply chain.

Currently, the UK is operating a low base – the UKTI ‘Aerospace Opportunities in Brazil’ briefing stated that UK content on Embraer aircraft is around only 2%. In order to compete globally, the UK must do more to significantly increase this value share by integrating into the Embraer supply chain and contributing to Airbus and Boeing sales to the region, where new aircraft carry significant UK content.

Continued government support is also vital however. UK companies will only see Brazil as a realistic future market if they are able to access the market knowledge to break down economic and cultural barriers, and are eligible for more financial support packages in order to protect their businesses from uncertainty.