UK aerospace sector one of the hardest hit by Brexit

Last Autumn, ADS published our ‘Building Brexit’ report which estimated that post-Brexit, the UK aerospace sector could face additional costs of almost £1.3bn in additional customs costs in moving goods across the UK-EU27 border.

Yesterday, new research by Oliver Wyman and Clifford Chance on ‘The Red Tape Cost of Brexit’, confirmed ADS’ estimates on the post-Brexit costs of customs to the aerospace sector.

In particular, the Oliver Wyman analysis shows that, as a % of GVA, UK aerospace is in the top three sectors facing the highest direct customs costs post-Brexit. Looking at the Olivery Wyman chart below, suggests the tariff and non-tariff costs of a WTO arrangement would be about 8%-8.5% of UK aerospace sector GVA. In absolute terms, this amounts to about £1.1bn in added costs for UK aerospace companies.

While other sectors such as financial services and the auto industry face a much higher post-Brexit bill, adding over £1bn in new, recurring costs to a sector that’s trying to take out 5%-20% cost out each year just remain globally competitive is a huge challenge.

For the EU27, similar analysis shows that, as a % of GVA, the aerospace sector in the EU27 will take the biggest hit from new tariff and non-tariff costs, approximately 2.5% of EU27 aerospace GVA. The analysis by Oliver Wyman and Clifford Chance isn’t that surprising: the European aerospace sector is highly-integrated, and while the EU27 will take a hit from Brexit, the absolute and relative costs to UK are far higher. Something to bear in mind as we head into the second phase of negotiations.