UK Aerospace Supply Chain Taskforce

Update from the UK Taskforce Chair, Tom Williams CBE

Tom Williams CBEI would like to take this opportunity to provide an update on the ADS UK Aerospace Supply Chain Taskforce and its activities.

As a result of the current COVID-19 crisis, the global aviation and aerospace industries have been severely impacted, and the demand for new aircraft is likely to remain suppressed for a prolonged period, affecting backlogs and impacting current aircraft manufacturing and delivery rates. This means a significant revenue impact for the industry and its supply chain

The combination of diminished revenues and the cost of managing liquidity through this period, poses a significant challenge, putting several companies in the sector at high-risk of insolvency, including suppliers in the UK. As the OEMs and Tier 1’s reset their operations to adjust to a period of prolonged lower demand, the supply chain has also got to re-size itself for a lower-volume future, optimising and rationalising capacity. This is not an option but a necessity if the supply chain is to remain competitive into the future.

Given this, ADS, in consultation with industry primes, has set up a dedicated “UK Aerospace Supply Chain Task Force” to co-ordinate support through this challenging period. The taskforce’s mandate is embodied in its mission, which is to minimise the impact of COVID-19 by taking  action to support the business continuity of critical UK aerospace suppliers in the short-term, whilst enabling longer-term recapitalisation and investments in strategic capabilities to ensure competitiveness of the UK supply chain in the long-term.

The membership of the UK taskforce is currently comprised of 7 UK Primes and Tier-1’s including Airbus, Bombardier, Spirit, GKN, Rolls Royce, Collins, and SAFRAN who are working collectively to support the UK Supply Chain. The supply chain and the Department for Business, Energy and Industrial Strategy (BEIS) are also represented in the group, with ADS providing project, legal and data management support. Strict governance processes have also been established to ensure the integrity of the collective approach and adherence to appropriate competition legislation.

Since its first meeting on the 2nd of June 2020, the taskforce has established a database of a limited number of critical suppliers, reviewing their health across a set of agreed criteria to identify those who might need immediate support. The initial activity will be followed by a further two phases to cover a greater number of suppliers. Further discussions have also been initiated with third parties to potentially conduct forward looking analysis on supplier health based on future demand scenarios.

A set of ‘operational support actions’ has been proposed to be used on a case by case basis, providing a best practice approach to supporting suppliers in the near-term. This includes provision of support to suppliers applying for existing government support measures such as CBIL’s and other schemes, amongst other measures that can be deployed by the primes to support their suppliers. We envisage that the Primes and T1’s will continue to work with their own supply chains, utilising or aligning to the support actions where practical. Where suppliers serve multiple customers, Prime leads have been selected to lead the support activity.

The taskforce is also actively reviewing gaps if any, in existing support mechanisms with a view to making recommendations through ADS and the AGP to Government and policymakers on further measures required to support the UK aerospace supply chain companies and their competitiveness. This includes a ‘long-term supply chain patient capital fund’ to enable long-term recapitalisation of critical suppliers.

We understand that industry stakeholders will have several questions about the taskforce and its activities, so the taskforce team have kindly put together answers below to some frequently asked questions to help understand the taskforce and its activities further, which we hope will be useful.

We will look to provide further updates as we progress through the taskforce activities, and in the meantime we thank you for the tremendous enthusiasm and support you have provided to the taskforce.

Yours Sincerely,

Tom Williams

Contact the taskforce by completing the form on the ADS contact us page with the subject “To the attention of the ADS CV-19 supply chain task force”.

Frequently Asked Questions (FAQ’s)

Q. What is the objective of the taskforce?

The mission of the taskforce is to minimise the impact of COVID-19 by taking necessary action to support business continuity of critical UK aerospace suppliers in the short-term, whilst enabling longer-term recapitalisation and investments in strategic capabilities during the recovery phase.

Q. Which are the companies involved in the taskforce?

The current membership of the taskforce consists of seven UK Primes and Tier-1’s including Airbus, Bombardier, Spirit, GKN, Rolls Royce, Collins, and SAFRAN who are working collectively to support the UK Supply Chain. The supply chain and the Department for Business, Energy and Industrial Strategy (BEIS) are also represented in the group, with ADS providing project, legal and data management support.

Q. What are the types of companies that the task force is looking to support?

The focus of the taskforce is broad and wide with an aim to support the entire supply chain. However, given its limited bandwidth and with the need to act fast, it needs to prioritise its activities. The task-force’s immediate focus is on identifying and supporting “critical” suppliers who are in distress and ensuring that necessary measures of support are offered by their customers whilst also ensuring that the businesses themselves have exhausted all the avenues of support available to them through schemes introduced by the Government and others as relevant.

Alongside, its focus on specific critical suppliers, the taskforce is also reviewing the effectiveness of economywide measures, specific challenges being faced by aerospace suppliers, and gaps if any in existing support measures that can benefit the wider community of aerospace suppliers in the UK. The taskforce is and will continue to make recommendations to prime customers and the Government through ADS and the Aerospace Growth Partnership, on such issues and where gaps need to be addressed.

Q. What is a “critical” business?

All suppliers are important, however, for the purposes of the taskforce, “critical suppliers” are defined as businesses with specific attributes such as, critical IP ownership, providers of critical processes, single source of key parts, processes, and services, and suppliers whose products / services which will take a long-time to re-source and requalify, whose operations if compromised could cause disproportionate continuity issues in the supply chain. Additionally, civil aerospace suppliers who are critical to continuity of key national defence, security and sovereignty would also be considered where information is available.

Q. Would all critical suppliers be supported?

The taskforce will review the health of all critical suppliers as identified by the prime customers on the taskforce, including if the identified critical suppliers have sufficiently and successfully accessed all existing support measures available (such as the government support schemes like CBILs), and if there is a need for further support to keep them viable. Only those critical suppliers who need intervention beyond the existing support schemes will be reviewed by the taskforce.

The task force will also continue to keep a close watch on how the market situation evolves and will continue to expand its focus as appropriate on other suppliers who might become vulnerable as we move into the later part of 2020.

Q. What are the support measures being reviewed by the taskforce?

The taskforce is constantly reviewing a set of “procurement operational support actions” that customers can discuss and deploy in support of their critical suppliers. These include but are not limited to:

  • Facilitating access to financial support – capital markets as well as Government backed
  • Renegotiation/ provision of customer guarantees including support of CBIL’s application
  • Increasing forward visibility of demand
  • Nominations to business/competitiveness improvement programmes (restart focus)
  • Offering low interest loans where possible
  • Payment to terms/ shorten payment terms
  • Sharing of resources/services – HR/Finance
  • Support / manage suppliers procurement activity (free issue material)
  • Smooth schedules/ advance orders
  • In-shore packages
  • Removal of dual / multi-source

Beyond these immediate measures, the task force is also reviewing the need for a patient capital fund to support long-term re-capitalisation of critical suppliers. However, the process of setting up a fund and securing investors would take over a year so the immediate focus remains on maximising access to existing schemes of support. Alongside the fund, the taskforce is also reviewing long-term needs for business/ competitiveness improvement, diversification, mergers & acquisition, divestment, vertical integration, export support and other additional Government support measures required.

Q. If my business is in distress, what do I do? Q. Is the taskforce the only avenue for support?

If you are a business in distress, there are several avenues of support. You might benefit from the schemes introduced by the Government to support businesses of various types through this crisis.

https://www.gov.uk/government/collections/financial-support-for-businesses-during-coronavirus-covid-19

If you need support beyond the government schemes, you should highlight your difficulties with your immediate customer to see if they can help you with support actions if they can.

Q. I think I am a critical supplier in distress but not in the direct visibility of the companies on the taskforce, nor am I getting any support from my customer, how do I inform the taskforce of my situation?

In the absence of any support from your customer, and if you think your business is “critical” as per the definitions outlined in this FAQs, then please contact the taskforce by completing the form on the ADS contact us page with the subject “To the attention of the ADS CV-19 supply chain task force”.

Q. Is there funding available through the taskforce and does the taskforce determine who gets funding?

There is no direct funding available through the taskforce. The taskforce looks to set recommendations which may guide companies towards existing funding opportunities or give recommendations into HMG through ADS and the AGP, of new schemes that may be required to support the supply chain. Any funding established as a result of the taskforce’s recommendations will be applied through specific funding criteria set by the fund owners, independent of the taskforce’s involvement or influence.

Q. How can I get involved in the taskforce?

The Taskforce currently consists of a limited number of participants to keep it effective and focussed. However, the Chair will review its membership at appropriate intervals and will decide on increasing participation as appropriate. In the meantime, if you choose to contribute to the taskforce, please feel free to submit your inputs or ideas by taskforce by completing the form on the ADS contact us page with the subject “To the attention of the ADS CV-19 supply chain task force”.

Q. Does the taskforce replace existing activities or groups focussing on the supply chain?

The taskforce is a tactical body established to help critical UK suppliers through the immediate impact of the CV-19 crisis and it does not replace any existing strategic activities focussed on the supply chain.

Q. How can I get updates on what the task force is doing or what progress has been made?

Regular communications as and when appropriate will be made to relevant stakeholder groups about the taskforce and its activities. Should you require any specific information from the taskforce more urgently, please contact the taskforce by completing the form on the ADS contact us page with the subject “To the attention of the ADS CV-19 supply chain task force”.

Q. Does the taskforce affect companies and their decisions to access support or schemes?

The taskforce will only make recommendations and has no intention or legal authority to force companies to follow its recommendations or advice. Companies are at their freewill to implement recommendations made by the taskforce or its member companies.

Q. Do I need to be a member of ADS to be provide input / feedback to the task force?

Although the taskforce is an ADS initiative, all UK aerospace businesses are welcome to provide inputs to the taskforce. Please do this by completing the form on the ADS contact us page with the subject “To the attention of the ADS CV-19 supply chain task force”.

Q. How will the taskforce handle sensitive information about suppliers?

A strict governance process has been established to ensure the integrity of the collective approach and adherence to appropriate competitiveness legislations. This is constantly reviewed by ADS legal teams through their participation in the taskforce meetings.

Q. How do I contact the taskforce if I have other questions?

Please contact the taskforce by completing the form on the ADS contact us page with the subject “To the attention of the ADS CV-19 supply chain task force”.