
Written by Tom Oldham, ADS Aerospace Policy Adviser
What has been announced?
Last week was a big week for the UK’s aviation and aerospace sectors. Further to the headline declaration of support for a third runway at Heathrow, the Government also announced a £63 million investment in the Advanced Fuels Fund. A response to the consultation on the establishment of a Revenue Certainty Mechanism (RCM) for Sustainable Aviation Fuel (SAF), built on the inaugural meeting of the Jet Zero Council Expert Group. All this in addition to recent welcome confirmation that the Future of Flight Industry group is to be renewed, supporting industry-government collaboration on Advanced Air Mobility.
While the Industrial Strategy and Spending Review will ultimately determine the direction of the Government’s approach to aerospace, last week’s announcements represent a promising start. The UK’s aviation sector has been severely constrained by a number of factors, including the Covid pandemic and production and capacity challenges, limiting economic growth opportunities and international competitiveness. A third runway at Heathrow, delivered in line with the UK’s climate and environmental obligations, could create over 100,000 jobs, secure the UK’s world-leading reputation as a major hub and deliver significant benefits for passengers.
On sustainability, while fuel providers are now obligated to provide increasing quantities of SAF, the absence of a mechanism to ensure SAF producers receive a minimum, above-market level of revenue for their product is limiting investment and undermining domestic production at its genesis point. It is welcome that the Government responded to the RCM consultation on 29 January, indicating that they will proceed with a General Strike Price mechanism, something supported by ADS in our own submission to the Government. The proposed approach will build on existing Contracts for Difference schemes, which have brought down the cost of renewable energy by 70% since 2014.
What is in it for the aerospace sector?
Aircraft manufacturers have already taken significant steps to develop cleaner, quieter aircraft, meaning the impact of airport expansion will be less disruptive than ever before. Coupled with plans to streamline flight paths via a generational programme of airspace modernisation, today’s aircraft are 75% quieter than jets in the 1960s. The new Rolls Royce Trent 7000 engine alone delivers a 50% noise reduction on take-off and landing compared to its predecessor.
In the decades to come, global demand for aviation will continue to soar, with up to 39,000 new commercial aircraft required by 2040, according to Airbus. The UK therefore has a choice: to harness this significant opportunity in an era of anaemic growth in the wider economy, or to surrender that business to international competitors, ushering in a period of managed decline.
It is therefore welcome that the Government have recognised that supporting and growing the UK’s aerospace and aviation sectors is central to delivering the ultimate prize of economic growth – one of the key metrics by which this Government wants to be measured.
Industry recognises that prioritising sustainability is central to securing public support for continued expansion. That is why progress on the development of an RCM for domestic SAF production is so welcome, although progress is somewhat undermined by the lack of a firm launch date. Given the asymmetrical implementation of the SAF mandate and the linear year-on-year increases involved, if the Government is going to seize the moment and create a dynamic and affordable SAF industry here in the UK, time really is of the essence.
What next?
Turning the Government’s vision into a reality will be a huge challenge, and it is at this point where successive governments have become bogged down in overly restrictive planning laws and legal challenges. Airport expansion has always been contentious and that shows no sign of changing. With that said, promising signs are emerging as the Government seeks to use its Parliamentary majority to make bold changes to the planning system.
Investment in SAF plants has also been hindered by planning restrictions, underlining the importance of permitting and accelerating industrial development. All of this will need to be addressed by the Industrial Strategy if the UK is going to make up lost ground.
While there is much to welcome from last week’s announcements, it is unlikely that airport expansion at Heathrow will deliver significant benefits for at least another decade, probably more. With that in mind, there is a need to ensure we do not lose sight of the near-term priorities – to deliver the rate ramp up in aircraft production by strengthening supply chains, widening the skills base and resolving issues with access to finance. Delivering on the rate ramp up will also cut emissions as newer aircraft are significantly more efficient than those they replace. To this end, long-term support for technology innovation (via this ATI) is needed so industry can continue to make further efficiencies.
Delivering on these issues represents a generational economic prize in and of itself: £257 billion worth of work over 13 years for the UK alone. No other industry has a global backlog of this scale, highlighting just how massive the prospective growth trend is for the UK. Last week’s announcements were a promising start, but there is, as ever, much more to do.