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Farnborough 2018: Brexit bad news for UK defence growth

12th July 2018 - 12:02 GMT | by Helen Haxell in London

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The UK’s lack of strategy surrounding Brexit could be impacting the defence sector’s annual turnover if figures released by the ADS Group are anything to go by.

The group reported an annual turnover of £23 billion in 2016, this decreased to £22.1 billion in 2017. This raises potential issues over the UK as an investment spot for aerospace and defence companies.

In comparison, in 2015 the defence sector experienced a high of a £24 billion turnover. Since Brexit has entered the political discourse there has been a year on year decline of around £1 billion in the defence sector's annual turnover.

Currently, the UK is the largest exporter of defence equipment and services in Europe and second only to the US globally. 

On 5 July this year, Paul Everitt, chief executive at ADS Group, made his ‘frustrations’ clear over the scenario of what happens if no deal is reached in relation to Brexit.

‘Our concerns are on the longer-term implications. We’ve been clear that no deal is the worst possible outcome because no deal is chaotic… depending on how the deal deals with custom and regulatory issues – the customs and regulatory alignment are a piece; one or the other is not what we want because that is how you deliver frictionless trade.’

Everitt explained that businesses are seriously concerned about the costs of operating in the UK post-Brexit and the potential for those costs to climb higher as a result of withdrawing from the EU. Therefore, the attractiveness of the UK as an investment hub will be ‘diminished’.

The fear is investment in big projects like new aircraft and technologies will go elsewhere on the continent or beyond thus causing a long-term business problem.

Fears of the impact of Brexit on investment in UK aerospace stemmed around the necessity for minimal delay in investment to the UK, this is a sentiments shared by ADS in July 2016; interestingly, a year prior to the referendum.

Everitt said at the time: ‘From a national economy point of view, the danger is a vacuum to see what happens and that process of waiting to see actually creates the economic conditions. Which then create a set of circumstances that are difficult to deal with.’

A year on in June 2017, Everitt called on the government to establish a ‘more collaborative approach’ to negotiations and emphasised the need to ‘build a strong consensus on the priorities and options for a successful Brexit’ for the industry.

Whilst the UK government continues to flip-flop over the deal it desires to make the UK a successful independent trading nation – confidence from the business community is waning despite industry groups like ADS calling for clear decision-making well in advance of Brexit deal talks.

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