Professor KEITH HAYWARD FRAeS assesses the view from UK aviation and aerospace in the upcoming 'Brexit' UK referendum.

Now a global aerospace concern, Airbus would prefer that that the UK stays in the EU. (Airbus)

So the moment of Euro-truth is nearly upon us. And what will happen to UK aerospace and aviation in the event of an out vote? In truth I do not know. I can speculate but the only sure prediction is a period of chronic uncertainty.

Aerospace has few immediate problems

Senior aerospace industry leaders are almost unanimous in wanting a ‘remain’ vote. If ‘out’, some comfort is afforded by the fact that Airbus, MBDA, Finmeccanica and other overseas investors in the UK aerospace industry would not be upping sticks immediately. However, Airbus UK recently sent a letter to all its employees saying that staying in the EU benefited its business and that future investment could be directed elsewhere should Britain decide to leave. The weight of EU investment carries a powerful inertia and the British defence market is still sufficiently attractive to anchor footloose defence companies. Possible problems lie over the political horizon and probably into the next Parliament but one. UK manufacturing is well integrated into a network of transnational enterprises and collaborative programmes stretching out by up to a decade. The difficulties could come in launching new projects with our neighbours.

The UK worked with its neighbours before we joined the EEC in the 1970s. Quality and market will ensure some continuity of future interest in working with us. But British companies could lose access to EU R&D funding: the UK has done reasonably well out of Clean Skies and should obtain returns from Horizon 2020 which for the first time, will include a defence/security thematic area.

But further out?

The Government has increased national funding on aerospace R&D; but filling the EU gap might be problematic. Politically, the issue will be whether our neighbours, all things being equal, will want the UK to be involved in government-to-government programmes. In the defence sector, this might confirm the long-term transatlantic relationship; the civil arena may become a touch cooler where there are options for potential European partnerships. Things are probably OK in respect of the European Space Agency – industrial returns still largely follow national contributions and we would join several other non-EU contributors. Much will depend on the national government’s willingness to fill any gaps in R&D funding, to ensure that the UK remains an attractive potential partner and good place to do business in.

Aviation’s smoke and mirrors

Ryanair has benefited from the liberalised single European air travel market. (Ryanair)

Moving on to aviation, the picture gets even murkier. The EU is now a single market in air transport, and negotiates air traffic agreements with outsiders such as the US. The two-year transition period under the withdrawal provisions of the European Treaties should cover the European dimension: non-members Switzerland and Norway slot into the European market, and so the UK might be able to arrive at similar arrangements – depending on the temper and duration of subsequent negotiations. But this will give us no say in future policy-making affecting air transport in the Union. Transatlantic and other international agreements might also take rather longer to resolve.

The International Airlines Group (IAG) is neutral on ‘Brexit’; both easyJet and Ryanair want the UK to remain in the Union – as LCCs operating predominately European networks with a lot of traffic in and out of the UK, perhaps more understandable than a long-haul carrier with three hubs to access international routes. The LCCs have warned of soaring ticket prices – but all is again impossible safely to predict. Flight compensation is currently paid for delayed departures from EU airports. Airlines operating inside the EU, or European Economic Area would still be affected. Gaps, however, would have to be remedied by domestic legislation.

To boldly leave?

In aerospace and aviation there appears to be no obvious gain from leaving the EU. It may not do irreparable harm either but the uncertainty might cause some damage. The real risks are in the imponderables of future politics both here and across the Channel.

17 May 2016