Recommendation 14

HM Government Acknowledged

Like the Committee, the Government is acutely aware of the current fragility of the commercial aerospace sector as a result of the Covid pandemic and agrees that a strong aerospace sector is important to this country, driving economic growth and prosperity across the breadth of the UK. The UK aerospace sector is a global leader in some of the most technological areas of aircraft production, including engines, wings and systems. We recognise that many aerospace businesses, including SMEs, provide goods and services to both defence and civil aerospace sectors and would like to reassure the Committee that we are fully aware of the close links between the commercial aerospace industry and the defence supply chain. 10 Fifth Special Report of Session 2019–21 Covid is presenting particular difficulties for the aerospace industry, and mindful of that, we continue to work closely with aerospace companies to mitigate the risks wherever possible, and to ensure that vital Defence outputs continue. Civil aerospace companies have been able to draw upon the Government’s extensive business support measures during this unprecedented period of challenge, including furlough, Coronavirus Business Interruption Loans and Bounce Back loans. The aerospace industry and its aviation customers have been supported with around £11 billion made available through loan guarantees, support for exporters, the Coronavirus Corporate Financing Facility, and Research and Development grants. To help secure jobs for the long-term, the Government is supporting the development of future green aviation technologies in the UK through our £1.95 billon Aerospace Technology Institute programme and the £125 million Future Flight Challenge. We are committing to JetZero and to becoming a world leader in Sustainable Aviation. The MOD is working with the Department for Business, Enterprise and Industrial Strategy to explore how we can plan and coordinate better our respective investments in aerospace research and technology. The Committee is right to raise the importance to Defence of supporting the UK civil aerospace industry. While Covid has put significant pressure on the industry, there is evidence to suggest that Defence involvement is playing a crucial role in sustaining work until the civil sector recovers. The MOD takes the health and resilience of its supply chains very seriously and has undertaken significant work with defence suppliers to help alleviate financial problems and improve resilience. We have actively supported the defence sector with increased government financial assistance (via the Cabinet Office-led initiative to support strategically important suppliers, the Furlough Scheme, and the Supplier Interim Payments Scheme) and contract management support. The MOD has ensured that suppliers at risk continue to be paid as normal, and in line with Government guidance, has paid £140 million in interim payments to ensure that critical defence outputs can continue uninterrupted. The Prime Minister’s announcement of an historic increase in defence spending will help to secure jobs in our aerospace industry. The Government is making a strategic investment of more than £2 billion over the next four years in the Future Combat Air System (FCAS). Our commitment to FCAS will generate thousands of jobs across the country over the coming years and will provide a vital boost for UK aerospace. We are aware that based on these investments, some companies have been able to sustain expertise by redeploying staff from civil to military programmes. The Government is committed to ensuring our aerospace industry will not only survive but will thrive in the future.