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CITY FIRMS SET FOR TAKE-OFF AS REGION'S INDUSTRY SOARS ; Focus on start-ups | Sponsored by THEME Aerospace sector focusAerospace is a vital sector in...

May 14, 2014

CITY FIRMS SET FOR TAKE-OFF AS REGION'S INDUSTRY SOARS ; Focus on start-ups | Sponsored by THEME Aerospace sector focusAerospace is a vital sector in Bristol and the South West, which affects a vast range of companies from giants of the industry down to SMEs. Rupert Janisch found out more.

DO YOU ever hear about a new aircraft being unveiled and wonder why it's big news? Obviously there are large amounts of money sloshing around, with customers in airlines and sometimes air forces all over the world spending many millions or even billions of pounds. However what you might not appreciate is the sheer number of people affected, working for the many businesses that such news affects.

Yes, there are the thousands employed by the giants of the industry - the companies like Airbus, Rolls and GKN. But there are also the many people involved in supplying these mega-firms with parts and expertise for the jets we see flying overhead.

The UK boasts the world's second largest aerospace sector, with around 3,000 companies serving the industry's supply chain.

Many of these companies are based in Bristol and the West Country. They are responsible for designing and manufacturing aircraft components, from fuel systems, wings and landing gear to specialist, individual parts.

The South West's aerospace supply chain provides 41,000 full- time jobs and generates an annual turnover of Pounds 5.5 billion. And it's set to grow further, with SMEs in and around Bristol likely to benefit.

Nick Golding is aerospace sector specialist at the Manufacturing Advisory Service and also sits on the Aerospace Growth Partnership working group for manufacturing and supply chains.

His day-to-day activities therefore involve helping SMEs engage with the supply chain and also engaging with larger scale issues that the industry faces.

He said: "Local companies are getting an increasing pick-up in the marketplace because of increasing volumes, particularly because of the A320 that's launching and the new Bombardier aircraft.

"The launch timescales are starting to be compressed and the production cycles of these aircraft are starting to overlap and that's challenging for the supply chains that feed into them.

"It puts additional pressure on these companies but it also creates additional opportunities in the supply chain. For single- aisle platform aircraft, short-haul aircraft with 100 to 150 seats, the production rate has jumped.

"The industrial strategy focuses on these high volume aircraft, the next generation of these aircraft and what can we do to position the UK for it.

"The high-value work is often linked to the wide-body aircraft, where although as a proportion the volume is lower but the cost is significantly higher.

S3 E01-"Some of the companies in the supply chain have high growth potential and are already starting to grow very EPB-rapidly. They have recently been awarded regional growth funding to make changes in their facilities and they're under the sort of pressure where they're at the point that they need to make significant business decisions to allow them to take advantage of the opportunities in the market. "So for them to develop for the future they need to understand what their technology needs, what their unique differentiators are and how they can finance their business to ensure they can continue to maximise their potential.

"There's no shying away from the fact that aerospace is a very competitive marketplace but we have some unique skills and capabilities in the South West. The region has the largest aerospace cluster in Europe and if we can pull that knowledge together in a collaborative fashion there has to be a competitive advantage in that."

So what do companies need to do to capitalise on the opportunities? One of the major challenges is to find the right routes to market, according to Adrian Harding, head of business development at the West of England Aerospace Forum (WEAF).

He said: "We ran one of our popular 'Meet the Buyer' events in May and predictably, everyone wanted to book meetings with the biggest companies, which included Airbus, AgustaWestland and Rolls- Royce - despite the fact that they really needed to be talking to those lower down the supply chain. This is where the opportunities are most likely to be. There is tremendous optimism in the industry as a whole but huge frustrations are being expressed by companies unable to tap into it. "With the industry set for significant and ongoing growth, we are encouraging suppliers to think carefully about where they ought to be targeting their goods and services.

"We know, for example, that companies like Messier-Bugatti- Dowty, which manufacture aircraft landing gear, are looking to double their production for Airbus in the next 24 months and are keen to expand their supply chain to meet demand. Their existing suppliers will also be looking to bolster their resources." Another ongoing challenge is skills. The West of England Aerospace Forum (WEAF) is working closely with UWE and Bridgwater College in association with local businesses to develop a new aerospace apprenticeship geared to the current and future needs of the sector. This is due to be unveiled later this year.

The other crucial factor is access to working capital. With long procurement cycles, many businesses need help to keep their teams and projects alive from the time a contract is agreed and development work begins to the point at which they start to generate revenues. This can take years. WEAF is holding a 'Navigating the Grants, Loans and Funding Maze' event at Leigh Court, Bristol, on June 5. Supported by accountancy and investment management group, Smith & Williamson, and HSBC, the event will feature 12 speakers offering advice and information.

According to an HMRC Statistical Report issued in August 2013, only 9,900 SMEs claimed research and de-velopment tax credits between 2011 and 2012.

Paul Bray, right, a tax partner at the Bristol office of Smith & Williamson, who will be speaking at the event, said companies were missing out on opportunities to claim potentially significant cash rebates on their R&D activities. He said: "The Government has created a taxation environment, which offers some great incentives. This relief has been designed to encourage businesses to carry out research and development and they can improve cash flow by either reducing their tax liabilities or providing tax repayments. "Many companies miss out by failing to claim R&D tax credits, possibly because they view their R&D activities as integral to their overall trade and not something they specifically identify or because they do not see themselves as carrying out research or advancing technology.

"It is always worth asking a tax adviser to have a look, as you may qualify without realising it."

Richard Brown, partner at law firm Veale Wasbrough Vizards based in Orchard Lane, Bristol, and board member of WEAF, said there was an "imbalance" between the big corporate firms and the smaller companies in the supply chain in the sector.

He said: "The companies at the top of the supply chain have very long term contracts, often with governments, of 10, 20, even 30 years. But they issue much shorter contacts to their suppliers." Mr Brown said that allows the big firms to get the best prices and keep suppliers competitive, but it causes difficulties when the smaller firms want to borrow money to invest in research or equipment. "The smaller companies don't have long term contracts they can take to their bank manager and say 'I'd like to borrow Pounds X million for new kit."

The Government and WEAF are urging big players to move towards longer contracts for suppliers. The hope is such a move would spur more innovation in the sector and help keep the UK and Bristol ahead of the game in such a key export market. Mr Brown added: "There is a need for innovation. Lots of the big companies are going to smaller suppliers saying 'come to us with your ideas' but the problem for the SMEs is how to work collaboratively with large corporate partners who could squash them.

"That's where they need help with things like contracts and intellectual property protection."

'Government needs to help the next generation' Case study ? Avon Valley Precision Engineering (AVPE) was set up in 1997 and manufactures precision machined components for the aerospace and defence markets.

The company, based in Bitton, employs 39 staff and is growing, currently supplying direct into prime and tier 1 partners in the aerospace supply chain. It makes parts for aircraft including the Airbus A380, A350, A340 and A320, the Bombardier Global 7000/8000 Series, as well as supplying the Maintenance, Repair, Overhaul (MRO)market via Airbus Spares and BAE Systems.

Despite being relatively unaffected by the recession, finance director Mark Summers says the company is benefiting from a strong improvement in confidence, which is helping AVPE grow. He said: "The UK aerospace industry is second in the world behind the US and is a world leader in wing, under carriage and propulsion systems. The global aerospace industry is growing strongly on the back of demand from South East Asia, China, India and South America and this gives excellent medium to long-term opportunities for the UK supply chain, if they are able to meet the prime demand for quality and delivery performance.

"I would like to see better access to funding for the SME sector. Banks are holding back our growth opportunities and R&D programs for new generation aircraft technology. We also need to equip youngsters with more appropriate skills for the workplace. We are very committed to apprenticeship programs but more appropriate backing from Government in this area should assist the next generation of the workforce."

Ex-motorbike workshop that has engineered major transformation Case study ? Fowlers Engineering's involvement in the aerospace industry is growing. Five years ago it provided 40 per cent of the company's turnover. Last financial year, it was 63 per cent of the Pounds 1.5 million the company turned over and the forecast for this year is Pounds 1.7 million, off the back of a buoyant aerospace sector.

The company was originally set up in 1917 as a motorcycle workshop but is now completely separate from Fowlers Motorcycles and recently celebrated its 50th anniversary as a limited and independent company.

Employing 27 staff at its site in Montpelier, Fowlers provides sheet metal work, precision machining, fabrication and welding, press work and hand fitting for the industry - generally in bracketry, making brackets for products like landing gear and turbine engines.

Sales and engineering director Gary White, who has been with the company for 20 years, said: "We think our growth in the sector is going to continue and it's more than likely that if this trend continues it will account for 100 per cent within the next five years.

"We've invested quite a bit of time and money into training and recruiting the right calibre of staff to serve the aerospace industry and that's where we see our future.

"We understand the customer requirements but we also have multiple accreditations and approvals. This past year Rolls-Royce gave us integrator status, so we are a preferred supplier and other suppliers have to go through us."

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Nick Golding, below "There's no shying away from the fact that aerospace is a very competitive marketplace but we have some unique skills and capabilities in the South West.


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Source: Bristol Evening Post (England)