LONDON – According to the latest data from ADS, aerospace manufacturers saw the strongest Q3 for global aircraft orders since 2015. With 670 aircraft orders placed in Q3 2022, a 210% increase on Q3 2021, aerospace manufacturers are continuing to buck the trend within the wider manufacturing industry where output is falling sharply and new orders are contracting.
Despite soaring energy and raw material costs, manufacturers delivered 252 aircraft in Q3 2022, up 19% on deliveries in Q3 2021. The backlog of aircraft orders (13,036) is up 2% on Q3 2021, and is worth a potential £217bn to the UK economy and several years’ worth of work for manufacturers.
Mark Nisbett, partner and head of aerospace and defence at RSM UK, comments:
‘With global aircraft orders for Q3 2022 at the highest level since 2015 and a strong backlog of orders, aircraft manufacturers will be hopeful that they can ride out this challenging economic time, as they continue to buck the trend within the wider manufacturing industry and show long-term recovery post-Covid.”
“The backlog of orders amounting to several years’ worth of work also bring welcome news for the sector, with manufacturers preparing to ramp up production lines as the possibility of aircraft deliveries exceeding 1,000 aircraft for the first time since 2019 becomes more likely.”
“However, despite these encouraging figures for Q3 2022, the UK’s and wider global economic downturn and wider geopolitical issues may negatively impact demand and could therefore have a medium-term impact on passenger aircraft production, especially when thinking about air passenger footfall as food and fuel poverty heightens for millions of households amidst soaring energy prices, interest rates and inflation.”
‘In our recent survey in partnership with Make UK, 6 in 10 manufacturers said they plan on investing more in plant and machinery over the next two years.”
“But, with interest rates expected to peak at around 5% early next year, coupled with ongoing labour shortages, global supply chain issues and a potential fall in consumer demand, aerospace manufacturers and other capital-intensive industries face headwinds.”
“As interest rates rise, businesses may struggle to refinance debt and borrow to invest, and as such, capital investment may dwindle.’
He added: ‘While the government’s investment in the ‘Generation Aviation’ recruitment campaign and its £89m deal with leading Brazilian aerospace manufacturer Embraer brings further encouraging news for the UK aerospace sector, the challenges faced by the industry are not going to be solved overnight.”
“While the energy price guarantee is helping manufacturers to a degree at present, what happens when this runs out in April is not yet clear, and the industry needs some certainty so they can plan ahead. As the chancellor prepares to give his fiscal announcement on 17 November, businesses will be waiting with bated breath for clarity and long-term solutions for both the energy and skills crises.”
RSM is a leading audit, tax and consulting firm to the middle market with 3,660 partners and staff operating from 32 locations throughout the UK. For the year ending 31 March 2021, RSM generated revenues in excess of £376m.
RSM UK is a member firm of RSM International – the sixth largest network of audit, tax and consulting firms globally. The network spans more than 120 countries, over 860 offices and more than 51,000 people, with global revenues of $7.26 billion (US).