Aerospace manufacturers urgently need clarity on energy price cap implications

According to the latest data from ADS, aerospace manufacturers have seen strong levels of recovery in July 2022, with 531 global aircraft orders placed in July 2022 – the highest number of aircraft orders in a single month since 2014. 

Although aerospace appears to be maintaining an upward trend in orders, concerns are growing across the wider UK manufacturing sector as labour shortages, dwindling output, pressures on salaries and soaring energy prices squeeze profit margins and productivity levels. 

Mark Nisbett, partner and head of aerospace and defence at RSM UK, comments: ‘With year-to-date aircraft orders the largest for the first seven months of the year since 2014, the return of the Farnborough International Airshow has been a real boost for the industry; reconnecting global manufacturers to discuss ESG, new, greener and cleaner technologies, and long-term growth strategies. 

‘However, despite the clear positivity being gained as aerospace manufacturers experience less cancellations to orders, headwinds remain as the impact of energy price cap rises materialise and warning signs are evident across the wider UK manufacturing sector. 

‘The sharp fall in manufacturing PMI in August to 42.4, its lowest level since the financial crisis excluding the pandemic, suggests that the UK manufacturing sector is already entering into a recession. Challenges remain for manufacturers as employment shortages, disputes over salaries and productivity gaps will undoubtedly increase as the cost-of-living crisis heightens, adding further financial pressures to consumers and businesses alike.’

He added: ‘As aerospace manufacturers are highly energy intensive, we expect that rising energy prices will cause lower margins and tighter cashflows for businesses that haven’t managed to hedge these costs, until energy prices return to more normal levels. With strike action already taking place in response to inflation and earnings, aerospace manufacturers urgently need clarity from the government on energy price caps and the extent to which they’ll be supported.’