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Custom Fittings News & Blog
19 Apr 2017
As the debate around what kind of terms the UK will leave Europe rumbles on and the Government call a snap general election announced to reassert their dominance in parliament, there’s good reason for the UK aerospace industry to be nervous about its future.
Currently, the UK is the second largest aerospace manufacturer in the world, and the fourth largest exporter, sending parts around the globe (in particular the EU). That means that any changes which affect the aerospace industries ability to freely trade with the world could be devastating to their business, and force them to move abroad. It’s a suggestion which has been noted by the government, who recently moved to reassure the industry in a speech, but fears linger
Now, research by the banking giant Santander and EEF has suggested that the sector will continue to thrive, despite those aforementioned risks.
The UK supply chain is worth around £12 billion per year, with the largest percentage manufacturing high tech components like wings and engines. The MRO sector is also large, worth over £2.1 billion in 2014, according to the ONS. There’s also the great many smaller manufacturers, who supply aerospace testing parts and other vital equipment which keeps the UK’s aerospace and aviation industries ticking over.
The survey suggests that increasing aircraft demand from emerging markets should help propel UK aerospace growth, though the report does highlight a myriad of risks to the sector like political pressure for Airbus to move jobs to the EU; regulatory de-harmonisation between the UK and EU; reduced access to skilled labour; and a price rise of row manufacturing inputs thanks to a weakened pound.
Regardless, the authors of the report remain optimistic. Paul Brooks, head of business development and manufacturing at Santander Corporate & Commercial said: “The UK’s aerospace industry has thrived off the back of its competitive advantage in the production of high-value added technology-intensive products, and we forecast that this will continue given that the UK is hardwired into the global supply chain,”
Meanwhile, George Nikolaidis, senior economist at EEF, added: “By staying at the forefront of cutting-edge technologies, aerospace manufacturers have managed to retain a high share of the global market despite fundamental changes in international value chains.”
Both men have high praise for the UK’s technological prowess, but they are worried about the UK’s participation in the latest research going forward. Collaboration in these Europe-wide research programmes by businesses and universities yields faster results than working on your own.
British aerospace companies currently receive £30m each year from RU research and development grants. That’s not a huge sum at all for aerospace companies which deal with huge numbers, it’s the access to the research programmes which is the real value proposition.Read More
07 Apr 2017
In a speech given last month to the Airport Operators Association annual dinner, Lord Ahmed moved to reassure the UK’s aviation industry that yes, their concerns regarding Brexit have been heard, and that aviation and aerospace will continue to grow in importance in the UK economy going forward.
During the speech, now available online, Lord Ahmad noted the relatively strong performance of the UK since the Brexit vote and said that looking forward, the government is looking to ensure that the UK gets a “new, comprehensive, free trade agreement, giving us the best possible access to the European single market” which also includes “the right access to European aviation markets”.
Mr Ahmad said: “It’s in the interests of the UK, the EU, European countries, and everyone who lives or travels between them, to seek a liberal arrangement for aviation.
So that you can continue to offer passengers a wide choice of destinations.
And so Britain can continue to do business with our European neighbours – and vice versa.”
Although he did concede that “Of course, the final outcome will have to await the conclusion of negotiations”
For the aviation secure, concern primarily revolves around access to the single European aviation market, and the disruption that could occur if the government carries out its threats of a “hard” Brexit.
As the first European aerospace economy, the UK is a major employer in the sector and a major exporter of aerospace parts and fittings. However, the UK’s aviation business is also huge. Recent reports from Deloitte cited figures from the CAA which show the UK is one of the biggest aviation markets in the world, with our airports carrying 200 million passengers every single year.
It's become clear, however, that the government are excited for the potential to look beyond their European neighbours to forge and develop new commercial and collaboration agreements with countries further afield.
In particular, Lord Ahmad said that new horizons in China and India meant that the industry within the UK could continue to grow and thrive outside of the EU, once again saying that the government will do all it can to support growth and/or offer alternative access to vital markets.
The Engineer notes that the University of Nottingham have long exploited the potential for collaboration in Asia, having engaged in the area for over a decade. In aerospace, they have forged collaborations with the Aviation Industry Corporation of China (AVIC), the Commercial Aircraft Corporation of China (COMAC) and have further interests in the University of Nottingham Ningbo China (UNNC). All of which points to a brighter future.
Further attention was paid in the speech to the task of modernising the use of the UK’s airspace. He pointed towards the fact that though aircraft are now fitted with the latest satellite navigation technology, the majority of airspace arrangements are over 50 years old now. Without action, he said, flight delays would continue to increase “enormously” over the next few fears.Read More
07 Apr 2017
Previously, we’ve covered the potential that single or small cargo passenger drones could change the way people travel short distances within cities, but what about aircraft capable of ferrying a larger number of passengers across greater distances, what will the innovation there be?
Well, if you believe a brand-new start-up called Zunum Aero, the future exists in small electric jets.
The Kirkland, Washington based company came out of stealth-mode this week with plans to build a fleet of hybrid electric jets to sell to major airlines around the world to service on densely travelled like those between US cities and the UK and Europe. It’s not just hot air either, the company have received funding from some of the biggest names in aerospace, like Boeing and JetBlue.
The company claim that because the jets won’t need refuelling with expensive fuel, they’ll save carriers huge sums, allowing them to reduce fairs by 40 to 80%. They also suggest that because the crafts are smaller than a typical jet, they’ll be subject to fewer security regulations, potentially cutting the time spent at the gate dealing with security, though this is primarily an American concern.
Zunum are planning to build a number of models of hybrid-electric propulsion jets, though at launch their only aircraft will be a tiny thing, between 10 and 15 feet, with a capacity of 10 passengers and a range of up to 700 miles, starting from the early 2020s. That won’t be good enough to replace the huge jets dominating the skies at the moment, but they’ve got plans of that.
By the early 2030s, as electric battery production improves, Zunum hope to build larger aircraft capable of carrying up to 50 people over 1,000 miles on a single charge.
Co-founder of Zunum, Kumar saidL “We’re entering the golden era where we’ll have high-speed links to every community on the backs of quiet, sustainable hybrid-electric technology, and that’s going to happen really fast.”
Nevertheless, there are a mountain of potential obstacles in the way, not least the length of time airplanes are meant to stay in operation for. Typically, consumer jets run for 30 years, and so ensuring that these early hybrid electric jets have as long a life as their traditional counterparts. Zunum are keen to point out that their designs are meant to be compatible with the future of battery designs and range-extending generators, though much remains unknown.
What is clear, however, is that Zunum represents a new wave in aerospace innovation, one which we’re delighted to see as a leading aerospace and aviation testing adapter supplier. These are very early days, but as the world moves away from fossil fuel technologies and towards sustainable, renewable sources and battery units, that innovation will eventually make its way towards the aerospace industry and revolutionise air travel, just as the jet engine did all those decades ago.Read More
03 Mar 2017
British aerospace companies suffered something of a mixed 2016, with the fall of the pound causing factory prices to rise at their fastest rate in years. However, that came along with a sharp uptick in orders from overseas, thanks to buying British being cheaper than ever before.
No company typified the tough year like Rolls Royce. As one of the leading supplier of jet engines around the globe, Rolls Royce enjoy a position within the industry envied by a great many. 2016 though saw the company report a pre-tax loss of £4.6 billion, thanks to a number of costly one off payments for the company.
They included a £671 million corruption settlement made after cases with UK and US authorities and a £4.4 billion write off from currency related contracts. It’s the latter which highlights just how destructive the collapse of the pound was to aerospace companies.
Like many international businesses, Rolls Royce take out long term currency trades in order to shield themselves from fluctuations in currency valuations. However, these were designed to protect RR from a fall in the dollar, not the pound. So when sterling took a dive after the UK voted to leave the European Union, the company had to take a £4.4 billion hit.
Those payments mask the fact that Rolls Royce actually did better than many analysists predicted they would, posting an otherwise profit of £813 million – although it was down from £1.4 billion for the previous year.
Yet, the aerospace industry is optimistic about the coming year. In a press release circulated last week, it was announced that 69 new aircraft rolled off the production line in January, which despite being down from the exceptional December witnessed (181 aircraft), remains a strong January performance for the industry.
A major order was also placed for single aisle engines, pushing the engines backlog up to record breaking levels, with manufacturers now having 23,392 to deliver – providing a huge boost for Aerospace testing fittings companies like us.
Paul Everitt, Chief Executive of ADS Group, commented: “January’s figures show a confident start to the year for the aerospace industry. 2017 is set to be a defining year for UK industry as it asserts its strengths in tough international markets against the challenge of Brexit.
“Through the launch of its industrial strategy Green Paper, the government has reaffirmed long-term commitment to work with the aerospace industry – through the Aerospace Growth Partnership – in support of R&D and supply chain competitiveness. This approach is encouraging world-leading companies to invest in new facilities, technology and skills, and positioning the UK to win work on future aircraft programmes.”
03 Mar 2017
There’s no denying that private space flight companies like SpaceX and Virgin Galactic see huge potential on the possibility of so-called “space tourism”, but they’re not the only space flight companies interested in the space. Major national agencies like NASA are also keenly interested, but there’s a number of issues that have yet to be resolved. Key among those? Where these commercial and passenger rockets would fly from.
In an announcement last month, the government announced that they wished the UK to become a world leader in space travel by 2020, beating out the likes of the United States and other world superpowers in the process. The plan centres around building spaceports which would allow consumers to fly out in to space, and was launched (if you’ll forgive the pun), by Jo Johnson, Boris’ brother and current science minister.
He said: “We will cement the UK’s position as a world leader in this emerging market”, adding “Space flight offers the UK the opportunity to build on our strengths in science, research and innovation. The Spaceflight Bill was later unveiled in parliament. Some of the port locations being considered are Newquay Airport in Cornwall, Llanbeddr airport in Snowdonia and Prestwick airport, near Glasgow, though no locations have been officially chosen.
As a leading UK supplier of Aerospace testing parts, we’re delighted by the government’s announcement that it wishes to push the accelerator on spaceflight innovation in the UK. Each and every day we work with engineers to solve complex problems with custom fittings, and we know that investment in this area could yield a huge bonus for the UK’s manufacturing and technology sectors.
“It provides opportunities to expand into new markets, creating highly-skilled jobs and boosting local economies across the country. That is why it is one of the key pillars of our Industrial Strategy.
“We want to see the UK space sector flourish, that is why we are laying the groundwork needed for business to be able to access this lucrative global market worth an estimated £25 billion over the next 20 years”, Mr Johnson added.
The draft bill revealed in parliament also grants researchers the permission to perform experiments in zero gravity to help battle bugs like MRSA and Salmonella. Indeed, it’s thought that only 10% of the money generated from these commercial space flights, with the rest coming from missile launches, science expeditions, refuelling missions and more.
One potential roadblock in the way of these spaceports would be the planning permissions required to create them. The United States is blessed with a huge landmass, with thousands of square miles of uninhabited land. The UK, on the other hand, does not. With the noise and pollution created from spaceflight, all locations would have to be far away from populated areas, potentially causing an issue in protected areas.
Nevertheless, with such strong government support, the UK’s aerospace industry looks set for a real boost over the next decade.
01 Mar 2017
UK manufacturers order books have swelled in the first three months to February as the weaker pound boosted output, the Confederation of British Industry (CBI) have said. However, they warned that the weaker pound has boosted expectations of factory gate prices to an almost six year high.
The survey found that order books improved considerably for the fourth consecutive month over the quarter, hitting the highest level in two years. This renewed order strength was driven by mechanical engineering and metal products businesses like ours, who produce stainless steel welding fittings. Indeed, optimism surrounding production across the sector was found to be at its highest level in two years.
CBI’s survey took in 47 manufactures and found that 43% expected output to rise over the next three months, compared to just 10% which expected a fall, giving a positive balance of 33% - the highest since September 2013.
That optimism is borne out by economists like Ruth Gregory at Capital Economics, who said that the data found that the “manufacturing sector is getting back on its feet” following a worrying 2016, before going on to state that the sector is on course to grow 1.5% this quarter.
"With manufacturing exports set to benefit from the fall in sterling and solid demand from abroad, the future looks more promising for manufacturing activity than it has done for some time," she said.
That growth can partially be attributed to the weakened pound making British products cheaper abroad, although that weak pound has also driven up the cost of importing dramatically.
As such, the survey also found that 38% of manufactures expected their consumer prices to rise over the next three months, with inflation expectations picking up “notably” within the food and drink sector. Just 6% of manufacturers felt that they would be able to cut prices over the same period, resulting in a 32% balance, the highest since April 2011.
That’s bad news for consumers, which have been tightening their belt post-Brexit and will have to do so further as everyday essentials like food and drink.
As a result, Rain Newton-Smith, CBI chief economist, urged the government and chancellor to offset the cost pressures being felt by businesses by bringing forward a planned measure to link future business rate increases to the consumer prices index (CPI), instead of the real prices index (RPI) to 2018, instead of from 2020.
She added: "Over the longer term, investment in education and innovation as part of the Government’s industrial strategy will really need to deliver in the face of increasing political headwinds."
The value of sterling is set to be in flux for a good while yet, as the government negotiates with Europe regarding the terms of separation and negotiates with powers around the world for trade deals.Read More
22 Feb 2017
In a shock for the manufacturing industry, one of the titans of British manufacturing has posted the biggest loss in their history.
Rolls Royce, supplier of jet engines for companies around the world, posted a loss before tax of £4.6 billion for 2016. However, with one-off costs stripped out, the company’s underlying profit was better than many experts had predicted. Rolls Royce is a separate company to the car making division.
One off costs for 2016 included issues like a £671 million corruption settlement made after cases with UK and US authorities and a £4.4 billion write off from currency related contracts. The reason for that? Well, like many international businesses, Rolls Royce takes out long term currency trades in an effort to shield themselves from fluctuations in currency valuations.
However, this was designed to protect RR from what was considered the most likely scenario – a fall in the dollar. Indeed, many were put in place before the EU referendum was even announced. That has meant that since the UK voted to leave the EU and the value of the pound has fallen significantly, Rolls Royce have had to make that £4.4 billion write off.
Profits aside from these costs sat at £813m, down from £1.4bn from the previous accounting year, but still a respectable profit.
Rolls Royce are expecting 2017 to see a “modest performance improvement”, though chief executive Warren East said that more has to be done to bolster profit margins within the company.
"We must ensure our wide ranging business transformation programme delivers the full benefits expected, not only in terms of cost savings but also the cultural and behavioural changes necessary to ensure the transformation is sustained and high standards of business conduct are maintained," said Mr East.
"These are essential if we are to become a more trusted, resilient company."
Rolls Royce continue to expand at a remarkable pace, which is slowing down profit growth, but they will be susceptible to the weakened pound across the year.
The value of sterling has meant that whilst it’s cheaper for overseas companies to buy British, it’s much more expensive for UK manufacturers to buy from abroad. This has driven costs up for many, and is tipped to result in increased prices for the consumer later in the year.
As a UK supplier of BSP hose fittings and PFTE hose fittings, we too are susceptible to these increases. However, by buying raw materials from the UK, the cost increase has been negligible. Nevertheless, the effect on UK manufacturers shouldn’t be underestimated. A report earlier in the month found that factory costs rose at their fastest rate since records began in 1992.
Rob Dobson, Senior Economist at Markit said: “UK manufacturers have reported a bumper start to 2017, but are also seeing prices rise at an unprecedented rate. Factory output growth accelerated to a 32-month high in January, as solid domestic demand continued to drive production volumes higher. There were signs that the boost to export orders from the weak exchange rate was waning, as growth of new business from abroad slowed sharply.”
14 Feb 2017
For decades, growth in the UK has been led by a strong services sector first, and a flagging manufacturing sector second. However, new survey data released within the last week seems to show that the pendulum is beginning to swing in the opposite direction.
Growth in the country’s dominant services sector eased back during January to the slowest pace for four months, according to the report published by Markit. The Markit/CIPS inde fell from 54.5 in January from 56.2 in December.
Whilst potentially foreshadowing bad news for the services economy, it remains the sixth consecutive month of growth in the services sector, providing a boost for the soon-to-be post-Brexit economy. Any number above 50 indicates growth, whilst anything below it indicated contraction.
The fall in growth follows a number of other published surveys that have indicated a fall in consumer borrowing and confidence. Lloyds, for example, found that customers were paying more for essentials because of higher prices trickling down. However, we’ll have to wait a couple of weeks to confirm if that slowdown is anecdotal or genuine.
Indeed, Samuel Tombs, chief UK economist at Pantheon Macroeconomics believes that these numbers might overestimate how well the services sector is doing as “it excludes retailers, who likely will find that consumer demand crumbles as they pass on higher import prices”.
Meanwhile, the PMI survey for manufacturing has shown that growth in the sector accelerated to its fastest rate in years off the back of higher orders from home and abroad. It’s a sign that the industry could be back on the rise, and might well help the UK rebalance itself when Article 50 is triggered later in the UK.
However, it’s not all good news for manufacturing as costs soared to their highest since Markit began taking records in 1992, which could well limit the impact of a manufacturing resurgence.
Indeed, it’s thought that the increased costs of manufacturing could lead to higher costs for consumers, further limiting the services sector. As a company which specialises in JIC fittings and hose fittings UK, primarily sold to other manufacturing businesses, the cost of increased materials is poised to hit.
Rising prices will likely constrain growth for 2017, said Scott Bowman, UK economist at Capital Economics. He’s just one of the many economists expecting that increases this year will erode the spending power of the consumer in the UK.
Nevertheless, Mr Bowman said “We think that these forces will result in a rare period where manufacturing sector growth is higher than that in the services sector.”
Capital Economics latest forecast predicts that saving rates will fall to their lowest level since 1963 as consumers borrow to cope with the rise in prices, rather than cut back on spending. Whether these forecasts are correct will be hotly contested over the next few years, but if consumer spending falls sharply, then so will the economy as a whole.Read More
10 Feb 2017
The weakened pound was always going to cut both ways for UK manufacturers. Following on from the vote to leave the United Kingdom, the immediate devaluing of the pound meant that yes, UK products were cheaper to buy for countries around the world, but also the costs for factories would rise in tandem.
Until January, however, manufacturing costs were being outstripped by the increase in demand for British product, both domestically and from overseas markets. Worryingly, that trend did not continue into 2017 as data firm Markit recorded the biggest ever increase in input costs for UK manufacturers, sending its input prices index to an all-time high of 88.3.
The highest reading since measurements were initially taken in 1992 is a significant rise from the already steep 77.7 recorded in December, and is high above the 50 reading which indicates no change.
More than half the firms surveyed by Markit blamed the fall in Sterling with the increase in the cost of raw materials, but factors like the rising price of oil is also a factor. Worryingly for consumers, there are initial signs that manufacturers are starting to pass these costs on to consumers, as Markit’s output index posted one of its biggest jumps ever.
If that trend is echoed around other sectors, it could indicate that the UK is in line to see some strong inflation.
Nevertheless, UK manufacturers reported a fantastic start to the year with factory output growth growing at its fastest rate in 2 and a half years. The main source of the new orders was from within the domestic market, according to the survey, as British manufacturers and companies bought stainless pipe fittings and NPT fittings, alongside other British made goods. Overseas orders also saw a slight bump in sales.
Rob Dobson, Senior Economist at IHD Markit said: “UK manufacturers have reported a bumper start to 2017, but are also seeing prices rise at an unprecedented rate. Factory output growth accelerated to a 32-month high in January, as solid domestic demand continued to drive production volumes higher. There were signs that the boost to export orders from the weak exchange rate was waning, as growth of new business from abroad slowed sharply.
“The big numbers coming out of the January survey were for the price measures. Input cost inflation spiked to the highest seen since data were first collected in 1992. Over 55% of companies’ link rising costs to the exchange rate. However, we’re also seeing more companies reporting domestic supplier price hikes resulting from the rising cost of commodities such as fuel, oil, plastics and steel. With cost pressures increasingly feeding though to higher selling prices at factories, it looks inevitable that consumer price inflation will rise further in coming months.
“The question is whether increased cost inflationary pressure will act as a drag on manufacturing growth going forward. Companies seem fairly sanguine on this front, as a new index tracking business confidence signals optimism climbed to an eight- month high. Taken alongside robust output growth, rising new order inflows and job creation, all signs are pointing to a solid contribution to UK GDP from manufacturing during the opening quarter of 2017.”Read More
08 Feb 2017
The Prime Minister, Theresa May, has announced a new interventionist industrial strategy in a bid to drive the UK away from an over reliance on a services sector, which currently dominates the UK economy.
The announcement comes after mounting pressure from members of her own cabinet and heads of the British manufacturing industry to make plans for the UK’s struggling manufacturing industry going forward. Indeed, the calls for answers have only grown louder since Mrs May announced that yes, the UK would be leaving the single market in the coming years.
Broadband, transport and energy are highlighted aspects of the plan which bid to “align central government infrastructure investment with local growth priorities”. The ten point plan outlined by the PM involves:
- Investing in science, research and innovation
- Developing skills
- Upgrading infrastructure
- Supporting business to start and grow
- Improving government procurement
- Encouraging trade and inward investment
- Delivering affordable energy and clean growth
- Cultivating world-leading sectors
- Driving growth across the whole country
- Creating the right institutions to bring together sectors and places
Further to this, the government will set out a green paper with the ways that they can help to support businesses by addressing onerous regulatory barriers and agreeing trade deals to make up for the fact that UK manufacturers are soon to lose access to the single market.
Additionally, the government will look to support those who wish to set up establishments which encourage innovation and skills development, alongside boosting STEM skills, digital skills and numeracy whilst investing £170m in new technology institutes.
That fund will be known as the Industrial Strategy Fund and will look to benefit “smart energy, artificial intelligence and 5G mobile broadband”, however, such a small sum wouldn’t affect research and deployment in these areas dramatically.
In total, £4.7bn in additional funding will be provided by the government for R&D, as announced in November of last year. As part of the plan, the government are holding a "consultation on what should be our priorities for a long-term industrial strategy".
The director-general of the CBI, Carolyn Fairbairn said "It must help fix the country's productivity problems and remove the regional inequalities that have dogged our country for generations, having a positive impact on living standards, wages and the future opportunities of many people."
However, she stressed that it will be through skills training, regulation and infrastructure that the government will see the best results, rather than through cash injections. A statement that we, as one of the leading suppliers of welding fittings in the UK, wholeheartedly agree with.
However, Labour’s shadow business secretary, Clive Lewis, questioned how much money the government was investing into the strategy, saying "We await further detail, but what's been announced so far will fall far short of getting us back to where we were in 2010, let alone equip our economy for the challenges of the 21st Century."
Nevertheless, the announced plan isn’t a million miles away from what UK manufacturing has been asking for over the last five years. Whether what comes out at the end of the consultation period is workable is something else entirely, but this is welcome news so early in 2017.Read More