The impact of on the UK economy

THE IMPACT OF AIRBUS ON THE UK ECONOMY JUNE 2017

1

The impact of Airbus on the UK economy

TABLE OF CONTENTS

Executive summary 2

1. Introduction 6

2. Airbus’ impact on the UK 11

2.1 Direct impact 11 2.2 Indirect impact 12 2.3 Induced impact 16 2.4 Total impact 16

3. Airbus’ regional impact 19

3.1 Wales 19 3.2 The South West 22 3.3 The East of 23 3.4 The South East 25 3.5 Rest of the UK 27

4. Airbus’ catalytic impact 35

4.1 Science and engineering skills 35 4.2 R&D and innovation activity 38 4.3 Assisting the UK’s Emergency services 38

5. Conclusion 41

6. Methodology 42

1 The impact of Airbus on the UK economy

EXECUTIVE SUMMARY

Airbus is one of the world’s leading manufacturers of aircraft, helicopters, and defence and space equipment. Its facilities across the UK employ nearly 15,000 people and represent £7.8 bn a sizable and crucial part of its operations. Airbus factories GDP contribution in 2015 in Broughton and Filton are responsible for assembling the wings and landing gear for its commercial aircraft, its centre in pioneers space technology, and numerous other Larger than the economy of locations throughout the country feed into the Company’s broad Newcastle upon Tyne. scope of operations.

Airbus’ impact is not limited to its cutting-edge manufacturing: it also makes a substantial and important contribution to the UK’s economy. This impact stems not only from the Company’s activities at its UK facilities, but also the presence of UK firms in its global supply chains and the spending of its UK-based 117,400 workforce in the wider consumer economy. Oxford Economics’ bespoke Global Economic Impact Model jobs has been used to map Airbus’ complex, interwoven, global supply chains. This enabled us to explore how the Company’s Employment contribution purchases from its operations in , for example, then trigger in 2015. activity in the UK, further up the supply chain. Consequently, this unique model makes it possible to develop a comprehensive picture of the Company’s impact on the UK economy. Equivalent to around eight percent of In 2015, Airbus’ global operations supported a £7.8 billion sector employment. contribution to the UK economy. Much of this impact was generated in Airbus’ UK supply chain, which includes companies such as Rolls-Royce, GKN and BAE Systems. To put this footprint into context, in 2015, the contribution to GDP supported by Airbus was larger than Newcastle’s economy and nearly a third bigger than the economy of Oxford. £1.7 bn The activity supported by Airbus sustained 117,400 jobs Fiscal contribution in 2015. throughout the UK in 2015. This means that more than 100,000 people who did not work for Airbus had jobs linked to the Company in some way. For some 64,000 people, their jobs were Equivalent to 60 percent located in Airbus’ UK-based supply chain. The total number of of spending on jobs supported by Airbus’ operations in 2015 was equivalent to all fire-protection services. of the jobs in Swansea.

The activity and employment supported by Airbus’ operations in 2015 generated significant tax revenues for the Exchequer. We estimate Airbus’ operations raised more than £1.7 billion in tax revenues in 2015. This means £1 in every £400 collected by the UK government can be attributed to Airbus’ activity. Put another way, the taxes generated by Airbus alone in 2015 were equal to 60 percent of projected public spending on fire-protection services in 2015/16.

2 The impact of Airbus on the UK economy

Airbus’ impact reaches all parts of the UK. It operates facilities in nine of the UK’s nations and regions, and makes purchases from a wide range of businesses throughout the country. However, the Company’s impact is not evenly distributed across the country. 1.6% The extent of Airbus’ impact in each region reflects the size of its Airbus’ contribution to the operations there and the value of its procurement from firms in Welsh economy in 2015. the region.

Wales is home to key parts of Airbus’ worldwide operations Equivalent to 28 percent of and the Company is one of the nation’s largest employers. The the economy of Newport. 6,400 people employed at its Welsh sites meant 0.4 percent of all jobs in Wales were at one of Airbus’ facilities in 2015. In total, the Company supported a £845 million contribution to Welsh GDP in 2015, equivalent to 1.6 percent of the nation’s economy. In total, including those employed directly, as well as in its supply chain and through consumer spending effects, Airbus supported some 11,600 jobs in Wales in 2015, equivalent to 5.8 percent of all 17,500 employment in . Airbus also contributed over £1 billion to the South West jobs economy. This contribution stemmed from its major site at Filton and its South West supply chain, which includes major suppliers Supported by Airbus in GKN, and . This impact—equivalent to a third of the South West. the city of Gloucester’s economy—supported 17,500 jobs in the region, equivalent to a sixth of all employment in Bath and North East Somerset. Or one in six jobs in Bath and North Somerset. Airbus is a major employer in the East of England. Nearly five percent of all jobs in Stevenage are at either at the Airbus or MBDA sites in the town. When the Company’s total impact in the region is considered, the number of jobs it supported increases to 10,400. This employment was associated with a £734 million contribution to the region’s economy—equal to one third of Stevenage’s own economy. 5% Of jobs in Stevenage The Company has a sizable presence in the South East. are at Airbus Airbus operates many sites within the South East, including its Defence and Space centre in Portsmouth, and AirTanker in Oxfordshire, Vector Aerospace in Hampshire, This equates to 42 and Surrey Satellite Technology Ltd in Surrey. In total, Airbus percent of the town’s generated a £1.3 billion contribution to the South East economy in manufacturing jobs. 2015 and supported some 15,200 jobs in the region.

However, Airbus’ impact is not restricted to these four regions. Indeed, Airbus contributed over £3.9 billion to regional economies in the rest of the UK, with £1.2 billion located in the East Midlands, where its third largest global supplier Rolls-Royce is located. This activity supported some 62,700 jobs throughout these regions.

3 The impact of Airbus on the UK economy

EXECUTIVE SUMMARY (cont)

While Airbus’ operations support thousands of jobs and billions of pounds’ worth of GDP, its influence on the UK economy and society extends far beyond this. Airbus supports and expands £1.3 bn the UK’s stock of technical expertise, engages and inspires Contribution to the future generations of scientists and technicians, and runs highly South East economy successful university and apprenticeship schemes.

The Company’s innovations also contribute to the UK’s R&D Equivalent to half of the stock, spilling over into the wider economy and raising the UK’s ecomony of Woking. productivity. Finally, the products it manufactures play a crucial role in society: from aircraft facilitating trade and tourism to helicopters supporting the emergency services. In all these ways and through the sizable contribution it makes to the UK economy, the thousands of jobs its support and the significant amount in tax revenue that is generates for the Exchequer, Airbus has an undeniably important role in UK life.

4 EXECUTIVE SUMMARY (cont) The impact of Airbus on the UK economy

1. INTRODUCTION

Airbus1 is one of the world’s ignore any of its activity leading manufacturers of and procurement occurring aircraft, helicopters, and elsewhere in the world. Such an defence and space equipment. approach would fall far short It has a reach that extends of comprehensively measuring from providing employment the impact of Airbus—a truly at the local, individual level, to global company—on the UK. maintaining the vital linkages Therefore, this report uses that support global society. Oxford Economics’ bespoke Indeed, an Airbus aircraft Global Impact Model. The lands every 1.5 seconds around unique global model captures the world, and its helicopters how Airbus’ activity and provide crucial support for the procurement in other countries UK’s police and air ambulance affects the UK. services. Airbus is also helping to further scientific knowledge, The story of Airbus’ impact on building the Rosetta spacecraft the UK is not just a national that orbited a comet 719 million level one. The Company kilometres from Earth. has a sizable presence in communities throughout the Although headquartered in country, and its impact reaches the Netherlands, the Company all regions and nations in the maintains a considerable UK. To explore how Airbus’ presence across a number impact extends across the of EU countries. Its facilities length and breadth of the UK in the UK represent a sizable we also employ our UK regional and important part of its impact model. operations. Airbus’ factories in Broughton and Filton are The remainder of this responsible for assembling report explores how Airbus the wings and landing gear contributes to the UK. First, for its commercial aircraft, we discuss the impact that its centre in Stevenage the Company’s operations had pioneers space technology, on the UK economy in 2015. and numerous other locations Then, it investigates how this throughout the country feed impact was distributed among into the Company’s broad the UK’s nations and regions, scope of operations. drawing special attention to the location of its primary UK This report seeks to provide facilities. Finally, we address a comprehensive assessment the softer impact of Airbus’ of Airbus’ contribution to presence on UK economy and the UK. However, doing so society. Although less tangible requires moving beyond and difficult to quantify, these the limitations of a standard wider, catalytic contributions economic impact assessment. are notable nonetheless. Typical impact assessments only focus on a company’s activity in one country, and

6 1 Airbus is not a single entity, but rather a collection of companies operating under the Airbus umbrella. This study seeks to capture the combined impact of 12 separate companies (Airbus Operations Limited, Limited, Paradigm Services Limited, Paradigm Secure Communications, Cassidian - Airbus DA, Surrey Satellite Technology Limited, Airbus Military Limited, Limited, Airbus Helicopters UK Limited, Vector Aerospace International Limited, Satair UK Limited and Airbus Group Limited. A further company—GPT—also falls under the Airbus umbrella, but as its activities are outside of the UK it is not considered in this analysis) and two joint ventures (AirTanker Holdings limited [Airbus owns 40% of company] and MBDA UK Limited [Airbus owns 37.5% of the company]). In compiling the aggregate results, we consider only the Airbus’ share of these companies’ total impact. The impact of Airbus on the UK economy

1. INTRODUCTION

Fig. 1. Airbus’ UK locations in 2015

Aberdeen

Almondbank

Farnborough

Bolton Stevenage Broughton

Oxford

Newport

Filton

Bristol Strand, London

Brize Norton Hounslow Gosport Guildford Portsmouth Alton

Source: Airbus

7 The impact of Airbus on the UK economy

INTRODUCTION TO ECONOMIC IMPACT ANALYSIS This report analyses Airbus’ economic impact across three core *This includes non-UK based channels that all standard impact studies would assess (Fig. 2). Airbus entities These are the:

• Direct impact, which is the economic activity that Airbus generates at its UK offices and plants because of its operational spending; and • Indirect impact, or supply chain impact, that occurs because Airbus buys inputs of goods and services from UK businesses, and Airbus’ international suppliers (or businesses in their supply chain*) buy inputs of goods and services from UK businesses; and • Induced impact, or wage-expenditure impact, which is the economic activity stimulated from Airbus’, and Airbus’ suppliers’, wage payments to employees.

We analyse these channels of impact using three core metrics:

• Employment, measured on a headcount basis so that it is possible to make comparisons to national statistics; • Gross value added contribution to UK GDP; and, • Tax receipts generated by the UK activity and employment supported by Airbus.

While most economic impact studies assess these effects based only on spending that occurs within the country of interest, this report goes further, to assess the impact of Airbus’ global activities (Fig. 3). This is a more comprehensive approach that is suited to companies with a global footprint, like Airbus. A detailed methodology discussion is in the appendix to this report.

Fig. 2. Core economic impact channels

Direct impact Induced impact Total impact

Payment of GDP employees’ wages, which are spent on: Employment Operational spending by Airbus Food and beverages Tax recepts at the company’s Indirect impact Recreation UK oces Clothing and plants Purchases of inputs Household goods from global suppliers

Suppliers’ own supply chains

Source: Oxford Economics

8 The impact of Airbus on the UK economy

Fig. 3. Our global model captures Airbus’ UK and international activities

STANDARD APPROACH… …PLUS GLOBAL LINKAGES

ROAD SUPPLIE IN AB K R HA SUPP U S Y C N LIE P PL IG R E UP E S N S O AD R P D T RO O E B N D A F EN D UK SP REST OF ER U M SU WORLD K N W O C C D A O N G N E E S S P T S I U S F S M E O E R R D G P R S EN E P A R P M W U O F NS F O I REIG N CO T S Source: Oxford Economics

GLOSSARY Gross value added: measures Input-output table: An input- the contribution to the output table is a one-year £: all currency values are economy of an individual snapshot of supply-chain in 2015 prices and exchange company. It is most easily purchases of goods and rates. thought of as a company’s services by every industry revenue minus the cost of from every other industry, as Direct impact: the impact of bought in goods and well has household purchases Airbus at its operational sites services used up in the from every industry. This study in the UK. production of that revenue. draws on the input-output The sum of gross value added tables for the UK published Employment: the number of across all companies in an by the ONS in 2014 and rest employees and self-employed. economy is equal to GDP after of the world published by the minor adjustments for taxes OECD in 2015. GDP: the most commonly and subsidies. used metric to assess the Office for National Statistics health of the UK economy. Indirect impact: Economic (ONS): The official UK It is used to determine the activity stimulated by Airbus’ government statistics agency. economy’s rate of growth purchases of inputs of or wether it has entered a goods and services from the recession. It is equal to the Company’s supply chain. gross value added of all firms in the UK economy, after Induced impact: Economic minor adjustments for taxes activity stimulated by Airbus’ and subsidies. wage payments to employees.

9

The impact of Airbus on the UK economy

2. AIRBUS’ IMPACT ON THE UK

Airbus has a considerable exploring the value added in the UK. Its workforce economic footprint in the UK. contribution it makes to the represents around 16 percent Thousands of people work at its economy, and the tax revenues of all employment in UK air facilities to design, manufacture it raises for the UK Exchequer. and spacecraft manufacturing and deliver its products to in 2015.2 Looking at Airbus’ consumers around the world. 2.1.1 Airbus’ UK workforce employment in a slightly The purchases Airbus makes different way, its workforce from its suppliers support In 2015, Airbus employed nearly is equivalent to 10 percent further activity throughout 15,000 people across the UK. of employment in the UK the UK, sustaining thousands Four locations dominate the motor vehicles and trailer more jobs across the country. Company’s UK operations. manufacturing industry.3 One Finally, the wages paid to its Nearly 6,000 people work in every 170 UK manufacturing own employees, and those at the Company’s site in jobs was an Airbus job.4 employed in its supply chain, Broughton (Fig. 4). Airbus’ site fund consumer spending and in Filton, near , employs 2.1.2 Airbus’ direct contribution deliver additional economic a further 3,000 people. Over to UK GDP benefit to the UK. 1,200 people work at the Airbus Defence and Space facility Airbus generated nearly £5.9 We quantify Airbus’ economic in Stevenage, and another billion in UK revenue in 2015, footprint in terms of its 1,000 people are located at by manufacturing airplane, contribution to GDP, the the Company’s Portsmouth helicopter, satellite, and employment it supports and site, which designs and builds defence equipment, as well as the tax revenues it generates payloads for mobile and military providing support services to for the UK government. In communications and earth airlines, helicopter operators, this chapter, we explore each observation satellites. and the military. However, this channel of Airbus’ impact on revenue does not represent the UK, starting with the direct Airbus is a prominent employer its full contribution to the contribution of its in the manufacturing industry UK economy. own operations. Fig. 4. Employment at Airbus’ UK locations in 2015 2.1 DIRECT IMPACT

The UK is a core part of Airbus’ worldwide operations. Its facility Airbus Commercial Broughton in Broughton manufactures wings for its commercial Airbus Commercial aircraft, landing gear are Filton designed and assembled at Filton, and its Stevenage Airbus DS location plays a leading role in Stevenage the Company’s extensive space activities, including designing Airbus DS Portsmouth and building the Rover for the upcoming ExoMars mission searching for life on Mars. Other

We first measure Airbus’ direct 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 impact in the UK in terms of Jobs the people it employs, before Source: Airbus

2 Industry defined as the manufacture of air and spacecraft and related machinery (SIC 30.3). 11 3 Industry defined as the manufacture of motor vehicles, trailers and semi-trailers (SIC 29). 4 ONS, “UK non-financial business economy (Annual Business Survey): Sections A-S”, 10 November 2016. The impact of Airbus on the UK economy

Airbus’ direct impact on the UK 2.2 INDIRECT IMPACT to deliver its engines to Airbus. economy is measured by the Again, our model enables value added it creates, and is To deliver its products Airbus us to map these complex equal to its UK profits and wage relies on a broad and diverse international supply chains and payments to UK-based staff. UK supply chain. UK businesses comprehensively quantify the Airbus recorded earnings of provide crucial inputs to scale of Airbus’ UK supply chain. around £720 million from its UK Airbus’ operations in the UK operations in 2015. At the same and elsewhere. Rolls-Royce, In total in 2015, Airbus spent time, it paid its UK employees for instance, is a prime supplier more than £5 billion on inputs £825 million in wages and of aircraft engines to Airbus’ of goods and services from UK salaries. Therefore, the French operations. suppliers. This represented 16 Company generated a value percent of the £32.5 billion the added contribution to UK GDP Airbus’ purchases of goods and Company spent on procurement of over £1.5 billion in 2015. services from UK businesses worldwide (Fig. 5). stimulate economic activity To put this contribution throughout the rest of the Our analysis of Airbus’ in context, Airbus’ direct economy. The bespoke model procurement indicates that value added equated to 23 we have constructed for this manufacturing firms dominate percent of the £6.7 billion study enables us to map its UK suppliers. Indeed, over GDP contribution made by these linkages and quantify £4 billion of its total spending in the UK’s air and spacecraft Airbus’ supply chain impact the UK was with manufacturing manufacturers in 2015. in the UK. Furthermore, the firms. Included among this Comparing to other parts of purchases Airbus makes from number are other major the UK economy, Airbus’ direct suppliers outside of the UK also aerospace companies such as GDP impact was equivalent to contribute to the UK’s economy, Rolls-Royce, GKN and Magellan eight percent of the £19.5 billion as these international suppliers Aerospace. Companies value added contribution made are likely to import some goods providing services were also by the UK’s motor vehicle and and services from the UK. For major suppliers to Airbus in trailer industry. example, Safran in France may 2015, accounting for £1 billion of purchase metal components its procurement. A further means of placing from a UK company in order Airbus’ impact into perspective is to explore the productivity of Fig. 5. Airbus’ worldwide procurement in 2015 its workforce. Airbus’ employees are highly productive because UK, £5.3bn they are skilled and their work is capital intensive. On average, Rest of World £10.4bn each Airbus employee created a £105,300 gross value added contribution to UK GDP in 2015. That is nearly twice the average across all UK employees, which 5 was £53,300. It is also nearly Rest of Europe two-thirds higher than average £16.8bn productivity across the UK manufacturing sector (£65,900 per worker).

Source: Airbus, Oxford Economics

12 5 UK average productivity was calculated by dividing total gross value added by total employment in the UK using Office for National Statistics, “ Economic Accounts time series dataset,” 2016 and Office for National Statistics, “Labour Market Statistics time series dataset (LMS),” 2016. The impact of Airbus on the UK economy

WORKING WITH SUPPLIERS: AIRBUS HELICOPTERS AND TLC HELILIFT Airbus’ relationship with its suppliers is not defined simply by the procurement of goods and services. The Company also works with its suppliers to enhance not only the products it purchases, but also its suppliers’ ability to access new markets. The relationship between Airbus Helicopters and TLC Helilift is a prominent example of this.

Although highly manoeuvrable in the air, helicopters can be difficult to move once on the ground. Weighing up to four tonnes and often equipped with skids rather than wheels, up to five people could be required to push even a small helicopter into a hanger for repair or storage. This presents a real risk of injury to the individuals and damage to the helicopter. TLC to test at its site, took one Through its relationship Wheel attachments are Helilift on trial and eventually with TLC, Airbus has not available for helicopter skids bought two more. only enabled a supplier to to enhance manoeuvrability, reach new markets, it has but these are bespoke to each However, this was only the also provided value to its type of aircraft. start of Airbus and TLC’s customers, reducing the risk relationship. As Airbus of injury to staff and damage Working independently, began selling helicopters to to helicopters. one engineer developed a emergency services in the solution: the TLC Helilift. mid-1990s, it promoted the The Helilift is an adjustable accompanying purchase of electronic hydraulic lift that a Helilift. This promotion, enables one person to easily together with Airbus lift and manoeuvre any Helicopters’ global client base, small helicopter. has enabled TLC to grow from a two-person operation into TLC approached Airbus a company with customers in Helicopters with its solution, the emergency services (and requesting facilities for testing other companies) in countries the Helilift. Impressed with ranging from Germany and the the concept, Airbus allowed US, to and .

13 The impact of Airbus on the UK economy

Airbus’ spending with spectrum of sectors than suppliers represents the first those which Airbus sourced stage of its supply chain. inputs from directly. Although By sourcing inputs from its over three-quarters of the suppliers, Airbus stimulates Company’s UK spending further activity in these was with manufacturing companies own supply firms, these firms made only chains. The model we have 43 percent of the indirect constructed for this study contribution to GDP (Fig. enables us to trace these 7). Conversely, business supply chains as they reach service and wholesale firms different industries and span accounted for 17 and 10 the global economy. Using percent of the contribution, this model, we can translate respectively—an indication this activity into a GDP of other firms’ reliance on contribution and employment. these businesses.

We estimate Airbus’ Fig. 6. Airbus’ UK procurement by supplier type in 2015 domestic and international procurement supported a value added contribution to UK GDP of over £3.8 billion. Manufacturing 4.0 This economic activity is estimated to have supported 64,000 jobs. Services 1.0

The activity supported in Airbus’ supply chain also Other 0.3 contributed tax revenue to the UK government. Businesses 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 in its supply chain pay corporation tax and other £ billion taxes on production and products. Equally, the people Source: Airbus, Oxford Economics employed in these businesses pay income tax and National Insurance Contributions. Considering all of these taxes, we estimate the Company’s UK supply chain activities raised almost £680 million for the Exchequer in 2015.

Further analysis of this impact clearly shows the breadth of Airbus’ UK supply chain. It is particularly apparent how the supply chain features companies from a much wider

14

The impact of Airbus on the UK economy

2.3 INDUCED IMPACT percent of Cardiff’s economy. Airbus itself employed nearly Airbus directly generated a 15,000 people at its UK The wage-financed spending fifth of this activity at its UK operational sites (12 percent of people working for Airbus, facilities. Because Airbus’ of the total). As was the case or in its supply chain, forms supply chain, including global with its contribution to GDP, the final channel through suppliers, is so extensive, the Airbus supported the greatest which it influences the UK indirect channel accounted for number of people through its economy. Employees make nearly half of the total impact procurement: an estimated purchases at retail and leisure (Fig. 8). 64,000 jobs (or 54 percent outlets throughout the UK. of the total) in 2015 (Fig. 9). These purchases stimulate We estimate Airbus’ worldwide In addition, Airbus’ wage further activity in these activities sustained 117,400 payments supported 38,700 sectors’ supply chains, adding jobs in the UK in 2015. This is jobs (33 percent of the total) value, sustaining employment equivalent to the number of throughout the UK economy and raising tax revenues. people employed in the city that year. of Swansea, 90 percent of all We estimate that the wage- employment in Sunderland financed spending of the and 10,000 more jobs than people employed directly and found in Reading. indirectly by Airbus across the UK in 2015 supported a value added contribution to UK Fig. 7. Airbus’ indirect contribution to GDP by sector in 2015 GDP of over £2.4 billion. This activity is estimated to have sustained a further 38,700 Manufacturing 1,650 - 43% jobs in the UK, and generated Business services 670 - 17% nearly £610 million for the Retail & wholesale 390 - 10% Financial services 240 - 6% Exchequer. Communications 220 - 6% Transport & storage 210 - 6% Public admin, education & health 100 - 3% 2.4 TOTAL IMPACT Construction 80 - 2% Other services 80 - 2% This chapter has shown Airbus’ Mining 60 - 2% Utilities 60 - 2% impact on the UK extends far Real estate 50 - 1% beyond the operations at its Accommodation & food 20 - 1% own facilities. Indeed, Airbus’ Agriculture 10 - 0% (0.1%) total economic footprint in 0 400 800 1,200 1,600 2,000 the UK is the sum of its direct, £ million indirect and induced impacts. By combining the three Source: Oxford Economics channels of impact, we estimate Airbus supported a £7.8 billion contribution to UK GDP in 2015.

This footprint is nearly a third larger than Oxford’s economy, slightly larger than the Newcastle economy and equivalent to more than 90

16 The impact of Airbus on the UK economy

The activity and employment Fig. 8. Airbus’ contribution to the UK economy in 2015 supported by Airbus’ operations in 2015 generated £ billion notable tax revenues for the Exchequer. We estimate 9.0 Airbus’ operations raised more 8.0 than £1.7 billion in tax revenues 7.0 in 2015. This means £1 in every 2.4 6.0 £400 collected by the UK government can be attributed 5.0 to Airbus’ activity. Put another 4.0 3.8 7.8 way, the taxes generated 3.0 by Airbus in 2015 equal 60 percent of projected public 2.0 spending on fire-protection 1.0 1.5 6 services in 2015/16. 0.0 Direct Indirect Induced Total

Source: Airbus, Oxford Economics. Note totals may not sum due to rounding.

Fig. 9. Airbus’ employment impact on the UK in 2015

Jobs (000s) 140

120

100 38.7 80

60 117.4 64.0 40

20 14.7 0 Direct Indirect Induced Total

Source: Airbus, Oxford Economics

6 HM Treasury, Public Expenditure Statistical Analyses 2016 (London: HM Treasury, 2016). 17

The impact of Airbus on the UK economy

3. AIRBUS’ REGIONAL IMPACT

Airbus’ impact reaches all specialising in cutting-edge parts of the UK. It operates cyber security and virtual facilities in nine of the UK’s reality techniques. nations and regions, and, as the previous chapter shows, 3.1.1 Direct impact makes purchases from a wide range of businesses Airbus is one of the largest throughout the country.7 employers in Wales. In total, Airbus’ £7.8 billion contribution the Company employed nearly to the UK economy, and the 6,500 people at its Welsh sites 117,400 jobs it supports, are in 2015. This meant that Airbus not distributed evenly. The was Wales’ second largest extent of Airbus’ impact in private sector employer. each region reflects the size of its operations there and The Company also makes a the value of its procurement substantial direct contribution from firms in a given region. to Welsh GDP. In 2015, the The strength of a region’s wages it paid to its employees economy, and how frequently in Wales, and the profits it its businesses appear in the made on its operations in the supply chains of firms located nation, led it to make a direct in other parts of the UK, also value added contribution to plays a significant role. Wales’ GDP of £563 million. That is equivalent to over five In this chapter, we explore percent of the economic output Airbus’ contribution to the produced in Cardiff in 2015.8 four nations and regions that are home to Airbus’ largest facilities. We start by focusing on its impact in Wales, before discussing the contribution it makes to the South West, South East and East of England. Finally, we investigate Airbus’ impact in the remaining UK nations and regions.

3.1 AIRBUS’ IMPACT ON WALES

Wales is home to key parts of Airbus’ worldwide operations. The Company’s site in Broughton houses the assembly lines for wings for all Airbus aircraft, as well as procurement and management functions. In addition, its facility in Newport is a Defence and Space centre

7 The UK is divided into 12 Government Office Regions (GOR) reflecting the nations and regions of Great Britain and Northern Ireland. The 12 GORs are 19 South West, South East, London, Wales, West Midlands, East Midlands, East of England, North West, Yorkshire and the Humber, North East, Scotland and Northern Ireland. 8 The comparison is to GDP in Cardiff in 2014, so the comparison is indicative rather than like-for-like. Office for National Statistics, “Regional Gross Value Added (Income Approach), 1997 to 2014,” 2015. The impact of Airbus on the UK economy

AIRBUS’ RURAL EMPLOYMENT IN WALES Airbus’ operations in Fig. 10. Airbus’ employment in ten rural wards in 2014 Wales provide significant employment opportunities and make the company the Employees Percent major employer in some parts 160 7 of rural Wales, particularly Airbus Employees (left-hand axis) 140 6 around its Broughton site. % of working age population (right-hand axis) 120 The Company therefore plays 5 a key role in sustaining these 100 communities. Of the 6,500 4 people Airbus employed 80 3 at its Welsh sites in 2015, 60 slightly more than half, or 2 40 3,300 people, live in Wales. 1 Airbus employs people in 188 20 of Wales’ 881 wards. In the 0 0 areas where Airbus employees live, the company employs an average of 1 in every 110 South Northop Brynford Connah’s Peny ord Leeswood North East working age people (those Broughton Broughton Bagillt East Gwern field Quay Wepre aged 16 to 64). Shotton West

Notably, Airbus employs Source: Airbus, ONS about 950 people who live in rural areas in Wales, or nearly one percent of working age people living there. Wards with a particularly high concentration of employment that is reliant on Airbus include Broughton South (where Airbus employs 138 of the residents, or 5.8 percent of the working age population), Penyffordd (120 people, or 4.9 percent), Broughton North East (67 people, or 4.6 percent), and Leeswood (44 people, or 3.2 percent), as shown in Fig. 10.

20 The impact of Airbus on the UK economy

3.1.2 Indirect impact Fig. 11. Airbus’ indirect contribution to GDP in Wales by sector in 2015 Airbus’ purchases of goods and services stimulate further Manufacturing 71 economic activity throughout Business & scientific services 20 Financial services 11 Wales. In total, Airbus spent Public admin, education & health 11 £199 million on inputs of Retail & wholesale 11 goods and services from Transport & storage 9 Welsh suppliers in 2015. Communications 5 Construction 5 Utilities 4 But this spending is only the Mining 3 first stage of the indirect Other services 2 impact. Airbus’ procurement Real estate 2 supported further Accommodation & food 1 Agriculture 0 contributions to the economy in Wales, among firms 0 10 20 30 40 50 60 70 80 providing inputs to Airbus’ £ million suppliers, and so on down their supply chain. Moreover, Source: Oxford Economics additional indirect activity is also supported within Wales as a result of Airbus’ procurement 3.1.3 Induced impact 3.1.4 Total impact spending elsewhere. In order to quantify the impact Airbus’ total economic impact We estimate that Airbus’ of Airbus’ wage-financed in Wales is the sum of its Welsh supply chain consumer spending in Wales, direct, indirect and induced contributed a further £153 it is necessary to consider the impact. By combining the million to GDP. This economic wages paid to their employees, three channels of impact, we activity also supported an and those paid to people estimate Airbus supported a estimated 2,750 jobs in employed in its supply chain. £854 million contribution to the nation. Our regional analyses assume GDP through its expenditure that employees of Airbus in Wales. Analysis of Airbus’ indirect spend most of their wages in GDP contribution to Wales their region of residence.9 Airbus supported 11,700 jobs demonstrates the wide range throughout Wales in 2015. of companies involved in its We estimate the wage spend This is equivalent to 5.8 supply chain. Manufacturing of Airbus workers living in percent of all employment in contributed the highest Wales–and that of workers in Cardiff.10 More than half (55 proportion (46 percent), but the Company’s Welsh supply percent) of these workers other sectors accounted for chain–supported a £137 million were employed directly at significant shares (Fig. 11): value added contribution to Airbus’ two key Welsh sites business and scientific services GDP. This activity is estimated (Fig. 13). A further quarter (24 and financial services were to have sustained a further percent) of the jobs were in responsible for 13 percent 2,500 jobs in the country. Airbus’ supply chain. Wage- and seven percent of GDP financed consumer spending contributions, respectively. by employees of Airbus and its Welsh supply chain supported the final fifth (21 percent) of this jobs contribution.

9 This means that, for example, some of Airbus’ salaries paid to workers at its Broughton site are assumed to support induced economic activity in the 21 North West, as many workers there live in or Liverpool. This likely underestimates the impacts in Wales of wage payments at the Broughton site, since workers there are likely to visit the region’s food, retail and leisure outlets during or after work. But it is difficult to estimate the extent of this, and so for simplicity and consistency, we assign salaries to the locations of workers’ residence. 10 Office for National Statistics, “Local Authority district - Business Register and Employment Survey (BRES): Table 6,” 2016. The impact of Airbus on the UK economy

Fig. 12. Airbus’ contribution to Welsh GDP in 2015 contributed a further £504 million in gross value added, whilst supporting around £ million 9,200 jobs in the region.

900 Our analysis of Airbus’ 800 137 supply chain indicates 700 that manufacturing firms 153 predominate in its indirect 600 impact in the South West. 500 The manufacturing sector 400 854 accounted for well over 300 half (58 percent) of the 563 Company’s entire indirect GDP 200 contribution in the South West 100 (Fig. 13). Business services 0 and public administration Direct Indirect Induced Total were responsible for 10 Source: Oxford Economics percent and 8 percent of GDP contributions, respectively.

3.2 AIRBUS’ IMPACT ON THE importance of the site to 3.2.3 Induced impact SOUTH WEST South Gloucestershire’s manufacturing sector is We estimate the spending of The South West is home to particularly marked: almost wages by Airbus’ employees important Airbus operations. one in five manufacturing living in the South West— Its Filton production site jobs in the area are located at and that of workers in the plays a vital role in the Airbus’ production site. Company’s South West-based design and production of supply chains—supported­ Airbus’ advanced aircraft, 3.2.2 Indirect impact a £290 million value added with hundreds of engineers contribution to GDP. This also involved in research The South West is an activity is estimated to have and development for future important region for Airbus’ sustained a further 5,400 jobs aircraft projects. The region procurement. In total, Airbus in the region. is also home to additional spent nearly £800 million on support functions, such as inputs of goods and services 3.2.4 Total impact human resources, finance and from businesses in the South procurement. West in 2015. Three significant Overall, our modelling suppliers were based in the suggests that Airbus 3.2.1 Direct impact region: GKN, Cobham and contributed £1 billion to the Meggitt. South West economy in 2015. In 2015, Airbus employed This is equivalent to one-third 3,000 people in the South Airbus’ purchases of goods of Gloucester’s economy in West of England. The site in and services from businesses 2015. The indirect impact of Filton is an important element in the local area and elsewhere spending by Airbus and its of South Gloucestershire’s support further economic suppliers accounted for almost economy. The facility houses activity in the South West. We half (48 percent) of this value just over two percent of estimate that Airbus’ South added contribution (Fig. 14). all jobs in the area. The West-based supply chain At the same time, Airbus

22 The impact of Airbus on the UK economy

supported 17,500 jobs in the 3.3 AIRBUS’ IMPACT ON THE region. To put this into context, EAST OF ENGLAND this is equal to a sixth of all employment in Bath and North Airbus has substantial East Somerset. operations in the East of England. Airbus Defence and Space, and MBDA, which is Fig. 13. Airbus’ indirect contribution to GDP in the South West 37.5 percent owned by Airbus, by sector in 2015 are both located in Stevenage. Airbus Defence and Space is a world leader in the space Manufacturing 292 industry, and Europe’s top Business & scientific services 48 defence and space company. Public admin, education & health 40 MBDA is the only integrated Retail & wholesale 33 defence company to provide Financial services 23 missiles and missile systems Transport & storage 18 for each branch of the UK’s Communications 17 Mining 7 armed forces. Utilities 7 Construction 7 3.3.1 Direct impact Real estate 4 Other services 4 In 2015, Airbus employed 2,300 Accommodation & food 3 people in the East of England. Agriculture 1 This means one in every 1,200 0 50 100 150 200 250 300 350 jobs in the region were at one of the two Stevenage £ million Source: Oxford Economics sites. The company plays an important role in the Stevenage economy, directly accounting for 5.3 percent of jobs in the Fig. 14. Airbus’ contribution to the South West economy in 2015 town. When comparing to the town’s manufacturing activities, £ million Airbus’ importance to the local economy is even more 1,200 pronounced: its sites housed over 42 percent of Stevenage’s 1,000 manufacturing jobs in 2015. 290 800 The Company also made a significant contribution to the 600 1,004 504 East of England’s economy. 400 In 2015, the wages it paid to its employees in the East of 200 England, and the profits it made 250 on its operations in the region, 0 led it to make a direct value Direct Indirect Induced Total added contribution of £257 million to the regional economy. Source: Oxford Economics

23 The impact of Airbus on the UK economy

3.3.2 Indirect impact in its East of England supply Airbus supported 10,400 chain—supported a £210 million jobs throughout the East of The East of England is a value added contribution England in 2015. A fifth (22 key location for Airbus’ to GDP in 2015. This activity percent) of these workers were supply chain, with three of sustained about 3,300 jobs in employed directly at Airbus the Company’s biggest UK the region. or MBDA’s sites in Stevenage. suppliers located in the region Spending by Airbus and its including BAE Systems, One 3.3.4 Total impact East of England supply chain Facility and Serco. Counting all and their workers contributed of its UK and global sites, Airbus By combining the direct, the rest of this jobs impact. procured over £370 million indirect and induced channels worth of goods and services of impact, we estimate Airbus from businesses in the region supported a £734 million gross during 2015. value added contribution to the East of England (Fig. 16). This Airbus’ purchases of inputs is equivalent to approximately of goods and services from a third (32 percent) of the total local companies—as well as economic output produced in companies elsewhere—stimulate Stevenage in 2015. further economic activity throughout the East of England. We estimate Airbus’ supply Fig. 15. Airbus’ indirect contribution to the East of England chain in the region contributed economy by sector in 2015 a further £267 million value added to the regional economy. This economic activity Manufacturing 79 supported an estimated 4,900 Public admin, education & health 39 Business & scientific services 35 jobs in the region. Communications 28 Retail & wholesale 24 Airbus’ East of England supply Transport & storage 17 Financial services 13 chain supported economic Construction 10 activity in a wide range of Other services 8 industries. Manufacturing Utilities 5 Real estate 4 accounted for 30 percent of Mining 3 its indirect GDP contribution Accommodation & food 1 in the region in 2015 (Fig. Agriculture 1 15). Public administration, 0 10 20 30 40 50 60 70 80 90 and business and scientific £ million services were also important to Airbus’ supply chain, accounting for 14 percent and Source: Oxford Economics 13 of its indirect value added contribution, respectively.

3.3.3 Induced impact

We estimate the wage spend of Airbus’ employees in the region—and that of workers

24 The impact of Airbus on the UK economy

Fig. 16. Airbus’ contribution to East of England’s GDP in 2015 for 1 in 8 of Portsmouth’s manufacturing jobs. The Company also made a £ million significant contribution in the 800 South East’s economy. In 2015, the sum of its gross salaries and 700 gross profits amounted to a direct value added contribution 600 210 of £458 million. This was 500 equivalent to approximately a quarter (26 percent) of Dover’s 400 267 total economy. 734 300 3.4.2 Indirect impact

200 The Company’s purchases of 257 100 goods and services in the South East, as well as elsewhere, 0 support further supply chain Direct Indirect Induced Total activity in the region. In total, Airbus spent nearly £750 million on inputs of goods and services Source: Oxford Economics from businesses in the South East in 2015.

We estimate that Airbus’ South 3.4 AIRBUS’ IMPACT ON THE of Hampshire. AirTanker, East-based supply chain made SOUTH EAST with operations including an additional £583 million maintenance, operational gross value added contribution The South East is also control and training, has its to GDP in the region. This home to a variety of Airbus base in Oxfordshire. And Surrey economic activity supported operations. Airbus Defence Satellite Technology Limited, a an estimated 8,300 jobs in the and Space’s site in Portsmouth Company subsidiary, is based same year. specialises in the design and in Guildford with additional manufacture of advanced facilities in Hampshire. This indirect impact supported satellites and systems economic activity across for telecommunications, 3.4.1 Direct impact a variety of industries. observation and navigation. Manufacturing suppliers Airbus Helicopters, the world’s Airbus employed over 2,700 accounted for just over 20 largest helicopter manufacturer, people in the South East in percent of Airbus’ indirect has its civil helicopter hub at 2015, amounting to 0.1 percent contributions to the region’s Oxford airport. of all jobs in the region. economy in 2015 (Fig. 17). Airbus Defence and Space Business and scientific services Three of Airbus’ subsidiaries itself directly supports one in and retail and wholesale also have operations in every 60 jobs in Portsmouth. businesses were also important the South East. Vector, a When focusing on the city’s to the supply chain, responsible worldwide leader in helicopter manufacturing sector, the for 18 percent and 15 percent of and engine repair and impact is proportionally more contributions, respectively. maintenance, operates out important: the site accounted

25 The impact of Airbus on the UK economy

Fig. 17. Airbus’ indirect contribution to GDP in the South East by 3.4.3 Induced impact sector in 2015 Airbus’ South East-residing employees spent a proportion Manufacturing 120 of their wages in the region, Business & scientific services 106 Retail & wholesale 86 and our modelling suggests Public admin, education & health 62 that this consumption Communications 59 spending, and that of workers Transport & storage 49 in the Company’s South East Financial services 42 supply chain, generated Other services 17 another £298 million in GDP, Construction 15 while sustaining a further 4,200 Real estate 10 Utilities 7 jobs in the region. Accommodation & food 6 Mining 3 3.4.4 Total impact Agriculture 1 The sum of these three impacts 0 20 40 60 80 100 120 140 reveals Airbus’ operations £ million supported a £1.3 billion contribution to South East economy in 2015 (Fig. 18). This is equivalent to half of the Source: Oxford Economics gross value added generated in Woking in 2015. The largest Fig. 18. Airbus’ contribution to the South East economy in 2015 component of this impact was the indirect channel (44 percent), highlighting the £ million importance of Airbus’ supply chain in the region. 1,600 Airbus supported 15,200 jobs 1,400 throughout the South East in 1,200 298 2015. Over half (55 percent) of these jobs were sustained 1,000 through the indirect channel, again emphasising the crucial 800 583 role of Airbus’ supply chain in the region to its overall 600 1,339 economic activity. 400

200 458

0 Direct Indirect Induced Total

Source: Oxford Economics

26 The impact of Airbus on the UK economy

3.5 AIRBUS’ IMPACT ON 3.5.2 Indirect impact REST OF THE UK Airbus’ supply chain Airbus’ impact on the UK extends across the UK, with extends beyond the four key procurement of inputs of regions in which it conducts goods and services made in most of its operations. Airbus every region. In particular, has facilities in London, the Airbus’ third biggest global North East of England, the supplier by value, Rolls-Royce, East Midlands, Scotland and is located in the East Midlands. Northern Ireland. Additionally, In total, Airbus spent over £3 Airbus procures inputs of billion with businesses across goods and services from all the UK regions and nations in over the UK. This supply chain addition to the spending supports GDP contributions in the four key regions and employment throughout already analysed. the country. Workers at Airbus and its national supply chain Airbus’ purchases of goods live in every region, sustaining and services throughout further economic activity and the UK supported further employment by spending economic activity in every their wages. region. We estimate that Airbus’ supply chain 3.5.1 Direct impact contributed £2.3 billion in gross value added to Airbus employed over 130 GDP in 2015, excluding the people outside of its four key contribution of the four key regions in 2015. This includes regions. The largest GDP almost 50 Defence and Space contribution, £907 million, was employees in the North East made in the East Midlands and nearly 40 in London. (Fig. 20). Airbus’ Scottish The remaining staff were supply chain also supported employed at Airbus sites in considerable economic the North East, East Midlands, activity, making a gross value Scotland and Northern added contribution of £342 Ireland. million in 2015.

The Company’s operations This economic activity also in these regions generated a supported 39,000 jobs in the £15 million gross value added other regions. In particular, contribution to UK GDP in Airbus’ spending sustained 2015. The largest contribution 16,000 jobs in the East Midlands. was made in the North This is equivalent to one in every East: £7 million. Significant 145 jobs in that region. contributions were also made in the East Midlands and London: £5 million and £3 million, respectively.

27 The impact of Airbus on the UK economy

Fig. 19. Distribution of Airbus’ procurement from UK suppliers in 2015

Procurement (£ million)

50 2,050

Total Procurement: £423m

£77m £54m £166m

£63m

£2,011m

£199m £371m £199m

£797m £744m

£234m

28 The impact of Airbus on the UK economy

3.5.3 Induced impact

Airbus pays wages to employees living throughout the UK. Using the ONS’ mapping software, employees’ postcodes have been allocated to each nation and region to estimate the induced impact. This accounts for the fact that some employees live in different regions to where they work. For example, some employees at the Broughton site in Wales commute in from their homes in the North West.

Employees of Airbus spend a proportion of their wages in their region of residence, supporting further economic activity. This wage spend— and that of workers in the Company’s supply chains— supported a £1.5 billion gross value added contribution to GDP in 2015, excluding Airbus’ four key regions. This impact was more evenly distributed throughout the regions than the direct and indirect impact. The most significant contributions were made in the East Midlands and the North West of England: £320 million and £259 million, respectively.

The wage-financed consumer spending of Airbus employees—and workers in its supply chain—is estimated to have stimulated a further 23,000 jobs in 2015. Just over 26 percent of this employment was in the East Midlands and just over 18 percent in the North West of England.

29 The impact of Airbus on the UK economy

Fig. 20. Distribution of Airbus’ wage and salary payments in 2015

Compensation of employees (£ million)

0 250

Total Wage and Salary Payments: £9m

£3m £0m £238m

£0m

£4m

£7m £135m £84m

£169m £141m

£34m

30 The impact of Airbus on the UK economy

3.5.4 Total impact

Overall, our modelling suggests that Airbus contributed £3.8 billion to UK GDP through its operations in regions outside of the Company’s four key regions in 2015. This activity supported 62,500 jobs across the eight regions.

This analysis shows that Airbus’ gross value added contribution to GDP were not isolated to the regions that house its main sites. The Company made significant contributions across the UK, especially when considering the relative sizes of the regions (Fig. 21).

Fig. 21. Airbus’ contribution to the rest of the UK’s GDP in 2015

£ million

1,400 1,232 Direct Indirect Induced 1,200

1,000

800

600 550 541 492 400 335 279 221 193 200

0 East East West West North North Ireland London Humber Yorks. & Scotland Midlands Midlands Northern

31 The impact of Airbus on the UK economy

Fig. 22. Distribution of Airbus’ GDP contribution across the UK’s Outside of the four key nations and regions in 2015 regions, Airbus supported the largest contribution to GDP in the East Midlands. The £1.2 billion it supports Percent share or regional economy there is 1.3 percent of the region’s economic output 0.15% 1.6% (Fig. 22). Although the other regions received smaller absolute contributions, Airbus’ relative contributions to Northern Ireland and the North East were also notable, accounting for 0.6 percent Total GVA impact: and 0.5 percent of the £541m regions’ gross value added in 2015, respectively.

£221m £193m £492m

£279m

£1,232m

£335m £734m £854m

£1,044m £1,339m

£550m

32 The impact of Airbus on the UK economy

Fig. 23. Distribution of Airbus’ contribution to employment Airbus has an impact on the across the UK’s nations and regions in 2015 labour market across the UK. It supports at least 3,200 jobs in each of the nations and regions. Outside of the Percent share or regional employment four in which its major sites are located, it supports the 0.1% 1% most employment in the East Midlands (at 22,100 people), followed by the North West (8,300 people) and Scotland (8,000 people). Relative to total employment in each geography, Airbus supports Total employment one in every 90 jobs in the impact: East Midlands and 1 in every 8,000 jobs 300 jobs in Scotland (Fig. 23).

3,600 3,200 8,300

5,100

22,100

6,000 10,400 11,700

17,500 15,200

6,100

33

The impact of Airbus on the UK economy

4. AIRBUS’ CATALYTIC IMPACT

Previous chapters have high-tech manufacturer, Airbus simulated Martian environment. examined the ‘core’ channels relies on these skills in its Moreover, the centre will through which Airbus makes operations. Consequently, it feature interactive STEM an impact on the economy has a stake in the UK’s ability exhibits, science careers advice of the UK. Thousands of jobs to produce skilled workers. and guidance, and class and and billions of pounds’ worth As the rest of this section workshop space. of GDP are supported by shows, the Company is By hosting up to 5,000 Airbus’ own activities, and its extremely active in promoting student visitors per year— indirect and induced effects STEM careers, engaging including sponsored visits for as expenditure ripples through schoolchildren, collaborating inner city schools and other the wider economy. with universities, and providing disadvantaged groups—the a number of early career STEM Experience is intended However, there are also other schemes to encourage people to engage and inspire future channels through which Airbus into STEM vocations. generations of technicians and influences the economy. engineers. This engagement is While the nature of these 4.1.1 The Airbus STEM an important way of supporting effects means their size is Experience future scientific capability and not always straightforward helping to generate an ‘inflow’ to quantify in terms of jobs Airbus employs thousands of of future technical abilities for or GDP, they undoubtedly scientists and engineers, and the UK workforce. amount to meaningful engages in vast amounts of economic contributions. This innovation and research. In this 4.1.2 The Airbus University so-called ‘catalytic’ impact way, it supports and expands Partnership Programme constitutes the wider benefits the UK’s stock of technical that governments, consumers, expertise, whilst devising Airbus teams up with society and other industries practical applications for its universities through a formal derive from Airbus’ production, cutting-edge technologies. Universities Partnership investment and training. While the Company’s activities Programme (UPP), which at the frontier of technological during 2015 encompassed 21 In this chapter, we explore three innovation are important, it universities in 11 countries. The additional ways in which Airbus also endeavours to engage UPP is a scheme to develop benefits the UK. These include young people in scientific and links with leading universities its role in UK innovation and in engineering disciplines. and engineering schools, assisting the UK’s emergency providing practical knowledge services. First, however, we One example of this is the and insight into workplace discuss its promotion of Airbus STEM Experience, a £2.5 challenges for students. science and engineering skills million facility currently being This collaboration is a channel in the UK workforce. built in Stevenage. This centre, through which Airbus helps developed in conjunction with to ensure future generations 4.1 SCIENCE AND North Hertfordshire College of aerospace workers and ENGINEERING SKILLS and Hertfordshire LEP, is based engineers have the full range around Airbus’ ExoMars Rover of desirable skills. It also The UK government has test facility. It will provide gives Airbus the opportunity acknowledged the need unprecedented public access to promote its field to a to address skills shortages to the engineering behind the diverse body of students—for in science, technology, ExoMars project: including a example, to help raise the engineering and maths (STEM) viewing gallery for the Mars participation of women in in order to maintain the UK’s Yard, where the capabilities of aerospace and engineering. capacity for growth.11 As a the Rover are tested across a

11 HM Government, Building our industrial strategy, Green Paper, January 2017. 35 The impact of Airbus on the UK economy

Partnerships between industry qualification that is equivalent the UK plant management and academia are also an to two A-levels. These team, began their careers with effective way to ensure the apprenticeships are offered an Airbus apprenticeship. development of the varied skills across Airbus’ operations, from demanded by the knowledge engineering departments to There are also various economy in the 21st century. finance and management. graduate training Arrangements such as the programmes offered by UPP therefore have important The Company also offers Airbus, across diverse implications for future more advanced programmes, disciplines such as competitiveness, prosperity leading to degree-equivalent engineering, finance, and economic growth. certifications, as well as procurement and HR. Over professional accreditation 200 graduates have joined One example in the UK is from bodies such as CIMA, the Company through these Airbus’ partnership with ILM or CIPS. In particular, the schemes since 2010, with the Bristol University. This involves Undergraduate Apprenticeship majority staying on at Airbus research collaborations provides school leavers with after they have completed the between Airbus’ experts the opportunity to gain an two years of training provided and faculty staff, lectures undergraduate degree, in on the graduate programme. delivered by Company engineering, management employees, targeted outreach or finance, while working The past five years also and scholarship programmes at Airbus. This offers an have seen more than 500 (including specific outreach to alternative to university that internship placements, encourage women to explore allows apprentices to earn of students from various engineering careers), and while they learn, with their academic backgrounds. These opportunities for students to university course funded by positions, which are paid and visit Airbus’ site at Filton. Airbus. The Company has typically last for a full year, been growing this programme are available across a range 4.1.3 Early careers schemes recently: almost 100 new of business areas such as undergraduate apprentices engineering, supply chain Airbus runs several other started at Airbus last year. management, finance, ICT and initiatives to help ensure HR. In addition, Airbus also that appropriate supplies The cost to Airbus of these offers around 200 similarly of expertise and human investments ranges from varied work experience capital are brought into the £75,000 to £110,000 per placements, designed for Company, and the wider apprentice, depending students aged 14-19. aerospace sector. At present on the programme. This more than 550 people are on underlines the Company’s Many of Airbus’ graduates, one of the Company’s early commitment to investing interns and apprentices are careers schemes, including in its staff and maximising recruited from the local area, internships, apprenticeships their potential, whether this with a large number coming and graduate programmes. involves progression to more from within 100 miles of one senior roles at Airbus, or new of the Company’s sites. The Over the last five years, Airbus’ challenges elsewhere in the Company also attracts talent apprenticeships programme labour market. The majority of from across the UK, and has trained 800 people, of apprentices do stay on with globally: many of these new which 300 were internal Airbus on the completion of joiners move to the local area apprentices.12 At present, there training. Indeed, around 70 in order to work for Airbus. are 25 internal placements percent of Airbus’ UK senior on Level 3 Apprenticeships, a managers, and 75 percent of

36 12 Internal apprenticeships are a formal platform through which existing Airbus employees can develop new skills and experience.

The impact of Airbus on the UK economy

4.2 R&D AND INNOVATION assessed the social spillover services to the UK’s police ACTIVITY benefits to R&D investment.13 forces since the 1980s. The That analysis examined the company’s H135 and H145 In 2015, Airbus was the second- relationship between R&D now make up three-quarters most prolific filer of European spending within the aerospace of the fleet of the National patents in the transport field, sector, and underlying Police Air Service (NPAS). equivalent to 25th overall across productivity in the economy These helicopters provide all technological disciplines.13 overall, after controlling for essential services for the the other well-understood police, including searching for While this level of R&D determinants of productivity missing and vulnerable people activity undoubtedly provides such as labour and capital or suspects, surveillance, commercial benefits to Airbus, inputs. carrying out photographic the process of developing new tasks for operational planning and innovative technologies The benefits that Airbus’ or evidential purposes, and (and their applications) also innovation activity has emergency casualty evacuation. gives rise to wider, societal on productivity growth is benefits. This occurs as the particularly important, since The NPAS have unique advances and developments productivity improvements are helicopter needs that emerging from innovation the fundamental driver of long- require the best equipment, are disseminated throughout term prosperity. including thermal scanners other businesses, academia, and searchlights. Airbus government, and wider society. 4.3 ASSISTING THE UK’S Helicopters works closely EMERGENCY SERVICES with the NPAS to develop The channels through which this these add-ons. The company takes place are varied. Licensing Airbus also plays a vital role in undertakes significant research agreements for patented helping the UK’s emergency and development work, guided products and approaches are services to protect and care for by engagement with the police one method through which UK residents. and other emergency services. new developments can be spread throughout the wider The UK emergency services The Air Ambulance services economy. The technical aspects have a growing fleet of in the UK provide rapid of a novel system can also be helicopters able to respond to responses to life-threatening shared across a firm’s supply life-threatening situations and situations. Helicopters play chain, with the innovator to provide other key services a crucial role in the UK’s requiring new and improved such as surveillance and emergency services provision, inputs to their product. In searches. Airbus Helicopters being able to treat people addition, employee turnover can provides helicopters and quickly even in remote areas. spread novel ideas into other support services to the UK The service is provided by a companies or new start-ups. emergency services. Airbus number of individual charities, Overall, these represent some of has contracts with the National nearly two-thirds of whom the ways that R&D investment Police Air Service, a number of buy their helicopters from can produce social benefits, Air Ambulance services and is a Airbus Helicopters. also termed ‘spillovers’. partner of the Joint Emergency Services Interoperability Airbus Helicopters not only These spillover benefits can be Programme (JESIP). supplies helicopters to various quantified using econometric Air Ambulance services, it analysis. For Airbus we have Airbus Helicopters has been also designs and installs the estimated these using previous supplying helicopters and kit necessary to equip the Oxford Economics research that maintenance and support helicopters for their life-saving

38 13 European Patent Office, “European Patent filings in 2015”, in Statistics. 14 Oxford Economic Forecasting, “Assessing the Economic Impact of Aerospace R&D” (Final report, 2006), 6. The impact of Airbus on the UK economy

missions. Air Ambulance Worldwide, they manufacture services are able to provide and support helicopters for emergency treatment at the law enforcement, firefighting scene, as well as to transport and search and rescue. patients to hospitals. Air Ambulance services have reported success in providing emergency care; doctors transported by helicopter have even performed open- heart surgery at the roadside.

In addition to providing helicopters to the branches of the emergency services, Airbus Helicopters is the trusted working partner of the Joint Emergency Services Interoperability Programme (JESIP). This government- sponsored programme has a focus on improving the way the Police, Fire and Ambulance services work together in response to major incidents.

As the designer of the world- class helicopters used by the UK emergency services, Airbus Helicopters is well placed to provide repair and maintenance services. The Cvompany’s premium service, with professional back-up team and spare parts ready to go, ensures that these irreplaceable helicopters are in the air for the maximum time.

Leveraging its relationship with the UK’s emergency services, Airbus Helicopters now supplies helicopters to emergency service providers worldwide. Globally, the Company supplies almost two-thirds of the emergency medical services market.

39

The impact of Airbus on the UK economy

5. CONCLUSION

Airbus is a key component Royce, located in the East notable portion of this impact, of the UK’s high-tech Midlands, is the third largest Airbus’ economic footprint manufacturing sector. Its UK global supplier to Airbus reaches all parts of the UK activities place the company and the purchase of aircraft through its strong links with at the forefront of innovation engines by the Company UK businesses in its supply in aerospace, defence and generates considerable value chain. Airbus’ contribution to space technology. for the region’s economy. Our the UK is not just limited to modelling indicates all regions GDP, jobs and tax revenues. This study has explored how benefitted from a gross value It plays a crucial role in Airbus’ operations, and the added contribution of at least maintaining and extending the complex, international supply £190 million and 3,200 jobs as UK’s scientific base through chains on which it depends, a result of Airbus’ operations its innovation and support for affect the UK economy. We in 2015. STEM education. Moreover, estimate Airbus supported a its products enable the timely £7.8 billion gross value added While Airbus’ operations delivery of vital and often life- contribution to UK GDP in support thousands of jobs saving services for citizens all 2015. Meaning its footprint and billions of pounds’ across the UK. was larger than Newcastle’s worth of GDP, its influence economy and nearly a third on the UK economy and bigger than the economy society extends far beyond of Oxford. The Company’s this. Airbus supports and operations and supply chain expands the UK’s stock of supported 117,400 jobs in the technical expertise, engages UK, more than 100,000 of and inspires future generations which were outside of Airbus of scientists and technicians, itself. This is equivalent to and runs highly successful all of the jobs in Swansea university and apprenticeship and 90 percent of those schemes. The Company’s in Sunderland. Finally, we innovations also contribute to estimate Airbus’ operations the UK’s R&D stock, spilling raised more than £1.7 billion in over into the wider economy tax revenues in 2015. and raising the UK’s productive potential. Finally, the products All of the UK’s nations and it manufactures play a crucial regions benefit from Airbus’ role in society: from aircraft impact. Most of Airbus’ facilitating trade and tourism facilities are located in four to helicopters supporting the nations and regions—Wales, emergency services. the South West, East of England and the South East. This report shows that And these areas benefit Airbus plays an integral greatly from the direct and role in UK life. It makes wider activity and employment a sizable contribution to the Company brings to them. the UK economy, supports But Airbus’ contribution to thousands of jobs and raises the UK extends beyond these a significant amount in tax areas, dictated particularly revenue for the Exchequer. by the location of its supply And while the regions hosting chain. For instance, Rolls- Airbus facilities retain a

41 The impact of Airbus on the UK economy

6. METHODOLOGY

This section outlines the key year.16 Through a series of methodological techniques matrix algebra techniques, used in this report: input- it is possible to estimate output modelling at the UK the additional economic and regional levels. activity that is stimulated from a given amount of final 6.1 Input-output modelling demand, where in this case final demand is the purchases To quantify Airbus’ indirect Airbus makes from its (supply chain) and induced suppliers or Airbus’ employees (wage expenditure) impacts make from consumer goods on the UK economy, Oxford and services outlets. Economics used a technique called input-output modelling, 6.2 UK impact using a global first developed by the model academic Wassily Leontief, who won a Nobel prize for A crucial weakness of using an his work.15 The technique input-output model for a single uses national accounts data country is that any imports that specify how much each are treated as leakage and lost industry buys from each from the model. This can lead other industry and from to understating the economic other countries in a given impact of an entity.

Fig. 24. A simple input-output model

Industry Industry Industry Consumer Other Final Total 1 2 3 Spending Demand Outputs

Industry 1 C 1,1 C 2,1 C 3,1 C 4,1 C 5,6,7,1 C 8,1

Industry 2 C1,2

Industry 3 C1,3

Employment C 1,4

Incomes

Profits C1,5

Leakages C 1,6,7

Total Inputs C 1,8

42 15 Wassily Leontief, “Input-Output Economics,” 1986. 16 Office for National Statistics, “UK input-output analytical tables,” 2014 The impact of Airbus on the UK economy

The first way of understating 6. 3 Regional impact impact occurs as a single- country input-output model Oxford Economics maintains ignores that supply chains a custom model of the UK reach across many countries, economy that allows for and may often enter a country estimates of employment and multiple times. For example, gross value added impacts Airbus in the UK may use a across the country’s 12 supplier located in Germany. In government office regions. turn, the German company may The model is created using purchase computer programs techniques developed in written in the UK. In a single- academia, a combination country input-output model, of spending location and in this example, the economic ‘location quotients’ to impact of the expenditure on determine regional impacts.19 the import from Germany is Location quotients express reported as a leakage. And the intensity of a particular the subsequent supply chain industry’s economic activity in will not be considered for the a particular region relative to model, even though part of the the nation as a whole. expenditure re-enters the UK at a later stage. Consequently, This procedure allows for better the impact assessment fails estimates of the location of to attribute the activity in the gross value added supported UK computer programming in the indirect and induced industry to Airbus’ initial spend. channels. Geographies with higher concentrations of To avoid understating Airbus’ industries receiving procurement impact in the UK, this study or household expenditure will employs a global input-output tend to have greater impacts. In model that enables supply addition, by dividing gross value chains to be traced across added by regional productivity countries. The model uses the estimates (where productivity global input-output tables is gross value added per developed by the OECD as employee per year), total its foundation.17 The OECD employment estimates are made provides time series of world more accurate. input-output tables for 61 countries worldwide and a model for the rest-of-the- world, covering the period from 1995 to 2011.18

17 OECD, “OECD Inter-Country Input-Output (ICIO) Tables, edition 2015: Access to data”, in OECD 43 18 The countries included are the 34 members of the OECD, the seven EU member states that are not OECD members, and Argentina, , Brunei Darussalam, Cambodia, China, Colombia, Costa Rica, Hong Kong, Indonesia, , Malaysia, Philippines, Russia, Saudi Arabia, Singapore, Thailand, Tunisia, Chinese Taipei, Vietnam and South Africa. 19 Flegg and Webber, “Regional Size, Regional Specialization, and the FLQ Formula,” 34.6 (2000), 563-9 The impact of Airbus on the UK economy

OXFORD ECONOMICS

Oxford Economics was founded in 1981 as a June 2017 commercial venture with Oxford University’s All data shown in tables and charts are business college to provide economic Oxford Economics’ own data, except where forecasting and modelling to UK companies otherwise stated and cited in footnotes, and and financial institutions expanding abroad. are copyright © Oxford Economics Ltd. Since then, we have become one of the world’s foremost independent global advisory firms, This report is confidential to Airbus and may providing reports, forecasts and analytical not be published or distributed without their tools on 200 countries, 100 industrial sectors prior written permission. and over 3,000 cities. Our best-of-class global economic and industry models and analytical The modelling and results presented here tools give us an unparalleled ability to forecast are based on information provided by third external market trends and assess their parties, upon which Oxford Economics has economic, social and business impact. relied in producing its report and forecasts in good faith. Any subsequent revision or update Headquartered in Oxford, England, with of those data will affect the assessments and regional centres in London, New York, and projections shown. Singapore, Oxford Economics has offices across the globe in Belfast, Chicago, Dubai, Oxford Economics, Miami, Milan, Paris, Philadelphia, San Francisco, Broadwall House, and Washington DC. We employ over 230 21 Broadwall, full-time people, including more than 150 London, professional economists, industry experts and SE1 9PL business editors—one of the largest teams UK of macroeconomists and thought leadership specialists. Our global team is highly skilled Tel: +44 207 803 1400 in a full range of research techniques and thought leadership capabilities, from www.oxfordeconomics.com econometric modelling, scenario framing, and economic impact analysis to market surveys, case studies, expert panels, and web analytics. Underpinning our in-house expertise is a contributor network of over 500 economists, analysts and journalists around the world.

Oxford Economics is a key adviser to corporate, financial and government decision-makers and thought leaders. Our worldwide client base now comprises over 1000 international organisations, including leading multinational companies and financial institutions; key government bodies and trade associations; and top universities, consultancies, and think tanks.

44

Global headquarters Belfast Chicago Oxford Economics Ltd Tel: + 44 (0)2892 635400 Tel: +1 (773) 372-5762 Abbey House 121 St Aldates Paarl Los Angeles Oxford, OX1 1HB Tel: +27(0)21 863-6200 Tel: +1 (424) 238-4331 UK Tel: +44 (0)1865 268900 Frankfurt Florida Tel: +49 69 95 925 280 Tel: +1 (954) 916 5373 London Broadwall House Paris Toronto 21 Broadwall Tel: +33 (0)1 78 91 50 52 Tel: +1 (905) 361 6573 London, SE1 9PL UK Milan Hong Kong Tel: +44 (0)20 7803 1400 Tel: +39 02 9406 1054 Tel: +852 3103 1096

New York Dubai Tokyo 5 Hanover Square, 8th Floor Tel: +971 56 396 7998 Tel: +81 3 6870 7175 New York, NY 10004 USA Philadelphia Sydney Tel: +1 (646) 786 1879 Tel: +1 (610) 995 9600 Tel: +61 (0)2 8458 4200

Singapore Mexico City Melbourne 6 Battery Road Tel: +52 (55) 52503252 Tel: +61 (0)3 8679 7300 #38-05 Singapore 049909 Boston Tel: +65 6850 0110 Tel: +1 (617) 206 6112

Email: [email protected]

Website: www.oxfordeconomics.com