Written submission from Airbus (PRO0063)

Executive Summary

Airbus welcomes the Committee’s examination of the UK’s priorities for growth as it develops its schedule of inquiries for 2026. Airbus supports the Committee’s ambition to identify policies that will strengthen national competitiveness, drive productivity and boost growth. To contribute Airbus believes there are three specific areas that the Committee should examine further in 2026:

Ensuring effective implementation of the Industrial Strategy: It is critical that the ambitions set out in the Industrial Strategy are now implemented at pace. Airbus recommends that the Committee examine how effectively the Government is delivering the Strategy in the year since its publication. The inquiry should also assess whether the Industrial Strategy Advisory Council has the resources required to effectively monitor implementation and delivery.This could cover alignment of industrial priorities across departments, whether the Strategy is driving innovation, promoting export-led growth and reviewing the effectiveness of the new institutional structures.

Bridging the gap between innovation and commercialisation: The UK has world-class research and early-stage innovation that we rely on in our British supply chain, but continues to face barriers in scaling technologies from the laboratory to industrial application (the “valley of death”). Airbus suggests the Committee could explore how Government can best support the transition from research (TRL 1-6) to deployment (TRL 7-9) including exploring whether there could be more flexibility in funding mechanisms and a review of subsidy regimes. The Committee has examined this issue in the past, but many of the same challenges remain. Addressing this is critical if the UK is to capture the economic productivity and employment benefits of its technological innovations and for primes like Airbus to continue to thrive in the UK.

Unlocking the UK’s space potential: The space sector represents one of the UK’s most significant long-term opportunities for growth, technological leadership and export potential. Airbus urges the Committee to examine how the UK can position itself as a leading space nation through an integrated national strategy that brings together civil, defence and commercial space activities, driven by a whole of government approach and the simplification of space policy across government departments.

Our response to the call for evidence is based on our insights, data and experience as both an international investor in the UK and a proudly domestic business. Airbus would welcome the opportunity to provide further information to the Committee on these issues and we would be very happy to provide oral evidence to any inquiries launched in these areas.

Business Confidence

What factors most affect confidence in the UK as a place to invest and expand?

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How are communication and engagement between government, business, and the City influencing sentiment?

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What role do stability, predictability, and long-term planning play in shaping business decisions?

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Pro-Growth Reforms and Investment

Which areas of reform—planning, infrastructure, regulation, skills—are most urgent for unlocking growth?

The aerospace industry is entering a period of intense, disruptive change as it seeks to decarbonise, moving from aluminium based to composite based components, and from kerosene to sustainable aviation fuels (SAF) and hydrogen. This presents significant opportunities for the UK to position itself as a global leader in emerging technologies. The UK, therefore, must create the foundations on which these technologies can be successfully scaled and commercialised.

For example, as identified by Hydrogen in Aviation’s 2024 report, Launching Hydrogen-Powered Aviation, it is critical to prepare a Hydrogen-ready workforce to support the transition to this new technology. In order to ensure that there is a well-trained workforce, skills training will need to be developed and delivered well in advance. This will involve scoping and identifying the high-level knowledge and skills which require targeting and developing an occupational standard alongside a curriculum before rolling it out to providers. This is notwithstanding the training time required for those undertaking the training for the first time.

It is vital that the new Growth and Skills Levy provides greater flexibility, particularly for fast-evolving sectors. Employers need more agile funding options for short-term training to rapidly upskill employees, while through-life learning and workforce upskilling should be embedded in policy decisions. Given the long lead time to develop expertise in complex technologies, Airbus recommends the introduction of greater skills incentivisation in defence contracts, a strategic long-term talent pipeline, and cross-sector career pathways.

Airbus welcomes the Skills England reforms but must highlight a critical challenge: the Skills and Growth Levy can only be spent in England, despite being calculated on a UK-wide basis. For a globally competitive business like ours, this means levy funds generated by our entire UK operation are inaccessible for vital skills and apprenticeship programmes at essential sites, such as our main wing factory in Broughton, North Wales. Airbus urges that the proposed Growth and Skills Levy be designed to ensure cross-border applicability.

Procurement reform is urgent for encouraging growth and innovation in the defence sector. The current process needs to be faster, more collaborative, and outcome-focused. Long-term strategic partnerships between the government and industry would help stimulate innovation and deliver improved results for defence investments that have long term benefit for the UK. We welcome the changes set out in the Strategic Defence Review, and look forward to supporting their rapid implementation.

What role will the Industrial Strategy play in driving growth?

Airbus strongly supports the wider Industrial Strategy’s ambition to strengthen the UK’s global competitiveness, address systemic barriers to growth and develop a framework for sustainable economic advancement in high-growth sectors. If implemented well, the Industrial Strategy also provides a unique opportunity to anchor the Defence Industrial Strategy into a national framework, delivering growth, jobs, security, prosperity and new international partnerships.

The Industrial Strategy is a chance to keep the UK at the forefront of space competitiveness, enhance national security, drive UK growth and foster bilateral partnerships. Although space is a global growth sector, projected to be worth $1.8 trillion by 2035, the UK’s sector is disparate and disaggregated. Given the interdependence between civil and military space, adopting a clear national strategy that integrates both government and industry would bring security, economic and scientific gains and guarantee UK competitiveness.

While the UK excels in early-stage and discovery R&D, particularly in developing cutting-edge capabilities in wings, engines, fuel systems, satellite systems, and cyber resilience, challenges emerge when scaling these innovations beyond early stages of R&D. Addressing this barrier is vital to safeguarding the UK’s competitiveness, supply chain resilience and sovereign capabilities.

How can growth be translated into higher productivity and achieving the Government’s ‘milestone’ of raising living standards in every part of the UK?

The aerospace sector already delivers productivity 2.5 times the national average, according to the UK Space Agency. This is in part because of investment innovation which is underpinned by sustained collaboration between government and industry through programmes such as the Aerospace Technology Institute (ATI). How this collaboration can be strengthened so the sector can grow further, is set out in more detail in our answers below.

Expanding local clusters, such as those in aerospace, advanced manufacturing, and space, can drive high-value job creation and foster innovation-led growth across the whole of the UK. A focus on clusters supported by improved access to capital for supply chain firms, will ensure that productivity gains are spread across the country, supporting the Government’s ambition to raise living standards in every part of the UK. This is set out in more detail in our answer below.

Costs of Doing Business

How are tax, employment costs, and regulatory obligations shaping firms’ ability to grow?

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What policy options could reduce the cumulative burden on business while maintaining fiscal sustainability?

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What lessons should be learned from past Budgets in balancing costs against growth incentives?

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Productivity Growth

What are the main drivers of the UK’s productivity challenge?

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How can the Government and business better align to improve productivity in the Industrial Strategy’s eight growth-driving sectors?

According to the trade association ADS , the aerospace industry has a median income of £48,700, 39% higher than the UK average. Airbus employees are also 2.5 times more productive than the national average, achieving a key competitive advantage for the UK. In 2024, ADS found that productivity within the aerospace sector has risen by 25% since 2013, with an average of £104,800 output per worker.

The aerospace industry has been supported by the Aerospace Technology Institute (ATI) to support R&D in the sector through joint-funding initiatives between Government and industry. This has been enormously successful in leveraging investment into innovative technologies, with analysis showing that every £1 of ATI investment returns on average more than £7 in private sector investment in R&D and manufacturing activity. Building on the current ten-year funding commitment of £2.3bn to 2035 as announced in the Spending Review, a rolling framework would provide the continuous, long-term stability required for sustained investment in aerospace R&D.

Airbus would recommend an evolution of the ATI funding framework to a ten year rolling funding commitment to help the UK secure a leading role in the market and for the framework to more closely align with the industry’s funding cycles and long term planning.

Access to capital remains a prevailing challenge for all businesses, but in particular for SMEs across the supply chain, including in the aerospace and wider advanced manufacturing sector. For many SMEs, lack of access to capital, at reasonable rates, limits their ability to upgrade their technologies and industrial processes, preventing them from scaling up and adopting new practices that may increase their efficiency, productivity, or make them more resilient. This lack of an ability to invest in new technologies by SMEs can result in a lack of resilience in the wider supply chain. Given 50% of Airbus’ suppliers are SMEs and we buy 80% of components for what we produce from these firms, this leaves Airbus and peers within our sector more vulnerable to supply chain disruptions.

Airbus welcomes the National Wealth Fund’s expanded mandate to consider investments in dual-use technologies and to support supply chain resilience to better support defence and security. Equally we welcome the work that the British Business Bank does to support SMEs.

A stronger MOD-industry partnership is essential for effective defence spending. Co-creating requirements ensures realistic specifications and effective decisions and delivery. A Space Industrial Partnership could showcase this new approach as the UK Space sector is 2.5 times more productive than the UK average. Airbus has a Space Vision for 2035, which proposes a partnership with government to move towards an integrated space architecture, aiming to super-charge our national space power, accelerate UK economic growth, and catalysing sovereign AI and quantum credentials.

What role should technology, skills, and innovation policy play in boosting long-term output per worker?

The journey from laboratory to industrial implementation (TRL6-TRL9) is the key to long-term growth and productivity gains, so government support across the advanced manufacturing sector to pull some of these technologies through to industrial application is key. The government must recognise the “valley of death” many of our potential suppliers face as earlier stage R&T projects need to be matured and work together with industry to find solutions to ensure that the innovations and technology are exploited and deployed here in the UK.

Airbus’ largest Global R&T programme, Wing of Tomorrow (WoT), is partly funded by HMG through the Aerospace Technology Institute and explores the best materials, manufacturing and assembly techniques, as well as new technologies in aerodynamics and wing architecture that will inform the next generation of wings. This represents an excellent example of public-private collaboration to address key technology challenges. A key challenge that the WoT programme is looking to address is how to evolve the build methodology in a demonstrator environment to allow rapid industrialisation of the technology to enable wing manufacturing at very high production rates - we are currently working towards increasing our rate to 75 single aisle aircraft per month, which requires 75 sets of wings per month for our single aisle aircraft and this will get higher.

Airbus welcomes the UK Government’s Industrial Strategy and the £2.3 billion in funding via the Aerospace Technology Institute (ATI) to 2035. This funding is crucial for the next generation aircraft technologies, including the development of zero-carbon, intellectual property (IP), and advanced manufacturing skills that underpin our operations in the UK. Airbus is instrumental in the development of these key capabilities which position the UK in a key role for future investment decisions and workshare of future aircraft programmes. These programmes will contribute substantially to the efforts towards the decarbonisation of aviation and indeed bring investment and growth to the UK.

Skills are vital to the growth of the advanced manufacturing sector in the UK. Airbus has trained more than 4,000 early careers in the last ten years, providing a clear pipeline of future talent, tailored to the industry’s needs and innovative technology. Investing in the next generation of skills is essential for sustaining long-term industrial capability and growth, critical in future proofing Airbus and the wider aerospace sector. Airbus welcomes the ambition of the Government to implement changes to the Apprenticeship Levy swiftly. It is vital that the new Growth and Skills Levy provides greater flexibility, particularly for fast-evolving sectors.

Employers in fast-evolving sectors such as ours, require the ability to quickly and efficiently train their workforce on new technologies and processes. Providing more flexible funding options for short-term courses, which can rapidly upskill employees, would be a critical step forward. For example, as identified by Hydrogen in Aviation’s 2024 report Launching Hydrogen-Powered Aviation, it is critical to prepare a Hydrogen-ready workforce to support the transition to this new technology. In order to ensure that there is a well-trained workforce, skills training will need to be developed and delivered. These stages will involve scoping and identifying the high-level knowledge and skills which require targeting, and developing an occupational standard alongside a curriculum before rolling it out to providers, notwithstanding the training time required for those undertaking the training for the first time.

How can productivity gains be shared fairly across the economy?

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The Role of Regions and Cities

How can regional and city leadership be further empowered to drive local growth?

To maximise local benefit, high-performing aerospace and advanced manufacturing clusters, such as the South West of England, should be leveraged to boost national growth. Raising productivity outside the capital is key to addressing national economic growth and geographic inequalities. Local authorities must proactively invest in areas such as skills, transport and infrastructure to support high-performing sectors and key future growth industries. An approach that recognises the role of place to focus effort on the city regions and clusters where the Industrial Strategy’s eight growth sectors concentrate is key. Local authorities should also be encouraged to collaborate with the private sector within those regions to create coherent regional strategies.

Collaboration between devolved governments and Westminster on sector plans for advanced manufacturing and defence is critical to unlocking regional growth potential. Coordinated efforts will amplify and accelerate progress, enabling a more unified approach to economic development. Removing administrative barriers to economic growth, rather than adhering rigidly to boundaries, would enable more integrated and effective strategies.

For example, the next Welsh Government should lean into the Defence Industrial Strategy and Defence Growth Deal cluster in Wales to build on one of the nation’s major strengths. This underpins an approach to building mission critical sovereign capabilities and driving growth across Wales. We welcome the commitment to driving growth through defence, and look forward to the publication of the Defence Investment Plan, which is essential to provide the certainty industry needs.

How will the Government’s housebuilding and infrastructure investment plans boost regional economies?

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What lessons can be learned from international models of regional economic development?

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Better Regulation

Is the current regulatory environment helping or hindering growth and investment?

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What impact will the Government’s Regulatory Action Plan have on reducing unnecessary costs and delays for businesses?

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What opportunities exist to streamline or consolidate regulators to improve efficiency?

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Risks and International Context

How should the UK position itself in relation to international competition, including the US, EU and emerging economies?

In the face of increasing overseas competition for internationally mobile investment, the UK

must take the steps set out in our previous answers to capitalise upon the country’s comparative strengths and ensure Government support is targeted at the areas where it can maximise its impact and catalyse as much international investment as possible. The steps that the Government has already taken in the Industrial Strategy and strategic investments are welcome measures to improve our competitiveness, but we must go further, as set out above.

Airbus considers European defence as globally competitive only including the UK. We believe the UK and EU have a co-dependency that is essential, not just in terms of industrial capability, but also in terms of our mutual contribution to the defence of Europe and to NATO. We would like to see this better reflected with a strategic partnership between the EU and the UK in defence and security to facilitate cooperation. We are pleased that the Government is committed to implementing the UK-EU security and defence partnership and we are keen to work with the government to help implement it.

A NATO-first approach should prioritise interoperability and alignment of national defence procurement strategies with NATO’s operational requirements. A good example is NATO’s Next Generation Rotorcraft (NGRC) multinational framework under which its participants can combine efforts to work on design, development and delivery of a medium multi-role helicopter. Continued participation is necessary to ensure the UK delivers optimum value for money, interoperability with NATO and other partner nations, while maintaining pace with key technologies.

The UK’s leadership in military satellite communications (MilSatCom) through the SKYNET programme places it at the heart of NATO’s secure, multi-domain operational network. The UK should build on this by expanding collaboration with NATO allies in secure space-based communications, ISR, and early warning capabilities. NATO’s emerging military space strategy presents an opportunity for the UK to lead on space resilience, counter-space capabilities, and secure data infrastructure.