The highly fragmented nature of the UK aerospace industry has generated a proliferation of highly innovative SMEs producing a variety of components for world-leading products. This presents both challenges and opportunities.

On the one hand a multiplicity of small companies can be resilient to changing market forces – traditionally being able to adapt to rapidly changing conditions faster then larger companies. This is particularly important in an age when private investment and multi-nation output driven contracts (such as the future strategic tanker aircraft, the UK Mil Satellite Communications system Skynet and the Anglo-French defence pact) are providing increased scope for innovative service and technology providers to implement platforms on which to sell their wares.

On the other hand, this fragmentation can also result in the lack of joined up strategy; sending mixed messages to government and ultimately failing to realise economies of scale. It is also a structure that empowers prime industry and, as a result, the entire supply chain may feel the impact of not ‘getting it right first time’ (such as the delays associated with the A400M for example).

As such, collaborative joint ventures between Government, Universities, SMEs and Primes businesses may provide a suitable model for fostering innovation in an age of budget cuts. Achieving competitive advantage in high technology engineering is tough – in particular demonstrating a sound return on investment, which can be complicated by various regulatory hurdles, technology immaturity, equipage rates and lengthy time to market. The ultimate vindication of such activity is the realisation of efficiency gains in supply chain development through such initiatives as SC21 and ensuring talent retention in strategically important industries whose capabilities cannot be readily ‘switched on and off’.  

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