Aerospace sector in EU

The EU aerospace sector is rising as the most high tech sector in European Union. The European Aeronautic industry is a multifaceted industry involved in development and manufacturing of wide range of products, such as aero engines, unmanned aerial vehicles, helicopters, military and civil aircraft, systems and equipments. The aerospace sector also provides training and repair services and several other activities that are related to different aerospace products.

Foreign investors have exciting investment opportunities in aerospace sector specifically in R&D sector as EU aerospace industry needs efforts in R&D to maintain global competitiveness. The total turnover of EU aerospace sector is €128 billion with the highest spending in R&D. Around 12% of turnover is directed towards R&D in aerospace industry.

Trends:

There is an increasing global demand for different aerospace and aeronautic products. It is anticipated that there will be 4.8% annual growth in passenger traffic in coming years.  The aerospace sector of EU hence needs to be ready to meet the rising demand which includes fleet enlargement, innovation to reduce the environmental impact, aircraft size and meets demand of new emerging markets. The importance of air transportation is expected to grow stronger with simultaneous increase in air cargo business.

Growth and FDI figures:

It is estimated that there will be a demand for approximate 26,000 jet airlines and cargo aircrafts to meet the growing air traffic worldwide. It is also estimated that there will be demand for 1,300 new aircraft annually worldwide. Even though the average employment cost is high in EU member countries, the sector is still profitable. As per the figures released by Eurostat, the production of aerospace sector in EU27 grew by an approximate rate of 1.5% from 2001 to 2008.  However, there was only a slight increase in the number of employees at rate 0.1% p.a

Key Players:

France: France has a multi-faceted aerospace industry. It is one of the dominant players in the EU aerospace industry. France has vertically developed its aerospace industry which is estimated to be of worth $15 billion.  France aerospace industry is involved in development of helicopters, avionics, and jets for defense forces, passenger aircraft for civil aviation, weapons and several other aeronautical projects.

Many private institutions and aerospace industries are located in primary location in France.  The French government has taken many initiatives that encourage new aerospace research and development in the region to give boost to the aerospace industry. Besides, aerospace industry is also known to generate good employment. Currently the aerospace sector generates around 100,000 jobs which are likely to grow in the future. The government has linked its aerospace sector with other aerospace sector of developed nations in EU. 

Some of the big names of French aerospace industry are French corporation Aerospatiale Matra and European Aeronautical, Defense, and Space Company (EADS). The French government   believes that foreign direct investment is necessary to create a global sized enterprises and also for strengthening the transnational corporations.  French aerospace generally specializes in Cockpit technologies and manufacture, engine manufacturing, aircraft funding, final assembly of helicopter and wide-body aircraft.

UK: The UK Aerospace industry is a major export sector. It is also the second R&D intensive sector after pharmaceuticals in UK.  The UK government funds R&D which improves the industry’s global competitiveness. UK government also approves public R&D investments to keep the costs low. The UKAI (United Kingdom Aerospace Industry) has recorded a turnover of £22.7 billion in 2006. The productivity of the UKAI is also 50% higher than the national average.  The UKAI has independence for manufacturing for civil as well as defense sides which proves to be an added advantage.
The UKAI can be divided into five different sectors which includes, aircraft frames and systems, aircraft engines, aircraft equipment, space and missiles.

Investment policy:

To maintain global competitiveness, the Aerospace industry needs to make huge investments in the R&D sector. The European commission framework takes this factor into consideration hence its primary aim for such sectors is to create environment and conditions for strengthening sector through investment in R&D.

On this line, the EU has already launched a “Clean Sky” initiative in 2008. It is public-private partnership worth € 1.6 billion which will help the aerospace industry to develop and build environmental friendly aircraft.   To encourage FDI in Aerospace, the EU commission as asked member states to remove barriers for foreign investments in Aerospace sector. France government has followed the EU initiatives and encouraged FDI in aerospace sector.

To maintain its position in terms of attractive destination for investment, UK has taken an initiative to make improvement in policies that adapts to the concern of investors. UK doesn’t discriminate among domestic and foreign investors. It gives many benefits through low tax rates to investors in this sector.
Investment incentives:

France is the leader of low business set up costs in Europe.  France offers lowest business setup costs in terms of facility costs, utility costs, labor, transport and corporate taxes. The total payroll costs after social security contributions are much lower than UK and Germany.  France Government has also showed generosity in terms of corporate tax. France has reduced or nil rate for corporate income tax.  The taxes are much lower in free trade zone areas. Energy conserving enterprises also enjoy low tax rates in France.

UK has made amendments by bringing in tax reform to attract FDI. In fact UK has the lowest corporate tax (28%) which is lowest in G7 countries.  The tax system of UK is simple: the small companies get marginal tax benefits on the profits (300,001-1,500,000 GBP). Besides, the tax system also allows further tax deductions on depreciation of assets used for trade and expenditures.

Resources:

The Invest in France Agency works for promotion of foreign private investment in different sectors in the country. The agency provides all necessary help to investors and help at all stages of setting up an enterprise in the country.

The UK trade and investment is a central agency that works to promote foreign investment in the country. Besides providing comprehensive information about legal framework, tax system. It also helps the investor to gain an understanding of the market and the sector, in which the investor intends to invest.
 

 

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