Boeing comes to Sheffield
The US aerospace giant is spreading its wings into Europe
Last week, Boeing announced it would be opening its first ever manufacturing facility in Europe. Where will it be I hear you ask? Sheffield. I imagine that isn’t what you were expecting. I certainly wasn’t. The decision is significant for two reasons; what it says about Boeing’s relationship with Europe, and what it says about UK industrial capability.
Boeing’s first foray into Europe will only produce actuators, so it isn’t quite as significant an incursion onto enemy territory as when Airbus opened a final assembly line (FAL) in Mobile, Alabama. Any decision by Boeing to move some production to Europe would be very significant indeed, but we are not there yet. What it shows is how keen Boeing is to keep its European governments on side. This is likely the result of a quid pro quo arrangement following recent defence sales. The UK MOD has signed contracts totaling £5bn for P-8 surveillance aircraft and Apache helicopters, but in a blow to the UK defence industry assembly of the helicopters will be in the US rather than the UK as was the case with previous orders. Boeing has therefore committed to building a £100m facility to service the Royal Air Force’s (RAF) P-8s at RAF Lossiemouth in Scotland, as well as making Britain a centre for training and maintenance of military aircraft, with Boscombe Down considered the front-runner.
Sir Michael Arthur, President of Boeing UK said that the move was part of Boeing “becoming a more global company”. Currently Boeing employs 2,300 staff in the UK on civil and military programmes. The new 25,000 sq ft factory will have an initial staff of 30, though this could well be expanded. Boeing maintains that the decision is not linked to lower manufacturing costs in UK, however with Airbus enjoying such a strong currency tailwind following the devaluation of sterling against the dollar, it must be a small factor. It is intriguing though that with Brexit looming, Boeing has not chosen a location with the future EU for its first European plant. Sheffield’s choice must surely be a boost to Theresa May and her Government, following the launch of the new UK Industrial Strategy at the end of January which champions technological development as the core of a Great Britain after we leave the EU.
The North of England, our traditional industrial heartland will certainly see it as a vote of confidence, and so it should. In this automated era, where more and more manufacturing plants are closing, it is all too easy to bemoan the loss of our industrial capability. However, it seems that brilliant things are happening in the North. Sheffield University’s Advanced Manufacturing Research Centre has been at the forefront of combining academic research with industry. It specializes in metals, materials and virtual reality prototyping and design. 500 engineers work alongside 5000 industry sponsored apprentices. It has developed designs for Rolls-Royce composite turbine blades, McLaren superstars and the Boeing Dreamliner. Boeing’s new facility will be 30 miles down the road.
Boeing aircraft are unlikely to lose their “made in the USA” stamp anytime soon, but this decision is a reminder why the two sides of the Aerospace and Defence sector will always be inexplicably linked, because often concessions on one side to sales in the other. In addition, it reminds Airbus that the dynamics of the US vs Europe aircraft duopoly are always shifting and is a small but well-timed boost to the UK industrial capability.
Disclaimer - Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. This document may contain materials from third parties, which are supplied by companies that are not affiliated with Edison Investment Research. Edison Investment Research has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of publication and is subject to change without notice. While based on sources believed reliable, we do not represent this material as accurate or complete. Any views or opinions expressed may not reflect those of the firm as a whole. Edison Investment Research does not engage in investment banking, market making or asset management activities of any securities. The material has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.