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The Impact of Covid-19 on UK Aerospace Industry

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Stephen Brown

Euro Projects Recruitment Business Leaders Zoom Call

For Manufacturing, Engineering, Technology, Transportation & Logistics Professionals

HR & COVID-19 Update + The Impact of Covid-19 on UK Aerospace Industry

Summary of Key Points: 2nd November 2020

Covid-19 & Business Update

Stephen Brown from Euro Projects Recruitment

Thank you for attending our latest, now 26th Business Leaders Zoom Call, bringing you the latest information relevant to navigating the latest challenges in business.

As you will know Saturday’s announcement sends us into another lockdown on Thursday, the full extent of which will be agreed by parliament on Wednesday, I urge anyone wishing to have their views and opinion felt in this debate to contact their elected MP to allow for your views to be represented democratically.

The impact of the pandemic on jobs so far was 242,501 redundancies at the last count with 2.8 million still on furlough in September awaiting news of their return to work.

Indeed reported that 1,700 employers notified the government they intended to make large scale redundancies cutting more than 20 jobs and 670,000 job seekers have recently registered their CV’s online, supporting our theory that finding the right person is still like finding a needle in a haystack, except the haystack just got 670,000 times bigger.

Furlough has so far preserved millions of jobs which might otherwise have been lost and as announced on Saturday this has been extended by a further month.

With more details on this, we are pleased to welcome Helen Dyke from Irwin Mitchell with a furlough and employment law update:

Furlough & Employment Law Update:

Helen Dyke, Senior Associate Solicitor, Irwin Mitchell LLP

DDI: 0121 214 5242

Mobile: 07435966985

The government has insisted for weeks that the furlough scheme would end, as scheduled, on Saturday 31 October. But, just hours before that deadline, the Prime Minister announced that it would be extended for a month to help businesses cope with the second national lockdown, which in England is due to start on Thursday 5 November, and expected to last for at least a month.

The government has said that it will publish guidance 'shortly', but this is what we know so far:

Which organisations can claim under the extended scheme?

The rules will be similar to those under the old scheme; you must have a UK bank account and UK PAYE scheme etc and there are restrictions on those organisations which receive public funds . But, you don't have to have previously received a furlough grant to qualify. 

Which employees are covered?

The rules are different from the original and flexible furlough schemes. You can claim for any employee who is on your PAYE payroll by 23.59 on Friday 30 October 2020 provided you have submitted Real Time Information about them to HMRC by that date. This means that new starters or people who have not previously been furloughed will qualify.

Other than that, the rules will mirror those under the original/flexible schemes and employees can be on any type of contract. Further information about the original eligibility requirements is available here.

How much can employers claim?

The government will pay 80% of an employee's wages subject to the original cap of £2,500 per month. You just have to pick up the national insurance and pension contribution costs.

The rules around flexible furlough will remain the same which will mean you can continue to pay staff to work some of their contractual hours and furlough them for those they don't work. The government's press release says that calculations 'will broadly follow the same methodology as currently under the CJRS'. 

When can employers start to claim?

We're not sure. The government has said that it will 'confirm shortly' when claims can first be made for employee wage costs during November. However, it has confirmed that they will be no gap in eligibility for support between the end of the original/amended scheme and this extension. 

You will have to claim for a minimum period of seven consecutive days.

Do staff have to agree to be re-furloughed?

We expect the rules to mirror the existing ones which require written agreement before you can furlough your staff. If you've already put in place a Job Support Scheme open or closed agreement, we recommend that you contact those employees as soon as you can to explain what has changed and ask them to agree to furlough instead. If you need any help with this, please get in touch.

What about the Job Support open and closed schemes?

These schemes were due to start on Sunday 1 November. However, they will now be postponed until the new extended furlough scheme ends. 

https://imbusiness.passle.net/post/102gjah/furlough-scheme-extended-as-england-gets-ready-to-go-into-another-national-lockdo

Euro Projects is grateful to Helen for this information and a special offer for contacts of Euro Projects, which has been offered by Irwin Mitchell with discounted rates for buying ‘banks of hours’ for legal support, please contact Helen Dyke for more information.

Helen Dyke, Senior Associate Solicitor, Irwin Mitchell LLP

DDI: 0121 214 5242

Mobile: 07435966985

The Impact of Covid-19 on UK Aerospace Industry:

Andrew Churchill, Chairman, JJ Churchill Ltd.

One of the most impacted sectors of the engineering and manufacturing community by the pandemic has been aviation and aerospace. We are therefore delighted to welcome a long time business leader in this sector, who is also very active in industry and local politics and who many of you may know from his regular interviews on TV and radio discussing business matters; may I introduce Andrew Churchill, Chairman of JJ Churchill Ltd, now in its third generation of family ownership and possibly experiencing it’s most challenging period of business right now.

Andrew, thank you for joining us, can you begin by outlining how things were for your industry and your business in the lead up to March and what life has been like since?

Start with glass ¾ full, in the second week of March we were closing the financial year with a £24million turnover and a £200m, 10 year order book, having just invested £10m in new capital plant and machinery.

Then our Italian based customer specified and sole supplier of precision castings (also owned by our main customer) went into lockdown, they were also in delivery arrears so we had no stock to work either. The business experienced an immediate 90% reduction in workload. We are currently 70% down on where we should be, expecting a 2 – 5 year slog to get things back to where they were.

The long term orders are still in place but we will not start to manufacture in earnest until Aug  2021.  We’ve had to cut staff by 50% and pay cuts of 10% for remaining staff to help manage the liquidity of the business to retain our key staff so we viable skills for when we restart.

The key is getting businesses like ours across the river with enough liquidity to still be in business within this timeframe and to then be able to buy expensive materials to restart production and then wait 85 days to get paid by our customer.

The issue for the UK aerospace industry is that whilst the furlough scheme was generous and nimbly introduced, it only lasted for a matter of weeks, whereas competing foreign countries are being given greater levels of support to that provided by UK Government. The French ‘chômage partiel’ and German ‘Kurzabeit’ alternatives to UK furloughing are set to run until the end of 2021. Importantly, these support measures were announced early, allowing businesses to plan long term.

There is a Chinese proverb that says when men are being chased by a tiger, you don’t need to be the fastest, but not the slowest. Right now the UK is in danger of becoming the slowest man in the industry.

This comes at a time ahead of Brexit when UK manufacturing needs to be given every available opportunity to become competitive as we leave Europe.

Also, compared to the French and German aerospace industries, the UK has a higher proportion of SME’s in the supply chain, which has fewer borrowing options than mid-cap sized firms and lower levels of patient capital.

UK loan options allowable for repayment over 6 years contravene state aid regulations, something only recently realised by the secretary of state.

A modest debt for equity swap should be available as a common instrument to provide medium term liquidity.

We have noticed a drop in enquiries for skilled workers of precision engineered parts, previously in high demand by aerospace manufacturers, how do you think this pandemic will impact the long term development of skills in this sector, which many other sectors also get to benefit from?

This situation is worse than a gap in the pipeline, it has completely messed up the mind of an 18 year old school leaver and engineering apprentice starts this September were 70% down nationally.

The FE sector, the Cinderella of tertiary education was already grossly underfunded and struggling to keep its head above water, now faces the risk of many college and apprentice training provider closures.

The ability to train during furlough was opaque and reduced the ability to build skills during this period and the apprenticeship levy is not flexible enough to help employers in the current crisis, it should ideally be used to cover the cost of training for all employees, necessary for retention of people to retrain for digital skills as we enter the 4th Industrial Revolution.

What is your long term opinion for the future of the UK aerospace industry?

Once the industry rebounds it is unlikely we will recruit back all 156 employees, we will be seeking higher levels of robotics and automation.

The UK Aerospace industry is also very good at defence and the two are symbiotic, with defence benefiting from the economies of scale of civil aerospace and civil aerospace benefiting from some of the technological advances in defence, therefore if there is a national under investment in the UK aerospace industry it will break our defence capabilities.

Long term people will return to flying, we have a human need and addiction to travel and explore, it will take 2-5 years to get to 2019 levels.

The recovery of air travel will be short haul first then long haul later.

Sustainability agenda needs to be first and foremost with investment such as in jet zero. The important thing for the UK is to decide what part we wish to play in the recovery.

We have been dominant in jet engines, second after U.S. which is a position we will lose if nothing is done to protect the sector.

If we are not careful the French and German aerospace industries won’t just eat our lunch, we will be serving it to them.

What are the key lessons learned from this experience?

Dust of your strap plan and know a daily cash position for 24 months. If we had not had this we wouldn’t have known to take cost cutting measures when we did.

Dynamic actual costings – not standard costing – actual costing

Understand your customer and your customer’s customer, airlines ceasing to fly with obvious impact but know to what degree and when, we learned the impact on business travel and private jets been affected, understand linkages and in granularity to make informed decisions.

Take rapid and decisive action, our view was that most decisions were the least bad thing we could do, there is always better data but if it takes an extra few weeks you are better off making decisions quickly and saving the costs of what you were putting off in the meantime.

Hold regular open and honest communication, let all employees understand the WHY, it’s not one person, one company or one country’s fault.

Ideally communicate face to face then follow it up in writing.

Other dates and topics of our Zoom Calls for your diary:

  • 16th November, Covid-19’s Impact on the Automotive Industry with Dr George Gillespie OBE, President of SMMT and Chairman of Horiba MIRA.
  • 30th November, Covid-19’s Impact on innovation with Terry Spall, President of Institute of Mechanical Engineers (IMechE)

Euro Projects Recruitment is delighted to invite you to the next Business Leaders Zoom Call with a focus on the future of the Automotive Industry and special guest George Gillespie, President of SMMT (Society for Motor Manufacturers and Traders) and Chairman of Horiba MIRA.

We will also be joined by Stephen Brown discussing the current economic impact of Covid and Brexit on UK employment and Helen Dyke of Irwin Mitchell on employment law.

Join us at 2.00pm on Monday 16th November 2020:

Join Zoom Meeting

https://us02web.zoom.us/j/89523280830?pwd=M2JYMU9LWWZVOW54RC9QSFNGd3NVUT09

Meeting ID: 895 2328 0830

Passcode: 805106

In the meantime, read about the latest candidates and salary levels in your industry in our Recruitment Review and Salary Survey: