Following the seismic development of last month’s 52 percent vote for Britain to exit the European Union, there is speculation about what this might mean for the aerospace sector. Although the formal process for the UK’s exit from the EU is yet to start, the markets are responding.
In the immediate aftermath of the vote, world markets fell by just under 5 percent, with airline stocks down by more than 10 percent and the pound at its lowest level against the dollar since 1985. The markets have since stabilized somewhat, but these changes threaten to disrupt the market dynamics that have prevailed over the last five years, with commercial aerospace in an almost uninterrupted expansion phase and defense companies hit by constrained government budgets. Now both markets appear to be shifting. Commercial aircraft orders have dipped and, absent a reversal, growth in deliveries will soften. Defense markets have started to stabilize and offer more upside outside the UK.