Changing lanes: From automotive to aerospace and defence

UK vehicle production fell to 764,715 units in 2025, its lowest level since 1952. Beneath the headline sits structural issues: electric vehicle (EV) programmes have delivered well below planned volumes, Chinese brands are taking share, and many suppliers are carrying capacity built for volumes that haven’t arrived.

The aerospace and defence sectors have the opposite problem. Civil aerospace is ramping production to meet record demand, and the government has committed £298 billion of defence investment over four years. The customers are different, but both aerospace and defence need more output than today’s supply chain delivers.

What automotive has, aerospace and defence need.

On 21 October, we co-hosted a working session at our Birmingham office with David Roberts, Executive Chairman of Evtec Group and Group Chief Executive of Sovereign Industrial Group. Participants worked through what stops suppliers moving from automotive into aerospace and defence, and what needs to happen next to help them make that move.

The following key themes around market access and funding stood out.

Market access: Getting in front of the right people

Lack of access is a key barrier: This was a consistent message. Many suppliers said they have no network in aerospace or defence and don’t know where to start. They described approved supplier lists as tightly held, and without a sponsor or a first order it is hard to be considered. When doors do open, the people they reach are often not the decision makers. The two sectors also use different terminology, which hides the common ground.

Finding the right way in: Suppliers also asked which part of the aerospace and defence supply chain to target. Going direct to prime manufacturers, such as Airbus or GE, offers the strongest long-term relationship, but approval hurdles are higher. Primes tend to prefer fewer suppliers, relying on their existing base to deliver more. Becoming a Tier 2 supplier to the primes’ Tier 1s was seen as the faster route to a first order, and it teaches the sector’s requirements on the job. The view in the room was to do both: build Tier 2 business now, and work towards direct relationships where capability genuinely stands out.

The knowledge gap runs both ways: Automotive suppliers are concerned that the aerospace and defence sectors are largely unaware of what automotive has to offer. To hit higher rates, aerospace and defence need greater automation, but many firms are building those skills from scratch or turning to specialist automation suppliers. Automotive suppliers already run automated, high-volume operations and have spare capacity. They also bring lean practices that aerospace is now trying to introduce, and a long record of delivering on time and in full. We heard about instances where aerospace visitors have seen automotive plants first hand and have been surprised that this capability exists in the UK.

Funding: The money has to arrive before the orders do

Almost every table raised the difficulty of accessing finance. Entering aerospace and defence means long qualification periods, first article costs and material lead times, all of which impact balance sheets already stretched by the automotive downturn. Many suppliers invested ahead of EV demand that was subsequently delayed, scaled back or never arrived. Suppliers and their lenders are understandably wary of funding another move against an order book that doesn’t exist yet.

Public support helps but has limits. The Drive35 scale-up fund covers up to 50% of project costs for smaller businesses and up to 30% for large ones. The supplier funds the rest and must also show the grant will unlock private investment of at least twice its value. With cash reserves depleted, many suppliers will find that hard to raise. The scheme was built for zero-emission vehicle manufacturing, and participants felt the wider landscape was designed for the EV transition. The sector needs a deeper conversation with government about funding that fits today’s challenge.

Directors also need to be aware of their duties when taking on any new investment. Should a firm’s solvency be under pressure, directors must shift focus to creditors’ interests, giving them priority where they conflict with shareholders’ interests. As financial distress worsens, creditors’ interests carry increasing weight.

Three routes into aerospace and defence

There are three main routes that firms could pursue to enter the aerospace or defence sectors, each with a different timeframe and risk profile.

• Acquire: Buying a business that already holds approvals and customer relationships is the fastest route, but it needs capital and integration resource that many suppliers no longer have
• Partner: Working with an approved Tier 1 or prime on build-to-print, overflow work or joint bids carries lower risk and teaches the sector, but gives less control and lower margins
• Build: Earning AS9100 aerospace quality accreditation and customer approvals organically is the slowest route, but it gives full ownership of the customer relationship

Combining routes is possible, and the right mix depends on each business’s cash, capability and customers.

David Roberts provided insight into Sovereign Industrial Group’s acquisition of aerospace capability, including precision machining supplying Airbus. David, who also leads Evtec Group, brought automotive disciplines into the acquired business. Within six months, Sovereign had signed a new five-year contract with Airbus. His lessons were that delivering on time and in full opens doors faster than anything else, and that buying approvals can save years.

What needs to happen next

Turning the discussion into action will take effort from suppliers, customers, funders and government alike.

Bring suppliers and primes together: The first practical step is to bring automotive suppliers together with prime manufacturers and their Tier 1 and Tier 2 suppliers. Primes can say plainly what they need from a new supplier, and where their gaps are. Suppliers can show their automation and delivery record. These sessions would build the connections suppliers currently lack.

Bring funders to the table: Participants saw support schemes as hard to navigate and slow, just when speed matters most. Lenders, investors and public funding bodies should meet suppliers who are ready to move and work out what finance is available, how to reach it faster, and where the gaps are.

Set a clear direction from the top: Participants wanted cross-party alignment on the sector’s move into aerospace and defence that holds regardless of political change, and felt government’s commitment has not always been consistent. They thought direction to the primes would need to come from government. In September, a group of industry leaders, including David Roberts, set out key policy asks in an open letter to government, including lower industrial energy costs, support to qualify for aerospace and defence contracts, and a dedicated West Midlands transition programme.

Work together on what they share: Suppliers will make faster progress together. On access to primes, qualification and funding, they face the same barriers, and a joint voice is more likely to be heard. Agreeing where to collaborate and where to compete would be a sensible first conversation.

How we can help

Moving into a new sector puts pressure on cash, covenants and management time. The earlier you talk to us, the more options you keep.

My team works with automotive suppliers, their lenders and investors. We stress test business plans and cash flow forecasts, including downside cases, help directors understand their duties, and support conversations with funders. With colleagues across Grant Thornton, we support acquisitions, partnerships and refinancing as part of a credible transition plan.

At the session, we committed to helping the businesses in the room, and others facing the same issues, find practical solutions. If you want to be part of the discussion, I’d like to hear from you: contact Jon Roden.