The impact of COVID-19 hits the aerospace industry, as the Aerospace Technology Institute announces a year’s pause on new projects.

Who is the Aerospace Technology Institute (ATI)?

The Aerospace Technology Institute (ATI) are responsible for allocating government R&D funds to companies innovating in aerospace technology. They were established in 2013 and are the way government and industry come together to create a common strategy for this sector.

R&D investment has gone into things like hydrogen technology, using electric power to fly and wing design adaptations. 80% of current active projects are working towards lowering emissions, in some way or other.

They get £150 million each year to give out to projects that make a successful bid. This is ‘matched funding’ that doubles the amount invested by the company itself.

What’s happening now?

The Aerospace Technology Institute, the Department for Business, Energy & Industrial Strategy, and Innovate UK have released a joint statement:

“Demand for ATI Programme funding is high and has been increasing. In the past, we have sought to commit to as much activity as possible while leaving budget headroom to start new projects each year. However, the impact of the COVID-19 pandemic has changed this. R&D activity due in FY2020/21 has been delayed and is now forecast to take place in FY2021/22. Our latest spending forecasts, generated from the live portfolio of 175 projects, shows that we have no scope to commit to new projects this financial year. To manage this, we will suspend new applications to the Programme, including expressions of interest. We will review forecast spend each month to test when we can re-open the Programme for new applications. Based on the latest data we do not think this will happen until the start of FY2022/23.”

The statement goes on to say that the £150m of R&D funding will still be spent in 2021-22. It reassures companies that all active projects that have grant agreements with ATI will stay funded. As will the R&D Funding for Smaller Businesses competitions and the £10m National Aerospace Technology Exploitation Programme plans.

What’s the reaction to this news?

This has further added to the ‘climate lite’ accusations of Rishi Sunak’s March Budget, and whether or not Britain will meet its own net zero greenhouse gas emissions target by 2050, with such a delay to investment.

According to the Financial Times, there’s also concern around international competition in the field. Last year, America and Germany committed “substantial funds” to reducing carbon emissions in aeroplane travel. And France announced €1.5bn worth of investment in hydrocarbon technology over the next three years.

You can see why the sector has been asking the government to double the investment pot available – the opposite of this year’s predicament.

Airbus’s Glenn Llewellyn said that the company was “perturbed” by this pause in funding. He’s vice-president for zero emissions at Airbus. Part of his remit is the development of hydrogen powered aircraft by 2035. Not actually that long away. Where it carries out this massive R&D project is an international question. The company can go anywhere in the world.

As Llewellyn told the Financial Times: “We are an international company. We need to figure out where we are going to do this research and how we can progress it at the pace we need.” This match funding from the government is a huge incentive for Airbus, and other aerospace companies, to bring the work to the UK. Airbus described it as bringing “significant value add to the UK economy and is vital in ensuring that the UK can maintain its position as a global leader in innovation and R&D”.

How will this look in the future?

Hopefully, this is just a one year blip – all down to the impact of COVID-19. Once we get back on a more even keel, the industry and government can re-start conversations about funding. In the meantime, the AIT has a series of useful FAQs to answer companies who are in the process of putting together a grant application.

As you move forward in your R&D projects, don’t forget to fully investigate the R&D tax relief that applies to your work. It’s a brilliant tax relief – worth an average of £49,000 to our clients. The government may be struggling with grant funding for innovation, but they haven’t announced any cuts to tax relief. It’ll take longer to process, HMRC are just as overwhelmed as everyone else, but you’ll still get that substantial cash boost for your next project. Check out how much your claim’s worth with our free R&D Tax Credit Calculator.

Jamie Smith