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1、Funding Growth in AerospaceNovember 2022EXECUTIVE SUMMARYCONTENTSThe aerospace sector is preparing for its most significant transformation since the jet age,driven by the need to achieve Net Zero in aviation by 2050.This will require the development of new and in some cases radically different aircr

2、aft types,which represent a significant market growth opportunity for UK aerospace companies.The Aerospace Technology Institute(ATI)estimates the global market for new aircraft deliveries at 4.6 trillion from 2022 to 2050.Capturing this market opportunity will require unprecedented levels of investm

3、ent into aerospace.This report highlights a number of funding opportunities available to the UK aerospace sector.These include government grants via channels such as the ATI,Innovate UK and various regional organisations,alongside multiple sources of private financing,including bank lending,corporat

4、e debt,public equity,and various types of private equity and venture capital.However,the aerospace sector faces several hurdles in relation to private financing,including a funding gap for companies within the growth economy.We have identified three key challenges for innovators in the UK aerospace

5、sector:1.The UK lags behind the best-in-class in terms of private investment in deep-tech and R&D intensive companies.2.Capital intensive-industries are less attractive to many investors3.Aerospace requires patient capital.Nonetheless,we believe that aerospace represents an attractive sector for inv

6、estors who are comfortable with capital intensity and long product development cycles.Large funds or high-net-worth-individuals looking for purpose-driven investments in low carbon technologies will find opportunities within the emerging landscape,while strategic industry investors and corporate ven

7、ture capital funds will also increasingly find value in aerospace.Meanwhile,there are actions that aerospace companies can take to attract private investment.For example,capital intensity and product lifecycles can be reduced through the adoption of new development methodologies and Industry 4.0 tec

8、hnologies.Companies can also leverage government funding to attract private investment,using it to demonstrate successful technology validation.Realising the UKs aerospace market potential will require investment now,and there is a clear appetite among growth economy companies to invest in the R&D,p

9、roduct development and scaling that will enable them to generate growth.For the right profile of patient investor,this represents an opportunity for significant long-term returns in a space that has traditionally been little understood and therefore underinvested by private finance.About this report

10、Funding Growth in Aerospace provides a consolidated overview of the funding landscape in aerospace today and highlights opportunities for private investment to capitalise on the growth potential inherent in the Net Zero transformation of the sector.This report is published as a collaboration between

11、 Aerospace Technology Institute(ATI)and PwC,referenced throughout the report as“we”.The ATI is responsible for setting out the technology strategy for the UK aerospace sector and funding R&D within industry while PwC is a globally recognised international professional services network.We are pleased

12、 to jointly present this report for the benefit of the UK aerospace sector and its funding ecosystem.03 EXECUTIVE SUMMARY 05 INTRODUCTION 06 GROWTH OPPORTUNITIES 07 The zero-carbon opportunity 08 The ultra-efficient opportunity 09 The advanced air mobility opportunity 10 FUNDING AVAILABILITY 10 Over

13、view of funding options17 CHALLENGES IN THE UK FUNDING LANDSCAPE 18 The UK lags behind the best-in-class in the amount invested in tech-intensive sectors 18 Capital-intensive sectors are relatively underserved by investors 20 Aerospace requires patient capital22 OPPORTUNITIES FOR INVESTORS 23 CONCLU

14、SION24 GLOSSARY 32Funding Growth in AerospaceFunding Growth in AerospaceINTRODUCTIONThe aerospace sector is becoming familiar with disruption.Following a decade of growth from 2008-2018,the industry has faced recalled orders,demand volatility,supply chain disruption and a rapidly rising cost base as

15、 the effects of aircraft recalls,COVID-19 and then an increasingly unstable geopolitical and economic environment have taken hold.The subsequent rebound,with global revenue from product deliveries growing from 42bn in 2021 to 61bn in 2022,has shown the industrys resilience and agility.While grapplin

16、g with these challenges,aerospace companies have also been preparing for the sectors most significant transformation since the jet age.This transformation is driven by the need to achieve Net Zero in aviation by 2050,which will require the development of more efficient and,in some cases,radically di

17、fferent aircraft types.Where todays fleet is powered by kerosene,tomorrows will increasingly be powered by batteries,hydrogen fuel cells,hydrogen gas turbines,and sustainable aviation fuel(SAF).In addition to the technologies that will power this change,supporting infrastructure for energy productio

18、n,distribution and storage will be needed.The growth opportunity associated with this transformation will be unprecedented.The ATI estimates that the global market for aircraft deliveries in 2050 will be 220 billion per annum,with zero-carbon aircraft representing a 41%share.To achieve this share,we

19、 expect the value of zero-carbon aircraft deliveries to grow at 34%CAGR through the 2040s.The zero-carbon technologies required to deliver this growth are currently at very low levels of technology readiness.Achieving technology maturity and market readiness will need high levels of investment,and t

20、he timelines associated with developing and certifying aerospace products mean that investment must begin now if the sector is to achieve its Net Zero ambitions.However,this capital will need to be patient,with aircraft unlikely to be delivered at scale until the late 2030s.Demand for funding will c

21、ome both from large,well-established players within the sector who are seeking to lead the development of the next generation of technologies,but also from a new generation of aerospace start-ups seeking to develop technology while growing and scaling their businesses.For the latter,the traditional

22、barriers to entry have been brought down by the availability of new,low-cost digital engineering tools and the absence of incumbents in emerging zero-carbon technologies.Meanwhile,the thousands of established small and medium-sized enterprises(SMEs)are a key element of the aerospace supply chain nee

23、d to identify ways of funding research and product development to prepare themselves for the transition.While the funding environment for innovation in aerospace can appear challenging,as this report makes clear,there is a wide variety of financing available to the UK aerospace sector.This includes

24、debt,equity and government grants,and ranges from seed funding of start-ups to multi-million-pound investments in technology development programmes that create thousands of high-value jobs.However,more funding will be needed to accelerate growth,and the sector can play an important role in highlight

25、ing the opportunity to investors seeking attractive long-term returns in technologies that will enable Net Zero 2050.This report outlines the major growth opportunities within aerospace to 2050,and summarises the key sources of funding available to UK companies.In undertaking research for this repor

26、t,PwC and the ATI identified a number of challenges that must be overcome to unlock the growth opportunity for the UK,including a private funding gap for growth economy businesses that will impact aerospace start-ups and SMEs.Our work on this report has highlighted that there is real ambition for te

27、chnology development and growth within the UK aerospace sector.For the right profile of patient investor,this represents an opportunity for significant long-term returns in a space that has traditionally been little understood and therefore underinvested in by private finance.5Funding Growth in Aero

28、space4Funding Growth in AerospaceFigure 2 shows annual growth in the aerospace sector,with the global market for the current fleet of aircraft being superseded by a market for ultra-efficient aircraft from the early 2030s.There is then a further shift towards zero-carbon aircraft from 2040 onwards.T

29、he zero-carbon opportunityThe largest,long-term growth opportunity comes from technologies for zero-carbon emissions aircraft,for which the ATI forecasts significant growth from the mid-2030s onwards.This segment begins to dominate the market from the late 2040s.The following categories represent th

30、e most significant zero-carbon technology market opportunities:Figure 1:Total global aerospace market new deliveries,2022-2050Figure 2:Global aerospace market current,ultra-efficient and zero-carbon deliveries,2022-2050(Forecasted entry into service of new aircraft types highlighted above the chart)

31、Table 1:Market opportunity for zero-carbon technologies(select technologies only)GROWTH OPPORTUNITIESAchieving Net Zero in aviation by 2050 presents a major economic opportunity to the aerospace sector,with a global commercial market of 4.6 trillion from 2022 to 2050 to develop lower emission aircra

32、ft.The ATI has modelled how this growth is achieved in three primary segments:Zero-carbon emission aircraft which focus on battery,hydrogen,and fuel cell technologies to enable zero-carbon tailpipe emissions.This represents an annual market of 91 billion globally in 2050,or 41%of the total global ma

33、rket.Ultra-efficient aircraft focusing on ultra-high bypass turbofan engines and a generational light-weighting of aircraft structures and systems.This represents an annual market of around 64 billion globally in 2050,or 29%of the total global market.Advanced air mobility new architectures which ena

34、ble electric vertical and conventional take-off&landing as well as smaller unmanned aircraft systems.This new market is expected to reach around 27 billion globally in 2050,or 12%of the total global market.With the longer development times associated to aerospace,there is an opportunity for investor

35、s to innovate in the construction of new financial instruments and products that will further enable patient capital.The ATIs market model forecasts that the UK could grow its market share from 13%to nearly 18%by 2050,as entire fleets transition towards zero-carbon emission technologies.However,achi

36、eving this market growth relies on early and sustained investment into the development of zero-carbon,ultra-efficient and cross-cutting technologies.The ATIs market model assesses the global market opportunity for the delivery of new aircraft of different formats.For this report,a moderate scenario

37、has been considered,in which a new generation of ultra-efficient 100%SAF capable narrowbody aircraft starts to enter service by the early 2030s,followed by new ultra-efficient widebody aircraft from 2040.It also anticipates that a zero-carbon hydrogen fuelled regional aircraft could enter the market

38、 around 2035,with a zero-carbon hydrogen fuelled single aisle aircraft in the early 2040s.For further information see the ATIs technology strategy,Destination Zero.These market values are based on aircraft sale price and use an USD/GBP exchange rate from September 2022.4.6TrillionTotal GlobalMarket

39、Value(2022-2050)220BillionTotal GlobalMarket Value(2050)8%AAM12%AAM48%Current18%Current13%Zero Carbon41%Zero Carbon31%Ultra-efficient29%Ultra-efficient2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047

40、 2048 2049 2050AAMCurrentZero CarbonUltra-efficient02040608000260Global Market Value(Bn)Regionalultra-efficientNarrowbodyultra-efficientRegionalzero carbonWidebodyultra-efficient+Narrowbodyzero carbonMidsizezero carbonZero-carbontechnologyDescription2050 marketopportunityCAGR20

41、22-2035CAGR2035-2050Hydrogenturbinepropulsion20.8 bn(See Figure 3)18.2 bn15.4 bn9.4 bn6.9 bn0%(Not introduceduntil 2035)16.6%16.6%16.4%16.5%50.2%26.3%25.7%22.7%23.8%The largest technology opportunity for zero-carbonaircraft including low NOx hydrogen combustors,heatmanagement and a flight demonstrat

42、ion before 2025.Integrating hydrogen systems on to emerging zero-carbon architectures.This represents a 20%shareof the total zero-carbon aircraft global market.Development of lightweight fuselage,empennage,pylon and nacelle aerostructures.This includes fuel systems,cryogenic thermalmanagement,and hy

43、drogen storage.Lightweight aero structures and integrationof the above systems into the wing.AircraftintegrationAerodynamicstructuresHydrogensystemsWings76Funding Growth in AerospaceFunding Growth in AerospaceFigure 3:Annual market for propulsion technologies,2022-2050(bn)Table 2:Market opportunity

44、for ultra-efficient technologies(select technologies only)Table 3:Market opportunity for advanced air mobility technologiesFigure 3 shows that from 2030,the global market for propulsion technologies is superseded by a market for ultra-high-bypass ratio engines.From 2040 the market sees the advent an

45、d rapid growth of hydrogen turbine propulsion.This trend is similar for all ultra-efficient technologies which begin to lead the market in the early 2030s with zero-carbon technologies growing rapidly to lead the market from the mid-2040s.The ultra-efficient opportunityThe largest market opportunity

46、 in the short to medium-term is the development of ultra-efficient aircraft with lower fuel use and improved operational efficiency.Development of these platforms is critical for enabling technologies to be developed in the long-term for zero-carbon architectures and addressing non-carbon emissions.

47、The ATI estimates that the global market for the ultra-efficient aircraft will peak at around 103 billion by 2041.To achieve this share,we expect the value of ultra-efficient aircraft deliveries to grow at 23%CAGR from the early 2030s.These ultra-efficient aircraft will enable the development of the

48、 following technologies:The advanced air mobility opportunityBy 2050,we expect the total advanced air mobility(AAM)market to be worth 27 billion per annum,representing a 12%share of the global market.This is from a base of close to zero today and has a consistent growth from the mid-2020s onwards.Al

49、though still immature and with a high degree of uncertainty,AAM presents a more accessible entry point for many burgeoning technologies.These include advanced modelling and simulation technologies,digital twins,automated manufacturing and assembly systems,and many other rapidly advancing technologie

50、s,systems and tools.Some AAM manufacturers are aiming for an entry into service from 2025 onwards and these platforms will require key enabling technologies described in table 3 below.Use cases for AAM ranges from remote cargo deliveries to commercial passenger transport and from disaster relief to

51、agricultural applications.The near-term exploitation of the AAM market allows the sector to prove these technologies in an environment which will require high-rate manufacturing and high levels of automation.These technologies and methods will be critical in developing the ultra-efficient and zero-c

52、arbon platforms of the future.202208026202820302032203420362038204020422044204620482050Total global market(bn)Electric propulsion&fuel cellsConventional gas turbineHydrogen turbine propulsionUltra-high bypass ratio enginesAAMtechnologyDescription2050 marketopportunityCAGR2022-2035CAGR2035

53、-2050Propulsion9.3 bn6.6 bn5.3 bn5.3 bn25.1%4.6%Propulsion provides the largest market opportunity forthe AAM sector,with the development of efficientand quiet electric motors.Highly integrated structures,making use of high-rate,high quality digital manufacturing systems.These structureswill require

54、 lightweight composite and metallic materials.The integration of structures and systems at a rateclose to that seen in the high-end automotive sector.This includes high voltage electrical systems,safety&sensing and increased automation in the future forcontrol and operation.AerodynamicstructuresAirc

55、raft integration&assemblyAAMsystemsUltra-efficienttechnologyDescriptionPeak marketopportunity(2041)CAGR2022-2035CAGR2035-2050Ultra-high bypassratio engines22.1 bn20.0 bn9.8 bn10.7%-0.4%Composite,gear driven fan systems for high propulsive,aerodynamic and noise efficiencies.These ultra-efficientsyste

56、ms aim to achieve over 10%efficiency and COemissions improvements by 2030.Includes electrical power,landing gear,fuel,thermalmanagement,flight control,communicationand control systems.High aspect ratio wings,optimised for aerodynamicefficiency.These wings will be manufactured usingrapid assembly,ful

57、ly automated high-rate techniques.More ElectricAircraft SystemsWings98Funding Growth in AerospaceFunding Growth in AerospaceFUNDING AVAILABILITYWhile the funding environment for innovation in aerospace can appear challenging to navigate,there is a wide variety of financing available to the UK aerosp

58、ace sector,covering both near-term opportunities and longer-term,high growth opportunities in zero-carbon aircraft.This includes both public and private sources such as grants,debt,and equity,and ranges from seed funding of start-ups,R&D funding for established SMEs to multi-million-pound investment

59、s in technology development programmes.The funding providers differ in their attitude towards risk,investment goals,and amount they are willing to invest.The following section outlines key available sources of funding for aerospace companies.Overview of funding optionsThe funding provider landscapeO

60、ur UK funding landscape framework below provides a high-level overview of appropriate types of growth funding for organisations at different levels of maturity.While there is no one size fits all answer for a given stage of development,and there is overlap in the types of company that investors will

61、 target,it is helpful for organisations to have an understanding of the types of investors who may be interested in them.For SME innovators in the aerospace sector,the technological maturity of their product is closely aligned to the business funding round,as the company tends to be built around a s

62、ingle,or small number of closely related technologies.The funding needs of larger companies are less strongly linked to the development of a given technology,as they will likely have a whole development portfolio,and so in aggregate they align more closely to mature,for example,they are more likely

63、to have the option to self-fund than SMEs.Government funding optionsGrant funding represents an important form of finance for the aerospace sector.It is an effective method to lower the economic risk associated with research,development and demonstration of new,advanced technology.The review process

64、 associated with grant funding can also help to attract further private investments following successful applications,providing an important means of technology validation for investors who may not have backgrounds in aerospace technologies.The ATI and Innovate UK are the two key organisations in th

65、e UK that deliver government funding to aerospace companies.The ATI creates the technology strategy for the UK aerospace sector,and channels government funding into research and technology within industry via its funding programmes.ATI funding is applicable to UK registered businesses of different s

66、izes.The National Aerospace Technology Exploitation Programme(NATEP),funded by the ATI,is aimed at SMEs with smaller projects,who are relatively new to investing in R&T.The funding helps these SMEs to develop innovative technologies to increase their ability to win new business with higher tier comp

67、anies.As well as grant funding,NATEP provides high calibre technical and management resource to help companies accelerate technology development towards market readiness.Meanwhile,the ATIs Strategic Programme is suited to larger projects,typically accessing grants in excess of 1 million.For the two-

68、stage assessment process,monthly calls for an Expression of Interest(EOI)are followed by a Full Stage Application(FSA).The ATI offers guidance and support and provides feedback on draft applications.Innovate UK is the UKs national innovation agency,and as part of UK Research and Innovation(UKRI),it

69、supports business-led innovation across all sectors and technologies,and runs grant funding competitions specifically for aerospace companies.Innovate UK runs the Future Flight challenge aimed at new classes of electric,hydrogen and autonomous vehicles to transform how we connect people,deliver good

70、s and provide services.A key aspect of Future Flight involves connecting industry,government and regulators in working groups to discuss and solve issues in aerospace.Other cross-sector Innovate UK competitions include the Zero Emission Propulsion challenge,which is open to UK businesses in the aero

71、space,maritime,rail or automotive industry.This challenge was recently set up as part of the Future Economy Net Zero programme to support the governments drive for zero-emission transport;by creating a cross-sector platform,knowledge and capability can be shared between transport industries.The Engi

72、neering and Physical Sciences Research Council(EPSRC)is one of the seven research councils of UKRI with a focus on funding research and training in engineering and the physical sciences.The EPSRC invests more than 850 million a year in a broad range of subjects,with funding aimed at fundamental,low

73、TRL(technology readiness level)technologies.ATI Programme Funding Streams:Funding-Aerospace Technology Institute(ati.org.uk)UKRI Funding Finder:Opportunities(ukri.org)UKRI Future Flight challenge:Future flight(ukri.org)UKRI Zero Emission Propulsion CR&D,Collaborative R&D(ukri.org)Engineering and Phy

74、sical Sciences Research Council:EPSRC(ukri.org)Made Smarter:Amplifying UK innovation(madesmarter.uk)Figure 4:The UK funding landscapeGovernment and pro-bono investmentscover the entire landscapeMaturityDefinitionAlignment to funding needFrontierPre-formation to early-stage start-upStart-up to scale-

75、upSeries C and beyond.Corporate and listed companiesThe technologies or solutions required are still in developmentTechnologies or solutions have been developed that are proven towork technically,but are not seeing market uptake at scale becausethe commercial model is not yet attractive for widespre

76、ad adoptionThe technology or solution has been proven to work on a commercialbasis and is being rolled out at scale,achieving significant penetrationEmergingMatureClassic private equityCorporate-ledMatureEmergingFrontierScale-up fundsTech-drivenbusiness modelsService-drivenbusiness modelsAsset owner

77、s/developersLending banksCoreinfrastructurefunds(includes corporate-ledventure capital vehicles)Venture Capital1110Funding Growth in AerospaceFunding Growth in AerospaceMade Smarter,a government backed initiative for the UK manufacturing sector,is driving the transformation of UK manufacturing throu

78、gh digital technologies,innovation and skills.The Made Smarter innovation programme offers an opportunity to rapidly prove,develop and scale digital technologies,including additive manufacturing and robotics and automation,through access to powerful cross-sector networks,centres and innovation fundi

79、ng.Aerospace businesses may also look to the Devolved Administrations who provide grant funding to support innovation in regional areas.Key examples include,but are not limited to;SMART Innovation,a programme led by the Welsh Government and funded by the EU with the aim of supporting innovative grow

80、th in Welsh businesses.Similarly,SMART Scotland provides grant funding of up to 100,000 for Scotland-based SMEs working on high-risk,highly ambitious projects which represent an advance in technological innovation.Invest Northern Ireland also provides a range of financial support,including innovatio

81、n vouchers and grants for R&D.UK organisations are also eligible to apply for funding and partnership opportunities through the 95.5 billion research and innovation programme,Horizon Europe.While the UKs association is still in the process of being formalised,UK-based researchers and innovators can

82、still apply to all Horizon Europe competitions,with the UK Government guaranteeing funding for successful applicants to cover all Horizon Europe calls that close on or before 31st December 2022.For aerospace,the primary Horizon Europe programme is the Clean Aviation Joint Undertaking(JU),which focus

83、ses on developing disruptive new aircraft technologies to achieve climate neutrality by 2050.With the EU committing funding of 1.7 bn to 2031,it funds collaborative projects developing technologies and demonstrators that will deliver net greenhouse gas(GHG)reductions of at least 30%,compared to 2020

84、 state-of-the-art.The Clean Hydrogen JU,responsible for the creation of cutting-edge hydrogen technologies,also has interest for those investing in fuel cells and liquid hydrogen tanks for aviation.Government loans represent an additional form of funding support applicable to the aerospace sector.In

85、novate UK will offer loans between 100k and 2M to micro,small and medium-sized enterprises(MSMEs).These loans are for highly innovative late-stage research and development projects which have a clear route to commercialisation and high economic impact.Innovation loans aim to provide flexible and pat

86、ient capital to support business growth through innovation.UK companies may also look to the British Business Bank for funding support.The state-owned economic development bank was established by the UK Government and aims to drive sustainable growth across the UK and to enable the transition to a N

87、et Zero economy by supporting access to finance for smaller businesses.The British Business Bank works with over 180 private sector partners,including banks,leasing companies and venture capital funds,and the new Finance Hub interactive finance finder encourages SMEs to find the finance support best

88、 suited to their needs.Table 4:Grant funding options relevant to the aerospace sectorZero EmissionPropulsion10 millionUK registered business of any size.October December 2022.Creation of a cross-sector platform so knowledge and capability are applied to adjacent transport sectors.Future Flight125 mi

89、llionUK registered business of any size.Single challenge running from 2019to 2024 with two funding phases.Connects industry,government and regulators in working groups to discuss and solve issues across the sector.Working groups will provide input and insight into government strategy and regulatory

90、policy.CleanHydrogen JU300.5 millionBusiness of any size.Call was open from March 2022 to September 2022.By enabling innovative competitive clean hydrogen technologies to be scaled upand expanded.CleanAviation JU1.7 billionAny organisation who can meet call criteria,including UK entities.Calls in 2

91、waves:Wave 1 2022(now closed),Wave 2 expected2024(tbc).Connects world class expertise and key technical skills.Routes to demonstrators programmes and supply chain collaboration.Sustainability driven programmes.Funding availableAudienceTimescaleBenefitsStrategicProgrammeNATEPCall for smallerbusinessA

92、TI ProgrammeInnovate UK grant fundingHorizon Europe grant funding685 million funding available 2022-2025(includes NATEP and call for smaller business)Industry-led collaborations with operations in the UK.Ongoing,programme confirmed until atleast 2031.Monthly calls for Expressionsof Interest where AT

93、I offersupport and feedback onfunding applications.Typically for larger,morestrategic projects.5 million per annumUK registered SMEs.Ongoing,period calls announced on website.Technical and management mentoring offered throughout the whole projects lifetime.Access to industry professionals and tech m

94、anagers to support funding applications.For project sizes up to 300,000.5 million per annumUK registered SMEs.Ongoing,period calls announced on website.For project sizes up to 1.5 million and therefore bridges the funding gap for projects in between Strategic Programme andNATEP scope.Enables collabo

95、ration.Business Wales:,SMART Innovation(gov.wales)Scottish Enterprise:SMART:Scotland(scottish-)Invest Northern Ireland:Funding for innovation and R&D()EU:Clean Aviation(clean-aviation.eu)UKRI:Innovation loans(ukri.org)British Business Bank:Finance options(british-business-bank.co.uk)1312Funding Grow

96、th in AerospaceFunding Growth in AerospacePrivate funding optionsWhile public funding tends to support R&T for businesses of all sizes,and can function as a springboard for private investment,particularly for smaller businesses,achieving rapid growth and commercial scale often requires raising priva

97、te capital.Below we have highlighted the key options for businesses to access third-party capital.1.Bank lending:Typically used to fund working capital and smaller/low-risk needs.2.Asset finance:Funding secured against a company asset.3.Corporate debt:Financial instruments such as bonds and commerci

98、al paper that raise debt financing in a similar manner to individual bank loans.In this case the lending party can be a bank,an institutional investor or an individual.4.Venture debt:Loan to an early-stage company that provides liquidity to a business for the period between equity funding rounds.5.P

99、rivate external equity investments:This category is split into the following types of investors according to the size and risk profile of the investment:a.Crowd funding:The practice of funding a project or venture by raising money from a large number of people,typically private individuals via an in

100、ternet-based platform.b.Business angels:Wealthy individuals with a business background who invest at the earliest stages and add value by providing seed funding and experience.c.Venture capital(VC):Funds that invest in early-stage businesses.They accept significant risk on individual investments as

101、the returns on successful investments tend to be high.d.Corporate venture capital(CVC):VC owned by a corporation.CVCs target similar companies to traditional Venture Capitalists,but their investments are also driven by the strategic goals of the parent company,rather than purely by financial returns

102、.e.Private investment funds that invest in larger,more stable and generally profitable companies.6.Public equity:A company sells a portion of its equity in public markets to raise funds.Public companies tend to be much larger than private companies.There is greater liquidity in public equity markets

103、,but the reporting requirements are more onerous.The UK has one of the most developed capital markets in the world and is well placed to provide venture capital(VC)and private equity(PE)funding.In 2021 UK PE and VC funds raised a total of c.3.7 billion,or c.22%of the global total.In the same year th

104、e UK PE and VC industry made a total of 34.8 billion of equity investments across all sectors,with half(17.3 billion)going towards UK companies.Approximately two-thirds went towards buyouts while the remaining third funded start-up and growth companies.Private equity investments grew at c.36%p.a.fro

105、m 2016 to 2021 and now account for c.18%of all external private finance for SMEs.The large increase in 2021,approximately double the previous year,was driven by growth across venture,growth and buyout sectors as the industry rebounded and additional capital was required to support growth.There was a

106、 degree of pent-up demand following the reopening of the economy after the worst of the COVID-19 restrictions.However,with interest rates increasing and the cost of debt therefore on the rise for private equity firms,this trend may have reached its peak.External financing for UK SMEs has traditional

107、ly been dominated by bank lending(Figure 5),required primarily for the management of working capital.A large increase in 2020 was caused by the issuance of government-backed loans to support businesses through the COVID-19 pandemic,such as bounce-back loans.This has now returned historical levels as

108、 these schemes have been wound down.Figure 5:External annual finance for UK SMEs,2016-2021(bn)2009(72%)17(21%)19(22%)20(22%)20(23%)16(12%)20(20%)4(3%)57(67%)58(66%)57(64%)59(72%)9(7%)8(9%)7(8%)7(8%)58(58%)18(18%)8286891341004(4%)4(4%)3(4%)3(3%)2(3%)Marketplace lending flowsPriv

109、ate external equity investmentsAsset finance flowsBank lending flowsCAGR(2016-2021)14%36%3%(1%)Private equity investments have been annualised from 14bn in Q1-Q3 2021,source Small Business Finance Markets 2021/221514Funding Growth in AerospaceFunding Growth in AerospaceThe UK has always been an attr

110、active place to locate aerospace companies,ranking 1st within Europe in PwCs 2021 aerospace manufacturing attractiveness rankings.This is driven mainly by the quality of the highly-skilled labour in the sector and the maturity of the UKs aerospace industry and associated infrastructure.The UK aerosp

111、ace sector also benefits from the presence of major aerospace organisations and aerospace OEMs who offer a strong route to market for the aerospace supply chain.The industrial footprint,coupled with a strong research ecosystem and an established supply chain,makes the UK a prime location for innovat

112、ors who are looking for the network,customer base and support to develop their ventures.Figure 6:UK VC and PE total investments by stage,2019-21(bn)CHALLENGES IN THE UK FUNDING LANDSCAPEAs our modelling indicates,there are significant growth opportunities within aerospace over the period to 2050.How

113、ever,despite a well-developed funding landscape,there remain significant challenges in funding growth within UK aerospace,particularly for smaller SMEs.There is a funding gap in the UKs growth economy the section of SMEs that broadly falls between scale-ups and large companies.In the UK this market

114、comprises over 20,000 companies,generating revenue of over 400 billion across a broad range of regions and sectors.Estimates of the size of this funding gap vary,with the UK governments Department for Business,Energy and Industrial Strategy(BEIS)identifying an annual equity gap of 6.5-12 billion,and

115、 the Scaleup Institute suggesting a funding gap of up to 15 billion.This may result in the under-capitalisation of many high-growth,technically innovative companies.Recent market volatility and other structural changes may see this gap widen further over the next 5-10 years.Increasing inflation,inte

116、rest rates,and disruptions such as the war in Ukraine are all serving to both increase demand for funding(e.g.to cover increasing costs),and reduce supply(investment cases become more difficult).To gain better insight into this funding gap,we conducted a deep dive survey and set of interviews with a

117、 number of smaller aerospace organisations to determine the challenges that they face,and what can be done to help reduce the barriers to investment.Our survey demonstrated that there is demand within the aerospace industry for investment into sector growth opportunities.A high proportion of our sur

118、vey respondents(82%)said that they were actively looking for funding,with 59%saying that they would like to secure funding in the next 12 months.This appetite for funding is explicitly tied to the growth opportunity:85%of respondents reported that the main reasons that they have sought funding in th

119、e recent past is for R&D and product development,with 40%seeking to take on funding to support growth in employees.This demand for funding will need to be met if the UK aerospace sector is to realise its growth opportunity.This research identified the following funding challenges for innovators in t

120、he UK aerospace sector:1.The UK lags behind the best-in-class in terms of amount invested in deep-tech and R&D intensive companies.2.Capital intensive-industries are less attractive to many investors.3.Aerospace requires patient capital.VentureBuyoutGrowth200.19.217.11.2(7%)0.9(10%)1(10%)

121、12(70%)6(65%)7.3(72%)3.9(23%)2.2(24%)1.8(18%)+70%Relevant toearly-stageand growthcompaniesThe strength of the UK Aerospace ecosystem beyond fundingThe differences in data between figures 5 and 6 is a result of them being drawn from different sources;figure 5 is from the British Business Bank Small B

122、usiness finance Markets Report 2022,while figure 6 is from the British Venture Capital Association BVCA Report on Investment Activity 2021.We surveyed start-ups and SMEs that have signed up to various ATI initiatives over the past two years,receiving 60 responses with the majority(72%)at seed or gro

123、wth-stage.Our respondents were also mostly small businesses,with over half(52%)employing 10 people or fewer.To better understand the experiences of hardware companies in particular,we supplemented the survey with 8 telephone interviews.The fieldwork was conducted from mid-September to mid-October 20

124、22.Survey Methodology BEIS:Equity Finance and the UK Regions(gov.uk)ScaleUp Institute:Access to Growth Capital (scaleupinstitute.org.uk)1716Funding Growth in AerospaceFunding Growth in AerospaceThe UK lags behind the best-in-class in the amount invested in tech-intensive sectorsThe British Business

125、Bank compared UK VC investment in deep tech and R&D intensive sectors as a proportion of GDP with those in peer countries.They found that the picture is mixed.UK investment in technology is lower than that of countries including the US and Israel,and the comparison between UK and US private investme

126、nt was the most frequently cited by our respondents.As well as the general level of financial firepower available to US funds it was felt that US investors had a higher degree of risk tolerance and a willingness to let companies fail faster i.e.,were more comfortable in giving companies more funds t

127、o develop their ideas faster therefore reducing the time taken to judge if the idea is a success or not.Another reason for the skew is that many private investors have backgrounds in other sectors and may lack detailed knowledge of aerospace.This lack of familiarity makes it harder to accurately eva

128、luate the risks and rewards,acting as a barrier to investment.The majority of our respondents(56%)thought it was harder to raise funding in aerospace compared to other sectors and the evidence above suggests they may be right.Between 2011 and 2021 there have been 1,628 academic spinouts in all secto

129、rs,with the average equity investment increasing by 69%from 2020 to 6.70 million in 2021.During this time,the number of UK spinouts has lagged behind international peers,such as the US,which can be attributed to the risk-aversion of UK investors providing smaller investments in earlier stages than t

130、heir US rivals.Universities will typically take an equity stake in spinouts,but if this is too large it can result in insufficient equity being held by founders,deterring VC investors who want to see founders incentivised to grow their companies.In the UK the average university stake has decreased s

131、lightly from c.24%in 2012 to c.20%in 2021,but this is still more than twice the US average.UK universities may see this as necessary given the gap in UK VC funding which is available once the venture has spun-out.Capital-intensive sectors are relatively underserved by UK investorsWhile the UK has ac

132、cess to a considerable amount of VC and PE funding,there is a skew to its distribution by sector.In general,UK investors favour investments in low capital-intensive industries.This means that the business can be scaled without investing up front in significant technology,plant,machinery or other ass

133、ets.This is not always the case in aerospace,where businesses tend to require R&D and/or investment in physical assets to grow,which have traditionally been seen as being at odds with aerospace characteristics:Low capital intensity High growth High profit margins Short pay-off periodsThese preferenc

134、es can be seen in investment behaviour,with consumer goods,ICT,and finance being the largest recipients of funding.Figure 7:VC investment as a%of GDP for deep tech and R&D intensive sectorsFigure 8:UK VC and PE investments in UK companies by industry(mn,2021)I was having a conversation with a VC and

135、 he said I really love your project but I cant tell if its a good one or a bad one.Survey respondent0.450.590.290.370.200.390.150.250.130.220.090.140.100.060.040.09IsraelSwedenUSChinaUKCanadaFranceGermanyDeep techR&D intensive sectors5,7233,3153,0931,8251,7281,581911AgricultureInfrastruct

136、ureConstructionChemicals and materialsReal estateTransportationEnergy and environmentBiotech and healthcareBusiness products and services(including aerospace)Financial and insurance activitiesICTConsumer goods and servicesAerospace is a notoriously cash-intensive sector,especially given the length a

137、nd complexity of the certification process.Unless a company can show that it has made substantial progress in this area,investors are wary of providing funding.Survey respondentFintech and consumer tech get the limelight and rapid returns.Aerospace is a slow burn.Investors want certainty if money wi

138、ll be locked away.That means that SME projects with perceived risk are not attractive.Survey respondent1918Funding Growth in AerospaceFunding Growth in AerospaceTo validate this view,we have taken a sample of 12 PE and 10 VC small-to-mid size funds,as they are more likely to invest in smaller compan

139、ies,and compared their deals by sector through the period 2013 to Q1 2022.Aerospace made up a small proportion of deal activity,accounting for c.0.5%of the number of deals over the period.This stands in contrast to less capital-intensive sectors such as business/productivity software(12%)and media a

140、nd information services(B2B)(5%),and financial software(3%).When aerospace is compared to similarly capital-intensive industries such as automotive,it becomes less of an outlier,although even here recent years show an overall lower appetite for aerospace investment.A high level of technological soph

141、istication and exacting safety standards mean that aerospace has one of the longest product development cycles of all sectors.The US Federal Aviation Authority estimates that certification alone can take 5 to 9 years.This results in aerospace being perceived as a less attractive investment for VC an

142、d PE funding.Aerospace requires patient capitalThe VC/PE holding period is often c.5 years.During the holding period,the investor hopes to grow the company and develop the equity story such that it can sell its stake(whole or in part)to the next round of investors at an acceptable return.All else be

143、ing equal,there is an incentive to hold a stake for less time,in order to realise profit more frequently.This can create a tension between the optimal product development pathway and the shorter-term pressures of investor exits.Figure 9:Aerospace and automotive sectors as a%of total deal volume(2013

144、-Q1 2022)Table 5:Indicative times to market Figure 10:UK VC and PE average holding period by initial investment stage(years,2021)20001920202021Q1 20220.4%0.9%1.0%0.0%0.7%0.7%0.0%0.0%0.0%0.3%0.2%0.2%1.0%0.6%0.6%0.9%0.8%1.6%0.4%1.0%Aerospace:Number of deals as a%of totalAutomotiv

145、e:Number of deals as a%of totalVentureGrowthBuyout5.74.75.6IndustryEnergyAerospace and defenceHealthcare and pharmaIndustrialsAutomobileSemiconductor(2 yr clock)Consumer goods7 233 229 193 73 51 51 5LowLowLowMediumHighHighHighTime to market range(years)Alignment to VC/PE holding period2120Funding Gr

146、owth in AerospaceFunding Growth in AerospaceCONCLUSIONOPPORTUNITIES FOR INVESTORSThis report has highlighted the enormous market opportunity for the development of aerospace technologies that facilitate the transition to Net Zero 2050.Aerospace growth opportunities cover a range of zero-carbon,ultra

147、-efficient and advanced air mobility.They include both near-term and longer-term market growth common to all is a need,and an opportunity,to invest now.There is no shortage of entrepreneurial drive and demand for funding,but despite the variety of funding opportunities available to the UK aerospace

148、sector,a funding gap does exist.This gap is particularly evident in the UKs growth economy the section of SMEs that broadly falls between scale-ups and large companies,resulting in the under-capitalisation of many high-growth,technically innovative companies.There is a risk that this gap will widen

149、further over the next decade.This is a problem beyond aerospace,with SMEs across all sectors suffering from being undercapitalised,but it is more acute in aerospace where complexity,capital intensity,and long development cycles can be seen as barriers to investment.Specific funding challenges for in

150、novators in the UK aerospace sector include:lower availability of investment in R&D intensive companies vs.other countries;investor perceptions of aerospace as a capital-intensive industry;the need for patient capital given lengthy development programmes;and the high percentage shareholdings typical

151、ly taken by universities in spin-outs deterring venture capital investment.But the UK aerospace sectors transformation towards Net Zero offers a very credible market to investors.Not only is the UK a hub of technical innovation and creativity but it also has access to some of the most skilled labour

152、 in the world.We have a well-developed aerospace ecosystem composed both of larger companies with a clear ability to drive emerging concepts to market at scale,as well as smaller innovators within aerospace with a strong appetite to invest in growth.And finally,we have a clarity of purpose that will

153、 drive demand,based on our ambitious Net Zero goals.This therefore represents a significant opportunity for those with the ability and the will to provide funding.In particular,aerospace investment may appeal to large,sector agnostic funds with a portfolio approach to managing risk and reward,and in

154、 particular funds focused on purpose-driven investments with longer-term payback periods.Equally,strategic industry investors and corporate venture capital may benefit from long-term returns combined with the opportunity to develop capabilities in collaboration with companies in their investment por

155、tfolio.Aerospace investments will also be attractive to ultra-high net-worth individuals looking for strong purpose-driven investment opportunities.Meanwhile,there are actions that aerospace companies can take to attract private investment.These will include introducing innovative technologies and d

156、evelopment processes to reduce capital intensity and product lifecycles,as well as leveraging public funding to attract private investment.The aerospace sector is recovering quickly from the volatility of recent years and is now gearing up for a once-in-a-generation transformation.For investors with

157、 the right understanding of the sector,an appetite for long-term growth,and a mission to invest in technologies that will help achieve Net Zero 2050,aerospace may represent a once-in-a-generation investment opportunity.While aerospace can appear daunting to some investors,the potential returns are c

158、learly high,given the scale of the market opportunity and the level of growth forecast in the coming decades.Aerospace represents an opportunity for stable,long-term returns given the long asset lifetimes of products entering the market,and the through-life services revenues available.New methodolog

159、ies and Industry 4.0 technologies have the potential to bring down the cost of development and time to market.Sharing of research,testing and production facilities via open access institutions such as universities are also helping to reduce capital intensity.This is reducing barriers to entry within

160、 aerospace as well as changing the investment case.Importantly for impact-focused investors,ATI research has shown that aerospace drives significant technical,economic and social spillovers into the wider economy.Aerospace creates significant technical spillovers in sectors including:automotive,rail

161、,marine,rubber and plastics,machinery and equipment and scientific R&D services.In addition to the potential for cross-sector exploitation of aerospace investments,these spillovers also drive wider economic and social benefits,with the average social return on investments in aerospace R&D approximat

162、ely 2-3 times the return.Based on these opportunities,and in light of sector-specific funding requirements,aerospace is likely to be of particular interest to large,sector agnostic funds which have a higher risk tolerance and can deploy more financial firepower.Rather than viewing companies as indiv

163、idual risks,larger funds can manage them as a portfolio,allowing risk to be diversified.Funds with an ESG focus,in particular,are more likely to have an appetite for purpose-driven investments with longer-term payback periods.Pension funds will also be more comfortable with the long-term nature of a

164、erospace returns.Investors also have the potential to innovate in the construction of new financial instruments that will enable the patient capital to drive long-term growth in aerospace.In addition,strategic industry investors and corporate venture capital,for example,will understand the long-term

165、 nature of the returns from their investments in aerospace and are seeking to develop their own internal capabilities rather than looking for a quick return.There may also be increasing interest in aerospace investments among ultra-high-net-worth individuals who are attracted by the purpose of decar

166、bonising flight and the challenge of developing entirely new,zero-carbon aircraft types.You can partner with a specific institution and use university grads and facilities,which benefits both parties as you get to reduced labour and capital costs,and a professors time while they get a project where

167、the students can earn a degree.Survey respondent ATI:Spillovers Revealing the broader economic benefits of aerospace R&D(ati.org.uk)2322Funding Growth in AerospaceFunding Growth in AerospaceContact usAerospace Technology InstituteMartell HouseUniversity WayCranfieldMK43 0TRwww.ati.org.ukinfoati.org.

168、u kThe Aerospace Technology Institute is an independent organisation that works alongside government and industry to transform aerospace through technology and innovation.The ATI is funded equally by the Department for Business,Energy and Industrial Strategy(BEIS)and by industrial recipients of proj

169、ect grants who pay a small levy.ATI projects are chosen and overseen through close collaboration with Innovate UK and BEIS.Our role is to establish a challenging technology strategy for the sector,and to develop a portfolio of research and technology(R&T)activity to realise that strategy,exploiting

170、the sectors strengths to the full and creating new capabilities for the future market.Government and industry have agreed to provide funding to the ATI Programme out to 2031,creating an ongoing commitment to the development of the UK sustainable aerospace sector.2022 PwC.All rights reserved.PwC refe

171、rs to the UK member firm,and may sometimes refer to the PwC network.Each member firm is a separate legal entity.Please see for further details.This content is for general information purposes only,and should not be used as a substitute for consultation with professional advisors.The Aerospace Techno

172、logy Institute(ATI)believes the content of this report to be correct as at the date of writing.The opinions contained in this report,except where specifically attributed,are those of the ATI,based upon the information that was available to us at the time of writing.We are always pleased to receive u

173、pdated information and opposing opinions about any of the contents.All statements in this report(other than statements of historical facts)that address future market developments,government actions and events,may be deemed forward-looking statements.Although the ATI believes that the outcomes expres

174、sed in such forward-looking statements are based on reasonable assumptions,such statements are not guarantees of future performance:actual results or developments may differ materially,e.g.due to the emergence of new technologies and applications,changes to regulations,and unforeseen general economi

175、c,market or business conditions.GLOSSARYAAM Advanced air mobilityAI Artificial intelligenceB2B Business-to-businessBEIS Department for Business,Energy and Industrial StrategyCAGR Compound annual growth rateCVC Corporate venture capitalEOI Expression of InterestEPSRC Engineering and Physical Sciences

176、 Research CouncilESG Environmental,social and governanceFSA Full Stage ApplicationGHG Greenhouse gasesJU Joint undertakingMSMEs Micro,small and medium-sized enterprisesNATEP National Aerospace Technology Exploitation ProgrammePE Private equityR&D Research&developmentR&T Research&technologySAF Sustai

177、nable aviation fuelSME Small or medium-size enterpriseTRL Technology readiness levelUKRI UK Research and InnovationVC Venture capital2524Funding Growth in AerospaceFunding Growth in AerospaceAuthors ATIEleanor Day,Innovation Delivery ManagerNour Eid,Senior Innovation ManagerHarry Malins,Chief Innovation OfficerDr Maria Nelson,Head of Innovation&SustainabilityPwCMatt Alabaster,Partner,Strategy&Matt Neave,Manager,Strategy&