While the UK is seen as a world leader in Aerospace and Defence (A&D) innovation, second only to the US, a lack of a leadership culture, challenges sourcing and retaining talent and the impact of COVID-19 could stifle this status unless action is taken now.

This is according to the latest PwC report Harnessing Innovation in Aerospace and Defence.

Developed in collaboration with the ADS Group, the survey and report aims to better understand innovation and the shackles that must be released if the UK is to boost its competitive edge and investment potential.

According to the survey of UK A&D firms, nine in 10 say leadership culture is vital in driving successful innovation in future - but over 60% of organisations don’t have innovation fully defined and embedded into their strategy at present.

Craig Kerr, PwC UK’s aerospace and defence consulting leader said: “This year, many UK A&D companies have been consumed with survival and repairing the immediate impacts of COVID-19. As hard as it is to think about the future in the midst of a crisis, it’s critical that A&D leaders create the space to rethink and to reconfigure their businesses for a different future - it would be wrong to think the supply chains, working practices and investment decisions of the past are the right ones for the future.

“As they respond to these pressures, we anticipate continued innovations through automation and development of products and services embedded with fourth industrial revolution technologies from artificial intelligence to data analytics and 3D printing.

“Other forces such as environmental and climate change will also require innovation in leadership, culture, and products & services. This makes for a very exciting time in the sector with a potentially refreshed environment.”

Four in five senior executives agree there is a lack of bandwidth for innovation at present, acknowledging skills gaps when looking to build teams to design, develop, manufacturer and deliver products and services and across business model innovation as a particular challenge.

Pay levels in comparison with competing sectors, a lack of progression for aspiring graduates due to project longevity and knowledge leakage as a “silver tsunami” of older engineers prepare for retirement are key components contributing to this issue.

Sameer Savani, head of innovation and engineering at ADS Group said: “ADS firms are in a war for talent with sectors such as technology, and new commercial tech in particular, which are seen as more agile and innovative. As an industry, we’ve a great track history as adopters of AI and other forward-leaning technologies - we’ve just hid our light under a bushel.

“We need to do much more to not only promote our innovative qualities but fully align these with future planning and strategy if we are to win this battle and secure our skills pipeline for years to come. We must better embrace diversity and recognise the ‘diversity dividend’, to attract diverse talent in order to exploit diversity of thinking that is key to innovation.

“And this has to be led from the top, with leaders promoting a culture that gives people the permission to be creative and the confidence to take risks as they develop next generation products that are better, faster and cheaper than our competitors.”

Despite the volatile and uncertain economic backdrop of 2020, optimism persists across the A&D industry - over half (55%) remain confident that innovation investment will return in the next three years with senior executives even more bullish (64%) in anticipating an uptick in investment. The spending boost for UK defence recently announced by the government validates this optimism.

When asked to describe the successful aerospace and defence organisation of the future, respondents characterised the 2030 version as technologically and digitally focused, agile and flexible, forward thinking, and customer-centric.

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www.adsgroup.org.uk