* UK aerospace industry is No.2 in world behind U.S.
* Brexit poses risks to investment, access to skills
* But long production cycles, weaker pound help
By Sarah Young
FARNBOROUGH, England, July 15 (Reuters) - With UK factoriesworking at full tilt to meet bumper demand for aeroplanes,aerospace executives have been quick to brush aside fears of anyimminent threat from Britain's exit from the European Union.
The industry is locked into production cycles that can takeup to three decades to play out, big customers like Boeing have rallied to support local suppliers and more work iscoming Britain's way as the U.S. aerospace giant and itsEuropean rival Airbus ramp up output.
That means it could be years before any real impact of theUK's divorce from the European Union becomes clear. For now,many of those attending the Farnborough Airshow this week saidthey were drawing up lists of what was needed as Britainrethinks its trading relationships.
"We will simply get on with it," Warren East, the chiefexecutive of Britain's biggest aerospace company Rolls-Royce, told reporters.
The UK's pre-eminence in aerospace, as the biggest player inthe world after the United States, is driven by know-how and arecord of industrial efficiency built up over decades.
Currently, British suppliers are trying to deal with a surgein business, with output up 39 percent in the last five years,much of it driven by exports.
And since the vote to leave the EU on June 23, two bigaerospace investors, Boeing and Italy's Leonardo Finmeccanica, which makes helicopters in the UK, have both saidthey planned to increase their British presence.
The concern is that the UK's standing could weaken overtime.
Although it is the heart of design and production for Airbuspassenger jet wings, and its Broughton plant in Wales is one ofthe group's most efficient facilities, some wings are nowequipped in Airbus's Bremen factory in Germany.
Industry executives conceded that Brexit will force them towork harder to win new business, including those crucial newprogrammes at Airbus which might otherwise be awarded to theaerospace giant's industrial bases in France and Germany.
"Nothing comes to us naturally, so if the UK is going tosucceed in the future, it's got to have the best economics andthe best technology," said Marcus Bryson, a former executive atFTSE 100 parts supplier GKN, who was last year named asa lead UK government adviser for aerospace.
Other areas of concern include whether Britain could risklosing its place at the top table on big aerospace projects ifit is locked out of vital research funding and that throwing upnew borders will add costs and complexity for companies tryingto move goods and people around a global business, making themthink twice about new investments in the UK.
"We had probably 60 people from the industry at ourbreakfast event at Farnborough and I think everyone viewedBrexit as pretty disastrous," said Robert Thomson, an aerospacespecialist at management consultancy Roland Berger.
ACCESS TO SKILLS
Almost a quarter of a million people work in UK aerospace,in around 3,000 companies. France and Germany often get to hostfinal assembly of new aircraft, but a big chunk of the profitscome to the UK where many of the complex parts are produced,from fuselages and engines to nacelles and landing gear.
Executives say they are talking to government about whatwill be most important to help secure the industry's future.
Bristol-based Boxarr, a supplier of software to Boeing andAirbus, employs 20 people including a Spaniard and has justhired a French engineer.
"The government need to reassure us about access to skillsin the EU because we can't get the skills in this country of thetype that we need, particularly engineering and mathematics,"said Boxarr CEO Alasdair Pettigrew.
Airbus, GKN and Rolls-Royce also said any change to EUfreedom of movement rules would be damaging as being able tomove teams of engineers easily and quickly around theirfacilities in different European countries was helpful toefficiency.
Britain's aerospace industry could also get cut out ofresearch and development funding, like the EU's 1.6 billion euroClean Sky initiative to develop new aviation technologies.
For British aerospace trade body ADS, the key issue is oneof certification, with the industry needing continued access tothe European Aviation Safety Agency (EASA), the bloc's body forcertifying new parts and components.
"Delays in certification would be catastrophic for UKindustry," said ADS's Chief Economist and Director of PolicyJeegar Kakkad.
Bryson said the government should make capital grantsreadily accessible to small and medium-sized companies to helpthem cope with the uncertainty caused by Brexit.
"The natural inclination at the moment is to defer(investment), whereas what you want to do is to incentivise aboard to say actually the government has created such a positiveenvironment, we'd be nuts not to," Bryson said.
After Britain leaves the EU, it could strike a new tradedeal, or alternatively, World Trade Organisation (WTO) rulescould come into force. WTO rules enforce zero tariffs onaerospace component makers in contrast to finished cars, whichare subject to a duty of nearly 10 percent.
The British industry already trades substantially beyond theEU, with non-EU exports accounting for around 69 percent ofBritain's total aerospace exports last year, according toofficial data.
Since Britain's vote to leave the EU on June 23, the poundhas fallen 14 percent to a 31-year low against the dollar,helping to lift the shares of companies like Rolls-Royce andMeggitt, a Dorset-based FTSE 250 supplier of wheels andbrakes for planes which has operations in both Europe and theU.S.
"Brexit is neutral in all regards, expect for currency,which is favourable," Meggitt CEO Stephen Young told Reuters. (Additional reporting by Conor Humphries; Editing by TomPfeiffer)
