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The aerospace industry is one of the most successful sectors of UK manufacturing, important not only because of its defence aspects but as a major contributor to employment, to exports and to technology and industry. However, the industry is currently suffering from the simultaneous downturn of its military and civil markets, and it is widely believed that present levels of research and technology acquisition are insufficient to maintain its competitive position in the long-term. This report examines the industry's prospects and the role of the Government in promoting its development. Nineteen main recommendations are summarized at the end of the report.