Defence and aerospace industries in Scotland generate nearly £2.31 billion in sales and together with the MoD support almost 50,000 jobs and a record number of apprentices. As well as a recognised expertise in naval ship building, Scotland also has a strong defence electronics industry and a strong aerospace industry based around Prestwick. This report examines the delay in the signing of the contract for two new aircraft carriers: the Committee is concerned that similar delays during the construction phase could lead to job losses and damage the ship-building skills base the UK needs to support if it wishes to retain sovereign capability in key areas. The Committee also comments on the Government's decision to treat the Military Afloat Reach and Sustainability (MARS) vessels as commercial rather than naval vessels, making them subject to EU competition law. There is confusion over the status of these vessels. The report also looks at the supply of skilled, semi-skilled and graduate workers, the Modern Apprenticeship programme, and the funding for adult apprentices. It is vital for Scottish industry to look at upskilling throughout the workforce, including mature workers who were not able to access apprenticeships as school leavers. The issue of constitutional change also affects the future sustainability of the Scottish defence industry. In the long term it is unclear what naval requirement an independent Scotland would have and whether this would make up for the potential loss of UK MoD orders. Government and industry need to work effectively together to ensure that Scotland's engineering and manufacturing base continues to be world class.