The space race was once the preserve of superpowers, but today a thriving industry of businesses large and small across numerous nations are vying for dominance across a range of advanced space-based technologies.
In the UK, the Government’s Refreshed Integrated Review reaffirmed the importance of space for UK national security and recommitted to the 2021 National Space Strategy. Recent economic evidence gives cause for optimism. The sector grew by 5% in 2020/21, faster than the global industry average and making it one of the fastest growing sectors in the UK and at a time when growth was hard to come by. As this industry grows, its engagement with Government and regulators will need to grow too. Of the frictions business report in the UK, accessing funding, licensing and enhancements to legislation, such as changes to the liability cap in the Space Industry Act 2018, and better aligning strategy between government departments are all key.
The EU is also focussed on developing its own space capabilities, strengthening its strategic posture and autonomy. The European Commission has announced its intent to deepen EU-US cooperation on space policy as equal partners. UK-EU space cooperation has cooled but not frozen post Brexit. The UK remains a member state of the European Space Agency (ESA), and its industrial base is fundamentally connected with the EU’s. However, companies operating across the UK-EU space economy report challenges in contracting and in accessing programmes.
But others are also upping their game. SpaceX’s first launch of Starship as this blog was being written was a reflection of the vitality of the industry globally: big investment and big ambition. Dramatic coverage of its demise in the upper atmosphere shouldn’t distract us from the gains SpaceX has made. Starship has the capacity to dominate the global launch market through the latter 2020s, transforming industry capacity with launch costs as low as $100 per kg to low earth orbit. The UK and EU will need to be active to maintain a strategic, domestic space capability in the face of such fierce competition.
Space is an arena of geopolitics and questions of space technology are now fundamentally linked to those of security and geopolitical competition. Russia’s November 2021 anti-satellite missile demonstration is a pattern of behaviour consistent with the Viasat hack that aided its attempted assault on Kyiv, and Russia also forced the abandonment of OneWeb’s launch from Kazakhstan. Conversely, Starlink’s satellites have helped to maintain vital connectivity for troops in Ukraine and demonstrated a shift of power from public to private actors. Stratospheric ‘spy balloons’ operated by China have spooked the West and technology for high-altitude drones is developing rapidly. The value of space as a strategic asset at all altitudes is strikingly clear.
As a consequence, space technologies are also likely to be increasingly caught within the tightening controls that Western nations are developing in critical technologies, such as through export, investment and IP restrictions. Of course, this may go hand in hand with a desire to grow domestic firms with funding and regulatory support. Recent US action on semiconductors is likely the start of a new chapter in industrial policy-making rather than a one off.
Public and private investment by UK and international firms to develop their capabilities is growing rapidly and, encouragingly for the sector, there is cross party support for ambitious UK space policy. Engagement with both the Conservative government and Labour to shape the detail of their future plans will be crucial for firms and investors to achieve their longer-term objectives.
The UK Government is clear it wants to create an internationally competitive regulatory regime for launch, but there is a complex array of Government bodies and regulators to engage with. The Space Industry Act 2018 has proven functional, but the practical application of the detailed regulatory processes is still maturing, albeit tested with the successful licenses granted recently for Virgin Orbit and Spaceport Cornwall. For operators looking to extend their capabilities from the US to the UK, they will notice that the regimes are different, and they will need a different type of engagement strategy to get traction. For companies aiming to go beyond Virgin Orbit’s first attempt at launch from UK soil, Flint can help them to navigate the complex path to launch.
Space is a place issue. The opportunities for local growth are significant. Engaging with devolved and local governments will be key, particularly with investment opportunities and new spaceports in Scotland and Wales. Whether it’s because of a space launch or new research facilities, firms will face extensive engagement ranging from local funding and planning authorities to police forces.
Public procurement and grant opportunities are also accelerating. Earth observation, climate, planetary exploration, and space debris removal are all areas of growth alongside commercially focussed telecom programs, and much of the £1.84bn committed to ESA programmes by the UK in November will be returned to the UK. The recent award of the Skynet contract is unlikely to be the last big procurement opportunity, particularly as the Government hasn’t yet finalised its view on a domestic alternative to Galileo. For investors, the relentlessly technical nature of aerospace projects makes judging firms’ business models and performance milestones challenging.
Across the EU, Member States and the EU institutions are pursuing their own objectives working both through ESA and individually; working on new initiatives, monitoring space hazards and producing new regulatory frameworks for space traffic management.
Flint is well positioned to assist businesses and investors with this wide range of challenges; helping our clients navigate the political, policy and regulatory issues which impact on the sector’s growth, including the geopolitical risks that are becoming ever more relevant. There are significant and time sensitive opportunities to influence the structure of the regulatory approach to space activity. Our expertise of UK and EU governments can aid clients making their way through complex regulatory and licencing requirements and complex funding applications. Alongside this, our teams have extensive experience advising firms and investors with the transactions, mergers and acquisitions that are a staple of operating in this exciting and dynamic industry.
This blog was written by Jon Sell, Flint Partner and former head of industrial and technology policy in the UK Treasury, Tom Doherty, Director, and former No10 advisor on business policy including space, and Ralph Heward-Mills, Flint intern and aerospace engineer on ESA Solar Orbiter, Mars Sample Return and TRUTHS.