News ID: 236285
Published: 0854 GMT December 23, 2018

UK space industry aims to chart post-Brexit course

UK space industry aims to chart post-Brexit course

Sylvia Pfeifer*

The grand salons of Lancaster House in London’s Whitehall played host to the great and the good of Britain’s space industry this month.

But a star guest was missing from the Christmas reception: The minister with responsibility for space technology, reported.

Sam Gyimah had resigned from his post as universities and science minister a few days before in protest at the government’s Brexit policy.

The news that the UK would walk away from the military aspects of Europe’s Galileo satellite navigation program after being told by Brussels it would be excluded from them was, said Gyimah, a ‘clarion call’ that EU interest would take precedence after Brexit.

The industry has a new minister Chris Skidmore — but the consequences of Britain’s decision are still being digested across the industry. Executives worry that while the UK space sector has attracted substantial amounts of private capital over the years, the uncertainty over Brexit and Galileo could impact the industry’s longer-term ambitions.

“There is a view that there is a lot of money to be invested, there is venture capital funding here but the issues around Galileo have created uncertainty,” said one executive who attended the reception.

Companies that have already lost out on contracts for Galileo because of Brexit include Airbus, the European aerospace group, while others that could be affected include CGI UK, formerly Logica, and FTSE 250 group Qinetiq.

British industry has been closely involved in the development of Galileo since its launch in 2003 as the world’s first civil-run satellite navigation system. Brussels, however, had consistently argued that Britain would no longer have access to the secure elements of Galileo when it leaves the EU.

In particular, it said that under EU law, countries outside the bloc cannot have access to Galileo’s Public Regulated Service (PRS), an encrypted navigation system for government users.

It is this decision that has hit Airbus, which designs and manufactures satellites at its Stevenage site, and has run Galileo’s sensitive ground control operations from Portsmouth. The company lost out in a competitive tender for a follow-on contract this summer. Around 100 jobs, most of them temporary, have been lost at Portsmouth as a result, sources close to the company confirmed.

Airbus subsidiary and a spinout from the University of Surrey, Surrey Satellite Technology, SSTL, which makes the payload — or brains — for the current generation of Galileo satellites, has also been locked out of bidding to provide the fourth batch of satellites for Galileo — the first of a new type, which is under way.

Other companies that have played a role on Galileo include CGI UK, which has provided much of the encryption used by PRS while Qinetiq is involved in the design and build of PRS receivers.

Immediate concerns are focused on what will happen with the UK’s involvement in another EU-wide program, the Copernicus Earth observation program. Non-EU nationals are not allowed to work on it but both sides say talks on the UK’s continued participation are continuing. The UK will remain a member of the European Space Agency which is independent of the EU.

“It would be a limiting glass ceiling for the UK space sector if we can’t be involved in EU space,” said Andrew Shepherd, a professor of Earth observation at the University of Leeds.

The UK government has said it will commit £92 million towards a national alternative to Galileo but the industry is calling for a wider ‘sector deal’ to help underpin a domestic space program.

“We have some ad hoc national investment in individual programs . . . but what industry really needs now is a sustained national space program running alongside our investment in the European Space Agency just like other EU countries such as France and Germany,” said Richard Peckham, the chair of UKspace, the industry trade body.

Britain has set an ambitious target of cornering 10 percent of the global space market by 2030 in a sector dominated by the US, Russia and China. Despite the shadow of Brexit looming over some of the larger companies in the industry there is still a strong current of optimism.

Unlike France or Italy, the UK has prioritized investments that will deliver commercial returns. As a result, the UK space industry is dominated by strong commercial sectors such as broadcasting and communications, which account for about three-quarters of all income generated by the industry, according to a 2016 report by London Economics, the research consultancy. Total income between 2014 and 15 was £13.7 billion.

Mark Boggett, the chief executive of Seraphim Capital, the world’s first venture fund dedicated to the space industry, said while the sector “seems to get short changed on the allocation of public funds”, private capital has been pouring in. More venture capital funds have been committed in the last three years in the UK than the previous 15 years combined.

According to the Seraphim Space Index, a publication of global venture capital investment in the space technology sector, nine companies in the UK received $32 million worth of funding from venture capitalists during the year to end September 2017. In the following year to end September 2018, that figure had increased to $185 million invested into 20 companies.

One area that has seen rapid expansion is the Harwell Space Cluster in Oxfordshire, which currently boasts 89 organizations that make up the UK’s most concentrated group of commercial, public and academic organizations focused on space innovation.

Angus Horner, the director of the Harwell Campus Partnership, believed the sector is in a “more robust state than a decade ago”, noting that about 44 percent of the world’s small satellites are made in the UK.

“We have a very interesting ability to do some things quite well,” he said.

He conceded that there is “immediate project and contract uncertainty for companies affected by Galileo” but said he is confident that “in the medium-term there will be a replacement program”.

As part of its industrial strategy launched last year, the government has set a target of spending 2.4 percent of gross domestic product on research and development across sectors in a bid to improve Britain’s productivity.

Horner believed this target will help provide a “more strategic focus” for the space sector.

Mark Thomas, the chief executive of Reaction Engines, a company working on a propulsion system that is part jet engine, part rocket engine and whose backers include BAE Systems and Boeing, said government support has been “very important” to the company.

With technological advances bringing the possibility of low-cost access to space ever closer, industry executives hope the UK will be able to leverage its success to build a truly sustainable industry — one backed by a national program.

*Sylvia Pfeifer is an industry editor at Financial Times.


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