How the UK can raise its game to compete in the space race

Nov 22, 2019

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by Diane Shaw Strategy& Partner

Email +44 7825 676420

by Neha Puri Senior Manager, Disruption & Innovation, PwC United Kingdom

Email +44 (0)7808 106699

The 50th anniversary of the moon landings, marked by NASA in July, prompted not only a global wave of pride over what was a stellar human achievement. It also got us thinking about another big step for humankind in space: innovation in aerospace and defence, and the UK’s role in it.

All areas of this industry are facing disruption from rapid technology innovation, changing customer demands and the rise of dual-use civilian and military applications. Nowhere are these forces more evident than in the global space sector—where the pace of innovation is being matched by headlong expansion in commercial opportunities.

Seeking to tap into this growth, the UK wants to capture a significant share of the burgeoning space economy. The country aims to grow its share of the global space market from around 6.5% to 10% by 2030, according to the UK government’s National Space Policy document.

In the same month that NASA marked the moon landings anniversary, the government committed £30 million to accelerate the launch of a small satellite demonstrator within a year – part of a package of other programmes that are designed to demonstrate the UK’s leading future role in space.

This is great. But there’s still a big gap between this ambition and the UK’s current capabilities. Narrowing it will require building on existing capabilities and investing in new infrastructure. And there are significant opportunities, if the right transformative approach is taken.

Opening up the next frontier

We’re witnessing a resurgence of global interest in space as the next commercial and technological frontier. Morgan Stanley estimates that the roughly $350 billion global space industry could surge to over $1 trillion by 2040. We think this will be fueled by growth in three areas:

  • New “earth-focused” value-added services - such as satellite-based mapping and data associated with it - driven by rising business and consumer demand and technological advances;
  • Defence and security, reflecting the increasing importance of space as an operational military domain; and
  • The “new space” economy, driven by venture capital funding, and focusing on deep space exploration and opportunities like space mining.

The good news is that the UK is starting from a strong foundation, thanks to its strength in long-standing satellite manufacturing (STEM) capabilities, and impressive roster of innovative space companies.

However, new initiatives like the first UK spaceport—scheduled to start operating from Scotland in 2021—face stiff international competition from proposed sites in the SpaceX South Texas Launch Site and the Pacific Spaceport Complex in the US, and the Santa Maria Island site in Portugal. Moreover, private sector activity could be greater; while Airbus has built industrial capabilities in the UK, few other players have done so.

Based on many of our client interactions so far, we think all of this creates four main implications for the UK’s space industry

  1. Growing demand for value-added services: The next generation of services will integrate space, air and land to offer ubiquitous connectivity. With several commercial launches planned over the next three years, these networks could significantly expand the reach of terrestrial mobile, creating global opportunities for UK companies. Australia and New Zealand could play an important role in a UK-led alternative to Galileo.
  2. The key role of government in attracting foreign direct investment (FDI): The strategic nature of many space business means that international partnerships are essential. The UK government affirmed its commitment to help British companies in the space sector compete by strengthening ties with partners globally at the UK Space Conference that took place in Wales in September, 2019. Follow-through will be vital.
  3. New private sector opportunities in defence and security: Aerospace and defence companies have historically focused on high-end military services such as Skynet, the UK government’s military satellite communication system. The UK’s decision to pursue building its own secure global satellite navigation system provides an exciting opportunity to develop a global offering. As the world becomes increasingly data-driven, space infrastructure—spanning satellites and ground-based facilities—is gaining strategic national value. In June 2019, France announced the creation of Space Command to protect French satellites from high-powered lasers and cyber attacks. We believe there is a great UK opportunity here, too.
  4. Governance challenges around space as a public resource: Increasing access to space raises complex legal, regulatory and ethical questions— addressing space debris, the exploitation of space resources—at a time when international cooperation is in retreat. The UK could play a pivotal role in establishing a new governance framework for activities in space.

Given these implications, we see two things that are needed if the UK is to achieve its targeted 10% share of the space market. First, more investment. And second, an ability to strike the right partnerships. Let’s see what milestones we can celebrate next.

1UK Space Agency - National Space Policy (2015)

2Morgan Stanley - A New Space Economy on the Edge of Liftoff (2019)

by Diane Shaw Strategy& Partner

Email +44 7825 676420

by Neha Puri Senior Manager, Disruption & Innovation, PwC United Kingdom

Email +44 (0)7808 106699