Submission from UKspace
1. This submission is from UKspace, the
main Trade Association for the UK space industry. Membership covers
upstream satellite manufacturers, equipment suppliers and ground
support providers, including Astrium, SSTL, QinetiQ, Logica, Vega,
SciSys, SEA and Serco and downstream operators and service providers
such as Inmarsat, BT and InfoTerra.
2. Space is a highly beneficial but widely
misunderstood sector of UK economic activity. It is in danger
of losing major opportunities through funding cuts, with loss
of prosperity to the UK and future dependence on others for vital
strategic services. A stronger national focus is needed to increase
investment and returns and to help the UK achieve its strategic
objectives in relation to global competitiveness, wealth creation,
social benefit and the challenges of security and climate change.
Action is needed to establish a more substantial national presence
through a variety of entrepreneurial initiatives, as well as,
very importantly, on regulation, co-ordination across government
and influencing ESA and the EC.
Impact of funding levels on international competitiveness
3. The UK has one of the most competitive
space sectors in the world. It is also one of the highest value
adding sectors in the UK economy. This competitiveness has been
built from judicious investment powered by a user led strategy
focused on value adding investment decisions. However, this is
not well or widely understood. The UK must reverse recent cuts
in already modest space budgets if the UK is to retain this key
asset in its hi-tech economy.
4. Space is an increasingly rewarding global
market, estimated to be growing at 15% pa, reaching $1.5 trillion
5. The UK's space sector scores well against
the Treasury's indicators of competitiveness:
It invested £300 million
in R&D in 2004-05, 12% of manufacturing turnover, placing
space in the top league for R&D intensity;
Over 60% of employees are graduates,
double the national averagethe highest skilled workforce
in UK manufacturing;
Value added per worker is £135,000,
four times the average;
Revenues grew at 12.5% pa in
the five years to 2004-05, four times the UK's economic growth.
6. The UK's space sector is a world leader
in small satellites, satellite financing and insurance, mobile
satellite communications and military satellite communications.
Inmarsat 4, Skynet 5, MOSAIC, the GIOVE-A Galileo satellite and
HYLAS are all testament to this fact. It has 7.3% of the global
market, including 11.8% of the high-growth downstream applications
sector. The Science Minister recently told Parliament: "How
many high-tech and high value industries are there in the UK with
such shares?" (Parliamentary Space Committee, 21 June 2006.)
7. Government support has been critical
in terms of investment and decision making.
8. The UK's user-led strategy has provided
a framework for focusing investment in areas of maximum tangible
benefitaway from launchers and the International Space
9. However, the UK's record on implementation
has been patchy. Science driven research has enjoyed consistent
support, but co-ordination and funding of non science-driven programmes
and technology has been far more difficult.
10. Two flagship European programmes, GMES
and Galileo, provide recent examples. GMES remains 75% under-funded
by the UK, seriously prejudicing the UK's role in EU exploitation
of Earth Observation. In both cases, user departments without
the necessary expertise or remit in space were asked to identify
and co-ordinate the UK position and decide on investment. Neither
department had an obligation to consider and weigh the impact
on the broader economy or competitiveness. The reality is that
the UK's excellent user-based strategy is not properly co-ordinated
across Government, with slow and complicated decision processes
that have compromised competitiveness and wealth creation.
11. Market failure prevails because of enormous
American government investment (~50% of world space expenditure)
and globally agreed data policies.
12. UK competitiveness ultimately lies in
its technology base. Current technology leadership is the fruit
of a long-standing partnership between industry and Government,
through joint investment in programmes such as ARTES, Europe's
space technology programme for satellite telecoms, and other smaller
ESA and national programmes. Satcoms represents 80% of the turnover
and employment of UK space manufacturing, and provides the critical
mass for it to remain viable, sustain its technology bank, and
bid for exports. ARTES is a very successful technology transfer
mechanism and has generated returns of 7:1.
13. In December 2005 UK Government reduced
investment in ARTES from £20 million to £8 million and
has blocked most other means for investment in technology. Britain
and France lead Europe in satcoms, but UK investment is now lower
than Belgium and Luxembourg. The Comprehensive Spending Review
threatens further cuts or even to eliminate any remaining investment.
Failure to reverse this will have direct, irreversible, long-term
impacts. Leading UK technology capabilities will be lost and rebuilt
abroad, accompanied by direct and indirect job losses and leading
to dependence on non-UK suppliers for key service provision. Failure
to sustain technology investment will jeopardise competitiveness
and wealth creation potential as the UK platform for lucrative
downstream service roll out is weakened and the technology bank
14. Public sector investment in space technology
at a national level and through ESA should be put on a firm footing.
15. Under the statutory indemnity provisions
in section 10 of the Outer Space Act 1986, UK nationals are subject
to unlimited liability for treaty claims against HMG. This risk
is not imposed on other business sectors and applies to anyone
who causes space related activities to occur. Other countries
do not require their nationals to indemnify their Governments
in respect of space treaty claims. As a result, UK companies involved
in space activities are at a disadvantage versus international
16. Further action is needed on market structure,
regulation and licensing. New upstream capabilities are not always
made available to service providers by incumbent satellite operators.
This can prevent delivery of advanced low-cost services. The UK
must seek to create competition at the wholesale capacity level
to overcome this, possibly through appropriate regulatory mechanisms.
Also, licences to operate services are difficult to obtain in
some countries, including some EU states. Current EU Directives
need proper enforcement. The UK should seek appropriate market
liberalisation elsewhere through the WTO.
Benefits and value for money from ESA
17. The UK's space industry is fully supportive
of Britain's participation in the European Space Agency. It sees
involvement in ESA as fundamental to the future and is willing
to support discussions on the future of the Agency.
18. ESA's role in procuring complex systems
and sharing technology and other risks is vital. It provides economy
of scale for many space programmes and offers highly leveraged
access to world class missions and resulting products and services.
19. ESA has played a leading role in kick-starting
programmes ahead of emerging end-user needs. It has been instrumental
in moving operations and responsibilities to the private sectoreg
Eutelsat and Inmarsat. ESA has also helped establish Eumetsat,
which provides world class meteorological products.
20. Building on the UK's past national technology
funding and ESA's technology programmes (GSTP and ARTES), which
the UK has previously supported, UK industry has developed world-beating
products that have helped develop vibrant export markets. ESA's
participation in these developments ensures global acceptance
of quality and marketing. Some of the early phases would best
be carried out nationally however, giving speedier exploitation
and clearer IP ownership. The recent PPARC CREST programme is
specifically targeted at better positioning UK industry and academia
for the ESA Aurora space science programme in this way.
21. It is vital to the future commercial
success of UK industry that this chain: national investmentESA
collaborative developmentUK-led commercial exploitationbe
maintained and enhanced. The strength of a national programme
significantly influences the return on investment in ESA. A strong
national investment enables government and industry to develop
properly co-ordinated national approaches to ESA and EU programmes,
enabling BNSC to influence the definition of ESA projects and
permitting the UK to obtain key roles and compete for key contracts.
It also secures IP for future commercial exploitation. However,
lacking sufficient funding, the current UK position is reactive
rather than proactive and takes a defensive stance in responding
to other nations' initiatives. UK involvement in the mandatory
science programme is excellent, but commitment to the application
targeted optional programmes is in many cases very difficult for
22. ESA's programme is complemented (and
sometimes co-funded by) the EU's Framework and related programmes,
which are more directly end-user application focused. These have
helped UK industry to an extent, but to date have not been as
useful, or well managed, as those of ESA.
23. ESA needs to encourage pseudo-commercial
public and private sector organisations to take over operational
service delivery, with transfer of ownership as soon as practicable.
ESA should be encouraged to focus on service delivery requirements
to drive provision of space assets.
24. Transferring ESA responsibilities to
national Agencies (as proposed by some) will work for UKspace
only if the UK plays its full part with full funding, otherwise
the UK will lose out. To strengthen the UK position, industry
recommends seeking placement of a major ESA facility in the UK,
aligned with UK strength in science, technology or commercial
and public sector applications for example. The UK could thereby
correct current unresolved under returns and benefit even more
from its membership of ESA.
25. Effective and early engagement in ESA
programmes and maximum influence from the UK in support of its
goals and priorities should be a major policy objective.
Maximising commercial benefits and wealth creation,
innovation and knowledge transfer
26. Space related revenues in downstream
services are projected to accelerate, growing by up to 15% pa.
To maximise commercial benefits and wealth creation it is essential
that the UK obtains a significant share of export markets for
UK companies, rather than becoming dependent on non-UK suppliers
for UK user needs.
27. Ownership of key areas of upstream IP
that will enable the UK to lead such enterprises has been secured
in satellite platforms, payloads, communication technology and
operations. Without this strong upstream base, UK downstream providers
will be at a disadvantage, being dependent on others for the necessary
28. The UK can harness its lead in innovative
technology and financing to build competitiveness. It has already
shown a high level of enterprise in smallsats and financing through
SSTL and Avanti (with HYLAS). In each case government investment,
complementing private sector risk taking, has been essential at
29. UKspace has identified opportunities
where modest increases in space technology investment should generate
much greater returns from innovative public and commercial space-related
services. Successful exploitation will expand UK high-value manufacturing
capacity, help to achieve government objectives and facilitate
creation of world-class commercial service enterprises.
30. The focus is on new satellite services...
television and multimedia to mobiles;
emergency communications for
security services and the public; and
next generation dual-use military/civil
...exploiting advanced technologies and equipment,
lower entry costs for new operators;
higher capacity and lower running
in orbit reconfiguration to
...creating and participating in collaborative
programmes, such as...
Meteosat 3rd Generation, GMES;
A real-time radar imaging constellation;
Location based services (eg
...and establishing UK led Commercialisation
31. Satellites are already the cheapest
way to provide digital TV, communications to ships and navigation.
It is important to correct the common, false perception that space
is too expensive for everyday use.
32. Novel, imaginative services will increasingly
disrupt conservative commercial structures, creating new supply
chains delivering greater economic activity and benefit, enabling
the UK to make better use of its limited resources. It can even
reduce the communications industry's carbon footprint.
33. The UK cannot afford the US "brute
force" approach based on huge spending on strategic defence,
and since the UK has international commitments dependent on maintaining
at least some industrial capacity in satellite communications
and Earth observation, it must (a) specialise where the UK has
leading capabilities and (b) maximise leverage from other public
expenditure. This requires intensification of knowledge transfer
between academia, defence, government and industry.
34. Effective collaboration can be aided
by the following strategies:
By fostering innovative commercial businessesin
areas where UK is already world class, driving down costs for
space infrastructure and services. Maintaining world-class industrial
capacity enables low risk adoption of dual-use technologies and
their adaptation between civil and military applications.
By exploiting committed European investments
and ensuring maximal leverage from ESA and the EC. By seeking
also significant returns from ESA through establishment in the
UK of a European facility and ensuring that the UK is the centre
of a virtual applications network for the whole EU. HMG has undertaken
many studies looking at benefits of ESA membership, including
by the NAO, which show demonstrable quantitative benefits.
By increasing understanding of space across government,
ensuring that procurement decisions are well informed, taking
into account alternative and often lower-cost space alternatives
and by creating a joint Government/City investment fund to bring
space projects to market.
By encouraging use of space applications, services
and technologies by RDAs for regional economic growth, taking
advantage of proposals for UK-hosted European facilities.
Delivery of public benefits from Government space
activities and their co-ordination
35. Public benefits from the use of space
and satellites are widespread and increasing, ranging from:
broadcasting and mobile communications,
particularly in remote areas, at sea and in the air, to secure
military communications (Ref: Defence Industry Strategy,
to synchronising financial transaction
in the City;
to helping farmers manage their
fields and crops;
monitoring and evaluation of
pollution, environmental damage and climate change;
to the use of satellite navigation
for finding your way and managing air, rail and road transport;
surveillance of terrorist and
criminal activity; and
to assistance with disaster
relief and distributing humanitarian aid.
Space is also used as a platform for scientific
36. The UK is unusual among nations involved
in space in pursuing an entirely user-led strategy for both choice
of activity and funding. It does not have a Space Agency as such;
rather it co-ordinates and operates through the British National
Space Centre, which is a Partnership between public bodies engaged
with space. A principal role for BNSC is the co-ordination of
activities, dialogue and funding with the European Space Agency
and its collaborative programmes, through which the UK achieves
many of its aims in space.
37. This user-led approach has the advantage
that strategy remains firmly focused on practical, valuable uses
of space rather than on involvement in prestigious projects and
the exploration of space for its own sake. This model works very
well for science and the Research Councils are by and large fully
engaged as primary funders of UK space efforts. However, the user
departments of government, such as DfT, DEFRA, the Home Office
and the FCO struggle to find funding for space as it is seen as
too long term and early stage, in spite of the considerable potential
benefits downstream. The DTI also struggles to bridge the gap
between science and commercial exploitation and to the government's
own future needs for satellite-based information and services.
This leaves the UK vulnerable to becoming ever more dependent
on key services that have been developed and provided by others
and over which the UK has no control.
38. Industry supports the BNSC Partnership,
but is concerned that the weaknesses outlined above will result
in loss of a significant global market opportunity and failure
to deliver important social benefit and political influence for
39. Industry is confident that BNSC would
operate with more effectiveness and cohesion if industry was a
full partner. Industry invests £300 million per annum in
space R&D alongside the government's own £190 million
per annum, frequently on co-funded programmes. Industry's status
outside the Partnership makes co-ordination of investment for
maximum impact even more difficult. Industry's involvement as
a full partner would bring greater focus and resources to the
problems of co-ordinating public and private responses to user-led
opportunities for the UK and to developing solutions for the departments
of government that presently find it difficult to engage. It is
also recommended that the involvement of these user departments
be strengthened and that a cross-departmental budget be provided
to BNSC's DG for the development of applications with the greatest
40. To bring this about, and given the strategic
importance to the UK, the Government is urged to take action at
Space research and skills development
41. To maintain a long-term, credible UK
scientific skills base, each science discipline has to provide
an environment that attracts and stimulates scientists and engineers.
Space has plenty of appeal in this respect, pushing at the very
boundaries of engineering, teaching the excellent management skills
that industry needs, providing opportunities for international
collaboration and producing opportunities for commercial spill-over.
Support for UK space-based scientific research has been good,
from both PPARC and NERC; PPARC in particular has taken modest
but excellent steps to work with industry on long-term planning
and technology development, but this on its own will not sustain
a UK industrial base.
42. ESA's space and Earth science programmes
are very successful, providing good value if the industrial return
can be secured. Many projects and specialist measurement missions
require complex observational facilities and sophisticated satellites,
taking 10-15 years from design to realisation. Support is needed
also for additional, more frequent, smaller missions to deliver
rapid results for nearer-term challenges, for example, in understanding
changes to the Earth system and for natural resource monitoring
and management as natural resources are become depleted at an
accelerating and unsustainable rate. This would also accelerate
career and skills development for researchers and is an area in
which the UK excels.
43. Importantly, modern components, rapid
development miniaturised instrumentation, and more flexible operational
approaches mean that capable smallsats can potentially be funded
by the UK on a national or bilateral basis, increasing the body
of scientific knowledge in the UK and raising the status of UK
science internationally. Such projects should be tasked to include
STEM skills development and educational material for schools and
undergraduate students, enhancing the profile and understanding
of space-related research and science as a whole.