Select Committee on Science and Technology Written Evidence

Memorandum 30

Submission from Astrium Limited

  I have pleasure in enclosing Astrium's written submission to your inquiry on Space Policy. Your inquiry occurs at a critical time for the future of UK Space. The combination of the Comprehensive Spending Review and the UK Space Strategy Review means that both space funding and policy are in the firing line.

  Recognising the importance of this period, this year Astrium initiated the "Case for Space" series of studies, an unprecedented one year project, undertaken by UK Space at the recommendation of Government, which aimed to scope and quantify the many social, economic and political benefits the UK enjoys from its world leadership in space, and to recommend a path of action to secure the political and economic opportunities for Britain. Our submission reflects the findings and recommendations of this study.

  Government remains critical to the success of this national jewel, both as a risk sharer and as a customer. However, the Case for Space points to urgent shortcomings, both in terms of the recent dramatic cuts in space technology investment and in the continued problems in promoting and coordinating space-based opportunities across Whitehall.

  It is within this context of opportunity and threat, set against the closing window of the Comprehensive Spending Review, that I welcome the opportunity presented by the Inquiry to highlight importance of space and of UK space policy. I would be delighted for the opportunity to give oral evidence before the Committee to elaborate on these issues.

October 2006

Astrium submission


  1.  The UK Space industry is a leader in one of the most strategic hi-tech sectors in the world, providing exceptional skills, R&D investment, growth and added value for the UK's knowledge economy. UK Space also provides innovative solutions for policy makers across Government. The UK's international competitiveness in Space, and its opportunities to create wealth for Britain, rest on sustaining the partnership of investment between Government and Industry in its world-class technology base and in ensuring a lead role by UK in user-driven space programmes. However, if the UK is to maximise the opportunities for wealth creation and for policy delivery, the Government must reverse recent cuts in public investment in space technology and must review its coordination of space policy across Whitehall, starting with a review of its decision only to offer a minimal contribution to the environmental monitoring programme GMES.


2.1  Focus of Astrium's submission

  2.  Astrium contributed significantly to the written submission by the industry trade association UKspace. To avoid duplication, we have focused our response to the Inquiry's areas of interest on the economic case for investing in UKspace, and the impact of funding cuts, and on the issues concerning the coordination of space policy. However we would like to stress that we whole-heartedly endorse the other areas of UKspace's submission we have not covered, namely the importance of the UK's membership of ESA, and the importance of the contribution of space to the UK's research and skills base.

2.2  About Astrium

  3.  Astrium is Britain and Europe's leading space company and one of the few organisations worldwide to offer an end-to-end space-based capability. It provides a full range of space products from civil and military telecommunications to Earth observation, science, exploration and navigation programmes. Astrium is capable of competing across the world space market, a market forecast to grow to at least $1 trillion a year by 2020. Its bank of world-leading technologies and its critical mass underpin the future competitiveness and viability of the sector.

  4.  In Britain, Astrium directly employs more than 2,500 people in its key sites in Portsmouth, Poynton and Stevenage, representing more than half of the total direct manufacturing workforce in UK Space, and the largest national workforce in Astrium's worldwide satellite operations. The UK is home to Astrium's centres of excellence for all military communications satellites, all antenna systems and for the design and manufacture of the advanced communications payloads.

2.3  Why Space?

  5.  Astrium believes the space inquiry will shed a welcome light on a sector which has for too long been neglected and misunderstood both in Government and Parliament. Space applications, in particular satellites, are driving change across the world: they synchronise City transactions, they improve crop yields, they monitor climate change and help protect our environment and support international relief efforts. They keep us in touch through the TV, mobile phone, weather forecasting and satellite navigation. Tomorrow, we will live in an increasingly space enabled world, where our quality of life, our national competitiveness and our public services will all depend on the satellite infrastructure above us, and on the continued success of our own world-class space industry.


3.1  Summary of economic benefits

  6.  The economic case for investing in the UK Space industry is compelling. Investment in world-beating satellite technology has created one of the UK's most innovative and competitive sectors, worth £7 billion a year and supporting 70,000 jobs. This year, Astrium commissioned an economic study by Oxford Economics (OEF) as part of its support for the "Case for Space", which demonstrates that UKspace scores well against the Treasury's key economic benchmarks, by:

    —    Investing £300 million a year in R&D, 12% of manufacturing turnover, in the top league for R&D intensity.

    —    Employing over 60% graduates, double the national average—the highest skilled workforce in UK manufacturing.

    —    Adding value of £135,000 per worker, four times the average.

    —    Growing at 12.5% a year, four times UK economic growth.

    —    Winning 7.3% of a global market that is itself growing faster than China, forecast to be worth over $1 trillion by 2020.

3.2  Causes of economic benefits

  7.  UKspace owes its economic success to a unique combination of factors: a public strategy of investing in areas of high value; the sector's high technology investment; its linkages with the UK's world-class service sector; its world leadership in key areas; its access to City funding; and its prime contractorship capability. Critically, Astrium's size, multinational operations, inward investment, technology portfolio, and range of products enables the UK to compete on the world stage, to access funding and to develop relationships with other sectors. Astrium directly funds more than half of the sector's R&D; it provides a reservoir of skills delivering knowledge transfer to SMEs and the UK's academic community; and it stands alone in its ability to lead and win major international orders. For instance, Astrium is one of only two companies in the world with the proven capability to build the Inmarsat 4 satellite series.

3.3  The upstream-downstream link

  8.  Some of the fastest growing sectors in the global economy are closely linked to satellite applications. The UK's technology lead in these major satellite sectors provides huge opportunities for growth in the wider UK economy:

3.3.1  Satellite Navigation

  9.  Positional services, driven by satellite navigation (satnav) and precision timing will grow dramatically in the next five to 10 years, as increased accuracy and reliability is provided by the Galileo programme. As a result, satnav will create new markets in every area of our lives, enabling us to track virtually everything that moves, from parcels, to mobiles, even to pets. A report by PWC suggests up to 20,000 jobs in the UK could be created from Britain's lead role in Galileo. Astrium is Europe's preferred supplier for satellite navigation payloads, supplying the payloads for all thirty Galileo satellites.

3.3.2  Earth Observation

  10.  Britain leads the world in the application of Earth observation data. The value of satellite data to better weather forecasting is estimated to benefit the UK by up to £1 billion per annum. The ability to predict natural hazards as a result of satellite observations could save up to $1.5 billion globally. In all these areas, UKspace, and Astrium in particular, has leading expertise. Astrium's portfolio of Earth observation technologies include radar, passive microwave sounders and cryogenic coolers, and through its subsidiary Infoterra, it provides Earth observation services including mapping products to businesses and humanitarian agencies worldwide.

3.3.3  Satellite Telecommunications

  11.  Commercial satellites represent a significant part of the high-growth telecommunications market, attracting increasing public investment worldwide. Britain can significantly grow its share of the expanding global satcom market, with potential UK turnover exceeding £10 billion by 2010. The UK, with France, dominates Europe's satcom sector, and accounts for 80% of UK space manufacturing jobs. Britain is home to Astrium's leading centres of competence for satcom payloads, including antennas, processors, RF electronics and mechanical platform. In particular, Astrium's breakthrough in payload technology has opened up new markets to the UK. Astrium's latest media satellite, Hot Bird 8, launched this year, carries as many TV channels as 24 satellites built 10 years ago. And Astrium's Inmarsat 4 satellite series, with their on-board digital processors, are the most advanced telecoms satellites in operation today, each carrying the communication capacity of 16 satellites produced ten years ago.

3.3.4  Military Satellite Telecommunications

  12.  Through winning two separate competitions (Skynet 4 and Skynet 5); Astrium in the UK has been the incumbent supplier of military hardened UHF and SHF satellites and increasingly the associated ground segment to the MoD for twenty five years. At the end of the present concession period, that time will have stretched to nearly forty years. There have also been associated export successes with NATO IV satellites, terminal sales to nearly twenty countries and now the successful and developing third party market. This achievement has benefited the UK defence forces, benefited the UK economy and been built upon judicious defence expenditure being aligned to both Government civil and Astrium investments.

3.4  Technology Investment

  13.  Britain's portfolio of world-leading technologies ultimately holds the key for wealth creation from UKspace. This technology leadership helps to underpin the entire space value chain, feeding cutting-edge space technology into the wider economy. UK Earth observation technology is a world leader in environmental monitoring. High-growth UK downstream operators such as Avanti and Inmarsat have built their business strategies around their relationship with the UK upstream technologies, giving them early access to technologies which have assured them a global market lead. This market edge has helped generate downstream revenue growth in the UK of 44% in the last three years alone, with strong future growth predicted.

  14.  The future of wealth creation in UK Space depends on the future of this relationship between the technology providers and the users, often referred to as the upstream-downstream link.

  15.  Public investment in technology remains critical in a fast developing industry with market failure characteristics. Continued Government investment at seedcorn stage, jointly with industry, will reduce risk and enable capital markets to invest larger sums and maximise wealth creation and maintain Britain's world-class science base.

3.5  ARTES

  16.  The Advanced Research in Telecommunications programme (ARTES) managed by the European Space Agency (ESA) is the only meaningful technology investment available to the UK Space sector. ARTES investment has underpinned the basic technologies which drive the entire industry. Government investment is matched 100% by industry funding. Government figures point to a return on ARTES investment of 7:1, and in some cases far higher. Investment in technologies developed for the Inmarsat 4 and Skynet 5 contracts demonstrated a 40:1 return.

  17.  Inmarsat was floated on the LSE in 2005 with a capitalization of $2.49 billion and is the world's most profitable mobile operator. ARTES investments of £15 million underpin the innovative technology in its Inmarsat 4 satellite series, one of the most complex satellites ever built. This offers Inmarsat significant flexibility with revenue earning potential estimated at £350 million per annum.

  18.  Paradigm, a subsidiary of Astrium, through the Skynet 5 PPP, provides global secure communications to the UK military and is now pioneering third party sales. ARTES investments in antenna technology enabled UK-based Paradigm to win the £2.5 billion contract with the Ministry of Defence, against strong US competition. ARTES funding ensured the full value was retained in the UK and that a key UK technology was retained.

  19.  There is no doubt that the UK's user-driven space policy, investing in programmes with clear user and policy benefits, provides an essential framework for maximising wealth creation. However the strategy should be better implemented, by ensuring a lead role for UK policy and industry and GDP contribution in European programmes of high value, including the environmental monitoring programme GMES and the space exploration programme Aurora.

3.6  Recommendations

  20.  To maximise wealth creation through a strong technology base, Astrium therefore recommends that:

    —    Industry and Government steps-up the funding of the advanced telecoms R&D programme (ARTES) to £30 million a year each.

    —    The UK creates a national satellite research and technology fund, with a minimum budget of £20 million a year.

    —    The UK maintains a leading and influencing role and provides full GDP contribution in user-driven space programmes, specifically GMES and Aurora.


4.1  Overall funding levels

  21.  By international standards, UK investment in civil space is relatively small, falling behind 15 other countries in GDP terms, including Finland and Belgium. The UK's civil space spend of £200 million compares with €1.9 billion for France and €850 million for Germany. In fact UK spending on space amounts to around a penny per person per day.

4.2  Policy constraints in promoting UK space competitiveness

  22.  UK Space Strategy recognises UK Space's economic credentials and the role of Government to maximise its potential for wealth creation. However, the prospects for maximising wealth creation are limited by two factors. Firstly, recent reductions in public investment in satellite technology risk undermining the sector's competitiveness. Secondly, lead UK departments outside the DTI do not adequately consider the economic benefits of major space programmes in making decisions.

4.3  ARTES funding cuts

  23.  UK investment in satellite technology, through the ARTES programme, has always represented a small proportion of overall UK space spend. However, in December 2005, the UK cut its investment in ARTES still further, from £20 million a year to £8 million, which itself will run out in two years. Despite the impressive returns, the UK's investment in ARTES is now only 4% of UK civil space spend, and only 4.2% of total European investment in ARTES. The UK's investment of €22 million compares with €112 million from France, €75 million from Spain, €70 million from Italy, and €56 million from Belgium. Even Luxembourg is investing more.

4.4  Impact of cuts in ARTES investment

  24.  Recent cuts in ARTES investment threaten to undermine the competitiveness of the entire sector. Astrium UK risks losing its market leadership in the intensely competitive and high growth international satcom market if the investment partnership between Government and industry is not restored. UK expertise in advanced payloads, processors and antenna could be lost and rebuilt abroad.

  25.  Astrium believes that a step up, not a step down, in ARTES investment is essential to sustain the UK's leading technology base, reduce risk, address market failure, and sustain UK competitiveness and the huge wealth creation prospects the sector brings to Britain.

  Recommendations are made in the previous section.


  26.  Innovative satellite-based solutions could transform every corner of the Whitehall map. The global reach, reliability and accuracy of satellites can improve the evidence base behind decision making and can help in delivering policy. Satellites can play a critical role in addressing all of the Treasury's five "Key Challenges for Britain" at the heart of the Spending Review, from climate change to terrorism. For example, location-based services could revolutionise our emergency services, road user charging and criminal tagging, not to mention the numerous consumer benefits.

5.1  Constraints in UK space policy coordination

  27.  The UK's "centrifugal" space policy is based on laudable aims of engaging with user departments to ensure that, in the first instance, funding is directed at those space programmes with the greatest policy benefits, and secondly that these departments are then best placed to shape and benefit from them. However, the reality of space-based programmes is that they invariably benefit a number of departments. Other countries recognise this fact by investing in a funded central space agency with dedicated expertise in space applications, which can then make informed decisions for the whole of Government. The UK's British National Space Centre is more of a secretariat, comprising around 30 highly-skilled staff compared to, say 1,500 in its French equivalent, CNES. It therefore relies heavily on the engagement of user departments.

  28.  However the history of decision-making under the UK's user-driven space strategy demonstrates clearly that user departments, when given the responsibility to lead decision-making, find it difficult to consider broader benefits outside their own departmental remits. Space decision-making therefore works best in Britain when the benefits clearly fit within the remit and expertise of the lead agencies within Government. Such examples include the Research Council PPARC's recognition and support of the value of space science and space exploration; NERC's commitment to environmental research; and the Ministry of Defence's longstanding use of military satellites.

5.2  Military satellites

  29.  In the case of military satellites, the recent Defence Industrial Strategy has highlighted the value of world-leading niche capabilities in space and the leverage that these offer in relationships with other nations. The capabilities in military satellite communications have already been referenced. The UK's national strength in small satellites has a clear development route when combined with Astrium's strength in Synthetic Aperture Radar payloads. It is projected that this combination will meet a national requirement for sovereign capability which can only benefit from coordinated cross departmental support, ensuring focused and judicious expenditure.

5.3  Earth Observation and environmental monitoring (GMES)

  30.  A less favourable example is the case of Earth observation. Satellites are the best way of monitoring gradual environmental change on a global scale. They are also vital in predicting disasters and in helping the response. The UK has built up a world leadership in Earth observation satellites—the Chief Scientist Sir David King recently remarked, "there is no doubt that satellites, often UK designed and built, play a critical role in evaluating man's impact on the environment." Astrium designed and built the AATSR satellite instrument which monitors the world's rising sea-surface temperatures. Astrium is also building a revolutionary satellite, Aeolus, which will use laser technology to record wind patterns at 25 different altitudes. Synthetic Aperture Radars, used to capture images through all weathers, have long been recognised as a strategic asset for Astrium in the UK.

  31.  At the policy level, environmental monitoring is supported by strong words. Both the Prime Minister's Natural Hazards Working Group and the UK's 2005 G8 Summit both committed strong UK support to strengthening environmental monitoring to tackle climate change and natural disasters. Europe's flagship environmental monitoring programme, GMES, should therefore have topped the UK's policy agenda, given the happy coincidence of policy support for tackling Climate Change; recognition of the role of environmental monitoring; and the UK's undisputed world leadership in environmental space science and technology. However, in December 2005, the UK opted to commit the minimal (1/4 GDP) funding allowed into GMES—the UK's investment of £4 million per annum compares with £20 million per annum from France and £24 million per annum from Germany.

5.3.1  Causes of the decision

  32.  The UK decision over GMES was caused by three main factors: firstly, the lead Department, Defra, did not significantly value those benefits from GMES outside its own departmental remit, specifically the economic benefits. Secondly, Defra lacked the in-house expertise in Earth observation that would have allowed it to make an informed decision on behalf of the UK; and thirdly, there was an inadequate structure in place to coordinate decision-making across Government departments.

5.3.2  Economic impact of the decision

  33.  The industrial impact of the UK decision has already been felt through the transfer of the Prime contract on the first satellite outside of the UK, reducing UK contract value from €220 million to €22 million. In the longer term, the contracts which may be lost could be as much as €730 million. This would have provided the UK an economic return of at least 10:1, and perhaps as high as 35:1. However, such economic considerations fell outside the lead department's remit.

5.4  Recommendations

  34.  To maximise public benefits from space, and to improve policy coordination across Government, Astrium recommends:

    —    Government urgently reassess the UK's approach to GMES. Astrium remains seriously concerned that, when the second phase of GMES requires funding, the UK could remain under-prepared for assessing the true value of GMES and coordinating a cross-Government decision.

    —    Government should reassess the role and responsibilities of the UK lead department on GMES.

    —    A high-level review of the coordination of space policy across Government departments to help ensure that the right machinery is in place to allow policy makers to make informed decisions and fully benefit from space-based opportunities.

October 2006

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