UK Space Industry Faces up to Brexit Consequences

“Britain is still open for business” said Nicola Blackwood, the then chair of the House of Commons Science and Technology Committee at a U.K. Parliamentary Space Reception just three days after the referendum result. It was a note of defiance as the U.K. space industry assessed where it goes next. Now, more than a month since the result, Via Satellite spoke to key players in the industry to see whether the thinking has changed since.

Talent

The U.K. space industry is a success story; currently worth around $15.64 billion (12 billion pounds) annually, it could reach $52.15 billion (40 billion pounds) annually by 2030 if the country achieves its an ambitious growth target. To do this, the U.K. will need to continue to attract the best talent. This is a major concern according to Patrick Wood, CEO of small satellite manufacturer Surrey Satellites Technology Limited (SSTL). He says that people are top of mind for him because SSTL has some very key staff members from all over the world.

“If I think about other space infrastructure companies in the United Kingdom, they similarly have a high percentage of staff that come from across Europe, and these days with the skills shortages we are seeing from a lack of U.K. applicants, it is a concern, yes,” he says. “At our end of the space market, we need people with a diverse capability of skills from the key assembly technicians all the way through the graduate engineers who are essential for space companies, as this is a high tech industry. In the future, do we have to push harder to find those skills in the U.K.? I would hope we would still have access to the resources that we currently have access too. So, that is an important point. From my point of view, there are still a lot of unknowns.”

Wood says SSTL’s is focusing on looking for business opportunities around the world and maximize those opportunities. “Clearly, we work for the European Union. At the moment, we are continuing to great support to continue to bid [from different organizations in Europe] for that work on Galileo and that is the positive and encouraging point so far,” he adds.

Steve Smart, Chairman of UKSpace and SVP of space defense and national security at CGI, a company that delivers mission critical space systems for space security and space applications, agrees with this sentiment saying that, if you look CGI as an example, it has more than 500 employees working in the space marketplace. The company has a team working on Galileo where there are 27 nationalities represented. It has teams working in the United Kingdom, the Netherlands, France, Germany, and in Italy formed by multicultural, multinational members. Smart says it has been a long standing characteristic of the space business since its inception in the mid 1970s, that it has bought together specialists from Europe, and that they have had a high degree of mobility, being members of the European Union.

Stuart Martin, CEO of the Satellite Applications Catapult, an independent U.K. nonprofit created to foster growth across the economy through the exploitation of space, also highlighted this issue saying there is large community of EU nationals working in the U.K. space industry who enjoy the environment and the culture. He believes it is important for the industry to hang on to such people. At Catapult, more than 20 percent of staff are from the EU. He says it is very easy for EU staff working here, as they can bring their spouses across and their children can go to schools.

“We hope all of those things will continue. It helps lower the barrier of entry and losing that would be potentially quite detrimental to the U.K. space sector workforce. And we want the people who are already here to stay. We have some really talented people here from both the United Kingdom and the EU,” he says.

Still Open for Business?

There is little doubt that there now exists a great uncertainty hanging over U.K. space businesses. Martin is optimistic that the impact may not be as profound as some people think. He highlights that the great thing about the European space community is that it is already very internationalized. Martin points to the fact that a number of big European primes like Thales and Airbus are located in multiple European locations, and that companies are well used to working in international arrangements.

Smart, however, believes there are some legitimate concerns that the industry now faces. When talking about the 40-billion-pound target, Smart believes this is still realistic but, to achieve this, a number of different elements need to fall into place. He says reaching 40 billion pounds annually by 2030 will be predicated on the United Kingdom maintaining its leadership in a number of technology areas, particularly in terms of satellite manufacture, security of space systems in response to the growing cyber threat, and in the delivery of services, such as navigation, for example.

“It is probably the applications and service area in particular where we have the greatest concerns when it comes to the projected growth. So, Brexit represents a risk to the United Kingdom in sustaining its leadership position,” Smart says. “For the United Kingdom to lead a marketplace, it needs to sustain its leadership role within ESA and those European-led projects.”

Martin believes having access to the single market will be key. But, he believes the plan for 40 billion pounds in growth had factored in exports outside of the EU.

“Currently the space sector has an annual contribution of 12 billion pounds a year and roughly 20 to 25 percent of that is exports. But, when we move to that 40-billion-pound target, that needs to move. A bigger part of that has to come from exports, and a lot of that is [already] coming from outside of the EU. There was a need, even before the Brexit decision, to increase our efforts to export outside the EU. This vote emphasizes the need to explore those options,” Martin says.

Ian Jones, CEO at Goonhilly Earth Station, a teleport in Cornwall in the South West of England admits there is no doubt that Brexit will have an impact on the satellite and space industry, although he says it is impossible to predict ultimately whether that will be positive or negative overall. “We do feel that there will be winners and losers — [and] not just in the U.K. Our relationship with ESA, of course, is not affected, but there are other elements of the European space program that are EU-based. The biggest challenge U.K. industry faces currently is a degree of procrastination whilst there is uncertainty in our politics,” he comments. Clearly, what hasn’t changed over the last few weeks is the ability of U.K. space companies to compete in a global marketplace. A company like SSTL has been doing smalls satellites way before they became a hot topic in the satellite industry. Wood, when looking at the company’s business in Europe compared to the rest of the world, said satellite navigation comprises the bulk of its business.

“We built the first 22 payloads for Galileo navigation. That has been the emphasis of our European work. North America has been an area we have been focusing on with our Surrey Satellites US subsidiary in Denver. They are building their first small satellite at the moment; they are due to launch that in 2017. Surrey Satellites are looking at growth opportunities within the U.S. market. In terms of the split, I would say the bulk of our work in Earth Observation (EO) and telecoms is outside Europe. We really are a global player.”

Smart admits that one of the concerns CGI has is the uncertainty it brings when doing business with key partners. “Brexit has been part of the backdrop of those negotiations. A number of space projects tend to be relatively long-term in nature. During the Brexit negotiations, we face a backdrop of uncertainty, and that, for a business-planning viewpoint, is unwelcome,” he says.

A Mood of Cautious Optimism

Martin admits that the result did come as a “bit of a shock” to people, but now that the dust has settled a little, he is encouraged about what he is hearing in the marketplace and the overall reaction from European partners. “It is not like Brexit was a secret, but I think most of us thought that the ‘remain’ vote would come through, so there was a period of shock. I think we have been reassured a little bit by the resilience of the sector and some of the conversations we have had with European partners. I was at a conference in Toulouse, France a week after the Brexit decision, and there was a very pragmatic approach taken by people in terms of working together. I am certain we will find ways of dealing appropriately with the challenges ahead of us, and where there are advantages, we will take advantages of them.”

The United Kingdom won’t be leaving the European Space Agency (ESA) but just the EU. The change may not be as dramatic as people think. “We are much more used to standing on our two feet, managing threats than perhaps other space industries around the world. The ESA Council of Ministers will get together later this year. It is a real opportunity, for the United Kingdom, to restate our ambitions for space, and to make a positive statement about cross-European collaboration. We are not leaving Europe, just the EU,” says Martin.

Smart also strikes a defiant note saying that “all is not lost”. He says the U.K. government can choose to directly invest in programs via ESA and decide to enhance these investments to target critical programs. “The U.K. can still play a full and active role in European and global collaborative programs. This would show Europe and the rest of the world we could collaborate in high-technology ventures, and the U.K. government remains committed to that. This would be an early and excellent example of how it remains open to business and developing high technology in this area,” he says.

Regulatory Impacts of Brexit

Joanne Wheeler, Partner at Bird & Bird and a member of the Via Satellite Advisory Board, recently published a short report looking at the impact of the United Kingdom exiting the European Union. She highlights for example, that the United Kingdom may no longer be subject to European Commission decisions and initiatives on the harmonization of spectrum allocations across the EU. However, she points out that the U.K. will still co-operate with other member states on some of these issues through its membership of other organizations such as European Conference of Postal and Telecommunications Administrations (CEPT), which is not an EU body. Interestingly, Wheeler says the United Kingdom many not now be included in the EU process related to WRC-19, but will be involved in other levels including CEPT.

The exit from the EU could lead to some other interesting regulatory developments. For example, Wheeler highlighted the fact that the European Commission had established a range of policy targets for the EU telecoms market including ambitious broadband access targets, which meant everybody in Europe would have access to 30 Mbps broadband by 2020. The United Kingdom will no longer be constrained by such targets. VS

Caleb Henry contributed to this report.