Brexit Biting for UK Space Industry

Artist's rendition of a satellite - mechanik/123RF Stock Photo

Artist’s rendition of a satellite – mechanik/123RF Stock Photo

UK companies involved in European Commission space programmes face an uncertain future according to media reports over the last week. The Financial Times reported that the European Commission wanted two key clauses in the contracts for work on the next part of the €10 bn Galileo Satellite Navigation System. These would allow the Commission to:

  • Cancel the contracts, without penalty, of any supplier who is no longer based in an European Union (EU) member state; and then
  • Charge that supplier all costs associated with finding their replacements.

Clearly, this poses a huge risk to UK companies given the fact that the UK has indicated its intention to leave the EU in 2019 by triggering Article 50. We wrote about the potential impacts of Brexit last year, and whilst we did pick up concerns over Galileo we didn’t see this coming!

Should the UK Space Industry be concerned?
Yes!

Despite reports to the contrary, this does not mean we are leaving the European Space Agency (ESA). We are very much remaining part of ESA, something that was confirmed at the ministerial in December. This solely relates to programmes owned, and funded, by the European Union (EU). However, it is concerning for two key reasons:

  • Anyone who has tried to negotiate contract terms with large governmental organisations will be aware that it tends to be a binary take it or leave it scenario. Therefore, if these clauses are in the contract, then it is highly likely companies will have to sign up to them to get the work.
  • It may not just be Galileo, the Copernicus Programme could be next. Copernicus is also an EU programme, and therefore it has to be a possibility that they may apply the same clauses to future Copernicus tenders. Galileo isn’t something Pixalytics is involved with, but if this was extended to Copernicus we’d be potentially impacted and would need to make choices.

What Can UK Companies Do?
The options are limited:

  • Bid anyway! Accept the potential financial risk, or hope that it will get resolved within the various Brexit negotiations. Given the size of these contracts, it will be a brave CEO who goes down this route.
  • Not bidding for any Galileo contract is probably the financially prudent option, but equally it removes a significant revenue stream.
  • Move to another European Country. I think there will be a number of companies who will be looking at moving some, or all, of their operations to another EU member state.

Any Causes For Optimism?
Not really, but there are tiny strands of hope.

  • Security – A key issue with Galileo is security. Currently, all EU members have agreements on security and when the UK leaves the EU, it leaves that agreement. Of course, security is just one of hundreds of agreements the UK will be hoping to discuss with the EU through Brexit negations. If security agreements are reached with the UK, maybe the position will change.
  • UK Election – Whilst writing this blog, the UK Prime Minister has announced a General Election in June. Parliamentary changes may influence the type of Brexit we have, but again it is highly unlikely.

It was fairly obvious, despite the contrary political rhetoric, that Brexit would have huge consequences on the UK’s relationship with Europe.

The UK’s space industry looks as though it will be at the forefront of those consequences. Forget 2019, the bite of Brexit is being felt today!

Is the UK Space Industry in good health?

Blue Marble image of the Earth taken by the crew of Apollo 17 on Dec. 7 1972. Image Credit: NASA

Blue Marble image of the Earth taken by the crew of Apollo 17 on Dec. 7 1972.
Image Credit: NASA

Last week the UK Space Agency issued its latest report on the Size and Health of the UK Space Industry, covering 2013/14 and 2014/15. There are a number of eye-catching headlines, but this broad-brush approach means that there are a lot of unanswered questions within the granularity of the report.

UK Space Industry Income is Worth £13.7 bn in 2014/15
This headline figure breaks down into 88% (£12 bn) for downstream activities. Whilst the 12% (£1.7 bn) for upstream activities is much smaller, it is higher than in previous years. Upstream refers to the part of the industry that build and launch satellites and sensors; whilst downstream encompasses the products and services that use the data those objects collect. Overall, the UK represents 6.5% of global space economy.

Unsurprisingly, given the above breakdown, space applications are the biggest segment of the industry, followed by space operations, space manufacturing and ancillary services.

This follows through into capabilities which are dominated by Broadcasting, Communications and Navigation & Timing which account for 56%, 19.6% and 12.2% of the space industry income respectively. Earth observation is listed with an income of £256 m, equating to 1.87% of the overall industry; although Meteorology is shown separately.

38,522 Jobs in the UK Space Industry in 2014/15
The space industry accounts for 0.12% of the total UK workforce, with 29,947 people working in downstream activities, and 8,575 working in upstream. It’s interesting to note the difference in the employment percentages, 78% and 22% respectively, compared to the income split above.

A fascinating fact in the report is that the average qualification level of space industry employees is higher than any other sector in England and Wales. With 74% of employees possessing a degree, 15% holding a HNC and the remaining 11% having other qualifications.

Space Industry Throughout the UK
All regions of the country have space companies. Of course, London and the South East – partially driven by the Harwell Campus – have the highest concentrations. We were delighted to see that the South West had was the third most populous area with 126 space organisations; although the South West is only fourth for Headquarters and income generated with £176 m worth of space business within the area.

UK Space Industry Customers
The report notes that the largest customer type is individual consumers, accounting for 54% of the income. However, given the domination of Broadcasting in the figures and with the majority of their customers being individual consumers this does skew the result. Equally limited information can be gleaned for the other customer types.

Personally, we’d be interested in seeing the customer type split for each capability. This would be much more useful, as at the moment these are a set of high level figures offering little, or no, insight.

Growth Slowing In the Space Industry?
The report has lots of positive statements about growth. There are at least four different income growth rates of 6.5%, 7.3%, 8.1% and 8.5% on page 10, depending on which time period you compare. Similarly, page 12 on employment lists growth rates of 5.8%, 6.0% and 6.7%.

All of this sounds great, but looking at the growth rates within in the tables for the last 7 years, quite wild swings year on year can be seen. The chart below shows some good growth rates, but the last two years are the lowest growth rates.

UK Space Industry Income & Employment Growth 2009 - 2016. Source: Size & Health of the UK Space Industry 2016, UK Space Agency

UK Space Industry Income & Employment Growth 2009 – 2016.
Source: Size & Health of the UK Space Industry 2016, UK Space Agency

To be fair the report itself notes a few caveats on the figures, such as new methodologies and the changing value of the pound. So care should be taken with such figures, but does it show signs that growth could be slowing for the industry?

Towards 2030 Ambitions
In February 2010 the UK Government set ambitious targets for the industry of:

  • 8% of the world space economy by 2020, and 10% by 2030.
  • 100,000 jobs created by 2030, taking the industry to 119,100

By the end of 2014/15 progress had been made towards both of these targets, with the industry representing 6.5% of the world space economy and having 38,522 jobs. Employment needs to grow by 7.8% each year to achieve the target, which is concerning given the current growth levels outlined above. If jobs aren’t being created, it’s unlikely the global market share target will be hit.

Shaping The Future
Finally, the UK Space Agency is currently seeking ideas and evidence on how to implement the 2015 National Space Policy. Anyone can submit their thoughts, and we’d encourage everyone to participate in helping shape the future of the UK space industry.

The submission document is straightforward asking for proposed actions, alongside evidence as why they are necessary, for each of the four principles of the National Space Policy

  • Space is of strategic importance to the UK because of the value that space programmes deliver back to public services, national security, science and innovation and the economy.
  • Preserving and promoting the safety and security of the unique space operating environment, free from interference.
  • Supporting the growth of a robust and competitive commercial space sector, underpinned by excellent academic research.
  • Cooperating internationally to create the legal frameworks for the responsible use of space and collaborating with other nations to deliver maximum benefit from UK investment in space.

Conclusion
The UK Space Industry is growing, but we need to ensure that we take advantage of every opportunity and develop, promote and encourage the use of space based applications and technology.

With all the concerns about economic certainty in the coming years, let’s make sure our industry rockets ahead!

Brexit and the Earth Observation Market

Artist's rendition of a satellite - mechanik/123RF Stock Photo

Artist’s rendition of a satellite – mechanik/123RF Stock Photo

Last week the UK voted to leave the European Union (EU). For us it was sad day, evidenced by the fact that on voting day Sam was at the European Association of Remote Sensing Laboratories (EARSeL) Symposium in Bonn, Germany; and I was in Brussels having attended the European Association of Remote Sensing Companies (EARSC) Annual General Meeting the day before – I should say we had both already submitted our postal votes!

This obvious topic for this week is what Brexit means for the UK Space Market, and in turn what it means for us:

European Space Agency (ESA)
ESA is not the EU. It has a different membership and different rules. The UK can remain part of ESA even if it leaves the EU, as evidenced by Norway and Switzerland’s membership, and even Canada’s associate membership.

However, at the ESA Ministerial in December member countries will need to declare how much money they intended to contribute towards ESA programmes. ESA operates a geo-return principle which dictates that countries cannot receive more money back than they put in, and therefore the decision on how much funding to commit at the December meeting will be vital for the UK Space Industry.

At the moment there is a power vacuum in this country following the resignation of the Prime Minister, and it would appear that no major decisions will be made on the future direction of the country until the new Prime Minister is appointed in September. Given the new Prime Minister will want to set up his own Executive arrangements and that the most pressing matter will be Brexit, it is not clear who will be taking the significant decision on the UK’s ESA Contribution.

Lack of commitment at this point has the potential to damage the UK Space Industry far more than Brexit.

European Union
Despite the assertion above that the EU and ESA are different bodies, they are linked organisations. They have a joint European Space Strategy and the EU is the biggest financial contributor to ESA’s budget. In addition, the EU owns a number of programmes such as Copernicus and the Galileo positioning, navigation & timing network.

Outside the EU the UK will probably no longer have a voice within these programmes and it is unlikely the siting of significant infrastructure related to these programmes, such as ground segments, will include this country. Hence, even remaining an active participant within ESA, it is hard to argue against the fact that the UK’s role in the future of the European space industry will diminish.

Single Market
The space industry, like other industries, currently benefits from the single market which makes it easier for European businesses to trade with each other. It is clear that most of our businesses, and politicians, feel that this is a benefit they’d like to keep. The question is whether they will be willing to pay the EU’s price?

If they do, then it is likely that change will be limited. However, if they don’t and the UK leaves the Single Market then trade with Europe will become more difficult. It will of course continue, but there may be tariffs, limitations on exports/imports and the potential for businesses to open or close offices within the UK or Europe to best maintain their access to both the UK and European markets.

Scientific Collaboration
We collaborate with a lot of EU companies, scientists and students. Now again there is no suggestion that this would stop, but everything will become more complicated.

  • How easy and quickly will people be able to get visa to travel to Europe or vice versa? This could impact attendance at meetings or conferences.
  • Will European Conferences still come to the UK?
  • What will be the impact on placement programmes such as ERASMUS? ERASMUS has different membership to the EU, like ESA, but will the UK still be as attractive to those students?

Of real scientific concern is the emerging anecdotal evidence that UK researchers are being removed from EU based funding bids, such as Horizon 2020, as the consortia fear their bids will be less attractive if the UK is involved. If true, this is will impact scientific research, at least in the short term until our involved in such programmes is clarified.

UK Space Industry
The UK has an expanding, exciting and innovative space industry and the future is certainly not dependant on us being part of the EU. However, it would be naïve to suggest that we don’t face challenges ahead following Brexit. There are a number of key elements we need in place to ensure that our industry can continue to thrive:

  1. Commitment to our continued membership of ESA, supported by funding at the December ministerial.
  2. Commitment that the resources the UK Science and Space sectors received via EU funding, such as Horizon 2020, must be replaced with equivalent UK based funding calls.
  3. Not to let the Brexit negotiations overtake everything else. For example, it must not stop continuing progress on elements such as a UK Spaceport.

Pixalytics
We have a variety of strong European links including:

  • European contracts
  • Scientific collaboration with European Researchers/Institutes
  • European placement students spending time working with us
  • Contracts that are either directly, or indirectly, based on ESA funding
  • Membership of European Associations

We believe we have a strong business, with good value products and a positive brand. However, like all other UK businesses, we are going to need to assess our current business strategy, and decisions we need to make, through the prism of Brexit as further information is known.

Conclusion
Almost one week on from the UK vote, I think our position is best summed up by paraphrasing the famous statement of US Secretary of Defense, Donald Rumsfeld:

There are some things we do not know, but there are also things we don’t know we don’t know and those will be the difficult ones.

Or to put it more succinctly, we face months, and years, of uncertainty! What does everyone else think?

Stellar Space Careers

ESA astronaut Tim Peake, tests his NASA spacesuit, at NASA's Johnson Space Center, USA. Image courtesy of NASA.

ESA astronaut Tim Peake, tests his NASA spacesuit, at NASA’s Johnson Space Center, USA.
Image courtesy of NASA.

The UK space industry will get a publicity boost in the next month, as astronaut British Tim Peake goes into space on a five-month mission at the International Space Station (ISS). Being an astronaut is something many children dream about, although as less than six hundred people have ever gone into space it is a challenge to achieve. Working in the space industry on the other hand is something within the reach of everyone.

The space industry, often referred to as the space economy, includes space related services ranging from the manufacturing of spacecraft, satellites, ground stations and launch vehicles; through space-enabled applications such as broadcasting, navigation equipment and satellite phones; to user value-added applications such as Earth Observation (EO), meteorological services and broadband. The industry is worth £11.8 Bn to the UK economy and it’s growing at rate of just under nine percent per annum. It directly supports around 37,000 jobs, and indirectly another 100,000.

The shining star of the industry – irrespective of how much we promote EO scientists – will always be the astronauts. Tim will be the second British astronaut into space; our first, Helen Sharman, went up 1991. He was selected as a European Space Agency astronaut in 2009 and was chosen for his ISS mission in 2013. The next step is a launch from the Baikonur Cosmodrome, in Kazakstan, in December.

Although we’ve said becoming an astronaut was difficult, it is not impossible. This week people were encouraged to apply to NASA to become an astronaut. Before you all rush off to send in your application, there are a few requirements:

  • You have to be a US citizen.
  • They are looking for pilots, engineers, scientists and medical doctors.
  • You’ll have to pass a long-duration spaceflight physical test.

If you want to become an astronaut, or indeed work in the space economy, education in STEM (Science, Technology, Engineering & Mathematics) subjects is crucial. Last week, at the Von Braun Symposium in America, they called for more STEM education and internships to encourage the next generation of the space workforce.

The European Space Education Resource Office in the UK (ERESO-UK) aims to promote the use of space to enhance and support STEM teaching, and they have set up a number of projects surrounding Tim’s mission and they are encouraging school participation. These include the EO Detective Competition to win a photograph from space during Tim’s mission, the Space to Earth challenge encouraging students to run, swim, cycle, climb, dance or exercise the 400 km distance from the Earth to the ISS and there are grants for innovative projects linked to Tim’s mission. The full details of all the projects can be found here.

The space economy is a wide and varied sector, it offers opportunities for anyone who wants to get involved. If you, or someone you know, is considering their first, or a change of, career, then go and whisper space in their ear. You never know, one of them may become an astronaut in the future!

2015 UK Space Conference Lifts Off

Uk Space 2015We’re at the UK Space Conference 2015 in Liverpool, and exhibiting! The opening day of the conference has been interesting, exciting and bookended by astronauts. The conference’s plenary session began with an upbeat assessment of the UK space industry, and the progress being made on the UK Space Growth Strategy of delivering a £40 bn sector by 2030; we’re currently at £11.8 bn. The plenary also had a presentation from Helen Sharman, Britain’s first astronaut; and the day ended with Tim Peake, Britain’s next astronaut, phoning into the conference from his preparations in Baikonur.

The European Space Agency’s new Director General, Prof Johann-Dietrich Woerner, gave a very inspiring presentation that put space at the heart of society, politics, science and technology and highlighted the need for new ambitions, disruptive technologies and a village on the far side of the moon! Other interesting presentations included Aleksandra Mir & Alice Sharp who explored the collaborations between art and space. Stuart Armstrong from the fantastically named ‘Future of Humanity Institute’ explained how we could colonise the universe, using natural resources from the planet Mercury. Stuart Marsh, from the Nottingham Geospatial Institute, described using a greater range of persistent features (rather than just urban and rocky features as previously used) to provide more complete maps of ground movement from InSAR. A thought provoking session on the use of Earth Observation data within Climate Services took place on day two, particularly on the need to start developing information products, rather than simply providing data and images.

The exhibition has also been positive. We’ve had good conversations with new people, reconnected with some old friends and given talks to groups of schoolchildren who attended as part of the conference’s Outreach / Education Programme.

Pixalytics stand at UK Space Conference

Pixalytics stand at UK Space Conference

At our first exhibition earlier this year, we published ten top tips for first time exhibitors; now we’d like to add an eleventh – Make sure you know whether or not you have a stand? We are not kidding! We’d reserved exhibition space within the Small Business Hub, which included a cocktail table, two stools and space for one pull-up banner. The plan looked like we were all on one big stand with tables distributed throughout; however, when we turned up yesterday we had our own stand complete with walls! This was a surprise to us, and all the other Small Business Hub exhibitors. The surprise was followed by creative thinking, a shopping trip and then we Blue Peter’d our stand! You can judge the results in the picture on the right.

The conference was great, and can’t wait until 2017!