The UK Space Agencyâ€™s biennial â€˜Size & Health of the UK Space Industryâ€™ report for 2018 was issued last week. This is put together with the help of London Economics through online questionnaires with organisations engaged in space-related activities, including businesses, universities and research institutes, coupled with other research to provide a comprehensive overview of the space sector within the UK and any emerging trends or issues.
The headlines, which relate the 2016/17 financial year, are impressive.
- The UK Space Industry income has grown to Â£14.8 billion per annum.
- It comprises of 948 organisations, and all regions of the UK are home to the headquarters of space companies supporting 41,900 jobs.
- Labour productivity for the space industry is 2.6 times higher than the national average.
- The average qualification level of space industry employees is higher than any other sector covered for the ONS Census for England and Wales.
The headlines donâ€™t show the full story though, and there are some interesting insights to be had if you look a little deeper.
The Â£14.792 billion industryâ€™s income breaks down into the following sectors:
- Broadcasting accounts for 51.27% of the incomeâ€™
- Communications account for 18.53%,
- Position, Navigation & Timing account for 12.3%,
- Defence/military accounts for 8.3%,
- Earth Observation accounts for 2.75%
- Science or Exploration accounts for 2.1%
- Transportation accounts for 0.66%
- Meteorology accounts for 0.52%
- Other activities account for 3.54%
Downstream activities total 83.8% of the industryâ€™s income; albeit over half of this comes from the direct-to-home broadcasting sector.
Employment in downstream activities has continued to grow, but this seems to be slowing down significantly. Employment growth rates of 1% in 2016/17 and 1.9% in 2017/18 are the two lowest rates in the last seven years with 2015/16 having shown a 9.1% increase in employment.
However, this is better than within the upstream sector whose employment levels fell by 1.0% in 2016/17, although the report is predicting a 3.8% growth in 2017/18.
Overall, there were only 239 more jobs in the UK Space sector in 2016/17 compared to the previous year.
Earth Observation (EO)
Looking specifically at EO â€“ excluding meteorology â€“ which generated an income of Â£407 million in 2016/17 equating to 2.75% of the industryâ€™s income overall and 3.25% of the downstream sector.
Itâ€™s not clear why meteorology continues to be separated from EO, as weâ€™d consider it to be an application of the EO sector like agriculture. So, for completeness, meteorology contributed Â£78 million to the industry.
According to the report the EO sector has grown at a rate of 25% per annum since 2014/15, increasing the income generated by Â£150 million. For us, this is a really interesting figure, as it does back-up the growth rates produced by a lot of the industry reports each year â€“ which, to be honest, weâ€™ve always been little sceptical of. Within the industry, it does not feel as though it has grown this much to us. There has been a significant investment by the UK Space Agency through areas such as the International Partnership Programmes and a number of new start-ups, which may be contributing to this level of growth.
Space Sector Is Across the UK?
Whilst the report states the space industry is found in every part of the UK, it also notes that the industry is incredibly concentrated with just four organisations accounting for two-thirds of the entire industry income, and the top seven accounting for just over threeâ€“quarters.
Looking at the detail, this does mean that in reality there is significant variation between the different regions of the UK.Â For example, if you take the South West – where weâ€™re based â€“ we have the third largest number of space-related companies, and the four highest headquartered organisations and income generated. However, weâ€™re only the sixth largest region for employment.
These results are unsurprising and speak to the fact that the south-west is predominately home to SMEâ€™s, although there are some larger organisations such as the Met Office. The average number of employees in South West space companies is 7.7, whereas for London it is 56.4 and the South East 24.5.
Interestingly, it means Pixalytics is just about the typical South West firm for employment, although weâ€™re nowhere near the average income of Â£1.8 million …. yet!
Exports account for around 37.4% of the industryâ€™s income, at Â£5.5 billion, which is higher than the 28% export share of the UK as a whole.Â It is also a slight increase of one percent on the 2014/15 figures.
Looking at the detail of this Â£5.5 billion raises the â€˜B-wordâ€™! Of the space industry exports:
- 29% are from the European Space Agency (ESA)
- 55% are from other EU countries
To this, we must add the note in the report that EU funded programmes account for Â£372 million of the total industry income.
Clearly, the EU funded programmes will disappear after Brexit, and who knows what might happen to the exports to other EU countries. This is reinforced by 61% of companies responding to the survey highlighting that a deal with the EU was a key enabler for growth, and of course conversely suggesting a no-deal with the EU is going to be challenging.
Obviously, the ESA funding will not be affected, where it is not coming from EU programmes such as Copernicus, but itâ€™s critical that the UK fully commits to the next ministerial.
The Government Space Innovation and Growth Strategy set out in February 2010 had an ambition for the UK to grow from 6% of the world space economy to 8% by 2020, and 10% to 2030. In 2014/15 the UKâ€™s global share was 6.5% however, this has actually fallen to 5.1% in 2016/17.
Whilst the report does talk about that the fact the global industry is measured in US Dollars and the fall in the pound, over the last few years, it does show that we are a long way from meeting these government targets. Weâ€™re almost certainly going to miss the 2020 target as the industry would have to grow by 57% to achieve the target today, and as the rest of the world will be developing in parallel the actual growth required will be higher.
Exports are closer to the 60% target of 2030 but with the current uncertainty, it is unclear what will happen to this figure over the next the few years. There is likely to be a dip, but how quickly it rebounds will be the key.
To achieve the growth target in jobs to 100,000 new jobs by 2030 will require a growth rate of 8.4% in employment which looks challenging, given that in the last ten years weâ€™ve only achieved this in 3 of the ten years.
Health of the UK Space Industry
To summarise, the future for the industry is definitely positive. There is clearly a growth trend for the industry, and weâ€™re outperforming the UK economy as a whole across a whole range of indicators.
Weâ€™re going to struggle to meet the 2020 government ambitions, but who knows about 2030? It will be challenging, but itâ€™s predicted that income will grow, jobs will increase and the space sector will become a great part of everyday life. There arenâ€™t many industries which can make these claims!