UK space sector takes off, needs state boost

LONDON Tue Aug 17, 2010 2:17pm BST

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LONDON (Reuters) - Britain's fast-growing space sector is confident it is just the sort of high-tech industry needed to rebalance the nation's fragile economy, but more state involvement is vital for it to flourish on the world stage.

Driven by the private sector, the UK space industry supports about 68,000 jobs and generated a turnover of 5.8 billion pounds in 2006-2007, the last year for which data is available, on a tiny government spend of 218 million pounds.

Britain has captured about 6.5 percent of the global space business despite state investment being a fraction of that spent by India, Germany, Canada and many other countries, but analysts warn of British complacency as competition mounts.

The UK space sector grew by an average of nine percent a year between 1999 and 2007, and given the high return on state investment, is confident the three-month-old coalition government will push to grow the industry further despite sweeping cuts elsewhere.

The space industry's expansion has been supported by growth in services including satellite television and satellite-based navigation and communications systems.

Britain has introduced a raft of austerity measures to tackle a budget deficit now at about 11 percent of gross domestic product, a debt built up partly by supporting the economy after the 2008 financial crisis.

Since then, officials have repeatedly emphasised the need to shift the focus of Britain's economy away from financial services, and more towards high-tech industry.

"The space industry is definitely seen as one of the technology sectors that will enable the rebalancing of the economy, the move to hi-tech manufacturing economy that we're looking for in the future," said Stuart Martin, director of space operations at Anglo-Dutch IT firm Logica LOG.L.

Logica Chief Executive Andy Green co-chairs with Science Minister David Willetts the newly formed Space Leadership Council, a body of representatives from industry, academia and government given the job of advising the new UK Space Agency.

The agency, launched this year to expand the space sector, declined to speak to Reuters about possible cuts, but Willetts' statements have been enthusiastic and analysts say he is likely to continue the previous government's drive to back the sector.

In February, a joint government, industry and academia report outlined an ambitious plan to make the space industry a 40 billion pound a year business by 2030.

SPACE TOURISM

Other reasons to be optimistic include the difficulty of scaling back government space funding, the rise in the number of graduates entering the space industry, and the chance for space firms to step in where the government cuts back.

Government funding for civil space programmes is now about 270 million pounds a year, and much of that is committed to European Space Agency projects, making cuts unlikely.

Due to turmoil in the financial sector, more mathematics and science graduates are entering the space sector, Martin said.

For British firm Avanti Communications (AVN.L), which provides broadband internet through satellites, the government's decision to delay a push for UK-wide terrestrial broadband access due to a lack of funds has been a boon.

"The obvious area where budgetary restraint has an impact is in telecoms," said Avanti chief David Williams.

"Commercial space is able to do things more cheaply than government in many respects," he added.

Britain's Inmarsat (ISA.L) also provides satellite broadband, and this month said it had made a $1.2 billion order for a new fleet of satellites to deliver the service on a global scale after its second-quarter earnings beat market forecasts.

While more state funding would be welcome, industry experts say, other government measures such as better coordinating the currently ad-hoc alliance between state and industry on space projects and better regulation would boost the sector.

"There's a degree of realism and pragmatism in industry (over state finances) ... To be fair to the government there's a great deal they can do short of putting their hands in their pockets to help the sector," said Graham Chisnall of ADS, a UK aerospace, defence and security industry trade organisation.

A lack of regulation in Britain dealing with space flights, for example, is one reason why Britain's Virgin Group has based its Virgin Galactic space tourism business in the United States.

Also, analysts say various government departments could benefit from satellite earth observation -- monitoring phenomena such as climate change -- but a lack of coordination means there has not yet been a business proposal for such a system.

INCREASING COMPETITION

Still, some analysts argue, there is only so much that better regulation and coordination can do for the UK space sector, and that what is really needed is more state money if Britain is to stay ahead in an increasingly competitive market.

Governments worldwide invested a record $68 billion in space programmes in 2009, data from space research and analysis firm Euroconsult showed, and more countries have started space programmes in recent years, including developing nations such as Mexico, Egypt, Turkey and Vietnam, the company said.

Euroconsult data showed the UK spent less on civil space programmes in 2009 than Germany, Italy, France, India and China, while spending by all was dwarfed by that of the United States.

British scientific talent lost to other industries or competing nations takes a long time to replace, said Mark Sims of the University of Leicester Space Research Centre.

"There's vast numbers of people in the Chinese, Indian and Korean space programmes," he said.

"The UK is very good at innovation, staying ahead of the curve in technology, but that requires investment and that requires people."

(Editing by Peter Millership)

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