The UK Space Strategy, unpacked

To gaze into space is to know that there are universes beyond our comprehension. It is to feel diminutive in the effervescent glow of a million billion stars that are long dead placing us in a netherland between our present and the reminder it must all end. It is to sit within a spectrum of the technooptimists who look to Mars as our future and the sci-fi writers that see the vast darkness as our all consuming finale.

For the government though, space is not about aliens, hitchhikers, or Skynet (in fact, it actually is about Skynet – the government’s satellite communication capability shares a name with the AI from Terminator which tries to destroy the world). Rather, it is an opportunity – and in government every opportunity needs an accompanying plan to be drawn up. The UK Space Strategy sets out how the UK will go where many others are attempting to in economic growth and defence.

For defence, the UK will seek to play an active role in collective defence through and from space. But it is worth noting that while the rhetoric is strong, the strategy’s technical annex shows that spending commitments are spread thinly. For example, funding committed to the novel development of dual use defence technologies is an (undefined) fraction of a £41m budget line. In an area of such expensive innovation the funding will not go far.

The second aim is growing the economy through innovating in space technologies, and innovating in the technologies in space that underpin technologies on Earth. In a sentence which on first read seems entirely full of paradoxes the government states that

“With around 1% of global public civil and defence space spending, the UK captures around 5% of the global space market.”

The “global space market” is significant and the underpinning idea of growth follows a similar flightpath. Pushing forward frontier technologies will help to create new demand for products – in this case it includes “space finance” and “space insurance” – while focussing on specific sub-sectors such as in-orbit servicing, assembly and manufacturing (ISAM) is intended to ensure that money isn’t wasted.

Although the theory is well rehearsed, the method feels notably different:

“We will be more selective and interventionist: refocusing grants on fewer and higher value awards with our R&D funding; consider acting as anchor customer where we have requirements; bolstering our talent base; and supporting businesses across our regions, from inception to global competitiveness.”

This is a significant policy shift to what we have previously seen from governments past. Only a few years ago, ministers claiming that they were being “selective and interventionist” would have seen them roundly criticised as picking winners in the style of the industrial strategies of the 1970s. Here, the government isn’t just saying that it will pick winners, but that it will grant fund them more generously even if that means others lose out.

Supply and demand

Not content with supply-side reform, the government is also intervening in research demand. It is considering acting as an anchor customer through its “enterprise space” category. The enterprise space category is a cross-government procurement model designed to identify opportunities for working together. Acting as an anchor customer means the government would become a major and recurring client for new businesses.

The government is going to both intervene in the market and take part in it as a customer of choice for firms. Only a few months ago NASA’s deputy administrator discussed the idea of being an anchor customer with CNBC. Specialist space capital firm Space Capital described the new approach as such:

“NASA is converting itself from prime mover to platform: setting destinations, publishing dates, and paying for outcomes while private companies own the execution and, increasingly, the assets. For founders, the demand signal is legible for the first time in a generation. For investors, the largest customer in the market just explained exactly how it intends to spend.”

The government sets out what they want, they pay companies that can deliver it, and for those that succeed they are rewarded with repeat business. The way to choose winners isn’t through the dispassionate assessment of the market, but in being part of it, allowing adaption, change, and direct exposure to the market itself.

This kind of model makes particular sense in space where, as the government strategy points out, “high capital needs, concentrated markets and skills gaps mean many companies have not yet reached their potential.” The strategy recognises that there is a national need for these technologies, that there are willing if not fragile providers, and that there is a route to economic growth if those providers can be incentivised to meet those national needs.

The government’s approach differs from standard procurement in two key regards. The first is that they will consider a range of options depending on the “particular circumstance” of their need. This includes equity stakes, loans, grants, and other mechanisms. The second is that they are expanding the procurement pipeline to include the whole of government. This means a collective procurement approach, more visibility, and – in theory – more market access.

Simultaneously stimulating supply through targeted intervention and then creating demand through more specific use of contracts, incentives, and predictable funding streams is arguably the clearest articulation to date of what this government’s version of market intervention is.

The interesting part now is whether this only applies to space, with its unusual mix of extreme national importance and extreme levels of cost in innovation and product deployment – or whether it could be used elsewhere. After all, where there are national interest, high-potential companies, but significant capital barriers, why would the government not step in where it can see a route to growth and a route to creating new technologies?

The space strategy is only part of the innovation puzzle, but it gives us a clue to the future. At its heart, its reliance on better procurement, on a grander scale, could be indicative of a new approach.