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For many of us, space exploration has largely been the domain of the US (with a high degree of competition from the USSR during the Cold War). Since the 1990s, however, other powers have sought to carve out their own names in the stars – including China, India and even the EU with its European Union Agency for the Space Programme.
More recently, the UK has rejoined the spacefaring race. One PwC-UK report finds that the UK now leads Europe as a destination for venture capital (VC) in space investment. Below, our team at Bure Valley Group explains what is going on in the UK’s space industry, helping investors evaluate how this exciting sector might feature in their portfolios moving forward.
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What is the UK’s history with space travel?
The UK had a brief filtration with space travel in the 1950s when it launched its first – and only – satellite into the far atmosphere. Over the last decade, and especially in the last year, the UK has reignited its passion for the void. The UK Space Agency was created in 2010 when the wider UK industry was valued at £9 billion and supported 68,000 jobs.
The government of the day aimed to increase these figures over the following two decades to £40 billion and 100,000 jobs, respectively. A focal point emerged in Harwell, Oxfordshire at the UK Space Gateway (the Harwell Space Cluster). Here, a range of startups, investors, corporate offices and cross-border projects (e.g. the Satellite Applications Catapult) came together to spearhead the UK’s space innovation.
As the UK navigated its coming departure from the EU, Parliament legislated the Space Industry Act 2018 to help regulate the expansion of commercial space activities. This included the development of future spaceports such as current contenders in Unst (Shetland Islands), Sutherland (Scotland) and Newquay Airport (Cornwall).
Tensions over the UK’s future involvement with European space projects rose as Brexit was completed in February 2020. Yet the UK remains a member of the European Space Agency (ESA) and still participates in the EU’s Copernicus Space Component (CSC-4). Over the years, the UK has sent seven astronauts to space – including the famous Tim Peake. He may soon join three others in the first “all-UK” space mission.
Why is venture capital taking notice?
According to PwC’s latest report called “Expanding frontiers – The down to earth guide to investing in space”, the UK is now the most attractive place for private space investment after the US. Since 2015, nine of the largest UK venture capital firms have invested since 2015, particularly in Earth observation, manufacturing and satellite connectivity.
Globally, industry growth is forecast at 11% per year until 2030. Business models within the sphere appear to have matured significantly, with 95% of space investments currently in revenue-generating companies compared to 56% only 8 years ago. Overall, the UK’s space sector is now valued at £17.5bn.
The report notes that the median deal size for early-stage space investing in the UK is up by 400%. Many of the funding recipients are rapidly growing companies such as OneWeb (specialising in satellite comms) and Wales’ Space Forge (aerospace manufacturing). The re-ignition of UK spacefaring appears to lie predominantly in the recent dramatic miniaturisation of modern electronics. Whilst early spacecraft were car-like in size and required huge launchers to get them into space, more recent versions can be the size of a wine box and need far less propulsion. The Skyrora XL, for instance, is only 22mm in height.
The potential applications of “miniature space travel” are enormous. Communications satellites will likely be a core business, as well as environment-monitoring probes. As other countries develop their own space capabilities, the sector will almost certainly play a greater role in military and national security uses. Other areas include meteorology, navigation, position location and timing. More distantly, the UK’s space sector could feature greater elements of tourism, resource extraction and agriculture (e.g. hydroponics).
Implications for investors
The sci-fi enthusiasts amongst our readers will likely be excited by many of these developments in the UK’s space industry. Yet it is always important for investors to follow sound principles when constructing their portfolios – such as diversification and conducting proper due diligence.
There are few public companies which focus their business model on space and space exploration (e.g. Virgin Atlantic). Elon Musk’s SpaceX is still a private business and there are currently no clear signs that the company will go public anytime soon. The likes of Boeing (BA), Lockheed Martin (LMT) and Northrop Grumman (NOC) have ventured into space programmes, but these have remained minor parts of their wider business models. To get direct portfolio exposure to space, therefore, investors need to consider early-stage private investments.
Here, UK investors have an advantage with the country’s recent rebirth of its space industry. However, the commercial aspect of this industry is still very much in its infancy. Investors need to be mindful of the potential risks as well as opportunities before committing significant amounts of capital. Consider joining a professional investor network (such as ours at Bure Valley Group) to rub shoulders with other investors and exchange mutual wisdom when considering exciting areas such as this one.
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