Written evidence submitted by ADS and UKspace (SSS0023)

Scottish Affairs Committee Inquiry: Scotland’s Space Sector

Joint submission from UKspace and ADS

About UKspace & ADS and our submission

1. UKspace is the trade association of the UK space industry and has been its leading voice for over 30 years. It promotes the interests of industry with the UK government, parliament, and national and international stakeholders, and represents a diverse membership across the industry, encapsulating the upstream and downstream nature of the space sector, with companies of all sizes across the breadth of the country. UKspace is industry-led and works in conjunction with its members to achieve the best business framework to promote growth.
2. ADS is the trade association for the United Kingdom’s aerospace, defence, security, and space industries. Spanning the length and breadth of the UK, ADS has more than 1,200 member companies across all four sectors, with over 90% of these companies identified as Small and Medium Size Enterprises (SMEs). Our sectors are vital to the UK’s growth, in 2022 generating £82 billion in turnover in the UK, including £36 billion in exports, directly supporting 417,000 jobs, as well as 20,000 apprenticeships and 2,500 graduate positions.
3. This submission is intended to provide a national industrial perspective of the Scottish space sector – and highlights opportunities and challenges that Scottish companies face in common with the wider UK, alongside specific opportunities and challenges relevant only to Scotland.

Introduction

4. The Scottish Space sector is a vibrant, growing end-to-end ecosystem of industry and researchers, benefitting from strong advocacy and support from the Scottish Government (which has identified space as a priority in its National Strategy for Economic Transformation[1]) and recognised as an important and integral part of the UK space sector.
5. The UK Government’s Size and Health of the UK Space Sector reports provide a regional breakdown of the sector – but the data presented is at too high a level to provide an in-depth analysis of the make-up of the Scottish space sector. However, a longitudinal analysis of the data (caveated by the fact that some surveys use different methodologies) indicates that the Scottish space sector saw a marked increase in income between 2020 and 2022, outstripping the increase in Scottish space sites and employment.  This increase matches the perception within industry of a number of successful Scottish SMEs developing from start-up to established and scaling companies.
6. The Scottish space sector is highly networked – with Space Scotland providing some opportunities to bring Scottish companies, government and academia together. Recognising the integral role that Scotland plays within the UK sector, many Scottish companies actively engage with, and take leading positions within, the national trade associations, UKspace and ADS, ensuring that they fully contribute to and benefit from UK-wide initiatives.

What contribution does the space sector make to Scotland’s economy?

7. Whilst the regular Size and Health of the UK Space Sector reports (commissioned by UK Space Agency on behalf of Government)  provide important insights into the strength and performance of the Scottish Space Sector in relation to the UK, the publicly available data is not robust enough for us to provide a full assessment of the contribution that the space sector makes to Scotland’s economy – not least because it is not possible from the available data to disaggregate headquarter effects or the impacts of direct to home broadcasting. We understand that the UKSA holds more detailed data that would enable this assessment.
8. We also understand that the Scottish Government has commissioned reports focused solely on the Scottish Space Sector and hope that they have been shared with the committee to support their inquiry.

What are the key opportunities and challenges for the Scottish space sector in the coming years?

Opportunities

9. In policy terms, space is a reserved matter whilst economic development is devolved.  The Scottish Government, which has the resources and powers to operate at a larger scale than English Local Enterprise Partnerships, has identified space as a priority sector, with the Scottish Space Strategy setting ambitions to capture a £4billion share of the global space market by 2030[2].  These powers and support provide Scotland’s space sector with specific opportunities in addition to its ability to complement and leverage capability available within the rest of the UK.
10. Goal 7 of the National Space Strategy[3] is to “Improve public Services with space technology”.   Industry welcomes this objective and has consistently highlighted that UK Government could be a more intelligent customer of space data and services by aggregating data demands across departments and using that data to provide a range of space-enabled public services.  In the absence of a UK-wide initiative, and noting the Scottish Government’s wider devolved responsibilities, there is an opportunity for the Scottish Government to show leadership in this area by supporting  Scotland’s end-to-end value chain to create a “sandbox” for the development and implementation of novel applications, with Scottish Government acting as the customer.  Such an initiative could also stimulate future export opportunities for Scottish companies.

Challenges

11. The challenges faced by the space sector in Scotland are similar to those affecting companies across the UK. Key concerns include:
1. Availability of skills at all levels to service the growing market demand.
2. The availability of adequate support mechanisms to support scale up and growth of SMEs – including

a)      utilising government procurement as a mechanism alongside grants for research and development (having Government as an anchor customer not only encourages company investment – it also supports confidence in export markets and with investors), and

b)      the availability of scale-up funds (for example patient / debt capital for established SMEs).

3. Access to the UK Defence market – the Scottish sector has relevant capability but working within MoD’s procurement framework is reported as challenging.
4. Access to infrastructure to test and build space hardware.
3. In addition, Scottish companies would welcome increased strategic engagement with national funding bodies and more comprehensive data being made available about the regional distribution of space funding (from national and European Space Agency programmes).
4. A more concerted approach from Government would help industry to address many of these challenges – in particular where cross-cutting issues affect multiple SMEs that do not have the resources on their own to develop solutions.

In which specific areas of the space industry is Scotland’s sector well-placed to succeed?

14. Scotland has an opportunity to lead in the commercial New Space market (technology, data and services) – underpinned by  significant strengths across the small satellite value chain. This expertise, in both industry and academia, has been built over the last two decades and can therefore position the Scottish space sector at the forefront of UK innovation and technology development.
15. A 2022 report[4] commissioned by the Satellite Applications Catapult highlights key strengths in small satellite manufacture, components and subsystems (supported by a strong electronics industry), space sensors, opto-electronic systems, earth observation, space data analytics, AI / machine learning and data science.
16. Notwithstanding the challenges Scottish companies have reported in accessing the UK defence market, defence presents a clear opportunity for the space sector. The UK Government’s Defence Space Strategy[5] (February 2022) states ‘the importance of space to Defence is irrefutable’. As in other defence sectors there will be areas where the UK will need dedicated sovereign capability and others where the Government will collaborate internationally.   We already see growing opportunity for and activity in Scotland, from existing space companies diversifying into defence opportunities and existing defence and aerospace companies diversifying into space sector. With a burgeoning space sector, a broad and long standing defence sector with expertise and experience of defence contracting and a mature support infrastructure to facilitate the relationship, Scotland is well placed to further develop and play a key role in the defence space sector.
17. Space also plays an essential role in helping us to understand how climate change is impacting our planet. However, it is recognised that more needs to be done both to improve the sustainability of the space sector’s actions here on earth and to ensure that the space environment is sustainable through debris removal and in orbit servicing and manufacturing. 

The UK is leading work in this area through the Earth∞Space Sustainability Initiative[6] (ESSI), which brings together industry, academia, governments, international organisations, with the finance and insurance communities to ensure that space continues to support the environmental, economic and scientific interests of current and future generations.

The Scottish Space Strategy has identified sustainability as a key thread of Scotland’s approach to space, which positions the Scottish sector to contribute to, and benefit from, the UK wide ESSI.

18. Scotland is home to the majority of the UK’s emerging launch industry (spaceports and launch vehicles). As the UK Government develops its space requirements, it will be important to consider how best to utilise UK (and Scottish) strengths to build, launch and operate these emerging capabilities.

How does Scotland’s space sector compare with those of its international counterparts?

19. The UK Government’s Case for Space 2023[7] provides a clear rationale for government investment in space, and the wider benefits that can deliver.  However, the UK Government invests significantly less on space than our international counterparts such as Japan, France, Germany, Italy and India[8]. Whilst the UK (and Scottish) space sectors are seen to “punch above their weight”, the UK is losing global market share as other countries consolidate and increase their support for their space sectors.
20. The Scottish space sector has world-leading capabilities in some key areas – in particular in small satellite missions & services (upstream) and earth observation and data (downstream).  It is often cited that more satellites have been built in Glasgow than any other place in Europe. With the development of launch capabilities, Scotland will have the strategic advantage of being one of the smallest geographical areas in the world with a truly end-to-end space value chain covering the ability to provide the hardware and infrastructure needed to capture and manipulate data and use that data to provide user-focused services.

What opportunities does the Scottish space sector have for international collaboration?

21. Scottish space companies report significant opportunities for export and international collaboration within the US, Africa (particularly Sub-Saharan Africa), Australia, South East Asia, building upon a successful track record including collaborative projects between Scottish space organisations and partners in Africa, Indonesia, Brazil and others, supported by the UK Space Agency’s International Partnerships Programme. The UK Space Agency’s new International Bilateral Programme and wider bilateral frameworks such as the UK-Australia Space Bridge can support companies in establishing these new partnerships.
22. The UK’s reassociation with the EU Copernicus and Horizon programmes are welcome developments to support international collaboration within and beyond Europe.  However, it should be noted both that the hiatus caused by industry’s ability to access these programmes has not been without impact and that the benefits of Copernicus reassociation are not geographically evenly spread. Industry is keen to see national measures to maintain innovation in our earth observation sector (upstream and downstream), to help UK companies recover lost ground in Earth Observation (to maximise benefits of reassociation) and to explore new approaches where UK companies may be able to offer data or services into national initiatives or bilateral / international partnerships.
23. The Scottish Government has its own objectives to support better understanding of international opportunities and a greater appetite and ability within Scotland to seize them. In space the Scottish Government has established the Scotland International Space Advisory Committee (SISAC). SISAC is made up of members of the Scottish Government’s GlobalScot programme – a network of Scots in business around the world – who have come together voluntarily to provide advice and identify opportunities to support the Scottish Sectors growth aspirations.
24. Further international opportunities arise due to the broad applicability of space (underpinning many sectors) and the role space plays in inspiring young people.  For example, Scotland has intergovernmental relations with Iceland and Norway that could be exploited both to support collaborative opportunities for the space industry (around launch, data and technology and the blue and rural economies) and to foster collaborative Science, Technology, Engineering, the Arts and Mathematics engagement, using space to inspire young people to consider STEAM careers including in the space sector.

To what degree do the UK and Scottish Governments’ space strategies have the right priorities for the Scottish space sector?

25. Both the National (NSS) and Scottish (SSS) Space Strategies set out ambitious growth aspirations for the UK and Scottish space sector – and specifically highlight the strengths of Scotland and the UK in small satellite technology. However, there is a lack of detail in terms of defined actions across both strategies – and in particular on how this capability can best be leveraged to support overall sector growth.
26. The strategies set out ambitions for small satellite launch capabilities that will support Scotland’s emerging spaceport and launch market.  This is important from a national capability and defence perspective, and provides a route for space to engage and inspire the general population, but it is important to note that launch is a means to an end.  The UK small satellite launch market will be driven by increasing demand for new data and services delivered by new small satellite missions – and the strategies do not provide clear intent on how this demand will be stimulated.
27. Unlike our European counterparts, the UK space sector is dominated by a large number of small, well established SMEs.  Despite their relatively small size, SMEs can act as the prime contractor for spacecraft and missions – and this is well evidenced in Scotland.  Urgent work is needed to build on the aspirations of the NSS and SSS in terms of developing a targeted set of measures that will support these dynamic and mobile SMEs to stay, grow and scale. 
28. Our current approach to inward investment is not necessarily cognisant of where there is already existing, mature capability in-country – and this has been demonstrated in Scotland. This approach can place extreme pressure on the entire ecosystem. Whilst industry acknowledges the overall benefits of competition, Scotland is seeing challenges in staff recruitment and retention in an already skills-constrained sector.  Following publication of the NSS, the UK Department for Science, Innovation & Technology and the Ministry of Defence have commenced work on national civil and defence space capability requirements. The inward investment strategies of both Scotland and the UK should use these capability requirements and other data to target new inward investment at the gaps in the UK supply chain and aim to fill those gaps with complementary capability.

What policies can the UK Government use to foster growth and success in the Scottish space sector, both ‘upstream’ and ‘downstream’?

29. A strong request from the space industry is for  Government to use procurement contracts rather than grants. Having the Government as an anchor customer helps in export markets (by providing confidence to customers) and is a more attractive proposition to investors.
30. Novel approaches could also be adopted where  data providers make data available for companies to generate value-added services for government agencies. As the demand for these services and data grows this ultimately creates the demand for new missions. Using small satellites, this type of programme can be relatively low-cost and can complement existing infrastructure and programmes. Such an approach requires Government to develop its capabilities as an intelligent customer and would require higher levels of cross-government coordination – including between Whitehall and Devolved Administrations and Local Authorities. However, the gains could be significant including improvements in public services, efficiency gains in the public sector and a real-world demonstrator of exportable space services.
31. As noted above, the Scottish space sector is dominated in number by SMEs.  There is a clear UK-wide need for mechanisms to support and fund company scale-up.  Specific policies that UK Government could adopt that would support SMEs across the UK and in Scotland include:
1. Actions to address the shortfall of skilled staff – at all levels.
2. Specific measures to ensure SMEs can engage in space programmes (be that bespoke SME-only programmes or mandatory SME involvement within supply chains).
32. Specific measures that could benefit the Scottish sector include:
1. Ensuring that Government R&D levelling up targets are applied to national and European Space Agency funding programmes (albeit this would need to be carefully considered and monitored both to fully understand subcontractors / supply chains within projects and to mitigate potential unintended consequences due to the skewed geography of the UK space sector.
2. Continuing support for the emerging commercial launch market – noting that most operational spaceports are not solely funded through commercial launches alone.
3. Targeted investments in test and manufacturing facilities that break down barriers to entry and support the specific needs of the Scottish sector (for example the ability to test and build small satellites at scale).
33. It is notable that in Europe, significant government space investment has recently been established; for example, Portugal and Spain are using Covid Recovery funds to establish constellations of small satellites to target national challenges. Without similar mechanisms in the UK, this extra boost for our competitors could result in industry falling behind and losing competitiveness built over decades.
34. Given that economic development is devolved, the Scottish Government and its Development Agencies may be able to use their own powers to provide advantage to Scottish space companies.

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How can the UK and Scottish Governments help to provide Scotland’s space sector with the skilled workforce it needs?

35. The availability of skilled staff is one of the key barriers to growth for the UK space sector. The 2023 Space Sector Skills Survey report[9]  found that between 2020 and 2023 the fundamental issues the sector is facing around skills have not changed – but the scale and significance of the problems have increased.    
36. Scottish companies have reported increasing challenges due to sector growth in Scotland outstripping the supply of staff.  Issues are reported at all levels – technician, graduate and, in particular, skilled staff – who’s loss within a small company can have a significant impact on existing long-term projects and programmes.  
37. The UK Government, through the Space Partnership, is developing a UK-wide Space Workforce Action Plan to address the increasing challenges that space companies face across the UK.  It is essential that this plan, and the resulting actions, are cognisant of the landscape of skills needs and providers in Scotland.  Specific measures that have been identified include support programmes for companies to upskill existing staff and career changers. Such support is difficult for companies to deliver at an individual level – so could benefit from coordination and local or national support.
38. As previously mentioned, large scale inward investment can cause significant staffing problems for geographically close companies – in particular where experienced staff are targeted by the investor.  Mitigations include targeting inward investment at gaps in local (and national) capabilities or supply chains and /or (in particular when the investor is being provided with government support), specific commitments from the inward investor to also invest in training new staff and supporting the overall growth of the ecosystem they are joining.

What can the UK and Scottish Governments do to support the establishment of Scottish spaceports and help them to succeed?

39. The UK Government’s National Space Strategy in Action publication outlined, at high level, the UK Government’s Civil Space Capability Goals – including for space transport and launch. As previously noted, most operational spaceports are not funded purely through the provision of commercial services.  In order to ensure viable spaceport(s) in Scotland (and the UK), the Government can play a key role in supporting the UK launch market through measures such as:
1. Ensuring that the UK has an enabling regulatory environment that makes the UK an attractive launch nation. Industry is seeing good progress in this area with Scottish companies involved in launch welcoming the Civil Aviation Authority’s approach of working proactively with companies to better understand and resolve launch licensing issues.
2. Mandating and supporting UK launch (where possible) when procuring UK civil and defence capabilities.
3. Supporting in-orbit demonstration / ride-share opportunities through reduced launch costs.