The 2012 Size and Health of the United Kingdoms (UK) Space Industry survey represents the latest incarnation of the key biennial barometer of the UK space industry. The UK Space Agency contracted Oxford Economics to conduct this edition, covering the years 2009/10 and 2010/11; Oxford Economics also conducted the 2010 survey. This document presents an executive summary of the findings.
This edition of the survey invited almost 420 companies and institutions to participate, selected through their involvement in previous surveys and their inclusion in the online UK Space Directory. Of those contacted, 234 were deemed to be actively involved in the UK space industry through their responses to this and previous surveys. The range of business activities captured encompassed both the upstream (providers of space technology) and downstream (users of space technology) space sectors, with respondents ranging from sole-traders to large multinationals with multi-million pound turnovers.
Given the prolonged period of poor economic performance in the UK and wider instability in Europe, the 2012 survey is possibly the most important ever conducted. Not only will its findings provide a crucial insight into how the sector has fared, they will also provide a guide for government and industry associations as to where companies are experiencing difficulties and barriers to growth. Encouragingly 42 respondents were not included in previous editions of the survey, suggesting that these companies were newcomers into the sector.
To ensure consistency with previous editions of the survey, the significant majority of questions remained unchanged from the 2010 version. However, three questions were added to the end of the 2012 survey in order to capture industry opinion on the factors currently limiting growth, potential strategies that the industry is seeking to employ to generate further growth, and the industrys medium-term growth forecast.
Size Of The Industry
Together the 234 companies deemed to be actively involved in the UK space industry recorded a total space-related turnover of over 9.1 billion pounds in 2010/11 (Chart 0.1). As in previous editions of the survey, the industry is dominated by the downstream sector, accounting for almost 8.2 billion pounds (89 percent) of the total. This represented a real (adjusted for inflation1) growth of 6.5 percent between 2009/10 and 2010/11, and by 15.6 percent since 2008/09 (the year covered by the previous survey)an average annual growth rate2 of 7.5 percent.
This strong performance indicates that the space industry continues to grow despite the uncertainty in the UK economy. Indeed, the average annual real growth rate over the last two years is only slightly below the long-term real growth trend for the industry (8.6 percent per annum since 1999/2000). However, that is not to say the space industry is immune from prevailing economic conditions; the industrys growth has slowed from that recorded in the 2010 survey (when an average annual real growth of 10.2 percent was experienced between 2006/07 and 2008/09). Furthermore, industry expectations for growth in 2011/12 are low, with the industry anticipated to grow by just 0.7 percent in real terms.
Examining the industry in greater depth shows that the strong growth recorded by the industry since 2008/09 is almost solely down to the robust performance of the downstream sector, which reported a real growth of 17.6 percent between 2008/09 and 2010/11 (an annual average of 8.5 percent). Conversely the upstream sector continued to face a more difficult sales environment, with real turnover increasing by only 1.3 percent between 2008/09 and 2010/11 (an annual average of just 0.6 percent). However, 2010/11 was a stronger year for the upstream sector, with a real growth of 3.3 percent (compared with a real decline in turnover of 1.9 percent in 2009/10).
Indeed, over the period 2008/09-2010/11, the upstream sector outperformed the UK economy as a whole, which reported an average annual real decline of 0.1 percent3. Nonetheless, 2011/12 is expected to be a difficult year for both the upstream and downstream sectors of the space industry; downstream turnover is expected to grow by just 1.0 percent in real terms, while the upstream sector is anticipating a real decline in turnover of 1.8 percent. Despite this, the outlook for the UK space industry beyond 2012 is extremely positive, an aspect explored in more detail later in this report.
1As measured by the Consumer Price Index.
2Computed as the compound average growth rate.
3Source: Office for National Statistics.
Economic Impact Of The UK Space IndustryValue-Added
While turnover provides a good indication of the size of an industry, the value-added (defined as turnover less all input costs) an industry creates provides an indication of the impact of the space industry on the UK economy.
From a turnover of almost 9.2 billion pounds in 2010/11, the UK space industry made a value-added contribution to UK GDP of 4.2 billion pounds. This represents a real growth of 5.3 percent from 2009/10, and 7.3 percent from 2008/09 (an average annual real growth of 3.6 percent).
As Chart 0.2 shows, the majority (88 percent) of space value-added was generated by the downstream sector, which saw real growth of 7.8 percent between 2008/09 and 2010/11 (an annual average real growth of 3.8 percent). Over the same period, the smaller upstream sector also recorded real growth (3.7 percent), but this was the result of a strong performance in 2009/10 when value-added increased by 4.8 percent in real terms; in 2010/11 the upstream sector recorded a real decline in value-added contribution to GDP of 1.0 percent.
Given the projected slowdown of turnover in 2011/12, the associated weakening of the space industrys value-added contribution to UK GDP displayed in Chart 0.2 (below) is anticipated. The space industry as a whole is expected to increase its contribution to the UK economy by 1 percent in real terms in 2011/12; however, this is purely driven by the contribution from the downstream sector, which is projected to grow by 1.2 percent in real terms. Conversely the upstream sector is expected to continue to see its value-added contribution to GDP decline in real terms.
Economic Impact of the UK Space IndustryEmployment
Employment in the space industry has continued to grow rapidly since the previous survey to reach 28,943 in 2010/11. Survey responses indicate that these employees are highly skilled, with almost 80 percent holding at least a first degree. Although the average annual growth recorded between 2008/09 and 2010/11 was just half of that witnessed between 2006/07 and 2008/09 (7.8 percent compared to 14.8 percent), this performance is in line with the average annual growth rate of 7.4 percent recorded since 1999/2000 (Chart 0.3). Industry expectations for 2011/12 are of a 3.7 percent growth in employment, with over 30,000 industry jobs expected to be supported.
As expected, the downstream sector dominates employment, accounting for over 21,825 jobs in 2010/11 and up 24.1 percent compared to 2008/09; however, the upstream sector has not shared this employment growth: between 2008/09 and 2010/11 employment declined by 2.5 percent to just over 7,100 jobs. The number of upstream jobs is expected to grow by 0.7 percent in 2011/12, while downstream employment is projected to reach 22,850a 4.7 percent growth on 2010/11.
Responding companies UK locations were noted and categorised regionally to give an indication of where the work is undertaken. This is potentially misleading for organisations that have a number of offices and plants across the country, but in practice the main companies in the field tend to be based in the South East of England, which dominates the numbers.
The distribution of space industry employment is highly concentrated, with the UKs South East corner accounting for 91 percent in 2010/11: the Greater London region contains 55 percent of UK space employment, with the South East accounting for a further 24 percent (up from 20 percent in 2008/09) and the Eastern region 12 percent (Chart 0.4). Space employment outside of the South East corner is concentrated in the South West and East Midlands, which together hold 8 percent of total space employment (up from 6 percent in 2008/09).
Economic Impact of the UK Space Industry Multiplier Impact
The space industry has a greater impact on the UK economy than simply the activity and jobs in those companies directly part of the industry. Both upstream and downstream companies source goods and services from UK-based companies outside the space industry thereby generating activity in the rest of the economy (known as the indirect impact). Further, individuals employed in the space industry and its suppliers spend their earnings in the UK, stimulating additional economic activity (the induced impact). Togethe, these impacts are known as the industrys multiplier impact.
Using the survey responses, the space industrys value-added multiplier has been estimated to be 1.99. This means that the industrys direct value-added contribution to GDP of 4.1 billion pounds in 2010/11 results in an additional GDP contribution of 4.1 billion pounds through the multiplier impact; therefore, the industrys value-added contribution to UK GDP in 2010/11 was estimated to be a total of 8.2 billion pounds (Chart 0.5).
Similarly, the employment multiplier for the UK space industry is estimated at 3.50. This means that the total UK-based employment supported by the UK space industry was estimated to be 101,200 in 2010/11. The employment multiplier is significantly larger than the value-added multiplier reflecting the high productivity nature of the industry. As productivity levels in the space industry are higher than the economy average, relatively few employers in the industry are able to support a large number of jobs through the indirect and induced channels.
Both the value-added and employment multipliers for the space industry have increased since the previous survey (value-added from 1.91 to 1.99 and employment from 3.34 to 3.50). These increases are positive news for the UK as they indicate a strengthening of UK-based supply chains for the space industry and mean that more of the value generated by the space industry and its suppliers is retained in the UK economy.
Responses to the 2012 survey have highlighted that there has again been a significant shift in the composition of the upstream sector since the previous survey. In the 2010 survey, the Space Subsystem Supplier business category was responsible for the largest share of upstream turnover, accounting for 40 percent of the total. However, as Chart 0.6 demonstrates, the upstream sector has become more diverse, with no activity accounting for more than 17 percent of turnover. Indeed, the previously dominant Space Subsystems Supplier only accounted for 16 percent in 2010/11.
Large increases have been witnessed in the market shares held by businesses operating in Contract, Research, Design and Consultancy, including university research departments (from 6 percent of turnover in 2008/09 to 10 percent in 2010/11), and the Space Prime/System Integrator category (from 10 percent in 2008/09 to 17 percent in 2010/11).
Whereas the two previous editions of the survey reported a movement from Space Prime to Space Subsystems, with the indication that the UK upstream sector was increasing its emphasis on the provision of payload subsystems, rather than complete spacecraft, the results of the 2012 survey suggest that the movement has reversed. However, it should be noted that a business changing the definition of activities does not mean that there is a substantive alteration in the actual processes conducted.
The 2010 edition of the survey noted that the division of employment between upstream business categories was not as extreme as that for turnover; the 2012 survey indicates this remains the case, with no category accounting for more than 16 percent of total upstream employment (Chart 0.7). The largest movement in terms of the proportion of employment was experienced by the Space Subsystem Supplier, which fell from accounting for 28 percent of employment in 2008/09 to just 15 percent in 2010/11. Conversely Space Prime/System Integrator and Space Component or Material Supplier business categories both saw significant jumps in their share of employment over the same period, from 9 percent to 16 percent and 10 percent to 16 percent respectively. A similar pattern can be seen for upstream employment by business category.
As found in previous surveys, the downstream sector continues to be dominated by the Satellite Broadcast Provider subsector (Charts 0.8 and 0.9); once again this was driven by Direct-To-Home (DTH) satellite television. Indeed, between 2008/09 and 2010/11, the share of turnover accounted for by the Satellite Broadcast Provider subsector increased slightly to 70 percent.
Elsewhere in the downstream sector, there has been little change in the proportion of turnover and employment held by each subsector. In terms of turnover, subsector contributions have remained static: aside from the Satellite Broadcast Provider subsector, only the Satellite Communications Provider subsector saw a notable change in its share (from 18 percent in 2008/09 to 14 percent in 2010/11). The composition of downstream employment has been more flexible. However, even this has been limited to incremental changes in share, the largest of which was the 2 percentage-point fall held by Satellite Broadcast Provider (from 67 percent to 65 percent) and a 2 percentage-point increase for Support Products and Service businesses (from 10 percent in 2008/09 to 12 percent in 2010/11).
Previous editions of the survey have noted that the UK space industrys largest customer group was the commercial sector. The 2012 survey indicates that this remains the case, accounting for 85 percent of total industry turnover (Chart 0.10). The commercial sector also accounted for 85 percent of turnover in the 2010 survey, albeit with a marginally different breakdown between Business-to-Business and Business-to-Consumer; the 2012 survey indicates that Business-to-Consumer sales have become more important to the industry (up 2 percentage points to 62 percent) since 2008/09.
The breakdown of sales to other types of customer have remained static since 2008/09, with Military sales slightly more important (7 percent) than those to Space Agencies (5 percent) and Civil Government (3 percent).
The dominance of Business-to-Consumer sales results in a significant UK focus to space industry activities, and this intensity has increased by 3 percentage points since 2008/09 to 78 percent in 2010/11 (Chart 0.11). While the UK focus increased, the proportion of sales accounted for by customers in the rest of Europe and the Americas declined, by 3 and 1 percentage points respectively; however, Asia has become a slightly more important market for the UK space industry, accounting for 4 percent of sales in 2010/11 (compared to 3 percent in 2008/09).
The movement from Europe and the Americas to Asia is not surprising given the relative economic performance of the regions: Europe and the Americas (the US, in particular) have been slow to emerge from recession, while the large Asian markets of China and India have continued to grow. As such, the shifting pattern of exports encountered by the space industry is not dissimilar to the experiences of other industries.
The domination of Broadcasting as the main method of use of UK space products was reported in each of the previous two surveys, and this pattern continues in the 2012 survey (Chart 0.12), with it accounting for 69 percent of all sales (up 1 percentage point compared to 2008/09).
The second largest method of useTelecommunicationshas experienced a slight fall in its importance, accounting for 21 percent in 2010/11, compared to 24 percent in 2008/09. This fall has been countered by increased market shares in Space Transportation and Navigation, both up 1 percentage point to 1 percent and 3 percent of total sales respectively.
Broadcasting sales increased by 17.6 percent in real terms between 2008/09 and 2010/11, with this growth alone accounting for 80 percent of all growth since 2008/09. The use of UK space products for Navigation witnessed an even greater growth rate, increasing by almost 80 percent in real terms between 2008/09 and 2010/11; this accounted for 10 percent of the industrys total growth. Growing from a far smaller base, the use of products for Space Transportation accounted for 5 percent of industry growth since 2008/09.
Research + Development
Spending on research and development (R&D) is crucial for the growth of the UKs knowledge economy. Sectors such as the UK space industry that are R&D intensive play a central role in driving the UKs knowledge base. As in the previous three editions of the survey, respondents were asked about the level of R&D investment undertaken and the source of funding.
The 2008 and 2010 editions of the survey both reported that R&D spending in the upstream sector as a percentage of turnover had declined from the previous survey. The 2012 survey has found that this trend has continued (Chart 0.13), with total upstream R&D activity equating to 5.2 percent of turnover (in 2004/05 upstream R&D expenditure was 14.1 percent of turnover; in 2006/07 this had dropped to 8.3 percent; the 2008/09 value was 7.3 percent of turnover). Having said this, the level of internal funding for R&D activities in the upstream sector has increased, from 3.2 percent of turnover in 2008/09 to 3.3 percent of turnover in 2010/11.
R&D expenditure in the downstream sector remains significantly lower than in the upstream, although this has increased as a share of turnover to 0.8 percent, compared to 0.7 percent of turnover in 2008/09, as R&D investment in the downstream sector increased by a third in real terms. The breakdown of downstream R&D funding between internal and external sources reported in the 2012 Survey indicates a movement towards greater reliance on internal funding: internal funding accounted for 72 percent of total in 2010/11 as compared to 55 percent in 2008/09.
The Department of Business, Innovation and Skills estimates that the 1,000 largest companies (by R&D spending) in the UK invest 1.7 percent of their turnover into R&D activities4. Although the space industry as a whole falls below this marker, the upstream sector is 50 percent more R&D intensive than the Aerospace and Defence sector (which invests 3.5 percent of turnover in R&D).
4BIS (2010) The 2010 R&D Scoreboard.
This edition of the survey presented respondents with a series of new questions examining the challenges their business faces, the strategies the company is planning to implement to stimulate growth, and their expectations of future performance.
The most common barrier faced (33 percent of respondents) in the year 2009/10 was a lack of sufficient demand for the products or services companies produced. A lack of skilled employees was a close second, with 32 percent of respondents reporting their company had encountered this barrier. A lack of investment and working capital were less common, but still reported by enough respondents to provide a concern (24 percent and 16 percent respectively). Survey responses indicated that the greatest barriers faced by the smallest companies were a lack of access to working and investment capital.
Looking forward, half of responding companies were seeking to expand independently into new geographic and product markets in order to deliver future growth (Chart 0.14); 40 percent were also considering recruiting extra permanent staff. From a turnover perspective, the most common strategy is independent expansion into new geographic marketspossibly continuing the trend of the increasing importance of sales to Asia. Businesses also appear to be open to the possibility of forming alliances or joint ventures in order to effectively exploit new markets. Furthermore, more than 60 percent of respondents (weighted by turnover) will be seeking to make new capital investments.
The outlook for the UK space industry is extremely positive. Almost two thirds of companies are expecting to see performance pick up at least slightly, with half of those expecting significantly stronger performance (Chart 0.15). Indeed, companies accounting for 80 percent of respondents turnover expected slightly stronger growth, and a further 10 percent expected significantly stronger growth. This positive outlook is no better illustrated than through the recent achievements of two UK companies, Astrium and Surrey Satellite Technologies Ltd. (SSTL).
Astrium has been selected by the European Space Agency (ESA) as the prime contractor for the Solar Orbiter mission that will perform close-up observations of the Sun. The 300 million euros contract was signed in April 2012. Astrium UK will lead a team of European companies who will supply various parts of the spacecraft. The contract is one of the largest ever signed between the ESA Science Programme and a UK company.
SSTL signed a contract with OHB in July 2012 for the construction of a further eight navigation payloads for the European Galileo programme. Under the contract, worth approximately 80m euros, SSTL will construct the navigation payloads for the second batch of Full Operational Capability satellites (Work Order No. 2), continuing a successful cooperation between the two companies to build the first 14 satellites (Work Order No. 1) under the supervision of the ESA.
About the agency...
The UK Space Agency is an executive agency of the Department for Business, Innovation and Skills (BIS) and at the heart of UK efforts to explore and benefit from space.
Space is an essential part of all our everyday lives and one of the key enablers of the global economy. Space has revolutionized telecommunications services, climate and weather forecasting, commerce, environmental management, security, banking, navigation and TV broadcasting.
Reporting to the Minister of State for Universities and Science, the UK Space Agency is at the heart of UK efforts to explore space, exploit space-based applications and technology and support our academic and industrial communities.
The UK Space Agency was launched officially on March 23, 2010, and became a full executive agency of BIS on 1 April 2011. On this date the responsibility for all space activities was transferred from a number of bodies, including government departments, Research Councils and non-departmental public bodies. The Agency therefore became responsible for the entirety of the UK space activities.
Representatives of the above bodies were invited to join the Space Leadership Council, which advises the Minister. A Steering Board was established to advise the Chief Executive, and an Audit Committee to provide guidance and formal oversight. The Chief Executive chairs an Executive Board, which is comprised of UK Space Agency directors.
UK space policy is carried out within the framework of the UK Civil Space Strategy 2012-2016. (PDF, 4.6 Mb) This strategy shapes the direction of UK space policy.
The UK Space Agency also interfaces with other departments on security and military programmes. Although it does not manage these programmes directly, the UK Space Agency is kept informed and involved in decisions relating to the programmes as necessary.
Collaboration lies at the heart of the UK Space Agency ethos and applies across Government as well as to external organisations including European and global partners such as the European Space Agency (ESA), the European Union, national space agencies and the United Nations.