LE-SE Development of the Scottish Space Industry (ExecSumm ...€¦ · Development of the Scottish...

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DevelopmentoftheScottishSpaceIndustry

EXECUTIVESUMMARYPublic

November2015

WhereverpossibleLondonEconomicsusespapersourcedfromsustainablymanagedforestsusingproductionprocessesthatmeettheEUeco-labelrequirements.

Copyright©2016LondonEconomics.Exceptforthequotationofshortpassagesforthepurposesofcriticismorreview,nopartofthisdocumentmaybereproducedwithoutpermission.

LondonEconomicsLtdisaLimitedCompanyregisteredinEnglandandWaleswithregisterednumber04083204andregisteredofficesatSomersetHouse,NewWing,Strand,LondonWC2R1LA.LondonEconomicsLtd'sregistrationnumberforValueAddedTaxintheUnitedKingdomisGB769529863.

AboutLondonEconomics

LondonEconomicsisaleadingindependenteconomicconsultancy,headquarteredinLondon,witha dedicated team of professional economists specialised in the application of best practiceeconomicandfinancialanalysistothespacesector.

Drawingonoursolidunderstandingoftheeconomicsofspace,expertiseineconomicanalysisandbest practice industry knowledge, our space team has extensive experience of providingindependent analysis and innovative solutions to advise clients in the public, private and thirdsectors on the economic fundamentals, commercial potential of existing, developing andspeculativemarket opportunities to reduce uncertainty and guide decision-makers in thismostchallengingofoperatingenvironments.

All consultants of our space team are highly-qualified economists with extensive experience inapplyingeconomictheoryandsophisticatedquantitativemethods,rangingfromcommonlyusedmarketresearchtoolstoadvancedexperimentalmethodstothespacesector,including:

! Insightfulandaccuratemarketanalysisanddemandforecasting;! Analysisofindustrialstructure,strategyandcompetitiveforces;! Newtechnologyadoptionmodelling;! Estimationofpublicutilitybenefits;! Opportunityprioritisationandtargetingtomaximiseexploitationofinvestment;! Sophisticatedstatisticalanalysis(econometrics,regression);! Economic and financial modelling, including: Cost-Benefit Analysis (CBA), cost

effectiveness analysis, Value for Money (VfM), impact assessment, policy evaluation,businesscasedevelopment,cashflowandsustainabilitymodelling.

HeadOffice:SomersetHouse,NewWing,Strand,London,WC2R1LA,UnitedKingdom.w:londoneconomics.co.uk/aerospace e:[email protected] :@LE_Aerospacet:+44(0)2037017707 f:+44(0)2037017701

Acknowledgements

WewouldliketoacknowledgetheusefulguidanceandfeedbackprovidedbyScottishEnterprisethroughoutthis research.Wewouldalso liketothankallof thestakeholdersconsultedfor theirinformativeinputs.ResponsibilityforthecontentofthisreportremainswithLondonEconomics.

Authors

GregSadlier,AssociateDirector,02037017707,[email protected]ær,SeniorEconomicConsultant,02037017717,[email protected],EconomicConsultant,02037017724,[email protected],EconomicConsultant,02037017714,[email protected]:ESA/NASA/A.Gerst

ExecutiveSummary

LondonEconomicsDevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public) 1

ExecutiveSummary

Introduction

Scotland’s history as an innovative, scientifically and technologically advanced country is strongandillustrious.Indeed,Scotland’sspaceindustryissignificant,anditleadsthelinegloballyinthenascentfieldofnanosatellites(particularlyCubeSats).TheScottishspaceindustrycoversactivitiesacross the value chain, from leading space science research institutes and internationallyrecognisedsatelliteplatformprimesoversatelliteoperatorstoleadingapplicationsdevelopersattheEuropeanlevelandcommercialusersofawiderangeofsatellitesignals.

However,thereisroomtogrowScotland’sspaceindustryinlinewiththerestoftheUK,whichhassetambitiousgrowth targetsout to2030.This report, commissionedbyScottishEnterprise, isasteptowardsrealisingtheScottishspaceindustry’spotential.

Objectivesofthisstudy

Theobjectiveofthisreportistoanswertwooverarchingquestions:

1) WhereistheScottishspaceeconomyatpresent inanabsolutesenseandincomparisonwiththeUKandglobalspaceeconomy?

2) Where could and should the Scottish space economy, and its composite upstream anddownstreamsegments,getto?

WhereistheScottishspaceeconomyatpresent?

Thetraditionalviewofthespacesectorhasfocusedonthespaceindustryinisolation–companiesthatmanufacture,launchandoperatespaceassets(e.g.satellites),butamoremodernviewistoextend the definition to include companies that utilise the signals and data supplied by thesespace assets to develop value-added applications (e.g. earth observation imagery, satellitebroadbandservices,etc.).Thisexpandedgroupofcompaniesisreferredtoasthespaceeconomy.

The value chain segmentation presented below comes from The Case for Space 2015 and isadoptedforthepurposesofthisreport.

Source:LondonEconomics

Insummary,eachsegmentmaybedescribedbrieflyasfollows:

Spacemanufacturing Spaceoperations Spaceapplications Users

LaunchvehiclesandsystemsLaunchprovisionandbrokerage

servicesDirect-To-Home(DTH)provision Security,safety&resilience

Satellites,payloads,spacecraftProprietarysatelliteoperation(incl.sale/leaseofcapacity)

VerySmallApertureTerminal(VSAT)networkprovision

Game-changingservices

Groundsegmentsystemsandequipment

Third-partygroundsegmentoperation

Value-AddedResale(VAR)/Value-AddedServices(VAS)

Climateandenvironmentalservices

Scientificandengineeringresearchandconsultancy

UserequipmentsupplyMoreefficientpublicsector

services

e-Connectivity

Non-users

FinancialandlegalservicesInsuranceandbrokerage

servicesConsultancyandapplied

researchR&Dandknowledgespillovers

Externalities

Ancillaryservices

Othersupportproductsandservices

ExecutiveSummary

2LondonEconomics

DevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public)

Scottishorganisationsintheglobalsupplychain

Spacemanufacturing

Spacemanufacturinginvolvestheassemblyofcompletespacecraft,subsystemsandcomponents,launchersand thenecessary terrestrial infrastructure (e.g. ground stations). The supply chain tospacemanufacturingisfurtherbrokendownintofiveseparategroupsofentities(someofwhichareverticallyintegrated):

! Primes are the last link in the chain of delivery of space products to government orcommercial customers. Their work involves assembly of final spacecraft, launchers orgroundinfrastructure.

! ThemostprominentScottishprimeisClydeSpace.! Tier 1 companies design and assemble major sub-systems such as power supply,

communications,propulsionetc.,whicharesoldtoprimesforfinalintegration.! Major Scottish companies in Tier 1 include Clyde Space, Com Dev (through subsidiary

MESLMicrowave),theUKAstronomyTechnologyCentre,andBrightAscension.! Tier 2 organisations manufacture equipment to be integrated in major sub-systems.

Manytier2organisationsalsoactascentralpartsprocurementagentsactingasmiddle-menintheprocurementofcomponentsfromlowertiers.

! Scottish Tier 2 companies include AGM Batteries, Com Dev (through subsidiary MESLMicrowave)andSelex.

! Tiers3and4 firmsincludeproducersofcomponentsandsub-assembliessuchascablesandelectronic,electricalandelectromechanical(EEE)components.

! ScottishorganisationsincludeSTAR-DundeeandAxon’Cable.! Other suppliers including raw materials (e.g. sheet metal) and other more generalist

suppliers(e.g.off-the-shelfsoftwareandcomponents).

Spaceoperations

Space operations is the operation of space and ground infrastructure for the purpose ofgenerationandterrestrialdistributionofsatellitedata.Themaininputsintothebusinessofspaceoperations are outputs from space manufacturing (space- and ground-based infrastructure),supplementedbysoftware(fromancillaryserviceproviders)andoff-the-shelfproducts.

! Scottish spaceoperations firms includeHarris CapRockUK,NEODAAS, SpireGlobal andVeripos.

Spaceapplications

Space applications comprises commercial organisations using space signals to offer value-addedservicestoconsumerend-users.Broadly,therearethreetypesofspaceapplicationsfirms:

1) Firms that add value to space signals, suchas EarthObservation imagery,which canbeusedtomonitorvariousenvironmentalparameters;

! ScottishcompaniesincludeAstrosat(previouslyknownasStevensonAstrosat)andGlobalSurfaceIntelligence;

2) Companies that sell access to space signals, suchasdirect-to-homebroadcasts, satellitecommunicationsandnavigation;

ExecutiveSummary


! ScottishfirmsincludeSky,HarrisCapRockandApogeeInternet;3) Companiesthatmanufactureorretailtheequipmentrequiredtoaccessspacesignals.

! ScottishentitiesincludeCaledonianAirborneSystems,HarrisCapRock,andVeripos.

The supply chain to types 1 and 2 primarily consists of data from space operations companies,software (fromancillary service providers) and off-the-shelf products (such as IT),while type 3-companiesrequirevarious inputssimilartotiers3and4 inspacemanufacturing(i.e.EEE,cablesetc.).Userequipment(type3)isanecessityforcompaniesintype2.

Ancillaryservices

Ancillaryservicesrefer tospecialistsupportactivities (e.g.consultancy,software)cateringtothespecificneedsofspaceorganisationsthroughoutthespacevaluechainsegmentslistedabove.

! ScottishorganisationsincludePHSSpace,Ecometrica,andAstrosat.

ScottishspaceeconomyinaUKandglobalcontext

Theglobal spaceeconomy is valued (turnover) atbetween£155billionand£190billion (OECDand Space Foundation, respectively), with the UK accounting for £11.8 billion (£5.0 billionexcludingDirect-To-Homesatellitebroadcasting),equivalenttoashareofbetween6.3%and7.7%.

Estimatesofglobalemploymentinthespaceeconomyarehamperedbylackofreliabledata,butbased on estimates from OECD (2014) The Space Economy at a Glance and Space Foundation(2015)TheSpaceReport2015,globalspaceemploymentisestimatedintheorderof890,000full-timeequivalents,buttheestimateishighlyuncertain.

Scottishspaceturnoverhasbeenestimated to be £134.1m in2012/13, but unlike UK andglobal totals, Scotland’s focus intermsofthespacevaluechainisfurther upstream. The tablecomparesScottish,UKandglobalshares, with UK and globalshares further broken down byinclusionofDTH.

Scotland’sshareofUKtotalturnoverbyvalue chain segment reflects thisdifferentfocus,andthecountry’sshareof UK space manufacturing and spaceoperations is therefore greater than itsoverall total while space applications(both including and excluding DTH) issmaller. Ancillary services in Scotlandare significantly less valuable than theUKtotal.Thefiguresummarises.

Spacemanufacturing

Spaceoperations

Spaceapplications

Ancillaryservices

Scotland 23% 33% 44% 0%

UK(incl.DTH) 8% 12% 78% 2%

UK(exDTH) 17% 27% 52% 4%

Global(incl.DTH) 33% 8% 58% 0%

Global(exDTH) 41% 10% 48% 0%Source:LondonEconomics(2015)TheCaseforSpace2015;OECD(2014)TheSpaceEconomyataGlance

Source:LondonEconomics(2015)TheCaseforSpace2015

0.6%

3.1%3.5%

0.0%

1.1%

2.1%

3.1%3.5%

0.0%

2.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Spaceapplications

Spaceoperations

Spacemanufacturing

Ancillaryservices

Total

UK(inclDTH) UK(exDTH)

ExecutiveSummary

4LondonEconomics


WherecouldandshouldtheScottishspaceeconomygetto?

To inform an answer to this question of themaximum growth potential for the Scottish spaceeconomy,weundertookthefollowinganalyses:

! Driversoftheglobalspaceindustryandemergingmarketneeds;! Lessonsfromexistinglocation-basedspaceclusters;! SWOTanalysis;! Potentialbenefitsofaspaceport;

Driversoftheglobalspaceindustryandemergingmarketneeds

Theglobalspaceeconomyischanging,andtheScottishspaceeconomyiswell-placedtocapitaliseonsomeofthesechanges:

! Increasingcommercialisationofspace:AsmeasuredbytheSpaceReport,1theshareofeconomicactivityinthespaceeconomytheshareofspaceactivitysatisfyinggovernmentdemand has reduced from 33% in 2009 to 24% in 2014, with the residual comprisingprivatesectordemand.

! New Spacemovement: ‘New Space’ is a philosophy ormovement that characterises anew breed of privately funded space organisations defined by principles such as: low-cost, clean sheet design, highly innovative and commercially-driven. This nascent, butrapidly growing, global community of entrepreneurs and organisations are challengingthe established approaches to space development of the traditionalmainstream spaceindustry.

! NewSpaceAge:ThankstodecadesofinvestmentinR&D,explorationandinfrastructuredevelopment, we are entering a ‘New Space Age’ – the age of applications. Therelationshipof theaveragecitizenorcompanywithspacehaschangedmore inthe lastdecadethaninthepreviousfour.

! Internationalisation of space value chains: The combination of limited governmentbudgetsandthehighcostofspaceexplorationhaveledpublicspaceagenciesdowntheroadofcollaboration;andtogreateffect(e.g.InternationalSpaceStation).Meanwhile,asinothereconomicsectors,spaceorganisationshaveneededtoadapttoglobalisationandensureitssuccessinthefaceofcompetitionfromtherestoftheworld.

! Internetofeverythingandeverywhere:Inthefuture,theInternet-of-Thingswillbecomethe Internet-of-Everything –with rapid growth forecasted over the coming decade. Tocreate value, ‘things’ will need constant connectivity, and satellite communicationsremainauniquetechnologicaloption.Thevalueaddedwillalsobeboostedifthe‘thing’knowswhereitis,soitisreasonabletoexpectmanydevicestobeequippedwithsatellitepositioning(GNSS)capability.

! SmallSatelliterevolution:Withpayloadweightbeingapositivedeterminantofthecostof spaceaccess, combinedwith thecontinuingminiaturisationof technology, there isaclear trend towards small satellites. Smaller satellites are becoming especially relevantwiththeconstellationsenvisagedforLowEarthOrbit(orlower)thatcanprovideremotesensing,satellitebroadbandandmanyinnovativenewservicesinthefuture.

1SpaceFoundation(2015)TheSpaceReport2015

ExecutiveSummary


Lessonsfromexistinglocation-basedspaceclusters

Scotlandmay be regarded as a location-based space cluster. In order to inform and guide thedevelopment of the Scottish cluster to become competitive, and ultimately world-leading, it isinsightful to examine the successful existing space clusters. The framework chosenwasPESTLEanalysis, which assesses the political, economic, social, technological, legal and environmentalfactorssupportingtheclusters.

The Scottish space cluster is supported by a range of institutions, policy measures and otherinfrastructure characteristics, backing the industry by means of a range of activities includingnetworking and industry coordination, business incubation, technology funding, business andindustrypromotion,andresearchandeducationactivities.

ThePESTLEanalysisoftheScottishspaceclusterisprovidedbelow.

Source:LondonEconomics’analysis

The same analysis was applied to three world-leading location-based space clusters (Bavaria;ColoradoandHarwell)toidentifygaps.TheidentifiedKeySuccessFactors(KSFs)andimplicationsforScotlandarepresentedinthefollowingtable:

Political

TechnologicalTechnologyfunding

FundingforR&D,innovationandtechnicalfeasibility

Fundingforcollaborativeresearchprojects

ResearchinstitutionsUKAstronomyTechnologyCentreAdvancedFormingResearchCentre

HigherEducationInstitutions

EnvironmentalSuppliers

Customers

InfrastructureCommercialairports

EconomicBusinesspromotionagency

ScottishEnterpriseHighlandsandIslands Enterprise

IndustrycoordinationSpaceNetworkScotland

ScottishCentreofExcellenceinSatelliteApplications

BusinessIncubationsupportHiggsCentreforInnovationAlbaInnovationCentreScottishInvestmentBank

SocialHigherEducationInstitutions

UniversityofDundeeUniversityofEdinburghUniversityofGlasgow

UniversityofStrathclyde

Scottishspacecluster

LegalR&Dtaxcredits

PatentBox

RelocationsupportScottishGovernmentScottishEnterprise

(Industrycoordinationiscoveredineconomicfactors.)

ExecutiveSummary

6LondonEconomics


KeySuccessFactor(KSF)

Bavaria Colorado Harwell ScotlandComments

Scale Companies 5501 1601 602 1282

Employees 36,0001 25,0001 5,0003 >8142

Political ! ! ! (!)

Relocation support: Relocation grant funding providedbyScottishGovernment,ScottishEnterprise(e.g.toSpire)andHighlands&IslandsEnterprise.Industry coordination: Governments in Colorado andBavariaoperatepolicyprogrammesaimedatcoordinatingand connecting the respective space clusters. In Scotland,suchcoordinationactivitiesareinsteadsupportedbySpaceNetwork Scotland (a Scottish Enterprise project) and theScottishCentreofExcellenceforSatelliteApplications(seeeconomicfactors).National Space Agency: DLR in Bavaria undertakesresearch and provides business incubation support. InScotland, these activities are covered by range of otherorganisations (see economic and technological factors),withoutaphysicalpresenceoftheUKSpaceAgency.

Economic ! ! ! (!)

Business promotion: Scottish space industry is supportedby Scottish Enterprise, Highlands and Islands Enterprise,andScottishDevelopmentInternational.Business incubation: To be provided by the Higgs CentreforInnovation,tobelaunchedin2016,withplanscurrentlyatarelativelysmallscale.AdditionalsupportisprovidedbytheScottish InvestmentBank, theAlba InnovationCentre,and ESA’s Integrated Applications Promotion AmbassadorPlatformforOffshoreEnergy.Industry coordination: Undertaken by Space NetworkScotland and the Scottish Centre of Excellence in SpaceApplications. Both organisations launched only relativelyrecently,with activities currently only in beginning stagesandatrelativelysmallscale.

Social ! ! ! ! KeyHigher Education Institutions include theUniversitiesofEdinburgh,Glasgow,StrathclydeandDundee.

Technological ! ! ! !

Research institutions: Scottish universities (with space-related research departments), the UK ATC and theAdvancedFormingResearchCentre.Technology funding: Provided by the Scottish InvestmentBankandScottishFundingCouncil,andatUKandEuropeanUnion level. Grants at Scottish level are relatively small,andcouldbepooledintosinglefundingstrandtofacilitatefundingaccessforSMEs.

Legal ! ! !

Scotland:Taxadvantages(R&Dtaxcredits(taxdeductionsfor R&D expenditure) and Patent Box (tax deductions forprofitsderivedfromUK-ownedIP).AlsoappliestoHarwell.Colorado: Tax advantages (tax exemptions for personalpropertyrelatedtospaceandsimplifiedcorporateincometaxstructure)andtargetedlegislation(tosupportpotentialSpaceportColorado).

Environmental ! ! ! (!)

Suppliers: Scotland’s supply chain is generally strong, butthe lack of a satellite operator (changed by Spire)meansspaceapplicationsfirmscurrentlysourceinputsabroad.Customers: With the location of Spire’s Europeanheadquarters,thecustomersideiswell-developed.Infrastructure: Scottish businesses are relatively less wellconnected than those in Colorado, Bavaria and Harwell,with smaller airports and fewer international connectionsavailable. Bavarian industry further benefits from SpecialAirportOberpfaffenhofen.

Note:1Referstonumberofcompaniesandemployeesassociatedwiththeentireaerospaceindustryintherelevantlocation,notjustthespacesectoritself.2Referstonumberofcompaniesandemployeesassociatedwiththespaceindustry.3:5,000employeesacross200organisationsinHarwell,noseparateestimateforthespacecompaniesexists.Source:LondonEconomics’analysis

ExecutiveSummary


In order for Scotland to become a market-leading space cluster, a strategic focus on onecapability,marketor infrastructureneedstobe identifiedandalldevelopmenteffortneedtobefocussedonestablishingScotlandasaglobalauthorityandcentreforthatactivity.

Cautionarynote:Inthecaseofastrategicfocus,itisimperativetofirstconsolidateandmaintainthe strongexistingbaseof the Scottish space industry andeconomy– so asnot todemote theimportanceoftheseorganisations,norto‘putalltheeggsinonebasket’.

SWOTanalysis

ThematrixbelowsummarisestheresultsofananalysisoftheScottishspaceindustry’sstrengths,weaknesses,opportunitiesandthreats(SWOT)–forthefulldiscussion,pleaseseetheFullReport.

Source:LondonEconomicsanalysis

Potentialbenefitsofaspaceport

Note: This section isbasedonpublishedsecondary sourcesandmakesneithercommentarynorrecommendationonthemostsuitablelocationfortheUKspaceport.

Allelseequal, theUKGovernment’scommitment tobuildingaspaceport in theUKby2018willfacilitateeasieraccesstospaceforUKandScottishcompanies,byreducing logisticalchallenges.Forthisreason,theanalysisofthebenefitsofapotentialspaceportisseparatedintwo:

! BenefitsofaUKspaceport(‘generic’benefitsofproximity);and! BenefitsofaspaceportinScotland(localeconomybenefits).

STRENGTHS§ Smallsatellitessupplies§ CubeSatdevelopmentandmanufacture§ NewSpacecompanies§ Business promotionactivitybythedevelopmentagencies§ FDIlocationand relocationsupporttoattractforeigncompanies

§ Taxadvantage§ GrantfundingfromtheScottishGovernmentandthedevelopmentagencies

§ Existingground segmentoperators(teleports&EO)§ ProximitytocustomersintheOil&Gassector§ Presenceofhigher educationandresearchinstitutions(e.g.UKATC)

§ Partof adynamicandgrowingUKandEuropeanspaceeconomy

§Work/lifebalanceandquality oflifeinScotland

WEAKNESSES§ FewOEMs§ Notraditionalspaceprimes/system integrators§ Nocriticalmass/limitedscaleoftheindustry§ Underdevelopedspaceapplications§ Nosatelliteoperators,butduetochange(Spire)§ Space-specificincubationsupport,butduetochange§ Networkingbetweencompanies(B2B)andresearchinstitutions

§ ConnectiontoEuropeandrestoftheworld

OPPORTUNITIES§ AttractionoftheUK spaceport§ UKSAexpandingtoScottish location§ InnovateUKand/orUKSAfunds§ Continued growthofCubeSats§ Continued,growing,importanceofNewSpace§ FDIrelocationfundingforsatelliteoperators (e.g.Spire)§ Spaceapplicationsdevelopment§ Clusterpolicy§ SmallSatelliteRevolution

THREATS• Failureofdemonstratorprojects(Clyde Spaceand/orSpire)• Competitionfromcheaper‘copy-cat’CubeSats andPocketSats• Insufficientengineering/programmingandmarketingskills• Neglectofspaceapplications• Negativeregulatoryshocks• Uncertaintysurroundingreferenda(UK/EU)• ReducedUK-levelfunding• Reducedpublicfunds/support

ExecutiveSummary

8LondonEconomics


BenefitsofproximitytoaUKspaceport

IrrespectiveofwhethertheUKspaceportisultimatelylocatedinScotland,EnglandorWales,thecloserproximity toa launch facilitywillmake the logisticsof launchsignificantlyeasier.Thiswillreduce the need to piggyback off larger satellites launched into geostationary orbit. The maindrawbackofthepiggybacklaunchmodelisthatthesmallersatellitesarealwayssecondarytothemainsatellite,oftenresultingindifficultieswithorbitaltransferandscheduling.

The reduced cost and complexity resulting from a local launch facility dedicated to sub-orbitallaunchwill improve the commercial offeringof British companies, thanks tobetter certainty onlaunchdatesand lowercosts.Theassociatedrisk-reductionstemmingfromclosercontrolof thesupply chain will also lower the cost of doing business for British companies in the spaceoperations and applications value chain segments. For this reason, the industrial activity isexpectedtoincrease.

Localeconomybenefitsofaspaceport

The location ultimately chosen as the site of the UK spaceportwill experience a range of localeconomybenefitsarisingfrom:

! Spaceportoperations–Generationofgrossvalue-addedandprovisionofemploymentbythe spaceport operator and sub-orbital commercial spaceflight and/or satellite launchserviceprovider(directeffect).Thesupplyofgoodsandservicestotheconstructionandoperation of the spaceport will support activity for suppliers (indirect effect), whilstemployees will spend their disposable income in the local economy, supporting otherbusinessesintheregion(inducedeffect);

! Space-related tourism – Spending by spaceport visitors and staff in the region, othertouristsintheregionvisitingthespaceport,andspendingonothertouristattractions.2

! Space-relatededucation–Increasedresearchanddevelopmentfosteredbythepresenceofaspaceport,andaccesstospace.

Using thereportedbaselinecumulativevalues in2028, rangeestimates for2020and2030havebeencalculatedforthetotalestimatedbenefitstoalocaleconomyofaspaceport,andbyactivity.

ActivityEconomicactivity Employment

2020 2030 2020 2030

Operations £5m-£8m £60m-£90m 30–50 400-450Tourism <£1m £3m-£5m 5-15 90-110Education <£0.1m <£0.5m <1 <5

Total £5m-£9m £60m-£100m 35-65 490-550Note:Calculationsarebasedoncumulativefiguresfor2028.Assumingalineofbest-fitisusedtoestimatevaluesfor2020and2030

Source:LondonEconomics’calculationsbasedon‘SpaceportUK:Forgingaheadwithcommercialconfidence’report

Additionally,theestablishmentofaspaceportcouldattractForeignDirectInvestment(FDI)totheregion for structures such as: a visitor centre; R&D facilities; a bespoke hangar space andmaintenance;shopsandrestaurantswithinterminalfacilities;andaconferencecentreforevents.

2Forthepurposeofthisstudy,spendingonothertouristattractionsisexcludedfromtheanalysisasonlyspace-relatedactivitiesisofinterest.Hence,onlytwo-thirdsofthetotalreportedbaselineeconomicactivityandemploymentforspace-relatedtourismisused.

ExecutiveSummary


MaximumgrowthpotentialfortheScottishspaceindustry

TheUK’s Space Innovation andGrowth (IGS)ActionPlan from2010defines a target for theUKspace economy to capture 10% of the global market by 2030,3 which has been estimated toequateto£40bnofeconomicactivity.TheSpaceIGSalsoincludesaninterimtargetin2020of8%oftheglobalmarket,estimatedtoamountto£19bn.

ItisrecognisedthatinorderfortheUKachieveitstarget,allcountriesandregionsneedtopullinthesamedirection,andonlywithcombinedeffortcanthetargetbemet.Thissectionpresentsasuggested,equivalent,numberforScotland.

Medium-termpotential(2020)

FromScotland’scurrentshareoftheUKspaceeconomyof1.1%(2012/13),it issuggestedthatareasonabletargetistoachieve3%oftheUKtotalby2020.Theelaborationofthisinterimtarget(pleaseseethefullreport)takesintoaccountthatthepoliciestobeimplementedbetweennowandthenwillneedtimetotakefulleffect.

Long-termpotential(2030)

Thelong-termpotentialisnotgovernedbythecurrentsizeandshapeofthespaceeconomy,andallparametersmaychangeovertheperiod.ItisthereforeinformativetoconsiderScotland’sshareofeconomicindicatorstoinformtheestimate.ThefigurebelowpresentsthemostrecentScottishsharesofUKtotals,whicharediscussedafterwards.

Notes:ᵃ:WeightedbytotalUKspaceGVA;ᵇ:HEIs:HigherEducationInstitutions;ᶜ:Medicine&dentistry,Subjectsalliedtomedicine,Biological sciences, Veterinary science, Agriculture & related subjects, Physical sciences,Mathematical sciences, Computer science,Engineering&technology,andArchitecture,building&planning

Sources:¹:UKIOtablesandScotstatIOtables(2010);²:UKIOtablesandScotstatIOtables(2010),C4S;³:2011censusesinScotland,England and Wales, and Northern Ireland; ⁴: Scottish Development International http://www.sdi.co.uk/; ⁵: Higher EducationStatistics Agency (2015). 'HESA SFR 210: Higher Education student enrolments and qualifications obtained at higher educationprovidersintheUnitedKingdom2013/14'.

3 UK Space Innovation and Growth Strategy (2015) 2015 Update Report available at:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/444918/_SPACE-IGS_report-web-JJF-V2.0.pdf

5.8%

7.3%

8.4%

8.9%

9.2%

10.0%

10.0%

10.7%

10.8%

11.5%

11.7%

12.1%

0.0% 5.0% 10.0% 15.0%

Weightedᵃ averageGVAofspace-relatedindustries(all)²

GDP¹

Population³

StudentsenrolledatHEIsᵇ inmathematicalsciences⁵

Weightedᵃ averageGVAofspace-relatedindustries(excl.DTH)²

Aerospace,MarineandDefence⁴

AllstudentsenrolledatHEIsᵇ ⁵

StudentsenrolledatHEIsᵇ incomputerscience⁵

StudentsenrolledatHEIsᵇ inallscienceᶜ subjects⁵

StudentsenrolledatHEIsᵇ inphysicalsciences⁵

GVAofallspace-relatedindustries²

StudentsenrolledatHEIsᵇ inengineering&technology⁵

ExecutiveSummary

10LondonEconomics


Scotland’sshareofgrossvalueaddedintheeconomicsectorsthatconstitutethespaceeconomy4amounts to 5.8% when DTH is included and the sectors are weighted by space-related GVA.However, DTH is near saturation in theUK, and the space economy growth that is required toachievetheUK’stargetsneedstobedrivenbyotherspaceactivities.ConsideringGVAofnon-DTHsectors,Scotlandcurrentlyaccountsfor9.2%(stillweightedbyspace-relatedGVAinthesector).As thesesectorsarestrongcandidates fordelivering thegrowth required in theUK, thecurrentScottish proportion can be considered an indicator ofwhat can be achieved outsideDTH if therelativesizeofthesectorsremainsconstant.

DTHwill,however,remainasignificantspaceapplication,anditscontinuedimportancemeanstheoverallachievablevalueislikelylowerthan9.2%.

Scotland’s shareofunweightedGVA in the sectors that constitute the spaceeconomy is11.7%.Hence,Scotlandcouldbenefitfromachangespaceeconomyfocus.

IncombinationwithScotland’ssuccessatattractingstudentsforspace-relevantuniversitystudies,and the fact that 78% of Scottish graduates have been found to remain in Scotland aftergraduation suggests that Scottish spaceorganisationswillbeable toattractand retainqualifiedstaffataslightlybetterratethanthe9.2%.

Insummary,Scotland’sachievableshareoftheUKspaceeconomyby2030issuggestedtobe9%excluding activity expected in the case Scotland is selected to host theUK spaceport. If theUKspaceport were to be located in Scotland, the country’s space economy could be expected toamountto10%oftheUKtotal.

Thecurrentstrengthinspacemanufacturingandspaceoperationsshouldbesolidified,andmorethan9%ofUKtotalshouldbeachievedforbothsegments.SpaceapplicationsshouldclosethegapontheUKtotal,butwillremainofrelativelylowerimportanceandachieveashareoflessthan9%.Ancillary services in Scotland competewith a strong clusterof especially insurance, finance andlegalservicesintheCityofLondon,andwillremainatlessthan9%ofUKtotal.

4Nationalstatisticsdonotcontainadedicatedspaceeconomy,sothecompaniesthatoperateinspacearedrawnfromawiderangeofofficialsectors.WiththeexceptionsofProgrammingandBroadcastingactivitiesandElectricalequipment,spaceactivityisaverysmallproportionofoverallvalueadded,withthemajorityofeconomicactivitynotdirectlyrelatedtospace.

SomersetHouse,NewWing,StrandLondon,WC2R1LA,UnitedKingdomlondoneconomics.co.uk/[email protected]+44(0)2037017700@LE_Aerospace

LE-SE Development of the Scottish Space Industry (ExecSumm ...€¦ · Development of the Scottish...

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