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FINAL
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
LondonEconomicsDevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public) 3
! 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
DevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public)
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
LondonEconomicsDevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public) 5
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
DevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public)
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
LondonEconomicsDevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public) 7
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
DevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public)
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
LondonEconomicsDevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public) 9
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
DevelopmentoftheScottishSpaceIndustry-ExecutiveSummary(Public)
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