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UK space sector outpaces economy as M&A activity skyrockets

by November 27, 2024
November 27, 2024
UK space sector outpaces economy as M&A activity skyrockets

The UK’s space sector is expanding at a pace surpassing the overall economy, contributing over £17.5 billion annually and employing more than 45,000 people.

Supporting £360 billion in economic activity through satellite infrastructure, the industry has become a significant player on the global stage.

Merger and acquisition (M&A) activity within the sector has surged over the past decade, leaping from just five transactions in 2013 to twenty-seven in 2023, according to advisory firm Heligan Group. This growth is expected to continue into 2025, driven by increasing government funding, decreasing launch costs, and the adoption of innovative technologies like satellite-based quantum key distribution.

Simon Heath, Partner at Heligan Group, commented: “Advances in technology such as reusable rockets, orbital refuelling, and in-space manufacturing via 3D printing are driving a wave of innovation in the space sector. A prominent development for the UK is the growth of small satellite technologies, which are revolutionising the industry by providing cost-effective and accessible satellite services.”

UK small and medium-sized enterprises (SMEs) are playing a transformative role in the global space industry. Specialising in satellite components, propulsion systems, and space data analytics, many are outpacing larger firms by focusing on niche technologies. There’s optimism that a company on the scale of SpaceX could emerge from the UK over the next decade, although there’s a rising risk of SMEs being acquired by larger integrators.

Heath continued: “Most UK space SMEs operate outside traditional aerospace hubs, decentralising the industry and fostering innovation across the country. This broader talent base is crucial for the long-term competitiveness of the UK space industry. However, SMEs face growing challenges, including reliance on large upfront investments, cautious investors due to long timelines, and increasingly competitive government funds.”

Access to growth finance and investment in the UK space sector has improved in recent years but remains mixed. Trends indicate increasing interest from venture capitalists and corporate investors. Major aerospace and defence organisations like Airbus and BAE Systems are actively investing through their corporate venture arms. The UK government has also remained a key player, offering funds and grants through the UK Space Agency and Innovate UK.

Heath added: “Over the next 24 months, we will see a variety of themes driving activity in the UK space sector. Space infrastructure investment will be a primary concern as strengthening the UK’s space resilience is a national security priority. There will also be consolidation, with the market being highly fragmented and full of young, IP-rich, and fast-growing businesses. Lastly, technological advancements such as innovations in small satellite systems and reusable launch vehicles are lowering entry barriers, reducing investment risks, and creating new opportunities for space startups.

“It is exciting to see the UK position itself to become a leading force in the global space economy. Although it currently lags behind other nations in space launch capacity, this will change with multiple launches planned from UK soil in 2025, with UK SMEs playing a bigger role than ever. Rapid technological advancements and escalating geopolitical tensions have intensified reliance on private sector innovation, with sovereignty playing an important role in supply chains.”

He concluded: “While the space sector is growing, it is a typically cash-hungry industry with profitability for many of the UK’s brightest companies still several years away. However, the space sector is one area where the UK government is highly supportive, and this is mirrored in the private sector, with several VC investors solely focusing on frontier technologies. 2025 will be an interesting year for the UK space sector as interest from venture capitalists and corporate investors continues to grow.”

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UK space sector outpaces economy as M&A activity skyrockets

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