UK among world's most attractive space markets for investors

12 September 2023 4 min. read
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After the United States, the UK is seen as the most attractive destination for investors looking to enter the growing space technology market. A new study suggests that almost one-fifth of funds poured into the space sector since 2015 has gone to UK-based projects.

With profit margins tumbling back to Earth, and the planet’s dwindling resources having been over-exploited for decades, the attention of many businesses and governments around the world is turning to the final frontier. According to a recent study from McKinsey & Company, many entities are drawn to the burgeoning space market by the promises of seemingly outlandish projects, from pharmaceutical companies establishing a lab on a space station to study cell growth, to semiconductor companies manufacturing chips in extra-terrestrial factories.

It is speculated that a lack of gravity might even improve some production processes, while the negative externalities – from toxic waste to carbon emissions – of such work would no longer occur within the Earth’s atmosphere. However, while the potential for space innovation is said to be ‘immense’, it will remain firmly the preserve of science-fiction, without the right investment strategies.

Segments delivering value to x-sector users are expected to have particularly high growth rates

A new report from Strategy&, in collaboration with the UK Space Agency, has suggested that the signs are bright for the sector in Britain. The report estimates global space sector growth of up to 11% per year over the next decade – a sizeable portion of that growth was backed by government spending in the space sector, which hit a record $92 billion in 2021. However, this growth was also buoyed by thriving private sector interest.

Strategy& UK Partner Matthew Alabaster commented, “The UK space industry will only maximise its potential if it receives the investment it deserves… Our research shows that there are opportunities for investors of all stripes; the industry contains asset-light and technology-driven businesses, as well as infrastructure assets and supporting services businesses, all of which stand to benefit from the significant growth of the global space industry.”

In total, the researchers believe more than $47 billion of private capital was invested across the global space sector since 2015 – with the amount rising by an average of 21% per year. The UK received 17% of this inflow – with venture capital investments in UK space companies almost doubling over that same period. This is not just preaching to the converted either; as hype for the sector grows, new parties are moving into space, with 63% of investors being new to the sector in 2021.

VC investment segmentation, global vs. UK

As space investments continue to mature, the amount of investment in the sector is likely to grow further, too. In regards to the maturity of the sector, 95% of space investments were in revenue-generating companies by 2022, compared to just 56% in 2015. Among the examples with segments already experiencing rapid annual revenue growth, Strategy& pointed to emerging segments with a growth rate of 23% to 2030, alongside Earth observation on 15% and satellite communications and connectivity on 13% - both markets in which the UK has a leading position currently.

This is helping draw attention from investors at an especially rapid rate. The country is now the second most attractive destination for investors in the space sector, behind the US – which has a historic reputation for leadership in the sector. Key areas of investment in the UK are Earth observation technology, manufacturing and satellite connectivity. Of the venture capital arriving in the UK, 42% is going toward Earth observation – almost twice the global average – while spacecraft manufacturing is also a larger portion of the market than overseas; demonstrating some of the opportunities the UK can cash in on, if it acts now.

Craig Brown, Director of Investment at the UK agency, added, “This report shines a light on the breadth and depth of space investment opportunities. From today’s satellite communications to the future of orbital assembly, space has taken on an increased significance as a deeply embedded part of the global economy that is poised to grow at up to 11% per annum to 2030.”