Rapidly growing industry needs solid legal and regulatory framework to guarantee global competitiveness

"Growing at almost 10% a year, as fast as the Chinese economy," is the speed at which science minister David Willetts described the growth of the UK space sector at the recent Conservative party conference. He complimented the sector as being "a remarkable success story of high-tech innovation".

Yet I doubt the general public, or the City, would perceive the UK space industry to be one whose growth will help lead the UK out of recession. In fact, I doubt they think about it much at all.

But they should. People use space every day without realising it; the space industry facilitates our bank transfers, emergency services, communications, navigation and even the TV broadcasts we watch on a Saturday night.

The UK space sector is now worth £9bn annually, and many companies that are not necessarily deemed to be part of the UK space sector benefit from this growth. These include terrestrial applications developed from space technology. The new Satellite Applications Catapult, established by the Technology Strategy Board to foster sector growth, is already providing valuable support to those types of start-ups and SMEs.

When I was the European Space Agency (ESA) lawyer to the ESA Human Spaceflight Programme Board, the UK representative desk was always empty. The UK did not contribute to this optional programme, believing that manned space flight could not justify the expense.

But now, Major Tim Peake is to be the first British astronaut for 20 years and the first on the International Space Station (ISS). The idea of the UK having an astronaut when I left ESA six years ago was unimaginable.

The UK's current contribution to the ESA (£240m per year) could also not have been envisaged in 2006. Yet it is believed that this investment will generate four times that much in commercial activity. It has already led to the 100-strong ESA telecommunications team being based in Harwell, near Oxford.

Chancellor George Osborne, in a move backing British technology and science, contributed £16m to join the ISS programme and allow the UK to participate in key research. So the message is clearly 'onwards and upwards' for the UK space industry.

But there are still questions about how this expansion can be secured and whether the UK regulatory and legislative framework facilitates this investment and growth.

To this end and following the 2010 joint industry and Government-led Innovation and Growth Strategy (IGS), which outlined a 20-year vision for the growth of the UK space sector, in 2012 the Government and industry launched a so-called 'Restack' of the IGS.

The aim was to make sure the recommendations proposed under the Labour Government in 2010 were still valid and being implemented in 2013 by the Conservative and Liberal Democrat coalition.

The Restack identified nine key themes. Theme 6 is particularly important as it deals with "how to create the most competitive regulatory environment for space business". It necessitated a review of current regulation, legislation, policy and Government practices to identify barriers to starting up a business in the UK space industry, investing in a business in the sector and developing and growing an already established business.

Rocket boosters

Many problems confronted by the space industry are no different to those faced by high-tech sectors generally. Yet there are specific regulatory issues that may be hindering the acceleration of the UK space sector.

CMS took the lead on Theme 6 and drafted a detailed consultation that was published and circulated to more than 8,000 companies. As stated by the Government, this represented a "rare opportunity for the space community to come together to raise regulatory issues in a way that has maximum impact with ministers and senior industry members and to influence the Government on the strategic direction and support required to ensure the continued development of the UK space industry".

The resulting key recommendations were announced at the UK Space Conference in Glasgow in July this year and a period of official consultation was launched, which ended on 14 October. The recommendations, to achieve a more competitive regulatory environment for space business in the UK, include:

• removing the concept of unlimited indemnity in the Outer Space Act 1986 (currently entities launching an object into space must provide the Government with an unlimited indemnity for damage caused by that object, a concept not well-received by the investor community);

• drafting a clear, transparent and certain process to obtain a UK Space Agency launch licence, suitable for the commercial and financial realities of small to medium-sized enterprises (SMEs);

• effective representation of the interests of the UK space industry by Ofcom in international fora, in particular the International Telecommunication Union, to avoid any competitive disadvantage;

• greater engagement by UK Export Finance with industry to advertise its products, especially to SMEs;

• removing insurance premium tax on satellite assets; and

• drafting of a regulatory framework for space planes in the UK.

One further recommendation is to expand the Satellite Finance Network, whose aim is to bring the finance community closer to the industry to help lobby for necessary regulatory change.

Not all of the 2010 IGS recommendations, even if still valid today, have been implemented, so there is a pressing need among industry and investors to see the Government actively implementing these new recommendations. 

The Restack report will be published on 14 November, and will need to guarantee that the framework is flexible enough to allow for reviews, which could be essential to guarantee the future growth of such a rapidly evolving industry. 

Joanne Wheeler is a partner in the technology, media and telecommunications team at CMS Cameron McKenna.