| Practice area: | Space |
|---|---|
| Client: | Department for Science, Innovation and Technology |
| Published: | 9 August, 2023 |
| Keywords: | space economy UK Government |
What determines success or failure for UK space sector companies? How can the government identify and support high growth potential companies?
London Economics’ recent report for the UK Department for Science, Innovation and Technology (DSIT) represents a first attempt to derive statistical inferences from the unique ‘Size and Health of the UK Space Industry’ dataset on the drivers of firm-level growth and firm exit from the industry. The project employed sophisticated statistical and economic analysis to identify trends and provide predictive forecasting of UK space companies’ growth and survival prospects, increase general understanding of the space sector, and support informed development of government policy. Key findings included:
- Segmentation: Cluster analysis indicated that the most prominent variables determining different segments of the population of UK space comanies are the level of space-related revenue and space-related employment, the range of customers that they serve, their solvency and asset/liability ratios, their size, their level of connectivity to international markets, the domains in which they are active, and their position in the value chain.
- R&D intensity and growth: When it comes to the effect of different variables on firm-level growth, the results of both the OLS and the Logit regressions suggest that R&D intensity has a statistically significant impact on growth. This implies that firms that invest more in R&D tend to grow faster than those that do not.
- Delivering on high growth potential: Only a few variables were found to be relevant here, including R&D intensity (positive) and space-related employment (negative).
- Exit from the UK space sector: Variables with significant impacts on exit from the sector include the level and intensity of R&D, firm size, export intensity, proximity to a UKSA space cluster, and foreign ownership.
Overall, this research sheds light on the complex nature of the UK space industry and highlights the importance of R&D investment for firm-level growth. While other variables may not have a statistically significant impact on growth, they may still play a role in shaping the dynamics of the sector.
The Executive Summary, including detail on the methodological approach taken and recommendations for future research, is available for download on this page.