Reshaping European space ecosystem is necessary

Many people working in the space sector here in Finland have a pretty clear picture: Europe certainly has a lot of know-how, but we are still not very competitive.

Europe could very well have done much more when it comes to its own crewed spacecraft or a reusable launch vehicle. European companies manufacture a large number of telecommunications satellites, and we are excellent at building scientific probes and satellites.

For various reasons, however, this expertise has not translated into major business or groundbreaking new products.

A step forward toward greater European space autonomy will probably come from the ongoing merger of Airbus’s and Thales Alenia Space’s space operations, but an even bigger driver is the growing desire for greater self-sufficiency in areas where Europe previously chose not to compete with the United States. As long as the transatlantic superpower was an unquestioned partner, there was no real need for it.

At the end of November, McKinsey & Company published a very interesting (and eye-opening) report about the challenges, opportunities, and need for reform in Europe’s space sector as global competition intensifies.

The article concretely describes how Europe has fallen behind the United States and China.Launch activity has dropped sharply because of Ariane 6 delays and a paradigm shift, but the more fundamental problem for the overall situation is the fragmentation of public funding and the small scale of private investment.

Funding flows through a complicated network (ESA, EUMETSAT, EU’s Galileo and Copernicus, EUSPA, DG DEFIS, EDA, etc.), which leads to inefficiency, higher costs, and slowed innovation. Public procurement rules offer low profit margins, and an additional burden is created when individual countries prioritize their own national defense budgets.

Private capital plays a proportionally smaller role in Europe than in the United States: over 70 % of investments in space companies are under €10 million and focused on early-stage companies. This limits growth and commercialization and forces growing startups to seek funding from abroad. Even today, a significant portion of the funding for European startups still comes from the United States.

Europe is stuck in a vicious circle.

The situation is not hopeless, however – especially now that Europe has woken up. A positive growth spiral may actually be starting, because public funding is increasing, which in turn attracts more private money. Resources are being pooled, and the willingness to reform is high. Europe already has genuine space-sector expertise, so the issue is more about using and developing it better than about having to catch up a huge gap with others.

The article (in English) is definitely worth reading!