As part of the partnership between SpaceWatch.Global and the European Space Policy Institute, we have been granted permission to publish selected articles and briefs. This is the conclusion of ESPI Special Report: ‘COVID-19 and the European Space Sector’, originally published in July 2020.
QUESTIONS RAISED BY THE CRISIS FOR THE EUROPEAN SPACE POLICY
Showcase for the role of space for crisis management and for the progress achieved by Europe
Space systems already demonstrated, at various occasions and in different circumstances that they provide unique solutions, essential to better understand, monitor and respond to a variety of crises. The COVID-19 crisis showed that space systems can also be quickly purposed and put to good use even in the case of unforeseen critical situations. It is of course impossible to quantify the contribution of space systems to the mitigation of the crisis impact in Europe, but from a qualitative standpoint it is clear that the situation illustrated well the various roles they play in improving situational awareness, strengthening economic resilience and supporting an adapted response.
As a matter of fact the crisis highlighted the great relevance of European programs such as Galileo and Copernicus, which actively contributed to the response to the crisis and the key role played by national and European institutions that were able, in close cooperation, to quickly support the development of adapted tools such as dashboards and dedicated applications, making full use of new European capabilities. Solutions also came from the private sector, stimulated by dedicated public initiatives totaling at least 20 Million € across Europe. Here, institutions were able to make good use of their increasingly wide-ranging and far-reaching involvement with the downstream sector resulting from their growing efforts to boost market uptake and maximize socio-economic benefits of space-based solutions.
Taking stock of the impact of the crisis on the sector: between resilience and vulnerability
Like most economic sectors in Europe, the space sector has also been profoundly impacted by the COVID- 19 crisis and directly suffered the consequences of lock-down measures adopted by European governments. Throughout the space value chain, the activity of space agencies, system manufacturers, launch service providers, satellite operators as well as downstream companies was disrupted in multiple ways:
- extensive use of teleworking,
- industrial and launch site shutdowns,
- supply chain disruptions as well as work interruption,
- payment delays and orders cancellation.
As compared to other industrial sectors, space is probably structurally more resilient thanks to long-term contracts and backlogs which partially mitigate the impact of temporary disruptions. The central role played by public programs, at least in the upstream segment, also provides some important guarantees through a stable, predictable and sizable demand. This resilience was further enhanced by the set of measures quickly taken by national and European institutions to ensure business continuity, uphold payment plans and process contractual adjustments. This will likely prevent major financial consequences for public programs, at least in the short-term. The situation is different in commercial markets, on which the European space sector also depends greatly.
While the manufacturing sector suffered the more immediate consequences of the crisis, the crunch of commercial activity on some market verticals, still difficult to predict, may also impact operators and downstream companies in the medium-term. This might, in turn, continue to affect the manufacturing industry through reduced demand.
Available indicators show that the resilience of the sector has limits and the COVID-19 crisis will lead to a net deficit for the space sector related to productivity loss, reduced turnover and increased costs that should not be underestimated. The sector may also continue to suffer in the longer-term from other impacts such as deteriorated markets or reduced financing capacities among others.
Ultimately, the magnitude of business impacts and their ripple effects will depend on multiple factors related to the crisis, to the governmental response and to the wider socio-economic shock. Although the final outcome of the crisis is difficult to anticipate, it is essential to already take stock of the impact suffered by the European space sector so far and to take into consideration that it will come out of the crisis weakened.
The role of public actors and the place of space in post-COVID Europe
In addition to adapted business strategies from the private sector to cope with the consequences of the crisis, public actors will also play a critical role to facilitate the recovery of the sector. This will require a tailored and concerted action between public and private stakeholders to elaborate an effective action plan and complement short-term measures taken to ensure business continuity with an adapted long- term strategy.
Based on industrial inputs, this strategy should not only address the survivability of the highly regarded space industrial base but also give it the means to tackle the structural difficulties that were arising on commercial markets before the crisis. What is at stake is Europe’s capacity to ensure the evolution of its space programs that are unanimously praised for their relevance and invaluable contributions in the current context. This raises also the question of the place of space in the post-COVID European policy agenda.
The COVID-19 crisis is shaking up political lines in Europe and topics such as economic resilience, strategic autonomy, sustainable growth or public safety are rising up in governmental agendas. Space programmes already demonstrated at multiple occasions their specific value and capacity to support all these agenda items. As a matter of fact, the political support for space is high but this support does not always translate into concrete means to achieve the ambitions displayed by European institutions and their Member States.
From this perspective the level of budget that will be allocated to the EU space program for the next multi-annual financial framework will be decisive to accompany industry efforts towards recovery. Therefore, a reduction of objectives and budgets anticipated initially to achieve them would seriously jeopardize Europe’s capacity to successfully tackle the challenges that the sector will face, not only as a result of the COVID-19 crisis but also from the overarching tense situation on commercial markets.
The crisis is breathing new life into policy debates in Europe, providing a fertile ground for fresh reflections on long-standing European space policy issues. Beyond the need to address immediate concerns of the sector, the crisis could therefore offer an opportunity to revisit strategic priorities and public action in the domain to position space as an integral component of the post-COVID agenda, for example by:
- giving shape to a technological and industrial policy with a stronger focus on strategic autonomy;
- rethinking accordingly the supply chains and the associated procurement processes as well as the investment, innovation and export policies;
- exploring a more ambitious public procurement of space services to support relevant public action of the EU and its Member States, in particular to boost a sustainable economic recovery;
- emphasising the role of space diplomacy to better promote European capabilities and know-how.
Raising important questions about European priorities and ambitions in the space sector and putting topics such as industrial policy and space diplomacy under the spotlight, the ultimate outcome of the COVID-19 crisis could very well be an acceleration of long-standing European space policy debates.
Rights reserved – this publication is reproduced with permission from ESPI. The study can be downloaded here: COVID-19 and the European Space Sector released in July 2020. All rights reserved.
For more articles please visit ESPI website (www.espi.or.at).