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Our Labour Budget 2024 lowdown
Transitioning to net zero, building out supply chain resilience and supporting interventions that will drive growth in the UK… Amidst predictions of a move to austerity, the focus on investment into the economy was a welcome announcement during the unveiling of Labour’s new Budget. Granted, there’s still many details to iron out, but so far, so good.
Welcome to the modern economy.
At Space Forge we know that the driving force behind the economy of the 21st century is semiconductors. Every iteration of our economy has a core material that drives it. In the 19th century that was coal and the burning of it. And similarly, in the 20th century it was the burning of oil. Now we’re trying to move away from the burning of materials — undoubtedly an unsustainable way to drive growth — towards more efficient, less carbon hungry, net zero technologies.
Semiconductors are critical components of those technologies. They’re found in almost everything we use today, from laptops and toasters to telecom towers and electric vehicle (EV) chargers. If we want to move to a more efficient economy, then we need more efficient semiconductors. The materials that are becoming the core of the modern economy are those needed to produce the best semiconductors. Which is what Space Forge does; provide best-in-class semiconductors using space-made advanced materials.
By providing the best available quality of these materials, we not only give the UK a unique capability within the semiconductor industry, but also improve economic resilience. Particular settlements in the Budget show how Space Forge could benefit across a number of investment verticals, including UK Export Finance (UKEF) who will now be able to provide “financial support to UK companies supplying critical minerals to UK exporters in high-growth sectors such as EV battery production, clean growth, aerospace, and defence”.
Rebuilding our supply chain.
The war in Ukraine and COVID-19 have shown us just how vulnerable our supply chains are, and the extent to which they’re beyond our control. Combined with our reliance on materials like oil and gas that come from afar, and we’re at risk of huge fluctuations in the market — which ultimately puts the economy and people’s livelihoods at risk. One way to mitigate those risks, as the Budget states, is to build out supply chain resilience, so that we’re not reliant on stretched, uncertain supply lines. That means providing a different source for our key materials.
You need the best materials to drive the building of that supply chain resilience, like those used to manufacture semiconductors. If we can get companies like Space Forge scaled and regularly delivering these products, then we can drive an economy that is built on solid foundations for growth. Other startups and innovators can develop innovative technologies that sit on top of what we’ve done, further driving growth and jobs in a way that moves us towards net zero.
Again, it all comes back to driving that clean energy mission.
“Transitioning to net zero and delivering on the government’s clean energy superpower mission is central to ensuring sustainable and resilient long-term growth”.
Some are worried that the shift towards net zero will cost a lot of money without providing direct benefits to people’s lives. I disagree — if we improve the efficiency of existing technologies, like those in telecoms and the grid, by moving them towards less carbon-hungry systems, we can make these systems more efficient and build out the clean energy economy without sacrificing jobs. Ultimately, by exploiting the space environment we can stimulate investment and growth and a better standard of living — in a more sustainable way.
I think the measures laid out in the Budget broadly support this, with missions that are moving us towards thinking about the economy in a new way. It’s not just about the level of investment, but how we approach it. How do we spend that money? The Prime Minister announced at COP-28 that the government is looking to reduce carbon output by 81% by 2035… So the question is, how do we do that? How does the industrial strategy support that? That’s where companies like ours can come in and say we’re building a technology that can start moving you towards that target pretty quickly, but you have to invest!
There’s £975 million up for grabs.
The Budget states two investment figures of “£975 million for the aerospace sector over 5 years and over £2 billion for the automotive sector up to 2030. This funding will support research and development in aerospace technology and the zero-emissions vehicle manufacturing sector and supply chain.”
But is it enough? On the one hand, these numbers are certainly not small, when looking at comparable economies like France, Germany and Italy. They’re putting in at least as much, which makes the UK competitive and keeps us in line with the “Industrial Strategy’s commitment to target interventions to drive growth where the UK has, or could develop, a comparative advantage”. But I don’t think it pushes the country beyond that point.
The UK has a lot of companies like ours: small, innovative, and with new ideas and technologies that need public and private investment to reach the stage of being scalable and commercialisable in the UK. The money available makes that possible and makes us competitive. However, if we really want to push beyond and drive further growth then we need greater levels of sustained investment.
On the other hand, the industries we’re working in are highly capital intensive — they need a lot of funding over sustained periods of time. There is only so much we can do with raising capital from private markets, so having government support to demonstrate that we’re a company of national interest or importance is really valuable for private investors. It also helps to fund things that private investment can’t, like infrastructure, training and capital equipment.
Both the semiconductor and space industries are essentially public-private partnerships. They’re not going to exist unless there’s government support behind them — even though most of the development and innovations are driven by the private sector. In short, having a fund and money clearly set aside gives us something explicit to target, and shows private investors that we can raise capital here, and that the government is willing to support us.
Clearing a pathway to success.
The industries Space Forge sits in are highly regulated and come with huge barriers to entry. Having a clear industrial strategy offers direction and a good indication of what the government intends to do, and where they’re going to put the support. It shows where the infrastructure we need to access is going to be (or not) and what the timelines are for that. It also provides a clear set of policies and regulations to work with, to make planning for the future a lot easier.
For example, our goal to launch and return satellites means we are moving across multiple regulatory boundaries including importing and exporting. We need support and investment from the government in order to navigate that journey smoothly — developing trade networks and agreements with partner countries is not something we can do ourselves. But that’s what we need to sell our product at the end of it. If the government could provide that kind of structure, then businesses like ours have a clear pathway to success. Ultimately, that provides value and jobs to the economy, which will hit those all important growth and net zero targets as laid out in the Budget.
The Budget lays out a strong settlement for the Department for Business and Trade (DBT) of over £500 million in 2024-25 and 2025-26 to support “international trade, attracting foreign direct investment and helping UK businesses expand their global reach”. If we can capitalise on this, alongside the DBT’s extensive overseas network and policy capacity to support trade negotiations, businesses like Space Forge stand to benefit greatly from this settlement.
More time must be spent on how this funding is deployed.
I like to think that rather than investing in technologies, we should be investing in capabilities. So, I’d like to see the government moving to a way of thinking around what capabilities the UK needs to have — then providing a framework to enable that capability to come through. It can be investment, but also: setting up support structures, funding structures, licensing, accessing infrastructure, developing regulations and policies. Anything that can help deliver that capability.
Invest 2035 should provide us with that clear framework, offering a “launchpad for businesses [that] provides the firm foundation for investment businesses have told us they need.” In theory, it should ensure that the investment and funding is allocated in a way that supports the growth of a business, and offers a clear pipeline to delivery. As long as the government is careful about the way that money is allocated, and the rules that come with it, then it can do some real good for companies like ours.
Overall, I’m encouraged by the way of thinking I’ve seen in the Budget announcements. There was a risk that with the way the economy and public finances has been, the knee jerk reaction would be to move to a position of austerity. To pair back public services and investment. But the government seems to have resisted that, acknowledging that they do need to invest in order to grow our new, modern economy. Of course, they could always invest more, but there are ways we can maximise the funding that we do have available. For me, that’s being very clear about the direction we want to go in, and then setting up the structure to support that; setting up a pathway to success.
