Reach for the Stars to Boost Britain's Space Industry
•February 20, 2026
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Companies Mentioned
Why It Matters
The government's retreat highlights the urgency for a new policy framework if Britain hopes to capture a share of the rapidly expanding multi‑billion‑dollar space economy.
Key Takeaways
- •Orbex collapsed after £26m UK funding withdrawn.
- •Global space market valued around £500bn annually.
- •State‑led investments in UK space firms have repeatedly failed.
- •Tax incentives could make UK attractive for space startups.
- •Deregulation and safety‑focused standards may boost industry growth.
Pulse Analysis
The Orbex episode illustrates the pitfalls of relying on direct government capital to nurture high‑risk aerospace ventures. While the £26 million injections were intended to jump‑start a domestic launch capability, the sudden funding withdrawal left the company insolvent, sending it into administration. This pattern mirrors earlier missteps, such as the OneWeb investment, and raises questions about the effectiveness of top‑down financing in an industry where technological timelines and market dynamics are notoriously volatile.
Globally, the space sector has transformed into a trillion‑dollar ecosystem, with commercial satellite constellations, orbital data services, and emerging lunar mining projects driving unprecedented growth. The market’s annual revenue, estimated at £500 billion, dwarfs many traditional industries and promises high‑skill, high‑pay jobs. Competitors like SpaceX and Blue Origin benefit from supportive regulatory environments and aggressive tax strategies, allowing them to reinvest profits rapidly and scale operations. For the UK, missing out on this wave could mean forfeiting a strategic pillar of future economic resilience.
Policy experts suggest a shift toward market‑oriented incentives: zero corporate tax on off‑planet earnings, a reduced 10 percent capital‑gains rate for space‑related exits, and a calibrated relaxation of safety regulations that still protect public welfare. Such measures would position the UK as a tax‑efficient hub for venture‑backed space startups, encouraging foreign and domestic capital to flow into launch services, satellite manufacturing, and related technologies. By fostering a deregulated yet safety‑conscious ecosystem, Britain could leverage its aerospace heritage to become a leading incubator for the next generation of space enterprises.
Reach for the stars to boost Britain's space industry
Orbex was certainly ambitious. It was one of two companies backed by the British government with plans to develop a domestic space industry.
At its peak in 2022, the business was valued at $220 million. It planned to create a commercial rocket that would be launched from its base in Scotland.
But last week the government decided not to take part in the latest funding round, despite putting in £26 million in two earlier rounds, and the company had no choice but to call in the administrators.
It is not the first space project backed by the British government to fail. An earlier investment in OneWeb, a satellite start‑up to rival Starlink, was made under Boris Johnson’s government. That also came to nothing and it had to be merged into France’s Eutelsat. It is not an inspiring record. The government keeps pumping money into research and development, only to watch its investments fail.
The space industry is throwing up some serious opportunities
Yet space is turning into one of the most important industries of the 21st century. The global space industry is already worth an estimated £500 billion a year and it is growing all the time. Elon Musk’s SpaceX is expected to list its shares later this year with a value of $1 trillion or more.
Rivals such as Amazon founder Jeff Bezos’s Blue Origin are growing just as quickly.
From internet connections, to orbital data centres, to mining for raw materials, lots of commercial applications are opening up. It has become clear that space is a serious commercial opportunity, and one where lots of money will be made.
Britain should want to be a part of that. The UK economy is hardly in great shape, but if it is to start growing again then it needs to find a way of building new, high‑tech industries that generate plenty of wealth and well‑paid, high‑skill jobs.
Space is a perfect candidate, especially considering we have a deep heritage in aerospace and engineering, and that we also have the venture‑capital firms to back them once they become established. There should be plenty of British entrepreneurs building new companies in the sector.
Yet we have taken completely the wrong approach. We are relying on the traditional policy of state‑led investment, even though it has failed countless times in the past.
The government tries to identify a company with a promising technology and gives it a little bit of money, then everyone crosses their fingers and hopes it turns into a success, or at least manages to find a buyer with deeper pockets. More often than not, it doesn’t work. The “winner” turns out not to be very good after all, the technology doesn’t quite work as planned, the schedule slips and the government loses interest. The start‑up closes or is sold off. Rinse and repeat.
Britain should do something different. We should radically deregulate to allow innovation. Of course, the industry needs proper safety standards. Nobody wants to see rockets blowing up on the launch pad, especially if it risks lives.
But there is still plenty we could be doing to make the UK the most competitive country in the world to start and build a space company.
Put a rocket under Britain’s space industry
To start with, we could make space profits free of corporation tax. If Britain had a zero rate for operations off‑planet, that would be very attractive for firms around the world. Next, offer a 10 % capital gains tax rate if a space business is listed or sold.
Again, that would make the UK the world’s best place to invest in new space businesses.
Finally, relax the technical regulations. The industry is inherently risky. SpaceX has suffered an explosion, but that has not stopped it from growing. If there are no humans on board, it does not really matter if a spacecraft does not work quite as planned.
We should recognise that we can’t apply the same standards we would to a car or a toaster, and relax the rules accordingly.
It is the one sector where it will pay to be a little less cautious. Let entrepreneurs experiment with what works and what doesn’t. That’s the way the UK could become a world leader in the space industry.
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