The space catch-up

By Manfred Hader

Space-based solutions have become indispensable for modern economies like Germany's. They help accelerate innovation and create new markets, and they ensure resilient infrastructure and a resilient society. Indeed, navigation signals and time signals from space play a key role in modern economies, be that in logistics and supply chain management, in new mobility solutions and location-based apps, or in synchronizing banks and stock markets through precise time stamps.

If satellite navigation systems were to fail, for example, the consequences would be severe. An analysis for the UK economy revealed that a disruption lasting just 24 hours would cost that nation more than EUR 1.6 billion. The damage for Germany would likely be even greater due to the country's bigger economic output. Equally as important as navigation signals from space are secure satellite communications and the supply of data provided by Earth observation satellites for both civilian and military purposes.

The space economy is closely interlinked with security policy

Space also holds essential, strategic importance for Europe's defense capabilities. Space services are by definition dual use, meaning they can always be used for both military and civilian purposes. For example, the same satellite image that a farmer uses to assess soil conditions can be used for military analysis to check whether the terrain is passable for heavy vehicles.

Private stakeholders are growing in importance

A new race has thus begun for access to space and the exploitation of this access. On a daily basis, governments and a steadily growing group of companies are testing increasingly powerful rocket systems, planning or operating large satellite constellations, revolutionizing launches, and sending more and more complex robot missions into space. Private stakeholders are growing ever more important in this power struggle, as is the close integration of the space economy with other industries. They are all players in the new space economy and the goal of all of them is the same: to dominate the infrastructure in space and thus secure pole position in defense and the economy for the coming decades.

A rapidly growing space market

The space market is divided into upstream and downstream. The upstream market comprises production of the infrastructure required on Earth and in space , from launch pads and rockets to satellites. The downstream market consists of space-based solutions – positioning, navigation & timing, Earth observation, and satellite communications. With a market volume of around EUR 408 billion in 2024, the downstream market was significantly larger than the upstream market, which amounted to EUR 63 billion. Based on a projected growth rate of 9.3%, the upstream and downstream markets together will account for a market volume of around EUR 2 trillion in 2040.

The US dominates

In the United States, space activity is more dynamic than anywhere else in the world as a result of the influence of private stakeholders on the market. Companies like SpaceX and Blue Origin, with their founders Elon Musk and Jeff Bezos, are investing billions in their space ambitions, aiming for the Moon and Mars, and are receiving support from their government in the form of contracts. Their results prove them right. SpaceX dominates satellite communications with Starlink and is by some distance the global technology leader in reusable rockets. Not only that, but SpaceX is NASA's most important service provider.

Europe risks falling behind

Impressive progress indeed, but if we look at Europe and Germany, it is clear that the region will not be able to keep up with global developments if current trends continue. The projected growth is a mere 6.7% (Europe) and 6.4% (Germany). This would bring Europe's global market share down from 17% in 2024 to 12% in 2040.

More investment needed

What needs to happen for Europe to sustain or even expand its market share? One thing is for sure: investment must increase. In our best-case scenario, which assumes that Europe increases its share in the global space market from 17% today to 25% in 2040, Germany's public investment in space would need to rise by EUR 93 billion by 2040.

However, more money alone will not resolve the challenges.

Structural change is equally necessary. What is required is:

• A new mindset among stakeholders. Policymakers, business and the wider public must become aware of the enormous economic potential of space and its importance for the growth of industry as a whole. There must also be a greater willingness to take risks to quickly turn good ideas into successes.
• A smart funding policy. The US has shown that a commercial space industry flourishes when the government awards anchor contracts to innovative private stakeholders. With anchor contracts, the government retains control while supporting the growth of promising European companies.
• A strategic investment focus. Investments must not only be on the right scale, they must also pursue the right goals. And that means making Germany and Europe strong and independent. The space industry has a crucial role to play in Europe's efforts to expand its own defense capabilities. And since space goods and services are dual use, the civilian economy will also benefit.
• More agile structures and processes. The fragmented European landscape of stakeholders must coordinate faster and more effectively if it wants to operate on an equal footing with global competitors. Space agencies must put the commercial potential of space front and center of their activities. European space law must not slow the momentum of the new space industry but must instead serve as an enabler.
• European and German space sovereignty. Europe must not be dependent on infrastructure and services from the US. Besides the European spaceport in French Guiana, launch capacities are also needed in continental Europe. Europe must be at the forefront of all future technologies. Where there are deficits today, leading positions in technologies will need to be achieved by leapfrogging.
• A grand vision. People must be inspired to embrace space and the immense potential it holds. Making Europe the world's leading space continent by 2040 and thereby achieving a renaissance of its core strength, industry, would send a strong signal that Europe is serious about its space ambitions. To this end, Europe must define milestones that people can see and understand – and it must achieve them.

Register now to access the full study and explore the "The space catch-up". Furthermore, you get regular news and updates directly in your inbox.