Virgin Orbit bankruptcy: why the UK's spaceport industry may still have a bright future

Virgin Orbit bankruptcy: why the UK's spaceport industry may still have a bright future
by Steffi Paladini |Reader in Economics and Global Security, BCU
Birmingham UK (SPX) Apr 18, 2023

The UK's space sector has shown a remarkable dynamism in the past few years. According to the latest official figures, the sector's revenue grew about 5.1% in 2021, outpacing the global space industry. This is even more impressive considering the UK's economy declined over the same period.

And there is more to it than just the numbers. The new regulatory framework (the Space Industry Act 2018) intends to attract commercial launches from domestic and international companies, and help the UK join the exclusive club of countries with spaceport ground launch facilities.

The recent news that Virgin Orbit had filed for bankruptcy months after its failed rocket launch from Cornwall Airport Newquay has left a question mark hanging over the future of the UK space sector in general, and the spaceport business in particular. However, for the country's ambitions of becoming a commercial spaceport powerhouse, as a space industry researcher I think little, if anything, has changed.

Virgin Orbit was founded in 2017 to provide a launch service for smaller satellites. It is a spin-off from Virgin Galactic, the space tourism company that aims to offer space flights for paying customers in the future (celebrities such as Angelina Jolie are rumoured to have put down deposits for a seat).

The highly anticipated launch of Virgin Orbit's LauncherOne rocket in January 2023 was supposed to propel the UK into a new age of space travel. But the rocket failed, lost its nine-satellite payload, and didn't make it to orbit (although it did technically reach space, as it ascended to 180km before breaking up). One of the companies that lost a satellite was Horizon Technologies, which provides intelligence services to governments.

Having failed to raise additional funding from private investors, Virgin Orbit then laid off the majority of its employees and filed for bankruptcy on April 4 2023. It's easy to blame the failed rocket launch for its bankruptcy, but there's more to it than that.

Risk and reward
Space is a high-risk, high-reward industry. Risk must be factored in from the start, which explains why government support is needed. Failure rate is high across all missions and types of space flight.

Even on Earth, things are complex - as the explosion of the usually reliable Ariane 5 rocket showed us in 1996, when a software design error caused it to fail 30 seconds after lift-off. Ariane 5, considered the workhorse of European space travel, was the most expensive rocket failure in history, costing US$370 million ( Pounds 298 million).

Any rocket is likely to experience technical issues. The destruction of the European Space Agency's new Vega C rocket in December 2022, caused by a faulty part, was another reminder. Any investor in the space industry knows what they're getting into.

A few missions are already scheduled to launch from other UK spaceports. SaxaVord Spaceport in Scotland is due to host the UK Space Agency's UK Pathfinder Launch mission - the first vertical small-satellite launch from UK soil - from its new launchpad in the Shetland Isles (scheduled for December 2023).

Scotland also boasts Space Hub Sutherland with its Orbex Prime, a micro-launch vehicle developed for small satellites. Orbex is expected to lift off for the first time in 2023, delivering small satellites into low-Earth orbit.

There are currently only limited alternatives in Europe: Esrange launchpad in Sweden opened in January 2023, and Norway's Andoya site hosted a Nasa rocket launch in May 2022.

Grounds for concern
This does not mean there aren't any grounds for concern, however. The international outlook for the hi-tech sector is less favourable, with rising interest rates worldwide squeezing the companies that need funding the most.

The failure of Silicon Valley Bank (SVB), which specialised in startup corporate clients, sent shockwaves through the space sector in March 2023, including established launch companies such as Rocket Lab and Astra Space.

Both companies risked seeing some of their SVB deposits (US$38 million for Rocket Lab, and 15% of Astra Space's current cash and cash equivalents) seized in bankruptcy procedures. The US government's safeguards relieved the pressure on them. But the global, inflation-related issues that caused the bank's bankruptcy are still there, and could get worse.

Virgin Galactic's share price target was recently downgraded by analysts for reasons including reduced availability of seats for prospective passengers (less capacity than originally planned) and projected financial losses until the company's fleet is completed in 2026.

While the outlook for its sister company Virgin Orbit appears bleak, space companies have proved remarkably resilient in the past, and more than one has come back from the brink.

But whatever happens to Virgin Orbit, 2023 may still prove a crucial year for the UK's chances of becoming a new commercial superpower in the space sector. Successful launches in Scotland could help attract more investors. Alternatively, more failed launches may signal to businesses that the UK is not (yet) a viable competitor to more established sites in the US and elsewhere.