UK is late to lift off as the space race becomes a bubble

Newquay is ambitious but Britain will not be able to match the spending power of the US, China and EU

Well, at least it marks a step forward from fishing, tourism and pasties. As Cornwall makes its debut in the space race with the launch of Virgin Orbit’s “Start Me Up” mission from the spaceport in Newquay, some are hoping it will just be the start of a thriving inter-planetary industry in the West Country.

At this rate, within a decade or two, astronauts will be beaming in and out of Truro, rockets will be whizzing in and out of Falmouth and the bars of St Ives will be filling up with travellers from all over the galaxy. Heck, perhaps particle accelerators or some other technology will even fix the legendary traffic jams on the A30.

But while the space industry is booming, with lots of venture capital money pouring into the technology and commercial applications starting to emerge, Cornwall and the UK are too late to this race. The valuations are being pumped up to absurd levels, creating a bubble that will burst spectacularly; there is too much competition, with space start-ups emerging all over the place; and in the medium term, it will be impossible to compete without military and government backing, and the UK will never be able to match the spending power of the United States, China and the European Union.

Britain has far more promising technologies it should be concentrating on – and space is just a distraction from that.

Newquay’s fledgling space port is an ambitious project. It could be just the start of a major new industry from what has traditionally been one of the poorer parts of the UK. After all, the space industry is no longer the stuff of science fiction. It is estimated to be worth more than $400bn (£330bn) globally and some huge companies are starting to emerge.

Elon Musk’s Spacex is now worth $137bn, according to the latest valuation (and the way things are going might soon be worth more than Tesla). Jeff Bezos’s Blue Origin is potentially worth just as much and Sir Richard Branson’s Virgin Galactic is coming up behind them. Even while other tech stocks have been crashing, space keeps on getting more and more exciting and the UK might well be able to carve out a slice of that. There is lots of money to be made and the market is still wide open.

The trouble is, Cornwall is not the natural home for that and neither is the UK. There are three big problems. First, valuations are becoming absurd, with the big venture capital firms cranking them up to crazy levels. On its latest valuation, Spacex is the world’s largest “unicorn”, as privately held tech companies with a value of more than $1bn are known. It is worth more than Boeing or Lockheed Martin, both companies with a long record of pioneering both aviation and space technology.

We have seen this script before, with companies such as Wework and FTX. Successive funding rounds are used by investors to pump valuations higher and higher. True, it creates a lot of momentum, and makes it easier to raise cash for building new stuff, but it also very quickly turns into a bubble, with businesses forced to raise the hype to ever more hysterical levels, until eventually the whole thing comes crashing down. If a bubble bursts, as it probably will one day, then it will be very messy and the whole industry will be dragged down.

Next, the competition is intense. New space-themed start-ups are emerging all the time. Only last week, the French company Gamma Space launched the first solar sail. Last year, Relativity Space raised $650m in funding for a 3D-printed rocket and Astranis Space Technologies raised $250m at a $1.4bn valuation to build smaller, more compact satellites.

In total, funding for space start-ups rose 61pc last year, and that was amid a crash of tech valuations, with funding for many new companies drying up completely. In reality, this is going to be a very crowded market with lots of new companies competing for a slice of a market that, to put it mildly, is still very uncertain.

Finally, in the medium term it will be impossible to compete without substantial military and government backing. Private companies can flourish, just as they have in aerospace, but they will be critically dependent on state-backed, or at least approved, orders.

The UK will never be able to match the spending of the US, China, or the EU, and yet each one of those blocs will be reluctant to place any more than very minor orders in Britain. In this race, we are out of our league and we might as well recognise that right at the start.

There will be a substantial space economy over the next couple of decades, even if it will probably not quite reach the size that the VC valuation models depend on now. There may even be niches that enterprising British companies can carve out for themselves. But the UK has far more promising technologies it should concentrate on.

Life sciences, artificial intelligence, gene editing and nuclear fusion are all industries where we can potentially make a genuine impact and not spend billions trying to keep up with far larger economies. Selling pasties and ice cream to surfers and tourists may not be nearly as exciting as blasting rockets into space. But it is a far better bet for the Cornish economy – because in truth it is not about to become an intergalactic hub any time soon.