From reusable rockets to small satellites, the space sector has seen unprecedented growth and innovation over the past couple of years. Joss Crewdson, Director at Granter and CFO at the startup Space Power, talks to us about the finances of the aerospace industry, innovation in satellite technology, and aerospace.
“My role is essentially an advisory one" he tells us, "I am a chartered accountant with the Institute of Chartered Accountants in England and Wales, and my primary role at Granter is to bring accounting, tax and compliance expertise to bear as Granter grows and looks to expand its offering".
Although Joss Crewdson helps Granter as a chartered accountant, his work at Space Power means that he can also bring his insights from the aerospace industry.
“[At Space Power], we are essentially trying to provide auxiliary power to satellites in Low Earth Orbit using LASER beams from other satellites,” says Joss, “We are particularly focused on small satellites of less than 500kg, as these are the most limited in terms of their power generation capability. This is also one of the fastest growing areas of the Space Economy.”
The space sector comes with many opportunities and challenges from both a financial and R&D perspective, and with Joss’ expertise in the industry and our experience in claims and consultancy, we can help aerospace companies with expert consulting and finances.
The space industry is growing at an unprecedented rate. More satellites have been launched in the last two years than ever, with 69% of small satellites launched in 2020 and a further compound 60% in 2021. With projects hitting the headlines like Starlink and SpaceX’s Falcon 9, the sector is undergoing a massive period of innovation and spending, making aerospace a sector rich with R&D.
With this exponential growth, innovations into space are not just limited to the big businesses like SpaceX but smaller businesses also joining this newest space race.
“There’s a lot of new aerospace companies popping up and spending lots of money on developing new technologies, and on applying those new technologies to satellites,” says Joss, “It’s a great area for Granter to be targeting because there’s money pouring into it. Things are starting to take off.”
In 2002, 3% of venture capital was invested in space companies, an equivalent of $17 billion. That number is poised to go up with increasing venture capital looking to the skies for future investments.
“It is now at the turning point. If you look at the number of satellites being launched, and you look at the expenditure, it’s just exponential over the past couple of years,” adds Joss, “And that’s driven by some key developments in the industry, like flexible launching, and mass produced satellites, which means the costs are coming down. At the same time, you also have the demand for satellite data exploding.”
With R&D in action, things get interesting from a tax perspective. As companies are funnelling funding into research, there’s an opportunity for tax breaks for many companies. However, there is also considerable grant funding in the space industry, which is handled a little differently.
“There’s also a lot of grant funding pouring into space. When you are spending money from grant funds, you can’t claim any additional tax benefits from that,” Joss points out, “It’s therefore a strategic decision for businesses about whether they want to spend time and resources hunting down non-dilutive grant funding, or whether they want the low-risk and immediate return of capital through R&D tax credits. It will also be interesting to see over the coming years how the government chooses to allocate its support to the space sector and how businesses respond to that.”
Joss thinks it’s an exciting time to be a player in the industry, even from an accounting perspective. He is joining Granter after becoming a chartered accountant, alongside his current work with Space Power.
“I’d done my chartered accountancy and was getting to the point where I was quite keen to find some other stuff to do,” he says, “Granter were looking for someone with some accounting and finance expertise both from a kind of strategic point of view as well as operational. I was looking to expand my portfolio of things I was doing, so it made complete sense to join. I am there really as a sounding board for more of the financial decisions within the business as well as providing day-to-day support around the more fiddly accounting bits.”
Although Granter is no stranger to R&D-related claims in various industries, from agriculture and agritech to the aircraft sector within the aerospace industry, we have also started to find clients in the space sector and are looking to expand their portfolio.
“There is a symbiotic relationship between what we do at Granter and the people we interact with within the aerospace and space sectors, as well as deep tech and what I’m doing,” says Joss, “There is huge amounts of R&D expenditure going on across the industry, and much of the operational expenditure that gets spent in the space industry qualifies for this kind of tax relief. Although Granter’s intention of bringing me on board was to get hold of some accounting expertise because there are quite exciting plans for the business to expand, my links to the aerospace industry allows both Granter and Space Power to forge a mutually beneficial relationship going forwards.”
The space sector, particularly within Europe, comprises a compact ecosystem of players.
“Everyone largely seems to know each other, and start-ups, large corporates, the public sector and space financiers are all working closely together to achieve common goals, something not-often seen in other sectors,” says Joss, “There are not many industries where the names that get bandied around, for example in the news outlets reporting, are known more or less by everyone in the industry. I think that’s quite beneficial when you’re starting as a young business because it’s not too overwhelming in terms of the investors and customers out there.”
One of the strengths of the upcoming space sector is that it has a small yet fast-growing set of investors and customers coming into the space.
“We have a lot of new investors and customers pouring in. The hope for many small businesses within the aerospace sector is that if you can find your feet now, just as the market is really starting to heat up, then you can be in a position to grow with the space,” adds Joss.
With all the recent growth and new companies getting ready to launch into the space sector, the question of financing is at the forefront of discussions, particularly for smaller space startups.
Although grants are a good route for new businesses looking to make their mark on R&D related to space, they come with their drawbacks. Grants require a proposal application and can take months, if not years, to be approved and come with strict spending restrictions based on the proposal. They also do not qualify for R&D tax payments. However, even those who receive grant funding can still benefit from R&D tax claims.
“Most grant funds do come with a prescription that you must match it with your own funds, whether that’s half of it or 25%. It’s common to see those two numbers. A project will rarely be funded entirely through grant funding alone. So, there are always opportunities to claim the R&D money back with your own money that’s been spent,” says Joss.
However, although it can be a challenge to raise independent funds, sometimes claiming tax benefits over grants could be preferable for a business.
The space sector comes with more challenges, to begin with, when compared to more Earth-bound industries, which is why it’s such an exciting industry to start with. But beyond the scientific and technical challenges facing engineers and scientists in the aerospace industry, there are challenges in sustainability, financing, and even those concerning red tape to contend with as well.
However, a lack of space is not an issue that would come to mind instantly when thinking about putting objects into space.
“People think of space as being a big black vacuum, but actually, particularly in Low Earth Orbit and Sun synchronous polar orbits, things are becoming very congested already,” says Joss, “There is a worry that as more and more space debris starts to build up, we limit ourselves in terms of what we can do in space before we even get started.”
Space debris is a massive concern for the public sector, especially from a sustainability perspective. It is also an area that new businesses could tap into with solutions, especially with available funding opportunities.
“Does everyone know, for example, what the key people within the industry are doing and trying to do about it? Are they aware of what funding is available out there that supports businesses trying to do this? Granter could share this kind of insight with businesses once a relationship is established. It doesn’t have to be about R&D tax claims. There’s more to being a tax advisor than that,” adds Joss.
And more Earth-born challenges can impact the space industry, especially since the industry is such a new player in the field. One concern is the distinct lack of regulation at present.
“I think this is a key concern for investors,” Joss says, “In particular, because they are worried about the changes to regulations that could render their investments completely worthless. So, that’s an area the public sector is trying to work on. Progress has been very slow and actually working up standards for how orbiting bodies interact with each other and how companies conduct business in space, for example, how the insurance will work, etc., all of this is being built from the ground up. Businesses have to come together and establish standards. So, that’s another key area where people need to be wary of: Are you at risk of spending a lot of money on creating something that in five years could be rendered by new regulations as worthless, useless, or just banned?”
Granter’s consultants can help businesses with advice about navigating any new regulations that come in, especially those of a financial nature or concern, or even point clients in the direction of experts who can advise further.
“The more knowledge the tax advisor has of the industry, the more they can provide accurate and solid advice around claiming R&D and making tax claims,” says Joss, “But also what’s great about Granter is they are a business that looks forward to the possibilities of what a business is doing and look closely into their R&D practices. Because they also build up a network through their clients, they can also think about what additional benefits beyond tax advice they can provide for their customers. Having expertise within all the industries that Granter looks at closely, embedding themselves in the ecosystem of that industry and knowing all the key players, all the businesses and what challenges they face, they can essentially provide the most helpful insight to them.”
As Granter continues to work with a wide range of businesses, we’ll gain a more holistic view of various challenges and solutions.
“Granter’s purpose isn’t to become a consultant on space, but knowing exactly what’s going on in the industry does position Granter much more firmly to provide advice, whether it’s ad hoc or under more contractual terms,” concludes Joss, “As Granter begins to touch more businesses within the industry, we will have more and more accrued knowledge that is quite specific and not really available to the market right now.”
With recent developments in massive projects like Starlink hitting the news, and the rate of innovation that is happening, it’ll be interesting to see where the aerospace industry will go.
“Right now, there is a trend towards sending up,” says Joss, “For example, sending up much larger numbers of small satellites to provide a global network coverage rather than sending up one big one.”
There is a rich market for business growth within the applications of the small satellites. Starlink sending up thousands of satellites to support their broadband network is the most well-known example, but there are plans for a huge number of mega-constellations to support the massive growth in demand for data for terrestrial trends like 5G and 6G, the internet of things and machine-to-machine communication.
“Those are the two key demand trends that are driving the growth in the satellite marketplace,” adds Joss, “For example, 95% of all launches last year were small satellites, and the industry deems them as the best way to solve this exploding demand for data. Whether that’s for communication, those are very data-heavy trends. I have seen figures projecting 70 billion connected devices projected within the next few years alone.”
Machine-to-machine communication cuts out the need for any human interaction with that data, which can enhance the efficiency of communication networks. Satellite data can be used to support massive growth when it comes to the demand for terrestrial trends like 5G or 6G, machine-to-machine communication, and Internet of Things.
Satellites can also provide internet for those living and working in hard-to-reach places, which is another massive area for potential growth.
“There are 2 billion people in the world without internet access. That is a huge untapped market and putting in place the infrastructure to provide internet for those people, as crazy as it sounds, may well be cheaper and more feasible in space than on the ground - time will tell.”
Another exciting development in the industry is the in-orbit services market. This is when other satellites provide services in space, such as refuelling, debris removal, in-orbit repair and manufacturing, and in-orbit energy transmission.
“It’s a growing area within the aerospace industry,” says Joss, “This is a key area that’s hopefully going to accelerate growth even further because once you can get additional fuel or power for your satellite in space, or repair a satellite while it’s still orbiting, you extend mission time significantly and reduce costs. If it’s done correctly, it will help accelerate the aerospace industry in very interesting ways. A fantastic and very relevant example of this would be the UK based Space Energy Initiative, of which Space Power is a founding member, who are working towards providing power to terrestrial grids by beaming energy back down to earth. In order to make this incredible project a reality, in-orbit manufacturing needs to get to the point where a solar farm could be constructed in situ by autonomous robots.”
An area that’s seeing massive growth is Earth observation data being used in areas like climate protection, agriculture, and asset tracking. The use of earth imaging in a large variety of industries is taking off.
Also, innovations in the industry, like SpaceX’s Falcon 9, mean that it’s also becoming increasingly cheaper to put satellites into space, which enables the sector to keep up with this increasing demand for satellite data more easily.
“SpaceX’s Falcon 9’s reusable rockets have opened the doors for the first spaceflight for cheap space missions,” concludes Joss, “Because reusable rockets now mean that it’s actually quite cheap, comparatively, to launch a satellite now. Before, we were talking several million to launch a small satellite, but your launch costs for a CubeSat can be a couple of hundred grand now, which is significantly less.”
Of course, with new technologies and industry growth, sustainability is an important concern. Key initiatives are being operated to make the space sector more sustainable, like space debris removal.
“I think that’s something a lot of businesses are now looking at,” says Joss, “If you are a new space business, you want to think about how your products, how your satellites, contribute to that agenda. I think there will be more stringent regulations put on satellite launches in the future mandating specific deorbiting practices as part of every mission.”
Another issue concerning sustainability is the materials used in the satellites. Satellites use a lot of rare Earth materials, for example in photovoltaic cells used to harvest solar energy, so sending a lot of satellites up can also be a concern. Technology like laser energy transmission between satellites could help by reducing the need for solar cells.
“You can reduce the size of your photovoltaic cells and the number of satellites in your constellations,” Joss says when talking about the laser transmission innovations used in Space Power to recharge satellites, “You can use fewer satellites to do the same amount of data processing or imagery capture. That way, you can help preserve the ecosystem by reducing space debris and not taking too many natural resources away from the Earth through inefficient space missions. These are the two main sustainability points that I see.”
The innovation behind reusable rockets also can help reduce the waste of materials being sent into space, as boosters can be returned and reused for future missions.
“I think that’s the main issue other than debris, you build a rocket and then it gets burned up in the atmosphere, and you’re wasting this material,” adds Joss, “With reusable rockets, you can reuse parts again. You don’t need to rebuild the rocket each time you want to launch.”
If you’re a company working in aerospace or R&D in any of our other verticals, and you are uncertain about how to make tax claims, then we can help you navigate the process. We can also help with consulting in your industry from a financial or even an R&D point of view. See how much you can claim with our benefit calculator or contact us today to find out how you can claim money back for your R&D projects.
