As we start the new year, UKspace considers some of the possible geopolitical, regulatory and market activities – nationally and internationally – that may impact the UK space industry.
Geopolitics
Geopolitics will impact the UK space environment both in terms of policy implications and commercial development. As we head towards the US mid-term elections in November 2026, the Trump administration will continue to take unprecedented actions to try and mitigate the electoral fallout of unpopular policies. The actions he takes in the run up to November will impact allies and partners both directly and indirectly as he tries to convey ‘strong man’ images, and the resulting volatility will hit global markets including the space sector. Successful companies will be those that have priced in these extreme levels of volatility and insulated themselves against the fallout.
In the ‘perfect storm’ category for the UK, we will also see issues in Europe as populist parties continue to do well and the integrity of the bloc will be challenged by those who see national priorities as more important in turbulent times. The ESA CMin25 appeared to buck the trend as member states lined up to pledge their support, but as France and Germany continue their domestic space industry growth plans, we can expect ESA to come under some pressure to move towards EU priorities, potentially at the expense of the UK if we have not completed a successful ‘reset’ with the EU.
Russia will continue to pummel Ukraine and it isn’t clear that there will be the political will to resolve this conflict within the next 12 months. Meanwhile, this could suit the Chinese who will want NATO to be distracted while they practise the blockade that will target Taiwan in 2027, (as announced in many speeches by Xi Jinping).
Meanwhile Keir Starmer will continue to be under pressure as the global turmoil buffets his attempts to turn the supertanker of the UK economy. Fortunately for him, no one else within Labour has any clear alternative plan, but unfortunately for him, other parties, in the luxury of opposition, will articulate seemingly simple solutions so he can expect poor results at any polls in 2026. Until the economy turns a corner, it is probable that any government in the UK would struggle to appeal to the people.
Impact on Space
Space Race
The publication of the US space policy on 18 December gives a very clear picture of the priorities and pace with which the US intends to challenge the Chinese threat to their interests in space. Mention is made of allies and partners, so there could be a role for the UK, but this will require levels of investment that might not be possible in the economic conditions that the volatility unleashed for the mid-terms brings. 2026 could be the year that the UK is forced to choose between security partners in the EU and our long-term partnership with the US. Focusing on NATO will likely be the UK’s way of navigating this delicate path.
Mega constellations, sovereign satcom, D2D, IAMD and commercial space
Jeff Bezos and the Europeans will continue to chase Starlink’s success, and the impact of those efforts will benefit the sector in general. In 2026, expect contracts, subsidies and spectrum/regulatory decisions to matter as much as pure tech performance. However, the biggest development of 2026 will be the transition from civil to military for those suppliers who can bring something to the various missile defence programmes – US Golden Dome, Europe’s Space Shield etc. The sensors and effectors required for these programmes will drive investment in space domain awareness, as well as PNT, and the enablers for that such as ISAM and the regulation required to convert civil assets to military ones.
Regulation
The US Space Policy makes it clear that they have no intention of doing things slowly and evolutionary. Regulation will need to develop quickly if it is to keep pace with the ambitious timeframe laid out in the document. This is highly unlikely to happen and so we will probably see regulation brought in after the fact – specifically to do with controls and restrictions on the use of the lunar commons. 2026 will be the final opportunity to secure agreements around general principals before the diggers begin to arrive on the Moon.
The UK will plod on with its slow development of an outcomes-based regulatory regime (unless lawmakers lose patience and move forward with even more hands-off proposals) and nothing will be finally decided until after the completion of the DSIT/UKSA merger in late April. Meanwhile the EU will be moving ahead with the EU Space Act but in more of a zig zag than a linear fashion as first Cyprus and then Ireland take over the Presidency. It isn’t clear whether Cyprus favours prescription over outcomes-based regulation, but Ireland has been vocal in supporting the original aims of harmonising the fragmentation of regulation in order to promote EU prosperity. These fall somewhat at odds with the Danish amendments recently published. So we can expect to revisit the intent of the Act even as the implementation is considered over the coming year.
Market
SpaceX may ‘IPO’ which will have a knock-on effect on the sector. 2026 could be a “risk-on” year for space equities again, but with sharper scrutiny on unit economics (launch cadence, satellite capex, customer concentration) as SpaceX sets the pace. China will be there too as 2026 likely brings more Chinese launch capacity and price pressure, plus faster iteration cycles as capital access improves. Their focus on reusability will continue to push the market in that direction which could be good for the sustainable space campaign.
The UK will, theoretically, enter the launch market with the expected first launch from Saxa Vord, as HMG keeps reiterating the importance of launch from UK soil. To fully capitalise upon the opportunity, they will need to do what is necessary to make it happen over and above expecting industry to see a value to doing this for nothing more than the goodwill of the Government. The development of hypersonics will continue to drive innovation and the UK launch community could benefit from the investments that are common, such as propulsion testing facilities and regulatory regimes. Elsewhere, the race to space will see companies tied to launch services, range modernisation, ground stations and supply chain throughput possibly outperform “cool demo” stories.
As mentioned above, the market will be good for SDA, PNT and other sensor-to-shooter network enablers. HMG will invest in the Digital Targeting Web and so industry will have the opportunity to direct its innovation into areas that will attract investment. The UK space sector will see a shift from civil to military and there will be regulatory reform (Defence Readiness Bill) to enable this.
A major development in 2026 will be the development of ‘Project Bromo’ – the merger of Airbus, Leonardo and Thales. If the merger is to make sense, it will likely mean a focus on eliminating fragmentation and duplication. With the centre of gravity of key security programmes residing in the EU and billions in the plan in both Germany and France, HMG will need to negotiate firm undertakings to ensure that programmes of significance and relevance remain in the UK. We can expect to see ‘white knights’ circulating in this environment.
The other major event in the UK will be the merger between DSIT and the UKSA and the “New Cross-Government Publication” of priorities. It is hoped that this will bring the One Government approach to space that industry (and numerous Select Committee reviews) feels is so desperately needed. But evidence to date is that it is not yet there. Once the HR changes have been completed, it will be easier to see where the strategic priorities will lie – and this will need support from across other government users of space such as the MOD, Cabinet Office, DEFRA, DESNZ, FCDO and DBT. These departments must be woven into the fabric of the intended new publication – otherwise supply and demand decisions will continue to be made in a vacuum.