On 22nd July, Wednesday, it emerged that Alok Sharma overrode official concerns while the government took a £400m stake in the failed satellite company OneWeb.
A senior official had warned the business secretary about a “high likelihood” that further taxpayer funding would be required to complete the company’s satellite constellation before it became a profitable business. The UK is part of a consortium with India’s Bharti Global which won a bidding war for the company. But the company went bankrupt earlier this year while trying to develop a space network to deliver broadband.
Sam Beckett, the acting permanent secretary at the Department for Business, Energy and Industrial Strategy (BEIS) had flagged up serious concerns about the “unusual” purchase which had “significant risks” in a letter sent initially in June. She said,
“I completely understand your, the prime minister’s and the chancellor’s interest in wider benefits such as the potential long-term geopolitical advantages for foreign policy and soft power that would come with sovereign ownership of a fleet of satellites. Moreover, I do not underestimate the potential opportunity that this investment represents for UK interests globally.
“It would be the first megaconstellation operator, if it succeeds, and would have the potential to connect millions of people, in particular those in remote, rural locations without broadband access.
“While in one scenario we could get a 20% return, the central case is marginal and there are significant downside risks, including that venture capital investments of this sort can fail, with the consequence that all the value of the equity can be lost.”
But the business secretary insisted that “even with substantial haircuts to OneWeb’s base case financial projections the investment would have a positive return”.
As well as the benefits of improved broadband access, the scheme could signal “UK ambition and influence on the global stage”.
Investments in this company was part of a government campaign to make “high-risk, high-payoff” investments of the kind advocated by Dominic Cummings. Ministers hope it will compensate for the loss of access to the EU’s Galileo programme after Brexit. The UK and mobile operator Bharti are each investing $500m (£400m), with Britain acquiring a “significant equity stake” in the company.
It will enable OneWeb, which has its headquarters in London and a manufacturing base in Florida, to complete the construction of a constellation of low Earth orbit satellites providing enhanced broadband and other services to countries around the world.
