Business Secretary Alok Sharma overrode the concerns of his senior official as the Government took a £400 million stake in the failed satellite company OneWeb.
The UK is part of a consortium with India’s Bharti Global which won a bidding war for the company earlier this month, despite it going bankrupt in March amid the coronavirus pandemic, while trying to develop a space network to deliver broadband.
If successful, it would be the first megaconsellation, which is a grouping of satellites that could provide millions of people with broadband.
Ministers hope it will compensate for the loss of access to the EU’s Galileo programme in the wake of Brexit.
But Sam Beckett, the acting permanent secretary at the Department for Business, Energy and Industrial Strategy raised serious concerns about the purchase.
MP’s have now launched an inquiry into the move, after Parliament’s business committee chief Darren Jones branded the deal a gamble.
Just 74 satellites in an initial network of 648 had been launched when OneWeb announced it was seeking bankruptcy protection – with most experts believing a further £2.35 billion at least is needed to bring the full constellation into use.
Business Secretary Alok Sharma ignored civil servant warning to push ahead with the £400 million purchase of a bankrupt satellite firm
Taking off: The Government will invest about £400m in Oneweb and take a significant share in the company
However, Mr Sharma overruled the concerns of Ms Beckett to push ahead with the deal.
Ms Beckett had told the minsiter that an assessment by the UK Space Agency had identified ‘substantial technical and operational hurdles’ that OneWeb would need to overcome in order to become a ‘viable and profitable business’.
There was a ‘high likelihood’ that further taxpayer funding would be required to complete OneWeb’s satellite constellation.
Ms Beckett 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.’
But it was an ‘unusual’ purchase for government and there were significant risks.
‘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.’
Sam Beckett, the acting permanent secretary at the Department for Business, Energy and Industrial Strategy raised serious concerns about the purchase
A Soyuz-2.1b launch vehicle takes-off with another 34 OneWeb satellites from the Baikonur Cosmodrome in Kazakhstan
A scale model of an Airbus OneWeb satellite, which ministers hope can help compensate for the loss of access to the EU’s Galileo programme in the wake of Brexit
She said he could not be sure that the investment met Whitehall’s strict value-for-money requirements and so requested a formal order, a ministerial direction, from Mr Sharma to proceed.
Mr Sharma told her 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’.
Darren Jones, chairman of the Commons Business, Energy and Industrial Strategy Committee said: ‘The Secretary of State’s use of a ministerial direction to push through the purchase of a stake in OneWeb against the advice of his own permanent secretary heightens concerns around this investment and about the prospects of this delivering UK jobs and value for taxpayers’ money.
‘It also prompts further questions about how the Government arrived at this decision and how it came to plump for this largely US-based bankrupt satellite company.’
He said that ‘now more than ever’, the Government needs to ensure that its spending taxpayers’ money as ‘prudently and wisely as possible’.
‘Using nearly half a billion pounds of taxpayers’ money to gamble on a ‘commercial opportunity’ whilst still failing to support manufacturing jobs with a sector deal is both troubling and concerning.’
The UK and mobile operator Bharti are each investing 500 million US dollars (£400 million), 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.