OneWeb: Minister overrode warning about £400m investment

OneWeb has a factory in Florida with the capacity produce two satellites a day

MPs have launched an inquiry into the government's $500m (£400m) investment in bankrupt satellite firm OneWeb, amid disclosure that a top civil servant warned that taxpayers could lose out.

The government took a stake in the satellite broadband company as part of a post-Brexit space strategy.

It emerged on Wednesday that an acting permanent secretary raised concerns, warning that the deal was "unusual".

Parliament's business committee chief Darren Jones called the deal a gamble.

Mr Jones, chairman of the Business, Energy and Industrial Strategy Committee, said in a statement that news of the permanent secretary's worries "heightens concerns around this investment" and "prompts further questions about how the government… came to plump for this largely US-based bankrupt satellite company".

He went on to say that "using nearly half a billion pounds of taxpayer money to gamble on a 'commercial opportunity' whilst still failing to support manufacturing jobs with a sector deal is both troubling and concerning."

• UK takes £400m stake in satellite firm OneWeb

• UK space company blames coronavirus for collapse

OneWeb is creating a satellite network to deliver broadband connections. But the firm collapsed in March, blaming the Covid crisis for not being able to raise more financial support.

Earlier this month, a joint offer from the UK government and India's Bharti Global mobile operator won a bidding war for the firm.

But it was disclosed on Wednesday that Sam Beckett, the top civil servant in the Department for Business, Energy and Industrial Strategy (BEIS), said all the money put forward could be lost.

"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," she wrote.

The comments were part of a letter for "ministerial direction", an avenue for civil servants to register a stronger than usual opinion. Ministers are obliged to formally overrule the official's objections to instruct the spending to go ahead. The contents of the letter must also be made public.

Overrode concerns

Ms Beckett said 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" and there was a high likelihood that further taxpayer funding would be necessary.

However, Business Secretary Alok Sharma overrode Ms Beckett's concerns and the government went ahead with the bid.

Mr Sharma said Chancellor Rishi Sunak had agreed to the purchase, and other private sector investors were involved in the bid for OneWeb.

OneWeb's largest unsecured creditor is the rocket operator Arianespace

The government hopes that London-based OneWeb, can take the place of the EU's Galileo programme, which the UK left when Brexit took effect in January this year.

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 mega-constellation operator, if it succeeds, and would have the potential to connect millions of people, in particular those in remote, rural locations without broadband access."

However she wrote that she could not be sure that the investment met Whitehall's strict value-for-money requirements and so requested the formal order from Mr Sharma to proceed.

OneWeb, which has its headquarters in London and a manufacturing base in Florida, is aiming to complete the construction of a constellation of low Earth orbit satellites.

The UK government sees satellites as a way to meet commitments on the roll-out of super-fast broadband and believes OneWeb's constellation could also deliver a precise satellite navigation system.

Seventy-four satellites in an initial network of 648 had been launched when the company announced it was seeking bankruptcy protection. Most experts believe a further $3bn at least is needed to bring the full constellation into use.