As geopolitical tensions escalate, nations worldwide are increasing their defence budgets, with a critical focus on space technology

The UK previously announced an increase in defence spending to 2.5% of GDP, with plans to reach 3% as quickly as possible. During a summit held in London on March 1st, the UK also revealed additional measures, including repurposing the £28bn National Wealth Fund, shifting its focus from cleantech infrastructure to defence. Furthermore, European Member states have been encouraged to raise their defence budgets by an average of 1.5% of GDP, potentially unlocking €650 billion for defence investments. A further €150 billion loan program is envisioned to support a proposed five-point plan, labelled “ReArm Europe,” which will increase Europe's focus on advanced defence and security technologies. As the global world order evolves, it is clear that nations are increasing investment into new defence technologies and capabilities.

The events in recent weeks has begun to reshape the world order that has been in place since the end of World War II. There is growing recognition that Europe will no longer be able to rely as heavily on the US for its security, given the rapidly changing geopolitical landscape. This shift has highlighted the urgent need for Europe to dramatically increase pan-European defence spending, as evidenced by the EU's recent announcement of an €800bn defence initiative.

A major beneficiary of these increased budgets is the space domain, which is now integral to modern security and defence strategies. SpaceTech is intrinsic to this reset in European security, and its importance is only growing as Europe looks to become more self-reliant in its defence capabilities.

The Integral Role of Space Technology in Defence

Space technology is inherently dual-use, meaning it serves both commercial and government applications. This dual-use nature makes space technology strategically important, as it underpins nearly every facet of modern military operations. Governments and private companies alike have increasingly recognised the value of space-based solutions, driving investment into new capabilities.

As defence strategies evolve, space technology has become a cornerstone of modern military operations. The importance of space technology has only grown in recent conflicts, notably the ongoing Ukraine conflict, which has illustrated how rapidly modern warfare is adapting to exploit the latest technological innovations. Some key developments include:

Cyber Warfare: One of the early moves by Russia during its invasion of Ukraine was to hack the satellite network from Viasat, which the Ukrainian military and government depended on. This attack underscored how reliant governments and militaries have become on space to operate effectively.

Commercial Space: The Ukraine conflict has been a turning point for the space technology ecosystem. Governments have fully embraced the capabilities of emerging private space companies for the first time. SpaceX's Starlink service has been critical in ensuring that Ukraine’s government and armed forces maintain operational communication despite the Russian onslaught. Additionally, commercial Earth observation constellations, such as those provided by Planet, have been vital in providing intelligence and imagery that complement government satellite data.

Drone Warfare: The role of drone warfare has been irrevocably altered by space technology. Both manually controlled and semi-autonomous drones have been extensively used in Ukraine, and such operations rely heavily on satellite communication networks. The ability to operate drones effectively is contingent upon access to secure and reliable satellite communication systems.

Electronic Warfare: Electronic warfare has been a key part of the Ukraine conflict, with Russia using a combination of radio frequency jamming, GPS spoofing, and signal disruption. Ukraine has leveraged space-based intelligence to counteract these efforts. For instance, the company Hawkeye 360 uses its "listening satellites" to track and identify sources of electronic interference, providing Ukrainian forces with crucial insights to locate and destroy Russian equipment.

SpaceTech’s dual-use nature is highlighted in key areas of defence operations:

Intelligence, Surveillance, and Reconnaissance (ISR): Satellites are vital in collecting regular, reliable, and actionable intelligence. This includes government-operated spy satellites, as well as commercial operators, such as those in SSIT’s portfolio. These ISR capabilities have wide-ranging applications, from military operations to civilian uses like combating climate change, disaster relief, and agriculture.

Secure Communication: Secure and reliable communication is the backbone of modern militaries. While government-owned satellites have traditionally provided this capability, private commercial players are now also providing connectivity that is used for a variety of applications. These include not only military operations but also global connectivity, such as broadcasting television and providing internet access to billions of people for the first time.

Navigation: GPS, initially developed by the US Department of Defense, has become a bedrock technology of the modern world. Militaries around the globe rely on GPS for both navigation and targeting, underscoring the strategic importance of satellite-based navigation systems.

The convergence of heightened security threats and rapid advancements in space technology is reshaping global defence strategies. Europe's proactive measures to enhance its defence capabilities, coupled with the strategic integration of space technology, reflect a commitment to safeguarding national and regional security in an increasingly complex geopolitical environment.

As recorded at the SSIT interim reporting (to 31st December 2024) the three largest holdings of Seraphim Space Investment Trust’s (SSIT) - ICEYE, D-Orbit and ALL.SPACE, accounting for 50% of Net Asset Value (NAV) - are all European companies with world-leading capabilities that are already being procured by departments of defence in Europe and the US.  The portfolio is positioned to play a key role in securing Europe’s long-term defence security as well as commercially benefiting from the European defence fund, with 16 of the 25 companies in the Trust – accounting for 65% of the NAV - based and operating in Europe. In relation to defence, half of portfolio, with 78% by NAV are addressing defence requirements of Governments in intelligence, communication, mobility and cyber security.

As the space domain becomes more integral to ensuring global security and stability, balancing technological advancements with responsible space governance is essential. For nations seeking to ensure long-term peace and security, investing in space technologies is not just strategic—it is essential for building a safer, more interconnected world.