Summary
DOWNLOAD PDFEurope stands at a critical juncture in the evolution of the global space economy. Once a technological leader with deep capabilities across the space value chain, the EU now risks structural marginalisation as the sector shifts from a state-led model (“Old Space”), driven by geopolitical competition, to a commercially driven, innovation-intensive paradigm (“New Space”). This transformation is characterised by declining launch costs, large-scale satellite constellations, and the integration of space infrastructure with advanced digital technologies.
Against this backdrop, we argue that Europe’s relative decline is not incidental but rooted in three mutually reinforcing structural challenges: a persistent capital markets gap, insufficient and fragmented public investment, and an industrial policy framework that continues to favour legacy incumbents over emerging high-growth firms.
The US has led this transition through deliberate policy choices that fostered competition and enabled private firms to scale. China is increasingly following a similar path, combining strong state direction with growing commercial dynamism. Europe, by contrast, has struggled to adapt its institutional and industrial frameworks to this new reality.
Empirical evidence reveals a widening gap between Europe and its global competitors. Across key indicators, Europe consistently underperforms relative to the US and China:
- Launch capability remains limited and volatile. In 2025, the US recorded 181 orbital launches, while China conducted 92, compared to just 8 in the EU, following a collapse to only 3 launches annually in 2023 and 2024.
- Satellite deployment has grown only incrementally. The EU increased deployments from 16 satellites in 2015 to 135 in 2025, while China added 371 satellites and US actors, driven largely by SpaceX, deployed over 3,700 satellites in 2025.
- Innovation capacity has also declined. The EU’s global share of space-related patents fell from around 11 per cent in 2000 to about 6 per cent in 2023, while China surged to over 70 per cent – driven by high patenting volumes, though concerns about average quality persist – and the US declined to roughly 12 per cent.
Drawing on evidence from our ECIPE Space Economy Database, the paper identifies three core challenges underpinning Europe’s declining space competitiveness:
1. Capital Markets Gap
Europe’s space startup ecosystem is constrained by insufficient access to scale-up financing. While the EU hosts a comparable number of startups to the US and more than twice as many as China, these firms receive significantly less funding.
- Too many leading EU space startups fail to reach meaningful funding scale: 42 per cent have raised under USD 10 million, compared to just 8 per cent in the US and 12 per cent in China.
- Average funding per space startup in the EU is just over USD 48 million, compared to nearly USD 317 million in the US and more than USD 195 million in China.
This funding gap limits the ability of European firms to scale, commercialise innovations, and compete globally. The problem reflects broader structural weaknesses in European capital markets, including limited venture capital depth and underdeveloped public equity markets.
2. Insufficient and Fragmented Public Investment
Public investment plays a critical role in the space sector, not only by funding R&D but also by creating demand through procurement and long-term contracts. Here too, Europe lags:
- In 2024, EU public space spending remained below USD 15 billion, less than one-fifth of US levels and behind China’s roughly USD 20 billion.
- Growth in European spending has also been slower. Between 2016 and 2024, EU public space expenditure increased by 66 per cent, compared to 121 per cent in the US and over 300 per cent in China.
- Funding is highly fragmented across national and EU-level programmes and multiple agencies.
Where the US uses large-scale, coordinated public investment to catalyse private sector growth, Europe fails to create strong demand signals for private capital.
3. Industrial Policy Misalignment
Europe’s industrial policy framework remains anchored in an earlier era of state-led space activity. It continues to prioritise established corporate incumbents through procurement rules, regulatory frameworks, and institutional practices.
Key features include:
- The geographical return principle, which allocates contracts based on national contributions rather than competitiveness.
- Regulatory frameworks, including the EU Space Act and Digital Networks Act that risk continuing reliance on legacy “champions” as the primary vehicles for competitiveness.
This structure limits the emergence of disruptive entrants capable of driving innovation in the New Space economy.
The result is an increasingly unbalanced ecosystem. Europe retains strong legacy industrial capabilities and continues to generate significant corporate revenues, but lacks the financial and entrepreneurial dynamism required to renew this industrial base. By comparison, France’s Old Space sector remains strong, with corporate space revenues at roughly 2.5 times the US level relative to GDP, but it lags in New Space financing, where, again relative to GDP, French startups attract around 6 times less venture funding than their US counterparts.
The consequences of this structural lag extend beyond the space sector itself. Space infrastructure is becoming a foundational layer of modern economies, underpinning communications, navigation, defence, and data systems. Falling behind in this domain risks a broader erosion of economic and strategic competitiveness.
Europe’s challenge in the space economy requires a fundamental rethinking of the relationship between public policy, private capital, and industrial organisation. Without such reforms, Europe risks remaining a capable but increasingly peripheral player in one of the most strategically important industries of the 21st century.