Global economic and competitive forces are reshaping the space industry. Spending and investment growth in the two leading space markets, the United States and China, has outpaced growth in the European market in recent years. Consequently, although Europe has a historically diversified and technically advanced space ecosystem, the continent is facing mounting challenges to its global competitiveness.1
Underinvesting in Europe’s space ecosystem, which is a critical enabler of a large swath of Earth-based activities, has the potential to affect the long-term development of numerous civil and defense markets that rely on space data and services. Acting today is imperative to sustain the European space industry’s long-term prospects. Strategic and collaborative stakeholder efforts are needed if Europe intends to remain on the launchpad in the future.
The European space industry: Pioneering innovations and leading capabilities
Europe has consistently advanced in the space industry since launching its first satellite in 1965, building cutting-edge satellite manufacturing and launch services that have supported nations and companies worldwide for decades. Notably, Europe’s Ariane 5 set a global standard for launchers with 82 consecutive successful launches from 2003 to 2017.2 This launcher was also adapted to deploy the James Webb Space Telescope into a transfer orbit in 2021, achieving such precision that no attitude correction maneuvers were needed post-deployment.3
Recent years have seen accelerated participation in the European space ecosystem. Latvia became a European Space Agency (ESA) associate member in 2020, followed by Lithuania in 2021 and Slovakia in 2022. In 2023, Spain established the Agencia Espacial Española (AEE) to focus on a national space strategy.
The European space ecosystem includes a diverse array of equipment and service providers, spanning both traditional and new-space economies. Collaborative institutions such as the ESA and the European Organisation for the Exploitation of Meteorological Satellites (EUMETSAT) oversee major European space projects, including Galileo, a global navigation service offering positioning accuracy within one meter, and satellite missions crucial for climate change monitoring. Additionally, the European Union’s IRIS2 satellite constellation aims to deliver commercial broadband services and secure communications for EU governments by 2030.4 Furthermore, the second-largest commercial communications constellation in the world is managed by a company based in Europe.
All of this development has been supported by private investment and rising spending from European nations and institutions, most of which flows to civil applications (Exhibit 1).
European space is being outpaced by other markets
Nonetheless, and despite mounting public spending and private investment in European space enterprises, the gap in scale between the European space ecosystem and those of the United States and China has widened. Public spending and private investments in the two leading markets accelerated faster than in Europe during the past five years. Two other factors contributing to this growing gap include fragmentation in Europe’s public-spending system and subscale private investments.
The European space industry has been leapfrogged by other industry leaders
In the past decade, Europe’s share of global launches and satellite deployments has declined progressively.5 In 2024, operational constraints led to an unusually low number of launches—just three.6 As of November 2025, five launches had taken place within the European space ecosystem in 2025.7 with at least one more planned by year-end.8 In comparison, the United States and China conducted 154 and 68 launches, respectively, in 2024.9 And in recent years, major European satellite manufacturers and operators have announced plans for significant layoffs and consolidation to adapt to evolving market conditions and industry dynamics.10
The increasing intensity of international competition in the global space industry is partly due to the fact that public spending and private investment growth in the United States has significantly outpaced that in Europe in recent years (Exhibit 2).
Fragmented public spending and allocation practices can hinder growth and innovation
The system for funding space initiatives is significantly more fragmented in Europe than in other regions. Funds are channeled through a complex institutional framework in which governments disburse funds to agencies, which then allocate them to programs involving individual countries. This framework includes various government agencies representing different member countries. For instance, ESA manages a wide range of mandatory and optional space programs for its 23 member states. EUMETSAT coordinates weather forecasting programs, while the European Commission (EC) sets policy and funding for EU-wide space initiatives. In collaboration with ESA and EUMETSAT, the EU Agency for the Space Programme (EUSPA) coordinates policy implementation and operations for joint European assets such as Galileo and Copernicus. The Directorate-General for Defence Industry and Space (DG DEFIS) of the EC coordinates policy for European defense-based space projects, and the European Defence Agency (EDA) identifies needs and proposes collaborations to enhance defense capabilities within the 27 EU member states.
Furthermore, public spending on European space is subject to public procurement and allocation rules that may offer lower premiums and inadvertently increase inefficiencies, adding costs and hindering broad innovation and growth.
This fragmentation in European space spending—among civil and defense stakeholders as well as international and national institutions—could increase if individual nations boost their spending on space defense capabilities and focus on their own initiatives rather than on continent-wide programs.
To mitigate this fragmentation, it could be time for the industry to move from its current logic of geo-return to programs leveraging individual strengths of European space champions. Significant funding initiatives announced in 2025—including €35 billion over the next five years from Germany and the European Commission’s announcement of a unified Space Shield in 2026—are raising expectations for near-term developments.11 However, recent history has shown that institutional programs can be slow to market, offer limited flexibility and risk mitigation for industry players, and remain fragmented across nations. The timeline and conditions of this anticipated funding must align with the industrial base’s need to create a sustainable turning point for the European space industry.
Subscale investments can diminish commercial profit potential and new opportunities
Private investment in the space industry is proportionally much smaller in Europe than in the United States—and private capital has been identified as one of the key levers that could boost European competitiveness.12 Private investment in European space is also focused primarily on earlier-stage projects; thus, close to 70 percent of investments in space industry companies are below €10 million (Exhibit 3).
This investment focus could restrict later-stage development and profitable commercial viability in Europe. How? Most investment is directed at early-stage European enterprises that are not ready for commercialization, so some later-stage enterprises that are ready to scale may struggle to secure necessary funding. These scale-ready enterprises often seek private funding outside Europe and access larger markets abroad.13
In the United States, an integrated space prime, SpaceX, established itself using a combination of private investment and civil and defense spending; the company offers competitive end-to-end infrastructure and a diverse portfolio of space capabilities, including manned and unmanned launch, low-Earth-orbit (LEO) satellite communications, and defense intelligence. This integration allows a private new-space company to deliver a wide range of cost-competitive services to the global commercial market while meeting a broader spectrum of defense needs more rapidly than its European counterparts.
Increased international competition makes it harder for the European space industrial base to take advantage of global opportunities. It puts pressure on commercial and institutional contracts and creates a dilemma for European companies that need scale to become cost competitive but require cost competitiveness to achieve scale. This dilemma is illustrated by the following recent European space industry trends:
- Large legacy primes are considering consolidation (for example, via the Bromo project14) to sustain European capabilities and economics in the face of increased competition and evolving market conditions.
- Emerging new-space companies face fragmented spending and investment, along with increased competition in small launchers and satellites.
- Scaling is limited for downstream services due to scarce private investment, diverse data sources, and commercial and institutional end markets that are not sufficiently scaled to generate demand for services.
Challenges notwithstanding, the right mix of private, public, and industry actions could restore the European space industry’s competitiveness in the coming decade.
How collaborative efforts, increased investment, and pooled spending are needed to reinvigorate space industry growth and leadership
Combining the efforts and resources of public, private, and industry stakeholders in the European space ecosystem could enhance Europe’s strengths, helping to navigate international competition and accelerate industry growth. An integrated European space ecosystem could address the continent’s unique geographic and geopolitical specificities:
- European terrestrial communications networks are well established and provide extended coverage; this could limit the commercial adoption potential needed to ensure the viability of very large satellite communications constellations.
- Given Europe’s proximity to ongoing geopolitical conflicts, there may be increased need to include space in a complementary role in terrestrial, maritime, and air defense.
As new threats emerge rapidly, it is crucial to leverage and integrate existing resources to accelerate and offset the relatively longer development timelines for major space programs.
In addition, outcomes will likely hinge on the growth of combined European spending and investments and the extent of intra-European collaboration among nations and stakeholders. Depending on their configuration and deployment, changes in European space spending, investment, and collaborations could lead to one of three potential scenarios, each presenting opportunities and risks: a unified strategy, national modernization, or a hybrid partnership (Exhibit 4).
Alternatively, if Europe were to deprioritize spending, investment, and collaboration and step back from its current role in the global commercial space industry, the space ecosystem could diverge significantly from the previously discussed scenarios. Europe’s space ecosystem might become quite limited, with public spending focused on niche roles, minimal private sector involvement, and a patchwork of agreements and bilateral deals. Space defense capabilities could become more fragmented, with resources diverted away from other space activities and directed primarily toward non-space defense. This ecosystem may attract only limited private capital. While nations may concentrate on their individual core space needs and maintain some flagship programs, Europe could become reliant on third-party communications providers, making it challenging to sustain competitive capabilities such as launch. Ultimately, the region’s security posture could become fragmented and weakened.
Optimizing a more integrated European space ecosystem: Strategies for stakeholders
Regardless of which scenario emerges, a competitive and well-integrated European space ecosystem should, ideally, involve public, private, and industry stakeholders deploying the supportive strategies discussed below.
Public investors can help align budgets and resources for coordinated response through the following actions:
- Regroup representative stakeholders, such as by optimizing the number of institutional bodies involved. This could streamline decision-making on pan-European initiatives, consolidate demand, and prevent delays in commercialization and production noted as potential risks in the unified strategy scenario.
- Collaborate on design requirements at a continental level. Even if production remains country-specific, this could facilitate interoperability and standardization. Providing long-term planning (five to seven years ahead) can create stronger demand signals for industry players.
- Align public contracts premiums with standards observed in other regions. This could support industrial players in reinvesting in innovation and reducing their costs, recovering better value for money for public agencies.
Private investors can help inject funding and promote dual-use technologies through the following actions:
- Scale private capital investment in later-stage development, based on clear public demand signals within a more cohesive market. This could support mid-scale players that have demonstrated competitiveness to scale faster.
- Support partnerships between players that pool resources and capabilities across space use cases. This could reduce industrial capability fragmentation and foster synergies throughout Europe.
Industry players can help navigate uncertainty and sustain competitive European space capabilities through the following actions:
- Consolidate European legacy production systems to sustain profitability or innovate geostationary-earth-orbit (GEO) production to enable shorter lead times and at-scale manufacturing. This could safeguard the sustainability of critical sovereign space capabilities, bolster Europe’s industrial base, and mitigate the risk of erosion associated with the hybrid partnership scenario.
- Accelerate the development of profitable downstream services for space, such as geospatial services for defense or data fusion for decision-making. This could help monetize existing European data and retain benefits within Europe.
All stakeholders would benefit from a virtuous cycle for the European space industry. Public funders could expect higher private funding for large-scale projects and industrial capacity ramp-up, as well as stronger commitments from large industrial players on ramp-up timelines, cost decreases, and risk acceptance. Private investors could expect lowered risk levels, thanks to greater certainty in priority investment areas and timelines from public funding sources as well as more financially stable industry players. Finally, industry players could expect a clear road map to prioritize R&D, mid- and long-term visibility for their production lines and supply chains, and stronger returns on investments.
All stakeholders share responsibility for shaping a European space ecosystem that aligns with Europe’s needs and capabilities.
As every space industry stakeholder is aware, the timeline to get from design to orbit is never brief, even in the new-space sector. Taking action today is imperative to reconfigure the European space ecosystem—to reflect a changing global industry landscape and to secure Europe’s spot as a leading player in the future industry.
