Repayable launch investment
Repayable launch investment is a risk-sharing government investment in the design and development of civil aerospace projects in the UK. The investment is repayable at a real rate of return, usually via levies on sales of the product. Repayable launch investment is permitted for the civil aerospace under the Civil Aviation Act 1982, which charges the Secretary of State with 'organising, carrying out and encouraging measures for the designing, development and production of civil aircraft.'
Over the last 25 years the Government has invested £1.7 billion in repayable launch investment projects and during that period £2.7 billion has been received in income.
The fundamental rationale of repayable launch investment is to address the apparent unwillingness of capital markets to fund projects with such high product development costs, high technological and market risks and such long pay back periods. The policy recognises that aerospace is unusual in experiencing these characteristics. Aerospace projects are also highly internationally mobile, and so launch investment enables the government to secure valuable projects for the UK that might otherwise be carried out elsewhere.
The provision of repayable launch investment is entirely discretionary. There is no formal scheme, promotion or budget for repayable launch investment. Each application is considered on its merits against a range of established criteria and also, by the Treasury, against public expenditure constraints and Government priorities.
An applicant must demonstrate: that the project is technically and commercially viable; that government investment is essential for the project to proceed on the scale and in the time-scale specified in the application; and that the Government will recoup the investment at a real rate of return.
The government undertakes an assessment of:
- The company's business case and its claim it cannot be funded by alternative means.
- The technical viability of the project and the potential market; and
- The wider benefits to the economy, which can include the spin-off of new technologies or production methods with wider applications in other sectors, or transferable improvements to the skill base.
If it is decided to support an application, the Government will provide the minimum support required for the project to go ahead.
BIS closely monitors the progress of a supported project. Payments are linked to actual expenditure by the company and to the achievement of specific technical milestones. Information is required on the development and commercial position of the project and the financial position of the company.
France, Germany, Spain, Netherlands and Italy have some form of launch investment. The US supports its industry by indirect measures, in particular the R&D programmes run by NASA and the Department of Defense. A range of international agreements exists to regulate financial support given to industry by governments, and these apply equally to launch investment.
Any offer of launch investment must be consistent with the UK’s international obligations, including the European Union’s State Aid rules.
