May 02, 2018
Galileo row escalates
The UK government continues to pile pressure on the EU to change its stance on participation of British firms in the development of the Galileo satellite navigation programme. In short, the EU aims to exclude firms not based in an EU member state from contracts for Galileo's public regulated service (PRS), a secured layer intended for government and military use. The FT is now reporting that the British government is exploring ways to prevent technology transfer from the UK to the EU if the country's firms are finally excluded from Galileo. This has been precipitated by the EU offering a contract to a key contractor, CGI UK, to transfer its expertise in the Galileo PRS to French firm Thales. The curious thing about this is that CGI UK is a subsidiary of a Canadian firm. it is not clear to us whether the EU would object to CGI setting up a subsidiary in the EU27 to carry on the work, but then the EU's security argument seems to fall flat because the parent company remains a non-EU firm.
A parallel story explains that the row is not so much about the direct investment flowing from Galileo itself, which is of a few billion euros over several years. What this is about is the downstream investment in technologies and products exploiting the satellite navigation technology, which could be in the tens of billions. Also, securing the contracts helps develop expertise and an industrial fabric for other aerospace applications. The UK is actually ahead of the EU in the commercial orientation of its aerospace industry.
At the moment the UK has no legal means to prevent such technology transfer, or to prevent CGI UK from taking the contract offered by the EU. But that may change after Brexit date next year. However, offering contracts to develop the UK 's own satellite navigation system could be one way to induce firms like CGI to not transfer technology to the EU firms working on Galileo.
The FT says Philip Hammond is behind the attempt to prevent technology transfer. Greg Clark, business secretary, is also said to have warned internal market commissioner Elzbieta Bienkowska that the UK withholding technology could set Galileo back by three years.