The UK will want a €1bn cash back if excluded from the Galileo programme.
Raising the stakes even further, the UK claims that disrupting the UK’s participation in Galileo risks the December 2017 agreement and, implicitly, the UK commitment to a €44.5 bn divorce settlement.
Elevating the standoff into a “chicken game,” the UK is openly threatening that being pushed out of Galileo could threaten the future of security cooperation with the EU.
At stake is the future of a strategic industry, placing at risk UK’s global competitiveness.
Gloves are off
British threats follow a European Commission warning that the nature of the Brexit deal will determine the UK’s future in the Galileo programme.
Galileo is a €10bn programme operating at this time 22 satellites and 22 spacecrafts. The satellite system can facilitate a multitude of services, from military targeting to roadmaps and advertising.
Brussels has made clear that it is legally not possible to hand over sensitive information to a “third country” and UK firms cannot be engaged in the programme at par with EU member states. In fact, the UK wants to have its status effectively elevated. The demand is not simply membership but turning Galileo from an EU project to an EU-UK partnership.
In sum, after March 2019 the UK may find it needs to apply for the use of Galileo’s Public Regulated Service (PRS), while access to sensitive “blue channels” used strategic infrastructure, governments and the military will not be on offer.
The discussion is not “civil.” Senior EU officials reportedly say that the UK is living in a “let’s just keep everything we have now… fantasy,” while British officials warn Brussels must drop the insults. Exploiting EU differences, the UK also managed to secure a statement by the Hungarian foreign minister, Péter Szijjártó, in support of the UK’s Galileo membership on Thursday.
Meanwhile, Downing Street insists discussions with Brussels are “constructive” while European Commission spokesman Margaritis Schinas says “negotiations are ongoing.”
In reality, this discussion comes weeks before the EU Summit in June, which is critical for Brexit talks. Brexit hardliners fear that Galileo will be a high-profile blow to their argument for the “opportunities” lying ahead for the global post-Brexit nation.
UK can always revert to the US-developed Global Positioning System (GPS), which however is less precise and less commercially valuable. The UK joined Galileo reluctantly 18 years ago, preferring the use of the GPS system rather than the European duplicate. Since, the UK has converted with gusto.
Galileo is expected to be fully deployed by 2026. Its development coincides with a global surge in demand for satellites and services linked to global positioning. At the moment, up to 25% of the programme’s developers are UK-based firms, although most make part of pan-European value chains.
If these companie werere to move to the EU, in order to ensure they have access to EU contracts, the UK would lose see one of its strategic industries erode. The UK is currently a market leader in a strategic sector of ascending strategic significance, militarily and industrially. That position is threatened.
Companies staying behind in the UK could benefit from the development of a home-grown system. According to the BBC, the cost of such “go-it-alone” national programme would be to the tune of €6bn and could be developed jointly with other partners in the Anglo-sphere, such as Australia.
However, the biggest client by far is Europe and the UK’s talent pool is like to erode, along with global competitiveness.
British threats and EU realities
The “money back” demand came from Brexit Secretary David Davis.
The demand is accompanied by the warning that disrupting the UK’s participation in Galileo – or making this conditional to the outcome of the negotiations – will undermine security cooperation.
“Negotiations on the future partnership should not be preempted or prejudiced. A gap in the UK’s participation in Galileo prior to, during or after the implementation period will have the effect of precluding future UK involvement on security and industrial grounds,” a British government technical note reads.
In mentioning the term “security,” the UK brakes a taboo of not linking security cooperation with Brexit.
Another threat is removing from the Galileo system tracking bases in places like the Falkland Islands, although this hardly seems detrimental.
British companies will be missed but will not be irreplaceable; even a €1bn rebate would not undermine the viability of Galileo, although it may disrupt the delivery schedule.
The most credible British threat is that the Galileo programme could be delayed. The UK says by three years, others may think this might be an exaggeration. The real question at hand is whether the disentanglement makes strategic sense in terms of cost and time, that is, a question on which the verdict is out.
EU member states may be making their own calculations if they were to benefit from a transfer of business, research, investment and know-how. A useful precedent in this respect is the devolution of London’s financial services cluster. The motive of divestment to Europe was noted on Wednesday by the former UK Ambassador to the EU, Sir Ivan Rogers.