The winning bid hailed as reflective of the scale of Britain’s ambitions on the global stage by UK Business Secretary Alok Sharma has come under the scanner of the House of Commons Business, Energy and Industrial Strategy (BEIS) Committee as “troubling and concerning” after it was alerted by a civil servant in the government’s business department over concerns around the investment.
As part of the deal, Sharma had confirmed that the UK will invest USD 500 million and take a “significant” equity share in London-based OneWeb, which had declared bankruptcy earlier this year.
Another USD 500-million will come from Bharti Global Ltd, an entity of the Sunil Bharti Mittal led Indian telecom major.
“Now more than ever, the government needs to ensure that it’s spending tax-payers money as prudently and wisely as possible. Using nearly half a billion pounds of taxpayers money to gamble on a ‘commercial opportunity’ whilst still failing to support manufacturing jobs with a sector deal is both troubling and concerning,” said Darren Jones, Opposition Labour Party MP and Chair of the BEIS Committee, as he announced an inquiry starting in September.
“The Secretary of State’s [Sharma] use of a Ministerial Direction to push through the purchase of a stake in OneWeb against the advice of his own Permanent Secretary heightens concerns around this investment and about the prospects of this delivering UK jobs and value for taxpayers’ money.
“It also prompts further questions about how the government arrived at this decision and how it came to plump for this largely US-based bankrupt satellite company,” he said.
The civil servant or Permanent Secretary in the BEIS department, Sam Beckett, had written to Sharma ahead of the deal expressing concern that all of the government’s investment may be lost.
“While in one scenario we could get a 20 per cent return, the central case is marginal and there are significant downside risks, including that venture capital investments of this sort can fail, with the consequence that all the value of the equity can be lost,” Beckett noted in a letter dated June 26.
Sharma responded with his ministerial direction in favour of the deal, highlighting Bharti Enterprises’ backing as a “large and trusted investor”.
“The fact that any investment would also be alongside other private commercial investors as part of a wider consortium, and as you say, one large and trusted investor already on board, indicates a rational commercial case for investing,” the Indian-origin minister noted in his reply.
The Commons committee, which has oversight over the Business department’s work, will now conduct an evidence-based hearing on the issue from September.
The deal between the UK and Bharti is intended to enable construction of a global satellite constellation that will provide enhanced broadband and other services to countries around the world, BEIS had said when the deal was announced in early July.
OneWeb was formed in 2012 and has been developing cutting-edge satellite technology from its bases both in the UK and in the US.
The deal to acquire it is subject to US court approval and regulatory clearances and is expected to close before the end of the year.
The acquisition of OneWeb has been pegged as a signal of the Boris Johnson led government’s ambition for the UK to be a pioneer in the research, development, manufacturing, and exploitation of novel satellite technologies through the ownership of a fleet of Low Earth orbit satellites.
It also offers the UK strategic opportunities across a wide range of other applications, working with international allies, BEIS said.
“OneWeb will also contribute to the government’s plan to join the first rank of space nations, along with a commitment to making the UK a world leader in science, research and development,” BEIS had said.