Space Minister Chris Bryant said the decision would result in “much greater integration and focus” while “maintaining the scientific expertise and the immense ambition of the sector.”
Founded in 2010, the organization currently operates as an executive agency of DSIT.
Ministers have been reviewing arms-length bodies across government as part of a push to root out “unnecessary bureaucracy and duplication.”
While the move was praised by several industry leaders, space scientist Simeon Barber told the BBC that the move “seems like a backward step” and could result in Britain’s space sector “losing focus” at a time when other countries are establishing national space agencies.
Agency boss Paul Bate welcomed the decision, saying that a “single unit with a golden thread through strategy, policy and delivery” would make it “faster and easier to translate the nation’s space goals into reality.”