In a workshop in England’s East Midlands, engineers at the British startup Skycutter are designing weapons for Ukraine using a row of 3D printers that produce the fuselages for interceptor drones. Parts such as motors and navigation chips are assembled by hand before the finished units are sent to partner factories in Ukraine, where the same process is replicated hundreds of thousands of times a month. The company, which employs 15 people in the UK and 50 contractors in Ukraine, turned its founders’ hobby of making civilian drones for pipeline inspections into a military supplier after Vladimir Putin’s 2022 invasion suddenly created demand for its expertise. Its cheapest ground-to-air interceptors cost about $2,000 — a fraction of the price of traditional NATO air defence missiles, which can run into millions of dollars for a single Patriot interceptor.
Defence sovereignty and the spending drive
The unsettling combination of war on Europe’s doorstep and Donald Trump’s wavering on the Nato alliance has sharpened long-running criticism that the continent has relied too much on US weapons makers. Trump’s insistence that members increase defence budgets has added further pressure. The EU has responded by promising to spend €800bn on defence over four years. The UK has also pledged to put aside more, with Keir Starmer likely to come under pressure to show progress after Labour’s heavy losses in Thursday’s elections. Starmer has promised to boost national security spending to 5% of GDP by 2035, describing it as the “biggest sustained increase in defence spending since the Cold War,” and has committed to increasing core defence spending to 2.6% of GDP by 2027, with an ambition to reach 3% in the next Parliament. However, a detailed Defence Investment Plan (DIP) is months overdue, blocked by the Treasury. The DIP missed its Autumn 2025 deadline, causing what industry leaders describe as “industrial paralysis” as companies struggle to make long-term decisions on investment, hiring and production capacity. Kevin Craven, chief executive of the UK aerospace and defence lobby group ADS, said: “The UK has been slower than most to increase spending. We are disappointed with the pace.”
With a new focus on defence sovereignty — the ability to make and use weaponry without unreliable America’s help — much of this money is pouring into homegrown companies. A crop of well-funded startups are gaining momentum and expanding production, making big promises — many still unproven — that they can do a better job than traditional manufacturers and Silicon Valley rivals. The growing feeling across Europe is that “we should be able to stand up on our own two feet,” according to one person at a fast-growing weapons startup. “Sovereignty is about control. If you buy things off the shelf from elsewhere you are always ceding some control.” That applies to parts and materials as well. The UK is consulting on how much needs to come from Britain for a product to be sovereign. Manufacturers cannot necessarily rely on parts and materials from various countries who could become adversaries — notably China. Kusti Salm, a former Estonian defence mandarin turned chief executive of the anti-drone missile startup Frankenburg, said: “A lot of supply chain diversification dreams have evaporated. I think it’s natural if Europe wants to sustain its prosperity and freedom.”
The UK’s Defence Industrial Strategy 2025 aims to make the country a defence industrial leader by 2035, positioning defence not only as a matter of national security but also as a catalyst for economic growth. It emphasises strengthening sovereign capabilities, fostering innovation and reforming procurement processes. The strategy includes £250m for five new “Defence Growth Deals” to stimulate regional economic growth and innovation. However, the effectiveness of these plans is hindered by the absence of a funded programme list and clear timelines.
Drone technology and the rise of European startups
Militaries do not believe they can totally dispense with people — infantry — or heavier machinery such as tanks, artillery and ships. But a big chunk of the planned spending will go on drones of various sizes, whether for the air, land, sea or below the waves. Gen Sir Roly Walker, the UK’s chief of the general staff, last year outlined a desired equipment mix: 20% “survivable” (because they have people inside), 40% “attritable” (you aren’t too worried if they’re destroyed), and 40% “consumable” (single use). This classification reflects a fundamental shift in military thinking, accepting that cheap, mass-produced assets can be expended in large numbers without crippling a force’s overall capability. The term “attritable” — a deliberate conflation of “affordable” and “expendable” — signals that losing such equipment is acceptable because it can be replaced quickly and cheaply. “Consumable” goes further, denoting single-use weapons such as loitering munitions or interceptor drones designed to be fired once and discarded. Together, the two categories account for 80% of the target equipment makeup, highlighting how profoundly the drone revolution is reshaping defence planning.
The falling costs of parts such as sensors and motors opened the door to the startups. The big, traditional manufacturers were caught flat-footed by the drone revolution, perhaps because it is hard to earn juicy profits on mass-produced products. Armin Papperger, head of the 137-year-old German manufacturer Rheinmetall, caused consternation earlier this year by describing Ukraine’s drones as low-tech “Legos” made by “housewives” with 3D printers. Rheinmetall was later forced to backtrack, but the statement unwittingly highlighted the changing economics of war. Falling prices make it much easier to do a lot of damage with relatively cheap weapons, such as Iran’s Shahed drones that Russia uses to terrorise Ukrainian cities and Tehran fired against its neighbours as it faced US-Israeli attacks. Shaheds are estimated to cost about $30,000. By contrast, many of Nato’s air defence systems use missiles that cost hundreds of thousands or, in the case of US Patriot interceptors, millions of dollars. Startups have focused instead on knocking Shaheds and other drones down with much cheaper kit. Frankenburg’s guided missiles are understood to cost “in the low five figures” in dollars, while Skycutter says its cheapest ground-to-air interceptors come in at about $2,000.
Ricardo Mendes, chief executive of the drone maker Tekever, says the advent of unmanned aerial vehicles has prompted “a radical transformation in how defence technology is built,” with companies betting on future demand for kit rather than locking in long-term contracts before starting. Tekever, which Mendes co-founded in Portugal in 2001, reached a billion-dollar “unicorn” valuation last year, and has 1,200 people, including new factories in the UK’s drone cluster in Swindon, Wiltshire, and another in Cahors, south-west France. Other European defence tech unicorns include Helsing, a German company backed by the Spotify founder Daniel Ek, and the German drone makers Quantum Systems and Stark Defence. Stark and Helsing recently won orders from Germany’s military for attack drones, while all but Quantum are investing in UK factories. The British missile maker Cambridge Aerospace — controversially chaired by the former defence secretary Grant Shapps — is reportedly also close to joining the billion-dollar ranks. Cambridge Aerospace, which develops interceptor missiles including the Skyhammer system designed to counter moderate-speed threats like Shahed drones, was founded in late 2024 by Steven Barrett (a Cambridge/MIT professor), Chris Sylvan (a former Anduril director) and Grant Shapps. In April 2026, the UK Ministry of Defence announced a multi-million-pound contract to purchase “hundreds” of Skyhammer interceptors. Shapps’ appointment as chairman drew scrutiny, with the standards watchdog Acoba clearing the move on the condition he does not work on defence-related matters for the company; critics have questioned this decision given the company’s defence focus.
US rival unicorns include the drone maker Shield AI, the autonomous boat company Saronic Technologies, and the anti-drone weapons company Epirus. But two companies with names taken from JRR Tolkien’s Lord of the Rings lead the American pack: the software company Palantir and the autonomous weapons maker Anduril. Both are making significant inroads into Europe, particularly the UK, but that expansion is coming under scrutiny as European politicians balk at their stridently pro-Trump backers. Palantir was backed by the billionaire Trump donor Peter Thiel. Thiel, a vocal critic of liberal democracies, has also backed Stark, which has raised concerns in Germany, though Stark says Thiel has no direct operational or strategic influence. Palantir’s chief executive, Alex Karp, has repeatedly extolled American dominance, while Anduril is run by 33-year-old Palmer Luckey, who has personally hosted a Trump fundraiser and has cultivated close ties with the administration. Anduril UK is investing heavily in R&D and local partnerships, aiming to strengthen sovereign UK defence capabilities with AI-enabled command-and-control platforms, and has partnered with GKN Aerospace for airframe manufacturing and with AtkinsRéalis on autonomous aircraft development for UK defence programmes.
Every startup emphasised the need to be more agile than traditional defence manufacturers, known as primes, as war brings a frenetic pace of change. Skycutter’s founders went out to Ukraine and worked directly with frontline units. It is a constant “cat and mouse” game of adapting the technology to new jamming abilities, says one of the directors, who asked not to be named after Russia threatened European drone makers. “Unless you’re there and working with units and what the Russians are trying to do, you fall behind,” they say. Mendes says Tekever has created more than 100 iterations of its main product in the first three years of the Ukraine war, with software updates and the newest sensors or propulsion fitted in as soon as they are ready. “This is constant,” he says. “You are constantly exposed. The only constant that you have is that it is evolving.”
Procurement challenges and the race for time
Yet there are problems with this pace of change: militaries and governments are not experienced at adjusting so quickly. For instance, the UK last year published a strategic defence review that called for much more use of drones, but its author last month accused British leaders, including Keir Starmer, of a “corrosive complacency” towards defence. Starmer slashed international aid in order to pay for new weapons — a deeply controversial decision for many Labour MPs — and yet so far money has not been forthcoming. A defence investment plan is months overdue, blocked by the Treasury. BAE Systems, Britain’s dominant prime, last month took the unusual step of publicly saying that work on a next-generation fighter jet would stop in June unless more funding was allocated. Finalising the defence plan — and papering over an alleged £28bn funding gap — will form part of Starmer’s post-election “reset,” the Financial Times reported last week.
The UK’s Ministry of Defence plans to purchase up to 5,400 drones in 2024 and 8,000 by 2026, and a UK uncrewed systems Centre of Excellence is being established to improve coordination. However, fragmented regulation is seen as a barrier to progress. The MOD has also awarded contracts for FPV drones for training purposes. Yet the delay in the Defence Investment Plan casts doubt on whether these ambitions can be realised. Skycutter caused a stir recently when it beat a range of rivals in the US military’s Drone Dominance programme. It has been vocal about the risks of delays to UK spending: videos of its interceptors taking down Shahed drones in Ukraine have attracted a host of offers for it to move to other countries, but spending has not come through from the UK. “We were knocking at the door of the MoD,” says the Skycutter director. “Unfortunately, the MoD weren’t interested at the time. We need to make a strategic decision as a company. Do we stay in the UK or leave the UK? The UK ultimately is our home. There’s no money at the moment because there’s no defence investment plan. We’re running out of time.”
Across Europe, there are still doubts over whether those who buy the kit are ready for the bewildering pace of technological change forced by war, although several executives say attitudes are shifting. “It’s a really fast-moving ecosystem and I don’t think the procurement is ready to deal with it,” says James Acuna, a former officer at the US’s Central Intelligence Agency and now chief operations officer at Ondas Capital, a US drone investor. Ondas Capital plans to invest at least $150m over two years, focusing on combat-proven technologies and localization efforts, including US-based manufacturing. Mike Armstrong, UK managing director at Stark, says military attitudes are changing because “delivery timelines that stretch several years are no longer feasible. Modern defence depends on sustained, industrial-scale production, rather than one-off procurement decisions. So long-term signals around demand and procurement really matter, because that gives companies like us the confidence to invest and scale at the pace the current security environment requires.”
