Anduril

Following the government’s commitment to increase military spending and the publication of the Strategic Defence Review (SDR) in early June, the military industry has been keenly awaiting the release of the government’s Defence Investment Plan (DIP) which will layout military spending plans and other details for the rest of this parliament. Numerous reports have indicated that many planned projects are ‘on hold’ until the plan is finalised and published.

UK Military Spending 2010/11 – 2024/25 – Statista

Defence minister Luke Pollard told MPs in June that the DIP will “cover the full scope of the defence programme, from people and operations to equipment and infrastructure”. Time and again ministers have promised that the plan will be unveiled in the autumn and so this now seems likely to be soon after the Budget of 26 November (although such promises are of course routinely broken).

How much?!

UK military spending was £60.2bn in 24/25 (around 2.4% of GDP), up from £42.4bn in 2020/21. In February 2025, the Starmer government committed to further increase military spending raising the budget to 2.5% of GDP by 2027 (estimated at around an extra £6bn per year – roughly the amount cut from the UK’s Aid budget) with ‘an ambition’ to reach 3% by the next parliament. At the NATO summit in June 2025, however, Starmer upped the ante, with a pledge to reach a ‘goal’ of 5% (3.5% on ‘core defence’ (estimated to be an extra £30bn per year) with 1.5% (around £40bn per year) on ‘defence-related areas such as resilience and security’) by 2029. Subsequently the government said it “expected to reach at least 4.1% of GDP in 2027”.

‘Whole of Society’

Importantly, alongside the increase in military spending, the Strategic Defence Review argued that ‘defence’ is now to be seen as a ‘whole of society’ effort and this may well be re-emphasised when DIP is published.

The plan is being billed as enabling the UK to be at ‘warfighting readiness’ and alongside equipment and weapons programmes, the public is being urged to be ”prepared for conflict and ready to volunteer, support the military, and endure challenges”.

Plans already announced to ‘reconnect society with the military’ include the expansion of youth cadet forces, education work in schools to develop understanding among young people of the armed forces, and broader public outreach events to outline the threats and the need for greater military spending despite increased social challenges.

Government keen to ‘reconnect’ young people with the armed forces

And to top this off, the government is deploying the hoary old chestnut that military spending is good for the economy (despite such claims being persistently and thoroughly debunked).

Trailed Plans

While specific spending details remain under wraps, government announcements since the publication of the SDR have indicated some of the broad areas which will receive more funding:

Drones, Drones, Drones. In the Spring Statement, Chancellor Rachel Reeves stated that “a minimum of 10% of the MoD’s equipment budget is to be spent on novel technologies including drones and AI enabled technology.” Defence Minister Alistair Cairns indicated in July that there would be around £4bn spending on uncrewed systems – ‘Drones, drones and drones‘ as he put it on twitter.

To the ever-expanding list of UK drone development programmes, many of which are seeking funding decisions as part of the DIP, we can add Project Nyx which seeks to pair a new drone with the British Army’s Apache Helicopter.

Perhaps most significantly in this area, publication of the Defence Investment Plan may illuminate UK plans for a ‘loyal wingman’ type drone – now described by the MoD as an Autonomous Collaborative Platform (ACP) – to accompany the UK’s planned new fighter aircraft, Tempest. While some funding has already been allocated to develop smaller Tier 1 and 2 ACP’s, plans for the more strategic and no doubt costlier level Tier 3 drone have been placed on the back burner pending funding decisions. Will the UK go it alone and build a new armed drone (as no doubt BAE Systems hopes) or will it buy Australia’s Ghost Bat or one of the two drones currently competing for the US contract?

Integrated targeting web. Alongside new drones, the UK is developing a ‘digital targeting web’ to link, as MoD-speak puts it, ‘sensors’, ‘deciders’ and ‘effectors’. In other words commanders supported by AI will be networked with ‘next generation’ drones, satellites and other systems to identify targets to be destroyed by a variety of novel and traditional military systems. The aim is to rapidly speed up the time between target identification and attack. As Drone Wars has reported, several tests of various elements of this system (such as ASGARD) have been tested and it is likely that further funding for this programme will be part of the DIP.

New munition and drone factories. The government is keen to bolster the UK’s munitions stocks after supplying huge amounts to Ukraine. The MoD accidentally released details of 12 potential sites for new munitions factories to The Ferret in a Freedom of Information mix-up. The government has plans to open 6 new factories at a cost of £6bn,

Alongside this, there is also a desire to persuade some of the newer drone companies to open factories here in the UK. While Tekever has announced it will open a new site in Swindon, Anduril and Helsing seem to be keeping their power dry while awaiting news that they have secured government contracts before committing to setting up premises. Both companies have, however, set up UK subsidiaries and have launched PR campaigns to persuade ministers and officials of the efficacy of their products.

While drones are key for these companies, a huge increase in UK spending on military AI systems is also in their sights.

An AI ‘Manhattan Project’ endeavour. Despite continued and significant concerns about the military use of AI, particularly in ‘the kill chain’, ministers, officials and commanders seem convinced that a rapid integration of AI into all areas of the armed forces is urgent and vital. Just before stepping down as Chief of the Defence Staff in September, Admiral Sir Tony Radakin put his weight behind calls from Helsing co-founder Gundbert Scherf for a “Manhattan-Project for AI defence”. Arguing such a plan “would not cost the earth” (but putting it at around $90bn!) Scherf suggested four areas to concentrate on: a) masses of AI-enabled defensive drones deployed on NATO’s eastern flank; b) deploying AI-enabled combat drones to dominate airspace; c) large scale deployment of ai-enabled underwater drones/sensors; and finally, d) replacing Europe’s ageing satellites with (you guessed it) ai-enabled surveillance and targeting satellites.

Anduril is also not shy of lobbying in its own interests. Anduril UK CEO Richard Drake told The House, Parliament’s in-house magazine, that Anduril US was “very much happy with the direction [the SDR is] taking” but went on to publicly push to reduce regulation on the use of drones in UK airspace:

“For UK PLC to get better and better and better in drones and autonomous systems, they have to always look at their regulatory rules as well. Companies like ours and other UK companies can design and build these really cool things, but if we can’t test them well enough in the UK, that’s going to be a problem.”

Winners and Losers

While wholesale adoption of Helsing’s plan seems unlikely, there seems little doubt that the new AI-focused military companies will be among the various military companies who will be the lucky beneficiaries of the UK’s DIP. Meanwhile, the rest of us seem assured of spending cuts and tax rises.

Keir Starmer visits drone factory. Credit: Reuters

While behind-the-scenes wrangling on the final details of the latest Strategic Defence Review continue, the overall message is crystal clear: the UK intends to significantly increase military spending. To enable this there have already been a number of government decisions designed to make funds available, in particular, for new weapons technology and programmes.

In November, the Defence Secretary announced he was cutting a number of ‘outdated’ military programmes (including the infamous Watchkeeper drone) to make funds available for new military technology. The Chief of the Defence Staff, Admiral Tony Radakin argued that “accelerating the disposal of legacy equipment is the logical approach to focus on the transition to new capabilities that better reflect changing technology and tactics.”

In a more ambitious money grab, PM Kier Starmer announced that he was cutting the UK’s aid budget to help increase military spending to 2.5% of GDP and said he would use the released funds to “accelerate the adoption of cutting-edge capabilities.” Starmer argued that the aid cuts would mean an extra £13.4bn military spending per year from 2027. Others, however, argued that in real terms, the increase would be around £6bn per year. Many noted that whatever the boost to UK military spending, the cuts would significantly harm the worlds poorest people.

Finally, there has been a concerted effort to ensure that banks, pension funds and other big investors – who have accepted that military companies should be excluded from ethical investment portfolios – get back in line and ensure that military companies have full access to all their funds. The government it seems, is adamant that private as well as public funds are made available to such companies. Not unrelated to this move, universities are also coming under pressure to crackdown on opposition to military company recruitment on campus.

Which drones companies are likely to benefit?

A number of newer and older military companies are likely to benefit from the coming increase in military spending and, in anticipation, we have seen a surge in the stock prices of many of the companies involved. While drones and related technology are only one part of the increase in military spending, a number of companies in this area are likely to benefit.

Helsing

Helsing is a new company set-up by three AI experts in Berlin in 2021. Its website states that it was “founded to put ethics at the core of defence technology development” and insists that ”artificial intelligence will be the key capability to keep liberal democracies from harm”

HX-2 one way attack drones stocked at Hesling factory

One of the company’s first products is the HX-2 attack drone. HX-2 is a meter long, electrically propelled X-wing, one-way attack drone with up to 100 km range. The company says that on-board AI enables it to resist jamming and that multiple HX-2 can be assembled into swarms. The drone has been designed to be mass-producible and Helsing announced in February 2025 that It had set-up the first of what it is calling its ‘resilience factories’ in southern Germany to mass produce 6,000 of the drones for Ukraine. Jane’s reported in December 2024 that Helsing was to set up a factory in the UK and it is highly likely that the UK will order the HX-2 drone.

Palmer Luckey with Andruil's Fury drone — Palmer Luckey with Andruil’s Fury drone

Although a little older than Helsing, Anduril too is a relatively new player to the defence industry. Co-founded in 2017 by technology entrepreneur Palmer Luckey, the company (named after a sword in Lord of the Rings) and its co-founder have been subject to an extra-ordinary amount of adulatory media coverage.

The UK has already awarded Anduril a number of contracts including a £30m deal in March 2025 to supply the Altius 600m and Altius 700m drones to Ukraine and it too announced this week plans to open a drone factory in the UK. Anduril is one of two companies left in the competition to supply the US air force with new category of drone called Collaborative Combat Aircraft (CCA). The UK too wants to acquire these type of drones to work in conjunction with its F-35 fighter aircraft and future Tempest combat aircraft. Anduril also works closely with another US AI tech company, Palantir, in development of AI-enabled intelligence and ‘battle-management’ systems similar in vein to the Israel ‘Lavender’ and ‘Gospel’ systems. This too is an area that the UK is likely to want to fund.

BAE Systems

Image of model of BAe's new drone concept — BAES System’s latest concept model for the UK’s ‘Autonomous Collaborative Platform’

The opposite of a newcomer, BAE Systems has a long history of being the main beneficiary of UK military spending. Research by CAAT showed that between 2012 and 2023, the company had more meetings with British prime ministers than any other private company.

With a track record of being involved with the development of drones including the UK’s experimental Taranis combat drone, BAE Systems is keen to position itself at the forefront of development of uncrewed autonomous systems. It has showcased its designs for the UK’s Autonomous Collaborative Platforms (ACP) programme – the UK’s equivalent to the US Collaborative Combat Aircraft (CCA) – and it continue to trial is Phasa-35 High-altitude surveillance drones.

Alongside this, BAE has quietly bought up a number of smaller, niche military drone companies to acquire new designs and expertise from those companies – including Prismatic, Malloy Aeronautics and Callen-Lenz – and has signed an agreement with QinetiQ to collaborate on the development of drone technology. Read more →