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In November, the Defence Secretary announced he was cutting a number of ‘outdated’ military programmes (including the infamous Watchkeeper drone) to make funds available for new military technology.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”
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.
Anduril
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
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
