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In a small workshop in England’s East Midlands, engineers at the British startup Skycutter are designing weapons for Ukraine. A row of 3D printers make the fuselage for interceptor drones, while parts such as motors and navigation chips are slotted together by hand. The same process happens hundreds of thousands of times a month in partner Ukrainian factories.
The swarms of cheap, deadly and often autonomous drones deployed in that war have already changed combat completely. Troops far behind the frontline must move constantly to avoid attack from the air, travelling along netted tunnels and landscapes crisscrossed by fibre optic cables used to steer drones past radio jamming. Cities are terrorised by guided missiles that are cheaper and therefore more widely used than those that came before.
Europe’s militaries are scrambling to catch up, in a drive to spend billions on weaponry – with added pressure from Donald Trump’s wavering on the Nato alliance and the US president’s insistence that members increase defence budgets.
The unsettling combination of Trump and war on the doorstep has sharpened long-running criticism that the continent has relied too much on US weapons makers.
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.
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.
Survivable v attritable
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 said he wanted the forces’ equipment to be 20% “survivable” (because they have people inside), 40% “attritable” (you aren’t too worried if they’re destroyed), and 40% “consumable” (single use).
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.
“A lot of supply chain diversification dreams have evaporated,” says Kusti Salm, a former Estonian defence mandarin turned chief executive of the anti-drone missile startup Frankenburg. “I think it’s natural if Europe wants to sustain its prosperity and freedom.”
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.
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.
Cat and mouse game
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 (£22,200). 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.
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 is smaller than many of the other companies raising hundreds of millions of pounds, with 15 people in the UK and 50 contractors in Ukraine. Its founders turned their hobby into a business making civilian drones for inspecting pipelines in 2018, before Vladimir Putin’s 2022 invasion suddenly meant their knowhow was in demand.
They 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.”
Running out of 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.
Last week, the Financial Times reported that finalising the defence plan – and papering over an alleged £28bn funding gap – would form part of Starmer’s post-election “reset”.
“The UK has been slower than most” to increase spending says Kevin Craven, chief executive of ADS, a UK aerospace and defence lobby group. “We are disappointed with the pace.”
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,” the director adds. “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.
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,” he says. “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.”
