Five continental defence start-up founders who once saw Britain as the obvious launch-pad for drones, robots, and military artificial intelligence now weigh a short train ride to Brussels instead. Their change of heart says less about Brexit than about cashflow.
“This is the worst business environment we have felt for over a decade,” a British industry stakeholder told The Financial Times. Activity is at a standstill, they added, with the delays forcing dozens of businesses to move abroad or, indeed, into administration. The culprit is the ten-year Defence Investment Plan, or DIP, still unpublished despite a promise for last autumn and a £28bn gap to plug. Without it the Ministry of Defence (MoD) signs few new cheques.
European start-ups that set up shop in Britain now find themselves marooned. “Strategies have been published, plans have been made, timelines have been communicated — nothing has happened,” said an executive at a young German defence company. “The government says the right things, but does nothing. The UK has enough strategic papers to serve all of NATO, but it has zero drones,” the executive told the same newspaper.
A lure across the Channel
On 25 March the European Commission launched AGILE, a €115m pilot that promises to award grants in under four months and fund up to 100 per cent of costs. Because Britain is outside the club, firms must form an EU subsidiary to apply. Lawyers report a spike in enquiries about Belgian registrations that would open the doors to AGILE’s first 2027 call.
That prospect delights Helsing, an AI defence specialist from Munich. The firm came to London to pitch battlefield-data engines to the British Army. Contractual inertia has since cooled its ardour. Executives tell investors that Brussels offers quicker money and fewer unknowns. Should UK orders fail to appear, the company will scale development inside the single market and treat Britain as an export destination.
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Stark, a German drone-maker, shares the view. It targets reconnaissance contracts that the MoD keeps hinting at yet never places. Managers say they will “expand operations into other European markets if conditions do not improve”. Quantum Systems, also German, has reached the same conclusion. If delays persist, it will look primarily to Germany and beyond for tactical UAV deals.
Portugal supplies two of the five itinerant firms. ARX Robotics wants to deploy its unmanned ground vehicles on British training ranges. The wait for orders grows long. The founders note that while they wish to establish a UK presence, uncertainties could lead them to strengthen ties with other European nations that offer more contractual certainty.
Shifting priorities
Tekever, a Lisbon drone outfit, already sells maritime-patrol craft to several EU navies. It once hoped to anchor production in Britain. Now it tells staff it is evaluating potential partnerships and contracts outside the UK to mitigate risks associated with current delays.
Not all pressure comes from Brussels. Washington dangles faster money still. Skycutter, a British start-up designing loitering munitions for Ukraine, recently topped the Pentagon’s new combat-drone trials with a 99.3/100 score.
“We would prefer to maintain a substantial presence in the UK but, given the absence of contractual certainty here, are considering our options and whether we may have to move to the US,” the firm said in a press statement. “Long-term decisions on footprint, jobs and production will ultimately be driven by where there is consistent demand and contractual certainty.”
The widening gap
Mimi Keshani, co-founder of Hadean, voices similar worries. The start-up has several priority MoD consumers ready to buy, and in urgent need of its capabilities, but they are struggling with budgetary approvals. “This isn’t directly tied to the DIP but it is not made any easier by a lack of a clear demand signal from the MoD,” she told reporters. If Britain cannot move faster, she warns, capital and talent will flow to whichever customer pays.
The UK has enough strategic papers to serve all of NATO, but it has zero drones. — A German defence executive
British founders feel the chill. Rob Taylor, a former Royal Marine who set up 4GD, rails at missed MoD deadlines. “We can’t even get a document out on time (…) Here is a sense that we need to get more serious about this,” he said. “Realistically we are looking at a market that is in effect in hiatus. It is unlikely to get moving quickly and even once it does, the majority of the planned defence increase has already been spent.”
Samira Braund, defence director at ADS, the industry lobby, sees “paralysis across the defence enterprise”. Cashflow strains have already pushed Yorkshire-based MTE Heat Treatment into administration, leaving turbine-blade buyers scrambling for American suppliers. Prime contractors such as BAE Systems pause R&D and divert incremental investment to Germany and Poland, where funding envelopes look firmer.
Some suppliers now add risk premia to MoD bids. Others open Delaware data rooms, ready to flip intellectual property to US holding companies should British dithering persist. Venture capitalists, sensing easy deals, funnel bridge loans that become relocation tickets.
Running out of runway
London officials protest that since July 2024 they have signed nearly 1,200 major contracts, with 93 per cent of that spend going to UK-based companies. Yet the absence of a published DIP obscures what comes next. Without clarity, founders cannot plan hiring or plant. Investors insist on revenue timetables that Whitehall will not provide.
Each quarter’s delay matters. Start-ups live on 12–18 month funding runways. The MoD’s slow pace forces them to stretch cash or seek lifelines abroad. AGILE’s four-month grant window looks tailor-made for survival. So does the Pentagon’s rapid-acquisition budget, which dwarfs anything available east of the Atlantic.
Meanwhile, AGILE’s first call—and a buoyant US wallet—mean relocation decisions will harden within 12–18 months. Europe’s defence awakening offers both competition and chance. A published plan would let British and European firms compete for work on merit, not on speed of bureaucracy.
