Anduril. Helsing. Quantum Systems. Stark. Tekever.
What do these companies have in common? They are among the buzziest defence tech startups in the world — due in part to the sector’s skyrocketing popularity among investors in recent years — and all announced offices, factories or investments in the UK in the last few months.
While Germany has been a leading defence tech hub in recent years, boasting Europe’s best-funded defence startup in Helsing, founders and investors tell Sifted the UK is fast becoming a key market for companies looking to scale.
The flurry of activity comes amid rising geopolitical tensions, with governments around the world hiking defence budgets and increasingly looking to autonomous capabilities as they rush to modernise military arsenals.
For its part, the UK government has pledged to spend hundreds of millions of pounds on military tech each year. A recent national review of the country’s defence systems identified a shift to AI in the armed forces as an “immediate priority”.
Grace Cassy, cofounder of UK-based cyber-focused investment fund CyLon, tells Sifted the UK government’s recent announcements aiming to invest more in fast-growing defence companies have been received loud and clear.
“That message is clearly being heard in the market. When you see these announcements from the likes of Helsing and Stark and Tekever and others, [it’s in response to] the UK is saying, ‘We’re open for business for different kinds of suppliers.’”
A green light
Founders, investors and industry sources point to a common motivator for the recent interest in the UK as a defence outpost: the country’s recent Strategic Defence Review, unveiled in June.
The review proposed, among other things, to help boost defence spending on novel technologies (the kinds startups are building) as well as streamlining procurement processes.
A key recommendation in the review is to cut down procurement timelines — the process of winning a military or government contract often bemoaned as far too long and laborious for young startups — to three months for novel technologies and about a year for modular upgrades.
UK finance minister Rachel Reeves had already announced in March the country would invest £400m in defence tech, promising to reform procurement processes for startups.
“By increasing defence spending with small and medium businesses, ringfencing at least £400m per year for investment in novel technologies, and reforming procurement, we are ensuring that defence is an engine for growth across the UK,” a Ministry of Defence (MoD) spokesperson tells Sifted.
It’s been seen as a green light by industry leaders.
“The Strategic Defence Review outlined the UK’s ambition to be at the forefront of NATO innovation, and we’re definitely seeing that starting to translate into government action,” says Mike Armstrong, managing director of the UK arm of German attack drones maker Stark. Even smaller startups are joining the trend: German anti-drone startup Alpine Eagle announced its UK expansion last week.
“My impression is that these are companies making these investments in the expectation that contract money is going to start flowing,” says Cassy, who was an external reviewer on the Strategic Defence Review.
There are also signs that other government-backed bodies are shifting further towards defence-focused footing.
In July, UK tech minister Peter Kyle told the Alan Turing Institute — Britain’s primarily publicly-funded AI agency — to refocus solely on defence and security, which was initially one of three priority areas alongside environmental sustainability and health.
VC funding has followed the noise. Still a nascent market, UK defence tech startups have picked up €243m in the first seven months of 2025, already more than double the €105m raised last year.
Homegrown startups have also seen their first $100m+ raises, with PhysicsX and Cambridge Aerospace both convincing VCs to part with their cash since June.
Buying British
Part of the UK’s defence strategy is to purchase more from domestic suppliers and boost its local industrial base.
That’s driving more overseas-headquartered companies to consider opening a UK arm of their business, argues William McManners, managing partner at UK-based defence and dual use VC MD One Ventures.
While some startups like German AI defence unicorn Helsing say they already work with the UK, some of their moves like setting up a factory in Plymouth to manufacture maritime products, as in Helsing’s case, may be angling to win more contracts in anticipation of more money trickling down, investors suggest. Ned Baker, Helsing’s UK managing director, tells Sifted the company believes it is “really important companies don’t just sell technology to the UK government,” but are “working together with local communities to develop and sustain the next generation of systems needed to protect our democracies.” He added Helsing is “confident there will be further opportunities” to provide the UK with the startup’s capabilities.
“There’s some good signals coming from the UK MoD on what they intend to buy and how much they intend to allocate it,” says Cassy. She adds that “having strong British links is going to be important,” but “quite how you define sovereign or British I think remains a bit of an open question.”
From her personal view, Cassy believes that “we need to just build a richer and more diverse supply chain with British roots and British connections, and if that includes companies from mainland Europe or from the US or other allies, then fine.”
Startups are also keen to tap into the UK’s tech and defence talent pools.
That was top of mind for Stark when it drew up plans to open a factory in the country, the company said at the time — as well as for Tekever when it expanded from its native Portugal in 2013.
“The reason we opened up in the UK was because of the talent pool,” says Ricardo Mendes, cofounder and CEO at Tekever. “It doesn’t get better than what you have in the UK in terms of the amazing school system and universities. The engineering capabilities coming out of the UK are just as good as any in the world.”
Strategic positioning
The UK is also in the unique position of having a deep military and economic relationship with the US — home to both the world’s largest defence and funding markets.
It makes the UK the “perfect bridge” to both US and European startups looking to access markets across the Atlantic, says Vinous Ali, deputy executive director at lobby group Startup Coalition.
“There is a very strong relationship, particularly in defence and security, alongside from a cultural point of view, between the US and the UK, much more than any other country in Europe,” says Mendes.
“If you are helping the UK government in the right way and have products and technology that works, working in the UK exposes you to the US Department of Defence and Homeland Security,” he adds.
It’s not just ties to the US that are drawing European startups to British shores.
In May, UK prime minister Keir Starmer said the UK would join the EU’s new €150bn military spending project, which is set to provide loans to governments to procure military tech from EU member states and designated “third countries”. In July, Britain and Germany pledged to work more closely to sell jointly-made weapons.
“What attracted Stark to the UK is the country’s growing relationship with the continent,” says Armstrong. “Announcements like last week’s commitment to conduct more joint procurement with Germany will be a game changer for us.”
Still, as those like Cassy point out, “we are playing catchup [to the US] in Europe on this front.”
‘A hell of a question’
As with any big policy proposals, the proof is in the pudding.
“I see a lot of ‘innovation’ announcements coming from the UK, but until the money flows, it’s all talk,” one Germany-based defence investor, who invests in companies across Europe, tells Sifted.
Meanwhile it’s not just the UK: Cassy points out there is “a sense of urgency among a number of different governments” including Germany and France. Baltic countries including Estonia, meanwhile, have long been pushing for more investment in defence considering their precarious proximity to Russia.
McManners doesn’t necessarily think the UK MoD is superior to work with versus other European countries. “Whether the UK has an advantage either in terms of budget, in terms of ease of doing business, relative over others — that’s a hell of a question,” he says. “I’m not actually sure that might be correct. […] The UK has myriad problems.”
Whether the UK is able to fix those problems in a timely manner — and start striking deals with the number of European startups who’ve set up shop across the water — remains to be seen.
Cassy adds: “What I hear reflected back at me by people is like, ‘Great report, great recommendations. Let’s see if it’s actually implemented.’”
Read the orginal article: https://sifted.eu/articles/european-defence-tech-startups-uk-expansion/
