UK's Spring 2025 Statement and what it means for the UK Defence Drone Sector

Plus The Headlines, Money Matters, and Recommended Reading (Week 13 2025: 24 - 30 Mar)

Mar 31, 2025

Welcome to this week’s Beyond Line of Sight!

UK plans to allocate 2.5% of its GDP to defence by 2027. Chancellor Rachel Reeves announced in her Spring Statement 2025 last week that an additional £2.2 billion will be made available for defence in 2025/26. This includes funding for novel technologies, UK Defence Innovation, job creation in Barrow, and increased capacity for UK Export Finance. Some weeks ago, the UK Government also announced a new defence innovation body to deliver cutting-edge military tech to British troops and create highly skilled jobs across the UK.

Opportunities in the UK for the drone and counter-drones ecosystem is increasing. With these opportunities, they would need to be designed and built in the UK, or at least manufactured in the UK. Really not surprising that Anduril announced building a factory in the UK soon after getting a £30 million order from the UK government for supplying Ukraine with its Altius loitering munition drones.

Where are the opportunities?

Here is a non-exhaustive list.

UAS:

Small tactical battlefield drones for ISR and loitering munitions
MALE (Medium Altitude Long Endurance) drones for ISR and ‘platform-of-platforms’ systems for both defensive and attack missions
Autonomous Collaborative Platforms (ACP)
Heavy lift drones to deliver munitions and supplies

Other:

Counter-drone systems like direct energy weapons (DEW) and interceptors for soft or hard-kill requirements
AI-driven sensors and systems for tasks such as threat detection and categorisation
Space-based sensors and capabilities to augment drone operations and provide robust communications and data relay (we have previously seen the role Starlink has played for military comms and drone operations in Ukraine)
Solutions that enable interoperability with other allies’ kit (e.g. NATO)
Data security and encryption solutions

The Defence Drone Strategy and ACP Strategy published a year ago under the Sunak Conservative government, provide much of the context needed and nuances around the UK MOD’s requirements.

The one big challenge

As drones and autonomous systems play an ever increasing role in combat, having an industrial base capable of supplying at rate is the key pillar that will unlock UK’s capability. Industrialisation of capability is the key.

As a business, those that can demonstrate and industrialise their capabilities are more likely to be darlings of the MoD. In the end, it’s no good having a great system that meets the mission requirements, if it cannot be produced at the required rate.

The Takeaway

UK has been doing a good job of treading the fine line between US and Europe, demand for drones for defence is rising, and UK is starting to bigger role to play within NATO. So without sounding like an advertisement, the very simple (but not easy) takeaway is this: build in the UK (and NATO) and focus on industrialisation.

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Defence and Security

China's Civil Aviation Administration has certified the TD550D, its first unmanned helicopter, enabling its use in emergency rescue, firefighting, and logistics.

Raytheon successfully launched its Coyote LE SR loitering munition from a helicopter, demonstrating its multi-domain capabilities for reconnaissance, electronic warfare, and precision strikes.

HII's Mission Technologies division is developing a High-Energy Laser (HEL) weapon system for the U.S. Army to counter small unmanned aircraft, featuring an open architecture for scalability and rapid innovation.

Airbus unveiled the Low-Cost Air Defence (LOAD) drone, designed to carry guided missiles for aerial threat interception, with a prototype set to fly by year-end and deployment expected by 2027.

ZeroAvia secured an AFWERX grant to explore hydrogen-electric propulsion for autonomous Cessna Caravans, enhancing stealth with reduced noise and thermal signatures.

Kratos Defense is developing a cost-effective hypersonic drone exceeding Mach 5, with details under wraps until its first flight.

The British and U.S. Armies launched Project VANAHEIM to test counter-UAS solutions, with field trials in Germany in June 2025 and participation from Ukrainian and Australian forces.

Policy and Regulations

Transport Canada will introduce new drone regulations by November 2025, allowing routine BVLOS operations and expanding drone weight limits to 150kg, with phased implementation beginning in April.

The UK CAA will enforce new drone safety standards from January 2026, requiring Open Category drones to meet Class Marking compliance and ensuring manufacturers, importers, and distributors adhere to regulations.

Partnerships

Dedrone by Axon and Thales Australia are integrating a mobile counter-UAS system into Bushmaster vehicles, successfully testing its ability to detect and neutralize drones on the move.

Shield AI and Korea Aerospace Industries (KAI) are incorporating Hivemind Enterprise AI into KAI aircraft, enabling autonomous operations without GPS or communications for advanced military missions.

Money Matters

Contracts

Anduril: $86 million, three-year contract from U.S. Special Operations Command (SOCOM) to develop and deploy autonomy software that coordinates various drones and robotic platforms on the battlefield.

Investment and M&A

Kite Aerospace has acquired key assets from Swoop Aero, including the Kite drone and its operations software, to scale global drone logistics through open integration and third-party collaborations.

Israel’s SpearUAV secured major funding from Deep Insight and private investors to establish a new production line in Israel and expand into the U.S., driven by rising demand for its VIPER loitering weapon systems.

BEYOND LINE OF SIGHT

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