Aerospace reignited: why innovation is taking off

In November 2024, UK prime minister Keir Starmer announced a £975 million funding commitment to the Aerospace Technology Institute Programme over five years, signalling a renewed government focus on innovation, regional growth, and economic security. That message was reinforced in April 2025 with a broader £13.9 billion R&D package spanning aerospace, AI, and advanced manufacturing. Together, these moves underline the government’s view of aerospace as a strategic growth sector, not just for exports, but for national resilience and global competitiveness.

Once seen as too capital-intensive and risk-heavy for many investors, the sector is now at the forefront of deep tech progress, backed by soaring government budgets, dual-use defence urgency, and the rapid maturing of technologies like AI, advanced materials, and quantum computing.

“The two drivers for the industry as a whole are defence and space,” says Wil Benton, venture partner at Aerospace Xelerated, a global accelerator backed by Boeing, Rolls-Royce, and others. “Defence is where most of the budget is, and space is obviously the new cool thing.”

But what does this really mean for start-ups, innovators working within university labs and the larger corporations already established within these industries? As geopolitical pressures mount and the post-war mindset gives way to a more prepared footing, governments are pushing hard on innovation. And Benton, who is based in Vienna, sees a shift. “Europe is now starting to recognise we can’t just be living in a comfortable post-war situation,” he says. “We’ve got to be prepping for a pre-war situation.”

It certainly looks as though this thinking is fuelling a rise in innovation and in particular, dual-use start-ups – those building tech with both civil and defence applications in mind. Overcoming preconceptions has been part of this process.

“Six years ago, start-ups wouldn’t come out and say they were building defence companies,” says Benton. “Now we’re seeing companies identify as dual-use or defence-focused. It’s more palatable.”

Geopolitics has certainly had a lot to do with that, but even then it’s been something of a culture leap. That said, the growing convergence of technologies, such as AI, robotics and telecoms, is shaping these industries more than ever, which could help recruitment, certainly in terms of attracting younger talent.

This shift from cultural hesitation to strategic alignment is now being formalised through structured support programmes that help start-ups navigate aerospace’s complex regulatory and supply chain environments.

Start-ups that make it into Aerospace Xelerated’s programme undergo rigorous onboarding, including becoming Boeing suppliers before the programme even begins. “Becoming a supplier can be a one-to-five-year process. It’s very slow and expensive,” says Benton. “We do the heavy lifting so corporates and start-ups can just focus on working together.”

AI takes flight, quantum in the wings

Once integrated, many of these start-ups are tasked with deploying advanced digital technologies, particularly AI, to tackle some of aerospace’s most entrenched challenges, from manufacturing bottlenecks to maintenance forecasting.

But these AI systems aren’t just improving factory efficiency, they’re enhancing operational safety and regulatory compliance. For example, AI-driven visual inspection tools can now detect micro-defects invisible to the human eye. Other start-ups are developing AI co-pilots that can assist with flight route optimisation based on weather and fuel efficiency, or provide predictive support for ground-based air traffic systems. As Airbus and Boeing wrestle with record backlogs, these tools are becoming critical to maintaining throughput and quality.

According to Oliver Gibson, patent scientist at patent law firm EIP, AI is already proving “more mature and more immediately deployable,” in the aerospace sector. It’s used, he adds, “to monitor manufacturing processes, flag component issues, optimise flight planning and more.” Increasingly we hear of AI-enabled analytics to drive predictive maintenance and factory throughput, but quantum technology, while less mature, holds longer-term promise in crunching the analytical numbers. 

“Quantum simulators could speed up the discovery of new materials for lighter, more efficient aircraft,” says Gibson. Though still in early-stage development, several UK start-ups are exploring defence-adjacent quantum applications – but any urgency surrounding quantum is in security.

University of Bristol spinout KETS Quantum Security is one of those companies. It has developed chip-scale quantum key distribution (QKD) and quantum random number generator (QRNG) devices tailored for aerospace, defence, and space applications. In partnership with Airbus, KETS has already demonstrated its QKD technology aboard UAVs, and is also involved in the Innovate UK-funded ViSatQT project to commercialise satellite-based QKD. Its work with the Satellite Applications Catapult, BT, and Thales reflects growing momentum around deploying lightweight, quantum-secure technologies in environments where data integrity and resilience are critical.

Another company working in this space is Quantum Dice. Its co-founder Wenmiao Yu says that aerospace is a natural fit for quantum-secure cryptography, calling it “a pivotal moment.”

“Quantum computing is no longer theoretical,” says Yu. “The ‘harvest now, decrypt later’ threat is pushing critical infrastructure providers to future-proof.”

Quantum Dice’s patented self-certifying QRNG technology is being tested in space through a partnership with Singapore-based SpeQtral.

“Proving that a QRNG can operate reliably in the harsh environment of space builds trust with aerospace and defence stakeholders,” Yu says.

These developments in quantum-secure systems reflect a broader shift, where resilience, autonomy, and cyber integrity are fast becoming baseline requirements for future aerospace platforms. And just as aerospace companies work to secure data in orbit, they’re also rethinking how to power flight on Earth.

Composites and clean flight

The UK government is reinforcing its push toward net zero aviation with policy as well as funding. The newly introduced Sustainable Aviation Fuel (SAF) Mandate sets a target for 10% of jet fuel to come from sustainable sources by 2030, rising to 22% by 2040. To give investors and producers confidence, the government has launched a Revenue Certainty Mechanism, designed to underwrite prices for SAF and stimulate domestic production. This combination of policy clarity and technological progress creates the conditions for scale.

Airbus’s long-established presence in Filton, South Gloucestershire, continues to play a central role in advancing composite structures, particularly in wing design. The company’s work complements regional supply chain activity and highlights the importance of collaboration across commercial and defence aviation. Airbus is widely recognised for its involvement in ATI-backed sustainability initiatives and close ties to the Bristol Innovation ecosystem, particularly through partnerships with the National Composites Centre (NCC), a key UK hub for advanced materials development and aerospace prototyping.

This collaborative momentum around composites is being matched by breakthroughs in performance. Weight reduction is key to reaching net zero aviation targets, and advanced materials are central to this mission. As Wil Benton puts it, “if you can make planes lighter, they become more efficient, burn less fuel, and go further.”

One company taking this challenge head-on is iCOMAT, a University of Bristol spinout pioneering a novel composite manufacturing technique called Rapid Tow Shearing (RTS). Unlike traditional carbon fibre layering, RTS enables curved fibre paths without defects, significantly improving structural efficiency.

In 2024, iCOMAT raised $22.5 million in Series A funding, co-led by 8VC and the NATO Innovation Fund, NATO’s first public start-up investment. The company claims RTS can reduce component weight by up to 65% and accelerate production tenfold.

“Our RTS process not only offers unparalleled structural efficiency but unlocks fully automated production workflows, akin to automotive stamping lines,” said Dr Evangelos Zympeloudis, iCOMAT’s founder and CEO.

The company is building a state-of-the-art production facility in Gloucester (phase one was completed in January), supported by a £4.8 million grant from the UK Space Agency, and is expected to create around 60 high-skilled jobs in the south west.

Investment and the new space economy

Airbus Ventures, the strategic venture capital arm of Airbus, has also stepped up its investment activity with a growing footprint in the UK space scene. In 2023, it launched a new $155 million “Fund-Y” dedicated to early-stage deep tech and space start-ups. Around a third of its capital is focused on space-related technologies, supporting companies tackling challenges in advanced propulsion, quantum, and orbital systems. Airbus has also backed initiatives like the Airbus UK Space Accelerator, supporting ventures such as Aquark Technologies and Magdrive.

“For decades, investors dismissed aerospace and space tech as too capital-intensive, with few buyers,” says Andreas Riegler, general partner at APEX Ventures. “That logic no longer holds. The space economy is projected to exceed $1 trillion by 2040.”

APEX Ventures is backing start-ups with real-world applications in biotech, environmental monitoring and microgravity research. Riegler notes that nearly 95% of investment in space tech is aimed at Earth-based solutions, with his portfolio including ATMOS Space Cargo (affordable microgravity access) and Yuri (drug discovery and regenerative medicine in space).

Major funding rounds in Europe underline the momentum in the industry with Isar Aerospace ($165m), The Exploration Company ($160m) and ICEYE ($136m) among those making news in recent years.

Breaking barriers: regulation, scale, and talent

Despite the excitement, there are challenges. Regulatory frameworks, for example, still struggle to keep pace with innovation. Benton cites portfolio company CCI, which became one of the first UK start-ups to secure beyond visual line of sight (BVLOS) drone operation approval after a long and drawn out regulatory process. In the aerospace and defense sectors, where rapid innovation outpaces the evolution of regulatory frameworks, this can pose hurdles for startups aiming to bring novel technologies to market.

Access to talent and scale-readiness also remain hurdles. Benton emphasises that early-stage companies must be mature enough to engage with aerospace giants. But many benefit from the soft-skills development Aerospace Xelerated embeds into its accelerator process

“If you can develop the people behind the business, the business is generally more set up for success,” says Benton.

Marc Rivière, strategic advisor in aerospace and defence at PTC (and a former Airbus A400M program manager), draws a useful comparison between space systems and military aviation. Projects like the A400M and Eurofighter, he notes, were often plagued by delays and budget overruns.

“The space industry can avoid those pitfalls by building digital consistency and scalability into its foundations,” he argues.

He says Europe’s future in space depends on embedding scalable, digitally connected production systems from the outset – what he calls the “digital thread.” This means creating systems where design, simulation, manufacturing, certification, and maintenance data flow seamlessly and traceably across teams and lifecycle stages.

“Start-ups like Isar Aerospace need early access to scalable development systems, certification bodies need real-time data to speed up approvals, and investors must start demanding production maturity, not just technology demos,” says Rivière.

Fly with innovation

So, what’s next?

The policy landscape is likely to evolve further. Beyond ATI and SAF funding, industry observers expect new incentives around AI safety, quantum resilience, and advanced manufacturing to emerge in the next government cycle.

“We’ve had the research push and some impressive early wins,” says Benton. “Now we need continuity, production readiness, and clear procurement pathways to turn UK aerospace into a truly global innovation engine. Space and defence are the two really big bets for the next two or three years. And much like in past decades, innovation that begins on the defence side of the aisle often trickles into civil aviation.”

With billions in public investment, regional clusters like Bristol growing in stature, and early-stage ventures leading the charge on AI, quantum and materials science, aerospace is no longer a legacy sector trying to catch up. It’s proving to be a vehicle for breakthrough technologies with potential far beyond the skies. And we may not need to gaze too far into the future to understand where the sector is heading. Some of the most transformative ideas are already being developed today.

Look at Cardiff-based Space Forge, which is pioneering in-space manufacturing with its ForgeStar satellites, aiming to produce advanced materials in microgravity for use in semiconductors, quantum computing, clean energy, and defence. Backed by a record-breaking £22.6 million Series A led by the NATO Innovation Fund, the company’s progress with ForgeStar-1 and -2 suggests space-based industrial production is closer than we think.

Meanwhile, Bristol-based Vertical Aerospace, founded by Stephen Fitzpatrick (who also founded energy firm Ovo in 2009) is developing the VX4, an electric vertical take-off and landing (eVTOL) aircraft designed to revolutionise urban air mobility. With zero operating emissions and partnerships with firms like Honeywell for critical flight systems, Vertical’s aircraft could soon be certified and commercially operational, offering a quieter, cleaner alternative to helicopters.

What binds all these examples together – from quantum-secure satellites and ultra-light composites to space factories and urban air taxis – is a clear shift in mindset. UK aerospace is no longer defined by legacy, it’s defined by innovation. And for any industry or national economy, that can only be a good thing.