The war in Ukraine has exposed the limits of a defence industry geared to producing small numbers of expensive weapons, as modern drone warfare demands cheaper systems that can be redesigned and manufactured in weeks.
As governments race to adapt — backed by initiatives such as the UK’s £5bn drone transformation plan announced last week as part of its Defence Investment Plan — a new generation of manufacturers is emerging.
Among them is UK start-up Isembard, which aims to combine precision military manufacturing with the speed and scalability of consumer electronics supply chains.
The company, its name is a nod to the British engineer Isambard Kingdom Brunel, is betting that the future of arms manufacturing will not resemble that of the large contractors or “defence primes” of the last century, but a software-driven network linking hundreds of small machine shops into a decentralised production model.
Isembard operates on a franchise model, where it provides advice, software, financing support, manufacturing processes and a pipeline of work, allowing new operators to establish factories under its brand in months rather than years.
The start-up’s customers include defence newcomers such as drone makers Anduril and Tekever, as well as the established contractors such as the UK’s Babcock International.
From one factory in London at the start of 2025, it now boasts six in the UK, including a factory that opened this week in Swindon, a hub for drone production, and seven in other countries, including the US, France and Germany.
“The pace of hardware innovation and scaled production is strongly bottlenecked by your ability to manufacture parts quickly,” said Isembard engineer Rory Rose at the company’s London factory, where two gigantic computerised milling machines turn aluminium billets into drone parts.
He contrasts the west’s fragmented production base with China’s manufacturing clusters, where designers can often receive components within a day.
“If it takes six to eight weeks to get a part turned around, the number of design iterations you can complete in a year is an order of magnitude lower,” he says. “Your ability to make leading-edge hardware is just much worse.”
Before the proliferation of drone warfare in Ukraine, the defence industry was dominated by large players that spent years designing and producing relatively small numbers of complex, expensive equipment: exquisitely engineered fighter aircraft, missiles and warships that were expected to remain in service for decades. That focus is changing with the advent of drones.
“There is this real move from doing low numbers of very expensive systems to needing to produce hundreds or thousands of unmanned systems,” Rose said.
The benefits of automation are already being applied by Q5D, an early-stage company based near Bristol in south-west England, that has developed robotic tools combined with software to automate the manufacturing of wiring harnesses used in drones and other equipment — one of the industry’s biggest production bottlenecks.
Wiring is usually the “slowest part of any manufacturing process because it’s pretty much always done by hand,” said Steve Bennington, chief executive.
The company has a three-year sole-supplier contract to automate wire harness manufacture for the US Army which is hoping to make a million drones a year. Q5D counts Lockheed Martin among its backers, an investment that will enable the US contractor to introduce automated wiring into its supply chain.
The company usually offers to do wiring “40 to 50 per cent cheaper” than conventional methods, said Bennington. For drones, the process itself is in the range of “two times” faster.
Other defence tech start-ups, including Estonia’s Frankenburg Technologies, which is building affordable missile systems, are similarly focused on speed and scale.
The company, which in June opened what it says is the world’s “first affordable air defence missile mass-production facility”, in Riga, uses commercial off-the-shelf components as much as possible, said Kusti Salm, chief executive. The focus, he added, was on building “very low capex assembly factories” with an emphasis on localising production.
Nato’s military leaders agree that manufacturing will have to change to suit the new era. “We need to get people to be comfortable with procurement cycles which are far, far faster than what they have been brought up in,” said Johnny Stringer, Nato deputy supreme allied commander Europe, at a drone conference in Riga in May. “If you’ve been in procurement for the last 30 years, you’re comfortable with big programmes that last many, many decades.”
“We need to be in that space where we are testing, adjusting, failing, learning, procuring much, much faster than has been the case,” he said.
Ukraine’s drone losses average about 670,000 per month according to Nato data from May. Both Ukraine and Russia buy most of their drones or components from China in industrial quantities — but Nato has made it clear it wants the domestic capacity to manufacture such quantities.
Several companies offer manufacture of non-China drone components. One of the largest in Europe is Croatia’s Orqa. Srdjan Kovacevic, Orqa’s co-founder and CEO, says the model is to provide easily scalable, EU-sourced “Lego bricks for companies’ own solutions”. The company last month signed a C$150mn contract with Canada’s Remote Robotic Systems.
Stringer said Nato’s 32 countries should be easily capable of producing 1mn drones a month. “If we can’t do that across 32 nations, then frankly we should be shot,” he joked in May.
Nevertheless, rapidly increasing production has proved to be elusive.
“The big drone companies are still on relatively small contracts,” said Linus Terhorst of the Royal United Services Institute. “We still see, especially in the drone world, that large-scale contracts are not coming through . . . [which] is hampering companies’ attempts to scale production,” he said.
One catch is that cash-strapped governments have stockpiled big quantities of drones, which can then become obsolete overnight. That has left manufacturers in a bind over whether to invest in production or not.
“Factories win wars,” said Alexander Fitzgerald, co-founder and CEO of Isembard on the eve of the Defence Investment Plan, which was delayed by months over wrangling between the UK Treasury and the Ministry of Defence.
Factories cannot be built without orders, “so let’s stop agonising about this plan and commit to increasing production today”.
