Drone warfare rewires the west’s arms production

Ukraine’s experience drives race by new generation of start-ups to reshape the weapons industry

Financial Times UK

13 Jul 2026

CHARLES CLOVER AND SYLVIA PFEIFER

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 two weeks ago 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 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.

“There is this real move from doing low numbers of very expensive systems to

needing to produce hundreds or thousands of unmanned systems,” said Isembard engineer Rory Rose.

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 established contractors such as the UK’s

Babcock International.

The start-up has six factories in the UK 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 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.

The benefits of automation are already being applied by Q5D, an earlystage

company based near Bristol in south-west England, which 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.

Q5D has a three-year sole-supplier contract to automate wire harness manufacturing for the US Army, which is hoping to make 1mn 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.

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 massproduction facility” in Riga, uses commercial off-the-shelf components as much as possible, said Kusti Salm, chief executive.

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 Air

Chief Marshal Sir Johnny Stringer, Nato deputy supreme allied commander

Europe, at a drone conference in Riga in May. “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.

Several companies offer the manufacture of non-China drone components. One

of the largest in Europe is Croatia’s Orqa. The company last month signed a

C$150mn ($106mn) 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 elusive.