BAE Systems Launchpad: How Defence Giants Are Becoming Startup Factories

The UK defence sector has long faced a frustrating paradox. Billions of pounds go into cutting-edge research, yet too few technologies make it past the prototype stage. This week, BAE Systems launched a programme that could change that equation.

The BAE Systems Launchpad incubator marks a big shift in how military-grade innovations reach broader markets. Rather than letting promising dual-use technology manufacturing languish in limbo, the programme spins them out into startups. These new ventures get venture capital backing and access to BAE’s technical expertise.

For UK manufacturers in energy, advanced manufacturing, and the defence supply chain, this signals new opportunities worth understanding.

The Valley of Death Problem

Defence technology has long suffered from what insiders call the “valley of death”. This is the gap between early-stage research and full-scale industrial adoption. Many promising innovations show early success through Ministry of Defence innovation hubs. They generate real demand from end users. Yet they die somewhere between initial enthusiasm and frontline adoption.

The numbers tell the story. The UK Defence Industrial Strategy from September 2025 notes that the Ministry of Defence has struggled with “poor pull-through to commercialisation” for years. Small awards, fragmented funding, and long approval timelines have deterred innovators. Many programmes get stuck at demonstrator level: impressive technology but marginal real-world impact.

The BAE Systems Launchpad incubator directly addresses this by creating a clear path from prototype to product. Julian Cracknell, Chief Technology and Information Officer at BAE Systems, put it plainly: “It allows us to bring to market agile start-ups that are increasingly vital to sectors beyond defence, including energy and advanced manufacturing.”

Rho-C: The First Test Case

The programme’s first spinout shows how defence technology can find new uses. Rho-C is bringing to market technology from BAE Systems’ submarine programmes. The system transmits power and data through solid materials without drilling holes or running wires.

In submarines, this technology enhances stealth and structural integrity. But Rho-C is targeting the oil and gas industry instead. The same capability could boost efficiency and safety in offshore installations. Removing the need to drill through pressure vessels eliminates failure points and simplifies maintenance.

Rob Malkin, Chief Technology Officer at Rho-C, noted the speed advantage: “BAE Systems Launchpad has given us a highly effective, mature technology that we can quickly turn into a product. We are currently working on our first operational unit, which would never have happened this fast without BAE Systems’ support.”

The company is now closing its first venture capital funding round. This validates commercial interest in UK defence technology spinouts.

Aligning with National Strategy

The BAE Systems Launchpad incubator does not exist in isolation. It directly supports priorities in the UK’s Defence Industrial Strategy. That strategy calls for “constant innovation at wartime pace” and highlights the need for more UK defence technology spinouts.

The government has made defence technology a national priority. Consider the scale of resources now aimed at the problem:

• UK defence spending stands at £62.2 billion for 2025/26, rising to £73.5 billion by 2028/29
• The Ministry of Defence will spend an extra £2.5 billion with SMEs through May 2028, taking total SME spend to £7.5 billion
• A new £20 million fund targets British startups with limited prior MoD business
• UK Defence Innovation now coordinates all MoD innovation work
• Five regional defence growth deals aim to develop industrial clusters across the country

For manufacturers, this represents a major shift in how defence technology reaches the market and who benefits from it.

What This Means for UK Manufacturing

The effects extend well beyond defence contractors. BAE Systems has signalled that future ventures could include partnerships with universities and third-party tech specialists. Potential areas include quantum clocks for radar systems and hyperspectral sensing.

Quantum clocks show the dual-use technology manufacturing potential clearly. Built for GPS-free navigation where satellite signals can be jammed, these systems have uses in financial trading, telecoms infrastructure, and precision manufacturing that needs exact timing.

Hyperspectral sensing captures data across the electromagnetic spectrum beyond what human eyes can see. It has clear uses in quality control, environmental monitoring, and precision agriculture.

Supply Chain Opportunities

Manufacturers in these technology areas should pay attention. The creation of defence spinouts opens doors at multiple levels:

Component manufacturing. New startups need physical products built to tight specs. Firms with precision engineering, materials processing, or electronics skills could supply the next wave of UK defence technology spinouts.

Testing and certification. Defence technologies often need special testing regimes. Manufacturers with accredited facilities or relevant expertise could help spinouts navigate regulatory needs.

Production scaling. Startups that prove their technology need partners who can scale up. Companies with flexible capacity and quality systems may find opportunities as spinouts move from prototype to production.

Maintenance and support. Technologies in challenging environments need ongoing care. Manufacturers with field service skills could build long-term ties with successful spinouts.

The Bigger Picture: Defence as Economic Engine

BAE Systems’ economic contribution provides context for why this matters. An Oxford Economics analysis found the company added £13.7 billion to UK GDP in 2024. That equals 0.5% of the entire economy. The multiplier effect is significant: for every £100 generated directly by BAE Systems, an extra £325 flows through the broader economy.

The company supports more than 159,000 jobs, with nearly 50,000 directly employed in the UK. Its supply chain includes 5,800 suppliers and £5.8 billion in annual procurement. More than 40% of the UK workforce lives in the most deprived fifth of local authority areas, where the company has spent £1.3 billion with local businesses.

If Launchpad spins out even a handful of viable ventures, the economic ripple effects could be substantial. Each success creates jobs, needs suppliers, and could export technology globally.

Lessons from the Model

Several elements of the Launchpad approach merit attention from manufacturers thinking about how to position themselves:

Speed over perfection. The programme stresses rapid commercialisation. Rho-C is already working on its first operational unit, not running endless studies. Manufacturers who can move quickly while maintaining quality will be attractive partners.

Technology maturity matters. Launchpad starts with mature, proven technologies from BAE’s internal R&D programmes. This cuts risk and shortens time to market. Manufacturers should look for similar chances where core technology is validated and the challenge is scaling production.

Sector diversification. The clear targeting of energy and advanced manufacturing shows defence companies seeing broader uses for their technologies. Manufacturers in these sectors should engage with UK defence technology spinouts rather than assuming military tech is not relevant.

Ecosystem thinking. BAE gives spinouts access to technical experts and operational support, not just intellectual property. Manufacturers who can offer similar packages will find themselves preferred partners.

Practical Steps for Manufacturers

For operations directors and managing directors in UK manufacturing, several actions are worth considering:

Monitor the pipeline. BAE has indicated future ventures could come from partnerships with academics and tech specialists. Manufacturers with relevant skills should track announcements and position themselves early.

Review supply chain positioning. Companies already in defence supply chains should assess whether their capabilities align with emerging spinout opportunities. Those outside defence should evaluate whether their precision manufacturing or scaling capabilities could translate.

Engage with regional initiatives. The five regional defence growth deals create local structures for connecting with defence innovation. Manufacturers in these regions should engage with the developing clusters.

Assess dual-use technology manufacturing potential. The Rho-C example shows technology flowing from defence to oil and gas. Manufacturers should consider whether the reverse might apply: could their commercial capabilities address defence requirements? Building sovereign manufacturing capability is now a national priority.

Build security clearance capacity. Defence work often needs cleared personnel and secure facilities. Manufacturers considering this sector should start early, as clearances can take months to obtain.

The Road Ahead

The BAE Systems Launchpad incubator represents a structural shift in how UK defence innovation reaches the market. By creating independent startups rather than internal business units, BAE gains agile vehicles that can raise private capital, move quickly, and focus solely on commercial success.

For the broader manufacturing sector, this creates both opportunities and competitive pressure. Companies positioned to support UK defence technology spinouts could find new revenue streams. Those who ignore the trend may find competitors gaining ground.

The UK’s Defence Industrial Strategy explicitly calls for defence to become “an engine for growth”. Programmes like Launchpad are the machinery designed to make that happen. Manufacturers would do well to understand the gears and consider where they might fit.

As Rob Malkin of Rho-C observed: “We have got a huge amount of interest from our first prospective customers and an exciting first year ahead of us.” For UK manufacturers paying attention, the excitement may extend well beyond that first year.