TheChek News Flow

SpaceX is on track to record another significant revenue increase this year, Elon Musk said, continuing a growth streak at the world’s busiest rocket launcher.

Musk, SpaceX’s chief executive, said Tuesday on X that the Texas-based company is expected to generate about $15.5 billion in revenue in 2025.

Privately held since Musk founded it in 2002, SpaceX doesn’t publicly disclose its financial results, making information about its performance rare. In 2022, SpaceX’s annual revenue totaled $4.6 billion, The Wall Street Journal has reported. Late last year, SpaceX was valued at $350 billion.

The company has two main business lines that have stoked revenue growth in recent years. One is its launch operation, which revolves around its Falcon 9 rocket. The partially reusable vehicle has emerged as the global workhorse, frequently used for U.S. government missions and by private satellite operators.

SpaceX’s launch business has been helped by the company’s focus on reusability, as well technical problems that have delayed several competing rockets.

The company’s other major business is Starlink—a low-Earth-orbit satellite constellation that provides subscribers on the ground with high-speed internet connections.

Starlink has driven a major part of the recent revenue gains at SpaceX, according to analysts tracking the company. Quilty Space, a consulting firm, estimates Starlink revenue is set to grow to $12.3 billion this year from $7.8 billion in 2024.

Starlink has won household subscribers from competing satellite services, built up a growing government business and reeled in blue-chip corporate clients, like United Airlines and Deere.

SpaceX continues to invest heavily in vehicle development and infrastructure efforts. A good part of its cash is flowing toward Starship, the deep-space vehicle the company has been testing in flight since 2023 and hopes to one day use for missions to Mars.

Bret Johnsen, finance chief at SpaceX, said at an industry event in March that getting Starship prepared for Mars was a huge endeavor. He said SpaceX continued to spend its own funds on research and development for the roughly 400-foot-tall vehicle, which the company has called the most powerful rocket ever built.

In his post Tuesday, Musk said “commercial revenue” at SpaceX would exceed the entire budget of NASA next year. The White House, where Musk worked until recently, has proposed cutting the National Aeronautics and Space Administration budget to $18.8 billion for its next fiscal year from nearly $25 billion currently.

NASA’s funds flow to a far-reaching set of scientific and exploration endeavors, and SpaceX is a major contractor at the agency. Musk said about $1.1 billion of the company’s expected revenue this year would come from NASA.

Billionaire sides with GOP critics who say measure doesn’t cut spending enough

Key Points

WASHINGTON—Former White House cost-cutting czar Elon Musk called President Trump’s “big, beautiful” tax and spending package a “disgusting abomination,” stepping up his criticism just as the Senate is trying to quickly pass the measure and get it signed into law by July 4.

Musk’s comments are his latest sharp words about the package, which includes tax cuts as well as reductions to spending on Medicaid and food assistance. Last month, he gave new fuel to GOP critics of the Republicans’ multitrillion-dollar agenda, saying that the current measure failed to reduce the federal deficit.

“Shame on those who voted for it: you know you did wrong. You know it,” said Musk, in comments on his X social-media platform. Musk, who left the administration last week, called the package a “massive, outrageous, pork-filled Congressional spending bill.” He issued a warning on the midterm elections: “In November next year, we fire all politicians who betrayed the American people.”

The bill narrowly passed the House last month by one vote. It is now in the hands of the Senate, where some fiscal hawks, including Sens. Ron Johnson of Wisconsin, Mike Lee of Utah and Rick Scott of Florida, have demanded deeper cuts.

The Senate is aiming to make changes to the bill and then send it back to the House. Backers can afford to lose no more than a handful of GOP votes in either chamber, with all Democrats expected to be opposed. Still, the White House and GOP leaders said that Musk’s statements didn’t shake their confidence in passing the measure.

Trump “already knows where Elon Musk stood on this bill,” White House press secretary Karoline Leavitt told reporters on Tuesday when asked about Musk’s social-media post. “It doesn’t change the president’s opinion.”

The current proposal would extend expiring tax cuts for all income groups and create new tax cuts on top of that, including versions of Trump’s campaign-trail promises to eliminate taxes on tips, overtime pay and Social Security benefits. The bill would provide new money for border security, national defense and support for farmers. To cover some—but not all—of those costs, the bill would reduce spending on green energy tax credits, Medicaid and food assistance.

Top Republican defenders of the measure argue that the tax cuts will fuel increased economic growth to close the fiscal gap—counter to assessments by congressional scorekeepers. In all, the bill is expected to increase budget deficits by $2.7 trillion through 2034, compared with doing nothing, though a final official estimate wasn’t available.

Senate Majority Leader John Thune (R., S.D.) kept his focus on the bigger picture, saying that Republicans had campaigned on extending and expanding Trump’s tax cuts and that he intended to deliver, aiming to put the bill on the floor the week before July 4. Asked if he thought Musk’s pressure would tank the bill, Thune said he hoped Musk would further assess the bill and “come to a different conclusion.”

Senate Republicans still must sort through intraparty differences, including over the timing and depth of cuts to Medicaid and clean-energy subsidies, whether to go along with more generous state-and-local tax deductions, and demands from lawmakers who want special benefits for their states in exchange for backing unpopular changes elsewhere in the bill.

Musk helped derail a House GOP spending bill in December, forcing House Speaker Mike Johnson (R., La.) to slim down the proposal to get it passed and avoid a government shutdown right before Christmas. But there were signs Musk’s power has ebbed, and Johnson brushed off his objections.

Johnson said Musk is “terribly wrong.” He said the bill is a “very important first start” in terms of cutting costs, and the package will be “jet fuel for the economy.” He also questioned whether Musk’s objections were related to a provision ending federal tax incentives for electric vehicles.

Under the House bill, consumer tax credits for new electric vehicles would largely end after this year. Musk has previously said the government should end all such tax credits.

Democrats, who for months cast Musk as a villain haphazardly dismantling government agencies, reveled in the public split.

Senate Minority Leader Chuck Schumer (D., N.Y.) said the billionaire’s comments prompted him to “say something I didn’t think was imaginable. I agree with Elon Musk.” He reiterated Democrats’ criticism of the package as a “big, ugly bill” that provides “tax breaks for the ultra-wealthy paid by gutting health care for millions of Americans.”

While in government, Musk drove sharp cuts in many government departments, but fell well short of producing the $1 trillion in savings he promised. Some Republicans questioned how meaningful Musk’s comments were in swaying senators.

“I don’t know how influential he was when he was in the administration, so I can’t gauge it,” said Sen. Mike Rounds (R., S.D.). “He’s a businessman who came in and tried to help. We appreciated it,” Rounds said. “But now we move on.”

Trump hosted Musk at a farewell Oval Office press conference last week, where the two men heaped praise on each other, aiming to counter the perceptions that their partnership had frayed. The White House on Tuesday sent Congress a $9.4 billion rescissions package that would codify some spending cuts made during Musk’s tenure.

Critics of the bill embraced Musk’s latest remarks.

“The Senate must make this bill better,” Lee wrote in a response to Musk’s post. Sen. Rand Paul of Kentucky, who has objected to the debt-limit increase included in the package, said both he and Musk “have both seen the massive waste in government spending and we know another $5 trillion in debt is a huge mistake. We can and must do better.”

Trump attacked Paul on social media earlier Tuesday, saying the senator “has very little understanding of the [big, beautiful bill], especially the tremendous GROWTH that is coming.”

Inside the Ukrainian Drone Operation That Devastated Russia’s Bomber Fleet

WSJ analysis reveals how Ukraine used homegrown tech and old-school spycraft in the attack

KYIV, Ukraine—Ukraine’s spectacular drone attack on Russia’s strategic bomber fleet on Sunday began with a daunting request from Ukraine’s president to his spy chief in late fall 2023.

The Russian Air Force was pummeling Ukraine’s power stations and cities with missiles, overwhelming meager air defenses, and Volodymyr Zelensky wanted to know: How can we fight back?

Lt. Gen. Vasyl Maliuk, a 42-year-old career security officer with broad shoulders and a stern mien, has earned a reputation for innovative operations with explosive naval and aerial drones that forced Russia to withdraw much of its Black Sea Fleet from its base in occupied Crimea and damaged dozens of oil plants and military-production facilities deep inside Russia.

But the task was formidable. The strategic bombers that launched many of Russia’s most powerful missiles operate from beyond the range of Ukraine’s air-defense systems, and were based at airfields across the country as much as 3,000 miles from Ukraine. Ukraine’s SBU security service, which Maliuk heads, has deployed long-range aerial drones effectively, but they are vulnerable to Russian air defenses, including missile interceptors and jammers.

What Maliuk and his team came up with shocked the world Sunday with its audacity. The agency smuggled Ukrainian drone parts into Russia and assembled them at a secret location. SBU operatives inside Russia used unwitting truck drivers to deliver a modern version of the Trojan horse by concealing the drones in the roofs of wooden containers. On Sunday, the roofs—activated remotely—slid open on trucks close to the Russian air bases, releasing dozens of drones and adding a dash of Transformers to old-school spycraft.

More than 100 quadcopters—small drones with four rotors—emerged and zipped toward their targets, some descending through smoke billowing from already-damaged aircraft.

A Wall Street Journal analysis of official Ukrainian statements along with satellite images, accounts by people familiar with the operation, and photographs and videos posted on social media shows how a meticulously planned operation that combined homegrown technology with the classic art of deception unfolded.

Ukraine said that it damaged 41 warplanes valued at $7 billion at four bases using drones that cost about $2,000 each. Publicly available videos and satellite imagery reviewed by the Journal showed 12 damaged planes across two air bases.

“The numbers the Ukrainians have been providing aren’t backed up yet by hard evidence,” said Sam Lair, a research associate at the James Martin Center for Nonproliferation Studies, a Monterey, Calif.-based think tank that studies weapons of mass destruction. Lair identified the damaged planes through satellite imagery and social media.

Still, he said, “it’s clear that this has dealt a very heavy blow to the Russian strategic bomber force, even if we aren’t seeing the numbers that the Ukrainians have claimed.”

Of the four air bases that the SBU said it targeted, satellite imagery indicates that three sustained damage, and only two show visible signs of damaged aircraft—the Belaya and Olenya air bases.

Satellite imagery from Monday shows that a third air base, Dyagilevo, sustained only a patch of burned grass, according to Lair.

Much of the damaged equipment is irreplaceable or hard to rebuild. A Ukrainian law-enforcement official said at least one of the targets damaged was a rare A-50 plane, which provides airborne early warning of potential threats and targets as well as command and control of the battlefield. Available satellite imagery doesn’t show any damaged A-50s.

Most of the planes hit were Tupolev Tu-95 bombers, a Soviet-era aircraft still crucial to Russia’s long-range missile campaigns. While the extent of the damage to Tu-95s remains unclear, in light of the aircraft’s age and scarcity of parts, even relatively minor damage could derail Russia’s air missions for months, Lair said.

Maliuk and his agency have plenty of experience striking prime targets, from the use of a truck bomb to damage the Kerch Bridge between mainland Russia and occupied Crimea to assassinations on Russian territory, including the killing of a Russian general with an exploding scooter as well as a bomb hidden in a statuette to kill a prominent war blogger.

Zelensky said that Ukrainian intelligence operatives in Russia had set up a base right under the noses of Russia’s Federal Security Service, the FSB. Russian law enforcement searched a concrete warehouse Sunday in Chelyabinsk, an industrial city in the Ural Mountains about 900 miles east of Moscow and a few miles from the local FSB headquarters, according to Russian media.

Russian state media named a Ukrainian DJ who had been living in Russia and recently relocated to the city last year as one of the people responsible for logistics behind the drone attack, purchasing the trucks that would carry the drones and coordinating the drivers. He didn’t respond to requests for comment.

Some of the materials the SBU used in the operation had to be smuggled across tightly controlled borders, including the parts that would eventually be assembled into the attack drones.

A Ukrainian law-enforcement official said the drones used were quadcopters called Osa, produced by the Ukrainian company First Contact. The craft, about the length of a man’s arm, are made in Ukraine, can carry a payload just over 7 pounds and travel at a maximum speed of just over 90 miles an hour, according to the manufacturer’s website.

Valeriy Borovyk, the founder of First Contact, declined to comment on whether the drones were used in the operation, but said they are manufactured for complex special operations.

Osa, Ukrainian for “wasp,” has several alternatives for how it can be controlled. One of them is the ability to connect to cellular networks, which Russia shuts down when it expects an incoming strike but which remain operational when there is an element of surprise, as there was with Sunday’s operation.

Borovyk said it was the SBU’s meticulous preparation ahead of the strike that would have allowed for drone operators to do their job effectively. He said the strike portion of the operation was the cherry on top.

“But this cake, they prepared it, cooked it, put it in a box, decorated it—to continue the metaphor—and all of this was done with great care and detail,” Borovyk said.

The truck drivers said to Russian authorities that they weren’t told about the contents of the containers and were instructed to stop at gas stations or roadside rest stops near the airports, according to Russian media.

New York pension scheme considers boost to overseas investments

Donald Trump’s erratic policies have prompted ‘gut check’ review of asset allocation, says investment chief

New York’s public pension scheme was weighing whether to boost its allocations to overseas markets as Donald Trump’s erratic policy measures upended the outlook for global markets. 

Steven Meier, chief investment officer for the New York City pension systems, which manage about $290bn of assets for the city’s municipal workers, told the Financial Times he was considering a “gut check” review of its asset allocation at the end of the year. 

“There’s been a lot of changes in policy in Washington the last few months. Those policy changes have raised the level of uncertainty and volatility in the marketplace,” Meier said, adding that the changes may affect the fund’s underlying assumptions concerning GDP growth, inflation, productivity, government spending and private capital flows.

The funds have 15 to 20 per cent invested in Europe and less than 5 per cent invested in Asia.

The New York City pensions investment chief said international diversification was a “benefit to a portfolio . . . particularly coming off of a time when the US has really outperformed and portfolios are so dominant in US dollar assets”.

He added that Europe’s plans to increase spending on defence “would probably combine to deliver a more vibrant economy in Europe which means more investment opportunity” and that he was “increasingly” looking at more opportunities in Asia because the funds’ holdings there were “so small”.  

However, he added that any asset allocation changes would be incremental and US markets would continue to dominate the portfolio. “As a US dollar investor with US dollar liabilities, we have a home bias that makes sense — these are the deepest and most liquid capital markets in the world,” Meier said.

The New York City pension systems, which are collectively the third-largest public pension plan in the US, last carried out a major asset allocation review in 2023, which was implemented last year. Such reviews are normally carried out every three to five years. 

“Enough has probably changed in terms of the outlook for the economy that we should probably think about a strategic asset allocation review at the end of the year,” Meier said, adding that he had not made any such changes yet because it was “still a little early” to digest the implications of Trump’s trade war.

Meier’s comments come after the US president has rocked markets in recent months by announcing a spate of tariffs, delays and partial climbdowns. In late May a court ruled he did not have the authority he relied on to impose most of the levies, a decision the White House has appealed. 

Trump’s “big, beautiful” tax bill along with a recent Moody’s downgrade of the US’s credit rating has also brought the sustainability of America’s debt levels under renewed scrutiny and put pressure on US government borrowing costs. 

“I do think that some of the announcements that have been made and the actions that have been taken are material . . . and this administration has a different communication style that lends itself to more uncertainty and more volatility that needs to be taken into consideration,” Meier said. 

He added that ultimately tariffs “will have the impact of increasing inflation at least for a period of time and will probably dampen growth”. 

At its last strategic asset allocation update, the funds increased their allocation to private markets following a change in New York state legislation that expanded their potential allocation to non-traditional assets, primarily alternative investments, from 25 per cent to 30 per cent. 

Ministers to hand more than £1bn to Lower Thames Crossing in spending deal

Taxpayer backing to be unveiled by Reeves will pave way for private fundraising

Ministers are set to allocate more than £1bn of public funding for the Lower Thames Crossing as part of next week’s spending review, according to government officials.

The sum, which is set to be lower than the £2bn project operators initially wanted, is needed to unlock private investment into the £10bn road tunnel that will link Kent and Essex.

National Highways, the government body behind the project, previously estimated that £1.9bn was required to secure £6.3bn of private capital, using a model favoured by the Treasury that would allow investors to recoup their money through driver tolls.

Chancellor Rachel Reeves would allocate taxpayer support for the project as part of the spending review, the people said.

Officials expect the crossing to be financed and run by private investors under the “regulatory asset based” or RAB model.

The model has been used by other big infrastructure projects such as the Thames Tideway sewage tunnel. National Highways previously said that this approach would cost about £200mn more than if the state funded the entirety of the project.

Construction on the 14-mile road and tunnel is expected to start as soon as the next 12 months, after no appeals were received ahead of a deadline to legally challenge the project’s planning consent.

The project is a test of the government’s ambitions to unblock major infrastructure work.

National Highways has spent more than £1.2bn on the crossing even before building work has started, while its planning document runs to more than 300,000 pages.

The funding for the Lower Thames Crossing will be part of a broader announcement by Reeves of up to £113bn in capital and infrastructure projects, as she seeks to convince the public that her government has a plan to boost economic growth and improve public services.

Reeves changed the government’s fiscal rules at her October Budget to increase the amount she could borrow to fund capital investment.

At the same time, she is set to announce sharp cuts to government spending across some unprotected departments as she seeks to rein in costs and balance the budget.

The Treasury declined to comment. National Highways did not immediately comment.

More than £1.2bn has already been spent on the project since it was first agreed in 2017, including on legal fees, consultations, land purchases and a community woodland.

In March, the government gave planning permission for the crossing, which Reeves has said is “infrastructure our country desperately needs”. No legal challenges to the permission were filed before a May 6 deadline.

The absence of objections has surprised experts, who are used to UK infrastructure projects being bogged down in court proceedings.

Mustafa Latif-Aramesh, partner at law firm TLT, said the lack of a court claim against the controversial road project suggested that the government’s proposed planning reforms were “having the desired effect”.

“The strong endorsement by the Department for Transport and the government’s strong signal it supports projects like this, which support growth, will have dissuaded challenges too,” he added.

A judicial review can add between £66mn and £121mn to a scheme and delay construction by a year or 18 months, a government review found last year. 

The government’s infrastructure and planning bill, currently winding its way through parliament, will make it harder for third parties to challenge development projects through the current judicial review process. 

However, there are concerns that it will weaken environmental protections as developers will be allowed to pay into a nature restoration levy scheme in an attempt to mitigate any environmental harm elsewhere.

Thames Water’s financial options are narrowing

KKR’s exit highlights difficulty of pursuing market-based solution for embattled utility

When one has manoeuvred oneself into a corner, frantic wriggling only causes further scrapes. That could reasonably describe the predicament of Thames Water. News that private equity group KKR has pulled out of a plan to provide it with £4bn in fresh equity highlights just how hard pursuing a market-based solution is for the embattled UK utility.

In theory, it is possible to make Thames Water investable — just about. It currently has about £20bn of regulated assets and £18bn of debt. Over the next five years, revenue — while growing — will do so more slowly than outflows. That, along with fines and other niggles, will leave it with negative free cash flow of perhaps £5bn. The good news, however, is that planned investments will raise its regulated capital value to about £32bn — the main source of value creation.

On these very rough assumptions, Lex calculates that an investor injecting £4bn of equity could stand to double their money. If, that is, they can impose a 30 per cent haircut on existing debt and — most challenging of all — turn the utility’s performance around. It’s a reasonable, rather than huge, return on investment given Thames Water’s turbid history.

A sharper haircut on debt could invite a new equity investor rescue. However, senior bondholders — a group including Elliott Management, Aberdeen and many others — need to approve any voluntary recapitalisation in practice, so the space to impose punitive conditions may be limited. 

That puts the onus on the government and regulators to provide an environment that is suitably lenient — in terms of bills, fines and performance metrics — so as to make the investment stack up. Presumably, under current conditions, it doesn’t for KKR, which has now walked off into the sunset.

Other interested parties may face similar challenges. The other “market” alternative is for Thames Water to pursue a restructuring plan proposed by the bondholders themselves, which also envisages haircuts and junior capital injections in the form of new equity.

But while the details of this proposal have not been disclosed, and holders of existing debt with skin in the game may be supportive, it is rare for companies with only one option on the table to get the very best deal.

There is, of course, another route. Putting Thames Water into special administration — a form of temporary renationalisation — would not be popular with the utility’s creditors. It would also be politically fraught, encumber public finances further, and might well send a poor signal to those looking to invest in UK infrastructure, whom the government needs onside. 

But through a series of mis-steps, the UK has already manoeuvred itself into an uncomfortable space. Meanwhile, Thames Water is flailing around raising expensive emergency debt, paying large adviser fees and running auction processes that end up with few serious bidders. A chance to restructure under public ownership looks like the pick of a bad bunch.

Friedrich Merz plans €46bn corporate tax breaks to revive German economy

Finance minister Lars Klingbeil will outline measures to boost corporate investments amid threat of US tariffs

Germany’s new government will seek to pass a €46bn package of corporate tax breaks over the summer in an effort to jolt the Eurozone’s largest economy out of stagnation.

Finance minister Lars Klingbeil, a Social Democrat, will outline the measures during a cabinet meeting on Wednesday. The tax incentives, which include deductions for new equipment and new electric vehicles, will cost about €46bn in total by 2029, when the coalition’s term expires, according to government estimates seen by the Financial Times.

“Following a period of economic stagnation, it is important to raise the potential of the German economy significantly,” reads the draft bill. The measures are meant to “send a strong signal for the short-term and long-term competitiveness of Germany as a business location.”

The initiatives come in addition to a massive debt-funded public spending plan of more than €1tn to modernise Germany’s armed forces and ageing infrastructure — the central plank of Chancellor Friedrich Merz’s efforts to revive the economy.

The leader of the Christian Democrats, who campaigned on a pro-business platform, has also vowed to subsidise electricity costs for the country’s struggling manufacturing industry. A ministry has been created to slash bureaucracy and speed up digitisation of the administration.

The planned tax breaks would be “good for Germany as a place to invest”, said Holger Schmieding, chief economist at Berenberg. “But this can only be the start. Easing the regulatory burden will be more difficult but also more important.”

From July 1, companies would be able to deduct 30 per cent of the cost of new machinery and other equipment from their tax bill annually between 2025 and 2027.

From 2028, the federal corporate tax rate of 15 per cent would then decrease by one point each year to 10 per cent. Companies will also be allowed to depreciate 75 per cent of the purchase price of new electric vehicles on year one, and thus reduce their taxable income. The government intends to introduce more advantageous tax incentives for R&D spending.

Robin Winkler, head of German macro at Deutsche Bank, said the proposals should provide a “welcome short-term stimulus for the manufacturing sector”.

Merz’s coalition with the Social Democrats expects the measures to be adopted by the two houses of parliament by the end of the summer.

Merz’s economic plan signals a policy shift for a country that, not long ago, stood as the EU’s standard-bearer for fiscal discipline.

The export-oriented nation — already struggling with Chinese competition and higher energy costs — has seen minimal growth over the past three years. Economists warn that renewed threats of 50 per cent US tariffs on European goods could push the economy into contraction this year.

In the third quarter of 2024, Germany’s corporate investments in plant, machinery and vehicles were 9 per cent below the pre-pandemic level, according to German development bank KFW.

They were 11.5 per cent higher in the US and 1 per cent higher in the EU as a whole in the same period.

Public and private R&D expenditures were also lower than in other countries: while Germany spent 11 per cent more in intellectual property than before the Covid-19 pandemic, the US spent 36 per cent more and France 27 per cent more in areas such as AI, according to KFW.

Cheaper and quicker-to-produce weapons are needed to deter Russia and other threats

Russia’s war on Ukraine has thrown up a particular challenge for the defence industry: why use highly expensive missiles to take down cheap drones, especially when there might be hundreds of them?

Military chiefs and politicians across Europe have acknowledged the new nature of warfare coming out of Ukraine. “The war in Ukraine is a strange combination of old-fashioned World War 1-World War 2 trench tactics, and a new kind of warfare using drones,” says Anders Fogh Rasmussen, the former head of Nato.

That in turn requires both new technology and much greater scale in armed capability. The latter is mostly about the sheer number of soldiers that might be needed, especially given the cavalier disregard for casualties shown by Russia, the main likely adversary for most European countries. But it is also about the required weaponry. Ukraine has shown the power of drone warfare, most recently and audaciously with its blowing up of multiple Russian aircraft deep inside enemy territory.

Myriad start-ups are popping up to address this issue across Europe as both entrepreneurial spirit and venture capital pour into the defence sector. Many of these new businesses say it is not just drones that are needed but also good anti-drone air defence that does not cost huge amounts of money.

“The cost-to-kill ratio is terrible. Current anti-drone, short-range air defence kit can cost €500,000 versus €20,000 drones,” says Kusti Salm, chief executive of Estonian start-up Frankenburg Technologies.

Europe’s defence industry is highly fragmented with many countries having one or multiple national champions. These may be good at producing complicated and costly large systems such as fighter jets, submarines and some missile defence.

However, Europe desperately needs these new start-ups and their potentially cheaper and quicker-to-produce weapons if the continent wants to be able to deter Russia given that various ministers across the continent are warning that Moscow could turn its attention to Nato countries within anything from three to 10 years. While Ukraine has become highly proficient at drone warfare, so too has Russia. Europe outside Ukraine lags a long way behind.

Another start-up in this space is Nordic Air Defence, a Swedish company that aims to produce an inexpensive drone interceptor for both military and civil use. Karl Rosander, NAD’s chief executive, says that one artillery grenade currently costs more than 80 times its pre-Ukraine war price while getting hold of large amounts of air defence missiles quickly is all but impossible.

“What happens if we get into a war and we need to scale production dramatically? We can’t right now. We need to have defence systems more at the same cost level as drones,” he says, adding that NAD’s solution — due to go into production next year — should be a tenth of the current cost.

That’s a similar level to what Frankenburg is aiming at. “The big problem with the defence industrial space in Europe, as well as the US, is simple: the weapons currently produced are outrageously expensive, and available at very low number. We need 10-100 times more, and 10 times cheaper,” Salm says, adding that his company is targeting a price of much less than €50,000 for its short-range rockets.

Rasmussen, also a former Danish prime minister, believes nation states need to step up defence spending dramatically to something like 5 per cent of GDP, investing in a “mass of fighter jets, tanks and heavy equipment”. But also needed is private investment that backs start-ups in new technologies such as drones.

In the past, environmental, social and governance concerns have stopped many fund managers from backing defence groups. But signs are emerging of more investment happening, with start-ups reporting strong demand from VCs, angel investors and family offices chasing the high growth that defence companies look to offer in the coming decade.

One question is whether over time that will affect the established defence industry. Salm argues that it “needs to be disrupted in every respect”, saying existing big firms would offer a new product that is only a few per cent better than the old one, but for a much higher price. “The bigger challenge is a product that is 10 per cent inferior, but 50 per cent cheaper, and can be manufactured by factors of hundreds,” he says.

The task is particularly urgent for Europe. Russia and China have both made drone technology a priority. Europe needs to unleash its start-ups to do likewise.