BAE Systems has bought a 20% stake in a company developing a radical engine that could propel aircraft into space.
BAE is paying £20.6m for the stake in Reaction Engines, which is developing a hybrid rocket/jet engine called Sabre.
Reaction says the technology would allow the launch of satellites into space at a fraction of the current cost and allow passengers to fly anywhere in the world in four hours.
The British government is also investing £60m in the company.
It is based at the Culham Science Centre near Abingdon in Oxfordshire.
The firm hopes to have a ground-based test engine working by the end of this decade and begin unmanned test flights by 2025.
According to Reaction, an aircraft using such engines could take off from a runway and accelerate to more than five times the speed of sound, before switching to a rocket mode which would propel the aircraft into orbit.
Reaction has designs for such a plane, which it calls Skylon.
"Today's announcement represents an important landmark in the transition of Reaction Engines from a company that has been focused on the research and testing of enabling technologies for the Sabre engine to one that is now focused on the development and testing of the world's first Sabre engine," said Mark Thomas, managing director of Reaction Engines.
One of the challenges for the engineers at Reaction is to manage the very hot air entering the engine at high speed.
These gases have to be cooled prior to being compressed and burnt with onboard hydrogen.
Reaction engineers have developed a module containing arrays of extremely fine piping that can extract the heat and plunge the inrushing air to about -140C in just 1/100th of a second.
It's new technology such as this that Reaction and BAE believe could put them ahead of the competition.
Nigel Whitehead, group managing director of programmes and support at BAE Systems, said: "Reaction Engines is a highly innovative UK company and our collaboration gives BAE Systems a strategic interest in a breakthrough air and space technology with significant future potential."
Competition has been growing in the market to launch satellites into space.
SpaceX, backed by billionaire Elon Musk, is using conventional rockets to carry satellites into space as well as ferrying supplies to the International Space Station.
Blue Origin, which is financed by Amazon founder Jeff Bezos, is working on a fully reusable space vehicle.
Meanwhile Richard Branson's Virgin Galactic has developed its own launch system which involves a plane carrying a rocket to high altitude.