Hypersonic air travel and cut-price satellite launches will move a step closer when BAE Systems buys a stake in a UK company developing engines able to power aircraft at 2,500mph and into space.

The FTSE 100 group is set to purchase 20pc of Oxfordshire-based Reaction Engines for £20.6m, in a deal that will see the defence giant's expertise applied to research on the privately-held company's engine, which combines jet and rocket technology.

A working partnership will be formed allowing Reaction Engines to tap BAE's engineering talent and resources, in an arrangement likely to speed up development of technology that could revolutionise air travel and space flight.