The first satellites could lift off from Britain next year after the UK Space Agency pledged millions to help Virgin Orbit launch from Cornwall.
Business Secretary Greg Clark said the new horizontal launch facility would position Britain as a ‘leader in the new space age.’
Although Britain is a world leader in building satellites, it currently has no way of getting them into space, meaning they have to be shipped elsewhere.
Unlike traditional vertical launch systems, the Virgin rocket is attached to a Boeing 747 which carries it 30,000 feet up into the air, from where it blasts off into space, cutting fuel costs substantially.
The company has been carrying out tests in California but will now begin building facilities at Spaceport Cornwall in Newquay.
“Space is not only about pushing the boundaries of human knowledge, it is a rapidly growing sector of our economy,” said Mr Clark.
“These exciting plans from Spaceport Cornwall and Virgin Orbit to make horizontal launch a reality from Cornwall will help further our position as a leader in the New Space Age.”
Britain has not launched a rocket since 1971, when Black Arrow carried a satellite called Prospero into low Earth orbit from Australia.
The UK Space Agency and Cornwall Council said they intended to make available up to £20 million to enable small satellites to be launched from Cornwall by the early 2020s, creating around 150 jobs.
The government is hoping that launching from the UK will also inspire young people to take up careers in science, engineering or even as space entrepreneurs.
Dan Hart, CEO of Virgin Orbit, said: “We are very proud to play a role in bringing space launch back to Britain.”
The UK Space Agency also announced £7 million funding for leading scientists at UCL to develop a new instrument – a ‘plasma analyser’ – to monitor space weather.
When placed in space between the Earth and the Sun, it would give early warnings as solar storms to allow industry to power grids and communications networks.
A new National Space Council, will also be established later this year, bringing together industry, government and the Ministry of Defence.
Science Minister Chris Skidmore said: “As we approach the 50th anniversary of the Apollo 11 moon landing, these announcements demonstrate the UK government’s commitment to space.
“Satellite technology is crucial to our daily lives, for observing the Earth and gathering vital climate change data, and the space industry is growing rapidly with 42,000 jobs across the country.
“Establishing a National Space Council is a landmark occasion and will help put space at the heart of government policy.”
After Brexit, the UK will remain a member of the European Space Agency but is also considering a national investment programme to link up with up space programmes.
Colin Paynter, MD Airbus Defence and Space UK said: "Airbus, Britain's largest space company welcomes the commitment of the UK to establish a National Space Council - recognising the importance of satellites and space applications to all areas of government.
"We look forward to continuing to work closely with the UK Space Agency and more widely across government to reinforce the country's space sector."