The plan would see £100m in grant funding for the UK's space sector with an additional £60m from the European Space Agency's (ESA) UK-backed Advanced Research in Telecommunications Systems (ARTES) programme.
In particular, the funds are being targeted at improving connectivity in remote and rural parts of the UK, which typically face considerably worse speeds than their urban counterparts.
Low Earth Orbit (LEO) space is filling up with satellite constellations from the likes of Starlink and OneWeb that aim, when complete, to give total broadband internet coverage around the world.
These constellations – which are more resilient and harder to disable than ground-based infrastructure – have already ensured reliable connectivity for Ukraine following the attempted invasion from Russia.
The Connectivity in Low Earth Orbit scheme (CLEO) is designed to build on the UK's growing satellite industry by providing UK researchers and businesses with financial support to drive the development of new constellations.
This would include supporting smarter satellites with better hardware, using AI to make data delivery faster and connecting satellites together for improved connectivity.
The scheme would mark the UK's most significant investment in satellite communications thus far and would also include a range of live 5G integration projects such as the 5G testing facility at ESCAT in Harwell, Oxfordshire, which aims to establish networks in underserved and remote areas.
Science minister Michelle Donelan said: "Tackling the digital divide is at the heart of empowering our citizens wherever they live, and by investing in the vital research and development that CLEO would facilitate, we can level up our country while growing the economy through high-quality jobs.
"This proposed record investment is also potentially a huge opportunity to harness our reputation as a world leader in innovation and R&D investment, supporting leading UK businesses to deliver the next generation of satellites and positioning the UK as a true space superpower."
Harshbir Sangha, mission delivery director at the UK Space Agency, said: "Our intent is to catalyse investment, build on existing capabilities and meet the challenges associated with seizing a significant share of a fast-moving global market by leveraging our growing national space programme and leading investments in commercial ESA programmes such as ARTES."
UK universities recently signed a deal to help build Europe's largest solar telescope at La Palma in Spain.
