Small steps is indeed the best way to go. They haven't got an infinite pot of cash, and spending it on the bit that really matters has paid off; they've got more investment :-)
Britain's history in the space business is accidentally quite good.
We had a rocket, called it Blue Streak, meant if for use as an ICBM / deterrent but then realised it was obsolete before it ever came anywhere near going into service. Apparently we gave the whole lot to the French as a "please let us in the EEC" bribe. The French said merci beaucoup, pizouf, and now they have Ariannespace.
Disaster? Big opportunity missed? Perhaps, but not as big as all that.
I don't think anyone has ever made a lot of commercial cash running a launcher. Mainly the motivation is to get a capability for national security reasons. Ariane did that for the French, we did that another way.
Instead we concentrated on satellite building. There's the sites in Portsmouth, Stevenage, Guildford, bits 'n' pieces at the Rutherford Appleton labs, etc. Building satellites has proved to be highly profitable.
If Skylon ever gets anywhere, we (the UK taxpayer) have a stake in it. Sending up lots of payloads that can then be in-orbit assembled is ultimately more impressive than trying to launch all in one go (e.g. the International Space Station). "Impressive" can turn into big money, maybe.