The new version of the P.1127 presented to MWDP in March 1958 met with strong approval from them. They had already intimated that the BE.53 was about to receive funding from NATO, and with such encouraging developments the level of resources and personnel devoted by Hawker to the aircraft increased significantly. Much Drawing Office effort was vainly devoted to coming up with a different undercarriage proposal as Sir Sydney Camm professed to be offended by the existing bicycle scheme. In May construction began of wind tunnel and ground effect models although as Hawker had no wind tunnel of their own, and British government facilities were not made available, some of these had to be tested in the wind tunnel at Kingston Technical College. However, this was only a temporary expedient as in June 1958 the Royal Aircraft Establishment offered its wind tunnels for testing. This was the first positive sign of official British support for the project, prompted by the first musings by the Operational Requirements Branch of the RAF on the development of a possible V/STOL replacement for the Hunter FGA.9 in the ground attack role, although this was unknown to Hawker. With the engine now firmly financed, and with design and construction of the P.1121 winding down in the face of official indifference, Hawker began detail design of the P.1127's wing in August 1958.

The first day of 1959 saw the announcement that English Electric and Vickers had been jointly awarded the contract for GOR 339, the aircraft being developed to specification OR 343 as the ill-fated TSR 2. This was the final nail in the coffin of the P.1121 as a possible production aircraft, the only hope for this design now resting in a research contract in support of TSR 2 development. Even this hope was to be unfulfilled and the incomplete prototype was removed from the Experimental Department later in 1959. The company's hopes now rested on the P.1127, which was always designed as a prototype combat aircraft, with provision to carry operational equipment and weapons. With the TSR 2 firmly 'in the bag' the RAF now felt able to make public its desire to replace the Hunter with a V/STOL strike fighter. In the same month that that they were told about the TSR 2 contract, Hawker learned that the Ministry of Supply was considering an order for two prototype P.1127s. Early in March the first draft of General Operational Requirement 345 reached Hawker, outlining a need for an aircraft clearly in the P.1127 mould to enter service in 1965. With British government interest in the P.1127 now clearly evident Hawker felt able to begin construction of two prototypes in advance of official funding. The first drawings were issued to the Experimental Department during March 1959, while the last major design change was made in the following month when the reaction control system was changed from using low to high pressure bleed air, the pipes required by the original scheme having proven unfeasibly bulky. This prompted a further modification to the engine, the BE.53/2 with its Orpheus 3 core being superseded by the BS53/3 that used an Orpheus 6 to cater for the demand for high pressure bleed air.

Government interest was further illustrated in May 1959 when they sent Hawker a firm specification, ER 204D, for the prototype P.1127s. Although all this interest was welcome to Hawker, it did mean that the P.1127 was now facing in two directions - towards domestic needs and European ones. While the RAF had been drawing up its plans, NATO had been firming up its needs for a V/STOL light fighter to replace the Fiat G.91. By 1959 these needs were becoming more than the basic P.1127 could meet, calling for the carriage of complex navigation and attack avionics and a possible supersonic ability. Despite this, as the P.1127 was clearly the most advanced aircraft in development MWDP continued to support it via the BE.53, although with less likelihood of ordering it into production for NATO forces.

P.1127 powerplant installation.	Initial P.1127 reaction control system for jet-borne flight.

With the first flight now scheduled for July 1960, Hawker authorised overtime for all departments working on the P.1127 in July 1959, the same month that the first BE.53/2 went on test at Bristol. This engine was soon to be renamed Pegasus 1, the BE.53/3 becoming the Pegasus 2. In October the newly formed Ministry of Aviation awarded a £75,000 holding contract for design work on the aircraft, while thoughts at Hawker now centred on preparing the flight test programme for their conceptually novel aircraft. To this end the head of Hawker's Project Office, Bob Marsh, accompanied Ralph Hooper to visit Bell Aircraft and the NASA facility at Langley Field in America. The reason for their visit was to examine the Bell X-14, a small, vectored thrust research aircraft powered by two Armstrong Siddeley Viper engines. In using vectored thrust and in having a jet reaction control system, the X-14 approximated to the P.1127, although it had significant gyroscopic engine forces that the P.1127 design had eliminated. At NASA the two Hawker engineers met John Stack, a P.1127 supporter since a visit to Kingston in August 1958. This enthusiasm was shown by Stack's initiation of free-flight model tests of the P.1127 that would be able to demonstrate transitions from vertical to conventional flight. This help was extended in September when Stack authorised the construction of a 10% peroxide powered transonic model of the P.1127. The free-flight model was first tested by NASA in January 1960 and quickly laid to rest British fears that transitions would be uncontrollable, these results greatly encouraging Hawker. Two Hawker test pilots, Bill Bedford and Hugh Merewether, undertook a further visit to NASA Ames in March 1960 in order to fly the X-14 and other research aircraft, although Merewether had an accident on 1 April that resulted in some damage to the X-14, although he was unhurt. Back in Britain both pilots flew the SC1 to gain further V/STOL experience.

By this time construction of the first two P.1127s was well advanced. Full contract cover and finance was received from the MoA on 22 June 1960, with the first aircraft, XP831, being taken from Kingston to Hawker's Dunsfold airfield on 15 July. Here final installation tests were carried out, with the first flight cleared Pegasus 2 arriving from Bristol during September. With the administrative hurdles of fitting an engine designed for MWDP to an aircraft designed to meet MoA requirements already overcome, all was now set for the aircraft's first flight.