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UK defence shares jump after John Healey becomes chancellor

Babcock, BAE Systems and Qinetiq rose in early trading as investors bet Healey could support defence spending, despite analysts warning demands on the budget could limit near term funding.

Reported · Written up by our desk · Europe

UK defence stocks rose in early trading after John Healey was appointed chancellor, lifting some of the sector’s biggest names on expectations of a potential boost for military spending. The UK’s FTSE 100 opened 0.3% lower, while defence shares moved higher, with Babcock International up 4%, BAE Systems up 2.4%, and Qinetiq up 3.5%.

Investors are looking to Healey to use his new role to increase defence spending, with one possibility previously discussed by him being the issuance of “defence bonds”, borrowing earmarked for the military. However, Chris Beauchamp, chief market analyst at broker IG, said the appointment does not guarantee an immediate windfall for the sector.

Beauchamp noted that as chancellor Healey will face competing budget priorities, and that it may be difficult to find additional defence funding given other broad spending commitments being made by the new prime minister. The guidance implies market optimism may take time to translate into actual spending decisions.

Separate cost of living data in the same coverage showed UK grocery inflation eased to 2.6% in the four weeks to 12 July, the lowest since December 2024, marking the fifth consecutive month of slowing price growth.

Latest closeFTSE 100 10,515.90 ▼0.1%

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