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UK defence stocks jump after John Healey named chancellor

Babcock shares gained 7% and BAE Systems rose 3% on the FTSE 100, while the 10-year gilt yield was around 5.03% and sterling edged higher against the dollar.

Reported · Written up by our desk · Equities

Defence stocks rose sharply after Andy Burnham appointed former defence secretary John Healey as chancellor, lifting sentiment that suppliers to the military could see higher spending. Defence shares were among the biggest risers on the FTSE 100 on Tuesday morning, with Babcock International up 7%, BAE Systems up 3%, and Rolls-Royce up nearly 2%. On the FTSE 250, QinetiQ rose nearly 4%.

Investors are looking for potential moves that could expand defence budgets, including the possibility of issuing so-called “war bonds”, a borrowing approach Healey previously advocated for in government. The outlet also notes that Healey resigned last month amid a dispute over defence spending, warning that security could be at risk and arguing an investment plan did not go far enough.

Despite the stock reaction, IG’s Chris Beauchamp cautioned that an immediate boost to defence funding is not guaranteed. He said the chancellor would face competing budget priorities and that it would be difficult to find additional cash for defence even as the new prime minister makes broader spending commitments.

Bond and FX markets were comparatively steady, with the 10-year gilt yield about one basis point lower at roughly 5.03%, and sterling up slightly versus the dollar. The piece also cited UK government borrowing coming in below expectations in June, and a separate plan to reduce household electricity bills by an average of 45 pounds a year from October, at an estimated cost of 850 million pounds for the financial year.

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