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UK's Babcock upgrades medium term forecast as defence needs rise

The British defence engineering firm Babcock updated its medium-term forecast on Wednesday. It expects to benefit from UK plans to increase spending on defence and energy to counter rising geopolitical instabilities.

Keir starmer, British Prime Minister, pledged on Tuesday to increase overall defence and security expenditure to 5% by 2035. He cited volatility as a result of the wars in Ukraine and the Middle East, and tensions with China.

Babcock, which maintains Britain’s naval fleet and builds new warships, as well as providing weapons systems and nuclear engineering, has said that it now expects an operating margin underlying of at least 9 percent in the medium-term, up from a minimum of 8% previously.

This is a new age for defence. Babcock CEO David Lockwood stated in a press release that there is a growing recognition of the importance of investing in energy security and defence capabilities to both safeguard populations and drive economic growth.

Babcock expects an operating margin of 8 percent for the current year. This is up from 7.5% recorded in the 12 months ending March 2025. The company announced that it would buy back 200 million pounds ($272.46 millions) of shares.

Babcock shares have doubled since the beginning of this year, thanks to Britain's commitment to increase defence spending. This is a far better performance than Britain's bluechips index, which has risen by 8%.

(source: Reuters)