BAE Systems PLC and other defence sector shares climbed on Tuesday as prime minister Keir Starmer firmed up plans to ramp UK defence spending.
Starmer told Parliament the UK’s security budget would climb to 2.5% of gross domestic product by 2027, from the 2.3% level currently.
Some £13.4 billion extra would go towards defence annually from 2027 as a result, he said, with a reduction in the UK’s aid budget set to “fully” fund the increase.
“This investment means that the UK will strengthen its position as a leader in Nato and in the collective defence of our continent, and we should welcome that role,” Starmer said.
Plans for ramped spending come ahead of a meeting between Starmer and Donald Trump on Thursday, after calls from the latter for Europe to boost defence budgets.
These have come as Trump attempts to broker a peace deal over the war in Ukraine, following Russia’s invasion in 2022.
FTSE 100-listed defence firm BAE Systems jumped 4.4% to 1,362p on the news, alongside peers such as Rolls-Royce Holdings PLC, which gained 1.5%, QinetiQ Group PLC by 1.2%, Babcock International Group PLC 1.3% and Avon Technologies PLC 0.8%.