Plans for the UK to build up to 12 new attack submarines were unveiled on Monday, lifting shares in Babcock International PLC (LSE:BAB), BAE Systems PLC (LSE:BA.) and Rolls-Royce Holdings PLC (LSE:RR.).
Prime Minister Kier Starmer and Defence Secretary John Healey unveiled a major defence review, saying the armed forces will be moved to a "war-fighting readiness" to deter potential threats.
As part of this review, Starmer announced the building of "up to" a dozen nuclear-powered submarines to replace the UK's current fleet, as part of the AUKUS partnership with Australia and the US.
The UK currently has five Astute-class attack submarines, with two more under construction by BAE Systems at its Barrow-in-Furness facility.
An increased fleet of up to 12 AUKUS submarines from the late 2030s, the Ministry of Defence said in a statement, with "a major expansion" of capability at Barrow and Rolls-Royce's Raynesway reactor site in Derbyshire, with the build of a new submarine every 18 months in the future.
The increase in capacity at the two sites will allow the UK to increase its fleet to up to 12 attack boats, the MoD said, with the government "working closely with industry partners to rapidly expand training and development opportunities", aiming to double defence and civil nuclear apprentice and graduate intakes to 30,000 apprenticeships and 14,000 graduate roles over the next ten years.
BAE Systems was the most recent company contracted to build submarines under the AUKUS programme for Australia, using nuclear reactors from Rolls-Royce, it was revealed last year, while fellow FTSE 100 defence group Babcock has secured several major submarine contracts in recent years, led by a five-year contract with the MoD in 2023 to provide input into the detailed design for the new ‘Ship Submersible Nuclear' format of submarines for the AUKUS programme (SSN-AUKUS).
Today's announcement from the PM confirmed the number of new submarines, though the previous government had already committed to replacing the Royal Navy's current Astute fleet with AUKUS vessels in a similar timeframe.
The UK will spend £15 billion on its nuclear warhead programme, Starmer said, another of the 62 recommendations in the Strategic Defence Review commissioned by Labour.
There was also £1.5 billion of investment outlined for an "always on" pipeline for munitions, with at least six new munitions factories built in the UK, producing munitions and energetics such as propellants, explosives and pyrotechnics.
Up to 7,000 UK-built long-range weapons for the UK Armed Forces were also stipulated.
Defence Secretary, John Healey MP said in a statement on Sunday that lessons from Russia's invasion of Ukraine "show a military is only as strong as the industry that stands behind them. We are strengthening the UK’s industrial base to better deter our adversaries and make the UK secure at home and strong abroad."
The government sees the defence review as helping make defence "an engine for economic growth and boosting skilled jobs", he said.
Shares in Babcock rose 6.7%, while those in BAE were up 1.9% and Rolls 0.2%.
** Update: Adds details, share prices **