Defence plans emerged yesterday (Tuesday), with the government finally publishing its Defence Investment Plan after weeks of delay that had already cost one Defence Secretary his job.
The headline number is £15 billion in extra funding, set against a reported £28 billion shortfall in the defence budget. That is roughly £1 billion more than the level John Healey resigned over on 11 June.
The extra cash takes total planned spending to around £300 billion over the next four years, with defence outlays rising to 2.7% of GDP by FY29.
Nuclear and submarines take the lion's share
Of the new money, £64 billion is earmarked for the nuclear deterrent, with £47 billion of that going towards submarines and upgrades at the naval bases in Faslane, Devonport and Portsmouth.
Munitions and weapons receive £11 billion, including around £6 billion on conventional munitions and £490 million on directed energy weapons. The plan reaffirms a commitment to build six new energetics facilities by 2030.
Drones and autonomous weapons pick up £5 billion, including funding towards what Jefferies describes as an autonomous Navy built around the Common Combat Vessel programme, six hybrid ships intended to replace the Type 45 destroyer from 2030.
The Digital Targeting Web, meanwhile, sees its allocation double to around £2 billion, up from roughly £1 billion in the Strategic Defence Review.
Six stocks, two different reactions
Jefferies flags positives across its coverage universe, though the read-through varies by company.
Chemring Group (LSE:CHG), rated 'buy' with a price target of 658p, benefits directly from the energetics facility commitment and what the broker says is an increased allocation to the Digital Targeting Web.
Babcock International PLC (LSE:BAB), also a 'buy' with a target of 1,400p, gets a resolute commitment to nuclear deterrence and AUKUS-related infrastructure. The Land Rover replacement and six-by-six armoured vehicle programmes both appear to be proceeding, and Jefferies sees the Common Combat Vessel as a potential follow-on to the Type 31. The broker also expects the plan's release to clear the way for the FMSP follow-on contract to be signed.
Cohort PLC (AIM:CHRT), rated 'hold' with a target of 1,300p, should see prospects open up around sonar and naval countermeasures work. QinetiQ Group PLC (LSE:QQ.), also a hold with a target of 487p, is positioned around directed energy weapons, which feature heavily in the plan, alongside a broader pipeline of emerging technologies that will need detailed test and evaluation work, an area where QinetiQ specialises.
Avon Technologies PLC (LSE:AVON) is also covered in the note, rated 'buy' with a target of 2,390p, though Jefferies does not detail a specific programme read-through for the maker of helmets and breathing apparatus.
