BAE Systems PLC (LSE:BA.) and the government are reportedly in talks over a multi-billion pound deal for five new warships in the face of growing Russian military threats.
A contract for the construction of five new Type 26 frigates is expected to be signed by the defence ministry and BAE soon, according to reports.
Simon Lister, managing director of BAE's naval ships business, told the Telegraph the company has been in negotiations with the government for at least 18 months.
He said the talks were "in the final phase" but stressed that the requirement for an anti-submarine capability "pre-dates the Ukrainian invasion".
In 2017, BAE and the defence ministry agreed a £3.7bn contract for the construction of three Type 26 ships in Glasgow, with the Royal Navy set to receive the first ship soon.
The Type 26 frigates will be primarily responsible for countering Russian submarine threats in the north Atlantic, and since the hulls of the ships are acoustically quiet, it improves stealthiness.
The project could be given the seal of approval by the new Prime Minister, when the new PM takes office.
In her campaign for the premiership, Liz Truss has already committed to increasing defence spending to 3% of GDP by 2030, while Rishi Sunak has resisted a rise in defence spending.
With investors expecting government spending on defence to increase due to the outbreak of war in Europe, BAE Systems shares have soared 47% this year.
But the shares were down 2.04% at 796.40p in London today.
In its first-half results BAE recorded an increase of £18bn in orders with underlying profits up 8% to £1.1bn.
A spokesman for BAE told media: "We are currently working through our proposal for the second batch of Type 26 frigates, comprising a further five to make a total of eight. The contract is expected to be awarded in the early 2020s."
BAE's strong order book stood out for analysts at Jefferies as they raised the target price to 960p from 945p earlier this month.