Babcock seals £1bn British Army Challenger 2 tanks deal as Reeves fires up defence spending

By JOHN-PAUL FORD ROJAS

Updated: 22:05 GMT, 26 March 2025

Defence giant Babcock yesterday received a £1billion boost as ministers extended a contract to maintain Challenger 2 tanks, artillery guns and Trojan armoured vehicles for the British Army.

It came as Rachel Reeves announced an extra £2.2billion for defence in her Budget as governments across Europe ramp up military spending.

In a further boost for the sector, UK defence contractor Avon Technologies bumped up its annual sales outlook after receiving an order for equipment for the Ukrainian armed forces.

Meanwhile, Britain’s biggest defence firm BAE Systems told Bloomberg that it was ready to step up capital spending beyond the current record level of £1billion a year as it prepares for a European ‘super-cycle’.

Arms makers are seeing demand ramp up in the UK and on the continent as leaders wake up to the possibility that Donald Trump’s America may no longer be a reliable guarantor against Russian aggression – and work out how they can support Ukraine if the US pulls the plug on aid.

Prime Minister Sir Keir Starmer has announced an increase in defence spending to 2.5 per cent of gross domestic product (GDP). 

Tank deal: The Ministry of Defence has announced a £1.6bn five-year contract extension for Babcock to maintain military equipment

German politicians, meanwhile, have agreed to toss aside borrowing rules in a bid to fire up military preparedness.

In Britain, Babcock – best known for maintaining the UK’s fleet of submarines – has been a major beneficiary, with a share price rise of nearly 50 per cent so far this year winning it promotion into the blue-chip FTSE 100 index this week.

Yesterday, the Ministry of Defence announced a £1.6billion five-year contract extension for Babcock to maintain military equipment for the Army. 

It said the deal would support 1,600 UK jobs. The contract is worth £1billion to Babcock, which provides services such as vehicle maintenance while the remaining £600million is accounted for by kit such as spare parts bought from third parties.

Defence Secretary John Healey said tanks, armoured vehicles and kit were ‘the backbone of the British Army’ and the spending would ensure that soldiers are ‘properly equipped and ready to respond to ever-changing global threats’. 

Babcock boss David Lockwood said: ‘In a period of increased global instability, more is being expected of our armed forces.

‘This contract extension ensures that Babcock continues to provide the British Army with the tools to do its job.’

Avon Technologies, which makes protective helmets and face protection equipment, said it had received two new orders for personal respirators for Ukraine’s armed forces.

Babcock shares rose 1.8 per cent and Avon surged by 8.8 per cent.

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Babcock seals £1bn British Army Challenger 2 tanks deal as Reeves fires up defence spending

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