The new Trump administration could be ‘good news’ for Britain’s defence industry as the incoming US president pushes allied nations to spend more on armaments, according to the boss of Babcock.
Chief executive David Lockwood told the Mail that if Trump continued to press other members of Nato to meet their spending commitments, this could result in demand ‘edging up’ as it did in several countries during his first term in office.
‘If you combine Trump’s second term with what’s going on in Ukraine, I think it further reinforces the need to meet spending commitments. So for us, that’s got to be marginally good news,’ he said.
Profits up: Babcock chief exec David Lockwood said that if Trump continued to pressure NATO members to meet their spending commitments it could boost demand
The comments follow the Autumn Budget, in which Labour reiterated its pledge to keep defence spending at 2.5 per cent of gross domestic product, as well as committing to a £2.9billion increase to defence spending for 2026 and an additional £3billion a year to support Ukraine.
It came as Babcock, which works on the Royal Navy’s Dreadnought Class nuclear submarines and runs Naval yards at Devonport in Plymouth and Rosyth in Scotland, posted a profit of £184million for the six months to September 30, up from £144million in the same period a year ago while sales jumped to £2.4billion from £2.2billion.
Earnings were boosted by a strong performance from the firm’s nuclear power division, which saw sales surge 22 per cent to £866million.
Lockwood also said the ‘complex geopolitical backdrop’ stoked by conflicts in the former Soviet Union and the Middle East meant demand for Babcock’s services ‘remains high’.
Shares in the firm jumped 3 per cent or 14.8p to 514p.
The company did, however, join the list of those knocked by the increase to employers’ national insurance contributions unveiled in last month’s Budget, flagging that the changes would add £20million to its tax bill.
Analysts at broker Shore Capital cautioned that the higher costs meant they would need to ‘moderate’ their forecasts for Babcock, although they added that remained ‘positive’ about the business.
The positive results followed an update from BAE on Tuesday that revealed that Babcock’s rival had amassed orders worth £25billion so far this year amid strong demand from its key British and US markets.
BAE has cashed in on a boom in defence spending since Russian tanks rolled into Ukraine in February 2022, while it has also benefited from programmes such as Aukus, a submarine collaboration between Australia, the UK and the US, and the GCAP fighter jet project, which includes Britain, Italy and Japan.
BAE shares lost some of their midweek gains closing down 2.7 per cent or 37p at 1344.5p.
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