British defence stocks rallied across the board on Monday after Norway commissioned a record-breaking order of British-made warships and Babcock was handed an upgrade by a top stock broker.
Shares in BAE Systems rose by nearly two per cent after the Ministry of Defence (MoD) confirmed the Nato member had placed an order for five of the arms manufacturer’s anti-submarine warships worth some £10bn.
The commission for the Type 26 Frigates is the UK’s largest ever warship export deal by value, and promises support 4,000 jobs in the UK “well into the 2030s”, the defence ministry claimed.
The ships, which also represent Norway’s biggest defence procurement deal, will be built at BAE Systems’ shipyard in Glasgow, where construction for eight other frigates for the Royal Navy is already under way.
AJ Bell’s investment director, Russ Mould, said the deal was “tangible evidence of how the increased appetite among European countries to spend on their military capabilities could benefit the likes of BAE”.
Defence firms carried higher across the board by deal
News of the deal sparked a mass rally across all London-listed defence stocks on Monday. Along with several miners, the sector is among the best performing industries on London’s bourse this year, thanks to Nato members accelerating their rearmament efforts in the face of a heightened threat from Russia and pressure from Donald Trump’s White House.
BAE Systems’ valuation has risen by over 55 per cent so far this year while those of Chemring and Rolls-Royce have ballooned by 67 per cent and 93 per cent respectively.
But the sector’s biggest publicly listed riser has been Babcock, whose share price has more than doubled in 2025. It made further gains on Monday after it was handed a chunky upgrade by a star analyst at Peel Hunt for hitting its earnings forecast a year early.
The investment bank raised its target price for the recently annointed FTSE 100 constituent from 828p to 1,119p, and reiterated its ‘buy’ rating citing the transition “from decades of cost-down to output-based budgets”.
“Today’s news suggests that Europe’s push to boost defence systems and beef up Nato spending, now that the US has scaled back its funding, will benefit UK firms, and potentially the UK economy,” said Kathleen Brooks, research director at XTB. “This is a much-needed piece of good news for the UK economy as we embark on a tough autumn.”