Shares in defence firms have received a significant boost following the UK government’s announcement of a £15 billion investment to enhance the nation’s military capabilities.

Babcock International saw an increase of 49½p, translating to a 5.3% rise, bringing its shares to 985½p. This surge follows plans for the construction of up to 12 new submarines under the Aukus initiative. The seasoned defence manufacturer has recently secured a series of substantial submarine contracts.

In 2023, Babcock entered into a £750 million, four-year agreement to support the infrastructure of Britain’s submarine fleet. Additionally, the company has acquired contracts aimed at the maintenance and advancement of tanks, aircraft carriers, and various military apparatus in recent times.

BAE Systems, which obtained a £3.95 billion contract for the next stage of the Aukus initiative in 2023, saw its share price rise by 19p, or 1%, reaching £19.20.

Rolls-Royce Holdings, responsible for the reactors that will power Australia’s upcoming fleet of nuclear-powered submarines, experienced a slight uptick of ½p, or 0.1%, bringing its shares to 867p.

In the FTSE 250, Qinetiq Group, which focuses on diverse areas including defence robotics, surveillance, and cybersecurity, improved by 15½p, or 3.1%, to 512½p.

The Aukus agreement, which was first introduced in September 2021, is a trilateral partnership in defence and security involving the United Kingdom, the United States, and Australia.

The initial phases of this agreement emphasized Australia’s acquisition of nuclear-powered attack submarines, with future discussions expected to explore other collaborative efforts among the three nations in fields such as quantum technologies and artificial intelligence.

The additional funding outlined recently, ahead of the UK’s upcoming defence review, will allocate a total of £15 billion for the new submarines, along with enhancements to the warhead program and the nation’s nuclear capabilities.

It is anticipated that the expanded submarine fleet will eventually replace the UK’s Astute-class submarines, although this will not take place until the latter part of the 2030s.

Moreover, the UK government is set to establish six new munitions factories to ensure continual industrial production, purchase up to 7,000 long-range missiles, and bolster investment in cybersecurity and support equipment stockpiles.