Britain’s leading defence companies added almost £4 billion to their combined market value after the unexpected appointment of John Healey as chancellor sparked optimism among investors.
The market reacted positively, with many believing the former defence secretary will push for higher military spending after previously stepping down from Sir Keir Starmer’s government, arguing that Britain was not investing enough to protect its national security. His arrival at the Treasury under Andy Burnham’s administration has been viewed as a strong indication that defence could receive greater financial backing.
Defence stocks outperformed much of the wider European market during Tuesday’s trading. BAE Systems recorded the biggest gain, rising 3.23% and adding about £1.85 billion to its market value. Rolls-Royce climbed 1.24%, increasing its valuation by roughly £1.42 billion, while Babcock surged 7.5%, adding around £400 million. QinetiQ advanced 3.9%, boosting its value by approximately £100 million, and Chemring gained 2.6%, contributing a further £40 million. Together, these increases lifted the sector’s overall value by nearly £4 billion.
Healey’s appointment came as a surprise to many within Labour, with several MPs and allies of Burnham expecting Home Secretary Shabana Mahmood to take the role instead. His previous resignation from the Ministry of Defence over concerns about inadequate funding has reinforced expectations that he will seek to increase military investment.
Andrew Wishart, a senior UK economist at Berenberg, said Healey’s departure from the Defence Ministry over spending concerns points to a greater likelihood of higher defence expenditure, although he noted that how such plans would be financed remains uncertain.
There is also growing speculation that Healey could revive proposals for defence bonds, a borrowing scheme designed to fund military projects that he has supported in the past.
Despite the market’s optimism, analysts have cautioned that significantly increasing defence spending may prove challenging. Chris Beauchamp, chief market analyst at IG, noted that as chancellor, Healey must balance a much broader range of economic priorities beyond defence alone.
