Shares in London-listed defense companies rallied after new Prime Minister Andy Burnham appointed former defense secretary John Healey as finance minister. By 10:03 GMT, Babcock International saw its shares rise by 6.4%, Qinetiq gained 3.8%, and BAE Systems added 3%.
Healey's appointment was a surprise, as he had not been considered a frontrunner for the role. However, his background includes serving as a junior Treasury minister under Gordon Brown from 2002 to 2007, and holding senior positions under every Labour leader since. Investors, analysts, and lawmakers generally welcomed him, viewing him as a steady choice.
Analysts believe his past actions signal a push for higher defense spending. Andrew Wishart, senior U.K. economist at Berenberg, noted that Healey's resignation from Keir Starmer's government in June over insufficient defense funding "suggests that he will raise military expenditure," though the method of funding remains to be seen. Healey had previously stated that the prime minister was "unable" and the Treasury "unwilling" to secure necessary defense funding.
Healey faces the challenge of securing additional funding for priorities like defense, accelerating a sluggish economy, and cutting welfare spending, all while adhering to the fiscal rules Burnham has pledged to maintain. He has indicated that defense investment could play a role in reviving and reindustrializing the country. His appointment led to the pound edging higher after an earlier slip, which occurred when Burnham suggested some flexibility around the U.K.'s fiscal rules.
The broader context includes a prior commitment of an additional £15 billion to the UK's Defence Investment Plan by outgoing Prime Minister Keir Starmer, with the annual figure projected to reach £80 billion by 2029, or 2.7% of GDP. Healey had previously pushed for an £18 billion increase, exceeding the £13.5 billion then considered.
