Defence agency secures £1bn deal extension with MoD as Britain boosts navy spending

Aerospace giant Babcock has won a contract extension worth around £1billion with the Ministry of Defence as Britain ramps up military spending. 

The FTSE 100 group said the extension to the Defence Support Group [DSG] service provision and transformation contract ‘will deliver a comprehensive range of support capabilities for the Army in the UK with global reach’.

DSG helps look after the British Army’s military vehicles and equipment, such as its quad bikes, artillery guns, and main battle tanks.

It was formerly an MoD agency until being partially acquired by Babcock in 2015 as part of a decade-long agreement to provide services to the MoD, with an option for a five-year extension.

Babcock said the new contract will see it ‘deliver improved readiness, regeneration and asset management services underpinned by extensive engineering and supply chain expertise.’

The deal comprises about £1billion taken into the firm’s contract backlog and another £600million delivered as agent and not recognised as revenue.

Agreement: Babcock has won a contract extension worth about £1billion from the MoD

David Lockwood, chief executive of Babcock, said: ‘In a period of increased global instability, more is being expected of our armed forces.

‘This contract extension ensures that Babcock continues to provide the British Army with the tools to do its job, when and wherever they are needed.

‘Our know-how, application of technology and extensive experience in the land domain help ensure that the British Army is ready to fight and win wars.’

Prime Minister Sir Keir Starmer vowed last month to boost UK defence expenditure to 2.5 per cent of GDP from April 2027 and set out an ambition to raise this to 3 per cent in the next parliament.

NATO members are hiking military budgets in response to the Ukraine conflict and pressure from US President Donald Trump for European countries to shoulder more of the defence burden.

As a result, global military spending hit a record $2.46trillion last year, according to the International Institute for Strategic Studies think tank.

Like other British defence businesses, Babcock has benefitted significantly from this spending boom.

Just in January, the firm gained contracts to support training programmes for the French Air Force and NATO’s Joint Warfare Centre in Stavanger, Norway.

That came after it gained deals last year to build 53 Jackal 3 vehicles for the British Army and manage the Royal Navy’s Type 23 class frigate Refit Support Group.

Commenting on Babcock’s latest contract, UK Defence Secretary John Healey said: ‘Tanks, armoured vehicles and kit are the backbone of the British Army. 

‘We are taking action to ensure the outstanding service men and women of our armed forces are properly equipped and ready to respond to ever-changing global threats.’ 

Babcock International Group shares were 0.75 per cent up at £7.38 on Wednesday morning and have risen by about 56 per cent over the past six months.