Key facts
- Prime Minister-to-be Andy Burnham pledged to prioritize investment in Britain's defence industry.
- Rolls-Royce shares rose 2% following the announcement.
- Burnham stated that strengthening Britain's defence will be his first priority.
- He emphasized backing British workers and businesses in defence spending.
- Burnham plans to level with the public about the funds needed for defence spending targets.
Shares in London-listed defence companies, including Rolls-Royce and Babcock, experienced an increase on Thursday morning following a pledge by Prime Minister-to-be Andy Burnham to boost investment in Britain's defence sector. Burnham, the Makerfield MP, stated that strengthening the UK's defence would be his primary objective upon entering Number 10, emphasizing a commitment to supporting British workers and businesses.
Rolls-Royce, a constituent of the FTSE 100, led the morning's gains, with its shares rising by two percent to 1,426p. Babcock, BAE, and Qinetiq also saw their stock prices climb at the market's opening.
In an article for The Times, Burnham outlined several foreign policy commitments intended to enhance the UK's resilience against external disruptions, such as the potential closure of the Strait of Hormuz and the ongoing conflict in Ukraine. He noted the darkening global landscape and the necessity for concerted action to improve national resilience, beginning at the local level.
Burnham, formerly the Mayor of Greater Manchester, asserted that his priority as prime minister would be safeguarding the UK through increased defence spending, revitalizing domestic industries, and reinforcing international alliances. This commitment to bolstering defence investment follows closely on the heels of Sir Keir Starmer's delayed defence investment plan (DIP), published shortly before Starmer's tenure concluded. The plan left Burnham facing a £5 billion funding shortfall, exacerbated by the resignations of Defence Secretary John Healey and Armed Forces Minister Al Carns.
Earlier in the week, former Nato secretary general Lord Robertson cautioned that Britain needed to be more aware of the threat of war, expressing that allies were concerned by the delay to the DIP. He described the plan as "unconvincing" despite its proposal to increase military spending by £15 billion over the next four years.
Burnham intends to be transparent with the public regarding the financial requirements to meet the UK's commitment of spending at least 3.5 percent of its GDP on defence by 2035. He argued that investing in "hard power" is essential for the livelihoods of working people, citing the impact of soaring energy and food prices due to conflicts in Iran and Ukraine. He also referenced a cyberattack on Jaguar Land Rover that disrupted operations and resulted in significant economic losses and job risks.
The former Manchester mayor stressed that reducing Britain's reliance on foreign defence capabilities is crucial for both economic and national security. He also indicated a desire to foster closer defence ties with European nations.