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(Alliance News) - Rolls-Royce Holdings PLC was the top performing FTSE 100 stock on Tuesday afternoon, as a statement from the UK government said it and BAE Systems PLC have been chosen to build the UK and Australia's SSN-AUKUS submarines.
Rolls-Royce is a London-based aerospace power systems supplier, while BAE is a London-based defence contractor.
Shares in Rolls-Royce were up 7.4% to 155.70 pence each in London on Tuesday afternoon, while BAE shares were up 3.3% to 938.00p.
The UK government confirmed the SSN-AUKUS submarines will be built by BAE and Rolls-Royce and are set to be delivered in the late 2030s in the UK and in the early 2040s for Australia. Once they are operational, the UK's new SSN-AUKUS submarines will replace its current Astute-Class submarines.
The news follows a trilateral agreement by the UK, US and Australia in September 2021, committing to support Australia to acquire a conventionally-armed, nuclear-powered submarine or SSN, with the partnership known as AUKUS.
Alongside US President Joe Biden and Australian Prime Minister Anthony Albanese in San Diego, US, UK Prime Minister Rishi Sunak also said that Australia and the UK will both build new submarines to the SSN-AUKUS design, with construction of the UK's submarines taking place principally in Barrow-in-Furness, England.
Australia will work over the next decade to build up its submarine industrial base, and will build its submarines in South Australia with some components manufactured in the UK.
"The SSN-AUKUS submarines will be the largest, most advanced and most powerful attack submarines ever operated by the Royal Navy, combining world-leading sensors, design and weaponry in one vessel," the statement said.
It is expected the contract award will create "thousands of jobs" in the UK, according to the government.
This will largely be concentrated in Barrow-in-Furness, with further roles created elsewhere in the supply chain, such as in Derby, England.
By Greg Rosenvinge, Alliance News reporter
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