Babcock shares up as signs interim UK naval deal ahead of longer pact

(Alliance News) - Babcock International Group PLC on Wednesday said a bridging pact has been struck with the UK Ministry of Defence for a maritime support deal, while talks for a longer contract progress.

The London-based aerospace, defence and nuclear engineering services company said it is "in the latter stages of negotiation with the MoD" for a longer deal.

Babcock shares shot up 6.0% to 1,227.50 pence each in London on Wednesday morning, the best FTSE 100 performer.

The bridging agreement under the future maritime support programme spans six months. The five-year FMSP support contract had concluded on Tuesday.

"The contract bridges to a new long-term agreement which is in the latter stages of negotiation with the MOD. A Letter of Intent from the MOD sits alongside the bridging agreement and reinforces the commitment to a long-term strategic relationship between the MOD, the Royal Navy and Babcock, and the critical contribution that Babcock makes to the UK defence capability, including as the sole provider of in-service submarine support to the Royal Navy," Babcock said.

"The future agreement supports the government and Royal Navy's priorities and aligns with the strategic defence review and defence industrial strategy."

Babcock had finalised the just-expired five-year FMSP deal, worth some GBP3.5 billion, in 2021.

A new deal is expected to enable "increased demand, scope and operations" at the Clyde and Devonport naval bases. Clyde in Scotland is home to the UK's nuclear deterrent. Devonport is located in Plymouth, England.

Babcock Chief Executive Officer David Lockwood said: "The strength of Babcock's partnership with the Ministry of Defence and Royal Navy is critical to the increased availability and resilience of the UK's submarine fleet and the defence of our nation.

"This agreement with the Submarine Delivery Agency reinforces our joint intention to move to a new long-term agreement that will see even more investment in skills, communities and infrastructure, while growing this critical, sovereign capability, together."

By Eric Cunha, Alliance News news editor

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