8th Jul 2015 13:22
LONDON (Alliance News) - Defence companies were given a boost in afternoon trade on Wednesday after UK Chancellor George Osborne said the government will commit to raising the defence budget in the UK in real terms.
Osborne said the government has committed to maintaining the real growth of the Ministry of Defence's equipment plan at 1% per year and will maintain the size of Britain's army. Beyond this, the government also will raise the entire budget of the Ministry of Defence by 0.5% per year in real terms.
The budget also will protect counter-terrorism spending across the government to the tune of around GBP2 billion.
Along with the additional defence budget, Osborne said the government will provide another GBP1.5 billion a year by the end of this parliament in order to fund increased spending on military and intelligence agencies by an average of 1% in real terms every year.
The chancellor did reiterate that the final allocation of the defence spending will be determined by the Strategic Defence and Security Review and will be conditional on the armed forces and security agencies finding further cost cuts in their budgets.
The news sent shares in BAE Systems PLC and Meggitt PLC higher in early afternoon trade, with BAE up 2.1% to 454.9 pence and Meggitt rising 2.0% to 461.30 pence, among the best performers in the FTSE 100. Also in the blue-chip index, Smiths Group PLC was up 1.7% to 1,103.00 pence, while Rolls-Royce Holdings PLC rose 0.9% to 766.00 pence, having seen its shares drop heavily this week following a profit warning on Monday.
In the FTSE 250, Cobham PLC also was boosted by the news, rising 1.8% to 261.40 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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