Britain’s aerospace and defense companies saw their shares soar on Monday as investors anticipate increased military spending following U.S. President Donald Trump’s argument with Ukrainian President Volodymyr Zelenskyy on Friday.
Shares of BAE Systems surged 14.6%, making it the day’s top performer on the FTSE 100 index. Rolls-Royce also helped to lift the benchmark by adding another 4.4% to its recent gains.
BAE Systems is a London-based defense contractor that builds nuclear submarines, warships, jets and tanks, as well as guns and ammunition.
Rolls-Royce, which is no longer affiliated with the luxury carmaker of the same name, manufactures engines for civilian and military aircraft as well as reactors for the U.K.’s nuclear submarine fleet.
The FTSE 350 aerospace and defense index hit a record high after notching up a gain of 8.1% on Monday.
“Investors aren’t simply expecting a boost to defense companies from supplying equipment and services to Ukraine,” said Russ Mould, AJ Bell’s investment director. “They’re also focused on the potential for governments around the world now taking defense even more seriously and spending large swathes of money to help others while also defending their own land.”
A day earlier, Britain’s Prime Minister Keir Starmer warned that “this is a once in a generation moment for the security of Europe,” as he hosted a summit in London with Zelenskyy and other world leaders, including French President Emmanuel Macron, German Chancellor Olaf Scholz and Canadian Prime Minister Justin Trudeau.
The purpose of the summit was to find a “just and lasting” peace deal for Ukraine, which took on an added urgency after the argument between Trump and Zelenskyy.
Many of America’s longtime allies are now questioning where they stand with the Trump administration as the U.S. appears to be turning away from Europe and seeking improved ties with Russia.
Starmer said Sunday after the summit that the U.K. will work with France and the Ukraine on a ceasefire plan to be presented to Trump in an attempt to salvage a peace deal that involves the U.S.
Starmer also said the U.K. and other nations across Europe were ready to form a “coalition of the willing” to defend Ukraine and to guarantee peace afterwards, although it remains unclear which countries have committed to the effort.
“The U.K. is prepared to back this with boots on the ground and planes in the air, together with others. Europe must do the heavy lifting,” Starmer said.
The British prime ministers also pledged to supply more arms to Ukraine, announcing that an additional £1.6 billion ($2 billion) in export financing to supply 5,000 air defense missiles. The new funding comes on top of a £2.2 billion loan that was agreed on Saturday that’s intended to provide more military aid to Ukraine backed by profits from frozen Russian assets.
The leaders also agreed that they need to ramp up spending on defense. Macron told Le Figaro newspaper after the gathering that the EU should provide €200 billion ($209 billion) to boost its defense capabilities.
European Commission President Ursula von der Leyen told the media after the summit that “we urgently have to rearm Europe” and she will present a comprehensive plan for this at a meeting of European leaders.
Last week, Starmer announced that the U.K. would raise its spending on defense to the equivalent of 2.5% of GDP by 2027, three years earlier than planned and up from 2.3%. The increase in defense spending will be funded through cuts in international aid programs.
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