The UK is ramping up military spending. Shares of defense companies hit record highs

Quotes of British defense company BAE Systems, German Renk Group AG and Rheinmetall AG soared to historic highs. Shares of other European arms manufacturers also rose amid the UK's announcement of plans to expand its submarine fleet and strengthen nuclear deterrence.

- BAE Systems securities jumped by 2.2% to an all-time high in London.

- Shares in Babcock International Group, which services British submarines, soared by nearly 11.5% in Frankfurt trading. That marked their highest since September 2016. The company's market value has more than doubled since the start of 2025. 

- Shares in U.K.-based Qinetiq, which specializes in scientific and technical developments, rose 3.5% in Frankfurt.

- Quotes of German Renk Group, a supplier of components for tanks, rose immediately by 7% - to the maximum for all the time of circulation on the Frankfurt Stock Exchange. The company held its IPO in February 2024: since then, its capitalization has soared more than 380%. 

- Securities of one of the largest German defense companies - Rheinmetall - rose by about 3%. This has become their all-time high. Since the beginning of the year, they are up almost 210%.

- Shares of German defense electronics company Hensoldt rose 14.3% - also to an all-time high.

The latter three companies are among the top gainers in the pan-European Stoxx 600 index this year, notes Bloomberg.

Investors began actively buying up securities of European defense companies on the background of the statement of Great Britain about a large-scale reform of the armed forces, Bloomberg notes. The country plans to invest 15 billion pounds ($20 billion) in a nuclear warhead program and build up to 12 submarines as part of a partnership with the U.S. and Australia.

British Prime Minister Keir Starmer also said the country will go on "alert" in response to growing threats and increasing instability in the world. "If you want to prevent conflict, the best way to do that  is to be ready for it," Starmer told BBC Radio in an interview on Monday, ahead of the publication of a strategy to boost defense. - The world has changed: we have to be ready."

Britain and the EU are expanding defense spending amid rising geopolitical tensions and pressure from U.S. President Donald Trump, Bloomberg notes. Trump argues that European countries are too dependent on the U.S. for their own security.

An additional driver of growth was the fact that JPMorgan analyst David Perry raised target prices on shares of five defense companies: two German (Hensoldt and Renk) and three British (BAE Systems, Babcock and Qinetiq). For example, he more than doubled his target price on Hensoldt shares from €50 to €110 and improved their rating from neutral to "above market", which is equivalent to a recommendation to buy these securities. He raised the target on German Renk by 25%, and on British Babcock by 37%. The analyst cited the improved outlook for financials and just the governments' growing commitment to military spending. He said Germany faces a long rearmament cycle until 2035, while the UK's cross-party government will support increased defense investment beyond 2029.