- Rachel Reeves says the defence sector is key to UK growth plans, triggering another rally for related shares
- QinetiQ led the rally, followed by Chemring and Cohort
- The chancellor also bigged up the housebuilding sector and reiterated plans to build more homes, including money to train construction workers
- Housebuilding companies on the stock market barely moved as the pro-housing policy was deemed ‘old’ news
“The Spring Statement shone a light on the defence and housebuilding industries, with Rachel Reeves placing them at the centre of the UK’s economic growth plans,” says Dan Coatsworth, investment analyst at AJ Bell.
“Defence stocks were in demand whereas housebuilders’ shares barely moved as the government’s support for the industry isn’t ‘new’ news as far as markets were concerned.
“Defence stocks have been a hot investment area amid a broader push by governments around the world to boost defence spending. The Spring Statement stoked that excitement as investors liked Reeves’ comment that defence will be ‘at the heart of (the UK’s) modern industrial strategy’.
“QinetiQ jumped 6.8% while Chemring and Cohort advanced 2.5% and Babcock rose by 1.8%. BAE Systems was the laggard, only rising 0.4%.
“Number 10 reiterated its intention to increase defence spending as a percentage of GDP, and said a plan was in place to ‘make our country a defence industrial superpower’. That was music to the ears of investors who raced to buy shares in key players.
“An equally bullish tone surrounded the housing sector, yet government has been banging the same drum since winning the general election last year. Its manifesto promised 1.5 million new homes in England in this parliament, and the same message was spoken for the umpteenth time. It’s no surprise that investors didn’t get as excited about the sector following the Spring Statement compared to defence stocks.
“Housebuilders continue to face headwinds, including near-term economic uncertainty and the return of build cost inflation. However, the OBR’s upgraded economic growth forecasts for the UK from 2026 could lead to renewed optimism if markets feel it will feed through into greater consumer and business confidence.
“The housebuilding industry would dearly love to sell more homes and play catch-up after multiple years where potential buyers haven’t been able to get on the housing ladder due to affordability issues.
“Greater activity on the housing market could be a slow burner, partially because the industry still faces a lack of skilled workers. Brexit negatively impacted the construction industry, leading to labour shortages as fewer EU nationals come to the UK to work. The UK government earlier this week announced more than £600 million to train 60,000 more construction workers, but that could take time to play out.”
