Simply earlier than Rachel Reeves delivered her spring assertion yesterday (26 March), the FTSE 100 was at 8,684. That was 2.5% off its document excessive. Thirty-three minutes later, after she sat down, it was barely unmoved at 8,681. Given there was little new in what the Chancellor stated, this isn’t shocking. Having stated that, I assumed there would have been extra of a market response to the halving of Britain’s progress forecast for 2025.

However the motion within the general worth of the index hides some particular person winners and losers.

Throughout the course of the Chancellor’s speech, Babcock Worldwide Group (LSE:BAB) gained essentially the most (0.65%) of all of the shares on the index. And it continued to rise after she had completed talking.

Rolls-Royce Holdings, which derives roughly 1 / 4 of its income from its defence division, was the subsequent greatest performer.

In distinction, Severn Trent was the largest loser, falling 0.76%. I think this displays ongoing issues within the sector because the water business wasn’t talked about within the spring assertion.

An unsure world

Provided that the federal government desires to ascertain the UK as a “defence industrial superpower”, it’s straightforward to see why Babcock’s share price did effectively. The federal government has already dedicated to rising navy spending to 2.5% of gross home product from April 2027. It now plans to spend an extra £2.2bn within the subsequent monetary 12 months.

It additionally desires to streamline the procurement course of to make it faster and extra agile. As well as, additional export finance will likely be made accessible to assist firms within the sector promote extra abroad.

A British success story

Since March 2020, Babcock has seen its share price greater than double. Because of this, it was lately promoted to the FTSE 100.

Encouragingly, the UK authorities typically likes to ‘spend local’ in terms of defence, which ought to assist the group proceed to broaden. Presently, it’s the second largest provider to the Ministry of Defence. Importantly, it has a really small publicity to the US, which, beneath Donald Trump’s presidency, is trying to cut back its navy spending.

And the inventory seems to supply higher worth than that of its closest peer within the index, BAE Methods. For the 12 months ending 31 March 2025, analysts are forecasting earnings per share for Babcock of 45.5p. This suggests a ahead price-to-earnings (P/E) ratio of 16.2. The P/E ratio of BAE Methods is 20.9. If the 2 had been valued on the identical foundation, Babcock’s share price can be 28% increased.

Nonetheless, I do have some considerations. Babcock incurred £90m of extra prices when constructing 5 ships for the Royal Navy. Its dividend can also be tiny. Based mostly on quantities paid over the previous 12 months, the inventory’s presently yielding simply 0.7%.

Nonetheless, for these buyers who’re snug investing within the sector, I believe Babcock’s a inventory they might contemplate. The Chancellor’s spring assertion has reaffirmed the federal government’s dedication to the business, which it believes will help contribute to financial progress.

In fact, profitable investing requires taking a long-term view. Hourly actions in share costs ought to be ignored. However I believe this analysis provides an perception into how institutional buyers — these with deep sufficient pockets to maneuver share costs considerably — are assessing the impression of the Chancellor’s bulletins.