Investing in UK Defence Stocks
The London Stock Exchange is home to many UK defence companies which provide a range of products and services - including weaponry, intelligence, risk assessment and cybersecurity. But what are the top UK defence stocks to watch?
The information in this article is provided for educational purposes only and does not constitute financial advice. Consult a financial advisor before making investment decisions.
Investing in UK Defence Shares
Many of the top defence stocks tend to generate fairly reliable revenue from government contracts, although income may increase during periods of geopolitical instability.
After the Cold War ended, defence spending around the world fell as international tensions eased. However, owing to heightened geopolitical tension, this trend has reversed in recent years, with global defence spending hitting a record $2.7 trillion in 2024.
The Russian invasion of Ukraine in 2022 has sparked a revaluation of defence capabilities around the world. As many Western nations commit to higher defence spending, defence contractors have seen orders rise.
Consequently, a sector which had been previously maligned by many investors has received a wave of interest, with share prices of many global defence stocks rising over the last few years.
Top UK Defence Stocks
In the following sections, we will take a look at 4 of the top UK defence stocks from both the FTSE 100 and the FTSE 250.
Rolls-Royce Holdings
Whilst the name is perhaps more closely associated with the brand of luxury cars, Rolls-Royce Holdings is a multinational aerospace and defence company based in the UK.
At one point the company was also responsible for the automobiles of the same name; however, after entering liquidation, Rolls-Royce was nationalised by the UK government in 1971 who spun off the automobile division, allowing the parent company to concentrate on jet engine manufacturing. In 1987, Rolls-Royce returned to the stock market.
Still specialising in jet engines, Rolls-Royce has a Civil Aerospace division and a Defence division – which produces aero engines for military transport and patrol aircraft.
In 2024, its defence division accounted for 25% of underlying revenue, with the majority of revenue being generated by its Civil Aerospace division. As of 30 June 2025, its defence order backlog stood at £18.8 billion.
Rolls-Royce shares have risen sharply in recent years, with share price appreciating more than 750% over a five-year period. In 2024, the defence stock reinstated its dividend which had been suspended in 2020 in the wake of the pandemic, highlighting the fact that dividends are never guaranteed.
BAE Systems
Although, in terms of market capitalisation, Rolls-Royce is a larger company, it derives most of its revenue from its non-defence operations. BAE Systems is the largest pure play UK defence stock in terms of both market cap and revenue.
BAE provides a range of defence capabilities across land, sea, air, cyber and space. In terms of sales, Air is its largest sector, where it is involved in a number of fighter jet programmes, including the F-35, Eurofighter Typhoon and the Global Combat Air Programme (a collaboration between the UK, Italy and Japan).
BAE Systems has a global presence, operating in more than 40 countries. Its two largest customers are the US Department of Defense and the UK Ministry of Defence which, between them, accounted for 56% of revenue in 2024.
As of 30 June 2025, BAE’s order backlog stood at £75.6 billion as demand for its products has increased considerably in recent years. Like many other UK defence stocks, its share price has also risen significantly, gaining more than 300% in the last five years. Although it should be noted that past performance is not a reliable indicator of future results.
BAE Systems also has an impressive track record of paying dividends, having increased its annual payout every year for more than two decades. At the time of writing, 19 September 2025, the stock has a dividend yield of 1.8%.
Babcock International
Babcock International is an international defence company operating across four sectors: Marine, Nuclear, Land and Aviation.
Amongst the products it manufactures is the Type 31 frigate, of which it is currently building five for the UK’s Royal Navy. In fact, Babcock is the second largest supplier to the UK’s Ministry of Defence, after BAE.
As with other defence stocks, share price has risen sharply in recent years, winning Babcock promotion back into the FTSE 100 earlier in 2025.
This share price gain has been accompanied by improving results. In the year ending 31 March 2025, revenue and underlying operating profit rose 9% and 53%, respectively, whilst its order backlog rose to £10.4 billion.
Babcock has also reinstated its dividend, which it suspended in the face of the pandemic in 2020. At the time of writing, it has a dividend yield of 0.6%.
Chemring
Chemring is by far the smallest of the four UK defence companies we’ve highlighted in this article, with a market cap of around £1.5 billion, it’s a member of the FTSE 250 index.
Chemring manufactures sensors, explosives and countermeasures for both defence and civil markets, operating over two main segments: Countermeasures & Energetics and Sensors & Information.
In particular, the company is a leader in countermeasures, supplying 85% of NATO air fleets and 60% of NATO naval fleets. Its biggest markets are the UK and the US, which accounted for almost 80% of revenue in 2024. As well as defence, it is also a supplier to SpaceX and NASA.
In the six months ended 30 April 2025, revenue and underlying operating profit rose 5% and 8%, respectively, and the group’s order book hit a record £1.3 billion, an increase of 25% from the previous year.
Like the other companies examined in this article, Chemring is a dividend payer, having hiked its annual payout each year for the last eight years. At the time of writing, its dividend yield is 1.4%.
How to Invest in Defence Stocks UK
Those who are interested in learning how to invest in the top UK defence stocks, can follow these steps:
- Open an Invest.MT5 account and log in to the Dashboard.
- Click ‘Invest’ next to your account details to open the Admiral Markets Platform.
- Search for the UK defence company you want to invest to open the instrument page.
- Enter the number of shares you want to buy on the right-hand side of the screen and click ‘Buy’ to send the order to the market.
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Frequently Asked Questions
Who is the biggest defence company in the UK?
BAE Systems is the biggest defence company in the UK in terms of both market capitalisation and revenue, as of 26 September 2025.
Are British defence firms publicly traded?
Yes, there are a number of UK defence companies which are publicly traded on the London Stock Exchange. These include Rolls-Royce, BAE Systems and Babcock International, which are some of the top 10 UK defence stocks.
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