UK defence stocks soar after Trump calls for 50% increase in US military spending – taking gains this year to £20bn

Shares in Britain’s defence sector are soaring – taking 2026’s gains to £21billion – as Donald Trump called for a 50 per cent rise in US military spending.

BAE Systems, the UK’s largest defence firm, climbed as much as 7 per cent before closing 5 per cent, or 97p, higher at 2023p.

It stands to be a major winner if, as Trump demands, US military spending surges by more than half a trillion dollars next year.

Rolls-Royce and Melrose also rose amid double-digit increases in the sector in just five days of trading in 2026.

Defence firms have been big gainers since Russia’s invasion of Ukraine prompted a significant increase on European military spending plans.

And geopolitical tensions have ratcheted up further after America’s intervention in Venezuela and sabre-rattling over Cuba and even Greenland. 

Now, the US President wants military spending to rise to $1.5trillion in 2027, up from this year’s $901billion.

‘This will allow us to build the “Dream Military” that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe,’ he posted on Truth Social.

He has threatened to block US contractors from dividend payouts or share buybacks unless they speed up their weapons production.

In Britain, despite promises to raise spending, Labour has stalled on firming up military orders. But the UK’s biggest players stand to benefit from Trump’s largesse.

The US represented 44 per cent of £28.3billion in BAE sales in 2024. 

In 2023 it expanded its US presence with the £4.4billion takeover of Ball Aerospace, which builds satellites and satellite technology for the military.

BAE’s share price has soared since Vladimir Putin’s tanks rolled into Ukraine in 2022. And it is up by almost 18 per cent for the year so far.

Babcock, another FTSE 100 defence giant rose 0.6 per cent, or 9p, to 1450p. It is up nearly 17 per cent over the first few days of 2026.

Aerospace giant Rolls-Royce climbed 1.1 per cent, or 13.5p, to 1272.5p and is up 11 per cent this year. Melrose fell 1.1 per cent, or 6.8p, to 624p – but is up 6pc for 2026.

The combined increases in the FTSE 100 defence valuations totals around £21billion for 2026 to date.