Babcock hit by £140m warship overhaul cost blow as Navy frigate programme runs over

Babcock International has taken a £140m charge after late-stage design changes and rework on its newest Royal Navy frigates, underscoring the pressure facing Britain’s defence supply chain as complex naval programmes run into cost overruns.

The FTSE 100 defence contractor said the hit related to its Type 31 frigate programme, which is delivering five warships being built at its Rosyth yard in Fife.

The company said the financial impact stemmed from “higher than expected levels of rework as a result of changes to the design”, with remedial work proving more expensive because it is being carried out at late stages of construction.

The first two frigates in the programme have already been floated for the first time after around four years of construction, while the remaining three vessels are at earlier stages and therefore less exposed to redesign issues.

Babcock said the £140m charge includes around £100m of revenue reversal linked to revised assumptions about programme completion costs.

The Type 31 ships are intended to form a key part of the Royal Navy’s future surface fleet, supporting missions ranging from maritime security and intelligence gathering to humanitarian operations and countering illicit activity at sea.

Despite the setback, Babcock reported stronger overall revenues for the year to March, driven by growth in its nuclear and aviation divisions.

However, underlying operating profit fell to £293m from £363m a year earlier, reflecting the impact of the frigate programme charge.

The group said its wider defence and nuclear capabilities remained in strong demand as governments increase spending on security and energy resilience amid heightened geopolitical tensions.

“As the nature of defence and energy security continues to evolve amid an increasingly complex and rapidly changing geopolitical context, Babcock’s critical defence and nuclear energy capabilities remain highly relevant,” it said.

The company also announced plans to return a further £200m to shareholders via buybacks after completing its previous programme.

The cost overrun adds to growing scrutiny of Britain’s major defence procurement projects, where inflation, design changes and supply chain strain have increasingly pushed programmes above initial budgets and timelines.