DIP Release Brings Relief

Research evidence excerpt

DIP Release Brings Relief

Update

June 30, 2026 03:56 PM GMT

Morgan Stanley & Co. International plc+MAerospace & Defence | Europe Ross Law, CFA

Equity Analyst

DIP Release Brings Relief Ross.Law@morganstanley.comMarie-Ange Riggio +44 20 7677-0560

Our view? Publication of the Defence Investment Plan (DIP) provides greater Marie-Ange.Riggio@morganstanley.com +44 20 7677-2003

Leonore Pele

visibility on programme priorities, procurement timelines and the allocation of Research Associate

incremental defence spending in the UK, removing a key overhang on UK defence- Leonore.Pele@morganstanley.com +44 20 7425-2044

exposed stocks. While incremental spending of £15bn over the next 4 years comes in Aerospace & Defence

below the levels requested by military officials (£28bn), it is modestly ahead of Europe

Industry View Attractive

recent expectations of £13.5bn, and supports the UK reaching 2.7% of GDP by 2029.

While potential for new UK govt leadership to revisit the plan’s funding and

spending assumptions cannot be ruled out, the provision of a clearer medium term

roadmap for UK defence spending should reduce policy uncertainty and could

support a re-rating of companies most exposed to UK defence modernisation. We

would suggest the recent de-rating of BAE shares, our new Top Pick in EU defence,

offers an attractive entry point.

Stocks Read Across? We would view the DIP as a supportive read-across for both

BAE Systems and Rolls-Royce, which are exposed in areas where the plan either

increases funding versus prior communication or provides renewed long-term

visibility. The clearest area of focus is the nuclear/submarine complex, with over

£63bn of funding versus the previous £41bn figure, covering Dreadnought, SSN-

AUKUS, the replacement warhead and wider nuclear infrastructure.