Business Services Weekly: The Service Station

Research evidence excerpt

Business Services Weekly: The Service Station

3 July 2026

Business Services

Business Services Weekly

The week in Business Services

n The UK's Defence Investment Plan, confirmed a £15bn uplift in UK defence

spend that is notionally positive for Babcock, albeit with c.1/3 of the

increase unfunded, capping sentiment. Confirmation of £64bn spending

on the Defence Nuclear Enterprise is also supportive of Babcock’s largest

end-market, with investment in Clyde infrastructure a possible positive for

the company and the move to more output and incentive-based sole

sourced contracts in line with what Babcock is negotiating re the FMSP

successor contract (and where management continues to think the

overriding priority will be submarine availability). The company thinks it

should be well positioned on the proposed Common Combat Vessel and

uncrewed Type 91-94s. Babcock is 62% UK defence and we forecast a

FY26-29E organic revenue CAGR of 4.8% (management’s medium-term

target is for mid-single-digit organic growth vs. a total MOD budget CAGR

FY27-30 +5%).

n Mears’ H1 trading update confirmed the business had continued to trade

well through its first half, with strong new order conversion in its

Maintenance business. New orders worth £1.5bn have been secured with

local government in H1 that underpin future growth, with an increasingly

good prospect for the Maintenance business to be towards the upper end

of its targeted growth of 5-9% for the full year. Management remains

confident in delivering full-year results in line with market expectations and

we expect a higher weighting of profit in the first half.

n There was press commentary suggesting Capita had not met the

Government’s 30 June deadline to improve performance on its Civil Service