At the beginning of 2025, the United Kingdom announced its intention to raise defense spending to 2.5% of GDP by 2027, with a target of reaching 3% starting from the next parliamentary term in 2029. This morning, the BBC reported that Prime Minister Keir Starmer is considering moving up the timeline to hit the 3% mark before 2029.

However, the British media outlet clarified that no firm decision has yet been made.

"If confirmed, this development would be positive for BAE Systems (hold) and Babcock (buy)," Jefferies commented this morning in a note. According to the analyst, budget dynamics and their funding remain "major concerns."

"Raising the defense budget from 2.5% to 3% of GDP by 2029 would require a compound annual growth rate (CAGR) of 8% for the UK budget, assuming GDP grows by 1.5% per year. Notably, Thales (buy), facing similar challenges in France, would see its 2026 budget rise by 13% year-on-year, representing an increase of €6.7 billion," the broker added.

India's Rafale Shopping Spree?

Meanwhile, in an article published Sunday, La Tribune reports that beyond India's green light for the purchase of 114 Rafale jets, New Delhi is also seeking to acquire 31 Rafale Marine aircraft. This order would come in addition to the 26 Rafale Marine jets already ordered by India in April 2025.

In this context, Jefferies reaffirmed its buy rating on Dassault Aviation and noted that this development is "not surprising," since "the Indian Navy's total requirements had previously been estimated at 57 aircraft."

The topic could be discussed during President Macron's state visit to India this week, though a firm order is not necessarily expected to be finalized at that time, the analyst added.