Babcock says Brexit and Covid beset Royal Navy contract as profits plunge

One of the UK’s biggest defence contractors has blamed Brexit and Covid among a catalogue of problems to beset a key contract for the Royal Navy , which led its annual profits to plunge. Annual profits at Babcock International fell by almost a fifth in the year to the end of March, as the firm reported a £140m charge on its contract to build five Type 31 frigates for the Royal Navy. The company, which reported a 19% fall in underlying operating profits to £293.3m, said the contract it won in 2019 only had “certain escalation clauses” to protect it from cost increases related to building the frigates. “It provided limited protection from the macroeconomic changes of recent years relating to Brexit, Covid, raw material prices and UK labour shortages, which have significantly increased our costs,” the company said. “This has resulted in the contract being loss-making, together with increases in estimated costs due to the maturing of the design and the forecast cost of labour.” The company had to make late-stage changes to the designs of the first two ships in the five-ship fleet. Shares in the company fell more than 3% on Monday morning. Defence contractors have been waiting for the government to publish its long-awaited defence investment plan. Earlier this month, the defence secretary, John Healey, resigned in a row with Keir Starmer over the plan . …