Boris Johnson Exit Could Prove Positive for Defense Sector, Citi Says

(Bloomberg) --

A new face at No. 10 Downing Street could be positive for defense suppliers, depending on which potential candidate were to replace the embattled Boris Johnson in the event of an attempt to remove him as U.K. prime minister, according to analysts at Citigroup Inc. 

Analyst Charles J. Armitage said he couldn’t take a view on the whether Johnson would survive the political furor provoked by details of a rule-breaking party at the Prime Minister’s residence.

Even so, it’s “worthwhile thinking about the outlook for defense if he were to go,” he wrote in a report. Johnson’s departure would be “neutral to positive depending on successor,” Armitage said.

While Chancellor Rishi Sunak’s focus on the economy and responsible spending make him a “neutral” choice in terms of defense if he were to succeed Johnson, Foreign Secretary Liz Truss, would “likely to be more bullish” as she pushes for a “global Britain,” Armitage wrote. He noted that Housing Secretary Jeremy Hunt, meanwhile, had backed higher defense spending in his 2019 leadership bid.

Leveling up Secretary Michael Gove would be “neutral/positive” and Health Secretary Sajid Javid neutral, he added.  

Finally, Labour Leader Keir Starmer would be “probably positive” for defense spending if elected as prime minister, according to Armitage.

“Starmer is not Jeremy Corbyn and he wants to cultivate a pro-British working class Labour party as well as keeping the U.K. nuclear deterrent,” he wrote. Even so, Armitage doesn’t expect a general election until 2024 with the Conservatives unlikely to bring forward a vote before then.

Shares of defense firm BAE Systems Plc were little changed Friday at 578.2 pence, while peer Ultra Electronics Holdings Plc was up 0.4% to 3,190 pence. Babcock International Group Plc rose 0.2% to 339.7 pence.

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