European defence stocks slide as Germany set to ditch warship plans

(Sharecast News) - European defence stocks slid on Wednesday following reports that Germany plans to abandon a multibillion-euro project to build the biggest warship commissioned by the navy since the second world war. According to the Financial Times, citing two people familiar with the matter, defence minister Boris Pistorius and other senior officials on Tuesday informed industry figures and senior MPs of their intention to abandon plans to build six F126 frigates.

The government's change of plan was first reported by Der Spiegel.

According to Bloomberg, Pistorius plans to instead purchase a total of eight Meko-200 frigates from German manufacturer TKMS, which are significantly smaller than the F126.

At 0928 BST, Rheinmetall shares were down 13%, while Renk and Hesoldt were off 4.8% and 2.9%, respectively. Saab was 3% lower and Italy's Leonardo was 3.9% weaker. In contrast, shares of TKMS were up 7.6%.

Neil Wilson, UK investor strategist at Saxo Bank, said: "The dropping of the multi-billion-euro plan for Berlin to build six new warships Is not just a disappointment for firms engaged in the contract, it has broader implications about Germany's commitment to defence spending, which has been a lynchpin of the long defence sector investment thesis. This has left defence stocks across Europe broadly lower with Hensoldt, Renk, Saab and Leonardo all hit has collateral damage.

"UK-listed defence names BAE Systems, Babcock, Cohort and Chemring fell in sympathy. At the same time Britain's defence industry is in a state of uncertainty over the government's delayed ten-year defence investment plan. Starmer wants to force it through before a Nato summit but Burnham wants to wait until he can deal with it. There is a lack of credibility either way."