Babcock hit by Type 31 frigate charge despite strong FY2026 performance

As the build of ship two is close behind ship one, there is also some cross over in the design-related rework necessary to this ship. With ships three and four still in the early construction stages, the extent of impact on these and future vessels is comparatively reduced.

As a consequence, we have performed an engineering maturity review, and we have updated our financial estimates to complete the programme, given the elevated levels of work due to engineering change and productivity. These re-estimates not only cover the production costs of material and personnel, but also an increased programme risk contingency.

This is reflected in an expected charge on the contract (subject to audit) of £140 million for the revised costs to complete delivery of the Type 31 design and build contract, which is fully recognised in FY2026, but the cash costs of which will be incurred over the remainder of the programme. Babcock estimates c.£100 million of this £140 million will be recognised as a revenue reversal in FY2026 with the balance increasing the contract loss provision.