Frigate costs rise after design changes revealed – Daily Business

Babcock has seen costs rise on new frigates

Babcock has revealed a £140 million cost over-run on its Royal Navy frigate building contract as a result of design changes.

These modifications are late in build programme and will have knock on effects on the five-ship programme under way at Rosyth.

The company floated the first two ships during the financial year ending 31 March, laid the keel of ship three, and began construction of the fourth vessel.

Babcock said the number of rework events was not entirely unexpected. However, as work on the lead ship progresses, rework requirements during outfitting have proven “more complex and more costly than anticipated” as they occurred in the later stages of completion.

Five Type 31 frigates are under construction

The company has completed an “engineering maturity review” and updated its estimates to complete the programme, incorporating higher production costs and an increased risk contingency.

About £100m of the charge will be recognised as a “revenue reversal” in FY26, with the remainder added to the contract loss provision. Cash costs will be spread across the remainder of the programme.

The update came in a post-close trading update which showed underlying operating profit increased 19% at constant foreign exchange rates to £433 million, excluding the Type 31 charge. Including the charge, underlying operating profit was £293m.

#Frigate #costs #rise #design #revealed #Daily #Business