The defence sector is experiencing a spending surge as geopolitical tensions drive governments to modernise military capabilities. BAE Systems leads the UK's defence industry with an £84bn order backlog, but the battlefield has shifted from traditional hardware to electronics and AI-driven systems. This transformation is creating opportunities for niche technology specialists like Concurrent Technologies and Cohort.

Concurrent Technologies designs military-grade embedded computers that operate in extreme conditions, from space to battlefield command centres. Its £145mn in recent design wins—more than triple its annual revenue—demonstrates strong demand for its systems, which are used in everything from armoured vehicles to drone detection. These design wins typically convert to purchase orders within three years and revenue within a decade. Despite a US government shutdown slowing activity in the second half, the company's forward price-to-earnings ratio of 24 times reflects investor confidence in its structural growth drivers.

Meanwhile, Tesco reported solid results with 5.4% sales growth to £74bn and operating profit up 10% to £2.98bn, though Middle East tensions tempered its outlook. Churchill China maintained stable performance despite inflationary pressures, reducing inventory and hedging 64% of its gas requirements for 2027 while automating production to control costs.