Babcock International has booked a £140 million charge against its Type 31 general purpose frigate contract after design changes and out-of-sequence build activity pushed up the cost of the five-ship programme. The company said the overrun came into view as the lead ship moved closer to structural completion and outfitting rework proved more complex and more expensive than expected.

The size of the charge matters because much of it will hit this year’s accounts. Around £100 million will be recognised as a revenue reversal in the financial year ending 31 March 2026, while the rest will increase the contract loss provision. The cash costs will be spread over the remainder of the programme, which means the strain will not disappear quickly even as the headline accounting impact is booked now.

Babcock said it floated the first two ships in the five-ship programme during FY26, laid the keel of ship three and formally commenced construction of ship four. It also said the build of ship two is close behind ship one, with some crossover in the design-related rework needed for the second vessel. Ships three and four remain in early construction, and the company said the effect on those vessels and on later ships is comparatively reduced.

The Type 31 programme is a five-ship general purpose frigate contract, and the latest charge follows earlier design changes and build activity that had already been carried out out of sequence. Babcock said it completed an engineering maturity review and updated its estimates to finish the work, taking into account elevated levels of work linked to engineering change and productivity. That review, not a new delay on its own, is what forced the company to reset the numbers.

Even with the charge stripped out, Babcock said its underlying performance in the period was firm. It reported underlying operating profit of £433 million and an operating margin of 8.2 per cent, ahead of its 8.0 per cent full-year target. That matters because it suggests the group’s broader trading picture remained healthy even as the frigate contract absorbed another hit.

The tension now sits in how much of the programme can still be delivered without fresh cost shocks. Babcock has already recognised the higher cost of finishing the first ship and part of the second, while saying the later vessels should be less affected. The balance of the charge will build the loss provision now, but the underlying work still has to be done, and the remaining ships will test whether the engineering reset is enough to keep the five-ship programme on track.