Rolls-Royce’s value has topped £75billion for the first time in its 119-year history as pressure on governments to increase military spending sends defence stocks soaring.

As it emerged that Nato plans to force Britain to spend 3.5 per cent of GDP on defence by 2032 – far more than the 3 per cent ‘ambition’ outlined by Sir Keir Starmer this week – shares across the sector rallied once again.

Rolls-Royce, which makes engines for Royal Air Force fighter jets and nuclear reactors that power Royal Navy submarines, closed the day up 2.9 per cent, or 25.4p, at a record high of 894.2p. That gave the engineer a value of £75.7billion.

The shares have risen almost ten-fold since ‘Turbo’ Tufan Erginbilgic took over as chief executive at the start of 2023 when the company was worth just £7.9billion. 

BAE Systems also hit a record high, rising 2 per cent, or 37.5p, to 1957p, giving it a value of £59billion and taking gains this year to 69 per cent.

The company supplies the Ministry of Defence, providing everything from munitions to battlefield communications while also building warships, submarines and planes.

Babcock – which was seen as a big winner from plans announced this week to build 12 nuclear-powered attack submarines as it plays a key role in servicing the Royal Navy fleet – gained another 0.9 per cent having risen more than 8 per cent on Monday. 

The three FTSE 100 defence groups have a combined value of £140billion having been worth just £28.5billion at the start of 2022 before Russia invaded Ukraine.

Countries across Europe – including Britain – are racing to rearm in the face of Russian aggression after US President Donald Trump said the Continent must take more responsibly for its own security.

In his strategic review of UK military spending announced on Monday, Starmer outlined plans to raise defence spending from 2.3 per cent of GDP to 2.5 per cent by 2027. 

He also outlined an ‘ambition’ for it to rise to 3 per cent but refused to set a date.

However, Nato members are under pressure to sign up to a much higher target of 5 per cent of GDP in total – made up of 3.5 per cent on defence and 1.5 per cent on wider cyber and security.